-----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, KlEY9cAcmGtoym2s9iUiYPvR7j1sbHbPYZc2cKbG6O9uaxz8DZqzQoJnQiy5X3fc IQEZgKAa6DjgrTG2H10+7w== 0000912057-97-006052.txt : 19970222 0000912057-97-006052.hdr.sgml : 19970222 ACCESSION NUMBER: 0000912057-97-006052 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970219 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMPHENOL CORP /DE/ CENTRAL INDEX KEY: 0000820313 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 222785165 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-10879 FILM NUMBER: 97537930 BUSINESS ADDRESS: STREET 1: 358 HALL AVE CITY: WALLINGFORD STATE: CT ZIP: 06492 BUSINESS PHONE: 2032658900 10-K405 1 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal Year Ended December 31, 1996 or / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission file number 1-10879 AMPHENOL CORPORATION (Exact name of Registrant as specified in its Charter) DELAWARE 22-2785165 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 358 HALL AVENUE, WALLINGFORD, CONNECTICUT 06492 203-265-8900 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: CLASS A COMMON STOCK, $.001 PAR VALUE NEW YORK STOCK EXCHANGE, INC. (Title of each Class) (Name of each Exchange on which Registered) 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/ The aggregate market value of Amphenol Corporation Common Stock, $.001 Par Value, held by non-affiliates was approximately $841 million based on the reported last sale price of such stock on the New York Stock Exchange on January 31, 1997. As of January 31, 1997 the total number of shares outstanding of Class A Common Stock was 44,720,287. There are no shares outstanding of Class B Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Definitive Proxy Statement which is expected to be filed on or before February 19, 1997, are incorporated by reference into Part III hereof. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEX
PAGE ----- PART I........................................................................................................ 3 ITEM 1. BUSINESS............................................................................... 3 General.............................................................................. 3 Product Development.................................................................. 4 Product Groups....................................................................... 5 International Operations............................................................. 7 Customers............................................................................ 7 Manufacturing........................................................................ 8 Research and Development............................................................. 8 Trademarks and Patents............................................................... 9 Competition.......................................................................... 9 Backlog.............................................................................. 9 Employees............................................................................ 9 Cautionary Statements for Purposes of Forward Looking Information.................... 10 ITEM 2. PROPERTIES............................................................................. 12 ITEM 3. LEGAL PROCEEDINGS...................................................................... 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.................................... 15 ITEM 4.1 EXECUTIVE OFFICERS..................................................................... 15 PART II....................................................................................................... 16 ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS............... 16 ITEM 6. SELECTED FINANCIAL DATA................................................................ 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................................................... 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................ 21 Report of Management................................................................. 21 Report of Independent Accountants.................................................... 21 Consolidated Statement of Income..................................................... 22 Consolidated Balance Sheet........................................................... 23 Consolidated Statement of Changes in Shareholders' Equity............................ 24 Consolidated Statement of Cash Flow.................................................. 25 Notes to Consolidated Financial Statements........................................... 26 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE........................................................................... 37 PART III...................................................................................................... 37 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................................... 37 ITEM 11. EXECUTIVE COMPENSATION................................................................. 37 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................... 37 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................... 37 PART IV....................................................................................................... 38 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K........................ 38 Signature of the Registrant.......................................................... 42 Signatures of the Directors.......................................................... 42
2 PART I ITEM 1. BUSINESS GENERAL Amphenol Corporation ("Amphenol" or the "Company") is a leading designer, manufacturer and marketer of electrical, electronic and fiber optic connectors, interconnect systems and coaxial and flat-ribbon cable. The primary end markets for the Company's products are telephone, wireless and data communications systems; cable television systems; commercial and military aerospace electronics; automotive and mass transportation applications; and industrial factory automation equipment. For the year ended December 31, 1996, approximately 52% of the Company's sales were to the worldwide communications market (including 23% for the cable television market), 26% were for commercial and military aerospace and other military electronics applications and 22% were for industrial, transportation and other applications. The Company focuses on optimizing its mix of higher margin application-specific products in its product offerings and has enhanced the cost controls in its operations. As a result of these initiatives, the Company's operating profit margin has increased from 13.5% in fiscal year 1993 to 17.8% in fiscal year 1996. The Company designs and manufactures connectors and interconnect systems, which are used primarily to conduct electrical and optical signals for a wide range of sophisticated electronic applications. The Company believes, based primarily on published market research, that it is one of the largest connector manufacturers in the world and the leading supplier of high performance environmental connectors that require superior performance and reliability under conditions of stress and in hostile environments. Such conditions are frequently encountered in commercial and military aerospace applications and other demanding industrial applications such as natural resource exploration, medical instrumentation and off-road construction . In addition, the Company has developed a broad range of interconnect products to serve the rapidly growing markets of wireless communications including cellular and personal communications networks and fiber optic networks; electronic commerce including smart cards and electronic purse applications; and automotive safety products including airbags, pretensioner seatbelts and anti-lock braking systems. The Company is also one of the leaders in developing interconnect products for factory automation and machine tools and, in addition, develops interconnect products for mass transportation applications. The Company believes that the worldwide industry for interconnect products and systems is highly fragmented and estimates that the total sales for the industry were approximately $27 billion in 1996. The Company believes that its Times Fiber subsidiary is one of the world's largest and lowest-cost producers of coaxial cable for the cable television market, and that it is one of the technological leaders in increasing the bandwidth of coaxial cable products to accommodate increased channel capacity for full service cable television/telecommunication systems. The Company is the second largest supplier of coaxial cable to the traditional U.S. cable television industry. In addition, the Company is beginning to supply the developing market for high bandwidth coaxial cable and related interconnect products used in full service cable television/ telecommunication systems being installed by cable operators and telecommunication companies. The Company has also become a major supplier of coaxial cable to the emerging international cable television markets. The Company estimates that the total sales for the worldwide market for coaxial cable for cable television were approximately $800 million in 1996. The Company is a global manufacturer employing advanced manufacturing processes. The Company's products are manufactured and assembled at facilities in the U.S., Canada, Mexico, Germany, France, the United Kingdom, the Czech Republic, Hong Kong, Taiwan, Japan, India and the People's Republic of China. The Company's connector products are sold through its global sales force to thousands of original equipment manufacturers ("OEMs") in 52 countries throughout the world as well as through a global 3 network of electronic distributors. The Company's coaxial cable products are primarily sold to cable television operators and to telecommunication companies who have entered the broadband communications market. In 1996, approximately 55% of the Company's net sales were in North America, 33% were in Europe and 12% were in Asia and other countries. PRODUCT DEVELOPMENT The Company's product development strategy is to offer a broad range of products to meet the specific interconnect requirements of its customers in its target markets. The Company's market focus is primarily in interconnect products for the: (1) wireless, telecom and data communications market; (2) broadband communications, primarily cable television and the developing markets for full service television, telephone and data communication broadband networks; (3) commercial and military aerospace markets; (4) industrial markets, primarily factory automation and mass transportation; and (5) automotive electronics, primarily automotive safety devices such as airbags, pretensioner seatbelts and anti-lock braking systems. The Company implements its product development strategy through product design teams and collaboration arrangements with customers which result in obtaining approved vendor status for the customer's new products and programs. The Company further seeks to have its products become widely accepted within the industry for similar applications and products manufactured by other potential customers, thereby providing additional sources of future revenue. The development of application-specific products has decreased the significance of standard products which generally experience greater pricing pressure. In addition to product design teams and customer collaboration arrangements, the Company uses key account managers to manage customer relationships on a global basis such that the Company can bring to bear its total resources to meet the worldwide needs of its multinational customers. The Company is also focused on making strategic acquisitions in certain markets to further broaden and enhance its product offerings and expand its global capabilities. The following examples illustrate the Company's market and product development strategy: - The use of fiber optics in communications systems has been increasing in recent years, including fiber optic applications in long distance telephone systems and local area networks. The Company has developed a broad line of fiber optic interconnect components for fiber optic systems including sophisticated narrowband wavelength division multiplexers, which permit greater transmission capability, and fiber optic management systems, which facilitate the organizing and management of a fiber optic network. - Radio frequency/microwave electronics technology has been characterized by developments that expand circuit capacity with increasingly smaller electronic devices. These technologies have expanded into the growing markets of cellular and personal communication networks. The Company has developed a broad line of interconnect products and systems used in base stations for such wireless communication systems. - Smart cards, where data is stored in a chip on a plastic card, are increasingly being used in banking systems (including electronic purses), telephone credit cards, security systems and other applications. The Company is one of the leaders in developing acceptor devices used in readers that transmit the information stored on smart cards or as components of the electronic purse. - Performance, reliability and ability to withstand harsh environments are essential to products and systems for the commercial and military aerospace market. The Company, in conjunction with a significant OEM customer, has developed a sophisticated interconnect coupler technology for advanced commercial aircraft flight control systems. The Company also performed certain research and development studies and is now producing a family of connectors for the international space station program. 4 - The use of electronics and sensing devices in automobiles has been increasing for the past several years. The Company, in conjunction with major automobile European manufacturers, has developed a broad line of interconnect products used in automotive airbags and pretensioner seatbelts. Such products, which were originally used primarily in European luxury cars, have evolved in technology and availability to standard European car models and are being used in a wider array of applications such as passenger side and side impact protection. - The Company has been one of the technology leaders in expanding the bandwidth characteristics of coaxial cable for cable television. The Company produces 1 gigahertz coaxial cable which is used in hybrid fiber coaxial cable ("HFC") full service networks for offering video, voice and data services. - The Company also seeks to expand its product offering and global presence in its chosen markets through strategic acquisitions. In 1996, for example, the Company acquired The Sine Companies, Inc., one of the leading suppliers of interconnect products and assemblies for the factory automation market. This acquisition complemented the Company's existing line of industrial interconnect products and further positioned the Company for growth in factory motion control equipment. The Company also acquired a 51% interest in Kai-Jack Industrial Co., Ltd. one of the leading Taiwanese radio frequency connector manufacturers. The acquisition strengthens the Company's manufacturing capabilities and worldwide sourcing of radio frequency products as well as expanding the Company's presence in the growing Asian markets. PRODUCT GROUPS The following table sets forth the dollar amounts of the Company's net sales for each major product group. For a discussion of factors affecting changes in sales by product category, see "Management's Discussion and Analysis of Financial Condition and Results of Operations."
1996 1995 1994 ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Net sales by product group: Commercial, radio frequency and industrial interconnect products, cable assemblies and flat-ribbon cable........................................... $ 388,941 $ 370,619 $ 321,511 High performance environmental connectors.................................... 208,071 174,329 156,995 Coaxial cable................................................................ 179,209 238,285 214,145 ---------- ---------- ---------- $ 776,221 $ 783,233 $ 692,651 ---------- ---------- ---------- ---------- ---------- ---------- Net sales by geographic area: United States operations..................................................... $ 397,023 $ 394,563 $ 381,016 International operations(1).................................................. 379,198 388,670 311,635 ---------- ---------- ---------- $ 776,221 $ 783,233 $ 692,651 ---------- ---------- ---------- ---------- ---------- ----------
- ------------------------ (1) Includes international coaxial cable sales, which are primarily export sales. COMMERCIAL, RADIO FREQUENCY AND INDUSTRIAL INTERCONNECT PRODUCTS, CABLE ASSEMBLIES AND FLAT-RIBBON CABLE. The Company produces a broad range of commercial and industrial interconnect products. Such products include: fiber optic interconnect products and systems used in fiber optic networks for voice, video and data communications; chip card acceptor interconnect devices and readers used in conjunction with smart cards and electronic purses (a system for cashless monetary transactions); industrial interconnect products used in a variety of applications such as factory automation equipment, mass transportation applications including railroads and marine transportation; and automotive safety products including interconnect devices and systems used in automotive airbags, pretensioner seatbelts and anti-lock braking systems. The Company designs and produces a broad range of radio frequency connector products used in 5 telecommunications, computer and office equipment, instrumentation equipment, local area networks, aerospace and military electronic applications. The Company's radio frequency connectors are used in base stations, hand held sets and other components of cellular and personal communications networks. The Company has also developed a broad line of radio frequency connectors for coaxial cable for full service cable television/telecommunication networks. The Company designs and produces highly-engineered cable assemblies. Such assemblies are specially designed by the Company in conjunction with OEM customers for specific applications, primarily for computer, communications and office equipment systems. The cable assemblies utilize the Company's connector and cable products as well as components purchased from others. The Company is also a leading producer of flat-ribbon cable, a cable made of wires assembled side by side such that the finished cable is flat. Flat-ribbon cable is used to connect internal components in systems with space and component configuration limitations. The product is used in computer and office equipment components as well as in a variety of telecommunications applications. HIGH PERFORMANCE ENVIRONMENTAL CONNECTORS. The Company believes, based primarily on published market research, that it is the leading supplier of circular, military-specification connectors; such connectors require superior performance and reliability under conditions of stress and in hostile environments. Such connectors are generally used to interconnect electronic and fiber optic systems in sophisticated aerospace, military, commercial and industrial equipment. These applications present demanding technological requirements in that such connectors are subject to rapid and severe temperature changes, vibration, humidity or nuclear radiation. Frequent applications of these connectors include aircraft, guided missiles, radar, military vehicles, equipment for spacecraft, energy and geophysical applications and off-road construction equipment. Specially designed high performance environmental connectors, which include fiber optic, filtered, nonmetallic, diode and breakaway connectors, are manufactured to specific customer input/output configurations. COAXIAL CABLE. The Company designs, manufactures and markets coaxial cable primarily for use in the cable television industry. The Company manufactures two primary types of coaxial cable: semi-flexible, which has an aluminum tubular shield, and flexible, which has one or more braided metallic shields. Semi- flexible coaxial cable is used in the trunk and feeder distribution portion of cable television systems, and flexible cable (also known as drop cable) is used primarily for hookups from the feeder cable to the cable television subscriber's residence. Flexible cable is also used in other communications applications. The rapid developments in fiber optic technologies, digital compression (which allows several channels to be transmitted within the same bandwidth that a single analog channel currently requires) and other communication technologies, including the Company's development of higher capacity coaxial cable, have resulted in technologies which are expected to give cable television systems channel capacity in excess of 500 channels. Such expanded channel capacity, along with other component additions, will permit cable operators to offer full service networks with a variety of capabilities including near video-on-demand, pay-per-view special events, home shopping networks, interactive entertainment and education services, telephone services and high-speed access to data resources such as the Internet. With respect to expanded channel capacity systems, cable operators have generally adopted, and the Company believes that for the foreseeable future will continue to adopt, a cable system using both fiber optic cable and coaxial cable. Such systems combine the advantages of fiber optic cable in transmitting clear signals over a long distance without amplification, with the advantages of coaxial cable in ease of installation, low cost and compatibility with the receiving components of the customer's communications devices. The Company believes that while system operators are likely to increase their use of fiber optic cable for the trunk and feeder portions of the cable systems, there will be an ongoing need for high capacity coaxial cable for the local distribution and street-to-the-home portions of the cable system. U.S. cable system designs are increasingly being employed in international markets where cable television penetration is low. For example, it is estimated that only 25% of the television households in Western Europe subscribe to some form of multichannel television service as compared to an estimated subscription rate of 64% in the U.S. The estimated subscription rates in the Asian and Latin American 6 markets are even lower at approximately 15% and 11%, respectively. In terms of television households, it is estimated that there were 178 million television households in Western Europe, 398 million in Asia and 81 million in Latin America. This compares to an estimated 97 million television households in the U.S. In 1996, the Company had sales of coaxial cable in approximately 40 countries, and the Company believes the development of cable television systems in international markets presents a significant opportunity to increase sales of its coaxial cable products. INTERNATIONAL OPERATIONS The Company believes that its global presence is an important competitive advantage as it allows the Company to provide quality products on a timely and worldwide basis to its multinational customers. Approximately 49% of the Company's sales for the year ended December 31, 1996 were outside the United States. Approximately 68% of such international sales were in Europe. The Company has manufacturing facilities in the United Kingdom, Germany, France, the Czech Republic and sales offices in most other European markets. The European operations generally have strong positions in their respective local markets. Local operations coordinate product design and manufacturing responsibility with the Company's other operations around the world. The balance of the Company's international activities are located primarily in Canada, Mexico and the Far East, which includes manufacturing facilities in Hong Kong, Taiwan, India, Japan and the People's Republic of China. The Hong Kong, Taiwan, Indian, People's Republic of China and Mexican facilities generally serve the respective local markets as well as provide low cost manufacturing and assembly sources for world markets. CUSTOMERS The Company's products are used in a wide variety of applications by numerous customers, none of whom accounted for more than 5% of the Company's sales for 1996 (except for sales under contract with the U.S. Government and its subcontractors, which accounted for 8% of 1996 sales). The Company's products are sold both directly to OEMs, cable system operators, telecommunication companies and through distributors. There has been a trend on the part of OEM customers to consolidate their lists of qualified suppliers to companies that have a global presence, can meet quality and delivery standards, have a broad product portfolio and design capability, and have competitive prices. The Company has focused its global resources to position itself to compete effectively in this environment. The Company has concentrated its efforts on service and productivity improvements including advanced computer aided design and manufacturing systems, statistical process controls and just-in-time inventory programs to increase product quality and shorten product delivery schedules. The Company's strategy is to provide a broad selection of products in the areas in which it competes. The Company has achieved a preferred supplier designation from many of its OEM customers. Cable television services in the U.S. are provided primarily by multiple system operators ("MSOs"). It is estimated that in 1996 the twenty largest MSOs served 85% of the estimated 62 million cable television subscribers in the U.S. The major MSOs include such companies as Tele-Communications, Inc., Time Warner Cable, Continental Cablevision, Comcast Cable Communications and Cablevision Systems. Many of the major MSOs are customers of the Company, including those listed above. The Company's sales to distributors represented approximately 26% of the Company's 1996 sales. The Company's recognized brand names including "Amphenol," "Times Fiber," "Pyle-National," "Spectra-Strip," "Sine," "Tuchel" and "Socapex," together with the Company's strong connector design-in position (products that are specified in the plans and qualified by the OEM), enhance its ability to reach the secondary market through its network of distributors. The Company's products are sold by 8 of the top 10 distributors in the United States, and the Company believes that its distributor network represents a competitive advantage. 7 MANUFACTURING The Company employs advanced manufacturing processes including molding, stamping, plating, turning, extruding, die casting and assembly operations as well as proprietary process technology for flat-ribbon and coaxial cable production. The Company's manufacturing facilities are generally vertically integrated operations from the initial design stage through final design and manufacturing. Outsourcing of certain fabrication processes is used when cost-effective. Substantially all of the Company's manufacturing facilities are certified to the ISO9000 series of quality standards. The Company employs a global manufacturing strategy to lower its production costs and to improve service to customers. The Company sources its products on a worldwide basis with manufacturing and assembly operations in the United States, Canada, Mexico, the United Kingdom, France, Germany, the Czech Republic, Hong Kong, Taiwan, India, Japan and the People's Republic of China. To better serve high volume OEM customers, the Company has established just-in-time facilities near major customers. The Company's policy is to maintain strong cost controls in its manufacturing and assembly operations. The Company has undertaken programs to rationalize its production facilities, reduce plant and corporate overhead expense and maximize the return on capital expenditures. The programs to improve productivity are ongoing. The Company purchases a wide variety of raw materials for the manufacture of its products, including precious metals such as gold and silver used in plating; brass, copper, aluminum and steel used for cable, contacts and connector shells; and plastic materials used for cable and connector bodies and inserts. All such raw materials are readily available throughout the world and are purchased locally from a variety of suppliers. The Company is not dependent upon any one source for raw materials or if one source is used, alternate sources of supply are available. RESEARCH AND DEVELOPMENT The Company's research, development and engineering expenditures for the creation and application of new and improved products and processes were $14.6 million, $15.7 million and $14.3 million (excluding customer sponsored programs representing expenditures of $0.9 million, $1.3 million and $0.8 million) for 1996, 1995 and 1994, respectively. The Company's research and development activities focus on selected product areas and are performed by individual operating divisions. Generally, the operating divisions work closely with OEM customers to develop highly engineered products that meet the customer's needs. The Company continues to focus its research and development efforts primarily on those product areas that it believes have the potential for broad market applications and significant sales within a one-to-three year period. TRADEMARKS AND PATENTS THE COMPANY OWNS A NUMBER OF ACTIVE PATENTS WORLDWIDE. While the Company considers its patents to be valuable assets, the Company does not believe that its competitive position is dependent on patent protection or that its operations are dependent on any individual patent. Allied Corporation has granted to the Company a worldwide non-exclusive license to use all trademarks, service marks, trade names and corporate names relating to "Bendix" which the Company has used in its sales and marketing of high performance environmental connectors. The license will expire on June 2, 1997. The Company has been increasing its use of other trade names in its marketing of high performance connectors, and accordingly does not believe that its operations will be materially adversely affected by the expiration of this license. The Company regards its trademarks "Amphenol," "Pyle-National," "Tuchel," "Socapex," "Spectra-Strip," "Sine," and "Times Fiber" to be of value in its businesses. The Company has exclusive rights in all its major markets to use these registered trademarks. 8 COMPETITION The Company encounters competition in substantially all areas of its business. The Company competes primarily on the basis of product quality, price, engineering, customer service and delivery time. Competitors include large, diversified companies, some of which have substantially greater assets and financial resources than the Company, as well as medium to small companies. In the area of coaxial cable for cable television, the Company believes that it and CommScope, a division of General Instrument Corporation, are the primary providers of such cable; however, CommScope is larger than the Company in this market. In addition, the Company faces competition from smaller companies that have concentrated their efforts in one or more areas of the coaxial cable market. BACKLOG The Company estimates that its backlog of unfilled orders was $207.4 million and $203.4 million at December 31, 1996 and 1995, respectively. Orders typically fluctuate from quarter to quarter based on customer demands and general business conditions. Unfilled orders may be cancelled prior to shipment of goods; however, such cancellations historically have not been material. It is expected that all or a substantial portion of the backlog will be filled within the next 12 months. However, significant elements of the Company's business, such as sales to the cable television industry, distributors, the computer industry, and other commercial customers, generally have short lead times. Therefore, backlog may not be indicative of future demand. EMPLOYEES As of December 31, 1996, the Company had approximately 6,200 full-time employees worldwide. Of these employees, approximately 4,500 were hourly employees, of which approximately 2,300 were represented by labor unions, and the remainder were salaried. Beginning on October 21, 1995, the Company experienced a seven day work stoppage at its plant in Sidney, New York when approximately 1,000 hourly employees represented by the International Association of Machinists and Aerospace Workers rejected a Company proposal and voted to strike upon the expiration of their then current collective bargaining contract. A new three year contract was approved and the work stoppage ended on October 28, 1995. The Sidney, New York plant manufactures interconnect products used primarily in the aerospace industry and other commercial and industrial markets. The one week work stoppage did not involve any other operation of the Company. The Company has not had any other work stoppages in the past ten years. In 1996, the United Steelworkers International Union, AFL-CIO attempted to organize approximately 500 employees of the Company's plant in Chatham, Virginia, the Company's primary plant for the production of coaxial cable. The union organizing effort was defeated by a vote of the hourly employees. A Regional Director of the National Labor Relations Board subsequently found that unfair labor practices had been committed by the Company prior to the election and ordered that a new election be held. The Company has appealed the finding and order of the Regional Director. If the Company's appeal is denied and a new election is held at the Chatham, Virginia plant and the union is certified, the Company would be required to bargain in good faith with the union, and its operations at such facility could be subject to the risks associated with unionized employees generally, including the risk of work stoppages. The Company believes that it has a good relationship with its unionized and non-unionized employees. CAUTIONARY STATEMENTS FOR PURPOSES OF FORWARD LOOKING INFORMATION Statements made by the Company 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 the Company to fail to conform with expectations and predictions: 9 - A global economic slowdown in any one, or all, of the Company's market segments. - The effects of extreme changes in monetary and fiscal policies in the U.S. and abroad including extreme currency fluctuations and unforeseen inflationary pressures. - Drastic and unforeseen price pressure on the Company's products or significant cost increases that cannot be recovered through price increases or productivity improvements. - Increased difficulties in obtaining a consistent supply of basic materials like steel, aluminum, copper, gold or plastic resins at stable pricing levels. - Unpredictable difficulties or delays in the development of new product programs. - Significant changes in interest rates or in the availability of financing for the Company or certain of its customers. - Rapid escalation of the cost of regulatory compliance and litigation. - Unexpected government policies and regulations effecting the Company or its significant customers. - Unforeseen intergovernmental conflicts or actions, including but not limited to armed conflict and trade wars. - Difficulties and unanticipated expense of assimilating newly-acquired businesses. - Any difficulties in obtaining or retaining the management and other human resource competencies that the Company needs to achieve its business objectives. - The risks associated with any technological shifts away from the Company's technologies and core competencies. For example, a technological shift away from the use of coaxial cable in cable television/ telecommunication systems could have a substantial impact on the Company's coaxial cable business. - Unforeseen interruptions to the Company's business with its largest customers and distributors resulting from, but not limited to, strikes, financial instabilities or inventory excesses. 10 ITEM 2. PROPERTIES The table below presents the location, size and function of the Company's principal manufacturing and assembly facilities as of January 31, 1997. The Company's principal executive offices are located in Wallingford, Connecticut.
SQUARE LOCATION FEET FUNCTION - ----------------------------------- --------- -------------------------------------------------------------- UNITED STATES: Chatham, VA 175,000 coaxial cable manufacturing Chatham, VA (1) 100,000 coaxial cable warehousing Chatham, VA (1) 40,000 coaxial cable manufacturing and warehousing Chicago, IL 270,000 industrial connector manufacturing and assembly Danbury, CT (1) 170,000 RF connector manufacturing Danville, VA (1) 80,000 coaxial cable warehousing Endicott, NY 125,000 cable assembly Hamden, CT 60,000 cable manufacturing Hamden, CT (1) 25,000 cable warehousing Lisle, IL (1) 28,000 fiber optic connector manufacturing Mt. Clemens, MI (1) 71,360 industrial connector manufacturing and assembly Nogales, AZ (1) 20,250 connector warehousing and assembly Parsippany, NJ (1) 32,500 RF connector manufacturing Phoenix, AZ (1) 12,000 coaxial cable warehousing Sidney, NY 685,000 high performance environmental connector manufacturing and assembly Wallingford, CT (1) 28,800 Executive offices CANADA: Renfrew, Ontario (1) 26,000 coaxial cable manufacturing Scarborough, Ontario (1) 88,000 high performance connector manufacturing MEXICO: Nogales (1) 27,558 connector assembly Nogales (1) 12,700 connector assembly Nogales (1) 57,884 connector assembly
11
SQUARE LOCATION FEET FUNCTION - ----------------------------------- --------- -------------------------------------------------------------- UNITED KINGDOM: Greenock, Scotland (1) 10,000 connector manufacturing and cable assembly Nottingham, England (1) 11,000 high performance environmental connector manufacturing and cable assembly Romsey, England (1) 24,000 cable manufacturing and cable assembly Whitstable, England 135,000 connector manufacturing, cable assembly and coaxial cable warehousing GERMANY: Heilbronn 130,000 connector manufacturing and cable assembly CZECH REPUBLIC: Klucouska 16,300 connector assembly FRANCE: Dole 121,000 connector manufacturing Thyez 125,000 connector manufacturing HONG KONG: Fotan Shatin (1) 70,000 cable manufacturing and assembly TAIWAN Taoyuan Hsien (1) 15,700 cable assembly Tainan (1) 64,600 RF connector manufacturing and assembly JAPAN: Ritto-cho, Shiga (1) 15,700 assembly, warehousing INDIA: Pune (2) 53,400 connector manufacturing and assembly Bangalore 12,200 connector manufacturing and assembly CHINA: Changzhou 65,000 coaxial cable manufacturing and warehousing
- ------------------------ (1) These facilities are leased. Such leases expire at various times through 2004. (2) This facility is owned but is situated on property subject to a long term lease arrangement, expiring in 2065. The Company estimates that during 1996 its principal manufacturing facilities operated at between 70% and 95% of capacity. 12 In addition to the facilities described above, the Company leases various warehouses and sales and administrative offices. ITEM 3. LEGAL PROCEEDINGS On January 23, 1997 the Board of Directors approved, subject to shareholder approval and certain other closing conditions, and the Company entered into an agreement and plan of merger (the "Merger Agreement"), with NXS Acquisition Corp., a wholly owned subsidiary of KKR 1996 Fund L.P., a limited partnership formed at the direction of Kohlberg Kravis Roberts & Co. L.P. The Merger Agreement contemplates that approximately 90% of the Company's Class A common stock will be converted into $26.00 in cash and approximately 10% of such shares will be retained by the stockholders. The proposed transaction was announced to the public on January 23, 1997 and on that same date the Company and its directors (four of whom are also executive officers of the Company) were named as defendants in a complaint filed in the Court of Chancery in the State of Delaware by two alleged stockholders of the Company, individually and purportedly as a class action on behalf of all stockholders of the Company. In general, the complaint alleges that the Company's directors have breached their fiduciary duties by, among other things, resolving to approve the Merger Agreement at an allegedly inadequate price and by allegedly failing to take adequate steps to enhance the value of the Company and/or its attractiveness as a merger or acquisition candidate, including failing to conduct an auction. The complaint seeks injunctive relief prohibiting the Company from, among other things, consummating the Merger Agreement. The complaint also seeks unspecified damages, attorney's fees and other relief. The Company believes that the allegations contained in the complaint are without merit and intends to contest the action vigorously, on behalf of itself and its directors, if the plaintiffs elect to proceed further with their action. The Company and its subsidiaries have been named as defendants in several other legal actions in which various amounts are claimed arising from normal business activities. Although the amount of any ultimate liability with respect to such matters cannot currently be precisely determined, in the opinion of management, any such liability will not have a material effect on the Company. Certain operations of the Company are subject to federal, state and local environmental laws and regulations which govern the discharge of pollutants into the air and water, as well as the handling and disposal of solid and hazardous wastes. The Company believes that its operations are currently in substantial compliance with all applicable environmental laws and regulations and that the costs of continuing compliance will not be material to the Company's financial condition or results of operations. In connection with the acquisition of Amphenol in 1987, Allied Signal Corporation ("Allied") agreed to indemnify Amphenol for a portion of environmental liabilities of Amphenol identified within a period of seven years following the acquisition that arise out of events, conditions or circumstances that occurred or existed at the time of or prior to the transaction to the extent that such liability exceeds $13 million. In such event, Allied is obligated to pay 80% of the excess over $13 million and 100% of the excess over $30 million. Allied representatives are presently working closely with the Company in addressing the most significant potential environmental liabilities including Sidney Center Landfill and the Richardson Hill landfill projects, as described below. The Company believes that as of December 31, 1996, the $13 million threshold described above has been exceeded and that future expenditures on these projects will be subject to the indemnification agreement. However, there can be no assurance that Allied will not dispute the amount of any future claims that the Company makes under this indemnification nor as to the ultimate resolution of any dispute. Owners and occupiers of sites containing hazardous substances, as well as generators of hazardous substances, are subject to broad liability under various federal and state environmental laws and regulations, including expenditures for cleanup costs and damages arising out of past disposal activities. Such liability in many cases may be imposed regardless of fault or the legality of the original disposal activity. The Company is currently performing investigative and monitoring activities at its manufacturing site in 13 Sidney, New York. In addition, the Company is currently voluntarily performing monitoring, investigation, design and cleanup activities at two local, public off-site disposal sites previously utilized by the Sidney facility and others. The Company is also performing proposed remedial design activities and currently is negotiating with respect to a third site. The Company and Allied have entered into an administrative consent order with the United States Environmental Protection Agency (the "EPA") and are presently determining necessary and appropriate remedial measures for one such site (the "Richardson Hill" landfill) used by Amphenol and other companies, which has been designated a "Superfund" site on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980. With respect to the second site, (the "Route 8" landfill), used exclusively by Amphenol, the Company initiated a remediation program pursuant to a Consent Order with the New York Department of Environmental Protection and is continuing to monitor the results of those remediation efforts. In December 1995 the Company and Allied received a letter from the EPA demanding that the Company and Allied accept responsibility for the investigation and cleanup of the Sidney Center Landfill, another Superfund Site. The Sidney Center Landfill was a municipal landfill site utilized by the Company's Sidney facility and other local towns and businesses. The Company has acknowledged that it sent general plant refuse but no hazardous waste to the Sidney Center Landfill site. Allied and the Company offered to prepare a remedial design and to assist the EPA in identifying other potentially responsible parties for the Sidney Center Landfill site. In July 1996 the Company and Allied received a unilateral order from the EPA directing the Company and Allied to perform certain investigation, design and cleanup activities at the Sidney Center Landfill site. The Company and Allied responded to the unilateral order by agreeing to undertake certain remedial design activities. To date the Company and Allied have not accepted any responsibility for the cleanup of the Sidney Center Landfill site. The Company also is engaged in remediating or monitoring environmental conditions at several of its other manufacturing facilities and has been named as a potentially responsible party for cleanup costs at several other off-site disposal sites. During 1996, the Company spent approximately $1.4 million in connection with investigating, remediating and monitoring environmental conditions at these facilities and sites. Amphenol expects such expenditures, net of indemnification payments expected from Allied, to be less than $.5 million in 1997. Since 1987, the Company has not been identified nor has it been named as a potentially responsible party with respect to any other significant on-site or off-site hazardous waste matters. In addition, the Company believes that all of its manufacturing activities and disposal practices since 1987 have been in material compliance with all applicable environmental laws and regulations. Nonetheless, it is possible that the Company will be named as a potentially responsible party in the future with respect to additional Superfund or other sites. Although the Company is unable to predict with any reasonable certainty the extent of its ultimate liability with respect to any pending or future environmental matters, the Company believes, based upon all information currently known by management about the Company's manufacturing activities, disposal practices and estimates of liability with respect to all known environmental matters, that any such liability will not be material to its financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None ITEM 4.1 EXECUTIVE OFFICERS The following table sets forth the name, age and position with the Company of each person who was an executive officer of Amphenol as of December 31, 1996. Officers are elected to serve at the discretion of the Board of Directors in accordance with the By-Laws of the Company. The By-Laws of the Company provide that the Board of Directors shall elect the officers of the Company at its first meeting held after 14 the Annual Meeting of Stockholders of the Company. All officers of the Company are elected to hold office until their successors are chosen and qualified, or until their earlier resignation or removal.
NAME AGE POSITION - ------------------------------------------- --- ------------------------------------------- Lawrence J. DeGeorge....................... 80 Chairman of the Board Martin H. Loeffler......................... 52 Director, President and Chief Executive Officer Edward G. Jepsen........................... 53 Director, Executive Vice President and Chief Financial Officer Timothy F. Cohane.......................... 44 Director and Senior Vice President Edward C. Wetmore.......................... 40 Secretary and General Counsel Diana G. Reardon........................... 37 Controller and Treasurer
Lawrence J. DeGeorge has been Chairman of the Board of Amphenol since June 1987. He was also Chairman of the Board and Chief Executive Officer of LPL Technologies Inc. ("LPL"). He was Chairman of the Board and Chief Executive Officer of Amphenol from June 1987 through May 1995. Martin H. Loeffler has been a Director of Amphenol since December 1987. He has also served as President and Chief Operating Officer of Amphenol since July 1987. He has been President and Chief Executive Officer of the Company since May 1996. He was also a Vice President of LPL. Edward G. Jepsen has been a Director of Amphenol since January 1991, Executive Vice President and Chief Financial Officer of Amphenol since May 1989 and Senior Vice President and Director of Finance since November 1988. He was also a Director, Executive Vice President, Chief Financial Officer and Controller of LPL. Timothy F. Cohane has been a Director of Amphenol since June 1987 and Vice President of Amphenol since December 1991. He was also a Director and Vice President of LPL. Edward C. Wetmore has been Secretary and General Counsel of Amphenol since 1987. He was also Secretary and General Counsel of LPL. Diana G. Reardon has been Treasurer of Amphenol since March 1992 and Controller since July 1994. From June 1988 until her appointment as Treasurer she served as Assistant Controller of Amphenol and LPL. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company effected the initial public offering of its Class A Common Stock in November 1991. The Company's Common Stock has been listed on the New York Stock Exchange since that time under the 15 symbol "APH." The following table sets forth on a per share basis the high and low sales prices for the Common Stock for both 1996 and 1995 as reported on the New York Stock Exchange.
1996 1995 -------------------- -------------------- HIGH LOW HIGH LOW --------- --------- --------- --------- First Quarter........................................... 26 20 1/8 27 1/2 20 Second Quarter.......................................... 27 5/8 19 7/8 30 3/8 23 3/4 Third Quarter........................................... 22 7/8 18 3/4 29 1/2 21 1/2 Fourth Quarter.......................................... 23 19 24 1/4 18 3/4
As of January 31, 1997, there were approximately 181 holders of record of the Company's Common Stock. The Company believes that a significant number of outstanding shares of Common Stock are registered in the name of only one holder, which is a nominee of The Depository Trust Company, a securities depository for banks and brokerage firms. Since its initial public offering in 1991, the Company has not paid any cash dividends on its Common Stock and it does not have any present intention to commence payment of any cash dividends. The Company intends to retain earnings to provide funds for the operation and expansion of the Company's business and to repay outstanding indebtedness. The Company's debt agreements contain covenants restricting the payment of dividends on, or repurchases of, the Company's Common Stock. The Company's Revolving Credit Agreement, which contains the most restrictive provision, in effect permits the declaration and payment of cash dividends on, or repurchase of, Common Stock only if, immediately after giving effect to any such proposed action, the accumulated amount of all dividends and repurchases since December 1995 does not exceed the sum of (i) 50% of the Company's cumulative consolidated net income (as defined) since December 1995, plus (ii) $110 million, plus (iii) the net cash proceeds received by the Company from sales of its Common Stock after December 1995. As of December 31, 1996, the amount available under this provision for future dividends on or repurchases of Common Stock by the Company was approximately $93 million. 16 ITEM 6. SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, -------------------------------------------------------------------- 1996 1995 1994 1993 1992 ------------ ------------ ------------ ------------ ------------ OPERATIONS Net sales.......................................... $ 776,221 $ 783,233 $ 692,651 $ 603,967 $ 457,677 Net income before extraordinary item............... 67,578 62,858 42,400 24,749 8,639(1) Extraordinary loss................................. (4,087) Net income......................................... 67,578 62,858 38,313 24,749 8,639(1) Net income per share before extraordinary item..... 1.45 1.33 .91 .58 .26(1) Extraordinary loss per share....................... (.09) Net income per share............................... 1.45 1.33 .82 .58 .26(1) FINANCIAL POSITION Working capital.................................... $ 136,864 $ 121,313 $ 95,590 $ 90,463 $ 151,544 Total assets....................................... 710,662 689,924 677,055 691,277 766,397 Current portion of long-term debt.................. 7,759 2,670 13,925 27,265 29,623 Long-term debt..................................... 219,484 195,195 234,251 364,574 458,446 Shareholders' equity............................... 360,548 344,085 278,640 173,292 149,688 Weighted average shares outstanding................ 46,649,541 47,304,180 46,611,759 42,821,091 32,983,315
- ------------------------ (1) Includes a non-recurring, after-tax charge for expenses of $3,139 ($.10 per share) associated with an acquistion. 17 ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the results of operations for the three fiscal years ended December 31, 1996 has been derived from and should be read in conjunction with the consolidated financial statements contained herein. RESULTS OF OPERATIONS The following table sets forth the components of net income before extraordinary item as a percentage of net sales for the periods indicated.
YEAR ENDED DECEMBER 31, ------------------------------- 1996 1995 1994 --------- --------- --------- Net sales................................................................................ 100.0% 100.0% 100.0% Cost of sales, excluding depreciation and amortization................................... 63.7 64.7 66.2 Depreciation and amortization expense.................................................... 3.7 3.5 4.1 Selling, general and administrative expense.............................................. 14.8 14.6 14.7 --------- --------- --------- Operating income......................................................................... 17.8 17.2 15.0 Interest expense......................................................................... (3.2) (3.3) (4.4) Other expense, net....................................................................... (.5) (.6) (.6) --------- --------- --------- Income before income taxes and extraordinary item........................................ 14.1 13.3 10.0 Provision for income taxes............................................................... (5.4) (5.3) (3.9) --------- --------- --------- Net income before extraordinary item..................................................... 8.7% 8.0% 6.1% --------- --------- --------- --------- --------- ---------
1996 COMPARED TO 1995 Net sales were $776.2 million for the year ended December 31, 1996 compared to $783.2 million for 1995. Sales of commercial, radio frequency and industrial interconnect products, cable assemblies and flat-ribbon cable for 1996 increased 4.9% compared to 1995 ($388.9 million--1996; $370.6 million--1995). Such increase is primarily due to increased sales of cable assembly and interconnect products including fiber optics, smart card reader devices, automotive safety devices (airbags and pretensioner seatbelts) and communications related interconnect products. Sales of high performance environmental connectors for 1996 increased 19.4% compared to 1995 ($208.1 million--1996; $174.3 million - -1995). The increase is primarily attributable to strong demand for the Company's application specific products for new and enhanced electronic aerospace and avionics interconnect systems for space, military and commercial aviation applications. Sales of coaxial cable products primarily for cable television applications for 1996 declined 24.8% ($179.2 million--1996; $238.3 million -1995) primarily due to: (1) a decline in U.S coaxial cable television sales which declined from $115.4 million in 1995 to $94.5 million in 1996, of which $18.4 million of the decline is attributable to diminished sales of coaxial cable to regional Bell operating companies ("RBOCs") that slowed their construction of broadband systems in 1996, and reduced sales to a major U.S. cable operator in the latter part of 1996 as that operator reduced expenditures for the rebuilding of its systems; and (2) a decline in international coaxial cable television sales which declined from $122.9 million in 1995 to $84.7 million in 1996, of which $29.1 million of the decline is attributable to reduced sales to a foreign cable operator as that operator selected local sourcing for its cable requirements, and reduced sales to companies in a foreign country as that country is undergoing a regulation of cable television franchises which slowed the construction of new systems. Geographically, sales in the United States in 1996 increased 0.6% compared to 1995 ($397.0 million-- 1996; $394.6 million--1995); international sales for 1996, including export sales, declined 2.4% in U.S. dollars ($379.2 million--1996; $388.7 million--1995) and increased approximately .5% in local currencies 18 compared to 1995. The comparatively stronger U.S. dollar in 1996 had the currency translation effect of decreasing net sales by approximately $11.4 million when compared to foreign currency translation rates in 1995. The gross profit margin as a percentage of net sales (including depreciation in cost of sales) increased to 34% in 1996 from 33% in 1995. The increase is generally attributable to increased sales of higher margin application-specific connector products, increased efficiencies due to increased production rates for certain connector products and continuing cost control programs, the effect of which was partially offset by lower coaxial cable sales. Selling, general and administrative expenses as a percentage of sales for 1996 remained constant at approximately 15% when compared to 1995. Interest expense was $24.6 million for 1996 compared to $25.5 million for 1995. The decrease is due to generally lower average debt outstanding during the year. Other expenses, net for 1996 was $3.7 million, a decrease of $.8 million from 1995. See Note 8 to the Company's Consolidated Financial Statements for details of the components of other expenses, net. The provision for income taxes for 1996 was at an effective rate of 38.4% compared to an effective rate of 40.0% in 1995. 1995 COMPARED TO 1994 Net sales were $783.2 million for the year ended December 31, 1995 compared to $692.7 million for 1994. Sales of commercial, radio frequency and industrial interconnect products, cable assemblies and flat-ribbon cable for 1995 increased 15.3% ($370.6 million--1995; $321.5 million--1994). Such increase is primarily due to strong demand, especially internationally, for connectors and interconnect systems used in telecommunications applications, automotive safety devices (airbags and pretensioner seatbelts), machine tool and factory automation equipment and smart card reader devices. Sales of high performance environmental connectors for 1995 increased 11.0% compared to 1994 ($174.3 million--1995; $157.0 million--1994). The increase is primarily attributable to strong demand for the Company's application specific products for new and enhanced electronic aerospace and avionics interconnect systems. Sales of coaxial cable products primarily for cable television applications for 1995 increased 11.3% ($238.3 million--1995; $214.1 million--1994) primarily due to increased international sales; U.S. sales of coaxial cable were approximately even with 1994 with increased sales to certain RBOCs as they began initial construction of broadband systems offsetting a decline in sales to traditional cable television operators. Geographically, sales in the United States in 1995 increased 3.6% compared to 1994 ($394.6 million-- 1995; $381.0 million--1994); international sales for 1995, including export sales, increased 24.7% in U.S. dollars ($388.7 million--1995; $311.6 million--1994) and increased approximately 19% in local currencies compared to 1994. The comparatively weaker U.S. dollar in 1995 had the currency translation effect of increasing net sales by approximately $19.2 million when compared to foreign currency translation rates in 1994. The gross profit margin as a percentage of net sales (including depreciation in cost of sales) increased to 33% in 1995 from 31% in 1994. The increase is generally attributable to increased sales of higher margin application specific connector products, increased sales of the relatively higher gross margin coaxial cable products and continuing cost control programs. Selling, general and administrative expenses as a percentage of sales for 1995 remained even with 1994 at approximately 15%. Interest expense was $25.5 million for 1995 compared to $30.4 million for 1994. The decrease is due to decreased debt outstanding. 19 Other expenses, net for 1995 was $4.5 million, an increase of $.3 million from 1994. See Note 8 to the Company's Consolidated Financial Statements for details of the components of other expenses, net. The provision for income taxes for 1995 was at an effective rate of 40% compared to an effective rate of 39% in 1994. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities totaled $68.2 million, $79.2 million and $88.9 million for 1996, 1995 and 1994, respectively. The decrease in cash from operating activities in 1996 compared to 1995 is primarily attributable to increased cash tax payments in certain foreign jurisdictions, increased cash payments to the Company's pension plans and increases in inventory. In 1995, the cash from operating activities was lower than 1994 primarily because of changes in the non-cash components of working capital primarily reflecting higher sales levels and a reduction in accrued liabilities. Cash from operating activities was used for capital expenditures: $20.4 million, $20.4 million and $10.9 million in 1996, 1995 and 1994, respectively. In 1996, cash from operating activities was also used for acquisitions ($29.5 million) and to repurchase in the open market the Company's common stock ($52.7 million). In 1995 and 1994, the Company also used the cash flow from operations for debt reduction ($50.4 million--1995; $145.6 million--1994); the 1994 debt reduction also includes approximately $67.0 million net proceeds from the sale of 4.4 million shares of common stock. In 1996, the Company increased its net borrowings by approximately $26.3 million to supplement the cash flow from operations to fund the expenditures described above. The Company has a $150.0 million unsecured revolving bank credit agreement that expires in the year 2000. The credit agreement requires the maintenance of a minimum net worth, interest coverage and leverage ratio and includes limitations with respect to secured borrowings and restricted payments, including dividends on the Company's common stock. At December 31, 1996, there was $24.0 million of borrowings outstanding with respect to the credit agreement. In December 1993, a subsidiary of the Company entered into an asset-backed securitization program whereby the subsidiary can sell to a financial institution up to $50.0 million of trade accounts receivable (See Note 9 to the Company's Consolidated Financial Statements). The program costs approximate rates charged on high quality commercial paper, plus certain administrative expenses. At December 31, 1996, sales under the program were approximately $50.0 million. The program expires in December 1997; however, the Company believes that it will be able to renew such program for one or more years. In 1996, the Company's Board of Directors authorized an open market share repurchase program of up to 5.0 million shares of the Company's common stock. At December 31, 1996, the Company had repurchased in the open market approximately 2.6 million shares of its common stock at an average price of $20.01 per share. The Company's primary ongoing cash requirements will be for capital expenditures and debt service. The Company does not have any present intention for the payment of cash dividends on its common stock. The Company expects that ongoing requirements for capital expenditures and debt service will be funded by internally generated cash flow. The Company expects that capital expenditures in 1997 will not exceed $25.0 million. The Company's required debt amortization in 1997 is $7.8 million; the Company's required cash interest payments for 1997, at current interest rates, are estimated at approximately $25.0 million. ENVIRONMENTAL MATTERS In connection with the acquisition of Amphenol from Allied Corporation in 1987, Allied agreed to indemnify Amphenol for a portion of environmental liabilities of Amphenol identified within a period of seven years following the acquisition that arise out of events, conditions or circumstances that occurred or existed at the time of or prior to the acquisition to the extent that such liability exceeds $13.0 million. In 20 such event, Allied is obligated to pay 80% of the excess over $13.0 million and 100% of the excess over $30.0 million. The Company has been named as a defendant in various legal actions or as a potentially responsible party in relation to several environmental cleanup sites in which the associated costs are subject to the Allied indemnification agreement. There are no amounts currently owed to the Company under the Allied indemnification agreement. Management does not believe that the costs associated with resolution of these matters, net of indemnification from Allied, will have a material adverse effect on the Company's financial position or results of operations. INFLATION AND COSTS The cost of the Company's products is influenced by the cost of a wide variety of raw materials, including precious metals such as gold and silver used in plating; aluminum, copper, brass and steel used for contacts, shells and cable; and plastic materials used in molding connector bodies, inserts and cable. In general, increases in the cost of raw materials, labor and services have been offset by price increases, productivity improvements and cost saving programs. RISK MANAGEMENT The Company has to a significant degree mitigated its exposure to currency risk in its business operations by manufacturing and procuring its products in the same country or region in which the products are sold so that costs reflect local economic conditions. In other cases involving U.S. export sales, raw materials are a significant component of product costs for the majority of such sales and raw material costs are generally dollar based on a worldwide scale, such as basic metals and petroleum derived materials. The majority of the Company's debt is at fixed interest rates and not subject to fluctuations. The Company does have credit agreements which allow it to borrow at variable rates. In such cases the Company may use financial instruments, primarily LIBOR contracts and interest rate swap contracts to fix such variable rates for varying periods, generally not longer than one year. FUTURE ACCOUNTING CHANGES In June 1996 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 125 (FAS 125), "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." Management has reviewed the statement and believes that implementation of the statement will not have a material effect on the Company's financial position or results of operations. SUBSEQUENT EVENT--PROPOSED TRANSACTION On January 23, 1997, the Company announced that it signed an Agreement and Plan of Merger ("Agreement") with an affiliate of Kohlberg Kravis Roberts & Co. L.P. ("KKR"). Upon completion of the transaction, which is expected to be consummated in April 1997, affiliates of KKR will be the majority owner of the Company. The Agreement provides that the owner of each share of Class A common stock can elect either to receive $26.00 in cash for that share or to retain that share. However, in no event can more that 4.4 million shares of common stock (approximately 10% of the currently outstanding shares) be retained by present Amphenol shareholders. If holders elect to retain more than 4.4 million of the outstanding shares, then the shares available will be prorated among those electing to retain and cash will be paid for all other shares. If holders elect to retain fewer than 4.4 million of the outstanding shares, the remaining available shares will be prorated among those electing cash. Following the merger, affiliates of KKR expect to own in excess of 75% of the Company's outstanding shares. Affiliates of KKR will invest up to $374 million of equity in the transaction. The balance of funds necessary to complete the transaction, estimated at approximately $990 million, including refinancing the Company's indebtedness and obligations, will come from new borrowings. 21 Lawrence J. DeGeorge, Chairman of the Board of the Company, and certain members of his family (and a trust founded by them) who hold, in the aggregate, approximately 30% of the outstanding common stock, have agreed to vote their shares in favor of the merger. An affiliate of KKR will also have the option to call the DeGeorge family shares under certain circumstances, and following the recapitalization the DeGeorge interests will have the option to put the shares which they retain following the merger to the affiliate, in each case for $26.00 in cash per share. The merger is subject to certain conditions including the approval of the Company's shareholders at its annual meeting, the expiration of antitrust regulatory waiting periods and the completion of financing arrangements. After the merger, Amphenol will continue to operate as an independent public company under its current name with headquarters in Wallingford, Connecticut. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF MANAGEMENT Management is responsible for the integrity and objectivity of the financial statements and other information appearing in this annual report on Form 10-K. The financial statements have been prepared in conformity with generally accepted accounting principles and include amounts based on management's best estimates and judgments, with due consideration given to materiality. The Company maintains a system of internal accounting controls and procedures intended to provide reasonable assurance that assets are safeguarded and transactions are properly recorded and accounted for in accordance with management's authorization. Price Waterhouse LLP has been engaged to audit the financial statements in accordance with generally accepted auditing standards. They obtain an understanding of the Company's accounting policies and controls, and conduct such tests and related procedures as they consider necessary to arrive at their opinion. The Board of Directors has appointed an Audit Committee composed of outside directors. The Audit Committee meets periodically with representatives of management and Price Waterhouse LLP to discuss and review their activities with respect to internal accounting controls and financial reporting and auditing. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Amphenol Corporation In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 38 present fairly, in all material respects, the financial position of Amphenol Corporation and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Hartford, Connecticut January 14, 1997, except as to Note 12, which is as of January 23, 1997 22 CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, ------------------------------------------- 1996 1995 1994 ------------- ------------- ------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales........................................................... $ 776,221 $ 783,233 $ 692,651 Costs and expenses: Cost of sales, excluding depreciation and amortization............ 494,689 506,707 458,318 Depreciation and amortization expense............................. 28,808 27,795 28,099 Selling, general and administrative expense....................... 114,746 114,041 102,183 Operating income.................................................... 137,978 134,690 104,051 Interest expense.................................................... (24,617) (25,548) (30,382) Other expenses, net................................................. (3,696) (4,515) (4,160) ------------- ------------- ------------- Income before income taxes and extraordinary item................... 109,665 104,627 69,509 Provision for income taxes.......................................... (42,087) (41,769) (27,109) ------------- ------------- ------------- Net income before extraordinary item................................ 67,578 62,858 42,400 Extraordinary item: Loss on early extinguishment of debt, net of income taxes of $2,613 (Note 1)................................................. (4,087) ------------- ------------- ------------- Net income.......................................................... $ 67,578 $ 62,858 $ 38,313 ------------- ------------- ------------- ------------- ------------- ------------- Net income per share: Income before extraordinary item.................................. $ 1.45 $ 1.33 $ .91 Extraordinary loss................................................ (.09) ------------- ------------- ------------- Net income........................................................ $ 1.45 $ 1.33 $ .82 ------------- ------------- ------------- ------------- ------------- ------------- Average common shares outstanding................................... 46,649,541 47,304,180 46,611,759
See accompanying notes to consolidated financial statements. 23 CONSOLIDATED BALANCE SHEET
DECEMBER 31, ------------------------ 1996 1995 ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ASSETS Current Assets: Cash and short-term cash investments.................................................. $ 3,984 $ 12,028 Accounts receivable, less allowance for doubtful accounts of $1,868 and $1,758........ 64,904 67,419 Inventories: Raw materials and supplies.......................................................... 21,648 21,094 Work in process..................................................................... 92,771 79,971 Finished goods...................................................................... 38,864 33,688 ----------- ----------- 153,283 134,753 Prepaid expenses and other assets..................................................... 11,611 11,516 ----------- ----------- Total current assets................................................................ 233,782 225,716 ----------- ----------- Land and depreciable assets: Land.................................................................................. 11,090 11,143 Buildings............................................................................. 65,379 64,452 Machinery and equipment............................................................... 188,716 169,624 ----------- ----------- 265,185 245,219 Less accumulated depreciation......................................................... (163,110) (150,560) ----------- ----------- 102,075 94,659 Deferred debt issuance costs............................................................ 3,717 4,332 Excess of cost over fair value of net assets acquired................................... 346,583 342,624 Other assets............................................................................ 24,505 22,593 ----------- ----------- $ 710,662 $ 689,924 ----------- ----------- ----------- ----------- LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable...................................................................... $ 49,484 $ 51,684 Accrued interest...................................................................... 2,481 2,701 Accrued salaries, wages and employee benefits......................................... 12,671 11,972 Other accrued expenses................................................................ 24,523 35,376 Current portion of long-term debt..................................................... 7,759 2,670 ----------- ----------- Total current liabilities........................................................... 96,918 104,403 ----------- ----------- Long-term debt.......................................................................... 219,484 195,195 Deferred taxes and other liabilities.................................................... 18,696 18,755 Accrued pension and post employment benefit obligations................................. 15,016 27,486 Commitments and contingent liabilities (Notes 2, 6 and 9) Shareholders' Equity: Class A Common Stock, $.001 par value; 96,250,000 shares authorized; 44,720,287 and 47,320,382 shares outstanding at December 31, 1996 and 1995, respectively........... 47 47 Additional paid-in capital............................................................ 265,425 265,193 Accumulated earnings.................................................................. 151,634 84,056 Cumulative valuation adjustments (Note 5)............................................. (3,887) (5,211) Treasury stock, at cost, 2,625,100 shares............................................. (52,671) ----------- ----------- Total shareholders' equity.......................................................... 360,548 344,085 ----------- ----------- $ 710,662 $ 689,924 ----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements. 24 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
ADDITIONAL ACCUMULATED CUMULATIVE TREASURY TOTAL COMMON PAID-IN EARNINGS VALUATION STOCK SHAREHOLDERS' STOCK CAPITAL (DEFICIT) ADJUSTMENTS AT COST EQUITY ------------- ---------- ------------ ----------- ---------- ------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) BALANCE DECEMBER 31, 1993.................... $ 42 $ 197,424 $ (17,115) $ (7,059) $ 173,292 Net income................................. 38,313 38,313 Translation adjustments.................... 3,786 3,786 Net proceeds from sale of 4,410,689 shares of Class A Common Stock.................. 4 66,913 66,917 Conversion of warrants..................... 1 5 6 Amortization of deferred compensation...... 66 66 Stock options exercised.................... 413 413 Appreciation in market value of marketable securities available for sale, net of tax...................................... 162 162 Minimum pension liability adjustment, net of tax................................... (4,315) (4,315) --- ---------- ------------ ----------- ---------- ------------- BALANCE DECEMBER 31, 1994.................... 47 264,821 21,198 (7,426) 278,640 Net income................................. 62,858 62,858 Translation adjustments.................... 2,246 2,246 Amortization of deferred compensation...... 384 384 Stock options exercised and vesting of restricted stock, net of tax............. (12) (12) Decline in market value of marketable securities available for sale, net of tax...................................... (1,194) (1,194) Minimum pension liability adjustment, net of tax................................... 1,163 1,163 --- ---------- ------------ ----------- ---------- ------------- BALANCE DECEMBER 31, 1995.................... 47 265,193 84,056 (5,211) 344,085 Net income................................. 67,578 67,578 Translation adjustments.................... 647 647 Purchase of Treasury Stock................. (52,671) (52,671) Amortization of deferred compensation...... 65 65 Stock options exercised.................... 167 167 Decline in market value of marketable securities available for sale, net of tax...................................... (1,085) (1,085) Minimum pension liability adjustment, net of tax................................... 1,762 1,762 --- ---------- ------------ ----------- ---------- ------------- BALANCE DECEMBER 31, 1996.................... $ 47 $ 265,425 $ 151,634 $ (3,887) $ (52,671) $ 360,548
See accompanying notes to consolidated financial statements. 25 CONSOLIDATED STATEMENT OF CASH FLOW
YEAR ENDED DECEMBER 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net income.................................................................... $ 67,578 $ 62,858 $ 38,313 Adjustments for cash from operations: Depreciation and amortization............................................... 28,808 27,795 28,099 Amortization of deferred debt issuance costs................................ 691 652 674 Net extraordinary charge for write off of deferred debt issuance costs...... 4,087 Net change in: Accounts receivable......................................................... 7,315 (6,954) (14,236) Inventory................................................................... (10,801) (1,790) 13,483 Prepaid expenses and other assets........................................... 604 90 2,152 Accounts payable............................................................ (3,411) 4,121 4,282 Accrued liabilities......................................................... (13,832) 831 11,352 Accrued pension and post employment benefits................................ (7,590) (2,483) (1,492) Deferred taxes and other liabilities........................................ (970) (5,443) 824 Other....................................................................... (185) (450) 1,333 ---------- ---------- ---------- Cash provided by operations................................................... 68,207 79,227 88,871 ---------- ---------- ---------- Cash flow from investing activities: Additions to property, plant and equipment.................................. (20,374) (20,381) (10,936) Net investment in acquisitions and joint ventures........................... (29,461) (1,234) Other....................................................................... (1,030) (1,290) ---------- ---------- ---------- Cash flow used by investing activities........................................ (49,835) (21,411) (13,460) ---------- ---------- ---------- Cash flow from financing activities: Decrease in long-term debt.................................................. (45,368) (97,972) Net increase (decrease) in borrowings under revolving credit facilities..... 26,255 (5,002) (47,659) Net proceeds from issuance of common stock.................................. 66,917 Net proceeds from the sale of accounts receivable........................... 5,000 Treasury stock repurchases.................................................. (52,671) ---------- ---------- ---------- Cash flow used by financing activities........................................ (26,416) (50,370) (73,714) ---------- ---------- ---------- Net change in cash and short-term cash investments............................ (8,044) 7,446 1,697 Cash and short-term cash investments balance, beginning of period............. 12,028 4,582 2,885 ---------- ---------- ---------- Cash and short-term cash investments balance, end of period................... $ 3,984 $ 12,028 $ 4,582 ---------- ---------- ---------- ---------- ---------- ---------- Cash paid during the year for: Interest.................................................................... $ 24,180 $ 25,109 $ 30,139 Income taxes paid, net of refunds........................................... 54,765 37,606 15,624
See accompanying notes to consolidated financial statements. 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OPERATIONS Amphenol Corporation ("Amphenol" or the "Company") is in one business segment which consists of designing, manufacturing and marketing connectors, cable and interconnect systems, principally for telephone, wireless and data communication systems; cable television; commercial and military aerospace electronics equipment; automotive and mass transportation applications; and industrial factory automation equipment. USE OF ESTIMATES The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION AND INVESTMENTS The consolidated financial statements include the accounts of the Company and its subsidiaries. Other assets includes an investment in equity securities deemed available-for-sale. Such investment is recorded at its market value at December 31, 1996 of $8,187 ($9,857 at December 31, 1995), and the cumulative appreciation in market value over the cost basis of the investment, net of deferred tax, of $3,687 ($4,772 at December 31, 1995) is recorded as a component of shareholders' equity. CASH AND SHORT-TERM CASH INVESTMENTS Cash and short-term cash investments consist of cash and liquid investments with a maturity of less than three months. INVENTORIES Inventories are stated at the lower of standard cost, which approximates average cost, or market. The principal components of cost included in inventories are materials, direct labor and manufacturing overhead. DEPRECIABLE ASSETS Property, plant and equipment are carried at cost. Depreciation and amortization of property, plant and equipment are provided on a straight-line basis over the respective asset lives determined on a composite basis by asset group or on a specific item basis using the estimated useful lives of such assets which range from 3 to 12 years for machinery and equipment and 20 to 40 years for buildings. It is the Company's policy to periodically review fixed asset lives. DEFERRED DEBT ISSUANCE COSTS Deferred debt issuance costs are being amortized on the interest method over the term of the related debt. In 1994, in conjunction with the prepayment of certain bank debt, the Company incurred an extraordinary net charge of approximately $4,087 for the write off of deferred debt issuance costs. 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED The excess of cost over the fair value of net assets acquired (goodwill) is being amortized on the straight-line basis over a period of 40 years. Accumulated amortization was $85,657 and $74,695 at December 31, 1996 and 1995, respectively. Management continually reassesses the appropriateness of both the carrying value and remaining life of goodwill. Such reassessments are based on forecasting cash flows, on an undiscounted basis, and other factors. REVENUE RECOGNITION Sales and related cost of sales are recognized primarily upon shipment of products. Sales and related cost of sales under long-term contracts with commercial customers and the U.S. Government are recognized as units are delivered or services provided. RETIREMENT PENSION PLANS Costs for retirement pension plans include current service costs and amortization of prior service costs over periods of up to thirty years. It is the Company's policy to fund current pension costs in conformance with minimum funding requirements and maximum tax deductible limitations. The expense of retiree medical benefit programs is recognized during the employees' service with the Company as well as amortization of a transition obligation recognized on adoption of the accounting principle in 1993. INCOME TAXES Deferred income taxes are provided for revenue and expenses which are recognized in different periods for income tax and financial statement purposes. Deferred income taxes are not provided on undistributed earnings of foreign affiliated companies which are considered to be permanently invested. RESEARCH AND DEVELOPMENT Research, development and engineering expenditures for the creation and application of new and improved products and processes were $14,550, $15,740 and $14,261, excluding customer sponsored programs representing expenditures of $927, $1,272 and $831, for the years 1996, 1995 and 1994, respectively. ENVIRONMENTAL OBLIGATIONS The Company recognizes the potential cost for environmental remediation activities when assessments are made, remedial efforts are probable and related amounts can be reasonably estimated; potential insurance reimbursements are not recorded. The Company regularly assesses its environmental liabilities through reviews of contractual commitments, site assessments, feasibility studies and formal remedial design and action plans. NET INCOME PER SHARE Net income per share is based on the net income for the period divided by the weighted average common shares outstanding. 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments, which are periodically used by the Company in the management of its interest rate and foreign currency exposures, are accounted for on an accrual basis. Income and expense are recorded in the same category as that arising for the related asset or liability. For example, amounts to be paid or received under interest rate swap agreements are recognized as interest income or expense in the periods in which they accrue. NOTE 2--LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, INTEREST RATE AT ------------------------ DECEMBER 31, 1996 MATURITY 1996 1995 ----------------- ----------- ---------- ------------ Senior notes.......................................... 10.45% 1999-2001 $ 100,000 $ 100,000 Senior subordinated debentures........................ 12.75% 2002 95,000 95,000 Revolving credit facility............................. 6.0% 2000 24,000 Notes payable to foreign banks........................ 1.62-9.25% 1997-2000 8,243 2,865 ---------- ------------ 227,243 197,865 Less current portion.................................. 7,759 2,670 ---------- ------------ Total long-term debt.................................. $ 219,484 $ 195,195 ---------- ------------ ---------- ------------
On November 30, 1995, the Company entered into a $150,000 five year unsecured revolving credit agreement with a group of banks. Interest on borrowings under the credit agreement generally accrues at 0.275% over LIBOR or, at the Company's option, at the bank's base rate; in addition, the Company pays a facility fee. The credit agreement requires the Company to meet certain financial tests including minimum net worth, interest coverage and leverage ratios. In addition, the agreement includes limitations with respect to secured borrowings and restricted payments, including dividends on the Company's common stock. The Senior Notes are unsecured and subject to redemption at the option of the Company at any time, in whole or in part, at par plus a make-whole premium determined in relation to the current interest rate on U.S. Government securities at the time of an optional redemption. The Senior Subordinated Debentures are subject to redemption at the option of the Company, in whole or in part, beginning in 1997 at 104.8% and declining to 100% by 2000. The maturity of the Company's long-term debt over each of the next five years ending December 31, is as follows: 1997--$7,759; 1998--$206; 1999--$33,576; 2000--$33,368; and 2001--$33,334. 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 3--INCOME TAXES The components of income before income taxes and the provision (benefit) for income taxes are as follows:
YEAR ENDED DECEMBER 31, --------------------------------- 1996 1995 1994 ---------- ---------- --------- Income before taxes and extraordinary item: United States................................................................ $ 67,889 $ 69,694 $ 47,402 Foreign...................................................................... 41,776 34,933 22,107 ---------- ---------- --------- $ 109,665 $ 104,627 $ 69,509 ---------- ---------- --------- ---------- ---------- --------- Current provision: United States................................................................ $ 24,174 $ 18,045 $ 25,771 Foreign...................................................................... 15,993 16,144 3,000 ---------- ---------- --------- 40,167 34,189 28,771 ---------- ---------- --------- ---------- ---------- --------- Deferred provision (benefit): United States................................................................ 1,884 7,122 (1,103) Foreign...................................................................... 36 458 (559) ---------- ---------- --------- 1,920 7,580 (1,662) ---------- ---------- --------- Total provision for income taxes............................................... $ 42,087 $ 41,769 $ 27,109 ---------- ---------- --------- ---------- ---------- ---------
At December 31, 1996, the Company had $15,009 of foreign tax loss carryforwards and $380 of tax credit carryforwards that expire in various periods. Differences between the U.S. statutory federal tax rate and the Company's effective income tax rate are analyzed below:
YEAR ENDED DECEMBER 31, ------------------------------- 1996 1995 1994 --------- --------- --------- U.S. statutory federal tax rate...................................................... 35.0% 35.0% 35.0% State and local taxes................................................................ 1.5 1.2 1.8 Non-deductible purchase accounting differences....................................... 3.7 3.6 5.4 Foreign tax provisions at rates different from the U.S. statutory rate............... .5 4.8 .7 Tax cost (benefit) of foreign dividend income, net of related tax credits............ (2.6) (2.8) .2 Valuation allowance.................................................................. (4.1) (1.8) (5.3) Other................................................................................ 4.4 (.1) 1.2 --- --- --- Effective tax rate................................................................... 38.4% 39.9% 39.0% --- --- --- --- --- ---
30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 3--INCOME TAXES (CONTINUED) The Company's deferred tax assets and liabilities, prior to valuation allowance, were comprised of the following:
DECEMBER 31, -------------------- 1996 1995 --------- --------- Deferred tax assets: Accrued liabilities and reserves...................................... $ 6,359 $ 9,190 Operating loss carryforwards.......................................... 4,447 5,663 Foreign tax credit carryforwards...................................... 380 1,558 Employee benefits..................................................... 6,459 8,499 --------- --------- $ 17,645 $ 24,910 --------- --------- --------- --------- Deferred tax liabilities: Depreciation.......................................................... $ 9,351 $ 10,262 Marketable securities................................................. 1,985 2,570 Prepaid pension costs................................................. 4,930 3,510 --------- --------- $ 16,266 $ 16,342 --------- --------- --------- ---------
A valuation allowance of $8,184 and $12,628 at December 31, 1996 and 1995, respectively, has been recorded which relates primarily to foreign net operating loss carryforwards, foreign tax credits and certain deferred tax deductions for which a tax benefit is less likely than not to be received. The net change in the valuation allowance for deferred tax assets was a decrease of $4,444 in 1996 and $1,842 in 1995 and reduced income tax expenses each year. The net decrease in the valuation allowance related primarily to benefits arising from utilization of foreign net operating losses and foreign tax credit carryforwards in 1996 and 1995. Changes to certain deferred tax deductions resulted in an increase to the valuation allowance for 1995 and a decrease for 1996. Current and non-current deferred tax assets and liabilities within the same tax jurisdiction are offset for presentation in the consolidated balance sheet. United States income taxes have not been provided on undistributed earnings of international subsidiaries. The Company's intention is to reinvest these earnings permanently or to repatriate the earnings only when it is tax effective to do so. Accordingly, the Company believes that any United States tax on repatriated earnings would be substantially offset by U.S. foreign tax credits. NOTE 4--BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS The Company and its domestic subsidiaries have a number of defined benefit plans covering substantially all U.S. employees. Plan benefits are generally based on years of service and compensation. The plans are noncontributory, except for certain salaried employees. Certain foreign subsidiaries have 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 4--BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED) defined benefit plans covering their employees. The following is a summary of the defined benefit plans' funded status as of the most recent actuarial valuations (December 31, 1996 and 1995).
DECEMBER 31, 1996 DECEMBER 31, 1995 -------------------------- -------------------------- ACCUMULATED ASSETS ACCUMULATED ASSETS BENEFITS EXCEED BENEFITS EXCEED EXCEED ACCUMULATED EXCEED ACCUMULATED ASSETS BENEFITS ASSETS BENEFITS ------------ ------------ ------------ ------------ Actuarial present value of benefit obligations: Vested benefit obligation................................. $ 72,983 $ 102,685 $ 145,750 $ 26,595 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Accumulated benefit obligation............................ $ 74,319 $ 104,576 $ 147,390 $ 26,802 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Projected benefit obligation.............................. $ 76,959 $ 112,777 $ 156,824 $ 28,316 Plan assets at fair value................................. 42,637 136,202 114,485 39,366 ------------ ------------ ------------ ------------ Plan assets over (under) projected benefit obligation..... (34,322) 23,425 (42,339) 11,050 Unrecognized net loss (gain).............................. 11,625 (2,994) 22,986 (2,365) Unrecognized prior service cost........................... 4,116 1,351 6,214 (154) Unrecognized transition asset............................. 241 (3,350) (11) (2,236) ------------ ------------ ------------ ------------ Pension asset (liability) included in the Consolidated Balance Sheet........................................... $ (18,340) $ 18,432 $ (13,150) $ 6,295 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
YEAR ENDED DECEMBER 31, ------------------------------- 1996 1995 1994 --------- --------- --------- Net pension expense included the following components: Service cost benefits earned.................................................... $ 3,551 $ 3,221 $ 3,163 Interest cost on projected benefit obligation................................... 13,707 13,313 12,508 Actual return on plan assets.................................................... (16,193) (33,906) 4,664 Net amortization and deferral of actuarial (gains) losses....................... 1,321 20,045 (17,862) --------- --------- --------- Net pension expense............................................................... $ 2,386 $ 2,673 $ 2,473 --------- --------- --------- --------- --------- ---------
The weighted-average discount rate and rate of increase in future compensation levels used in determining actuarial present value of the projected benefit obligation was 7.5% (7.5% in 1995 and 8.5% in 1994) and 3.50% (3.50% in 1995 and 4.50% in 1994), respectively. The expected long-term rate of return on assets was 10.5%. The largest non-U.S. plan, in accordance with local custom, is unfunded and had an accumulated benefit obligation of approximately $20,485 and $20,761 at December 31, 1996 and 1995, respectively. Such obligation is included in the consolidated balance sheet and the tables above. Pension plans of certain of the Company's other international subsidiaries generally do not determine the actuarial value of accumulated benefits and the value of net assets on the basis shown above. The plans, in accordance with local practices, are generally unfunded. The vested benefit obligations of these plans are not significant. In accordance with the provisions of FAS No. 87, the Company recorded a minimum pension liability at December 31, 1996 of 13,572 ($15,558 at December 31, 1995) for circumstances in which a pension 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 4--BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED) plan's accumulated benefit obligation exceeded the fair value of the plan's assets and accrued pension liability. Such liability was partially offset by an intangible asset equal to the unrecognized prior service cost, with the balance recorded as a reduction in shareholders' equity, net of related deferred tax benefits. The Company maintains self insurance programs for that portion of its health care and workers compensation costs not covered by insurance. The Company also provides certain health care and life insurance benefits to certain eligible retirees through postretirement benefit programs. Beginning in late 1996, the Company implemented changes in its postretirement medical benefit plans such that the Company's share of the cost of such plans for most participants is fixed, and any increase in the cost of such plans will be the responsibility of the retirees. The cost of postretirement health care and life insurance benefit programs charged to expense was approximately $2,734, $2,088, and $1,831 for the years 1996, 1995 and 1994, respectively. The Company expects to fund the benefit costs principally on a pay-as-you-go basis. Since the Company has modified its postretirement medical plans to hold constant its obligation and since the accumulated postretirement benefit obligation ("APBO") and the net postretirement benefit expense are not material in relation to the Company's financial condition or results of operations, management believes any change in medical costs from that estimated will not have a significant impact on the Company. The discount rate used in determining the APBO at December 31, 1996 and 1995 was 7.5%. Summary information on the Company's postretirement medical plans as of December 31, 1996 and 1995 is as follows:
DECEMBER 31, -------------------- 1996 1995 --------- --------- Accumulated postretirement benefit obligation: Retirees.............................................................. $ 10,710 $ 15,486 Fully eligible, active plan participants.............................. 1,236 832 Other active participants............................................. 1,156 825 --------- --------- Postretirement benefit obligation..................................... 13,102 17,143 Unrecognized gain (loss).............................................. (6,815) (2,891) Unrecognized transition obligation.................................... (933) (7,134) --------- --------- Postretirement benefit liability included in the balance sheet........ $ 5,354 $ 7,118 --------- --------- --------- --------- Components of net postretirement benefit expense are as follows: Service cost.......................................................... $ 36 $ 26 Interest cost......................................................... 1,545 1,535 Amortization of transition obligation................................. 424 424 Net amortization and deferral of actuarial (gains) losses............. 729 103 --------- --------- Net postretirement benefit expense.................................... $ 2,734 $ 2,088 --------- --------- --------- ---------
NOTE 5--SHAREHOLDERS' EQUITY The Company has entered into a Stockholders' Agreement with Lawrence J. DeGeorge, Chairman. The Agreement provides that if Mr. DeGeorge, together with his estate and his spouse, own at least 25% 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 5--SHAREHOLDERS' EQUITY (CONTINUED) of the Company's outstanding common stock, the Company will agree to nominate directors designated by Mr. DeGeorge, his estate or his spouse that represent up to 25% of the Board of Directors (but in no event fewer than two directors). If Mr. DeGeorge, together with his estate and his spouse, own less than 25% but at least 10% of the Company's outstanding common stock, the Company will agree to nominate that number of directors designated by Mr. DeGeorge, his estate or his spouse, that represent not less than 10% of the Board of Directors (but in no event fewer than one director). The Agreement also provides for certain registration rights in respect of common stock owned by Mr. DeGeorge. At December 31, 1996, Mr. DeGeorge, his estate and his spouse beneficially owned approximately 25.2% of the Company's common stock on a fully diluted basis. The Company has authorized 3,750,000 shares of Class B Common Stock, par value $.001. Such shares are equivalent to Class A Common Stock except the Class B shares are non-voting. There are no Class B shares outstanding. The Company has adopted a stock option plan which, as amended in 1996, authorized the granting of stock options by the Board of Directors for up to a maximum of 1,000,000 shares of Class A Common Stock. Options will be granted at fair market value at the time of the grant. Options granted under the Stock Option Plan may constitute incentive stock options (within the meaning of Section 422A of the Internal Revenue Code of 1986) or nonstatutory stock options. Such shares vest ratably over a period of three years from date of grant and are exercisable over a period of ten years from date of grant. At December 31, 1996 and 1995, 157,841 and 82,343 options were exercisable, respectively. Stock option plan activity for 1994, 1995, and 1996 was as follows:
OPTIONS AVERAGE PRICE --------- ------------- OPTIONS OUTSTANDING AT DECEMBER 31, 1993............................ 202,667 $ 8.94 Options granted..................................................... 155,000 15.53 Options exercised................................................... (47,787) 8.65 Options cancelled................................................... (38,499) 11.66 --------- OPTIONS OUTSTANDING AT DECEMBER 31, 1994............................ 271,381 12.36 Options granted..................................................... 155,500 26.32 Options exercised................................................... (54,705) 11.40 Options cancelled................................................... (58,332) 18.56 --------- OPTIONS OUTSTANDING AT DECEMBER 31, 1995............................ 313,844 18.48 Options granted..................................................... 173,600 23.82 Options exercised................................................... (15,005) 11.11 Options cancelled................................................... (49,001) 21.53 --------- OPTIONS OUTSTANDING AT DECEMBER 31, 1996............................ 423,438 $ 20.58 --------- ---------
34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 5--SHAREHOLDERS' EQUITY (CONTINUED) The following table summarizes information about stock options outstanding at December 31, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------- -------------------- AVERAGE AVERAGE EXERCISE PRICE SHARES PRICE TERM SHARES PRICE - --------------------- --------- --------- ----- --------- --------- $ 5.00-- $ 10.00 64,003 $ 9.14 5.93 64,003 $ 9.14 10.01-- 15.00 -- -- -- -- -- 15.01-- 20.00 91,335 $ 15.59 7.25 56,838 $ 15.50 20.01-- 25.00 158,100 $ 23.88 9.25 333 $ 25.00 25.01-- 30.00 110,000 $ 26.63 8.25 36,667 $ 26.63
The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for the stock option plan. Accordingly, no compensation cost has been recognized for the plan. Had compensation cost for the stock option plan been determined based on the fair value of the option at date of grant consistent with the requirements of Statement of Financial Accounting Standards No 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
1996 --------- Net income As reported........................................................... $ 67,578 $ 62,858 Pro forma............................................................. 66,884 62,366 Net income per share As reported........................................................... $ 1.45 $ 1.33 Pro forma............................................................. 1.43 1.32
The fair value of each stock option has been estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
1996 1995 --------- --------- Risk free interest rate............................................... 6.1% 6.6% Expected life......................................................... 4 years 4 years Expected volatility................................................... 30.0% 30.0% Expected dividend yield -- --
The weighted-average fair values of options granted during 1996 and 1995 were $7.98 and $9.14, respectively. 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 5--SHAREHOLDERS' EQUITY (CONTINUED) Activity in the Company's Shareholders' Equity cumulative valuation adjustment accounts for 1994, 1995 and 1996 is as follows:
CUMULATIVE CUMULATIVE MINIMUM TOTAL CUMULATIVE APPRECIATION PENSION CUMULATIVE TRANSLATION IN MARKETABLE LIABILITY VALUATION ADJUSTMENT SECURITIES ADJUSTMENT ADJUSTMENT ----------- ------------- ----------- ----------- Balance December 31, 1993................................... $ (8,444) $ 5,804 $ (4,419) $ (7,059) Translation adjustments................................... 3,786 3,786 Change in appreciation in market value of marketable securities available-for-sale........................... 162 162 Change in minimum pension liability adjustment............ (4,315) (4,315) ----------- ------ ----------- ----------- Balance December 31, 1994................................... (4,658) 5,966 (8,734) (7,426) Translation adjustments................................... 2,246 2,246 Change in appreciation in market value of marketable securities available-for-sale........................... (1,194) (1,194) Change in minimum pension liability adjustment............ 1,163 1,163 ----------- ------ ----------- ----------- Balance December 31, 1995................................... (2,412) 4,772 (7,571) (5,211) Translation adjustments................................... 647 647 Change in appreciation in market value of marketable securities available-for-sale........................... (1,085) (1,085) Change in minimum pension liability adjustment............ 1,762 1,762 ----------- ------ ----------- ----------- Balance December 31, 1996................................... $ (1,765) $ 3,687 $ (5,809) $ (3,887) ----------- ------ ----------- ----------- ----------- ------ ----------- -----------
NOTE 6--LEASES At December 31, 1996, the Company was committed under operating leases which expire at various dates through 2004. Total rent expense under operating leases for the years 1996, 1995, and 1994 was $12,216, $11,594 and $10,108, respectively. MINIMUM LEASE PAYMENTS UNDER NON-CANCELABLE OPERATING LEASES ARE AS FOLLOWS: 1997............................................................... $ 7,249 1998............................................................... 5,974 1999............................................................... 3,849 2000............................................................... 2,851 2001............................................................... 2,002 Beyond 2001........................................................ 2,915 --------- Total minimum obligation..................................... $ 24,840 --------- ---------
36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 7--INTERNATIONAL OPERATIONS A portion of the Company's revenues and assets relate to international operations. The Company has manufacturing facilities in Germany, the United Kingdom, France, Canada, Taiwan and Hong Kong and operations of lesser size in a number of other countries. Amounts included in the accompanying consolidated financial statements associated with operations outside the United States consist of the following:
YEAR ENDED DECEMBER 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Net sales: United States operations................................................... $ 503,385 $ 534,322 $ 494,299 International operations: Europe................................................................. 233,670 217,143 177,549 Other.................................................................. 92,689 78,442 59,744 Eliminations............................................................... (53,523) (46,674) (38,941) ---------- ---------- ---------- Net sales............................................................ $ 776,221 $ 783,233 $ 692,651 ---------- ---------- ---------- ---------- ---------- ---------- Net income before extraordinary item: United States operations................................................... $ 42,614 $ 46,493 $ 25,505 International operations: Europe................................................................. 21,954 16,266 16,679 Other.................................................................. 3,010 99 216 ---------- ---------- ---------- Net income before extraordinary item................................. $ 67,578 $ 62,858 $ 42,400 ---------- ---------- ---------- ---------- ---------- ---------- Identifiable assets: United States operations................................................... $ 473,889 $ 458,313 $ 470,209 International operations: Europe................................................................. 172,640 170,319 155,833 Other.................................................................. 75,560 73,406 65,682 Eliminations............................................................... (11,427) (12,114) (14,669) ---------- ---------- ---------- Total assets......................................................... $ 710,662 $ 689,924 $ 677,055 ---------- ---------- ---------- ---------- ---------- ----------
The Company had export sales from its United States operations of approximately $80,000, $118,000 and $93,000 in 1996, 1995 and 1994, respectively. The sales were made principally to Asia and the Far East, Europe and Latin America. Pursuant to FAS No. 52, "Foreign Currency Translation," the financial position and results of operations of all of the Company's significant foreign subsidiaries are measured using local currency as the functional currency. Assets and liabilities of such subsidiaries have been translated at current exchange rates, and related revenues and expenses have been translated at weighted average exchange rates. The aggregate effect of translation adjustments so calculated is included as a separate component of shareholders' equity. Transaction gains and losses are included in other expenses, net. The Company periodically enters into foreign exchange contracts to hedge its transaction exposures. At December 31, 1996, the Company had no outstanding foreign exchange contracts. 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 8--OTHER EXPENSES, NET Other income (expense) is comprised as follows:
YEAR ENDED DECEMBER 31, ------------------------------- 1996 1995 1994 --------- --------- --------- Royalty income (expense).......................................................... $ 108 $ (59) $ 92 Interest income................................................................... 784 134 66 Foreign currency transaction gains (losses)....................................... 339 205 (357) Equity in net earnings (losses) of investments.................................... (60) 272 Gain (loss) on sale of assets..................................................... (28) 262 (18) Program fees on sale of accounts receivable....................................... (3,504) (3,902) (3,180) Minority interests................................................................ (251) (407) (105) Other............................................................................. (1,144) (688) (930) --------- --------- --------- $ (3,696) $ (4,515) $ (4,160) --------- --------- --------- --------- --------- ---------
NOTE 9--COMMITMENTS AND CONTINGENCIES In the course of pursuing its normal business activities, the Company is involved in various legal proceedings and claims. Management does not expect that amounts, if any, which may be required to be paid by reason of such proceedings or claims will have a material effect on the Company's financial position or results of operations. In connection with the acquisition of Amphenol from Allied Corporation in 1987, Allied agreed to provide substantial indemnification for potential environmental liabilities identified within a period of seven years following the acquisition that arise out of events, conditions or circumstances that occurred or existed at the time of or prior to the acquisition to the extent that such liability exceeds $13,000. In such event, Allied is obligated to pay 80% of the excess over $13,000 and 100% of the excess over $30,000. The Company has been named as a defendant in various legal actions or as a potentially responsible party in relation to several environmental clean-up sites in which the associated costs are subject to the Allied indemnification agreement. Management does not believe that the costs associated with resolution of these matters will have a material adverse effect on the Company's financial position or results of operations. In December 1993, a subsidiary of the Company entered into a four year agreement with a financial institution whereby the subsidiary would sell an undivided interest of up to $50,000 in a designated pool of qualified accounts receivable. Under the terms of the agreement, new receivables are added to the pool as collections reduce previously sold accounts receivable. The Company services, administers and collects the receivables on behalf of the purchaser. Fees payable to the purchaser under this agreement are equivalent to rates afforded high quality commercial paper issuers plus certain administrative expenses and are included in other expense, net in the accompanying Consolidated Statement of Income. The agreement contains certain covenants and provides for various events of termination. In certain circumstances the Company is contingently liable for the collection of the receivables sold; management believes that its allowance for doubtful accounts will be adequate to absorb the expense of any such liability. At December 31, 1996 and 1995, approximately $50,000 in receivables were sold under the agreement and are therefore not reflected in the accounts receivable balance in the accompanying Consolidated Balance Sheet at that date. 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 10--FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. CASH AND SHORT-TERM CASH INVESTMENTS: The carrying amount approximates fair value because of the short maturity of those instruments. LONG-TERM DEBT: The fair value of the Company's long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. INVESTMENTS: The fair value of investments is based upon quoted market prices. The fair value equals the carrying value of equity investments, which are classified as available-for-sale. At December 31, 1996 and 1995, based on market quotes for the same or similar securities, it is estimated that the Company's 12.75% subordinated debentures due 2002 and 10.45% senior notes due 2001 were trading at premiums of approximately 10% to 20% over book value. It is estimated that the carrying value of the Company's other financial instruments at December 31, 1996 and 1995 approximates fair value. The Company periodically uses derivative financial instruments. The instruments are primarily used to manage defined interest rate risk, and to a lesser extent foreign exchange and commodity risks arising out of the Company's core activities. During 1994, the Company had interest rate protection agreements that fixed the interest cost relating to the majority of the Company's floating rate debt. During 1995, the Company used forward contracts to hedge certain foreign currency exposures. There were no derivative financial instruments outstanding at December 31, 1996 and 1995. 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 11--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED -------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ---------- ---------- ------------ ------------ 1996 Net sales.................................................... $ 194,822 $ 198,921 $ 184,876 $ 197,602 Gross profit, including depreciation......................... 66,639 67,816 63,523 66,539 Net income................................................... 16,940 17,408 16,697 16,533 Net income per share......................................... .36 .37 .36 .37 Stock price - High........................................... 26 27 5/8 22 7/8 23 - Low............................................... 20 1/8 19 7/8 18 3/4 19 1995 Net sales.................................................... $ 197,975 $ 207,584 $ 189,012 $ 188,662 Gross profit, including depreciation......................... 63,840 67,267 64,630 64,771 Net income................................................... 14,221 16,065 16,090 16,482 Net income per share......................................... .30 .34 .34 .35 Stock price - High........................................... 27 1/2 30 3/8 29 1/2 24 1/4 - Low............................................... 20 23 3/4 21 1/2 18 3/4 1994 Net sales.................................................... $ 155,508 $ 173,565 $ 178,172 $ 185,406 Gross profit, including depreciation......................... 46,974 54,431 56,606 59,997 Net income................................................... 7,047(a) 10,620 11,705 13,028 Net income per share......................................... .16(a) .22 .25 .28 Stock price - High........................................... 18 18 1/2 24 25 1/8 - Low............................................... 14 3/8 14 1/8 16 1/4 20 7/8
- ------------------------ (a) Excludes an extraordinary charge for the write off of deferred debt issuance costs of $4,087 or $.09 per share. NOTE 12--SUBSEQUENT EVENT--PROPOSED TRANSACTION On January 23, 1997, the Company announced that it signed an Agreement and Plan of Merger ("Agreement") with an affiliate of Kohlberg Kravis Roberts & Co. L.P. ("KKR"). Upon completion of the transaction, which is expected to be consummated in April 1997, affiliates of KKR will be the majority owner of the Company. The Agreement provides that the owner of each outstanding share of Class A common stock can elect either to receive $26.00 in cash for that share or to retain that share. However, in no event can more than 4.4 million shares of common stock (approximately 10% of the currently outstanding shares) be retained by present Amphenol shareholders. If holders elect to retain more than 4.4 million of the outstanding shares, then the shares available will be prorated among those electing to retain and cash will be paid for all other shares. If holders elect to retain fewer than 4.4 million of the outstanding shares, the remaining available shares will be prorated among those electing cash. Following the merger, affiliates of KKR expect to own in excess of 75% of the Company's outstanding shares. Affiliates of KKR will invest up to $374 million of equity in the transaction. The balance of funds necessary to complete the transaction, estimated at approximately $990 million, including refinancing of the Company's existing indebtedness and obligations, will come from borrowings. 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE 12--SUBSEQUENT EVENT--PROPOSED TRANSACTION (CONTINUED) Lawrence J. DeGeorge, Chairman of the Board of the Company, and certain members of his family (and a trust founded by them) who hold, in the aggregate, approximately 30% of the outstanding common stock, have agreed to vote their shares in favor of the merger. An affiliate of KKR will also have the option to call the DeGeorge family shares under certain circumstances, and following the recapitalization the DeGeorge interests will have the option to put the shares which they retain following the merger to the affiliate, in each case for $26.00 in cash per share. The merger is subject to certain conditions including the approval of the Company's shareholders at its annual meeting, the expiration of antitrust regulatory waiting periods and the completion of financing arrangements. After the merger, Amphenol will continue to operate as an independent public company under its current name with headquarters in Wallingford, Connecticut. 41 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Pursuant to Instruction G(3) to Form 10-K, the information required by Item 10 with respect to the Directors of the Registrant is incorporated by reference from the Company's definitive proxy statement which is expected to be filed pursuant to Regulation 14A on or before February 19, 1997. The information required by Item 10 with respect to the Executive Officers of the Registrant has been included in Part I of this Form 10-K in reliance on General Instruction G(3) of Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K. ITEM 11. EXECUTIVE COMPENSATION Pursuant to Instruction G(3) to Form 10-K, the information required in Item 11 is incorporated by reference from the Company's definitive proxy statement which is expected to be filed pursuant to Regulation 14A on or before February 19, 1997. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Pursuant to Instruction G(3) to Form 10-K, the information required in Item 12 is incorporated by reference from the Company's definitive proxy statement which is expected to be filed pursuant to Regulation 14A on or before February 19, 1997. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pursuant to Instruction G(3) to Form 10-K, the information required in Item 13 is incorporated by reference from the Company's definitive proxy statement which is expected to be filed pursuant to Regulation 14A on or before February 19, 1997. 42 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A)(1) CONSOLIDATED FINANCIAL STATEMENTS
PAGE ----- Report of Management....................................................................................... 21 Report of Independent Accountants.......................................................................... 21 Consolidated Statement of Income-- Years Ended December 31, 1996, December 31, 1995, and December 31, 1994.................................. 22 Consolidated Balance Sheet-- December 31, 1996 and December 31, 1995.................................................................... 23 Consolidated Statement of Changes in Shareholders' Equity-- Years Ended December 31, 1996, December 31, 1995, and December 31, 1994.................................... 24 Consolidated Statement of Cash Flow-- Years Ended December 31, 1996, December 31, 1995, and December 31, 1994.................................... 25 Notes to Consolidated Financial Statements................................................................. 26
(A)(2) FINANCIAL STATEMENT SCHEDULES FOR THE THREE YEARS ENDED DECEMBER 31, 1996 All financial statement schedules are omitted because they are not applicable or required, or because the required information is included in the consolidated financial statements or notes thereto. 43 (A)(3) LISTING OF EXHIBITS 2.1 Agreement and Plan of Merger dated as of January 23, 1997 between NXS Acquisition Corp. and Amphenol Corporation (filed as Exhibit 2.1 to the Current Report on Form 8-K dated January 23, 1997).* 3.1 Restated Certificate of Incorporation of the Company as of November 15, 1991 (filed as Exhibit 3.1 to the Annual Report on Form 10-K for the Year ended December 31, 1991 (the "1991 10-K")).* 3.2 By-Laws of the Company as of October 30, 1991 (filed as Exhibit 3.2 to the 1991 10-K).* 4.1 $100,000,000 Note and Guarantee Agreement, dated as of October 30, 1991 between Amphenol and the Purchasers named therein (the "Senior Note Agreement" (filed as Exhibit 4.5 to the 1991 10-K)).* 4.2 Amendment letter dated November 7, 1991 to the Senior Note Agreement (filed as Exhibit 4.2 to the Annual Report on Form 10-K for the Year Ended December 31, 1993 (the "1993 10-K")).* 4.3 Second Amendment to the Senior Note Agreement, dated as of December 9, 1992 (filed as Exhibit (4)(b) to the Company's Form 8-K dated December 22, 1992 (the "1992 8-K")).* 4.4 $95,000,000 Senior Subordinated Note Indenture dated as of December 15, 1992 by and between the Company and the Bank of New York, as trustee (filed as Exhibit (4)(a) to the 1992 8-K).* 4.5 Stockholders' Agreement, dated as of December 15, 1992 (filed as Exhibit 4.8 to the Registration Statement on Form S-1 (No. 33-54262) filed on November 5, 1992, and effective December 10, 1992 (the "1992 Registration Statement")).* 10.1 Receivables Purchase Agreement, dated as of December 3, 1993, among Amphenol Funding Corp., the Company, Pooled Accounts Receivable Capital Corporation and the Bank of Montreal (filed as Exhibit 10.1 to the 1993 10-K).* 10.2 First Amendment to Receivables Purchase Agreement, dated as of November 21, 1995 by and among Amphenol Funding Corp., the Company, Pooled Accounts Receivable Capital Corporation and Nesbitt Burns Securities, Inc., as successor to Bank of Montreal, as agent (filed as Exhibit 10.6 to the Annual Report on Form 10-K for the Year ended December 31, 1995 (the "1995 10K")).* 10.3 Second Amendment to Receivables Purchase Agreement, dated as of December 30, 1996 by and among Amphenol Funding Corp., the Company, Pooled Accounts Receivable Capital Corporation and Nesbitt Burns Securities, Inc., as successor to Bank of Montreal, as agent. 10.4 Purchase and Sale Agreement, dated as of December 3, 1993, among the originators named therein, Amphenol Funding Corp. and the Company (filed as Exhibit 10.2 to the 1993 10-K).* 10.5 First Amendment to Purchase and Sale Agreement, dated as of December 30, 1996 by and among the originators named therein, Amphenol Funding Corp. and the Company. 10.6 Subscription and Shareholder Agreement, dated as of December 3, 1993, among Amphenol Funding Corp., the Company, AIPC, Pyle-National, Inc. and Times Fiber Communications (filed as Exhibit 10.3 to the 1993 10-K).* 10.7 Agreement and Plan of Merger among the Company, Cable Acquisition Corp. and LPL, dated as of October 28, 1992 (filed as Exhibit 2.1 to the 1992 Registration Statement).* 10.8 $150,000,000 Credit Agreement, dated as of November 30, 1995, among the Company, Chemical Bank and various other banks named therein (the "Credit Agreement") (filed as Exhibit 10.5 to the 1995 10K).*
MANAGEMENT CONTRACTS AND COMPENSATORY PLANS (EXHIBITS 10.9 THROUGH 10.20) 10.9 Restricted Stock Plan of Amphenol effective July 1, 1987 (filed as Exhibit 10.6 to the 1991 Registration Statement).* 10.10 1994 Amphenol Management Incentive Plan (filed as Exhibit 10.10 to the Annual Report on Form 10-K for the Year Ended December 31, 1994 (the "1994 10-K")).* 10.11 1995 Amphenol Management Incentive Plan (filed as Exhibit 10.10 to the 1995 10-K).* 10.12 1996 Amphenol Management Incentive Plan.
- ------------------------ * Incorporated herein by reference as stated. 44 10.13 1997 Amphenol Management Incentive Plan. 10.14 Amended Stock Option Plan of Amphenol, effective May 23, 1996. 10.15 1996 Long-Term Incentive Stock Plan of Amphenol. 10.16 Amended and Restated Salaried Employees Pension Plan of the Amphenol Corporation (filed as Exhibit 10.12 to the 1994 10-K).* 10.17 Amended and Restated LPL Technologies Inc. Retirement Plan for Salaried Employees (filed as Exhibit 10.13 to the 1994 10-K).* 10.18 Amphenol Corporation Supplemental Employee Retirement Plan formally adopted effective January 25, 1996. 10.19 LPL Technologies Inc. and Affiliated Companies Employee Savings/401(k) Plan, dated and adopted January 23, 1990 (filed as Exhibit 10.19 to the 1991 Registration Statement).* 10.20 Management Agreement between Amphenol and Dr. Martin H. Loeffler, dated July 28, 1987 (filed as Exhibit 10.7 to the 1987 Registration Statement).* 10.21 Joint Venture Agreement between Allied Signal, Inc. and Daito Shoji Company Limited, dated March 12, 1986 by Allied Corporation and dated March 1, 1986 by Daito Shoji Company Limited (filed as Exhibit 10.14 to the 1991 Registration Statement).* 10.22 Stock Sale and Purchase Agreement dated as of July 2, 1994 between Daito Shoji Company Limited and Amphenol Corporation (filed as Exhibit 10.16 to the 1994 10-K).* 10.23 License and Technical Assistance Agreement between Allied Corporation and Nippon Interconnect Company, dated March 12, 1986 by Allied Corporation and April 1, 1986 by Nippon Interconnect Company (filed as Exhibit 10.15 to the 1991 Registration Statement).* 10.24 License and Technical Assistance Agreement between Amphenol and Amphetronix Limited, dated July 30, 1991 (filed as Exhibit 10.17 to the 1991 Registration Statement).* 10.25 Agreement and Plan of Merger among Amphenol Acquisition Corporation, Allied Corporation and Amphenol, dated April 1, 1987, and the Amendment thereto dated as of May 15, 1987 (filed as Exhibit 2 to the 1987 Registration Statement).* 10.26 Settlement Agreement among Allied Signal Inc., Amphenol and LPL Investment Group, Inc. dated November 28, 1988 (filed as Exhibit 10.20 to the 1991 Registration Statement).* 11 Statement regarding computation of per share earnings. 12 Statement regarding computation of ratio of earnings to fixed charges. 22 Subsidiaries of the Company. 99.1 Stockholders Agreement dated as of January 23, 1997 by and between NXS I, L.L.C. and the other parties signatory thereto (filed as Exhibit 10.1 to the Current Report on Form 8-K dated January 23, 1997).*
(B) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the last quarter of the period covered by this report. - ------------------------ * Incorporated herein by reference as stated. 45 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 in the City of Wallingford, State of Connecticut on the 18th day of February 1997. AMPHENOL CORPORATION By: /s/ MARTIN H. LOEFFLER ----------------------------------------- Martin H. Loeffler PRESIDENT AND CHIEF EXECUTIVE OFFICER Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and as of the date indicated below. SIGNATURE TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ LAWRENCE J. DEGEORGE - ------------------------------ Chairman of the Board February 18, 1997 Lawrence J. DeGeorge Director, President and /s/ MARTIN H. LOEFFLER Chief Executive Officer - ------------------------------ (Principal Executive February 18, 1997 Martin H. Loeffler Officer) Director, Chief Financial /s/ EDWARD G. JEPSEN Officer (Principal - ------------------------------ Financial Officer and February 18, 1997 Edward G. Jepsen Principal Accounting Officer) /s/ TIMOTHY F. COHANE - ------------------------------ Director February 18, 1997 Timothy F. Cohane /s/ FLORENCE A. DEGEORGE - ------------------------------ Director February 18, 1997 Florence A. DeGeorge /s/ A. HENRY MORGAN - ------------------------------ Director February 18, 1997 A. Henry Morgan /s/ DR. MARCIA A. SAVAGE - ------------------------------ Director February 18, 1997 Dr. Marcia A. Savage 46 EX-10.3 2 EXHIBIT 10.3 Exhibit 10.3 SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT THIS SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT, dated as of December 30, 1996 (this "Amendment"), is entered into among AMPHENOL FUNDING CORP., a Delaware corporation (the "Seller"), AMPHENOL CORPORATION, a Delaware corporation ("Amphenol"), POOLED ACCOUNTS RECEIVABLE CAPITAL CORPORATION, a Delaware corporation (the "Purchaser"), and NESBITT BURNS SECURITIES, INC., a Delaware corporation, as successor to Bank of Montreal, as the agent for the Purchaser (in such capacity, the "Agent") RECITALS 1. The Seller, Amphenol, the Purchaser and the Agent are parties to the Receivables Purchase Agreement dated as of December 3, 1993 (as amended by the First Amendment to Receivables Purchase Agreement, dated as of November 21, 1995, the "Agreement"); and 2. The parties hereto desire to amend the Agreement as hereinafter set forth. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Certain Defined Terms. Capitalized terms that are used herein without definition and that are defined in the Agreement and Appendix I thereto shall have the same meanings herein as in the Agreement. 2. Amendment to Agreement. (a) Appendix I to the Agreement is hereby amended by: (i) deleting clause (a) of the definition of "Net Portfolio Balance" and substituting therefor the following new clause (a): (a)(i) 8% of the Purchase Limit for TCI Communications so long as it is rated at least "Baa3" by Moody's and "BBB-" by S&P, and (ii) if not so rated, 6% of the Purchase Limit for TCI Communications so long as it is rated at least "Ba1" by Moody's and "BB" by S&P, in either such case so long as it is not subject to review for downgrade or on "Credit Watch" by such rating agencies; (ii) amending and restating the definition of "Originators" in its entirety as follows: "Originators" means Amphenol, Amphenol Interconnect Products Corporation, a Delaware corporation, Pyle National Inc., a Delaware corporation, Times Fiber Communications, Inc., a Delaware corporation, and The Sine Companies, Inc., a Michigan corporation, together with their successors as permitted under the Purchase and Sale Agreement. and (iii) amending and restating the definition of "Initial Closing Date" in its entirety as follows: "Initial Closing Date," with respect to each Originator, means the date on which the first purchases under the Purchase and Sale Agreement shall occur as to such Originator. (b) The Sine Companies, Inc. (the "New Originator"), pursuant to Section 8.01(c) of the Agreement, is appointed as a Servicer Person with respect to that portion of the Receivables Pool sold to the Seller by it. (c) Schedule 6.01(m) to the Agreement is hereby amended and restated in its entirety by Schedule 6.01(m) attached hereto. (d) Schedule 6.01(n) to the Agreement is hereby amended and restated in its entirety by Schedule 6.01(n) attached hereto. (e) Schedule 6.01(s) to the Agreement is hereby amended and restated in its entirety by Schedule 6.01(s) attached hereto. (f) The reference to "Section 14.02" in Section 6.01(m) of the Agreement is hereby replaced in its entirety by: "Section 14.02 (except as to the Servicer Persons, for whom the principal places of business and chief executive officers are as specified in Exhibit 6.01(m))" (g) The first sentence of Section 6.01(p) of the Agreement is hereby amended and restated in its entirety as follows: The authorized capital stock of Seller consists of one thousand (1000) shares of common stock, without par value ("Seller Common Stock"), 100 of which shares are currently issued and outstanding. 3. Representations and Warranties. Both the Seller (as to itself) and Amphenol (as to itself, the Seller and each Originator) hereby represents and warrants to the Purchaser and the Agent as follows: (a) Representations and Warranties. The representations and warranties contained in Section 6.01 of the Agreement (including after considering the New Originator as an Originator thereunder) are true and correct as of the date hereof (with the exception of page 2 Sections 6.O1(i)(i) and (ii) of the Agreement, in which case such representations and warranties are true and correct as to the most recent applicable financial statements). (b) Enforceability. The execution and delivery by it of this Amendment, and the performance of its obligations under this Amendment and the Agreement, as amended hereby, are within its corporate powers and have been duly authorized by all necessary corporate action on its part. This Amendment and the Agreement, as amended hereby, are its valid and legally binding obligations, enforceable in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (c) No Default. Both before and immediately after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event or Unmatured Termination Event exists or shall exist. 4. Effect of Amendment. All provisions of the Agreement, as expressly amended and modified by this Amendment, shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement (or in any other Transaction Document) to "this Agreement", "hereof", "herein" or words of similar effect referring to the Agreement shall be deemed to be references to the Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Agreement other than as set forth herein. 5. Effectiveness. This Amendment shall become effective as of the date hereof upon receipt by the Agent of the following, in form and substance satisfactory to the Agent in its sole discretion: (a) counterparts of this Amendment (whether by facsimile or otherwise) executed by each of the other parties hereto, (b) a written statement from both Moody's and S&P that this Amendment (and the contemporaneous amendment to the Purchase and Sale Agreement) will not result in a downgrade or withdrawal of the rating of the Commercial Paper Notes, (c) an acknowledgement and acceptance from Capital Markets Assurance Corporation, (d) duly executed copies of Lock-box Agreements with each of the Lock-box Banks pertaining to the New Originator, page 3 (e) such powers of attorney as the Agent reasonably shall request to enable the Agent to collect all amounts due under any and all Portfolio Receivables originated by the New Originator, (f) a Servicer Person Letter Agreement in substantially the form of the Servicer Person Letter Agreement, dated December 3, 1993, entered into in relation to the Agreement, (g) the payment of all invoiced costs and expenses of the Purchaser, the Agent and their respective Affiliates (including, without limitation, the reasonable fees and expenses of counsel) pursuant to Section 14.O6(a)(i)(B) of the Agreement, and (h) an executed copy of the First Amendment to Purchase and Sale Agreement, dated as of the date hereof, and confirmation that all conditions precedent to the effectiveness thereof either have been satisfied or waived. 6. Covenants. Within 60 days after the date hereof, Amphenol shall deliver to the Agent (with a copy for the Purchaser) a certificate from an authorized officer to the effect that: (a) the name of the renter of all post office boxes into which Collections may from time to time be mailed have been changed to the name of AFC (unless such post office boxes are in the name of the relevant Lock-box Banks) and (b) all relevant postmasters have been notified that each of the Servicer, the New Originator (as a Servicer Person) and the Agent are authorized to collect mail delivered to such post office boxes (unless such post office boxes are in the name of the relevant Lock-box Banks). 7. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. 8. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York (without regard to any otherwise applicable principles of conflicts of law), except to the extent that the validity or perfection of the interests of the Purchaser in the Receivables or remedies hereunder in respect thereof are governed by the laws of a jurisdiction other than the State of New York. 9. Section Headings. The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Agreement or any provision hereof or thereof. page 4 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. AMPHENOL FUNDING CORP. By: /s/Edward G. Jepsen ------------------------------ Name: Edward G. Jepsen ---------------------------- Title: E.V.P. & C.F.O --------------------------- AMPHENOL CORPORATION By: /s/Edward G. Jepsen ------------------------------ Name: Edward G. Jepsen ---------------------------- Title: E.V.P & C.F.0. --------------------------- POOLED ACCOUNTS RECEIVABLE CAPITAL CORPORATION, as Purchaser By: __________________________ Name: __________________________ Title: __________________________ NESBITT BURNS SECURITIES, INC., as Agent By: __________________________ Name: __________________________ Title: __________________________ By: __________________________ Name: __________________________ Title: __________________________ page 5 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. AMPHENOL FUNDING CORP. By: __________________________ Name: __________________________ Title: __________________________ AMPHENOL CORPORATION By: __________________________ Name: __________________________ Title: __________________________ POOLED ACCOUNTS RECEIVABLE CAPITAL CORPORATION, as Purchaser By:/s/Richard L. Taiano ------------------------------ Name: Richard L. Taiano ---------------------------- Title: Vice President --------------------------- NESBITT BURNS SECURITIES, INC., as Agent By: __________________________ Name: __________________________ Title: __________________________ By: __________________________ Name: __________________________ Title: __________________________ page 5 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. AMPHENOL FUNDING CORP. By: ____________________________ Name: ____________________________ Title: ____________________________ AMPHENOL CORPORATION By: ____________________________ Name: ____________________________ Title: ____________________________ POOLED ACCOUNTS RECEIVABLE CAPITAL CORPORATION, as Purchaser By: ____________________________ Name: ____________________________ Title: ____________________________ NESBITT BURNS SECURITIES, INC., as Agent By: /s/Jeffrey J. Phillips ------------------------------ Name: Jeffrey J. Phillips ---------------------------- Title: Managing Director --------------------------- By: /s/Harvey M. S. Fraser ------------------------------ Name: Harvey M. S. Fraser ---------------------------- Title: Managing Director --------------------------- page 5 Schedule 6.01(m) AMPHENOL CORPORATION LIST OF OFFICES WHERE RECORDS ARE KEPT
Name Division/Subsidiary Address - ---- ------------------- ------- Amphenol Corporation Subsidiary 358 Hall Avenue, Wallingford, CT 06492-7530 Amphenol Interconnect Subsidiary 20 Valley Street, Endicott, NY 13760 Products Corporation Amphenol - Aerospace Operations Division 40-60 Delaware St., Sidney, NY 13838-1395 (f/k/a Bendix Connector Operations) Amphenol Fiber Optic Products Division 1925A Ohio Street, Lisle, IL 60532 Pyle-National, Inc. Subsidiary 1334 N. Kostner Avenue, Chicago. 1L 60651 Amphenol Communications & Network Division One Kennedy Avenue, Danbury, CT 06810 Products Division (f/k/a RF/Microwave Operations) Amphenol Spectra Strip/ITD Division 720 Sherman Avenue, Hamden, CT 06514 Times Fiber Communications, Inc. Subsidiary 358 Hall Avenue, Wallingford, CT 06492-7530 Times Fiber Communications, Inc. Subsidiary Route 2. Chatham Industrial Park, Chatham, VA 24531 The Sine Companies, Inc. Subsidiary 25325 Joy Boulevard1 Mt. Clemens, MI 48046-2336
page 6 Schedule 6.01(n) AMPHENOL CORPORATION SUMMARY OF LOCKBOX ACCOUNT NUMBERS BANK A/C # LOCKBOX # ---- ----- --------- 1. AAO Northern Trust Floor B-1l 50 South LaSalLe Street Chicago, IL 60675 2. AAO Wells Fargo P.O. Box 63020 San Francisco, CA 94163 3. AAO NationsBank 600 Peachtree Street Atlanta, GA 30308 4. FOP Bank of America - Illinois 2Oth Floor Jackson 231 South LaSalle Street Chicago, IL 60697 5. CNP Bank of America - Illinois 20th Floor Jackson 231 South LaSalle Street Chicago, IL 60697 6. CNP Fleet 777 Main Street Hartford, CT 06115 7. SS Fleet 777 Main Street Hartford, CT 06115 8. TFC Fleet One Federal Street Boston, MA 02211 page 7 BANK A/C # LOCKBOX # ---- ----- --------- 9. AIPC Fleet 777 Main Street Hartford, CT 06115 10. AIPC Wells Fargo P.O. Box 63020 San Francisco, CA 94163 11. P/N Northern Trust Floor B-11 50 South LaSalle Street Chicago, IL 60675 12. SINE NBD Bank P.O. Box 116A Detroit, MI 48232 page 8 Schedule 6.01(s) TRADE NAMES AND CORPORATE REORGANIZATIONS ----------------------------------------- Legal Entity Trade Names - ------------ ----------- Amphenol Corporation Amphenol Corporation Amphenol RF Amphenol Products Bendix Connector Operations Spectra-Strip Amphenol Amphenol Aerospace Operations Amphenol Communication & Network Products AAO Amphenol FOP Amphenol Fiber Optic Products Amphenol Interconnect Products Amphenol Interconnect Products Corporation Corporation Amphenol Products Amphenol Amphenol Endicott Endicott AIPC Pyle-National, Inc. Pyle-National, Inc. Pyle Times Fiber Communications, Times Fiber Communications, Inc Inc. Times Fiber Communications Times Times Fiber TFC The Sine Companies, Inc. The Sine Companies, Inc. Sine Connector Corporation Sine Aaxico Tri-Mate Sine Products Company Sine Electro-Mold, Inc. Mil-Specialists, Inc. page 9 Amphenol Funding Corp. Amphenol Funding Corp. AFC From and after December 3, 1988, none of Amphenol Funding Corporation, Amphenol Corporation, Amphenol Interconnect Products Corporation, Pyle-National, Inc. and Times Fiber Communications, Inc. has been the subject of any merger or other corporate reorganization. From and after December 31, 1992, the Sine Companies, Inc. has not been the subject of any merger or other corporate reorganization. page 10 page 10 EX-10.5 3 EXHIBIT 10.5 EXHIBIT 10.5 FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT, dated as of December 30, 1996 (this "Amendment"), is entered into among the Originators named in the Purchase and Sale Agreement, dated as of December 3, 1993 (the "Agreement") (the "Initial Originators"), AMPHENOL FUNDING CORP., a Delaware corporation ("AFC"), THE SINE COMPANIES, INC., a Michigan corporation (the "New Originator" and, with the Initial Originators, each an "Originator"), and AMPHENOL CORPORATION, a Delaware corporation ("Amphenol"). RECITALS 1. The Initial Originators, AFC and Amphenol are parties to the Agreement; and 2. The parties hereto desire to amend the Agreement in order to add the New Originator as an Originator and a sub-servicer. NOW THEREFORE. for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Certain Defined Terms. Capitalized terms that are used herein without definition and that are defined in the Agreement and in Appendix A thereto shall have the same meanings herein as in the Agreement. 2. New Originator. (a)(i) The New Originator is hereby added as an Originator, and the definition of "Originators" in Appendix A to the Agreement is hereby amended and restated in its entirety as follows: "Originators" means Amphenol, Amphenol Interconnect Products Corporation, a Delaware corporation, Pyle National Inc., a Delaware corporation, Times Fiber Communications, Inc., a Delaware corporation, and The Sine Companies, Inc., a Michigan corporation, together with their successors as permitted under the Purchase and Sale Agreement. (ii) Each of Sections 1.1(a), (b) and (e), Sections 1.2(a)(i) and (ii) and the definition of "AUB" contained in Section 2.1 of the Agreement shall read "December 27, 1996" instead of "December 6, 1993" with respect to the New Originator only, and (iii) the definition of "Initial Closing Date" contained in Appendix A to the Agreement is hereby amended and restated in its entirety as follows: "Initial Closing Date," with respect to each Originator, means the date on which the first purchases under the Purchase and Sale Agreement shall occur as to such Originator. (b) For purposes of calculating the Cost of Funds Discount and the Servicer's Fee Discount (per Sections 2.2(a) and (b), respectively, of the Agreement) as of the Initial Closing Date for the New Originator, clause (i) of the definitions of "COF" and "SF," respectively, shall be disregarded. (c) Section 2.2(e)(A) of the Agreement shall read "November 30, 1996" instead of "October 31, 1993" with respect to the New Originator only. (d) Except as otherwise set forth herein, the New Originator hereby agrees to be subject to the provisions of the Transaction Documents as if it originally had been an Originator thereunder. (e) Exhibit G to the Agreement is hereby amended and restated in its entirety by Exhibit G attached hereto. (f) Exhibit H to the Agreement is hereby amended and restated in its entirety by Exhibit H attached hereto. (g) Section 9(c) of each AFC Note is hereby amended such that the reference to "Section 3.03(d)" therein is hereby replaced by "Section 3.03(c)." (h) Appendix A to the Agreement is hereby amended by: (i) deleting clause (a) of the definition of "Net Portfolio Balance" and substituting therefor the following new clause (a): (a)(i) 8% of the Purchase Limit for TCI Communications so long as it is rated at least "Baa3" by Moody's and "BBB-" by S&P, and (ii) if not so rated, 6% of the Purchase Limit for TCI Communications so long as it is rated at least "Ba1" by Moody's and "BB" by S&P, in either such case so long as it is not subject to review for downgrade or on "Credit Watch" by such rating agencies; 3. Representations and Warranties. The New Originator (only as to itself) hereby represents and warrants to AFC as follows: (a) Representations and Warranties. (i) The representations and warranties made by the Initial Originators in the Transaction Documents (including those contained in Article VI of the Agreement, Including Section 6.9(a), as to which "September 30, 1996" page 2 is substituted for "September 30, 1993" therein, but excluding Section 6.15) are true and correct as to the New Originator as of the date hereof as though made on the date hereof. (ii) The New Originator does not use any trade name other than its actual corporate name and the trade names set forth in Exhibit H. From and after the date that fell five (5) years before the date hereof, the New Originator has not been known by any legal name other than its corporate name and/or the trade names set forth in Exhibit H. From and after December 31, 1992, the New Originator has not been the subject of any merger or other corporate reorganization. (b) Enforceability. The execution and delivery by it of this Amendment, and the performance of its obligations under the Transaction Documents (including this Amendment and the Agreement, as amended hereby), are within its corporate powers and have been duly authorized by all necessary corporate action on its part. This Amendment and the Agreement, as amended hereby, are its valid and legally binding obligations, enforceable in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (c) No Default. Both before and immediately after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event, Unmatured Termination Event, Purchase and Sale Termination Event or Unmatured Purchase and Sale Termination Event exists or shall exist. 4. Effect of Amendment. Except as expressly amended and modified by this Amendment, all provisions of the Agreement shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement (or in any other Transaction Document) to "this Agreement", "hereof"', "herein" or words of similar effect referring to the Agreement shall be deemed to be references to the Agreement as amended by this Amendment. This Amendment shall not be deemed, expressly or impliedly, to waive, amend or supplement any provision of the Agreement other than as set forth herein. 5. Effectiveness. This Amendment shall become effective as of the date hereof upon receipt by the Servicer (on AFC's behalf) of the following: (a) counterparts of this Amendment (whether by facsimile or otherwise) executed by each of the parties hereto, (b) an Originator Assignment Certificate in the form of Exhibit D to the Agreement, duly completed, executed and delivered by the New Originator, page 3 (c) a copy of the resolutions of the Board of Directors of the New Originator, each Initial Originator, AFC and Amphenol, in each case approving the Transaction Documents to be delivered by it and the transactions contemplated hereby and thereby, and in each case certified by the Secretary or an Assistant Secretary of such Person, (d) a good standing certificate for each of the New Originator and Amphenol issued as of a recent date acceptable to the Servicer by the Secretary of State of the jurisdiction of its incorporation, (e) a certificate of the Secretary or an Assistant Secretary of: (i) the New Originator and (ii) unless previously provided, by each other party hereto, in each case certifying the names and true signatures of the officers authorized on such Person's behalf to sign the Transaction Documents to be delivered by it (on which certificates the Servicer and AFC may conclusively rely until such time as the Servicer shall receive from any such Person a revised certificate meeting the requirements of this paragraph), (f) the certificate or articles of incorporation or other organizational document of the New Originator, duly certified by the Secretary of State of the jurisdiction of its incorporation as of a recent date acceptable to the Servicer, together with a copy of the by-laws of the New Originator, each duly certified by the Secretary or an Assistant Secretary of the New Originator, (g) originals of the proper financing statements (Form UCC-1) that have been duly executed and name the New Originator as the assignor and AFC as the assignee (and the Purchaser or the Collateral Trustee as assignee of AFC) of the Receivables generated by the New Originator as may be necessary or, in the Servicer's or the Agent's opinion, desirable under the UCC of all appropriate jurisdictions to perfect AFC's ownership interest in all Receivables and such other rights, accounts, instruments and moneys (including, without limitation, Related Security) in which an ownership or Security interest may be assigned to it hereunder, (h) a written search report from a Person satisfactory to the Servicer listing all effective: (i) financing statements that name the New Originator as debtor or assignor and that are filed in the jurisdictions in which filings were made pursuant to the foregoing paragraph, together with copies of such financing statements (none of which, except for those described in the foregoing paragraph, shall cover any Receivable or any right related to any Receivable that is of the type described in Section 1.1 of the Agreement which is to be sold to AFC hereunder), and (ii) tax and judgment lien search reports from a Person satisfactory to the Servicer showing no evidence of such liens filed against the New Originator, (i) favorable opinions from: (i) Winthrop, Stimson, Putnam & Roberts, special counsel to the New Originator, AFC, the Initial Originators and Amphenol, and (ii) page 4 Edward C. Wetmore, General Counsel of the New Originator, AFC, the Initial Originators and Amphenol, in each case in form and substance satisfactory to the Servicer and the Agent, (j) an AFC Note in favor of the New Originator, duly executed by AFC, (k) an Originator Note in favor of AFC from the New Originator, duly executed by the New Originator, (l) a certificate from an officer of the New Originator to the effect that the Servicer and the New Originator have placed on the most recent, and have taken all steps reasonably necessary to ensure that there shall be placed on each subsequent, data processing report that it generates that are of the type that any proposed purchaser or lender would use to evaluate the Receivables the following legend (or the substantive equivalent thereof): "THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO AMPHENOL FUNDING CORP. PURSUANT TO A PURCHASE AND SALE AGREEMENT, DATED AS OF DECEMBER 3, 1993, AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AMONG AMPHENOL CORPORATION, CERTAIN OTHER ORIGINATORS, AND AMPHENOL FUNDING CORP.; AND UNDIVIDED, FRACTIONAL OWNERSHIP INTERESTS IN THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO POOLED ACCOUNTS RECEIVABLE CAPITAL CORPORATION PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT, DATED AS OF DECEMBER 3, 1993, AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AMONG AMPHENOL FUNDING CORP., AMPHENOL CORPORATION, POOLED ACCOUNTS RECEIVABLE CAPITAL CORPORATION AND NESBITT BURNS SECURITIES, INC. (AS SUCCESSOR TO BANK OF MONTREAL), AS AGENT.", and (m) confirmation that: (i) all the Obligors of the New Originator have been instructed to deposit all Collections of Portfolio Receivables directly to a post office box related to the relevant Lock-box Account with a Lock-box Bank or (ii) if not so instructed, the New Originator will transfer any Collections that it receives to the relevant Lock-box Account pursuant to Section 8.2(a) of the Agreement. 6. Covenants. Within 60 days after the date hereof, the New Originator shall deliver to the Servicer (on behalf of AFC) a certificate from an authorized officer to the effect that: (a) the name of the renter of all post office boxes into which Collections may from time to time be mailed have been changed to the name of AFC (unless such post office boxes are in the name of the relevant Lock-box Banks) and (b) all relevant postmasters have been notified that each of the Servicer, the New Originator (as a Servicer Person) and the Agent are authorized to collect mail delivered to such post office boxes (unless such post office boxes are in the name of the relevant Lock-box Banks). page 5 7. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. 8. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York (without regard to any otherwise applicable principles of conflicts of law), except to the extent that the perfection (and the effect of perfection or nonperfection) of AFC's interests in the Receivables is governed by the laws of a jurisdiction other than the State of New York. 9. Section Headings. The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Agreement or any provision hereof or thereof. page 6 IN WITNESS WHEREOF, the parties have executed this Amendment of the date first written above. AMPHENOL FUNDING CORP. By: /s/ Edward G. Jepsen --------------------------------------- Name: Edward G. Jepsen Title: E.V.P. & C.F.O. AMPHENOL CORPORATION, individually and as the initial Servicer By: /s/ Edward G. Jepsen --------------------------------------- Name: Edward G. Jepsen Title: E.V.P. & C.F.O. AMPHENOL INTERCONNECT PRODUCTS CORPORATION By: /s/ Edward G. Jepsen --------------------------------------- Name: Edward G. Jepsen Title: E.V.P. & C.F.O. PYLE NATIONAL, INC. By: /s/ Edward G. Jepsen --------------------------------------- Name: Edward G. Jepsen Title: E.V.P. & C.F.O. TIMES FIBER COMMUNICATIONS, INC. By: /s/ Edward G. Jepsen --------------------------------------- Name: Edward G. Jepsen Title: E.V.P. & C.F.O. page 7 THE SINE COMPANIES INC. By: /s/ Edward G. Jepsen ---------------------------------------- Name: Edward G. Jepsen Title: Executive Vice President and Chief Financial Officer Address: 358 Hall Avenue Wa11ingford, CT 06492 Attention: Edward G. Jepsen Facsimile: 203/265-8628 ACKNOWLEDGED AND CONSENTED TO as of this 30th day of December, 1996 by: POOLED ACCOUNTS RECEIVABLE CAPITAL CORPORATION, as the Purchaser By: ---------------------------------------- Name: Title: NESBITT BURNS SECURITIES, INC., as Agent By: --------------------------------------- Name: _______________________________ Title: _______________________________ By: --------------------------------------- Name: _______________________________ Title: _______________________________ page 8 THE SINE COMPANIES INC. By: ---------------------------------------- Name: Edward G. Jepsen Title: Executive Vice President and Chief Financial Officer Address: _________________________________ _________________________________ Attention: _________________________________ Facsimile: _________________________________ ACKNOWLEDGED AND CONSENTED TO as of this 30th day of December, 1996 by: POOLED ACCOUNTS RECEIVABLE CAPITAL CORPORATION, as the Purchaser By: /s/ Richard [Illegible] ---------------------------------------- Name: RICHARD [Illegible] Title: VICE PRESIDENT NESBITT BURNS SECURITIES, INC., as Agent By: --------------------------------------- Name: _______________________________ Title: _______________________________ By: --------------------------------------- Name: _______________________________ Title: _______________________________ page 8 THE SINE COMPANIES INC. By: ---------------------------------------- Name: Edward G. Jepsen Title: Executive Vice President and Chief Financial Officer Address: _________________________________ _________________________________ Attention: _________________________________ Facsimile: _________________________________ ACKNOWLEDGED AND CONSENTED TO as of this 30th day of December, 1996 by: POOLED ACCOUNTS RECEIVABLE CAPITAL CORPORATION, as the Purchaser By: ---------------------------------------- Name: ___________________________________ Title: ___________________________________ NESBITT BURNS SECURITIES, INC., as Agent By: /s/ Jeffrey J. Phillips --------------------------------------- Name: Jeffrey J. Phillips Title: Managing Director By: /s/ Harvey M. S. Fraser --------------------------------------- Name: Harvey M. S. Fraser Title: Managing Director Exhibit G LOCATION OF RECORDS 358 Hall Avenue Wallingford, CT 06492-7530 20 Valley Street Endicott, NY 13760 40-60 Delaware Street Sidney, NY 13838-1395 1925A Ohio Street Lisle, IL 60532 1334 N. Kostner Avenue Chicago, IL 60651 One Kennedy Avenue Danbury, CT 06810 720 Sherman Avenue Hamden, CT 06514 Route 2, Chatham Industrial Park Chatham, VA 24531 25325 Joy Boulevard Mt. Clemens, MI 48046-2336 page 9 Exhibit H TRADE NAMES Legal Entity Trade Names Amphenol Corporation Amphenol Corporation Amphenol RF Amphenol Products Bendix Connector Operations Spectra-Strip Amphenol Amphenol Aerospace Operations Amphenol Communication & Network Products AAO Amphenol FOP Amphenol Fiber Optic Products Amphenol Interconnect Products Amphenol Interconnect Products Corporation Corporation Amphenol Products Amphenol Amphenol Endicott Endicott AIPC Pyle-National, Inc. Pyle-National, Inc. Pyle Times Fiber Communications, Times Fiber Communications, Inc. Inc. Times Fiber Communications Times Times Fiber TFC The Sine Companies, Inc. The Sine Companies. Inc. Sine Connector Corporation Sine Aaxico Tri-Mate Sine Products Company Sine Eiectro-Mold, Inc. Mil-Specialists, Inc. page 10 EX-10.12 4 EXHIBIT 10.12 EXHIBIT 10.12 [Letterhead of Amphenol] - -------------------------------------------------------------------------------- Memorandum 1996 AMPHENOL MANAGEMENT INCENTIVE PLAN I. Purpose The purpose of the Plan is to reward eligible key employees of Amphenol Corporation and affiliated operations with cash bonus payments based on contributions to overall results and specific accomplishments. II. Eligibility Select management personnel, as designated by the Chairman and the President. Generally, participation includes senior management positions, corporate staff managers, general managers, and their designated direct reports. III. Plan Components There are several key performance factors which will be considered by executive management and the Compensation Committee. These include, but are not limited to, the following: o Year-over-year improvement o Accomplishments against budget o Customer satisfaction o Quality management o New market/new product positioning o Cost reductions/productivity improvements o Balance sheet management o Overall Amphenol performance Financial performance will be measured by revenues, operating income, cash flow of operating units, and EPS growth for total Amphenol. IV. Administration o Generally, payments are made as soon as possible during the first calendar quarter following the plan year. All payments are subject to the recommendation of the Chairman and President and to the approval of the Compensation Committee. o Payments are based upon average base salary during the plan year (new hires will be prorated accordingly if hired prior to October 1 of plan year). o The maximum allowable payout under the plan cannot exceed 50% of average base salary. o To be eligible for payment, a participant must be an active employee during the payroll period of bonus payment. Exceptions must be recommended by the Chairman and the President and be approved by the Compensation Committee. EX-10.13 5 EXHIBIT 10.13 EXHIBIT 10.13 [Letterhead of Amphenol] - -------------------------------------------------------------------------------- Memorandum 1997 AMPHENOL MANAGEMENT INCENTIVE PLAN I. Purpose The purpose of the Plan is to reward eligible key employees of Amphenol Corporation and affiliated operations with cash bonus payments based on contributions to overall results and specific accomplishments. II. Eligibility Select management personnel, as designated by the Chairman and the President. Generally, participation includes senior management positions, corporate staff managers, general managers and their designated direct reports. III. Plan Components There are several key performance factors which will be considered by executive management and the Compensation Committee. These include, but are not limited to, the following: o Year-over-year improvement o Accomplishments against budget o Customer satisfaction o Quality management o New market/new product positioning o Cost reductions/productivity improvements o Balance sheet management o Overall Amphenol performance Financial performance will be measured by revenues, operating income, cash flow of operating units and EPS growth for total Amphenol. IV. Administration o Generally, payments are made as soon as possible during the first calendar quarter following the plan year. All payments are subject to the recommendation of the Chairman and President and to the approval of the Compensation Committee. o Payments are based upon average base salary during the plan year (new hires will be prorated accordingly if hired prior to October 1 of plan year). o The maximum allowable payout under the plan cannot exceed 50% of average base salary. o To be eligible for payment, a participant must be an active employee during the payroll period of bonus payment. Exceptions must be recommended by the Chairman and the President and be approved by the Compensation Committee. EX-10.14 6 EXHIBIT 10.14 EXHIBIT 10.14 AMENDED STOCK OPTION PLAN OF AMPHENOL CORPORATION* 1. Purpose. This Amended Stock Option Plan (the "Plan") is designed to enable certain key employees of Amphenol Corporation (the "Company"), and its subsidiaries to obtain a proprietary interest in the Company, and thus to share in the future success of the Company's business. Accordingly, the Plan is intended as a further means not only of attracting, retaining and motivating outstanding personnel, but also of promoting a closer identity of interests between key employees of the Company and its subsidiaries and stockholders. Since the key employees eligible for stock options will be those who are in a position to make important and direct contributions to the success of the Company and its subsidiaries, the Company believes that the grant of Options under the Plan will be in the best interests of the Company and its stockholders. Options granted under the Plan may constitute incentive stock options (within the meaning of Section 422 of the Code) or nonstatutory stock options. 2. Definitions. As used herein: "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended. "Committee" means the committee referred to in Section 5(a). "Common Stock" means the Class A Common Stock, par value $.001 per share, of the Company. "Fair Market Value" shall mean the closing price of a share of Common Stock on the New York Stock Exchange, Inc. composite tape on the relevant date and if there were no trades on such date, on the day on which a trade occurred next preceding such date. "Option" means an option granted under the Plan. "Option Agreement" means the Option Agreement to be entered into by the Company and the grantee of an Option, as provided in Section 7 hereof. "Parent" means a parent corporation as defined in Section 424(e) of the Code. "Subsidiary" means a subsidiary corporation as defined in Section 424(f) of the Code. "Successor" means the legal representative of the estate of a deceased grantee or the person or persons who shall acquire the right to exercise an Option by bequest or inheritance or otherwise by reason of the death of the grantee, as provided in Section 11 hereof. "Term of the Option" means the period during which a particular Option may be exercised, as provided in Section 9(a) hereof. - ---------- *Amended as of May 23, 1996. 3. Effective Date of Plan. The Plan shall become effective as of January 24, 1996 by action of the Board conditioned on and subject to approval of the Plan by the holders of a majority of all the outstanding shares of the Common Stock of the Company entitled to vote on the Plan. No Options may be granted under the Plan after January 23, 2006. 4. Number and Source of Shares Subject to the Plan. (a) The Company may grant Options under the Plan for no more than one million (1,000,000) shares of its Common Stock, which will be provided from shares in its treasury or from authorized but unissued shares. (b) Shares as to which Options have been previously granted that have lapsed or have been terminated or forfeited without being exercised shall be available for grant. 5. Administration of the Plan. (a) The Plan shall be administered by the Compensation Committee of the Board (the "Committee"). The Board authorizes and empowers the Committee, to the full extent permitted by law, to do any and all things which the Board is authorized and empowered to do with respect to the Plan. No voting member of the Committee shall have received within one year prior to his appointment grants or awards of equity securities of the Company under this Plan or any other plan except to the extent the receipt of such grant or award would not affect the member's status as disinterested for purposes of Rule 16b-3 under the Securities Exchange Act of 1934. (b) The Committee shall adopt such rules of procedure as it may deem proper; provided, however, that it may take action upon the agreement of a majority of the Committee. Any action which the Committee shall take through a written instrument signed by all of its members shall be as effective as though taken at a meeting duly called and held. (c) The powers of the Committee shall include plenary authority to interpret the Plan, and subject to the provisions hereof, to determine the persons to whom Options shall be granted, the number of shares subject to each Option, the Term of the Option, the date on which Options shall be granted, and whether an Option shall constitute an incentive stock option (within the meaning of Section 422 of the Code) or a nonstatutory stock option. Options granted will not be treated as incentive stock options to the extent that the aggregate Fair Market Value (determined at the time the option is granted) of Common Stock, with respect to which Options treated as incentive stock options are exercisable for the first time by a grantee during any calendar year under all plans of the Company or any Parent or Subsidiary of the Company, exceed $100,000. 6. Employees Eligible to Receive Options. Options may be granted under the Plan to key employees of the Company and its Subsidiaries, as may be recommended by senior management of the Company and determined by the Committee. An individual key employee may receive more than one Option under the Plan. Determination by the Committee as to the eligibility status of any employee shall be conclusive. 2 7. Option Agreement. (a) In consideration for the Options granted hereunder, the grantee shall execute an instrument to be known as the Option Agreement, which shall set forth the terms and conditions of the Option in accordance with the terms of the Plan. (b) No Option shall be exercised by a grantee unless he shall have executed and delivered an Option Agreement. (c) Appropriate officers of the Company are hereby authorized to execute and deliver Option Agreements in the name of the Company as directed from time to time by the Committee. 8. Option Price. The option price to be paid by the grantee to the Company upon exercise of an Option shall be at least one hundred percent (100%) of the Fair Market Value of the respective shares of Common Stock on the date the option was granted, as determined by the Committee, except that in the case of an incentive stock option granted to an individual who, at the time such incentive stock option is granted, owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the option price shall be at least 110 percent (110%) of such Fair Market Value. 9. Terms and Conditions of Options: Exercise of Option During Life of Grantee. (a) Each Option granted under the Plan shall be exercisable only during a term (the "Term of the Option") commencing on the date when the Option was granted and ending (unless the Option shall have terminated earlier under other provisions of the Plan) on a date to be fixed by the Committee, which shall not exceed ten years from the date of grant except that in the case of an incentive stock option granted to an individual who, at the time such incentive stock option is granted, owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the Term of the Option shall not exceed five years from the date of grant. (b) The Committee shall have authority to grant Options exercisable in full at any time during their term or exercisable in installments. Installments or portions thereof not exercised in earlier periods shall be cumulated and be available for exercise in later periods. In exercising an Option, the grantee may exercise less than the full number of shares available to be exercised at such time. (c) Options shall be exercised by delivering or mailing to the Committee its designee: (1) A notice, in the form and at times prescribed by the Committee, specifying the number of shares of Common Stock to be purchased; and 3 (2) A check or money order payable to the Company for the full option price; shares of Common Stock owned by the grantee with a Fair Market Value on the date of exercise equal to the full option price; or any combination of the foregoing. (d) Upon receipt of such notice of exercise of an Option and upon payment of the option price, the Company shall promptly cause a certificate or certificates to be delivered to the grantee for the shares purchased, without charge to the grantee for issue or transfer tax. (e) All Options granted under the Plan shall be nontransferable other than by will or by the laws of descent and distribution, subject to Section 11 hereof, and an Option may be exercised, during the lifetime of the grantee, only by the grantee. 10. Exercise of Option by Grantee on Cessation of Employment. If a person to whom an Option has been granted shall cease to be employed by the Company or a Parent or a Subsidiary of the Company for a reason other than his death, disability (within the meaning of Section 22(e)(3) of the Code), or retirement on or after age 65, the Option shall terminate on the date of such termination of employment, unless it shall have terminated earlier under other provisions of the Plan. If a person to whom an Option has been granted shall terminate employment by reason of disability (within the meaning of Section 22(e)(3) of the Code), or retirement on or after age 65, the Option shall terminate three (3) months after the date of such disability or retirement, unless it shall have terminated earlier under other provisions of the Plan. Until the Option terminates, it may be exercised by the grantee for all or a portion of the shares as to which the right to purchase had accrued under the Plan at the time of cessation of employment, subject to all applicable conditions and restrictions provided in Section 9 hereof. 11. Exercise of Option After Death of Grantee. If the grantee of an Option shall die while in the employ of the Company or a Subsidiary of the Company or within three (3) months after ceasing to be an employee by reason of disability (within the meaning of Section 22(e)(3) of the Code) or retirement on or after age 65, the Option may, until the expiration of six (6) months from the date of death of the grantee (or, if applicable, six (6) months from the date of such disability or retirement) or until the earlier expiration of the term of the Option, be exercised by the Successor of the deceased grantee. Until the Option terminates, it may be exercised by the Successor for all or a portion of the shares as to which the right to purchase had accrued under the Plan at the time of cessation of employment, subject to all applicable conditions and restrictions provided in Section 9 hereof. 12. Shareholder Rights. No person shall have any rights as a shareholder by virtue of an Option except with respect to shares actually issued to him, and issuance of shares shall confer no retroactive rights to dividends. 13. Adjustment for Changes in Capitalization. If there occurs an increase in the number of outstanding shares of Common Stock or any other class of common stock of the Company which may at any time be outstanding, by reason of a stock dividend, stock split, recapitalization, change in par value, or combination or exchange of shares, such increase shall be reflected proportionately (1) in an increase in the aggregate number of shares then available for the grant of Options under the Plan, or becoming available through the termination of Options previously granted but unexercised, (2) in the number of shares subject to Options then outstanding, and (3) in the per-share option price as 4 to any outstanding Options or portions thereof not yet exercised. Any fractional shares resulting from such adjustments shall be eliminated. If, by reason of a merger, consolidation, transfer of assets, reorganization, or similar transaction, shares of Common Stock are exchanged for or converted into, or become exchangeable for or convertible into, any other stock or securities, whether of the Company or of any other corporation or entity, all Options outstanding under the Plan shall become exercisable for the type and number of shares or other securities for or into which the number of shares to which such Options relate would have been exchanged or converted or become exchangeable or convertible and appropriate adjustment shall be made in the type and number of shares available for grant under the Plan, the number of shares remaining available for exercise under outstanding Options and the option price. Nothing in this Section 13 shall require or permit any adjustment except as permitted by Sections 422 and 424 of the Code. If changes in capitalization other than those considered above shall occur, the Committee shall make such adjustments in the number and class of shares for which Options may thereafter be granted, and in the number and class of shares remaining subject to Options previously granted and in the per-share option price as the Committee in its discretion may consider appropriate, and all such adjustments, if any, shall be conclusive. 14. Termination. Suspension or Modification of Plan. The Committee may at any time terminate, suspend or modify the Plan, except that the Committee shall not, without the authorization of the holders of a majority of all the outstanding shares of Common Stock entitled to vote on the Plan obtained at a stockholders' meeting duly called and held (or by written consent in lieu of such meeting), change any provisions (other than through adjustment for changes in capitalization as hereinabove provided) which determine (a) the aggregate number of shares for which Options may be granted; (b) the classes of persons eligible for Options; or (c) the minimum option price. No termination, suspension or modification of the Plan shall adversely affect any right acquired by any grantee, or by any successor of a grantee (as provided in Section 11 hereof), under the terms of an Option granted before the date of such termination, suspension or modification, unless such grantee or successor shall consent; but it shall be conclusively presumed that all adjustments for changes in capitalization as provided in Section 13 do not adversely affect any such right. 15. Application of Proceeds. The proceeds received by the Company from the issuance of shares of Common Stock under the Plan will be used for general corporate purposes. 16. Effect of the Plan. The adoption of this Plan shall not be deemed to give any employee any right to be granted an Option or any rights hereunder unless and until the Committee shall have adopted a resolution granting such employee an Option, and then only to the extent and on such terms and conditions as may be set forth in such resolution. 5 17. Compliance with Laws Relating to the Sale of Securities. The Company shall have no obligation to issue shares of Common Stock pursuant to the Plan until it shall have complied with the listing requirements of any securities exchange upon which the Common Stock may be listed, the registration requirements of the Securities Act of 1933, the Securities Exchange Act of 1934, as amended, and any rules or regulations of the Securities and Exchange Commission promulgated thereunder or the requirements of applicable state laws relating to the authorization, issuance or sale of securities. 18. Governing Law. This Plan shall be governed by and construed in accordance with the laws of the State of Delaware. 7 EX-10.15 7 EXHIBIT 10.15 EXHIBIT 10.15 THE 1996 LONG-TERM INCENTIVE STOCK PLAN OF AMPHENOL CORPORATION The purpose of the 1996 Long-Term Incentive Stock Plan (the Plan") is to establish a method by which those senior management employees of the Company and its subsidiaries who have the opportunity to make substantial contributions to the growth and profitability of the Company may be encouraged to remain in the service of the Company and may be given an incentive to further the long-term growth and profitability of the Company. The Plan should also serve to attract new and experienced individuals into the employment of the Company and will more directly align economic rewards to senior management with benefits to the Company's stockholders. NOW, THEREFORE, the Company hereby establishes the following plan. SECTION 1. Definitions and Construction A. As used in the Plan, the following terms shall have the meanings indicated, unless the context clearly requires another meaning: (1) Company -- means Amphenol Corporation and its subsidiaries. (2) Plan -- means the Company's 1996 Long-Term Incentive Stock Plan as contained in this document and all amendments to this document. (3) Board -- means the Board of Directors of the Amphenol Corporation. (4) Committee - means the Compensation Committee of the Board of Directors appointed to administer the Plan as provided in SECTION 2. (5) Stock -- means Class A Common Stock, par value $.001 per share, of the Amphenol Corporation. (6) Incentive Share -- means a share of Stock awarded and transferred to a participant in the Plan subject to the conditions respecting continued employment and other conditions specified in SECTION 3 of the Plan. (7) Fiscal Year - means the fiscal year of Amphenol Corporation. (8) Award Period -- means a period of five (5) consecutive years beginning with the effective date of the issuance of Incentive Shares pursuant to an award under the Plan and ending with the fifth anniversary of the issuance of such Incentive Shares. (9) Fair Market Value -- means the closing price of a share of Stock on the New York Stock Exchange, Inc. composite tape on the relevant date and if there were no trades on such date, on the day on which a trade occurred next preceding such date. (10) Employment - means continuous employment with the Company and shall not be considered to be interrupted by transfers between the Company and a subsidiary or between subsidiaries. If approved in writing by the Committee, a leave of absence shall not be deemed to be an interruption of Employment subject to such conditions as may be established by the Committee in its discretion. B. In the construction of the Plan, the masculine shall include the feminine and the singular shall include the plural in all instances in which such meanings are appropriate. SECTION 2. Committee and Its Duties. A. The Committee may, from time to time, adopt rules and regulations and prescribe forms and procedures for carrying out the purposes and provisions of the Plan. The Committee shall have the sole and final authority to select participants, determine awards, and determine all questions arising under the Plan, including the proper construction and interpretation of the Plan. Any interpretation, decision or determination made by the Committee shall be final, binding and conclusive upon all interested parties, including the Company, their stockholders, participants and other employees of the Company, and the successors, heirs and representatives of all such persons. The Committee shall hold meetings at such times and places as it may decide and shall keep minutes of its proceedings. A majority of the members of the Committee shall constitute a quorum for purposes of any action taken by the Committee and all such actions shall be taken by a majority vote of the voting members present at any such meeting. Any action by the Committee may be taken by written instrument signed by all of the voting members, and any such action shall be as fully effective as if it had been taken by a majority of the voting members at a meeting duly called and held. B. Prior to, or as soon as practicable after, the beginning of an Award Period, the Committee shall: (1) Select the participants for such Award Period from among the key senior management employees of the Company. Such participants shall be persons whom the Committee determines have the opportunity to make substantial contributions to the growth and profitability of the Company. (2) Decide the potential number of Incentive Shares to be awarded to each participant for such Award Period. (3) Notify each participant that he has been selected for the Award Period, inform him of this target award of Incentive Shares and his performance goals and obtain from him such agreements and powers and designations of beneficiaries as the Committee shall reasonably deem necessary or appropriate. C. Notwithstanding anything to the contrary contained in the Plan, any Incentive Share awards to a participant under this SECTION 2 is intended to qualify as "Performance-Based Compensation" under Section 162(m) of the Internal Revenue Code of 1986 as amended from time to time and the regulations promulgated thereunder. All Incentive Share awards shall comply with the provisions set forth below: (i) Performance Criteria. The performance criteria used in establishing performance goals governing awards granted by the Committee to participants may include any or all of the following: (A) the Company's return on equity, assets, capital or investment; (B) pre-tax or after-tax profit levels of the Company or of any subsidiary, division, operating or business unit of the Company, or any combination of the foregoing; (C) cash flow or similar measure; (D) earnings per share or total Shareholder return; (E) changes in market price of the Company's Common Stock; or (F) sales or market share of the Company or of any subsidiary, division, operating or business unit of the Company. (ii) Grant of Incentive Share Awards. With respect to each performance-based award to a participant each year, the Committee shall select within the first 90 days of the Company's fiscal year (or, if longer, within the maximum period allowed under Section 162(m) of the Internal Revenue Code of 1986 as amended from time to time) the performance criteria for such Incentive Share award grant and the achievement targets with respect to each performance criterion (including a threshold level of performance below which no amount will become payable with respect to such Incentive Share award and a ceiling of performance beyond which no additional amount will become payable with respect to such Incentive Share award). Each performance-based award will specify the amount payable, or the formula for determining the amount payable, upon the achievement of applicable performance targets. The performance criteria established by the Committee may be (but need not be) different for each fiscal year and different goals may be applicable to performance-based awards to different participants. (iii) Payment of Incentive Share Awards. Following the completion of a fiscal year, the Committee shall meet to review and certify in writing whether, and to what extent, the performance criteria established for the prior fiscal year have been achieved and, if so, to also calculate and certify in writing the amount of Incentive Share Awards earned for the completed fiscal year. The Committee shall then determine the actual size of each participant's Incentive Share award, and, in doing so, may in its sole and absolute discretion reduce or eliminate the amount of any participant's Incentive Share award if the Committee deems such reduction or elimination to be appropriate. D. The Committee may select one or more outstanding, recently employed or promoted employees as additional participants in the Plan at any time, if the Committee determines that such selection will promote the objectives of the Plan. The effective date of such awards to any additional participant shall be as set by the Committee. SECTION 3. Incentive Shares. A. Conditions. All awards of Incentive Shares shall be subject to the following conditions during the Award Period: (1) Prior to the issuance and transfer of Incentive Shares to the participant, the participant shall pay to the Company the purchase price (the "Purchase Price") of the Incentive Shares which shall be at least equal the product of (x) the number of Incentive Shares awarded to him and (y) the par value of a share of Stock ($.001). Proceeds received by the Company will be used for general corporate purposes. (2) Prior to the issuance of Incentive Shares to the participant, the participant shall execute an instrument to be known as the Long-Term Incentive Stock Agreement, which shall set forth the terms and conditions of the Incentive Share award in accordance with the terms of the Plan. Any executive officer of the Company is hereby authorized to execute and deliver Long-Term Incentive Stock Agreements in the name of the Company as directed by the Committee from time to time. (3) If the participant's Employment terminates during the Award Period, then, except as otherwise provided in SECTION 5, his interest therein shall terminate. (4) Incentive Shares issued and transferred to a participant shall be deposited with the Secretary or the Treasurer or other executive officer of Amphenol Corporation designated by the Committee to be held until either the expiration of the Award Period or the earlier lapse of the restrictions upon such Incentive Shares as provided in SECTION 5, and each participant shall execute and deliver to the Company stock powers and powers of attorney enabling the Company to exercise its rights hereunder. (5) Certificates for Incentive Shares issued pursuant to this paragraph shall, if the Company shall deem it advisable, bear a legend in form satisfactory to the Committee to the effect that they are issued subject to specified restrictions. (6) Certificates representing the Incentive Shares issued and transferred pursuant to this paragraph shall be registered in the name of the participant to whom they have been granted and shall be owned by such participant. Such participant shall be the holder of record of such Incentive Shares for all purposes, including voting and receipt of dividends paid with respect to such Incentive Shares, if any. B. Non-Transferability. Except as otherwise provided in SECTION 5 (but subject to any other agreement relating to the Incentive Shares), Incentive Shares may not be sold, assigned, transferred, alienated, commuted, anticipated, or otherwise disposed of, except by will or the laws of descent and distribution, or pledged or hypothecated as collateral for a loan or as security for the performance of any obligation, or be otherwise encumbered, and are not subject to attachment, garnishment, execution or other legal or equitable process, prior to the lapse of restrictions on such Incentive Shares, and any attempt at action in contravention of this paragraph shall be null and void. If any partici- pant should attempt to dispose of or encumber his Incentive Shares prior to the lapse of the restrictions imposed on such Incentive Shares, his interest in the Incentive Shares awarded to him shall terminate. SECTION 4. Lapse of Restrictions As of the later of (i) 12:01 A.M. on the day following the last day of the Award Period and (ii) the execution by the participant of any necessary agreement in form and substance satisfactory to the Committee as set forth in SECTION 7 hereof and (iii) the participant's payment of any required withholding taxes, the restrictions imposed hereunder upon the number of Incentive Shares issued to the participant for such Award Period shall lapse if he has remained in Employment during such period. The certificates representing all such shares of Stock shall be delivered to the participant as soon as practicable thereafter and such shares shall no longer be considered Incentive Shares for the purposes of this Agreement. Simultaneous with the lapse of restrictions or the premature satisfaction of Plan conditions pursuant to SECTION 5 below, the Committee may, in its sole and absolute discretion, cause Amphenol Corporation to offer to purchase up to 35% of the participant's Incentive Shares at Fair Market Value. Such offer to purchase is intended to provide the participant with funds to offset or substantially offset any federal and state income tax accruing to the participant as the result of the lapse of restrictions upon the Incentive Share award. SECTION 5. Premature Satisfaction of Plan Conditions A. If a participant's Employment terminates prior to the end of an Award Period on account of his death, or disability retirement under any retirement plan maintained by Amphenol Corporation, or any subsidiary, or pursuant to the retirement policies of the Company, certain conditions respecting continued Employment imposed by this Plan may lapse. Such participant, or his beneficiary in the event of his death, shall be entitled to delivery of Incentive Shares free of the restrictions imposed by the Plan as soon as practicable thereafter, provided that such participant, or his beneficiary in the event of his death, shall execute any necessary agreement in form and substance satisfactory to the Committee as set forth in SECTION 7 hereof. In the case of voluntary retirement prior to age 65, the Committee shall have the sole discretion and right for waiving the continued Employment condition with respect to a portion or all of a participant's Incentive Shares at the time of such retirement. B. In addition to the premature satisfaction of Plan conditions set forth in paragraph A. above, if a participant's Employment terminates without cause prior to the end of an Award Period, in the sole and absolute discretion of the Committee, the conditions respecting continued Employment imposed by this Plan shall may be deemed to have lapsed with respect to a portion or all of his Incentive Share award. Such participant shall be entitled to delivery of such vested Incentive Shares free of the restrictions imposed by this Plan as soon as practicable following the termination of his Employment provided that such participant shall execute any necessary agreement in form and substance satisfactory to the Committee as set forth in SECTION 7. hereof. C. If a participant's Employment terminates other than on account of death, disability retirement, or without cause as set forth above1 his interest in all Incentive Shares awarded to him shall terminate unless the Committee in its sole and absolute discretion waives the conditions of this Plan requiring continued Employment to the end of the Award Period with respect to all or a portion of his Incentive Shares, subject to such conditions, with respect to competitive employment or otherwise, as the Committee determines are in the best interests of the Company in each case. The Committee may require retention of such Incentive Shares on deposit with the Secretary, Treasurer or other executive officer of the Ampenol Corporation until the expiration of the Award Period in order to secure the performance of such conditions. D. If Amphenol Corporation or any division or subsidiary thereof merges, consolidates, combines, liquidates, dissolves is purchased by or undergoes a similar corporate change, or in extraordinary cases, the Committee may in its sole and absolute discretion waive the conditions of this Plan requiring continued Employment to the end of the Award Period with respect to some or all of the Incentive Shares theretofore awarded, and upon such waiver the restrictions on such Incentive Shares shall lapse. E. If a participant's interest in and or all of the Incentive Shares awarded to him shall terminate, the Company shall pay to the participant the Purchase Price no later than thirty days after the termination of such interest. SECTION 6 Miscellaneous A. Authorization of Stock and Limitation. An aggregate of 350,000 shares of Stock shall be available for award under this Plan, and such shares shall be from authorized and unissued shares or treasury shares of Amphenol Corporation (including shares reacquired by Amphenol Corporation) or both, as the Board shall from time to time determine; provided however, that any Incentive Shares which are forfeited may be the subject of a subsequent award. B. Adiustments. The number of shares available for award under this Plan, or awarded to participants as Incentive Shares, and the values of such Stock established by the Committee for any purpose hereunder, may be adjusted by the Committee to reflect any stock split-ups, stock dividends, combination or reclassification of common stock, or a consolidation, merger or a sale of all or substantially all of the assets of the Company. All determinations made by the Committee with respect to adjustments under this paragraph of the Plan shall be final, binding and conclusive. No fractional shares of Stock shall be issued or issuable pursuant to any such adjustment or any other provision of this Plan. C. Effective Date, Plan Duration and Amendments. This Plan shall become effective as of January 24, 1996 by action of the Board conditioned on and subject to approval of the Plan by the holders of a majority of all the outstanding shares of the Common Stock of the Company entitled to vote on the Plan. Unless sooner terminated in accordance with the Plan, the Plan shall expire on January 23, 2006; provided, however, that the Board and the Committee and their respective designees shall continue to have authority to take all action contemplated by the Plan which is necessary or desirable to distribute Incentive Shares earned by participants during the Award Period. The Board shall have the right to suspend or cancel the Plan and to modify or amend the Plan in any respect. Nothing contained herein shall, without the consent of the participant, permit any amendment to this Plan which would adversely affect the rights of participants hereunder to Incentive Shares previously awarded to them. D. Limitation of Rights. Nothing in this Plan shall be construed to give any employee of the Company any right to receive Incentive Shares other than as provided herein. Nothing in this Plan or any agreement executed pursuant hereto shall be construed to limit in any way the right of the Company to terminate a participant's employment at any time, without regard to the effect of such termination on any rights such participant would otherwise have under this Plan, or give any right to a participant to remain employed by the Company in any particular position or at any particular rate of remuneration. SECTION 7. Restrictions upon Resale of Unregistered Stock If the shares of Stock that are acquired by a participant pursuant to the terms of this Plan are not registered with the Securities and Exchange Commission pursuant to an effective registration statement, a participant, if the Committee shall deem it advisable, may be required to certify and agree in writing (i) that any shares of Stock acquired by him pursuant to the Plan will not be sold except pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), or that he will have furnished the Committee with an opinion of counsel, which opinion and counsel shall be satisfactory to the Committee, to the effect that no such registration is required because of an exemption from registration under the Securities Act and under all applicable state securities laws and except in accordance with any restrictions imposed as a condition of the award of shares hereunder and (ii) that he is acquiring such shares of Stock for his own account and not on behalf of any other persons. The restrictions imposed by this SECTION 7 shall remain in effect after the end of any Award Period and after the termination of the Plan. No reference elsewhere in this Plan to lapse of restrictions or delivery of Stock free of restrictions shall impair the continued validity of the restrictions imposed by this SECTION 7. EX-10.18 8 EXHIBIT 10.18 EXHIBIT 10.18 AMPHENOL CORPORATION SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN Effective January 25, 1996 AMPHENOL CORPORATION SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN PREAMBLE Amphenol Corporation ("Amphenol") has formally adopted a Supplemental Employee Retirement Plan, effective January 25, 1996, for a select group of senior management personnel of Amphenol and its Affiliated Companies to insure that the overall effectiveness of the executive compensation and retirement programs of Amphenol and its Affiliated Companies will attract, retain and motivate qualified senior management personnel. Section I. Definitions. When used herein the following words shall have the meanings below unless the context clearly indicates otherwise. To the extent additional definitions of words or terms (not defined below) are necessary or helpful, the definitions of such words or terms in the Basic Retirement Plans shall apply unless the context clearly indicates otherwise. 1.1 "Affiliated Company" means any trade or business entity, or predecessor company of such entity, if any, which is a member of a controlled group of corporations as defined under the Internal Revenue Code Section 414, of which Amphenol is also a member. 1.2 "Basic Retirement Plan" means any defined benefit pension plan intended to be qualified under Section 401 of the Code, sponsored by Amphenol Corporation or any Affiliated Company, as amended from time to time. 1.3 "Basic Retirement Plan Benefit" means the annual benefit to which a Participant is entitled from the Basic Retirement Plan. 1.4 "Company" means Amphenol Corporation and its subsidiaries and any successors thereto. 2 1.5 "Compensation" means the Participant's Compensation as defined in the Basic Retirement Plan. 1.6 "Code" means the Internal Revenue Code of 1986, as amended. 1.7 "Participant" means any employee of the Company who meets the eligibility requirements of Section II and who is designated and approved as set forth in Section II. 1.8 "Pension Committee" means the Pension Committee as designated by the Board of Directors, from time to time, or if none, the Board of Directors of the Company. 1.9 "Plan" means the Amphenol Corporation Supplemental Employee Retirement Plan. 1.10 "Retirement Date" means a Participant's Normal Retirement Date, Early Retirement Date or Late Retirement Date as the context may indicate and as defined in Section III of the Plan. 1.11 "Supplemental Retirement Plan Benefit" means the annual benefit payable in accordance with the Plan. 1.12 "Surviving Spouse" means the spouse of the Participant who is legally married to the Participant, and is not legally separated or divorced from the Participant, and with respect to an active Participant, has been so married for a period of not less than 12 months as of the Annuity Starting Date or death of the Participant. 1.13 "Years of Service" means the Participant's Years of Accrual Service as defined in and accrued under the Basic Retirement Plan. 3 Section II. Eligibility to Participate. 2.1. Eligibility. Each senior management employee of the Company shall be eligible to become a Participant in the Plan but shall only become a Participant upon such employee being designated as a Participant by the Pension Committee in writing and provided further that at the time of such designation and approval the employee is a Participant in a Basic Retirement Plan. 2.2. Cessation of Eligibility. Once an employee becomes a Participant, he or she shall remain a Participant until his or her termination of employment with the Company and thereafter until all benefits to which the Participant or the Participant's Surviving Spouse is entitled under the Plan have been paid; provided, however, that if a Participant ceases to be a Participant in a Basic Retirement Plan prior to the first to occur of his or her Retirement Date and the date of his or her termination of employment with the Company, he or she shall cease to be a Participant hereunder on the date he or she ceases to be a Participant in a Basic Retirement Plan. Section III. Eligibility for and Amount of Benefits. 3.1 Eligibility. Each Participant eligible to retire from the Company shall be eligible to receive a benefit from the Plan beginning on the date benefits commence under a Basic Retirement Plan. 3.2 Retirement Benefits. The Supplemental Retirement Plan Benefit payable to a Participant as of the Retirement Date shall be an annual benefit, payable in the Normal Form provided under the Basic Retirement Plan, equal to (a) less (b) determined as follows: (a) is the annual benefit which is derived from Employer and Employee contributions, if any, payable to the Participant or Participant's Surviving Spouse or other applicable beneficiary, if any, under the Basic Retirement Plan as of the Participant's applicable Retirement Date, such benefit to be calculated as if the compensation limitation imposed to determine benefits by Section 401(a)(17) of the 4 Code was $500,000 and without regard to any limitations under Code Section 415; and (b) is the annual benefit which is derived from Employer and Employee contributions, if any, and which is payable to the Participant or the Participant's Surviving Spouse or other applicable beneficiary, if any, under the Basic Retirement Plan as of the Participant's applicable Retirement Date, such benefit to be calculated with the actual maximum limitation on compensation for benefit purposes as imposed by Section 401(a)(17) of the Code. A Participant or a Participant's Surviving Spouse or other beneficiary's Supplemental Retirement Plan Benefits under this Plan shall consist of such Supplemental Retirement Plan Benefits payable as a result of an excess existing when the Participant's retirement benefit under the Basic Retirement Plan is determined as if the compensation limit imposed under Code Section 401 (a)(17) was $500,000 and the limitations under Code Section 415 were not applicable. No benefit shall be payable under this Plan to a Participant or Surviving Spouse, or other beneficiary unless a benefit is payable to such Participant, Surviving Spouse or beneficiary under the Basic Retirement Plan. The calculation of the Supplemental Retirement Plan Benefit shall be done by Amphenol in consultation with the consulting actuary for the Company's Basic Retirement Plans. The benefits so determined and the interpretation of Amphenol based upon such actuarial input shall be final and binding on the Company, the Participant and the Participant's Surviving Spouse or other applicable beneficiary, if any. To the extent a Participant is required by the Basic Retirement Plan to make contributions to the Basic Retirement Plan and such contributions are reduced or eliminated as a result of the compensation limitations of Code Section 401 (a)(17), the Participant's Supplemental Retirement Plan Benefits so determined shall be reduced, as determined by the Basic Retirement Plan's consulting actuary, by the Actuarial Equivalent amount of benefits that would have been purchased by contributions which would have been required if the compensation limit under Code Section 401 (a)(17) had been $500,000. 5 3.3 Death Prior to Termination of Employment. If a Participant dies prior to his Annuity Starting Date under the Basic Retirement Plan, his Surviving Spouse, if any, shall be entitled to a Supplemental Retirement Plan Benefit equal to the Qualified Pre-Retirement Survivor Annuity or other pre-retirement death benefit payable to a Surviving Spouse under the Basic Retirement Plans based upon the Participant's Years of Service and Compensation as of date of death calculated in accordance with Section 3.2 above. Such Supplemental Retirement Plan Benefit shall be payable as of the date the Qualified Pre-Retirement Survivor Annuity or other pre-retirement death benefit is payable under the Basic Retirement Plan. 3.4 Termination of Employment. If a Participant's employment with the Company is terminated prior to attaining Early Retirement Age, the Participant and his Surviving Spouse or beneficiary shall have a right to receive deferred Supplemental Plan Benefits, subject to Section 6.1 hereof. Section IV. Form and Commencement of Benefits. 4.1 Form of Benefits. Supplemental Retirement Plan Benefits payable to a Participant, Surviving Spouse or beneficiary pursuant to Section III will be payable in the same form as may be applicable to the Basic Retirement Plan Benefit or the Surviving Spouse's or other beneficiary's benefit, if any, under the Basic Retirement Plan. If a Basic Retirement Plan Benefit is payable to a Participant in a form other than the Normal Form of Benefit under the Basic Retirement Plan, then his or her Supplemental Retirement Plan Benefit shall be subject to adjustment by the same factors as are applied under the Basic Retirement Plan with respect to the Basic Retirement Plan Benefit of the Participant. 4.2 Commencement of Benefits. A Supplemental Retirement Plan Benefit payable under this Plan to a Participant, Participant's Surviving Spouse or beneficiary pursuant to Section III will commence on the first day of the month coincident with the date on which the Participant's benefits under the Basic Retirement Plan commence. A Supplemental Retirement Plan Benefit payable to a Surviving Spouse or other beneficiary, if any, pursuant to Section III will commence 6 on the first day of the month coincident with or next following the Participant's death or the date Qualified Pre-Retirement Survivor Annuity or other pre-retirement death benefits under the Basic Retirement Plan commence, if later. Payment of a Supplemental Plan Benefit to a Participant will terminate at the same time as payments under the Basic Retirement Plan terminate, unless previously terminated pursuant to any other provision hereof. Payment of a Supplemental Retirement Plan Benefit to a Surviving Spouse will terminate with the payment made on the first day of the month in which the Surviving Spouse dies. In the event of any early commencement of benefits prior to Normal Retirement Date, such benefits shall be subject to the same actuarial adjustment for early commencement, if any, as are made for benefits under the Basic Retirement Plan. 4.3 Acceleration/Commutation of Benefits. Amphenol may, in its sole discretion, at any time, or from time to time, accelerate payment of Supplemental Retirement Plan Benefits and pay the Actuarial Equivalent thereof to any Participant in a single lump sum settlement in cash. Section V. Amendment and Termination. 5.1 Amendment or Termination. Amphenol intends the Plan to be permanent but reserves the right to amend or terminate the Plan when, in the sole opinion of Amphenol, such amendment or termination is advisable. Any such amendment or termination shall be made pursuant to a resolution by the Board of Directors of Amphenol which shall be effective on the date of such resolution. No amendment or termination of the Plan shall directly or indirectly deprive any Participant, Surviving Spouse or beneficiary of all or any portion of any Supplemental Retirement Plan Benefit which has commenced prior to the effective date of the resolution amending or terminating the Plan nor any benefit accrued prior to the effective date of a resolution amending or terminating the Plan. 5.2 Termination Benefits. In the event of termination of the Plan or a Participant's participation in the Plan, each actively employed or disabled Participant 7 on the termination date shall become vested in his accrued Supplemental Retirement Plan Benefit as of the termination date. Such accrued Supplemental Retirement Plan Benefit shall be calculated as set forth in paragraph 3.2 above based upon the Participant's Years of Accrual Service, Compensation and Basic Retirement Plan Benefit, as of the termination date. For purposes of determining a Participant's accrued Supplemental Retirement Plan Benefit pursuant to this paragraph, the Participant's Basic Retirement Plan Benefit shall be his or her then accrued benefits from the Basic Retirement Plan payable at Normal Retirement Age. Payment of a Participant's accrued Supplemental Retirement Plan Benefit shall not be dependent upon the continuation of employment with the Company following the Plan termination date. Accrued Supplement Retirement Plan Benefits shall become payable at the date for commencement of payment of a Supplemental Retirement Plan Benefit pursuant to the terms of paragraph 4.2 above. 5.3 Corporate Successors. The Plan shall not be automatically terminated by a transfer or sale of assets of Amphenol or by the merger or the consolidation of Amphenol into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate subject to the provisions of paragraph 5.1 and 5.2. Section VI. Miscellaneous. 6.1 Forfeiture of Benefit. Notwithstanding any other provision of the Plan, future payment of a Supplemental Retirement Plan Benefit hereunder to a Participant, Surviving Spouse or beneficiary will, at the discretion of the Retirement Committee, be discontinued and forfeited hereunder to the Participant, Surviving Spouse or beneficiary, at any time if any of the following circumstances occur: (a) the Participant engages in activities deemed competitive with and/or materially detrimental to the Company following his termination of employment with the Company; 8 (b) the Participant performs acts of willful malfeasance or gross negligence in a matter of material importance to the Company, and such acts are discovered by the Company at any time prior to the death of the Participant. The Pension Committee shall have the sole and unlimited discretion with respect to the application and the provisions of this Section and the exercise of discretion shall be conclusive and binding upon the Participant, Surviving Spouse and beneficiary and all other persons. 6.2 No Effect on Employment Rights. Nothing contained herein will confer upon any Participant the right to be retained in the employ or service of the Company nor limit the rights of the Company to discharge or otherwise deal with Participants without regard to the existence of the Plan. 6.3 Funding. The Plan at all times shall be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Company for payment of any benefits hereunder. Nothing in this Plan and no action taken pursuant to the provisions of the Plan shall create or be construed to create a trust fund of any kind. Any funds which may be set aside to provide for benefits hereunder shall continue for all purposes to be part of the general funds of the Company and no person other than the Company shall have any interest in such funds. No Participant, Surviving Spouse, beneficiary or any other person shall have any interest in any particular assets of the Company by reason of the right or prospective right to receive a benefit under the Plan, and any such Participant, Surviving Spouse, beneficiary or other person shall only have the rights of a general unsecured creditor of the Company with respect to any rights under the Plan. Nothing contained in this Plan shall constitute a guarantee by the Company or any officer or other member or other entity or member of the control group or other persons associated with the Company that the assets of the Company will be sufficient to pay any benefit hereunder. 6.4 Spendthrift. No benefit payable under the Plan shall be subject to any manner of anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, 9 or charge prior to actual receipt thereof by the payee; and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge prior to such receipt shall be null and void; and the Company shall not be liable in any manner for or subject to the debt, contracts, liabilities, engagement or torts of any person entitled to any benefit under the Plan. 6.5 Administration. The Pension Committee shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof. All provisions set forth in the Basic Retirement Plans with respect with the administrative powers and duties of the Pension Committee, expenses of administration and the procedure for filing claims and review of claims shall be also applicable with respect to this Plan. The Pension Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions, personnel files, records, benefit calculations and other information furnished by any actuary, accountant, Controller, legal counsel or the person employed by or engaged by the Company with respect to the Plan. 6.6 Disclosure. Each Participant shall receive a copy of the Plan and the Pension Committee will make available for inspection by any Participant, Surviving Spouse or beneficiary, a copy of any rules and regulations adopted by the Pension Committee or administrator of the Plan as well as make available any annual reports filed by the Plan. 6.7 State Law. The Plan is established under and will be constructed according to the laws of the State of Connecticut, to the extent that such laws are not preempted by the Employer Retirement Income Security Act of 1974, as amended, and valid regulation published thereunder. Each Participant hereof consents and submits to the jurisdiction of the state or federal court situated in the State of Connecticut in any action or proceeding arising out of or relating to this Plan, and agrees that all claims in respect of any such action or proceeding shall be heard and determined exclusively in such courts. 10 6.8 Incapacity. In the event a Participant, Surviving Spouse or beneficiary is declared incompetent and a conservator of the person legally charged with the care of his or her person or his or her estate is appointed, any benefits under this Plan to which the Participant, Surviving Spouse or beneficiary is entitled shall be paid to such conservator or other person legally charged with the care of the person or his or her estate. Except as provided above in this paragraph when the Pension Committee in its sole discretion determines that a Participant, Surviving Spouse or beneficiary is unable to manage his or her financial affairs, the Retirement Committee may direct the Company to make such distributions to any person for the benefit of such Participant, Surviving Spouse or beneficiary. 6.9 Unclaimed Benefit. Each Participant shall keep the Company or the Pension Committee informed of his or her current address and the current address of his or her spouse or beneficiary. The Pension Committee shall not be obliged to search for the whereabouts of any person. If the location of a Participant, Surviving Spouse, or other beneficiary is not made known to the Pension Committee within three (3) years after the date which any payment of the Supplemental Retirement Plan Benefit is due to be made, then the Company shall have no further obligation to pay any benefit hereunder to such Participant, Surviving Spouse, beneficiary or any other person and such benefit shall be irrevocably forfeited. 6.10 Limitation or Liability. Notwithstanding any of the preceding provisions of the Plan, neither the Company nor any individual acting as an Employee, agent, fiduciary or any other capacity of the Company or as a member of the Pension Committee or Board of Directors shall be liable to any Participant, former Participant, Surviving Spouse, beneficiary or any other person for any claim, loss, liability or expense incurred in connection with the Plan or any other forfeiture or nonpayment of any benefits under the Plan. 6.11 No Guarantee of Benefits. Nothing contained In the Plan shall constitute a guarantee by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder. 11 6.12 Administration. The Company shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof except for those duties and authority which are reserved to the Pension Committee. In Witness Whereof the above Supplement Employee Retirement Plan is by authority of The Board of Directors of Amphenol Corporation, adopted on the 25th day of January, 1996. EX-11 9 EXHIBIT 11 Exhibit 11 AMPHENOL CORPORATION Computation of Per Share Earnings For the Three Years Ended December 31, 1996 (dollars in thousands, except per share amounts)
Year Ended December 31, ------------------------------------------ 1996 1995 1994 ---- ---- ---- Net income before extraordinary item ..... $67,578 $62,858 $42,400 Extraordinary item: Write off of deferred debt issuance costs, net of income taxes ................... -- -- (4,087) ------- ------- ------ Net income applicable to Common Stock .... $67,578 $62,858 $38,313 ======= ======= ======= Average Shares Outstanding: Class A Common Stock .................. 46,649,541 47,304,180 46,345,880 Warrants (1) .......................... -- -- 265,879 ---------- ---------- ---------- 46,649,541 47,304,180 46,611,759 ========== ========== ========== Net income per share: Income before extraordinary item ...... $1.45 $1.33 $.91 Extraordinary charge .................. -- -- (.09) ----- ----- ---- Net income per share .................. $1.45 $1.33 $.82 ===== ===== ====
- ---------- (1) For purposes of calculating the earnings per common and common equivalent share, because of the de minimis exercise price, the Warrants are accounted for as if they had been exercised and the related shares of Common Stock were outstanding. EX-12 10 EXHIBIT 12 Exhibit 12 AMPHENOL CORPORATION Ratio of Earnings to Fixed Charges (dollars in thousands)
Amphenol Historical ------------------- Year Ended December 31, -------------------------------------------------- 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- Income from continuing operations before income taxes and extraordinary items .......... $109,665 $104,627 $ 69,509 $ 38,076 $ 11,367 Non-recurring acquisition expenses.......................... -- -- -- -- 4,130 Undistributed earnings of investments ...................... -- 60 (272) (410) (371) -------- -------- -------- -------- -------- 109,665 104,687 69,237 37,666 15,126 -------- -------- -------- -------- -------- Fixed charges: Interest ....................... 24,617 25,548 30,382 41,184 29,285 Other financing fees ........... 3,504 3,902 3,180 1,186 875 Appropriate portion of rentals representative of the interest factor ......................... 4,072 3,865 3,369 3,422 3,304 -------- -------- -------- -------- -------- Total fixed charges ........... 32,193 33,315 36,931 45,792 33,464 -------- -------- -------- -------- -------- Earnings from continuing operations before undistributed earnings of investments, income taxes, fixed charges and extraordinary items.. $141,858 $138,002 $106,168 $83,458 $ 48,590 ======== ======== ======== ======= ======== Ratio of earnings to fixed charges. 4.4x 4.1x 2.9x 1.8x 1.5x ======== ======== ======== ======= ========
EX-22 11 EXHIBIT 22 Exhibit 22
State/Country Name(s) under which Subsidiary List of Subsidiaries of Incorporation does business (1) =============================================================================================== Amphenol Australia Pty Ltd. Australia Amphenol Benelux B.V. The Netherlands Amphenol Amphenol Borg Limited England Amphenol Canada Corporation Ontario, Canada Amphenol Amphenol East Asia Limited Hong Kong AEAL, AEAM, Amphenol Amphenol FSC Barbados Amphenol Funding Corporation Delaware, U.S.A. Amphenol Gesellschaft m.b.H. Austria Amphenol Amphenol Interconnect Products Corporation Delaware, U.S.A. AIPC Amphenol International Ltd. Delaware, U.S.A. Amphenol Italia, S.p.A. Italy Amphenol Amphenol Japan K.K. Japan Amphenol Amphenol Limited England Amphenol Amphenol Socapex S.A.S. France Socapex Amphenol Aerospace France, Inc. Delaware, U.S.A. Amphenol Commercial & Industrial France, L.L.C. Delaware, U.S.A. Amphenol Taiwan Corporation Taiwan Amphenol Amphenol-Tuchel Electronics GmbH Germany Tuchel Amphetronix Limited India Amphetronix Changzhou Times Fiber Communications Cable Co. Ltd. China Times Fiber Kai-Jack Industrial Co., Ltd. Taiwan Kai-Jack LPL Technologies Holding GmbH Germany Optimize Manufacturing Co. Arizona, U.S.A. Optimize Productos de Memoria S.A. de C.V. Mexico Pyle-National Inc. Delaware, U.S.A. Pyle-National Pyle-National Ltd. England Pyle-National Pyle-National of Canada Inc. Ontario, Canada Pyle-National Spectra Strip Limited England TFC South America, S.A. Argentina Times Fiber The Sine Companies, Inc. Michigan, U.S.A. Sine Times Fiber Communications, Inc. Delaware, U.S.A. Times Fiber Times Fiber Canada Limited Ontario, Canada Times Fiber ==============================================================================================
- ---------- (1) Each subsidiary also does business under the corresponding corporate name listed in column 1. EX-27 12 EX-27 FDS
5 0000820313 AMPHENOL CORPORATION 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 3,984 0 66,772 (1,868) 153,283 233,782 265,185 (163,110) 710,662 96,918 0 0 0 47 360,501 710,662 776,221 776,221 494,689 494,689 0 0 (24,617) 109,665 (42,087) 67,578 0 0 0 67,578 1.45 1.45
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