How does the adoption of FAS No. 142 affect the reported financial results?

Amphenol adopted FAS No. 142, "Goodwill and Other Intangible Assets," effective January 1, 2002. This standard eliminates the amortization of goodwill. Consequently, goodwill amortization expense, which was $3.514 million in the first quarter of 2001, was nil in the first quarter of 2002, leading to higher reported net income and earnings per share. The company also performed an impairment evaluation, finding no impairment at adoption.

What is the company's liquidity position and how is it managing its debt?

Amphenol has a $150 million revolving credit facility with $142.3 million available at the end of the quarter. The company generated $43.635 million in cash from operations during the quarter, which was used to repay $23.875 million in bank debt, fund capital expenditures of $4.088 million, and finance acquisitions of $11.950 million. The company's debt structure includes a Term Loan with maturities extending through 2006.

Are there any significant environmental liabilities impacting the company?

Amphenol is jointly and severally liable with Honeywell for several environmental cleanup sites. An agreement from the 1987 acquisition outlines cost-sharing responsibilities, with Honeywell generally bearing a larger portion of costs for pre-acquisition conditions. At March 31, 2002, approximately $27.4 million in costs were incurred under this agreement. Management believes these environmental matters will not have a material adverse effect on the company's financial condition or results of operations.

APH 10-Q Quarterly Report Q1 FY2002 — Revenue, Net Income, EPS

Q: What led to the decrease in net sales for the first quarter of 2002?

Net sales decreased by approximately 19% to $255.976 million compared to the prior year's period. This was primarily driven by lower sales in the communications and industrial markets, partially offset by increased sales in the aerospace and defense sectors. Currency translation also had a negative impact of approximately $5.3 million on sales.

Summary

Amphenol Corporation's first quarter 2002 results show a notable decrease in net sales, down 19% year-over-year to $255.976 million. This decline is attributed to reduced demand in communications and industrial markets, partially offset by strength in aerospace and defense. Despite lower sales, the company demonstrated effective cost management, with selling, general, and administrative expenses remaining stable as a percentage of sales. A significant change in reporting is the adoption of FAS No. 142, which eliminates goodwill amortization, positively impacting reported net income and earnings per share compared to the prior year. The company maintained a strong cash flow from operations, which was utilized for debt repayment, capital expenditures, and acquisitions.

Key Highlights

1Net sales declined by 19% year-over-year to $255.976 million, primarily due to weaker performance in communications and industrial markets.
2Gross profit margin decreased from 34% to 30%, largely due to lower sales volume and pricing pressures, though cost reduction efforts provided some offset.
3Effective January 1, 2002, Amphenol adopted FAS No. 142, eliminating goodwill amortization, which favorably impacts reported net income and EPS.
4Operating income decreased by approximately 35% to $40.273 million, reflecting the decline in sales and gross profit.
5Cash flow from operations increased to $43.635 million from $37.254 million in the prior year's period, indicating strong operational cash generation.
6The company utilized cash flow to repay $23.875 million in bank debt and funded capital expenditures and acquisitions.
7Availability under the revolving credit facility was $142.3 million as of March 31, 2002, providing ample liquidity.

AMPHENOL CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2002

Summary

Key Highlights

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