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AMP tots up defense costs
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October 23, 1998: 9:29 a.m. ET
Fending off hostile AlliedSignal takeover has cost $43 million, with more to come
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NEW YORK (CNNfn) - Electrical component maker AMP Inc. said Friday its bitter legal battle with would-be takeover partner AlliedSignal Inc. has cost the company more than $43 million so far and the expenses are still adding up.
In its third-quarter results, Harrisburg, Pa.-based AMP took an exceptional charge of $35.9 million for costs relating to litigation and other actions in defense of the company.
Other one-time charges included a $7.5 million special interest expense for securing AMP's Oct. 9 buyback of 30 million shares, a tactic in the company's two-month struggle both to keep AlliedSignal from gaining a majority stake and, simultaneously, to mollify current shareholders.
AlliedSignal launched its $10 billion hostile takeover bid Aug. 10 with an offer to buy all outstanding AMP shares at $44.50 apiece. Since then, both companies have sued each other and contested shareholder rights legislation as well as fighting bitterly over AMP stock.
Excluding the war chest charges and a $187 million restructuring fee, AMP reported net income of $79.3 million, or 36 cents per share, in the quarter, a stark decline from third-quarter 1997's $121.6 million, or 55 cents per share, but still higher than analyst expectations of 34 cents per share.
Including the charges, the company lost $76.3 million, or 35 cents per share.
Revenue slipped to $1.33 billion from $1.43 billion a year ago, reflecting continuing weakness in the company's key Western Hemisphere markets.
AMP attributed the weakness to shifts in computer production to Asia. However, despite significant improvement in real terms, the Asian currency crash also drove the company's Asia/Pacific sales down 11 percent in dollar terms
The company said its extensive restructuring program continued apace in the quarter.
"The Profit Improvement Plan is clearly on track and we have every confidence that the company will continue to execute (it) successfully as we move forward," said AMP Chairman and CEO Bob Ripp. "Substantial cost savings from the plan will be realized in the fourth quarter and . . . the cost of sales line will see significant improvement in 1999."
Ripp said AMP is confident in earnings forecasts of $2.30 per share in 1999 and $3.00 per share in 2000. He expects the company to deliver 45 to 50 cents per share in the fourth quarter, not counting takeover defense and restructuring expenses.
Estimated restructuring fees for the coming quarter should be between $135 million and $190 million before tax, the company said.
In the year to date, AMP has earned $236.6 million, or $1.08 per share, compared with $345.6 million, or $1.57 per share, a year ago. After charges are applied, the company shows a year-to-date loss of $155.6 million, or 71 cents per share.
AMP stock (AMP) closed at 40 Thursday, up 1/2. AlliedSignal (ALD) gained 1/8 to 38-9/16. 
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