Revenue growth was strong in all regions. When compared with last year’s third quarter, revenue in the Far East South (including China), the Company’s largest region, increased 30% in dollars with a similar increase in local currencies. In the Far East North (Japan and Korea), revenue increased 7% in dollars and 16% in local currencies. In the Americas, revenue rose 19%, the highest growth rate in several years. In Europe, revenue increased 8% in dollars and 20% in local currencies.
Gross profit margin for the quarter increased to 35.6%, compared with 34.5% in last year’s third quarter, and 34.7% sequentially from the December 2005 quarter. Selling, general and administrative expense was $170.5 million for the March quarter, compared with $158.6 million for the prior year quarter. SG&A expense for the March quarter included the effect of accounting for share based payments in accordance with Financial Accounting Standards Board Statement No.123(R), which increased expense by $3.9 million ($2.6 million after-tax or approximately $0.01 per share), compared with the prior year quarter.
Pretax profit margin was 11.9%, the Company’s highest level to date this fiscal year and 190 basis points above last year’s third quarter.
The effective tax rate for the quarter was 28.5%, consistent with prior guidance, but higher than the 27.0% rate for the prior year March 2005 quarter, primarily due to changes in the mix of earnings by country.
Martin P. Slark, CEO and Vice-Chairman commented, “We continued to benefit from our strength in Japan and China, as well as in many of the world’s emerging markets. We also were pleased to see further improvement in both the Americas and European regions, driven by broad gains in most industry markets. We maintained good momentum with orders establishing a significant new record, and ended the March quarter with a backlog 19.1% above the prior December 2005 quarter. Looking at our markets, the mobile phone and consumer markets continued to be strong, and we did not experience the seasonal slowdown normally seen in the March quarter. These markets continue to be driven by requirements for higher functionality and mobility within customer’s applications, resulting in higher content for newer products based primarily upon micro-miniature technology. This technology is a major strength of Molex, and is a significant contributor to growth in a broad array of other markets. The strength in the telecom infrastructure market was also driven by micro-miniature, as well as our high-speed and optical technologies. In addition, growth also was impressive in the global distribution channel.”
Slark continued, “We remain focused on increasing operating margins. A major improvement during the quarter was the 90 basis point sequential increase in gross profit margin to 35.6%. A portion of this improvement was due to leverage from record revenue. We also believe our efforts to reduce manufacturing overhead and to improve margins on an individual product basis contributed to an excellent quarter. The raw material environment continues to be difficult, especially for copper and gold. To partially recover these higher costs, we implemented selective price increases and also released a high level of new products at prices reflecting current input costs.”
Cash and marketable securities were $401.4 million at March 31, 2006, compared with $419.8 million at December 31, 2005. As described below, during the March quarter the Company spent $40 million to repurchase its common stock. |
