Molex (MOLX) 10-Q/A 2007 Q1 Quarterly report (amended)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2006

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission File Number 0-7491

MOLEX INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 36-2369491
(I.R.S. Employer
Identification No.)

2222 Wellington Court, Lisle, Illinois 60532
(Address of principal executive offices)
Registrant’s telephone number, including area code: (630) 969-4550

     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. Yesþ Noo

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

     Large accelerated filerþ      Accelerated filero      Non-accelerated filero

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yeso Noþ

     On October 27, 2006, the following numbers of shares of the Company’s common stock were outstanding:

Common Stock	99,499,595
Class A Common Stock	84,524,280
Class B Common Stock	94,255

Explanatory Note

     As disclosed in our current report on Form 8-K filed on January 30, 2007, we are amending our quarterly report on Form 10-Q for the three months ended September 30, 2006 (the Original Filing) to reflect evolving understanding of the views of the staff of the Securities and Exchange Commission (the Commission) relating to the qualitative aspects of past stock option misdating. We will also separately amend our annual report on Form 10-K for the fiscal year ended June 30, 2006 to reflect the restatement of the consolidated financial statements and the related disclosures for the fiscal years ended 2006, 2005 and 2004 and for each of the quarters in fiscal years 2006 and 2005. Accordingly, the consolidated financial statements and related financial information contained in previously filed reports should no longer be relied upon.

     This Form 10-Q/A also reflects the restatement of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 for the three months ended September 30, 2006, and Note 2, “Restatement of Condensed Consolidated Financial Statements” in Notes to Condensed Consolidated Financial Statements. This Explanatory Note explains the history and previous disclosures on this subject, as well as presenting the financial impact of the restatement.

     Our decision to restate our consolidated financial statements was based on the results of an internal inquiry and independent investigation into our past stock option granting practices. In an August 2, 2006 press release (the August Press Release), we announced that, following the widespread publicity regarding the granting of stock options, we undertook in the fourth fiscal quarter of 2006 a voluntary internal review of our past practices related to grants of stock options. As a result of our preliminary review, our Board of Directors (the Board) formed a Special Committee of independent directors in June 2006 to commence an investigation of our stock option granting practices for the period 1995 through 2006. The Special Committee retained independent legal counsel to aid in the investigation. The Special Committee and its independent counsel, assisted by forensic accountants reviewed the facts and circumstances surrounding annual stock option grants made to executive officers, employees and non-employee directors, searched relevant physical and electronic documents and interviewed current directors, officers and employees.

     In the August Press Release, we announced that both we and the Special Committee concluded that the dates of stock option and restricted stock grants to executive officers and other employees in a number of instances differed from the dates such grants were approved by the appropriate Board committee such that the price on the approval date was higher than the price on the stated grant date. The Special Committee concluded that no stock options granted to outside directors were misdated. The Special Committee concluded that our former General Counsel was responsible for the misdating and found that he failed to ensure compliance with the terms of our stock option plans and the required granting actions by preparing minutes that did not accurately reflect the deliberations and actions of the relevant Board committee, failing to document approvals of certain grants, and selecting grant dates to provide a favorable grant price to executive officers and employees. The General Counsel was removed from his position by the Board immediately following the completion of the Special Committee’s independent investigation and has recently retired as a result of other related events.

     We provided in the August Press Release the aggregate unrecorded non-cash expense relating to misdated executive officer grants. We also stated that for grants to other employees (non-executive officers) we and the Special Committee concluded that it was impracticable to determine the actual measurement dates of the grants, but that even if all such dates were determinable there would not be a material understatement of expense. The analysis of the grants to employees relied on in this determination included a range of potential measurement dates determined by reviewing the dates on documentation such as final spreadsheets listing the employees and the number of shares to be granted to such employees, e-mails, and other correspondence.

     We announced in the August Press Release that our current executive officers agreed to repay their portion of the $685,000 in total gains realized by them as a result of the misdating and also agreed to increase the exercise prices of their unexercised options so that there would be no future gain due to misdating of grants, all of which has occurred. We also announced that we had voluntarily disclosed the misdated grants to the Commission. The facts and circumstances surrounding this issue continue to be the subject of inquiries by the Enforcement Division of the Commission and the United States Attorney’s Office for the Northern District of Illinois. We continue to cooperate in both inquiries.

2

     Following our August Press Release, the Commission’s Office of the Chief Accountant issued a letter on September 19, 2006 providing guidance regarding the proper accounting for various historical stock option granting practices. In light of this guidance, we undertook an effort to determine or estimate appropriate measurement dates of the misdated stock options granted to employees, other than executive officers, in order to calculate an understatement of expense relating to such options, rather than relying on a range of potential measurement dates for determining the understatement of expense. The effect of recognizing additional share-based compensation expense resulting from the investigation of past stock grants to executive officers and employees is included below in this Explanatory Note. A detailed discussion of the financial effects of these matters is included in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Restatement of Consolidated Financial Statements” and Note 2, “Restatement of Condensed Consolidated Financial Statements,” of the Notes to Condensed Consolidated Financial Statements.

     We continue to believe that the misdated grants did not result in a quantitatively material misstatement to our financial statements; however, due to evolving understanding of the views of the staff of the Commission relating to the qualitative aspects of this issue, we are making the restatement in accordance with generally accepted accounting principles to record the following:

• Non-cash share-based compensation expense for grants that were misdated; and

• Related tax effects.

     The incremental effect from recognizing share-based compensation expense resulting from the misdated grants is as follows (in thousands):

	Pre-Tax		After-Tax
	Expense		Expense
Quarter ended September 30, 2005	$	624	$	431
Quarter ended September 30, 2006		362		250

     The Original Filing was filed with the Commission on October 31, 2006. All information in this Form 10-Q/A is as of September 30, 2006 and does not reflect events occurring after the date of the Original Filing, other than the restatement and updating of certain disclosures affected by events subsequent to the date of the Original Filing. For the convenience of the reader, this Form 10-Q/A sets forth the Original Filing in its entirety, as amended and modified to reflect the restatement. The following items have been amended principally as a result of, and to reflect, the restatement, and no other information in the Original Filing is amended hereby as a result of the restatement:

     Part I — Item 1: Financial Statements;
     Part I — Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations;
     Part II — Item 1A: Risk Factors; and
     Part II — Item 6: Exhibits.

     This Form 10-Q/A should be read in conjunction with our periodic filings made with the Commission, subsequent to the date of the Original Filing, including any amendments to those filings, as well as any Current Reports filed on Form 8-K subsequent to the date of the Original Filing. In addition, in accordance with applicable rules and regulations promulgated by the Commission, this Form 10-Q/A includes updated certifications from our current Chief Executive Officer and Chief Financial Officer.

3

Molex Incorporated

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2006 and June 30, 2006		5
	Condensed Consolidated Statements of Income for the three months ended September 30, 2006 and 2005		6
	Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2006 and 2005		7
	Notes to Condensed Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		25
Item 4.	Controls and Procedures		26
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings		26
Item 1A.	Risk Factors		27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		27
Item 4.	Submission of Matters to a Vote of Security Holders		28
Item 6.	Exhibits		28
SIGNATURES			29
Section 302 Certification of Chief Executive Officer
Section 302 Certification of Chief Financial Officer
Section 906 Certification of Chief Executive Officer
Section 906 Certification of Chief Financial Officer

4

PART I

Item 1. Financial Statements

Molex Incorporated
Condensed Consolidated Balance Sheets
(in thousands)

	Sept. 30,			June 30,
	2006			2006
	As			As
	Restated (1)			Restated (1)
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	334,321		$	332,815
Marketable securities		17,595			152,728
Accounts receivable, less allowances of $38,269 and $26,513, respectively		731,719			660,665
Inventories		408,220			347,312
Other current assets		82,052			54,713
Total current assets		1,573,907			1,548,233
Property, plant and equipment, net		1,090,285			1,025,852
Goodwill		301,929			149,458
Other assets		291,912			250,877
Total assets	$	3,258,033		$	2,974,420
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	324,873		$	305,876
Accrued expenses		172,023			189,390
Other current liabilities		168,063			99,546
Total current liabilities		664,959			594,812
Other non-current liabilities		16,855			14,709
Accrued pension and postretirement benefits		78,641			75,055
Long-term debt		134,503			7,093
Minority interest in subsidiaries		866			882
Total liabilities		895,824			692,551
Commitments and contingencies		—			—
Stockholders’ equity:
Common stock		10,940			10,900
Paid-in capital		473,661			442,586
Retained earnings		2,527,576			2,464,889
Treasury stock		(755,597	)		(743,219	)
Accumulated other comprehensive income		105,629			106,713
Total stockholders’ equity		2,362,209			2,281,869
Total liabilities and stockholders’ equity	$	3,258,033		$	2,974,420

(1) See Note 2, “Restatement of Condensed Consolidated Financial Statements,” in Notes to Condensed Consolidated Financial Statements.

See accompanying notes to condensed consolidated financial statements.

5

Molex Incorporated
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share data)

	Three Months Ended
	September 30,
	2006		2005
	As		As
	Restated (1)		Restated (1)
Net revenue	$	829,545	$	659,815
Cost of sales		560,136		445,996
Gross profit		269,409		213,819
Selling, general and administrative		166,301		149,674
Restructuring costs		—		4,870
Total operating expenses		166,301		154,544
Income from operations		103,108		59,275
Equity income		1,884		3,109
Interest income, net		2,080		2,313
Other income, net		3,964		5,422
Income before income taxes and minority interest		107,072		64,697
Income taxes		30,504		18,423
Minority interest		67		34
Net income	$	76,501	$	46,240
Earnings per share:
Basic	$	0.42	$	0.25
Diluted	$	0.41	$	0.25
Dividends declared per share	$	0.0750	$	0.0500
Average common shares outstanding:
Basic		183,763		187,243
Diluted		185,992		188,543

(1) See Note 2, “Restatement of Condensed Consolidated Financial Statements,” in Notes to Condensed Consolidated Financial Statements.

See accompanying notes to condensed consolidated financial statements.

6

Molex Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

	Three Months Ended
	September 30,
	2006			2005
	As			As
	Restated (1)			Restated (1)
Cash and cash equivalents, beginning of period	$	332,815		$	309,756
Operating activities:
Net income		76,501			46,240
Add non-cash items included in net income:
Depreciation and amortization		58,122			54,667
Share-based compensation		7,639			7,362
Other non-cash items		3,351			10,282
Changes in assets and liabilities:
Accounts receivable		(28,279	)		(33,929	)
Inventories		(32,722	)		(15,708	)
Accounts payable		(9,382	)		(1,234	)
Other current assets and liabilities		(37,232	)		(16,533	)
Other assets and liabilities		(1,230	)		(1,509	)
Cash provided from operating activities		36,768			49,638
Investing activities:
Capital expenditures		(75,566	)		(64,067	)
Proceeds from sales or maturities of marketable securities		3,060,202			379,402
Purchases of marketable securities		(2,925,068	)		(305,175	)
Acquisitions		(236,626	)		—
Other investing activities		4,035			(2,650	)
Cash (used for) provided by investing activities		(173,023	)		7,510
Financing activities:
Proceeds from revolving credit facility		44,000			—
Proceeds from issuance of long-term debt		131,045			—
Payments of long-term debt		(26,146	)		(2,272	)
Cash dividends paid		(13,774	)		(7,048	)
Exercise of stock options		7,362			2,586
Purchase of treasury stock		(5,017	)		(50,107	)
Other financing activities		517			123
Cash provided by (used for) financing activities		137,987			(56,718	)
Effect of exchange rate changes on cash		(226	)		(273	)
Net increase in cash and cash equivalents		1,506			157
Cash and cash equivalents, end of period	$	334,321		$	309,913

(1) See Note 2, “Restatement of Condensed Consolidated Financial Statements,” in Notes to Condensed Consolidated Financial Statements.

See accompanying notes to condensed consolidated financial statements.

7

Molex Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(in thousands, except per share data)

1. Basis of Presentation

     Molex Incorporated (together with its subsidiaries, except where the context otherwise requires, “we,” “us,” and “our”) manufactures electronic components, including electrical and fiber optic interconnection products and systems, switches and integrated products in 65 plants in 20 countries on five continents.

     The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair statement of results for the interim period have been included. Operating results for the three months ended September 30, 2006 are not necessarily an indication of the results that may be expected for the year ending June 30, 2007. The Condensed Consolidated Balance Sheet as of June 30, 2006 was derived from our audited consolidated financial statements for the year ended June 30, 2006. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K/A for the year ended June 30, 2006.

     The preparation of the unaudited financial statements in conformity with GAAP requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. Significant estimates and assumptions are used in the estimation of income taxes, pension and retiree health care benefit obligations, stock options, allowances for accounts receivable and inventory and impairment reviews for goodwill, intangible and other long-lived assets. Estimates are revised periodically. Actual results could differ from these estimates.

     Certain reclassifications have been made to the prior year financial statements to conform to the current year classifications. We made a change in accounting principle to classify shipping and handling costs associated with the distribution of finished products to our customers as cost of sales (previously recorded in selling, general and administrative expense). We made the change in principle because we believe the classification of these shipping and handling costs in cost of sales better reflects the cost of producing and distributing our products and aligns our external financial reporting with the results we use internally to evaluate segment operating performance. The impact of this change in principle was an increase to cost of goods sold and a reduction to selling, general and administrative expense of $12.4 million in the three months ended September 30, 2005.

2. Restatement of Condensed Consolidated Financial Statements

     We have restated the consolidated financial statements and the related disclosures for the fiscal year ended 2006 and for the quarters ended September 30, 2005 and 2006.

     We are restating our consolidated financial statements to reflect evolving understanding of the views of the staff of the Commission relating to the qualitative aspects of past stock option misdating. In an August 2, 2006 press release (the August Press Release), we announced that, following the widespread publicity regarding the granting of stock options, we undertook in the fourth fiscal quarter of 2006 a voluntary internal review of our past practices related to grants of stock options. As a result of our preliminary review, our Board of Directors (the Board) formed a Special Committee of independent directors in June 2006 to commence an investigation of our stock option granting practices for the period 1995 through 2006. The Special Committee retained independent legal counsel to aid in the investigation. The Special Committee and its independent counsel, assisted by forensic accountants reviewed the facts and circumstances surrounding annual stock option grants made to executive officers, employees and non-employee directors, searched relevant physical and electronic documents and interviewed current directors, officers and employees.

     In the August Press Release, we announced that both we and the Special Committee concluded that the dates of stock option and restricted stock grants to executive officers and other employees in a number of instances differed from the dates such grants were approved by the appropriate Board committee such that the price on the approval date was higher than the price on the stated grant date. The Special Committee concluded that no stock options granted to outside directors were misdated. The Special Committee concluded that our former General Counsel was responsible for the misdating and

8

found that he failed to ensure compliance with the terms of our stock option plans and the required granting actions by preparing minutes that did not accurately reflect the deliberations and actions of the relevant Board committee, failing to document approvals of certain grants, and selecting grant dates to provide a favorable grant price to executive officers and employees. The General Counsel was removed from his position by the Board immediately following the completion of the Special Committee’s independent investigation and has recently retired as a result of other related events.

     We provided in the August Press Release the aggregate unrecorded non-cash expense relating to misdated executive officer grants. We also stated that for grants to other employees (non-executive officers) we and the Special Committee concluded that it was impracticable to determine the actual measurement dates of the grants, but that even if all such dates were determinable there would not be a material understatement of expense. The analysis of the grants to employees relied on in this determination included a range of potential measurement dates determined by reviewing the dates on documentation such as final spreadsheets listing the employees and the number of shares to be granted to such employees, e-mails, and other correspondence.

     We announced in the August Press Release that our current executive officers agreed to repay their portion of the $685,000 in total gains realized by them as a result of the misdating and also agreed to increase the exercise prices of their unexercised options so that there would be no future gain due to misdating of grants, all of which has occurred. We also announced that we had voluntarily disclosed the misdated grants to the Commission. The facts and circumstances surrounding this issue continue to be the subject of inquiries by the Enforcement Division of the Commission and the United States Attorney’s Office for the Northern District of Illinois. We continue to cooperate in both inquiries.

     Following our August Press Release, the Commission’s Office of the Chief Accountant issued a letter on September 19, 2006 providing guidance regarding the proper accounting for various historical stock option granting practices. In light of this guidance, we undertook an effort to determine or estimate appropriate measurement dates of the misdated stock options granted to employees, other than executive officers, in order to calculate an understatement of expense relating to such options, rather than relying on a range of potential measurement dates for determining the understatement of expense. The effect of recognizing additional share-based compensation expense resulting from the investigation of past stock grants to executive officers and employees is included below.

     We are making the restatement in accordance with generally accepted accounting principles to record the following:

• Non-cash share-based compensation expense for grants that were misdated; and

• Related tax effects.

The consolidated financial statements and related financial information contained in previously filed reports should no longer be relied upon.

9

     Share-Based Compensation

     The effect of recognizing additional share-based compensation expense resulting from the misdated grants is as follows for fiscal years 1995 through 2006 (in thousands):

	Pre-Tax		After-Tax
	Expense		Expense
1995	$	47	$	33
1996		119		82
1997		258		178
1998		418		288
1999		836		577
2000		1,986		1,370
2001		2,926		2,019
2002		3,920		2,705
2003		4,931		3,402
Total 1995 — 2003 effect		15,441		10,654
2004		4,456		3,075
2005		3,507		2,420
2006		1,330		918
Total 2004 — 2006 effect		9,293		6,413
Total effect	$	24,734	$	17,067

     The effect of recognizing share-based compensation expense resulting from the misdated grants is as follows for the first fiscal quarters of 2006 and 2005 (in thousands):

	Pre-Tax		After-Tax
	Expense		Expense
Quarter ended September 30, 2005	$	624	$	431
Quarter ended September 30, 2006		362		250

10

     The following table sets forth the impact of the above adjustments and the related tax effects on our historical Condensed Consolidated Statements of Income for the quarters ended September 30, 2006 and 2005 (in thousands, except per share data):

	Three months ended September 30, 2006							Three months ended September 30, 2005
	As Previously							As Previously
	Reported		Adjustments			Restated		Reported		Adjustments			Restated
Net revenue	$	829,545	$	—		$	829,545	$	659,815	$	—		$	659,815
Cost of sales		560,136		—			560,136		445,996		—			445,996
Gross profit		269,409		—			269,409		213,819		—			213,819
Selling, general and administrative		165,939		362			166,301		149,050		624			149,674
Restructuring costs		—		—			—		4,870		—			4,870
Goodwill and other asset impairments		—		—			—		—		—			—
Total operating expenses		165,939		362			166,301		153,920		624			154,544
Income from operations		103,470		(362	)		103,108		59,899		(624	)		59,275
Gain (loss) on investments		—		—			—		—		—			—
Equity income		1,884		—			1,884		3,109		—			3,109
Interest income, net		2,080		—			2,080		2,313		—			2,313
Total other income, net		3,964		—			3,964		5,422		—			5,422
Income before income taxes		107,434		(362	)		107,072		65,321		(624	)		64,697
Income taxes		30,616		(112	)		30,504		18,616		(193	)		18,423
Minority interest		67		—			67		34		—			34
Net income	$	76,751	$	(250	)	$	76,501	$	46,671	$	(431	)	$	46,240
Earnings per share:
Basic		0.42					0.42		0.25					0.25
Diluted		0.41					0.41		0.25					0.25
Average common shares outstanding:
Basic		183,763					183,763		187,243					187,243
Diluted		185,992					185,992		188,543					188,543

11

     The following table sets forth the impact of the above adjustments and the related tax effects on our historical Condensed Consolidated Balance Sheets as of September 30, 2006 and June 30, 2006 (in thousands):

	September 30, 2006									June 30, 2006
	As									As
	Previously						As			Previously						As
	Reported			Adjustments			Restated			Reported			Adjustments			Restated
ASSETS
Current assets:
Cash and cash equivalents	$	334,321		$	—		$	334,321		$	332,815		$	—		$	332,815
Marketable securities		17,595			—			17,595			152,728			—			152,728
Accounts receivable		731,719			—			731,719			660,665			—			660,665
Inventories		408,220			—			408,220			347,312			—			347,312
Other current assets		82,052			—			82,052			54,713			—			54,713
Total current assets		1,573,907			—			1,573,907			1,548,233			—			1,548,233
Property, plant and equipment, net		1,090,285			—			1,090,285			1,025,852			—			1,025,852
Goodwill		301,929			—			301,929			149,458			—			149,458
Other assets		290,621			1,291			291,912			249,698			1,179			250,877
Total assets	$	3,256,742		$	1,291		$	3,258,033		$	2,973,241		$	1,179		$	2,974,420
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	324,873		$	—		$	324,873		$	305,876		$	—		$	305,876
Accrued expenses		172,023			—			172,023			189,390			—			189,390
Other current liabilities		168,063			—			168,063			99,546			—			99,546
Total current liabilities		664,959			—			664,959			594,812			—			594,812
Other non-current liabilities		16,855			—			16,855			14,709			—			14,709
Accrued pension and other postretirement benefits		78,641			—			78,641			75,055			—			75,055
Long-term debt		134,503			—			134,503			7,093			—			7,093
Minority interest in subsidiaries		866			—			866			882			—			882
Total liabilities		895,824			—			895,824			692,551			—			692,551
Commitments and contingencies		—			—			—			—			—			—
Stockholders’ equity:
Common stock		10,940			—			10,940			10,900			—			10,900
Paid-in capital		455,053			18,608			473,661			424,340			18,246			442,586
Retained earnings		2,544,893			(17,317	)		2,527,576			2,481,956			(17,067	)		2,464,889
Treasury stock		(755,597	)		—			(755,597	)		(743,219	)		—			(743,219	)
Deferred unearned compensation		—			—			—			—			—			—
Accumulated other comprehensive income		105,629			—			105,629			106,713			—			106,713
Total stockholders’ equity		2,360,918			1,291			2,362,209			2,280,690			1,179			2,281,869
Total liabilities and stockholders’ equity	$	3,256,742		$	1,291		$	3,258,033		$	2,973,241		$	1,179		$	2,974,420

12

     The restatement did not impact cash flows from operating, investing and financing activities as reported for the three months ended September 30, 2006 and 2005. The following table shows the effect of the restatement on the components of our previously reported cash flow from operating activities (in thousands):

	Quarter ended September 30, 2006									Quarter ended September 30, 2005
	As									As
	Previously						As			Previously						As
	Reported			Adjustments			Restated			Reported			Adjustments			Restated
Net income	$	76,751		$	(250	)	$	76,501		$	46,671		$	(431	)	$	46,240
Add (deduct) non-cash items included in net income:
Depreciation and amortization		58,122			—			58,122			54,667			—			54,667
Share-based compensation		7,277			362			7,639			6,738			624			7,362
Other non-cash items		3,463			(112	)		3,351			10,475			(193	)		10,282
Changes in working capital:
Accounts receivable		(28,279	)		—			(28,279	)		(33,929	)		—			(33,929	)
Inventories		(32,722	)		—			(32,722	)		(15,708	)		—			(15,708	)
Accounts payable		(9,382	)		—			(9,382	)		(1,234	)		—			(1,234	)
Other current assets and liabilities		(37,232	)		—			(37,232	)		(16,533	)		—			(16,533	)
Other assets and liabilities		(1,230	)		—			(1,230	)		(1,509	)		—			(1,509	)
Cash provided from operating activities	$	36,768		$	—		$	36,768		$	49,638		$	—		$	49,638

     As a result of the restatements, we adjusted the opening balance of stockholders’ equity for the year ended June 30, 2006 to reflect the cumulative effect of errors made prior to that year. The cumulative adjustments of each component of stockholders’ equity at the end of fiscal year 2006 and the first quarter of fiscal 2007 follows (in thousands):

							Net Impact
							to
	Paid-in			Retained			Stockholders’
	Capital			Earnings			Equity
Pre-tax share-based compensation	$	24,734		$	(24,734	)	$	—
Related tax effect		(6,488	)		7,667			1,179
Opening balances for the year ended June 30, 2006	$	18,246		$	(17,067	)	$	1,179
September 30, 2006		18,608			(17,317	)		1,291

3. Restructuring Charges

     During the fourth quarter of fiscal 2005, we decided to close certain operations in the Americas and European regions in order to reduce operating costs and better align our manufacturing capacity with customer needs. Production from the closed operations has been transferred to existing plants within the respective regions. Also included in the restructuring charge are costs to reduce our selling, general and administrative costs in the Americas, Europe and at the corporate office.

     The cumulative restructuring charges as of June 30, 2006 were $54.2 million, of which $27.0 million related to the Americas region, $19.2 million related to the European region and $8.0 million for corporate operations. The restructuring activities were substantially complete as of June 30, 2006.

     The change in the accrued severance balance related to the restructuring charge is summarized as follows:

Balance at June 30, 2006	$	15,941
Cash payments		(4,739	)
Balance at September 30, 2006	$	11,202

4. Acquisition

     On August 9, 2006, we completed the acquisition of Woodhead Industries, Inc. (Woodhead) in an all cash transaction valued at approximately $236.6 million, including the assumption of debt and net of cash acquired. Woodhead develops, manufactures and markets network and electrical infrastructure components engineered for performance in harsh,

13

demanding, and hazardous industrial environments, and the acquisition is a significant step in our strategy to expand our products and capabilities in the global industrial market.

     The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

Current assets	$	100,738
Land and depreciable assets, net		53,809
Goodwill		147,071
Intangible assets		56,500
Other assets		1,078
Assets acquired		359,196
Liabilities assumed		122,570
Net assets acquired	$	236,626

     The above purchase price allocation for this acquisition is preliminary and subject to revision as more detailed analyses are completed and additional information about the fair value of assets and liabilities becomes available. We also plan to incur costs in connection with realigning portions of the business but it is impracticable to estimate a liability for such costs at this time. Any change in the fair value of the net assets of Woodhead and any realignment costs will change the amount of the purchase price allocable to goodwill.

     The following table illustrates the effect on operating results as if we had acquired Woodhead as of the beginning of the three months ended September 30, 2005. The pro forma effect on the three months ended September 30, 2006 was not material.

Net revenue	$	712,824
Income from operations		62,835
Net income		49,042
Net income per common share — Basic	$	0.26
Net income per common share — Diluted		0.26

     The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what our results of operations would have been had we acquired Woodhead on the dates assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from synergies, if any, resulting from the combination of Molex and Woodhead.

5. Earnings Per Share

     A reconciliation of the basic average common shares outstanding to diluted average common shares outstanding is as follows:

	Three Months Ended
	September 30,
	2006		2005
Basic average common shares outstanding		183,763		187,243
Effect of dilutive stock options		2,229		1,300
Diluted average common shares outstanding		185,992		188,543

14

6. Comprehensive Income

     Total comprehensive income is summarized as follows:

	Three Months Ended
	September 30,
	2006			2005
Net income, as restated (see note 2)	$	76,501		$	46,240
Translation adjustments		(5,228	)		(6,804	)
Unrealized investment gain		4,143			223
Total comprehensive income	$	75,416		$	39,659

7. Inventories

     Inventories are valued at the lower of first-in, first-out cost or market. Inventories, net of allowances, consist of the following:

	Sept. 30,		June 30,
	2006		2006
Raw materials	$	86,204	$	62,288
Work in process		118,611		107,533
Finished goods		203,405		177,491
Total inventories	$	408,220	$	347,312

8. Pensions and Other Postretirement Benefits

     The components of pension benefit cost are as follows:

	Three Months Ended
	September 30,
	2006			2005
Service cost	$	1,971		$	2,219
Interest cost		1,558			1,298
Expected return on plan assets		(1,606	)		(1,274	)
Amortization of prior service cost		57			28
Recognized actuarial losses		45			353
Amortization of transition obligation		10			9
Benefit cost	$	2,035		$	2,633

     The components of retiree health care benefit cost are as follows:

	Three Months Ended
	September 30,
	2006			2005
Service cost	$	572		$	641
Interest cost		645			597
Amortization of prior service cost		(166	)		(18	)
Recognized actuarial losses		270			260
Benefit cost	$	1,321		$	1,480

9. Commitments and Contingencies

     Between March 2, 2005 and April 22, 2005 seven separate complaints were filed, each purporting to be on behalf of a class of Molex stockholders, against us, and certain of our officers and employees. The shareholder actions have been consolidated, and the consolidated amended complaint alleges, among other things, that during the period from July 27, 2004 to February 14, 2005 the named defendants made or caused to be made a series of materially false or misleading statements about our business, prospects, operations, and financial statements which constituted violations of securities laws and rules. The parties have reached a settlement in principle of this action, which is anticipated to be funded by insurance proceeds. The settlement will be subject to court approval.

15

     In addition, in the Fall of 2005, two stockholder derivative actions were filed against us and certain of our directors and officers. The derivative actions arise principally out of the same facts as the stockholder actions described above. These two actions have been consolidated and an amended and consolidated complaint has been filed. In August 2006, plaintiffs asked the court for permission to file a further amended complaint, which adds allegations that stock options were priced and issued improperly. We intend to move to dismiss the complaint if the plaintiffs are permitted to amend their complaint. We believe the allegations in the stockholder derivative actions are without merit and intend to vigorously contest these actions.

10. Long-Term Debt

     During the quarter ended September 30, 2006, we entered into two unsecured borrowing agreements approximating 15 billion Japanese yen ($127.7 million). Both agreements have three-year terms with weighted-average fixed interest rates approximating 1.3%. Interest on both loans is payable every six months with the principal due in September 2009.

11. New Accounting Pronouncements

     In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), which, among other things, requires applying a “more likely than not” threshold to the recognition and derecognition of tax positions. The provisions of FIN 48 will be effective for us on July 1, 2007. We are currently evaluating the impact of adopting FIN 48 on the financial statements, but we do not expect its adoption to have a significant effect.

     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB statements No. 87, 88, 106 and 132(R). This statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status through comprehensive income in the year in which the changes occur. This statement also requires an employer to measure the funded status of its plans as of the date of its year-end statement of financial position. The requirement to initially recognize the funded status of plans will be effective for us on June 30, 2007. Based on the June 30, 2006 funded status of our plans, we expect that the adoption of this pronouncement will result in increasing our pension and retiree health care benefit liability by approximately $25 million with a corresponding decrease in other comprehensive income.

12. Segments and Related Information

     We operate in one product segment, the manufacture and sale of electronic components, and four geographic regions. Revenue is recognized based on the location of the selling entity. Effective July 1, 2006, we realigned our management structure in the Asia regions. As part of the realignment, the Far East North region was renamed the Asia Pacific North region and the Far East South region was renamed the Asia Pacific South region. Additionally, our entity in Korea is now managed by Asia Pacific South and was included in Asia Pacific North prior to July 1, 2006. Our entity in Thailand is now managed by Asia Pacific North beginning July 1, 2006, and was included in Asia Pacific South prior to July 1, 2006. Regional operating results for the three months ended September 30, 2005, were reclassified to conform to the current year reporting structure. Woodhead has locations around the world but is included in the table below as corporate and other because it is aligned independently from the other regions and is immaterial for separate classification. Information by region for the three months ended September 30 is summarized as follows:

16

			Inter-
	Customer		Company			Net			Net
	Revenue		Revenue			Revenue			Income
2006 :									As Restated (1)
Americas	$	200,222	$	67,860		$	268,082		$	16,267
Asia Pacific North		130,321		113,355			243,676			33,257
Asia Pacific South		309,771		38,665			348,436			35,761
Europe		136,615		16,808			153,423			4,047
Corporate and other		52,616		35,056			87,672			(12,831	)
Eliminations		—		(271,744	)		(271,744	)		—
Total	$	829,545	$	—		$	829,545		$	76,501
2005:
Americas	$	185,212	$	46,946		$	232,158		$	5,662
Asia Pacific North		107,059		91,470			198,529			22,265
Asia Pacific South		238,517		35,674			274,191			30,201
Europe		114,529		10,902			125,431			(2,921	)
Corporate and other		14,498		29,315			43,813			(8,967	)
Eliminations		—		(214,307	)		(214,307	)		—
Total	$	659,815	$	—		$	659,815		$	46,240

(1) See Note 2, “Restatement of Condensed Consolidated Financial Statements,” in Notes to Condensed Consolidated Financial Statements.

17

Molex Incorporated

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     Unless otherwise indicated or the content otherwise requires, the terms “we,” “us” and “our” and other similar terms in this Quarterly Report on Form 10-Q/A refer to Molex Incorporated and its subsidiaries.

     The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and accompanying notes contained herein and our consolidated financial statements and accompanying notes and management’s discussion and analysis of results of operations and financial condition contained in our Annual Report on Form 10-K/A for the fiscal year ended June 30, 2006. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those described below under the heading “Cautionary Statement Regarding Forward-Looking Information.”

     The following information has been adjusted to reflect the restatement of our financial results, which is more fully described in the “Explanatory Note” immediately preceding Part I, Item 1 and in Note 2, “Restatement of Condensed Consolidated Financial Statements” in Notes to Condensed Consolidated Financial Statements of our Form 10-Q/A.

Overview

     Our core business is the manufacture and sale of electromechanical components. Our products are used by a large number of leading original equipment manufacturers (OEMs) throughout the world. We design, manufacture and sell more than 100,000 products including terminals, connectors, planar cables, cable assemblies, interconnection systems, backplanes, integrated products and mechanical and electronic switches in 65 plants in 20 countries on five continents. We also provide manufacturing services to integrate specific components into a customer’s product.

     On August 9, 2006, we completed the acquisition of Woodhead Industries, Inc. (Woodhead) in an all cash transaction valued at approximately $236.6 million, including the assumption of debt and net of cash acquired. Woodhead develops, manufactures and markets network and electrical infrastructure products engineered for performance in harsh, demanding, and hazardous industrial environments and is a significant step in our strategy to expand our products and capabilities in the global industrial market. The acquisition of Woodhead contributed net revenue of $33.5 million and net income of $1.0 million for the three months ended September 30, 2006.

     In September 2006 we approved a plan to close our production facilities in Brazil. We expect to complete the closure of these facilities during the three months ended March 31, 2007, which we anticipate will reduce our quarterly revenue by approximately $10 million to $15 million after the facilities are closed. We recognized impairment charges and severance costs approximating $2.5 million during the three months ended September 30, 2006 in connection with our decision to shut-down the Brazil production facilities.

     Our financial results are influenced by factors in the markets in which we operate and by our ability to successfully execute our business strategy. Marketplace factors include competition for customers, raw material prices, product and price competition, economic conditions in various geographic regions, foreign currency exchange rates, interest rates, changes in technology, fluctuations in customer demand, patent and intellectual property issues, litigation results and legal and regulatory developments. We expect that the marketplace environment will remain highly competitive. Our ability to execute our business strategy successfully will require that we meet a number of challenges, including our ability to accurately forecast sales demand and calibrate manufacturing to such demand, develop, manufacture and successfully market new and enhanced products and product lines, control overhead, and attract, motivate and retain key personnel to manage our operational, financial and management information systems.

Critical Accounting Policies and Estimates

     This discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. In preparing these financial statements, we have made our

18

best estimates and judgments of certain amounts included in the financial statements. Estimates are revised periodically. Actual results could differ from these estimates.

     See the information concerning our critical accounting policies included under Management’s Discussion of Financial Condition and Results of Operations in our Annual Report on Form 10-K/A for the fiscal year ended June 30, 2006 filed with the Securities and Exchange Commission, which is incorporated by reference in this Form 10-Q/A.

Results of Operations

     The table below shows our results of operations and the absolute and percentage change in those results from period to period (in thousands). For the three months ended September 30, 2005, shipping and handling costs of $12.4 million have been reclassified from selling, general and administrative expenses to cost of sales to conform to the current year presentation.

	Three Months Ended				$Change			% Change			Results as %
	September 30,				Favorable			Favorable			of Net Revenue
	2006		2005		(Unfavorable)			(Unfavorable)			2006			2005
Net revenue	$	829,545	$	659,815	$	169,730			25.7	%		100.0	%		100.0	%
Cost of sales		560,136		445,996		(114,140	)		(25.6	)		67.5			67.6
Gross profit		269,409		213,819		55,590			26.0			32.5			32.4
Selling, general & administrative		166,301		149,674		(16,627	)		(11.1	)		20.1			22.7
Restructuring costs		—		4,870		4,870			100.0			—			0.7
Income from operations		103,108		59,275		43,833			74.0			12.4			9.0
Other income, net		3,964		5,422		(1,458	)		(26.9	)		0.5			0.8
Income before income taxes		107,072		64,697		42,375			65.5			12.9			9.8
Income taxes & minority interest		30,571		18,457		(12,114	)		(65.6	)		3.7			2.8
Net income	$	76,501	$	46,240	$	30,261			65.4	%		9.2	%		7.0	%

Net Revenue

     We estimate that the impact of price erosion reduced revenue by approximately $17.6 million compared with the prior year quarter. We sell our products in five primary markets. The estimated change in revenue from each market during the first fiscal quarter of 2007 as compared with the same quarter last year (Comparable Quarter) and the fourth quarter of 2006 (Sequential Quarter) follows:

	Comparable			Sequential
	Quarter			Quarter
Consumer		28	%		9	%
Telecommunications		22			5
Automotive		10			(7	)
Data		16			8
Industrial		94			40

     The Woodhead acquisition added $33.5 million to revenues in the current quarter. Woodhead contributed 60% of the 94% growth in industrial sales as compared with the prior year quarter and was representative of the sequential industrial growth. The remaining increase in revenue was derived primarily from unit volume increases with existing customers and existing products and sales of new products. Automotive revenue declined sequentially as a result of an annual shut-down in our customers’ facilities.

     We operate in one product segment, the manufacture and sale of electronic components, and four regions. Revenue is recognized based on the location of the selling entity. Effective July 1, 2006, we realigned our management structure in the Asia region. As part of the realignment, the Far East North region was renamed the Asia Pacific North region and the Far East South region was renamed the Asia Pacific South region. Additionally, our entity in Korea is now managed by Asia Pacific South and was included in the Asia Pacific North prior to July 1, 2006. Our entity in Thailand is now managed by Asia Pacific North beginning July 1, 2006 and was included in the Asia Pacific South prior to July 1, 2006. Regional operating results for the three months ended September 30, 2005, were reclassified to conform to the current year reporting structure. Woodhead has locations around the world but is included in the revenue-related tables below as corporate and

19

other because the division is aligned independently from the other regions and is immaterial for separate classification. The following table sets forth information on customer revenue by geographic region for the periods indicated (in thousands):

	Three Months Ended				$Change		% Change			Results as %
	September 30,				Favorable		Favorable			of Net Revenue
	2006		2005		(Unfavorable)		(Unfavorable)			2006			2005
Americas	$	200,222	$	185,212	$	15,010		8.1	%		24.2	%		28.1	%
Asia Pacific North		130,321		107,059		23,262		21.7			15.7			16.2
Asia Pacific South		309,771		238,517		71,254		29.9			37.3			36.2
Europe		136,615		114,529		22,086		19.3			16.5			17.4
Corporate and other		52,616		14,498		38,118		262.9			6.3			2.1
Total	$	829,545	$	659,815	$	169,730		25.7	%		100.0	%		100.0	%

     The weakening of the U.S. dollar against certain foreign currencies, principally the euro, Singapore dollar and Korean won increased revenue by approximately $10.6 million for the three months ended September 30, 2006 over the prior year period. The following tables show the effect on the change in net revenue from foreign currency translations to the U.S. dollar:

	Three Months Ended September 30, 2006
	Local		Currency			Net
	Currency		Translation			Change
Americas	$	14,490	$	520		$	15,010
Asia Pacific North		27,163		(3,901	)		23,262
Asia Pacific South		65,380		5,874			71,254
Europe		15,268		6,818			22,086
Corporate and other		36,831		1,287			38,118
Net change	$	159,132	$	10,598		$	169,730

     The change in revenue on a local currency basis is as follows:

	Three Months
	Ended
	Sept. 30, 2006
Americas		7.8	%
Asia Pacific North		25.4
Asia Pacific South		27.4
Europe		13.3
Total		24.1

     We continued our long-term commitment to reinvesting our profits in new product design and tooling to maintain and enhance our competitive position. Revenue derived from the sale of new products we released within the last 36 months as a percentage of net revenue is as follows:

	Three Months
	Ended
	Sept. 30, 2006
Americas		23.4	%
Asia Pacific North		27.7
Asia Pacific South		29.7
Europe		26.1
Total		26.9

Americas Region — North and South America

     Revenue in the Americas region increased from the prior year comparable period primarily due to stronger demand and new product offerings for electronic connector products, particularly in high performance applications such as servers and routers. Growth was across all channels for the connector products. Standard products contributed to growth in the distribution channel, while new products in power, signal, backplane and I/O fueled the growth with the direct OEM customers particularly in the data markets. We also experienced an improvement in the automotive market from the prior year quarter.

     Brazil revenue for the three months ended September 30, 2006 declined $9.7 million as compared with the prior year quarter and $8.1 million as compared with the three months ended June 30, 2006 as we began implementing our plan to close our production facilities in Brazil.

20

     While we believe that sales growth in the Americas region was negatively affected over the past 18 months by the movement offshore of original equipment manufacturers and contract manufacturers, we experienced a reduction in this trend since earlier this calendar year. We believe that this movement offshore by OEMs and contract manufacturers positively contributed to sales in other regions of our business, especially in the Asia Pacific South region.

Asia Pacific North Region — Japan and Thailand

     Revenue in local currencies was higher during the first fiscal quarter as compared with the same quarter last year primarily due to stronger demand in the consumer and telecom markets. Demand for flat panel display televisions remained strong. We believe that we are well positioned for growth in the satellite radio and games segment, where we have good connector content on the new wii machine and the Sony PS3.

     The region continues to capitalize on its ability to design compact, higher performance products for the sophisticated end of the mobile phone business in the telecommunications market. The region has developed connectors for third generation (3G) phones. We believe that we are well positioned to grow our 3G technology business as global cell phone makers adopt this technology.

     The Asia Pacific North region generally operates at a high capacity level with significant resources allocated to support higher demand in the Asia Pacific South region. Revenue between regions is generally recognized as intercompany revenue, which is excluded from the revenue by region table above.

Asia Pacific South Region — Singapore, Malaysia, China, Korea, Taiwan and India

     The Asia Pacific South region continues to be our largest and fastest growing in terms of revenue. The revenue growth in this region was driven by strong demand across the mobile phone and consumer products markets.

     Sales in China represent 67% of total Asia Pacific South sales for the three months ended September 30, 2006 and increased by 41% during the quarter as compared with the prior year period, due to customer demand supported by increased production capacity. The drivers of this growth included (i) overall higher demand in the mobile phone, consumer electronics and automotive markets, (ii) the trend of American, European and Japanese companies moving their design and production to China and (iii) greater penetration of Taiwanese multinational accounts. A significant portion of our integrated products that require a higher level of manual assembly are produced in China.

European Region

     For the three months ended September 30, 2006, revenue as compared with the prior year period increased primarily due to higher revenue from consumer products in the automotive market offset by the movement offshore of original equipment manufacturers and contract manufacturers. We believe that the latter is a trend that contributed to sales in other regions of our business, especially in the Asia Pacific South region.

     The region is focused on the strongest markets that we believe are most likely to remain in Europe. These include connectors and integrated products for industrial, medical and automotive applications.

Gross Profit

     Gross profit as a percentage of net revenue was slightly higher during the three months ended September 30, 2006, as compared with the prior year period. We estimate that we paid approximately $19.3 million more for metal alloys (primarily copper) and gold due to higher commodity prices in the three month period compared with the prior year period. These cost increases, along with the impact of price erosion, were partially offset by an improved sales mix and product pruning, selective price increases that were effective in February and September 2006 and improvements in manufacturing efficiencies. We recognized impairment charges and severance costs approximating $2.5 million during the three months ended September 30, 2006 in connection with our decision to shut-down the Brazil production facilities.

     Certain products that we manufacture in Japan and Europe are sold in other regions of the world at selling prices primarily denominated in or closely linked to the U.S. dollar. As a result, changes in currency exchange rates may affect our cost of sales reported in U.S. dollars without a corresponding effect on net revenue. We estimate that the impact from currency transactions increased gross profit by approximately $4.6 million for the three months ended September 30, 2006

21

compared with the prior year period. These increases were primarily due to a stronger U.S. dollar compared with the yen during the three months ended September 30, 2006.

Selling, General and Administrative Expenses

     Selling, general and administrative expenses for the three months ended September 30, 2006 improved as a percent of net revenue over the prior year quarter primarily due to leverage of fixed selling, general and administrative costs on higher revenue and a lower cost structure resulting from our 2005 restructuring initiative. Additionally, the prior year included bad debt expense of approximately $5.7 million in connection with an account receivable from an automotive customer that filed for bankruptcy. The impact of currency translation increased selling, general and administrative expenses by approximately $1.6 million for the three months ended September 30, 2006.

     Research and development expenditures, which are classified as selling, general and administrative expense, increased to $41 million, or 4.9% of net revenue, for the three months ended September 30, 2006, a percentage comparable with the prior year period.

Restructuring Costs

     We recorded a pre-tax restructuring charge of $4.9 million during the three months ended September 30, 2005, that consisted primarily of severance and other employee-related costs.

     During the fourth quarter of fiscal 2005, we decided to close certain operations in the Americas and European regions in order to reduce operating costs and better align our manufacturing capacity with customer needs. Production from the operations closed has been transferred to existing plants within the respective regions. Also included in the restructuring charge are costs to reduce our selling, general and administrative costs in the Americas, Europe and at the corporate office. We reduced headcount by approximately 500 people after additions at the facilities where production was transferred. We substantially completed the restructuring activities as of June 30, 2006. (See Note 2 of the “Notes to the Condensed Consolidated Financial Statements.”)

Effective Tax Rate

     The effective tax rate was 28.5% for the three months ended September 30, 2006 and 2005. The effective tax rates represent estimates of the full year effective tax rate. The effective tax rate for the three months ended September 30, 2006 is higher than the fiscal year 2006 effective tax rate of 28.0% due to our anticipation of greater earnings during fiscal year 2007 in countries with tax rates that are higher relative to the fiscal year 2006 earnings mix.

Backlog

     Our order backlog on September 30, 2006 was approximately $425.3 million, an increase of $137.3 million compared with $288.0 million at September 30, 2005. Orders for the three months ended September 30, 2006 were $864.6 million, an increase of 24.7% compared with $693.2 million for the prior year period. Woodhead contributed bookings of $30.6 million to the current quarter, and had a backlog of $24.1 million on September 30, 2006.

Financial Condition and Liquidity

     Our financial position remains strong and we continue to be able to fund capital projects and working capital needs principally out of operating cash flows and cash reserves. Cash, cash equivalents and marketable securities totaled $351.9 million and $485.5 million at September 30, 2006 and June 30, 2006, respectively. The primary source of our cash flow is cash generated by operations. Principal uses of cash are capital expenditures, share repurchases, dividend payments and business investments. Our long-term financing strategy is principally to rely on internal sources of funds for investing in plant, equipment and acquisitions, although we may elect to leverage our strong balance sheet with debt financing. We have historically used external borrowings only when a clear financial advantage exists. We believe that our liquidity and financial flexibility are adequate to support both current and future growth. Long-term debt at September 30, 2006 totaled $134.5 million.

22

Cash Flows

     Below is a table setting forth the key lines of our Consolidated Statements of Cash Flows (in thousands):

	Three Months			Three Months
	Sept. 30,			Sept. 30,
	2006			2005
Cash provided from operating activities	$	36,768		$	49,638
Cash (used for) provided by investing activities		(173,023	)		7,510
Cash provided by (used for) financing activities		137,987			(56,718	)
Effect of exchange rate changes on cash		(226	)		(273	)
Net increase in cash	$	1,506		$	157

23

Operating Activities

     Cash provided from operating activities decreased by $12.9 million from the prior year period due mainly to greater use of funds to finance working capital needs compared with the prior year period. This working capital increase was primarily due to the revenue growth for the three months ended September 30, 2006 compared with the prior year period. Working capital is defined as current assets minus current liabilities.

Investing Activities

     On August 9, 2006, we completed the acquisition of Woodhead in an all cash transaction valued at approximately $236.6 million, including the assumption of debt and net of cash acquired. Capital expenditures were $75.6 million for the three months ended September 30, 2006 compared with $64.1 million in the prior year period. Capital expenditures for the three months ended September 30, 2006 were primarily related to increasing capacity in the Americas, Asia Pacific North and Asia Pacific South regions.

Financing Activities

     Due to the cash investments made during the three months ended September 30, 2006, we adjusted our capital structure by increasing our cash and debt balances by $171.7 million. We entered into two borrowing agreements aggregating approximating 15 billion Japanese yen ($127.7 million). Both agreements have three-year terms with weighted-average fixed interest rates approximating 1.3%. We also borrowed $44.0 million on our unsecured revolving line of credit with a floating rate of interest.

     We purchased 162,500 shares of Common Stock and Class A Common Stock during the three months ended September 30, 2006, at an aggregate cost of $5.0 million and 1,973,000 shares of Common Stock and Class A Common Stock during the three months ended September 30, 2005, at an aggregate cost of $50.1 million. We use shares repurchased to replenish stock used for exercises of employee stock options, employee stock awards and our Employee Stock Purchase Plan.

     Our Board of Directors previously authorized the repurchase of up to an aggregate $250.0 million of common stock though December 31, 2006. On October 27, 2006, the Board of Directors extended this authorization through September 30, 2007. Approximately $45 million was remaining under the authorization as of September 30, 2006.

     We have a strong cash balance and cash flow. As part of our growth strategy, in the future we may acquire other companies in the same or complementary lines of business and pursue other business ventures. The timing and size of any new business ventures or acquisitions we complete may impact our cash requirements.

Contractual Obligations and Commercial Commitments

     We have contractual obligations and commercial commitments as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations and Commercial Commitments” of our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the Commission) for the year ended June 30, 2006. In addition, we have obligations under open purchase orders and the long-term liabilities reflected in our consolidated balance sheet, which principally consist of pension and retiree health care benefit obligations. There have been no material changes in our contractual obligations and commercial commitments since June 30, 2006 arising outside of the ordinary course of business other than the $44.0 million revolving line of credit and $127.7 million long-term debt borrowings.

Cautionary Statement Regarding Forward-Looking Information

     This Quarterly Report contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, our business, our beliefs, and our management’s assumptions. Words such as “expect,” “anticipate,” “outlook,” “forecast,” “could,” “project,” “intend,” “plan,” “continue,” “believe,” “seek,” “estimate,” “should,” “may,” “assume,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict. We describe our respective risks, uncertainties, and assumptions that could affect the outcome or results of operations in Part 1, Item 1A of our Annual Report on Form 10-K/A for the year ended June 30, 2006 (Form 10-K/A). You should carefully consider the risks described in our Form 10-K/A. Such

24

risks are not the only ones facing our Company. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. If any of the risks occur, our business, financial condition or operating results could be materially adversely affected.

     We have based our forward looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied, or forecast by our forward looking statements. Reference is made in particular to forward looking statements regarding growth strategies, industry trends, financial results, cost reduction initiatives, acquisition synergies, manufacturing strategies, product development and sales, regulatory approvals, and competitive strengths. Except as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions, or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     We are subject to market risk associated with changes in foreign currency exchange rates, interest rates and certain commodity prices.

     We mitigate our foreign currency exchange rate risk principally through the establishment of local production facilities in the markets we serve. This creates a “natural hedge” since purchases and sales within a specific country are both denominated in the same currency and therefore no exposure exists to hedge with a foreign exchange forward or option contract (collectively, “foreign exchange contracts”). Natural hedges exist in most countries in which we operate, although the percentage of natural offsets, as compared with offsets that need to be hedged by foreign exchange contracts, will vary from country to country.

     We also monitor our foreign currency exposure in each country and implement strategies to respond to changing economic and political environments. Examples of these strategies include the prompt payment of intercompany balances utilizing a global netting system, the establishing of contra-currency accounts in several international subsidiaries, development of natural hedges and use of foreign exchange contracts to protect or preserve the value of cash flows. No material foreign exchange contracts were in use at September 30, 2006 or 2005.

     We have implemented a formalized treasury risk management policy that describes the procedures and controls over derivative financial and commodity instruments. Under the policy, we do not use derivative financial or commodity instruments for speculative or trading purposes, and the use of such instruments is subject to strict approval levels by senior management. Typically, the use of derivative instruments is limited to hedging activities related to specific foreign currency cash flows and net receivable and payable balances.

     The translation of the financial statements of the non-North American operations is impacted by fluctuations in foreign currency exchange rates. The increase in consolidated net revenue and income from operations was impacted by the translation of our international financial statements into U.S. dollars resulting in increased net revenue of $10.6 million and decreased income from operations of $0.3 million for the three months ended September 30, 2006, compared with the estimated results for the comparable period in the prior year.

     Our $17.6 million of marketable securities at September 30, 2006 are principally debt instruments that generate interest income for us on temporary excess cash balances. These instruments contain embedded derivative features that enhance the liquidity of the portfolio by enabling us to liquidate the instrument prior to the stated maturity date. Our exposure related to derivative instrument transactions is, in the aggregate, not material to our financial position, results of operations or cash flows.

     Interest rate exposure is generally limited to our marketable securities and long-term debt. Long-term debt increased during the three months ended September 30, 2006, as a result of two borrowings aggregating approximating 15 billion Japanese yen ($127.7 million) by an entity that we own in Japan. The 3-year unsecured debt financing has a weighted average fixed interest rate approximating 1.3%. Total long-term debt was $134.5 million at September 30, 2006. We do not actively manage the risk of interest rate fluctuations. However, such risk is mitigated by the relatively short-term nature of our investments (less than 12 months) and the fixed-rate nature of our long-term debt.

     Due to the nature of our operations, we are not subject to significant concentration risks relating to customers or products.

25

     We monitor the environmental laws and regulations in the countries in which we operate. We have implemented an environmental program to reduce the generation of potentially hazardous materials during our manufacturing process and believe we continue to meet or exceed local government regulations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     We have established disclosure controls and procedures to ensure that material information relating to Molex is timely communicated to the officers who certify our financial reports and to other members of our management and Board of Directors.

     Based upon their evaluation as of September 30, 2006, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) are effective in providing reasonable assurance that information required to be disclosed by us in our Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

Internal Control Over Financial Reporting

     During the three months ended September 30, 2006, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As permitted by the rules and regulations of the SEC, we excluded Woodhead from our assessment of our internal control over financial reporting for the quarter ended September 30, 2006 and also expect to exclude Woodhead from our annual assessment for the year ended June 30, 2007. We are in the process of integrating the internal control procedures of Woodhead into our internal control structure.

PART II

Item 1. Legal Proceedings

     Between March 2, 2005 and April 22, 2005, seven separate complaints were filed, each purporting to be on behalf of a class of Molex shareholders, against us, and certain of our officers and employees. The shareholder actions have been consolidated before Judge Ruben Castillo in a case pending in the United States District Court for the Northern District of Illinois Eastern Division entitled The Takara Trust v. Molex Incorporated, et. al., Case No. 05C 1245. The Consolidated Amended Complaint alleges, among other things, that during the period from July 27, 2004 to February 14, 2005, the named defendants made or caused to be made a series of materially false or misleading statements about Molex’s business, prospects, operations, and financial statements which constituted violations of Section 10(b) of the Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act. The complaint also alleges that certain of the named defendants engaged in insider trading in violation of Section 10(b) and Rule 10b-5. On April 28, 2006, the Court denied defendants’ motion to dismiss the complaint. On July 6, 2005, the Court appointed City of Pontiac Group, Joan L. Weeks individually and as trustee, and James Baker as lead plaintiffs, and approved lead plaintiffs’ choice of lead counsel. On June 15, 2006, defendants answered the complaint, denying any liability to plaintiffs and asserting numerous defenses. The parties have reached a settlement in principle of this action, which is anticipated to be funded by insurance proceeds. The settlement will be subject to court approval.

     In addition, in the Fall of 2005, two stockholder derivative actions were filed against us and certain of our directors and officers in the Circuit Court of Cook County, Illinois. The derivative actions arise principally out of the same facts as the stockholder actions described above. These two actions have been consolidated and an amended and consolidated complaint has been filed. In August 2006, plaintiffs asked the court for permission to file a further amended complaint, which adds allegations that options were priced and issued improperly. We intend to move to dismiss the complaint if the plaintiffs are permitted to amend their complaint. We believe the allegations in the stockholder derivative actions are without merit and intend to vigorously contest these actions.

26

     The Commission has commenced an informal inquiry into our stock option practices, and the Office of the U.S. Attorney for the Northern District of Illinois has also requested information on this subject. As previously disclosed, a Special Committee of our Board of Directors completed a review of our historical stock option practices. Although we cannot predict the outcome of this matter, we do not expect that such matter will have a material adverse effect on our consolidated financial position or results of operations.

Item 1A. Risk Factors

     There have been no material changes from the risk factors disclosed in Part 1, Item 1A, of our Form 10-K/A.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     On April 25, 2005, our Board of Directors authorized the purchase of up to $250.0 million of Common Stock and/or Class A Common Stock during the period ending December 31, 2006. On October 27, 2006, the Board of Directors extended this authorization through September 30, 2007. Share purchases of Molex Common and/or Class A Common Stock for the quarter ended September 30, 2006 were as follows (in thousands, except price per share data):

					Total Number		Dollar Value
					of Shares		of Shares
	Total Number				Purchased as		That May Yet
	of Shares		Average Price		Part of Publicly		Be Purchased
Class A Common Stock:	Purchased		Paid per Share		Announced Plan		Under the Plan
July 1 — July 31		28	$	27.04		—	$	50,075
August 1 — August 31		110		30.36		100		47,043
September 1 — September 30		63		31.75		63		45,059
Total		201	$	30.34		163	$	45,059

     Also during September, 194,007 shares of Common Stock were purchased at an average price of $37.59 per share that was not part of a publicly announced plan.

27

Item 4. Submission of Matters to a Vote of Security Holders

     Our annual meeting of stockholders was held on October 27, 2006. Our stockholders elected all of the Board’s nominees for director and ratified the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending June 30, 2007. The voting results were as follows:

(1) Election of Directors	For		Withheld
Michelle L. Collins		91,154,833		1,339,076
Fred L. Krehbiel		88,489,115		4,004,794
David L. Landsittel		91,153,015		1,340,894

(2) Ratification of selection of Ernst &			Class B
Young LLP	Common Stock		Common Stock
For:		91,319,609		94,105
Against:		467,898		—
Abstain:		706,401		—
Broker Nonvotes:		—		—

Item 6. Exhibits

Number	Description
10.1	Summary of Non-Employee Director Compensation (incorporated by reference to Exhibit 10.1 to our quarterly report on Form 10-Q for the three months ended September 30, 2006 (the Form 10-Q)).
10.2	2005 Molex Incentive Stock Option Plan, as amended and restated (incorporated by reference to Exhibit 10.2 to our Form 10-Q).
10.3	2000 Molex Long-Term Stock Plan, as amended and restated (incorporated by reference to Exhibit 10.3 to our Form 10-Q).
18	Letter Regarding Change in Accounting Principle (incorporated by reference to Exhibit 18 to our Form 10-Q).
31	Rule 13a-14(a)/15d-14(a) Certifications
	31.1 Section 302 certification by Chief Executive Officer
	31.2 Section 302 certification by Chief Financial Officer
32	Section 1350 Certifications
	32.1 Section 906 certification by Chief Executive Officer
	32.2 Section 906 certification by Chief Financial Officer

28

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MOLEX INCORPORATED
 

(Registrant) 

Date: February 7, 2007	/S/ DAVID D. JOHNSON
	David D. Johnson
	Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer)

29