Molex (MOLX) 10-Q 2008 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended December 31, 2007

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. Yes þ     No o

     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 filer þ     Accelerated filer o     Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o     No þ

     On January 31, 2008, the following numbers of shares of the Company’s common stock were outstanding:

Common Stock	98,681,957
Class A Common Stock	81,483,697
Class B Common Stock	94,255

Molex Incorporated

INDEX

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 2007 and June 30, 2007		3
Condensed Consolidated Statements of Income for the three and six months ended December 31, 2007 and 2006		4
Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2007 and 2006		5
Notes to Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Item 3. Quantitative and Qualitative Disclosures About Market Risk		22
Item 4. Controls and Procedures		23
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		24
Item 1A. Risk Factors		24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 4. Submission of Matters to a Vote of Security Holders		24
Item 6. Exhibits		25
SIGNATURES		26
By-laws
2000 Molex Long-Term Stock Plan, as Amended and Restated
Form of Equity Award Agreement
2005 Molex Incentive Stock Option Plan, as Amended and Restated
2005 Molex Supplemental Executive Retirement Plan, as Amended and Restated
Molex Executive Deferred Compensation Plan
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

2

PART I

Item 1. Financial Statements

Molex Incorporated
Condensed Consolidated Balance Sheets
(in thousands)

	Dec. 31,			June 30,
	2007			2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	399,038		$	378,361
Marketable securities		43,545			82,549
Accounts receivable, less allowances of $37,130 and $31,064, respectively		725,091			685,666
Inventories		411,291			392,680
Other current assets		57,994			51,571
Total current assets		1,636,959			1,590,827
Property, plant and equipment, net		1,138,919			1,121,369
Goodwill		369,381			334,791
Other assets		295,354			269,121
Total assets	$	3,440,613		$	3,316,108
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	289,898		$	279,847
Accrued expenses		201,365			187,890
Other current liabilities		82,881			63,214
Total current liabilities		574,144			530,951
Other non-current liabilities		25,361			25,612
Accrued pension and postretirement benefits		111,668			108,693
Long-term debt		137,493			127,821
Total liabilities		848,666			793,077
Commitments and contingencies
Stockholders’ equity:
Common stock		11,064			11,020
Paid-in capital		543,633			520,037
Retained earnings		2,722,183			2,650,470
Treasury stock		(916,617	)		(799,894	)
Accumulated other comprehensive income		231,684			141,398
Total stockholders’ equity		2,591,947			2,523,031
Total liabilities and stockholders’ equity	$	3,440,613		$	3,316,108

See accompanying notes to condensed consolidated financial statements.

3

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

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2007		2006		2007		2006
Net revenue	$	841,560	$	837,467	$	1,634,170	$	1,667,012
Cost of sales		588,445		578,958		1,144,905		1,139,094
Gross profit		253,115		258,509		489,265		527,918
Selling, general and administrative		165,699		167,691		326,334		333,992
Restructuring costs and asset impairments		7,258		—		9,887		—
Total operating expenses		172,957		167,691		336,221		333,992
Income from operations		80,158		90,818		153,044		193,926
Investment income		2,081		1,792		2,779		3,609
Interest income, net		2,356		2,009		4,920		4,089
Other income, net		4,437		3,801		7,699		7,698
Income before income taxes		84,595		94,619		160,743		201,624
Income taxes		25,379		28,392		48,223		58,896
Net income	$	59,216	$	66,227	$	112,520	$	142,728
Earnings per share:
Basic	$	0.33	$	0.36	$	0.62	$	0.78
Diluted	$	0.33	$	0.36	$	0.61	$	0.77
Dividends declared per share	$	0.1125	$	0.0750	$	0.2250	$	0.1500
Average common shares outstanding:
Basic		181,034		184,058		182,211		183,895
Diluted		182,174		185,969		183,273		185,972

See accompanying notes to condensed consolidated financial statements.

4

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

	Six Months Ended
	December 31,
	2007			2006
Operating activities:
Net income	$	112,520		$	142,728
Add non-cash items included in net income:
Depreciation and amortization		121,357			117,696
Share-based compensation		12,427			13,744
Other non-cash items		1,654			4,346
Changes in assets and liabilities:
Accounts receivable		(6,155	)		5,445
Inventories		437			(41,174	)
Accounts payable		(5,548	)		(30,620	)
Other current assets and liabilities		7,403			(44,070	)
Other assets and liabilities		6,191			(2,754	)
Cash provided from operating activities		250,286			165,341
Investing activities:
Capital expenditures		(102,417	)		(155,806	)
Proceeds from sales of property, plant and equipment		6,787			2,097
Proceeds from sales or maturities of marketable securities		253,694			3,818,536
Purchases of marketable securities		(213,023	)		(3,709,724	)
Acquisitions		(42,470	)		(237,114	)
Other investing activities		(6,433	)		3,993
Cash used for investing activities		(103,862	)		(278,018	)
Financing activities:
Proceeds from revolving credit facility		—			44,000
Payments on revolving credit facility		—			(44,000	)
Proceeds from issuance of long-term debt		—			131,045
Payments of long-term debt		(1,467	)		(26,337	)
Cash dividends paid		(34,259	)		(27,579	)
Exercise of stock options		7,513			8,107
Purchase of treasury stock		(111,779	)		(12,539	)
Other financing activities		(497	)		452
Cash (used for) provided by financing activities		(140,489	)		73,149
Effect of exchange rate changes on cash		14,742			6,126
Net increase (decrease) in cash and cash equivalents		20,677			(33,402	)
Cash and cash equivalents, beginning of period		378,361			332,815
Cash and cash equivalents, end of period	$	399,038		$	299,413

See accompanying notes to condensed consolidated financial statements.

5

Molex Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

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 59 plants in 19 countries.

     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 December 31, 2007 are not necessarily an indication of the results that may be expected for the year ending June 30, 2008. The Condensed Consolidated Balance Sheet as of June 30, 2007 was derived from our audited consolidated financial statements for the year ended June 30, 2007. 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 for the year ended June 30, 2007.

     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.

2. Restructuring Costs and Asset Impairments

     During fiscal 2007, we undertook a restructuring plan designed to reduce costs and to improve return on invested capital in connection with a new global organization that was effective July 1, 2007. A majority of the plan relates to facilities located in North America and Europe and in general, the movement of manufacturing activities at these plants to other facilities. Net restructuring cost during the quarter ended December 31, 2007 was $7.3 million, resulting in cumulative costs since we announced the restructuring of $46.8 million. Restructuring costs during the three months ended December 31, 2007 were net of an adjustment for a defined benefit pension curtailment in the Custom & Electrical segment (see Note 7). We expect to incur total restructuring and asset impairment costs related to these actions ranging from $100 — $125 million, of which we expect the remaining expense to affect all segments. Management and the Board of Directors approved several actions related to this plan. A portion of this plan involves cost savings or other actions that do not result in incremental expense, such as better utilization of assets, reduced spending and organizational efficiencies. We expect to complete the actions under this plan by June 30, 2009.

     The following table sets forth restructuring costs by segment (in thousands):

			Trans-		Custom &			Corporate
	Connector		portation		Electrical			and Other		Total
Cumulative costs at June 30, 2007	$	3,492	$	5,914	$	12,206		$	15,257	$	36,869
Net restructuring costs during the first quarter		500		528		426			1,175		2,629
Cumulative costs at Sept. 30, 2007	$	3,992	$	6,442	$	12,632		$	16,432	$	39,498
Net restructuring costs during the current quarter		1,254		954		(1,107	)		6,157		7,258
Cumulative costs at Dec. 31, 2007	$	5,246	$	7,396	$	11,525		$	22,589	$	46,756

6

     The cumulative change in the accrued severance balance related to restructuring charges is summarized as follows (in thousands):

Balance at June 30, 2007	$	32,165
Cash payments		(8,059	)
Charges to expense		3,295
Non-cash related costs		(323	)
Balance at September 30, 2007	$	27,078
Cash payments		(4,700	)
Charges to expense		8,706
Non-cash related costs		(364	)
Balance at December 31, 2007	$	30,720

     The accrued severance balance includes $3.8 million related to eliminating redundant costs and improving efficiencies in operations in connection with the acquisition of Woodhead Industries, Inc. on August 9, 2006. Additionally, $3.3 million remains in the accrued severance balance related to a restructuring plan announced in fiscal 2005 that was substantially complete as of June 30, 2006.

3. Acquisition

     On July 19, 2007, we completed an acquisition of a U.S.-based company in an all cash transaction approximating $42.5 million. We recorded goodwill of $24.4 million in connection with this acquisition. The 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.

4. Earnings Per Share

     A reconciliation of the basic average common shares outstanding to diluted average common shares outstanding is as follows (in thousands):

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2007		2006		2007		2006
Basic average common shares outstanding		181,034		184,058		182,211		183,895
Effect of dilutive stock options		1,140		1,911		1,062		2,077
Diluted average common shares outstanding		182,174		185,969		183,273		185,972

5. Comprehensive Income

     Total comprehensive income is summarized as follows (in thousands):

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2007		2006		2007		2006
Net income	$	59,216	$	66,227	$	112,520	$	142,728
Translation adjustments		42,306		31,126		83,801		25,899
Unrealized investment gain		3,989		1,323		6,485		5,466
Total comprehensive income	$	105,511	$	98,676	$	202,806	$	174,093

7

6. Inventories

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

	Dec. 31,		June 30,
	2007		2007
Raw materials	$	79,321	$	85,320
Work in process		121,356		107,394
Finished goods		210,614		199,966
Total inventories	$	411,291	$	392,680

7. Pensions and Other Postretirement Benefits

     During the three months ended December 31, 2007, we recognized a $2.3 million reduction in selling, general and administrative expense due to a curtailment adjustment. The curtailment adjustment resulted from the freezing of benefits in a defined benefit plan after the participants transferred to another plan without credit for prior service. Separately, we also recognized a $3.1 million reduction in restructuring costs resulting from a curtailment adjustment for the early termination of participants in connection with the ongoing restructuring plan.

     The components of pension benefit cost are as follows (in thousands):

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2007			2006			2007			2006
Service cost	$	2,445		$	1,971		$	4,691		$	3,942
Interest cost		2,367			1,558			4,295			3,116
Expected return on plan assets		(2,893	)		(1,606	)		(5,065	)		(3,212	)
Amortization of prior service cost		53			57			106			114
Recognized actuarial losses		85			45			170			90
Amortization of transition obligation		11			10			21			20
Curtailment adjustment		(5,444	)		—			(5,444	)		—
Benefit cost (credit)	$	(3,376	)	$	2,035		$	(1,226	)	$	4,070

     The components of retiree health care benefit cost are as follows (in thousands):

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2007			2006			2007			2006
Service cost	$	765		$	581		$	1,524		$	1,153
Interest cost		812			656			1,619			1,301
Amortization of prior service cost		(175	)		(168	)		(348	)		(334	)
Recognized actuarial losses		329			275			656			545
Benefit cost	$	1,731		$	1,344		$	3,451		$	2,665

8. Long-Term Debt

     Long-term debt of $137.5 million as of December 31, 2007 consists principally of two unsecured borrowing agreements approximating 15 billion Japanese yen ($132.0 million). The agreements have three-year terms with weighted-average fixed interest rates approximating 1.3%. Interest on the loans is payable semi-annually with the principal due in September 2009.

8

9. Income Taxes

     We adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, “Accounting for the Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109”, (FIN 48) effective July 1, 2007. The adoption of FIN 48 did not have a material impact on our statement of financial position or on results of operations.

     As of July 1, 2007, unrecognized tax benefits were $12.6 million, of which, $10.5 million represents the amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate. Due to the various jurisdictions in which we file income tax returns, it is reasonably possible that there will be changes in the amount of unrecognized tax benefits over the next twelve months but the amounts of these changes cannot be estimated. Changes in the amount of unrecognized tax benefits in the second quarter were not significant.

     We are subject to tax in U.S. Federal, State and foreign tax jurisdictions. We have substantially completed all U.S. federal income tax matters for tax years through 2001. The examination of federal income tax returns for 2002 and 2003 has been completed and we expect to receive the final report from the Internal Revenue Service during fiscal 2008. The tax years 2004 through 2007 remain open to examination by all other major taxing jurisdictions to which we are subject.

     It is our practice to recognize interest and/or penalties related to income tax matters in tax expense. As of July 1, 2007, there were no material interest or penalty amounts to accrue.

10. New Accounting Pronouncements

     In December 2007, the Financial Accounting Standards Board (the FASB) issued Statement of Financial Accounting Standards No. 141R, Business Combinations (SFAS 141R). SFAS 141R states that acquisition-related costs are to be recognized separately from the acquisition and expensed as incurred with restructuring costs being expensed in periods after the acquisition date. SFAS 141R also states that business combinations will result in all assets and liabilities of the acquired business being recorded at their fair values. We are required to adopt SFAS No. 141R effective July 1, 2009. The impact of the adoption of SFAS No. 141R will depend on the nature and extent of business combinations occurring on or after the effective date.

     In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (SFAS 160). SFAS 160 requires identification and presentation of ownership interests in subsidiaries held by parties other than us in the consolidated financial statements within the equity section but separate from the equity. It also requires that (1) the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, (2) changes in ownership interest be accounted for similarly, as equity transactions (3) and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary be measured at fair value. This statement is effective for us on July 1, 2009. We are currently evaluating the requirements of SFAS 160 but do not expect it to have a material impact on our financial statements.

11. Segments and Related Information

     On July 1, 2007, we reorganized our operations, which changed the configuration of our segments into the Connector, Transportation and Custom & Electrical segments. A summary of the segments follows:

• The Connector segment designs and manufactures products for high-speed, high-density, high signal-integrity applications as well as fine-pitch, low-profile connectors for the consumer and commercial markets.

9

• The Transportation segment designs and manufactures products that withstand environments such as heat, cold, dust, dirt, liquid and vibration for automotive and other transportation applications.

• The Custom & Electrical segment designs and manufactures integrated and customizable electronic components across all industries that provide original, differentiated solutions to customer requirements. It also leverages expertise in the use of signal, power and interface technology in industrial automation and other harsh environment applications.

     Information by segment is summarized as follows (in thousands):

			Trans-		Custom &		Corporate
	Connector		portation		Electrical		& Other			Total
For the three months ended:
December 31, 2007:
Revenues from external customers	$	490,289	$	122,926	$	225,962	$	2,383		$	841,560
Income (loss) from operations		82,248		124		17,076		(19,290	)		80,158
Depreciation & amortization		38,916		9,450		8,722		3,296			60,384
Capital expenditures		30,047		7,097		5,776		10,353			53,273
December 31, 2006:
Revenues from external customers	$	487,138	$	113,412	$	232,438	$	4,479		$	837,467
Income (loss) from operations		95,437		727		13,277		(18,623	)		90,818
Depreciation & amortization		35,820		9,631		9,737		4,386			59,574
Capital expenditures		54,079		12,888		8,113		5,160			80,240
For the six months ended:
December 31, 2007:
Revenues from external customers	$	942,543	$	242,979	$	444,165	$	4,483		$	1,634,170
Income (loss) from operations		157,592		4,527		34,134		(43,209	)		153,044
Depreciation & amortization		77,108		19,391		17,665		7,193			121,357
Capital expenditures		59,124		16,614		8,963		17,716			102,417
December 31, 2006:
Revenues from external customers	$	983,151	$	218,681	$	454,551	$	10,629		$	1,667,012
Income (loss) from operations		204,795		850		33,024		(44,743	)		193,926
Depreciation & amortization		70,304		19,487		19,348		8,557			117,696
Capital expenditures		97,396		28,777		19,630		10,003			155,806

     Corporate & other includes expenses primarily related to corporate operations that are not allocated to segments such as executive management, human resources, legal, finance and information technology.

     Segment assets, which are comprised of accounts receivable, inventory and fixed assets, are summarized as follows (in thousands):

			Trans-		Custom &		Corporate
	Connector		portation		Electrical		& Other		Total
December 31, 2007	$	1,264,257	$	380,051	$	484,380	$	146,613	$	2,275,301
June 30, 2007		1,167,163		407,034		454,730		170,788		2,199,715

10

     The reconciliation of segment assets to consolidated total assets is as follows (in thousands):

	Dec. 31,		June 30,
	2007		2007
Segment net assets	$	2,275,301	$	2,199,715
Other current assets		500,577		512,481
Non current assets		664,735		603,912
Consolidated total assets	$	3,440,613	$	3,316,108

     Amounts for the three and six months ended December 31, 2006 and as of June 30, 2007, were recast to conform to the new organization structure. The recast data required the use of judgment in determining certain allocations of expense and assets related to manufacturing facilities and administrative services that are shared between segments.

11

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 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 for the fiscal year ended June 30, 2007. 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.”

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 59 plants in 19 countries. We also provide manufacturing services to integrate specific components into a customer’s product.

     On July 1, 2007, we reorganized our operations, which changed the configuration of our segments into the Connector, Transportation and Custom & Electrical segments. A summary of the segments follows:

• The Connector segment designs and manufactures products for high-speed, high-density, high signal-integrity applications as well as fine-pitch, low-profile connectors for the consumer and commercial markets.

• The Transportation segment designs and manufactures products that withstand environments such as heat, cold, dust, dirt, liquid and vibration for automotive and other transportation applications.

• The Custom & Electrical segment designs and manufactures integrated and customizable electronic components across all industries that provide original, differentiated solutions to customer requirements. It also leverages expertise in the use of signal, power and interface technology in industrial automation and other harsh environment applications.

     In connection with our reorganization, we undertook a multi-year restructuring plan in fiscal 2007 designed to reduce costs and to improve return on invested capital in connection with a new global organization that was effective July 1, 2007. A majority of the plan relates to the movement of manufacturing activities within facilities located in North America and Europe and activities from North America and Europe to Asia.

     We expect to incur restructuring and asset impairment costs related to these actions ranging from $100 — $125 million, of which the impact on each segment will be determined as the actions become more certain. Management and the Board of Directors approved several actions related to this plan. A portion of this plan involves cost savings or other actions that do not result in incremental expense, such as better utilization of assets, reduced spending and organizational efficiencies. This plan includes employee reduction targets throughout the company, and we expect to achieve these targets through ongoing employee attrition and terminations. See Note 2 of the “Notes to the Condensed Consolidated Financial Statements” for further discussion.

12

     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, manage rising raw material costs, develop, manufacture and successfully market new and enhanced products and product lines, control operating costs, 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 best estimates and judgments of certain amounts included in the financial statements. Estimates are revised periodically. Actual results could differ from these estimates.

     Except for the July 1, 2007 accounting change described below, the information concerning our critical accounting policies can be found under Management’s Discussion of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2007 filed with the Securities and Exchange Commission, which is incorporated by reference in this Form 10-Q.

Income Taxes

     As a result of the implementation of Financial Accounting Standards Board (FASB) interpretation No. 48, “Accounting for the Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (FIN 48), effective July 1, 2007, we recognize liabilities for uncertain tax positions based on the two-step process prescribed within the interpretation. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the probability of various possible outcomes. We re-evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period.

13

Results of Operations

     The following table sets forth consolidated statements of income data as a percentage of net revenue for the three months ended December 31 (in thousands):

			Percentage					Percentage
	2007		of Revenue			2006		of Revenue
Net revenue	$	841,560		100.0	%	$	837,467		100.0	%
Cost of sales		588,445		69.9	%		578,958		69.1	%
Gross profit		253,115		30.1	%		258,509		30.9	%
Selling, general & administrative		165,699		19.7	%		167,691		20.1	%
Restructuring costs and asset impairments		7,258		0.9	%		—		—
Income from operations		80,158		9.5	%		90,818		10.8	%
Other income, net		4,437		0.5	%		3,801		0.5	%
Income before income taxes		84,595		10.0	%		94,619		11.3	%
Income taxes		25,379		3.0	%		28,392		3.4	%
Net income	$	59,216		7.0	%	$	66,227		7.9	%

     The following table sets forth consolidated statements of income data as a percentage of net revenue for the six months ended December 31 (in thousands):

			Percentage					Percentage
	2007		of Revenue			2006		of Revenue
Net revenue	$	1,634,170		100.0	%	$	1,667,012		100.0	%
Cost of sales		1,144,905		70.1	%		1,139,094		68.3	%
Gross profit		489,265		29.9	%		527,918		31.7	%
Selling, general & administrative		326,334		20.0	%		333,992		20.1	%
Restructuring costs and asset impairments		9,887		0.6	%		—		—
Income from operations		153,044		9.3	%		193,926		11.6	%
Other income, net		7,699		0.5	%		7,698		0.5	%
	��
Income before income taxes		160,743		9.8	%		201,624		12.1	%
Income taxes		48,223		2.9	%		58,896		3.5	%
Net income	$	112,520		6.9	%	$	142,728		8.6	%

Net Revenue

     We sell our products in five primary markets. The estimated change in revenue from each market during the second fiscal quarter of 2008 compared with the same quarter last year (Comparable Quarter) and the first quarter of 2008 (Sequential Quarter) follows:

	Comparable			Sequential
	Quarter			Quarter
Consumer		2.2	%		4.6	%
Telecommunications		(3.2	)		12.4
Automotive		12.3			3.8
Data		7.0			6.2
Industrial		(16.6	)		(2.3	)

     On a Comparable Quarter basis, the automotive market increased 12.3% due to higher demand in Europe and Asia. Increases in the automotive market are also due to new products reflecting higher electronic content in automobiles and an increase in revenue of our standard products to traditional customers. We believe that the volume of automobiles manufactured by our customers during the first half of fiscal 2008 is lower than the volume in the same period last year; however, our customers have trended toward reducing their vendor list, which when coupled with the higher electronic content used in new automobiles, has resulted in an increase in our market share. The data

14

market increased 7.0% due to our customers’ releases of new high end products and their expansion in new optical and high speed technologies, for which we offer a strong product line. Storage networking is our best performing sector in the data market. The industrial market decreased 16.6% as a result of the divestiture of a subsidiary of Woodhead Industries, Inc. (Woodhead), acquired August 9, 2006, that had revenue of $7.3 million during the comparable quarter. We also had lower industrial market revenue due to a cable assembly product with high revenue levels in the comparable quarter but little revenue in the current quarter because our customer was enhancing their product.

     On a Sequential Quarter basis, the telecommunications market increased 12.4% due to a continuing recovery in our mobile business, which declined sharply during the second half of fiscal 2007. The data market increased 6.2% due to the expansion of our customers’ product lines into sectors for which we have a strong product line.

     The following table shows the percentage of our net revenue by geographic region:

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2007			2006			2007			2006
Americas		26	%		29	%		27	%		28	%
Northern Asia		16			15			15			15
Southeast Asia and Australia		38			37			38			38
Europe		20			19			20			19
Total		100	%		100	%		100	%		100	%

     The general weakening of the U.S. dollar increased revenue by approximately $37.5 million for the second quarter of fiscal 2008 over the prior year period. The following tables show the effect on the change in geographic net revenue from foreign currency translations to the U.S. dollar (in thousands):

	Three Months Ended December 31, 2007								Six Months Ended December 31, 2007
	Local			Currency		Net			Local			Currency		Net
	Currency			Translation		Change			Currency			Translation		Change
Americas	$	(24,994	)	$	1,116	$	(23,878	)	$	(23,983	)	$	1,593	$	(22,390	)
Northern Asia		10,279			4,257		14,536			2,902			708		3,610
Southeast Asia and Australia		(9,207	)		13,766		4,559			(43,371	)		22,629		(20,742	)
Europe		(14,845	)		18,346		3,501			(23,955	)		28,408		4,453
Corporate & other		5,375			—		5,375			2,227			—		2,227
Net change	$	(33,392	)	$	37,485	$	4,093		$	(86,180	)	$	53,338	$	(32,842	)

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

	Three Months			Six Months
	Ended			Ended
	Dec. 31, 2007			Dec. 31, 2007
Americas		(10.4	)%		(5.1	)%
Northern Asia		8.4			1.2
Southern Asia and Australia		(3.0	)		(6.8	)
Europe		(9.2	)		(7.6	)
Total		(4.0	)%		(5.2	)%

15

     The following table sets forth information on revenue by segment as of the three months ended December 31 (in thousands):

			Percentage					Percentage
	2007		of Revenue			2006		of Revenue
Connector	$	490,289		58.3	%	$	487,138		58.2	%
Transportation		122,926		14.6			113,412		13.5
Custom & Electrical		225,962		26.9			232,438		27.8
Corporate & Other		2,383		0.2			4,479		0.5
Total	$	841,560		100.0	%	$	837,467		100.0	%

     The following table sets forth information on revenue by segment as of the six months ended December 31 (in thousands):

			Percentage					Percentage
	2007		of Revenue			2006		of Revenue
Connector	$	942,543		57.7	%	$	983,151		59.0	%
Transportation		242,979		14.9			218,681		13.1
Custom & Electrical		444,165		27.2			454,551		27.3
Corporate & Other		4,483		0.2			10,629		0.6
Total	$	1,634,170		100.0	%	$	1,667,012		100.0	%

Gross Profit

     The following table provides a summary of gross profit and gross margin for the three and six months ended December 31 (in thousands):

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2007			2006			2007			2006
Gross profit	$	253,115		$	258,509		$	489,265		$	527,918
Gross margin		30.1	%		30.9	%		29.9	%		31.7	%

     The reduction in gross margin was primarily due to higher commodity cost and price erosion partially offset by general cost reductions, a portion of which is related to restructuring activities. Commodity costs were higher during the three and six months ended December 31, 2007 compared with the prior year periods primarily due to an increase in gold prices. Gold prices during the current quarter, which averaged $786 per troy ounce, increased 28% compared with the prior year quarter. For the six-month period, the average gold price of $732 per troy ounce increased 19% compared with the prior year period.

     In addition to commodity costs, the increase (decrease) of certain other significant impacts on gross profit compared with the prior year periods was as follows for the three and six months ended December 31 (in thousands):

	Three Months			Six Months
	Ended			Ended
	Dec. 31, 2007			Dec. 31, 2007
Price erosion	$	(39,338	)		(80,362	)
Currency translation		10,789			15,648
Currency transaction		(2,553	)		743

     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

16

revenue. The decrease in gross profit due to currency transactions was primarily due to a general weakening of the U.S. dollar against other currencies during the three and six months ended December 31, 2007.

Operating Expenses

     Operating expenses were as follows as of December 31 (in thousands):

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2007			2006			2007			2006
Selling, general and administrative	$	165,699		$	167,691		$	326,334		$	333,992
Selling, general and administrative as a percentage of revenue		19.7	%		20.1	%		20.0	%		20.1	%
Restructuring costs and asset impairments	$	7,258		$	—		$	9,887		$	—

     Selling, general and administrative expenses improved as a percent of net revenue over the prior year periods primarily due to the impact of restructuring actions. The impact of currency translation increased selling, general and administrative expenses by approximately $8.0 million and $11.2 million for the three and six months ended December 31, 2007, respectively.

     Research and development expenditures, which are classified as selling, general and administrative expense, were approximately 5.1% of net revenue for the six months ended December 31, 2007 and 2006.

     Restructuring costs during the six months ended December 31, 2007 included $8.9 million for employee termination benefits and $1.0 million for asset impairments. This expense primarily relates to actions taken during the second quarter of fiscal 2008 to reduce selling, general and administrative expense in the Connector segment and corporate office.

Effective Tax Rate

     The effective tax rate was 30.0% for the three and six months ended December 31, 2007 and was 30.0% and 29.2% for the three and six months ended December 31, 2006. The effective tax rates represent estimates of the full year effective tax rate.The effective tax rate for the first half of fiscal 2008 is higher than the prior year period due to our anticipation of greater earnings during fiscal year 2008 in countries with tax rates that are higher relative to the fiscal year 2007 earnings mix.

Backlog

     Our order backlog on December 31, 2007 was approximately $374.7 million compared with $375.9 million at December 31, 2006. Orders for the second quarter of fiscal 2008 were $858.9 million compared with $778.7 million for the prior year period, led by improvement in the telecommunications market during the second quarter of fiscal 2008, compared with the prior year period.

17

Segments

Connector

     The following table provides an analysis of the change in net revenue compared with the prior fiscal year (in thousands):

	Three Months			Six Months
	Ended			Ended
	Dec. 31, 2007			Dec. 31, 2007
Change in net revenue due to:
Organic net revenue decline	$	(16,946	)	$	(67,226	)
Currency translation		20,097			26,618
Total net revenue growth (decline)	$	3,151		$	(40,608	)
Organic net revenue decline percentage		(3.5	)%		(6.8	)%

     The Connector segment sells primarily to the telecommunication, data products and consumer markets, which are discussed above. Segment revenue was relatively flat in the second quarter of fiscal 2008 with currency translation offsetting an organic revenue decline. Organic revenue declined in the three and six months ended December 31, 2007, compared with the prior year period primarily due to lower revenue in the mobile sector of the telecommunications market, which began to weaken late in the second quarter of fiscal 2007. The mobile sector began improving during the first quarter of fiscal 2008 and continued improving during the current quarter. Additionally, price erosion is generally higher in the Connector segment compared with our other segments, particularly in the mobile business.

     The following table provides information on income from operations and operating margins for the periods indicated (in thousands):

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2007			2006			2007			2006
Income from operations	$	82,248		$	95,437		$	157,592		$	204,795
Operating margin		16.8	%		19.6	%		16.7	%		20.8	%

     Connector segment operating income decreased compared with the prior year periods due to price erosion and higher raw material cost, offset by lower selling, general and administrative expense. Selling, general and administrative expense was lower due to restructuring actions and specific cost containment activities.

18

Transportation

     The following table provides an analysis of the change in net revenue compared with the prior fiscal year (in thousands):

	Three Months			Six Months
	Ended			Ended
	Dec. 31, 2007			Dec. 31, 2007
Change in net revenue due to:
Organic net revenue growth	$	2,854		$	14,736
Currency translation		6,660			9,562
Total net revenue growth	$	9,514		$	24,298
Organic net revenue growth percentage		2.5	%		6.7	%

     Transportation segment revenue increased in fiscal 2008 due to an increase in the automotive market revenue discussed above.

     The following table provides information on income from operations and operating margins for the periods indicated (in thousands):

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2007			2006			2007			2006
Income from operations	$	124		$	727		$	4,527		$	850
Operating margin		0.1	%		0.6	%		1.9	%		0.4	%

     Segment operating income increased in the six months ended December 31, 2007, compared with the same period last year due to the increase in revenue, a more efficient use of capacity in fiscal 2008 and cost reductions in connection with the restructuring activities that began in June 2007. Capacity utilization improved due to completion of the transition of manufacturing operations that was ongoing during the first quarter of fiscal 2007. Sequentially, the current quarter results were negatively impacted by higher material and research and development costs.

Custom & Electrical

     The following table provides an analysis of the change in net revenue compared with the prior fiscal year (in thousands):

	Three Months			Six Months
	Ended			Ended
	Dec. 31, 2007			Dec. 31, 2007
Change in net revenue due to:
Organic net revenue decline	$	(17,094	)	$	(27,319	)
Currency translation		10,618			16,933
Total net revenue decline	$	(6,476	)	$	(10,386	)
Organic net revenue decline percentage		(7.4	)%		(6.0	)%

     Custom and Electrical segment revenue declined in fiscal 2008 due to the decline in the industrial market discussed above, which affected both the current quarter and year-to-date periods. This decline was offset in the year-to-date period by the acquisition of Woodhead on August 9, 2006, which had a partial quarter effect on operating results for the first quarter of fiscal 2007.

19

     The following table provides information on income from operations and operating margins for the periods indicated (in thousands):

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2007			2006			2007			2006
Income from operations	$	17,076		$	13,277		$	34,134		$	33,024
Operating margin		7.6	%		5.7	%		7.7	%		7.3	%

     Segment operating income increased during the second quarter of fiscal 2008 compared with the prior year period primarily due to efficiencies achieved with the Woodhead integration and actuarial gains resulting from changes to defined benefit plans.

Non-GAAP Financial Measures

     Organic net revenue growth, which is included in the discussion above, is a non-GAAP financial measure. The difference between reported net revenue growth (the most directly comparable GAAP financial measure) and organic net revenue growth (the non-GAAP measure) consists of the impact from acquisitions and foreign currency exchange rates. Organic net revenue growth is a useful measure which we use to measure the underlying results and trends in our business. It excludes items that are not completely under management’s control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition activity.

     We believe organic net revenue growth provides useful information to investors because it reflects the underlying growth from the ongoing activities of our business. Furthermore, it provides investors with a view of our operations from management’s perspective. We use organic net revenue growth to monitor and evaluate performance, as it is an important measure of the underlying results of our operations. Management uses organic net revenue growth together with GAAP measures such as net revenue growth and operating income in its decision making processes related to the operations of our reporting segments and our overall company. We believe that investors benefit from having access to the same financial measures that management uses in evaluating operations. The discussion and analysis of organic net revenue growth in Results of Operations above utilizes organic net revenue growth as management does internally. Because organic net revenue growth calculations may vary among other companies, organic net revenue growth amounts presented above may not be comparable with similarly titled measures of other companies. Organic net revenue growth is a non-GAAP financial measure that is not meant to be considered in isolation or as a substitute for GAAP measures. The limitation of this measure is that it excludes items that have an impact on our net sales. This limitation is best addressed by using net revenue growth in combination with our U.S. GAAP net revenue. The tables presented in Results of Operations above provide reconciliations of U.S. GAAP reported net revenue growth to organic net revenue growth.

Financial Condition and Liquidity

     Our financial position remains relatively strong and we continue to fund capital projects and working capital needs principally out of operating cash flows and cash reserves. Cash, cash equivalents and marketable securities totaled $442.6 million and $460.9 million at December 31, 2007 and June 30, 2007, respectively, of which $399.6 million was in non-U.S. accounts as of December 31, 2007. Transferring cash, cash equivalents or marketable securities to U.S. accounts from non-U.S. accounts could subject us to additional U.S. repatriation income tax. 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 believe that our liquidity and financial flexibility are adequate to support both current and future growth. Long-term debt at December 31, 2007 totaled $137.5 million.

20

Cash Flows

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

	Six Months Ended
	December 31,
	2007			2006
Cash provided from operating activities	$	250,286		$	165,341
Cash used for investing activities		(103,862	)		(278,018	)
Cash (used for) provided by financing activities		(140,489	)		73,149
Effect of exchange rate changes on cash		14,742			6,126
Net increase (decrease) in cash	$	20,677		$	(33,402	)

Operating Activities

     Cash provided from operating activities increased by $84.9 million from the prior year period due mainly to lower use of funds to finance working capital needs in the current year period compared with the prior year. The sequential six-month growth in net revenue was higher in the prior year period, requiring a greater use of funds to build working capital. Working capital is defined as current assets minus current liabilities.

Investing Activities

     On July 19, 2007, we completed an acquisition of a U.S.-based company in an all cash transaction approximating $42.5 million. On August 9, 2006, we completed the acquisition of Woodhead in an all cash transaction for approximately $238.1 million, including the assumption of debt and net of cash acquired.

     Capital expenditures were $102.4 million for the six months ended December 31, 2007 compared with $155.8 million in the prior year period, reflecting our efforts to increase asset efficiency by lowering the incremental investment required to drive future growth. Capital expenditures for the six months ended December 31, 2007 were primarily related to construction of a new plant in China and increasing capacity in other Asian entities.

Financing Activities

     On August 10, 2007 our Board of Directors authorized the repurchase of up to an aggregate $200.0 million of common stock though June 30, 2008. Approximately $88.2 million was remaining under the authorization as of December 31, 2007. We purchased 4,340,000 shares of Common Stock and Class A Common Stock during the six months ended December 31, 2007, at an aggregate cost of $111.8 million and 422,500 shares of Class A Common Stock during the six months ended December 31, 2006, at an aggregate cost of $12.5 million.

     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.

21

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, 2007. 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, 2007 arising outside of the ordinary course of business.

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. In addition, we, or others on our behalf, may make forward-looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, web casts, phone calls, and conference calls. 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 for the year ended June 30, 2007 (Form 10-K). You should carefully consider the risks described in our Form 10-K. Such 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, 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 establishment of contra-currency accounts in

22

several international subsidiaries, and the 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 December 31, 2007 or 2006.

     We have implemented a formalized treasury risk management policy that describes 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 or commodity costs, 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 $53.3 million and increased income from operations of $4.6 million for the six months ended December 31, 2007, compared with the estimated results for the comparable period in the prior year.

     Our $43.5 million of marketable securities at December 31, 2007 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. 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.

     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 December 31, 2007, 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 December 31, 2007, 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

23

factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings

     During the quarter ended December 31, 2007, we and FCI Americas Technology, Inc. (FCI) settled our respective patent suits involving our I-Trac™ connectors and FCI’s shieldless, high-speed connector patents. The settlement provides for a license to us under the FCI patents for our present and future sales of existing and future shieldless, high-speed connector product families. Under the settlement, each party will dismiss its respective patent suit.

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.

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

     On August 13, 2007, our Board of Directors authorized the purchase of up to $200.0 million of Common Stock and/or Class A Common Stock during the period ending June 30, 2008. This authorization replaces the Company’s prior authorization which was to expire September 30, 2007 and had a remaining balance of $15.2 million. Share purchases of Molex Common and/or Class A Common Stock for the quarter ended December 31, 2007 were as follows (in thousands, except price per share data):

					Total Number
					of Shares
	Total Number				Purchased as
	of Shares		Average Price		Part of Publicly
	Purchased		Paid per Share		Announced Plan
October 1 — October 31
Common Stock		200	$	27.79		200
Class A Common Stock		648	$	26.48		600
November 1 — November 30
Common Stock		247	$	28.20		200
Class A Common Stock		925	$	26.89		900
December 1 — December 31
Common Stock		—	$	—		—
Class A Common Stock		2	$	26.70		—
Total		2,022	$	27.01		1,900

     As of December 31, 2007, the dollar value of shares that may yet be purchased under the plan was $88.2 million.

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

     Our annual meeting of stockholders was held on October 26, 2007. Our stockholders elected all of the Board’s nominees for director, approved amendments to the 2000 Molex Long-term Stock Plan and the 2005 Molex Incentive Stock Option Plan and ratified the selection of Ernst & Young LLP as our independent registered public accounts for the fiscal year ending June 30, 2008. The voting results were as follows:

24

(1) Election of Directors

	For		Withheld
Michael J. Birck		83,793,539		10,686,496
Frederick A. Krehbiel		89,162,028		5,318,007
Kazumasa Kusaka		92,159,886		2,320,149
Martin P. Slark		90,382,794		4,097,241

	For		Against		Abstain
(2) Approval of Amended 2000 Molex Long-Term Stock Plan		85,276,496		2,986,370		951,721
(3) Approval of Amended 2005 Molex Incentive Stock Option Plan		83,755,561		4,496,718		962,309
(4) Ratification of the selection of Ernst & Young, LLP		93,575,744		79,234		825,057

Item 6. Exhibits

Number	Description
3.2	By-laws (as amended and restated).
10.1	2000 Molex Long-Term Stock Plan, as amended and restated.
10.2	Form of Equity Award Agreement under the 2000 Molex Long-Term Stock Plan.
10.3	2005 Molex Incentive Stock Option Plan, as amended and restated.
10.4	2005 Molex Supplemental Executive Retirement Plan, as amended and restated.
10.5	Molex Executive Deferred Compensation Plan.
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

25

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 4, 2008	/S/ DAVID D. JOHNSON
	David D. Johnson
	Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer)

26