Mail Stop 0306
December 17, 2004
Via Facsimile and U.S. Mail
Mr. Robert B. Mahoney
Acting Chief Financial Officer, Executive
Vice President, and President, Far East South
Molex, Inc.
2222 Wellington Court
Lisle, Illinois 60532
Re: Molex, Inc.
Form 10-K for the year ended June 30, 2004
Filed September 10, 2004
Form 10-Q as of September 30, 2004
Form 8-K`s dated November 11 and December 1, 2004
File No. 0-07491
Dear Mr. Mahoney:
We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. Where indicated, we think you should revise your
documents in response to these comments. If you disagree, we will
consider your explanation as to why our comment is inapplicable or
a
revision is unnecessary. Please be as detailed as necessary in
your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the Fiscal Year Ended June 30, 2004
Item 6. Selected Financial Data - Page 8
1. In future filings, please define how you calculated working
capital, current ratio, and return on beginning shareholders`
equity.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations - Page 9
Results of Operations - Page 10
2. In the Business section of your Form 10-K for fiscal 2002, 2003
and 2004 you report the approximate percentage of net revenue by
industry market for the latest fiscal year. In your MD&A analysis,
your discussion of the reasons for changes in revenues includes a
discussion of the changes within these markets. Please respond to
the
following comments:
(A) Please consider revising future filings to include a table of
the
approximate percentage of net revenue by industry market for each
fiscal year included in your statements of operations. Consider
including this table, or one based upon actual revenues by market,
in
MD&A. If you do not believe that inclusion is appropriate, please
tell us why.
(B) Please tell us why you do not report revenues by groups of
similar products in the notes to your financial statements. See
paragraph 37 of SFAS 131.
(C) The descriptive terms for each of your market groups used in
MD&A
is not always consistent with the terms used in the table of
revenues
in your Business section. Please revise future filings to be
consistent, or provide appropriate definitions and reconciliations
of
the industry group to which you refer.
3. We note that your revenues increased $404 million from 2003 to
2004, or 22%. You explain this significant increase as being due
to
(a) strengthening of foreign currencies of $89 million (22%), (b)
acquisition of Cinch adding $20.5 million (5%), and (c) increase
in
revenue of $44.9 million in the Americas due to "broad improvement
across all markets" (11%), (d) increase in revenue in Far East -
North of $92 million exclusive of $33 million for foreign currency
translation due to strong demand and improved revenue, and (e)
increase in revenue in Far East - South of $164.8 million due to
strong demand.
Under Item 303(a)(3)(iii) of Regulation S-K you should disclose
the
extent to which the increases in revenues are attributable to (a)
increases in prices or (b) to increases in the volume or amount of
goods or services being sold or (c) to the introduction of new
products or services. Further, we note that a similar comment was
issued to you on your June 30, 2003 Form 10-K wherein you agreed
to
provide these disclosures in future filings. Please tell us why
you
believe your current disclosure complies with Item 303(a)(3)(iii)
of
Regulation S-K.
In addition, changes in revenue should not be evaluated solely in
terms of volume and price changes, but you should also include an
analysis of the reasons and factors contributing to the increase
or
decrease.
Under SAB Topic 13.B -
"The Commission stated in FRR 36 that MD&A should "give investors
an
opportunity to look at the registrant through the eyes of
management
by providing a historical and prospective analysis of the
registrant`s financial condition and results of operations, with a
particular emphasis on the registrant`s prospects for the future."
"Examples of such revenue transactions or events that the staff
has
asked to be disclosed and discussed in accordance with FRR 36 are:
* Shipments of product at the end of a reporting period that
significantly reduce customer backlog and that reasonably might be
expected to result in lower shipments and revenue in the next
period.
* Granting of extended payment terms that will result in a longer
collection period for accounts receivable (regardless of whether
revenue has been recognized) and slower cash inflows from
operations,
and the effect on liquidity and capital resources. (The fair value
of
trade receivables should be disclosed in the footnotes to the
financial statements when the fair value does not approximate the
carrying amount.)
* Changing trends in shipments into, and sales from, a sales
channel
or separate class of customer that could be expected to have a
significant effect on future sales or sales returns.
* An increasing trend toward sales to a different class of
customer,
such as a reseller distribution channel that has a lower gross
profit
margin than existing sales that are principally made to end users.
Also, increasing service revenue that has a higher profit margin
than
product sales.
* Seasonal trends or variations in sales."
Further, in Release No. 33-8350 - "Interpretation - Commission
Guidance Regarding Management`s Discussion and Analysis of
Financial
Condition and Results of Operations," issued in December 2003,
"[t]he
SEC staff believes that the effects of offsetting developments or
events should be disclosed. Material increases in net revenues
must
be explained as being attributable to price or volume changes or
new
products. If the changes are a result of several factors,
disclosure
of the relative extent of each factor contributing to the increase
must be made.
"For example, if a company`s financial statements reflect
materially
lower revenues resulting from a decline in the volume of products
sold when compared to a prior period, MD&A should not only
identify
the decline in sales volume, but also should analyze the reasons
underlying the decline in sales when the reasons are also material
and determinable. The analysis should reveal underlying material
causes of the matters described, including for example, if
applicable, difficulties in the manufacturing process, a decline
in
the quality of a product, loss in competitive position and market
share, or a combination of conditions."
Also, "if a change in an estimate has a material favorable impact
on
earnings, the change and the underlying reasons should be
disclosed
so that readers do not incorrectly attribute the effect to
operational improvements."
Please supplementally tell us why you believe your current
disclosure
complies, and similarly respond for the discussion of the
comparison
of your revenues in the MD&A of your September 30, 2004 Form 10-Q.
Fiscal 2004 Compared to Fiscal 2003 - Page 10
4. On page 11 you disclose a non-GAAP financial measure for gross
profit margin excluding restructuring costs of $29.5 million. In
future filings, please comply with Item 10 of Regulation S-K
whenever
you present a non-GAAP financial measure that is subject to that
Item, or tell us why you believe your current disclosure does
comply.
Contractual Obligations and Commercial Commitments - Page 14
5. Please respond to the following comments:
(A) Under Item 303(a)(5) you should present your table of
contractual
obligations for at least the periods specified which are (a)
total,
(b) less than one year, (c) 1 - 3 years, (d) 3 - 5 years, and (e)
more than 5 years. Your table only includes 2005, 2006, 2007,
2008,
and thereafter. As such, you have not provided a total column, nor
amounts for the 3 - 5 year and more than 5 year categories. Please
revise future filings to comply.
(B) Please tell us why you have not reflected categories in the
table
for (a) purchase obligations and (b) other long-term liabilities
reflected on your balance sheet under GAAP.
Financial Statements and Supplementary Data - Page 19
Consolidated Statements of Income - Page 22
6. With respect to your impairment and write-down of investments
of
$5,089,000 in fiscal 2003, we note that $3.5 million of this
charge
relates to the write-off of certain licensed technology for a
product
that you intended to or did manufacture and market. As such, it
appears that this charge should be reflected within your cost of
sales and income from operations. Please revise future filings to
comply, or tell us why the current classification as a non-
operating
loss is appropriate under U.S. GAAP.
7. With respect to your impairment and write-down of investments
of
$12,570,000 in fiscal 2003, we note that at least $10 million of
this
charge relates to the write-off of an investment in a certain
affiliate`s common and preferred convertible securities. The
affiliate subsequently filed for Chapter 11 reorganization. Did
you
subsequently also write-off or down the subordinated debentures?
Please explain and quantify the amount of any charges and the
period
you recorded the charge. If you still have an amount reflected on
your financial statements for your investment in the common and
preferred convertible securities or subordinated debentures of
this
affiliate, please tell us why and quantify the amount as of June
30,
2004. Please also provide us with your analysis, with respect to
this
investment, for fiscal 2003 of the disclosure requirements of Item
4-
08(g) and Item 3-09 of Regulation S-X.
Note 2 - Significant Accounting Policies
Marketable Securities - Page 25
8. Please revise your future filings to provide the disclosures
required by paragraphs 19-21 of SFAS 115.
Goodwill and Intangible Assets - Page 26
9. Please revise future filings to provide a reconciliation of the
changes in goodwill as required by paragraph 45(c) of SFAS 142.
Revenue Recognition - Page 27
10. You disclose that you recognize revenue upon shipment of
product
and transfer of ownership to the customer. SAB Topic 13.A states
that
revenue generally is realized or realizable and earned when all of
the following criteria are met: (a) persuasive evidence of an
arrangement exists, (b) delivery has occurred or services have
been
rendered, (c) the seller`s price to the buyer is fixed and
determinable, and (d) collectibility is reasonably assured. Please
tell us and revise future filings to disclose how you consider
each
of these criteria in your revenue recognition policy.
11. We note that you disclose no warranty policy, but that you do
have a reserve for returns for defective product. Please cite the
accounting literature upon which you relied for this policy.
Please
note that under paragraph 4, SFAS 48 does not apply to sales
transactions in which a customer may return defective goods, such
as
under warranty provisions. You should account for warranty
provisions
under SFAS 5 and provide the disclosures required by FIN 45.
Please
revise or advise.
12. We reviewed response number 16 from your letter to the staff
dated March 19, 2004 and we have the following comments:
(A) Your disclosure for rights of return, inventory allowances,
price
protection and other allowances should explain (a) the nature and
terms of the rights/allowances, (b) how you determine the amount
to
accrue and the underlying rationale, and (c) the accounting for
and
judgments made with respect to assessing when to reverse the
accruals. You should also disclose whether or not your
methodology
is disciplined, consistent, systematic, and rational. Please
provide
this information to us supplementally and in future filings. In
your
response, cite the accounting literature upon which you relied. In
addition, tell us and disclose in future filings where the amounts
are recorded in your financial statements.
(B) From your response we note that you provide rights of return
to
your customers for defective products as well as product that has
been discontinued or made obsolete. Please revise your accounting
policy to clarify. We note that as a result of your 2003
restructuring you discontinued certain products. Did this action
have
a significant impact on your reserve? Please explain.
(C) Please provide us with a separate rollforward schedule of your
return, inventory allowance, price protection reserve, and other
allowance for the last three fiscal years and latest interim
period
showing all changes on a gross basis. Tell us why each amount is
not
included in Schedule II.
(D) We note that you provide your customers with allowances so
that
in the event that competition forces a lower resale price than
published to the distributors by Molex, the distributor may apply
to
Molex for an adjusted cost (buy price) on those specific items.
You
accrue for these allowances at the time of product shipment based
upon historical experience. Please address why you believe that
your
sales meet the fixed and determinable criteria of SAB 104. It
appears, from your response, that when you ship products to
customers
it is probable that those customers will demand, and/or you will
grant, additional rebates related to those sales. This practice
raises a question of whether your selling price meets the "fixed
or
determinable" criteria of SAB 101 because your sales price at the
time of shipment is contingent on the your future negotiation with
your customers` demands for rebates. That is, the selling price in
this case could not be fixed or determinable unless you could
reasonably estimate the amount of future rebates at the time of
shipment. If you could not estimate the rebates, you would defer
all
product revenue until either a rebate is demanded by the customer
and
granted by the company or the rebate demand by the customer
becomes
remote, i.e. the contingency is effectively resolved. If you
believe
that you can reasonably and reliably estimate the amount of future
rebates, you should disclose that fact and tell us the basis for
your
conclusion. Please note that you should evaluate each individual
sales transaction to determine whether or not it is probable when
you
ship the products that those customers will demand, and/or you
will
grant, additional rebates related to those sales and whether or
not
you can make a reasonable and reliable estimate.
(E) Please note that when one of the accruals or a reversal of an
accrual has a significant effect on sales or gross profit, you
should
quantify and discuss the impact in your MD&A.
Stock-Based Compensation - Page 27
13. Please revise future filings to include the disclosure of pro
forma information in the Significant Accounting Policies footnote.
Refer to paragraph 2(e) of SFAS 148.
14. Please tell us and revise future filings to disclose the
significant terms and accounting for your Deferred Compensation
Plan
under which you have credited phantom stock units to your
directors.
See discussion on pages 5 and 11 of your October 22, 2004
Definitive
Proxy Statement.
Reclassifications - Page 28
15. The reclassifications appear to be corrections of prior errors
(restatements) in the classification of certain financial
statement
items. Tell us why you have not provided the disclosures required
by
APB 20 related to the correction of errors. Also discuss why these
errors are not addressed in your controls and procedures section.
Note 3. Restatement of Cash Flow Activities - Page 29
16. Please revise future filings to clarify that the restatement
is
due to an error. Describe in more detail the nature of the error
and
how it was corrected including the accounts involved and the
nature
of the "certain changes." Tell us why it appropriate to classify
these amounts within operating activities and not investing
activities. Explain why 2003 is the only period impacted.
Note 15 - Segment Information - Page 41
17. We note that you present information by region twice for 2002
and
2003. Moreover, the amounts for the two presentations in 2002 and
2003 do not agree. For example, we note the following
(A) The first 2002 table - (a) excludes income tax expense and (b)
appears to include the net income, asset, and capital expenditures
allocations for 2003.
(B) The first 2003 table - (a) excludes net income and (b) appears
to
include the asset and capital expenditures allocations for 2004.
Please reconcile and revise future filings.
18. We note that the sum of the long-lived assets presented on the
bottom of page 41 for 2004 totals $1,672,276, which exceeds the
actual amount of long-lived assets presented on your balance
sheet.
Supplementally provide details of this discrepancy. Revise future
filings to reconcile such amounts as appropriate.
Item 9A. Controls and Procedures - Page 43
19. We note that your principal executive officer and principal
financial officer concluded that your disclosure controls and
procedures are effective as of the end of June 30, 2004. In light
of
subsequent events (i.e, see November 13, 2004 Form 8-K and 8-K/A),
please tell us why you believe that no amendment is required to
this
disclosure.
20. Please tell us and amend to disclose the specific types of
assets
and liabilities affected by the error, the nature of the "certain
changes" to which you refer, the reason why the error occurred and
was not previously detected, and how the error came to be
detected.
What have you done to ensure that there are no similar errors and
that all errors have been corrected?
Schedule II - Page 47
21. Please provide us with a summary schedule of the significant
components of your reserve for receivables and inventories.
Explain
how you calculate these reserves. Explain why the reserve for
accounts receivable has remain basically unchanged over the past
three years. Why is the reserve necessary and what does it
represent?
Provide us with both quantitative and qualitative explanations.
Relate your response to your accounting policy footnote which
states
that your reserve for doubtful accounts is recorded generally
based
on a percentage of aged receivables and management`s evaluation of
customer credit risk. Why do you use the term "generally"? What
other
methods do you use? Quantify the aging of your receivables for the
past three fiscal years and relate the aging to your reserve
requirements. Tell us why the amount of accounts written off in
each
of the last three fiscal years is immaterial and relate this
history
of accounts written off to your reserve balance.
Form 10-Q for the Quarterly Period Ended September 30, 2004
22. We note from Exhibit 16.1 of your Form 8-K/A dated November
13,
2004 that Deloitte & Touche LLP did not complete their review of
your
quarterly report on Form 10-Q for the quarter ended September 30,
2004 prior to their resignation. As such, please tell us the basis
for your statements in the September 30, 2004 Form 10-Q that
Deloitte
& Touche LLP were prepared to complete their review of your Form
10-Q
"in substantially the form hereof by the November 15 extended
deadline for such report." This statement suggests that Deloitte &
Touche had completed their review. Since their letter states
otherwise, you should remove any disclosures that suggest they had
completed their review.
23. Please file an amendment to your Form 10-Q that includes the
entire filing together with the certifications required by Item
601(b)(32) of Regulation S-K.
Part I. Financial Information - Page 3
Item 1. Financial Statements - Page 3
24. Upon completion of the review, when you file your amendment to
the Form 10-Q, please include disclosure that the review was
completed. Upon making such a statement, you would be required to
include the review report in the amended Form 10-Q. See Item 10-
01(d)
of Regulation S-X.
Note 1. Basis of Presentation - Page 7
25. Please tell us and disclose where material, the amount and
nature
of the reclassifications.
26. Please revise and refer to Note 10 since you do not comply
with
Item 10-01(d) of Regulation S-X.
Note 2. Restatement of Cash Flow Activities - Page 7
27. We note that you have foreign operations. Please tell us in
sufficient detail how you calculate your statements of cash flows
and
how that method complies with paragraph 25 of SFAS 95. We note the
restatement made in your September 30, 2004 Form 10-Q for the cash
flows previously reported for the first quarter of fiscal 2004.
Explain how you previously calculated those cash flows and how you
subsequently measured them. Have you determined that there are no
similar errors in the cash flow statements for the other quarterly
periods in fiscal 2004? Why did the adjustment only impact cash
flows
from operating activities and not investing and financing
activities
too?
28. Where you discuss a restatement, you should describe the
nature
of the error and its correction in sufficient detail. For example,
you refer to "certain changes" instead of explaining the nature of
those changes. You refer to a "clerical error" instead of
explaining
the nature of the error and whether the error impacted other
periods.
How you will ensure that future errors are detected and corrected
in
a timely manner? Why is the error not addressed in Item 4 -
Controls
and Procedures?
29. You disclose that the restatement was not material for the
2004
quarters. Does this mean that you did not restate the September
30,
2003 statement of cash flows? If so, please tell us why and revise
to
clarify. How and when will you reflect the correction for fiscal
2004? That is, will you only reflect the change in your next 10-K?
Was the change entirely allocable to the fourth quarter? Please
supplementally show us the amount of the adjustment for the three
months ended September 30, 2003 as a result of the change.
Note 3 - Prior Year Adjustment - Page 8
30. Please explain to us in more detail the nature of the error
resulting in an adjustment related to the omission of "certain"
intercompany inventory in your profit-in-inventory calculation.
What
was the "certain" inventory? How was the error detected and what
have
you done to prevent the error from recurring? How did you
calculate
the amount of the restatement and why? How many years were
impacted
and how were you able to determine the correct starting point for
your analysis? How did you determine which amounts relate to each
fiscal year? Since the adjustment relates to profit in inventory,
does the adjustment in one fiscal period reverse in subsequent
fiscal
periods when the inventory is finally sold to an end-user, third-
party customer? If so, is the $8.0 million in your disclosure the
net
effect to income before taxes in the current period? Please tell
us
and disclose the effect of the error for each period that you have
not restated. Tell us and disclose the amount and where you
reflected
the adjustment in your statement of operations, balance sheet, and
statement of cash flows. Did the adjustment impact your balance
sheet
accounts for intercompany receivables and payables and inventory?
Did
you book the adjustment on a gross basis by eliminating
intercompany
sales and cost of sales? Why do you only discuss a net impact of
$8.0
million in MD&A? Revise your disclosures throughout the filing to
consider the additional information provided in response to our
comment.
31. We note that you believe that because the misstatement is
immaterial to prior periods, you should correct the misstatement
in
the current period. However, we believe that, if the reversing or
carryover effects of a prior period misstatement is material to
the
current period financial statements, the correction of the prior
period misstatement should be reported as a prior period
adjustment
in accordance with APB 20 (that is, the financial statements of
prior
periods should be retroactively restated). See SAB Topic 5:F and
"Remarks Before the 2004 AICPA National Conference on Current SEC
and
PCAOB Developments by Russell P. Hodge, Professional Accounting
Fellow, Office of the Chief Accountant, U.S. Securities and
Exchange
Commission, Washington, D.C.
December 6, 2004." Please supplementally provide us with your
quantitative and qualitative analysis of how you concluded that
the
charge was not material to the September 30, 2004 interim period
or
to any prior period.
32. With respect to the reversal of $2.7 million of a prior year
insurance accrual which was no longer required, please tell us why
and when the amount was originally accrued and how the amount
accrued
was measured. Cite the accounting literature upon which you
relied.
Then tell us why it was appropriate to reverse $2.7 million in the
three months ended September 30, 2004. Address both the timing and
the amount of the reversal. Tell us why you reflected this amount
within cost of sales.
33. With respect to the reduction of $1.5 million in your
inventory
allowance, please tell us why and when the amount was originally
accrued and how the amount accrued was measured. Cite the
accounting
literature upon which you relied. Then tell us why it was
appropriate
to reverse $1.5 million in the three months ended September 30,
2004.
Address both the timing and the amount of the reversal.
Supplementally tell us how your accounting complies with ARB 43,
Chapter 4, footnote 2 and SAB Topic 5.BB - Inventory Valuation
Allowances. Pursuant to SAB Topic 5.BB, a write-down of inventory
to
the lower of cost or market at the close of a fiscal period
creates a
new cost basis that subsequently cannot be marked up based on
changes
in underlying facts and circumstances.
Item 4. Controls and Procedures - Page 13
34. We note your statement that the chief executive officer and
chief
financial officer have concluded that the company`s disclosure
controls and procedures are effective "except as discussed below."
Given the exception noted, it remains unclear whether your chief
executive officer and chief financial officer have concluded that
your disclosure controls and procedures are effective. Please
revise
your disclosure to state, in clear and unqualified language, the
conclusions reached by your chief executive officer and your chief
financial officer on the effectiveness of your disclosure controls
and procedures. For example, if true, you can state that your
disclosure controls and procedures are effective including
consideration of the identified matters, so long as you provide
appropriate disclosure explaining how the disclosure controls and
procedures were determined to be effective in light of the
identified
matters. Or, if true, you can state that given the identified
matters, your disclosure controls and procedures are not
effective.
You should not, however, state the conclusion in your current
disclosure, which appears to state that your disclosure controls
and
procedures are effective except to the extent they are not
effective.
35. Please revise to provide the disclosures regarding changes to
the
company`s internal control over financial reporting required by
Item
308(c) of Regulation S-K. If there are any such changes to
disclose,
please specifically identify each of those changes and discuss how
each change has materially affected, or is reasonably likely to
materially affect, the company`s internal control over financial
reporting.
36. We note that management has established a remediation plan to
correct the deficiency in internal controls and has discussed the
plan with the Audit Committee. Please provide us with a copy of
this
plan. Revise your disclosures as follows:
(A) Summarize the nature of the deficiencies.
(B) Discuss how the deficiencies were discovered and by whom.
(C) Discuss your plans to correct the deficiencies. Separately
discuss what actions you have taken and what actions you plan to
take
and when you plan to take them.
(D) Why do you state that you will continue to evaluate the
effectiveness of your disclosure controls and procedures and take
corrective action as appropriate? This statement suggests that you
are in the process of performing an evaluation. Please tell us and
revise to clarify.
(F) Why does the disclosure not address the problems related to
your
cash flow statements, insurance accrual, and accounts receivable
reserve?
37. Please supplementally tell us the nature of the additional
disclosures that your former auditor advised you to include in
your
filing. Discuss whether or not you have included all of the
recommended disclosures.
38. We note your statement that the signatories did not believe
that
the matter was required to be addressed in that letter. Does
current
management, including the current CEO and CFO, believe that in
representing that there are no transactions that have not been
properly record in the accounting records, and that no matters
have
come to management`s attention subsequent to the date of the
financial statements that require consideration as adjustments or
disclosures in the financial statements, matters such as the error
in
PII and the self-insurance reserve over-accrual need to be
addressed
when making such representations? Please tell us and revise to
disclose. We note the statement on page 14 that Molex`s management
is
not aware of any information which would result in any adjustments
to
the financial information included in the Form 10-Q. Please
confirm
and describe any qualifications to that statement, if applicable.
39. Tell us and disclose in more detail the scope of the inquiry,
who
performed the inquiry, and the findings of the inquiry. Did the
inquiry include (a) a resolution of the discrepancies between the
facts as presented to Deloitte & Touche by the investigators and
the
information contained in the chronology, the comments made to
Deloitte & Touche LLP by the then CEO and other information
provided
to Deloitte & Touche LLP by the Audit Committee Chairman, (b) a
search of personal files and emails to determine whether other
individuals had knowledge of the matters and whether there were
other
accounting matters or errors that had not been disclosed, and (c)
determine whether any illegal acts occurred, all as suggested by
Deloitte & Touche LLP and discussed in their letter dated November
30, 2004 included as Exhibit 16.1 in your November 13, 2004 Form
8-
K/A. Please tell us and revise to disclose the additional
information
requested by Deloitte & Touche LLP and how the Committee responded
to
those requests.
Part II. Other Information - Page 15
40. We note from your disclosure that Robert B. Mahoney was
appointed
as your Acting Chief Financial Officer on November 10, 2004. You
also
disclose that he will continue to serve as an Executive Vice
President of Molex and as President, Far East - South. It appears
that Mr. Mahoney may be physically located overseas based upon the
disclosure in the definitive proxy statement you filed on
September
15, 2004. Has Mr. Mahoney temporarily relocated to the U.S. while
he
performs his duties as Chief Financial Officer or does he continue
to
be located overseas? If he is still overseas, please address how
he
is able to oversee the accounting and financial reporting
operations
of your company which are located in the United States? From the
disclosure in Exhibit 16.1 of the November 13, 2004 Form 8-K/A, it
appears that Mr. Mahoney also signed the representation letter
given
to Deloitte & Touche LLP dated August 20, 2004. Please confirm if
true. Did Mr. Mahoney have knowledge of the PII errors when he
signed
the representation letter?
Item 4.01 Forms 8-K filed November 11, 2004 and December 1, 2004
(8-
K/A)
41. Please provide us with a schedule of your fiscal year end
fourth
quarter 2003 and 2004, and quarter ended September 30, 2004
adjustments to close the books, or adjustments recorded in
connection
with or as a result of the audit or review. Clearly explain the
reason for each adjustment. For each adjustment, show us the
impact
on pre-tax net income (loss). Quantify the net effect of all
adjustments on pre-tax income (loss). Also, tell us if any of the
adjustments relate to prior periods. If so, explain the impact of
such adjustments for each of the prior periods affected. For
remaining adjustments, explain in detail why you believe the
timing
of each adjustment is appropriate.
42. Provide us with any letter or written communication to and
from
the former accountants regarding any disagreements or reportable
events to management or the Audit Committee.
43. Please provide us with the written chronology of events
referred
to in the November 30, 2004 letter from Deloitte & Touche LLP,
included as Exhibit 16.1 in your November 13, 2004 Form 8-K/A.
44. Refer to the seventh paragraph discussion on page 3 of Exhibit
16
regarding the $3 to $4 million potential over accrual of the
accounts
receivable reserve. Please provide us with the written analysis
referred to by Deloitte & Touche. Was the reserve adequate but not
excessive at June 30, and September 30, 2004? Explain you
response.
Please note that it is not appropriate under U.S. GAAP to maintain
"cookie jar" reserves whose reversal can be used to offset the
effects of GAAP charges in your statements of operations. Please
supplementally confirm whether or not management has reviewed all
of
the reserves on the books as of June 30, and September 30, 2004
and
determined that the reserves are adequate and not excessive.
45. Please provide us with the following:
(A) Audit Committee Meeting minutes for October 19 and 21, 2004
(B) Board of Directors Meeting minutes for October 22, 2004
(C) Any written analysis or reports from the independent
investigation/inquiry into the omission and related matters
referred
to in the ninth paragraph of Item 4.01 of your November 13, 2004
Form
8-K
(D) The written report and written supplement provided to
Deloitte &
Touche LLP on November 11, and 13, 2004
Definitive Proxy Statement Filed September 15, 2004
Independent Auditor`s Fees - Page 17
46. Please supplementally provide us with additional details as to
the nature of the "actuarial work" and "legal services" performed
by
your auditors during fiscal year 2003. See Item 2-01(c) (4)(iv)
and
(ix) of Regulation S-X.
Form 8-K dated December 9, 2004
47. Please note that an accountant issuing a review report on
interim
data is presumed not to have adequate knowledge of the company`s
accounting and financial reporting policies unless he or she has
also
audited the prior fiscal year. Please request your auditors to
tell
us the procedures they have performed to obtain adequate knowledge
of
your accounting and financial reporting policies in order to issue
a
review report for the quarter ended September 30, 2004.
* * * *
As appropriate, please amend your September 30, 2004 Form
10-Q
and respond to these comments within 10 business days or tell us
when
you will provide us with a response. You may wish to provide us
with
marked copies of the amendment to expedite our review. Please
furnish
a cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please file
your cover letter on EDGAR. Please understand that we may have
additional comments after reviewing your amendment and responses
to
our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require.
Since the company and its management are in possession of all
facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* The company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* Staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
* The company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Kevin Vaughn, Staff Accountant, at (202)
824-
5387, or Kate Tillan, Reviewing Accountant, at (202) 942-2861, or
me
at (202) 942-2813 if you have questions regarding these comments.
In
this regard, do not hesitate to contact Martin James, the Senior
Assistant Chief Accountant, at (202) 942-1984.
Sincerely,
Daniel Gordon
Branch Chief
??
??
??
??
Mr. Robert B. Mahoney
Molex, Inc.
December 17, 2004
Page 17 of 17
17