UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission File Number 0-7491
MOLEX INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 36-2369491
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2222 Wellington Court, Lisle, Illinois 60532
(Address of principal executive offices) (Zip Code)
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 X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date (applicable only to corporate
registrants). At December 31, 2000:
Common Stock 98,760,631 shares
Class A Common Stock 96,492,554 shares
Class B Common Stock 94,255 shares
MOLEX INCORPORATED
FORM 10-Q
DECEMBER 31, 2000
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
December 31, 2000 and June 30, 2000
Condensed Consolidated Statements of Income -- 3
Three and Six Months Ended December 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows -- 4
Six Months Ended December 31, 2000 and 1999
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 10
PART II - OTHER INFORMATION 11
-1-
MOLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In Thousands)
ASSETS
December 31, June 30,
2000 2000
_________ _________
CURRENT ASSETS:
Cash and cash equivalents $ 122,404 $ 164,288
Marketable securities 28,264 76,955
Accounts receivable - net 531,629 514,855
Inventories 285,733 236,209
Other current assets 33,060 30,702
Total current assets 1,001,090 1,023,009
PROPERTY, PLANT AND EQUIPMENT - NET 1,053,298 980,775
GOODWILL 160,506 165,307
OTHER ASSETS 86,342 78,015
$2,301,236 $2,247,106
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 255,999 $ 277,303
Accrued expenses 129,401 128,157
Other current liabilities 75,952 69,989
Total current liabilities 461,352 475,449
DEFERRED ITEMS 9,271 6,434
ACCRUED POSTRETIREMENT BENEFITS 42,186 36,099
LONG-TERM DEBT 21,546 21,593
MINORITY INTEREST 2,556 1,727
SHAREHOLDERS' EQUITY
Common stock 10,573 10,555
Paid-in capital 266,066 259,806
Retained earnings 1,818,650 1,696,162
Treasury stock (266,776) (241,893)
Deferred unearned compensation (20,707) (25,788)
Cumulative translation and
other adjustments (43,481) 6,962
Total shareholders' equity 1,764,325 1,705,804
$2,301,236 $2,247,106
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- 2 -
MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - In Thousands Except per Share Data)
THREE MONTHS ENDED SIX MONTHS ENDED
December 31, December 31,
2000 1999 2000 1999
NET REVENUE $629,319 $543,009 $1,255,244 $1,034,879
COST OF SALES 388,470 333,554 769,705 632,001
Gross Profit 240,849 209,455 485,539 402,878
OPERATING EXPENSES:
Selling 48,952 41,681 99,426 79,585
Administrative 97,696 91,667 198,110 182,894
Total Operating Expenses 146,648 133,348 297,536 262,479
Income from Operations 94,201 76,107 188,003 140,399
OTHER INCOME:
Impairment charge - - (2,763) -
Foreign currency transaction
gain/(loss) 3,011 (999) 3,739 (1,637)
Interest income, net 1,239 2,396 3,109 4,047
Total Other Income/(Loss) 4,250 1,397 4,085 2,410
INCOME BEFORE INCOME TAXES 98,451 77,504 192,088 142,809
INCOME TAXES 30,617 23,386 59,732 43,194
NET INCOME $67,834 $54,118 $132,356 $99,615
EARNINGS PER COMMON SHARE:
BASIC $0.35 $0.28 $0.68 $0.51
DILUTED $0.34 $0.27 $0.67 $0.50
CASH DIVIDENDS PER COMMON SHARE $0.025 $0.020 $0.050 $0.040
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD: BASIC 195,440 196,158 195,542 196,215
DILUTED 197,860 198,074 198,000 197,976
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- 3 -
MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In Thousands)
SIX MONTHS ENDED
December 31,
2000 1999
CASH AND CASH EQUIVALENTS, Beginning of Period $164,288 $182,992
CASH AND CASH EQUIVALENTS
PROVIDED FROM (USED FOR):
Operations:
Net income 132,356 99,615
Add (deduct) non-cash items included
in net income:
Depreciation and amortization 106,785 93,626
Amortization of deferred unearned compensation 5,081 3,254
Other charges to net income 3,514 6,380
Current items:
Accounts receivable (33,247) (41,888)
Inventories (53,085) (39,733)
Other current assets (4,293) 11,572
Accounts payable (9,450) 36,170
Accrued expenses 18,451 6,056
Other current liabilities (2,726) (21,876)
NET CASH PROVIDED FROM OPERATIONS 163,386 153,176
Investments:
Purchases of property, plant and equipment (209,870) (150,204)
Proceeds from sale of property, plant
and equipment 2,297 5,777
Proceeds from sale of marketable securities 2,861,291 2,053,535
Purchases of marketable securities (2,812,600)(2,046,403)
(Increase)/decrease in other assets (16,653) 13,228
NET CASH USED FOR INVESTMENTS (175,535) (124,067)
Financing:
Increase in short-term loans 7,811 -
Increase in long-term debt 338 4,457
Decrease in long-term debt (385) (1,250)
Cash dividends paid (9,780) (6,280)
Purchase of treasury stock (24,979) (26,256)
Reissuance of treasury stock 1,661 1,212
Exercise of stock options 3,326 2,862
NET CASH USED FOR FINANCING (22,008) (25,255)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (7,728) 7,278
CASH AND CASH EQUIVALENTS, End of Period $122,403 $194,124
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- 4 -
MOLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Condensed Consolidated Financial Statements
The condensed consolidated financial statements have been prepared from the
Company's books and records without audit and are subject to year-end
adjustments. The interim financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of
information for the interim periods presented. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Molex Incorporated
2000 Annual Report to Shareholders and the 2000 Annual Report on Form 10-K.
The results of operations for the interim periods should not be considered
indicative of results to be expected for the full year.
(2) Earnings per Common Share
The reconciliation of common shares outstanding to dilutive common shares
outstanding is as follows:
Three Months Ended Six Months Ended
December 31, December 31,
2000 1999 2000 1999
Weighted average shares
outstanding - basic 195,440 196,158 195,542 196,215
Dilutive effect of stock options 2,420 1,916 2,458 1,761
Weighted average shares
outstanding - diluted 197,860 198,074 198,000 197,976
(3) Comprehensive Income
Comprehensive income includes all non-shareowner changes in equity and consists
of net income, foreign currency translation adjustments and unrealized gains
and losses on available-for-sale securities. Total comprehensive income, in
thousands of dollars, is as follows:
Three Months Ended Six Months Ended
December 31, December 31,
2000 1999 2000 1999
Net income $67,834 $54,118 $132,356 $99,615
Currency translation
and other adjustments (15,146) 81,741 (50,443) 128,994
Total comprehensive income $52,688 $135,859 $81,913 $228,609
-5-
4) Inventories
Inventories are valued at the lower of first-in, first-out cost or market.
Inventories, in thousands of dollars, consist of the following:
December 31, June 30,
2000 2000
Raw Materials $ 49,692 $ 44,595
Work in Process 109,487 82,341
Finished Goods 126,554 109,273
$285,733 $236,209
(5) Segment and Related Information
The Company and its subsidiaries operate in one product segment:
the manufacture and sale of electrical components. Management operates the
business by geographic segments. Information by geographic area is summarized
in the following table:
Inter-
Customer company Total Net Identifiable
Revenue Revenue Revenue Income Assets
December 31, 2000
United States $ 515,789 $ 63,037 $ 578,826 $ 60,977 $1,012,196
Americas (Non-US) 40,549 8,470 49,019 28 57,975
Far East North 281,062 99,021 380,083 49,163 568,126
Far East South 220,888 32,592 253,480 31,866 350,115
Europe 196,911 31,774 228,685 14,242 429,944
Corporate and Other 45 - 45 (23,920) 164,386
Eliminations - (234,894) (234,894) - (281,506)
Total $1,255,244 $ - $1,255,244 $132,356 $2,301,236
December 31, 1999
United States $ 381,567 $ 36,442 $ 418,009 $37,923 $ 855,801
Americas (Non-US) 46,857 7,360 54,217 (976) 55,041
Far East North 237,256 90,647 327,903 35,902 549,669
Far East South 193,434 22,480 215,914 22,879 320,831
Europe 175,688 23,422 199,110 14,761 395,199
Corporate and Other 77 - 77 (10,874) 181,300
Eliminations - (180,351) (180,351) - (200,869)
Total $1,034,879 $ - $1,034,879 $99,615 $2,156,972
-6-
MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues were $629.3 million for the quarter ended
December 31, 2000, increasing 15.9 percent in US dollars and 21.4 percent in
local currencies over the same period last year. For the six months ended
December 31, 2000, net revenues rose to $1,255.2 million from $1,034.9 million
in the corresponding period last year, resulting in US dollar growth of 21.3
percent and local currency growth of 25.0 percent. The strengthening of the
US dollar compared with other currencies caused net revenues to decrease $30.1
million and $38.5 million for the quarter and year-to-date periods,
respectively.
Management believes that Molex continues to grow at a rate higher than the
worldwide connector market. All geographic regions experienced sales growth
for the quarter as well as the six months ended December 31, 2000.
Net revenue in the Americas region rose 30.1 percent in both US dollars and
local currencies over the prior year quarter. Year-to-date net revenue growth
over last year was 33.8 percent in both US dollars and local currencies.
Growth in the region was fueled by strong demand in all major markets,
including fiber optics, telecommunications, networking and distribution.
Quarterly net revenue in the Far East North increased 1.2 percent in US dollars
and 8.0 percent in local currencies compared to the prior year. For the six
months ended December 31, 2000, revenue grew 15.9 percent in US dollars and
17.5 percent in local currencies over last year. Revenue growth was supported
by continued strength in the various markets served by the region. Investment
in new products, especially in the computer, consumer and telecom markets is
believed to be resulting in market share gains in Japan.
Far East South net revenue for the quarter was up 13.1 percent in US dollars
and 15.4 percent in local currencies over the prior year. For the year-to-date
period, revenue rose 18.1 percent in US dollars and 19.2 percent in local
currencies over last year due to strong sales in the personal computer,
computer-peripheral and mobile product markets.
-7-
In Europe, net revenue grew 19.2 percent in US dollars and 40.4 percent in
local currencies over the prior year quarter. For the six months ended
December 31, 2000, the revenue growth over the comparable prior year period
was 18.5 percent in US dollars and 38.3 percent in local currencies. Demand
was strong in the general distribution, fiber optic, mobile and
telecommunications markets.
For the six months ended December 31, 2000, 58.9 percent of Molex's worldwide
net revenue was generated from its international operations. International
operations are subject to currency fluctuations and government actions. Molex
monitors its currency exposure in each country and continues to implement
defensive strategies to respond to changing economic environments. Due to the
uncertainty of the foreign exchange markets, Molex cannot reasonably predict
future trends related to foreign currency fluctuations. Foreign currency
fluctuations have impacted results in the past and may impact results in the
future.
Gross profit as a percent of net revenue was 38.3 percent for the quarter ended
December 31, 2000 compared to 38.6 percent last year. For the six months ended
December 31, 2000, the gross profit percentage was 38.7 percent, down slightly
from 38.9 percent in the prior year period.
Selling and administrative expenses were $146.6 million and $297.5 million,
respectively, for the quarter and six month period ended December 31, 2000 as
compared with $133.3 million and $262.5 million, respectively, for the
corresponding periods in the prior year. As a percent of net revenue, selling
and administrative expenses for the quarter were 23.3 percent compared with
24.6 percent in the prior year, and for the year-to-date period were 23.7
percent compared with 25.4 percent in the prior year. These year-over-year
improvements are a result of efforts to keep overhead costs down. Also
included in selling and administrative expenses are research and development
expenditures, which for the six months ended December 31, 2000, decreased as a
percent of net revenue to 5.7 percent from 6.2 percent in the prior year
period.
The Company recorded an impairment charge on certain available-for-sale
securities during the first quarter of fiscal 2001 based on depressed market
values over the holding period, which is expected to be permanent.
Interest income, net of interest expense, was $1.2 million in the quarter ended
December 31, 2000 compared with $2.4 million in the prior year and was $3.1
million for the six months ended December 31, 2000 as compared with $4.0
million a year ago. The year-to-date decline is primarily due to a lower level
of short-term investments than in the prior year.
-8-
The effective tax rate was 31.0 percent for the quarter ended December 31, 2000
compared with 30.0 percent in the prior year period and was 31.0 percent for
the six month period compared with 30.1 percent last year. The changes were
a result of increased revenues in jurisdictions where higher tax rates apply.
Net income for the quarter was $67.8 million or 35 cents per basic and 34 cents
per diluted share, a 25.3 percent increase compared with $54.1 million or 28
cents per basic and 27 cents per diluted share for the same quarter last fiscal
year. Net income for the six months ended December 31, 2000 was $132.4 million
or 68 cents per basic and 67 cents per diluted share, as compared with net
income of $99.6 million or 51 cents per basic and 50 cents per diluted share,
for the same period in the prior year. Excluding the effects of currency
translation, net income increased 31.4 percent for the quarter and 36.2 percent
for the six months ended December 31, 2000 from the comparable prior year
periods.
The change in comprehensive income in Note 3 is partially a result of foreign
currency translation adjustments due to the stronger US dollar versus the
Japanese yen and most European currencies during the quarter and six months
ended December 31, 2000. During the prior year comparable periods, the US
dollar was generally weakening versus these currencies. The prior year periods
also include unrealized gains on an available-for-sale security that in the
current year periods, are accounted for using the equity method.
LIQUIDITY AND CAPITAL RESOURCES
Molex's balance sheet continues to be strong. Working capital at December 31,
2000 was $539.7 million, a slight decrease from $547.6 million at June 30,
2000.
During the six months ended December 31, 2000, the Company purchased an
aggregate of 710,000 shares of treasury stock at an aggregate cost of $25.0
million. This is in accordance with authorization by the Board of Directors
allowing for the purchase of up to $50 million of Company stock during the
current fiscal year.
Management believes that the Company's current liquidity and
financial flexibility are adequate to support its continued growth.
-9-
OUTLOOK
The outlook for the remainder of fiscal 2001 is for moderate, but continued
growth over the prior fiscal year. Demand remains firm in several important
markets such as fiber optics, micro miniature and high-speed products. Due to
the uncertainty of the foreign currency exchange markets, Molex cannot
reasonably predict future trends related to foreign currency fluctuations.
Foreign currency fluctuations have impacted the Company's results in the past
and may impact results in the future.
To further expand the Company's global presence, offer innovative products at
an accelerated pace, and improve internal productivity, Molex plans to invest
approximately $375 million in capital expenditures and approximately $150
million in research and development for the fiscal year ending June 30, 2001.
Management believes the Company is well positioned to continue to grow faster
than the overall connector industry. The Company continues to emphasize
expansion in rapidly growing industry segments, product lines and geographic
regions. Molex remains committed to providing high quality products and a full
range of services to its customers worldwide.
FORWARD LOOKING STATEMENT
This document contains various forward looking statements. Statements that are
not historical are forward looking statements and are subject to various risks
and uncertainties which could cause actual results to vary materially from
those stated. Such risks and uncertainties include: economic conditions in
various regions, product and price competition, raw material prices, foreign
currency exchange rates, technology changes, patent issues, litigation results,
legal and regulatory developments, and other risks and uncertainties described
in documents filed with the Securities and Exchange Commission.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk associated with changes in foreign
currency exchange rates, interest rates and certain commodity prices. The
Company mitigates its foreign currency exchange rate risk principally through
the establishment of local production facilities in the markets it serves and
-10-
invoicing of customers in the same currency as the source of the products.
Molex also monitors its foreign currency exposure in each country and
implements strategies to respond to changing economic and political
environments. Examples of these strategies include the prompt payment of
intercompany balances utilizing a global netting system, the establishing of
contra-currency accounts in several international subsidiaries, development of
natural hedges and occasional use of foreign exchange contracts.
A formalized treasury risk management policy has been implemented by the
Company which describes the procedures and controls over derivative financial
and commodity instruments. Under the policy, the Company does not use
derivative financial or commodity instruments for trading purposes and the use
of such instruments are subject to strict approval levels by senior officers.
Typically, the use of such derivative instruments is limited to hedging
activities related to specific foreign currency cash flows. The Company's
exposure related to such transactions is, in the aggregate, not material to the
Company's financial position, results of operations and cash flows.
Interest rate exposure is principally limited to the $28.3 million of
marketable securities owned by the Company. Such securities are debt
instruments which generate interest income for the Company on temporary excess
cash balances. The Company does not actively manage the risk of interest rate
fluctuations, however, such risk is mitigated by the relatively short term,
less than twelve months, nature of these investments.
Part II - Other Information
Items 1-6. Not Applicable
-11-
S I G N A T U R E S
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 13, 2001 /s/ ROBERT B. MAHONEY
----------------- --------------------
Robert B. Mahoney
Corporate Vice President,
Treasurer and
Chief Financial Officer
Date February 13, 2001 /s/ LOUIS A. HECHT
----------------- --------------------
Louis A. Hecht
Corporate Secretary and
General Counsel
-12-