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 March 31, 2001
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 March 31, 2001:
Common Stock 98,995,259 shares
Class A Common Stock 96,304,513 shares
Class B Common Stock 94,255 shares
MOLEX INCORPORATED
FORM 10-Q
MARCH 31, 2001
INDEX
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
March 31, 2001 and June 30, 2000
Condensed Consolidated Statements of Income -- 3
Three and Nine Months Ended March 31, 2001 and 2000
Condensed Consolidated Statements of Cash Flows -- 4
Nine Months Ended March 31, 2001 and 2000
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 11
PART II - OTHER INFORMATION 12
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MOLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In Thousands)
ASSETS March 31, June 30,
2001 2000
_________ _________
CURRENT ASSETS:
Cash and cash equivalents $ 119,563 $ 164,288
Marketable securities 28,023 76,955
Accounts receivable - net 491,625 514,855
Inventories 262,323 236,209
Other current assets 34,792 30,702
Total current assets 936,326 1,023,009
PROPERTY, PLANT AND EQUIPMENT - NET 1,063,663 980,775
GOODWILL 157,810 165,307
OTHER ASSETS 82,591 78,015
$2,240,390 $2,247,106
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 210,591 $ 277,303
Accrued expenses 125,363 128,157
Other current liabilities 47,949 69,989
Total current liabilities 383,903 475,449
DEFERRED ITEMS 10,393 6,434
ACCRUED POSTRETIREMENT BENEFITS 41,669 36,099
LONG-TERM DEBT 21,174 21,593
MINORITY INTEREST 2,695 1,727
SHAREHOLDERS' EQUITY
Common stock 10,587 10,555
Paid-in capital 273,858 259,806
Retained earnings 1,874,504 1,696,162
Treasury stock (273,227) (241,893)
Deferred unearned compensation (18,166) (25,788)
Cumulative translation and
other adjustments (87,000) 6,962
Total shareholders' equity 1,780,556 1,705,804
$2,240,390 $2,247,106
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - In Thousands Except per Share Data)
THREE MONTHS ENDED NINE MONTHS ENDED
March 31, March 31,
2001 2000 2001 2000
NET REVENUE $599,801 $567,569 $1,855,045 $1,602,448
COST OF SALES 380,765 346,432 1,150,470 978,433
Gross Profit 219,036 221,137 704,575 624,015
OPERATING EXPENSES:
Selling 45,458 43,023 144,884 122,608
Administrative 90,826 97,091 288,936 279,985
Total Operating Expenses 136,284 140,114 433,820 402,593
Income from Operations 82,752 81,023 270,755 221,422
OTHER INCOME:
Impairment charge - - (2,763) -
Foreign currency transaction
gain/(loss) 998 255 3,496 (287)
Interest income, net 1,094 1,396 4,203 5,443
Other income 949 1,345 2,190 250
Total Other Income 3,041 2,996 7,126 5,406
INCOME BEFORE INCOME TAXES 85,793 84,019 277,881 226,828
INCOME TAXES 25,058 26,224 84,790 69,418
NET INCOME $60,735 $57,795 $193,091 $157,410
EARNINGS PER COMMON SHARE:
BASIC $0.31 $0.29 $0.99 $0.80
DILUTED $0.31 $0.29 $0.98 $0.79
CASH DIVIDENDS PER COMMON SHARE $0.025 $0.025 $0.075 $0.065
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD: BASIC 195,360 196,044 195,491 196,157
DILUTED 197,380 198,463 197,763 198,175
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In Thousands)
NINE MONTHS ENDED
March 31, March 31,
2001 2000
CASH AND CASH EQUIVALENTS, Beginning of Period $164,288 $182,992
CASH AND CASH EQUIVALENTS
PROVIDED FROM (USED FOR):
Operations:
Net income 193,091 157,410
Add (deduct) non-cash items included
in net income:
Depreciation and amortization 156,653 141,143
Amortization of deferred unearned compensation 7,621 3,254
(Gain)/Loss on sale of property, plant and equipment 1,964 (1,066)
Deferred income taxes 1,385 1,980
Other charges to net income 822 (318)
Current items:
Accounts receivable (6,356) (82,970)
Inventories (35,402) (50,017)
Other current assets (4,578) 6,122
Accounts payable (47,856) 64,878
Accrued expenses 15,352 21,408
Other current liabilities (21,547) (29,192)
NET CASH PROVIDED FROM OPERATIONS 261,149 232,632
Investments:
Purchases of property, plant and equipment (297,994) (244,691)
Proceeds from sale of property, plant
and equipment 2,247 7,130
Proceeds from sale of marketable securities 3,615,309 3,568,467
Purchases of marketable securities (3,566,378)(3,530,746)
Increase in other assets (12,987) (16,278)
NET CASH USED FOR INVESTMENTS (259,803) (216,118)
Financing:
Increase in long-term debt 52 4,457
Decrease in long-term debt (383) (2,021)
Cash dividends paid (14,668) (10,194)
Purchase of treasury stock (31,136) (34,216)
Reissuance of treasury stock 1,771 2,460
Exercise of stock options 7,113 3,998
NET CASH USED FOR FINANCING (37,251) (35,516)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (8,820) (551)
CASH AND CASH EQUIVALENTS, End of Period $119,563 $163,439
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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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 Nine Months Ended
March 31, March 31,
2001 2000 2001 2000
Weighted average shares outstanding - basic 195,360 196,044 195,491 196,157
Dilutive effect of stock options 2,020 2,419 2,272 2,018
Weighted average shares outstanding - diluted 197,380 198,463 197,763 198,175
(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 Nine Months Ended
March 31, March 31,
2001 2000 2001 2000
Net income $ 60,735 $ 57,795 $193,091 $157,410
Currency translation and other adjustments (43,519) 56,681 (93,962) 185,675
Total comprehensive income $ 17,216 $114,476 $ 99,129 $343,085
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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:
March 31, June 30,
2001 2000
Raw Materials $ 46,669 $ 44,595
Work in Process 102,974 82,341
Finished Goods 112,680 109,273
$262,323 $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
March 31, 2001
United States $ 773,370 $ 97,324 $ 870,694 $ 91,052 $1,007,931
Americas (Non-US) 55,807 10,955 66,762 (434) 57,990
Far East North 396,474 139,357 535,831 64,612 514,283
Far East South 317,994 45,476 363,470 43,988 348,359
Europe 311,332 42,898 354,230 22,471 416,850
Corporate and Other 68 - 68 (28,598) 152,202
Eliminations - (336,010) (336,010) - (257,225)
Total $1,855,045 $ - $1,855,045 $193,091 $2,240,390
March 31, 2000
United States $ 603,620 $ 56,877 $ 660,497 $ 61,830 $ 896,027
Americas (Non-US) 65,159 10,964 76,123 (1,218) 53,995
Far East North 374,747 142,954 517,701 57,618 579,026
Far East South 290,291 34,087 324,378 33,492 318,086
Europe 268,534 37,155 305,689 22,795 402,244
Corporate and Other 97 - 97 (17,107) 153,391
Eliminations - (282,037) (282,037) - (119,605)
Total $1,602,448 $ - $1,602,448 $157,410 $2,283,164
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MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues for the third fiscal quarter ended March 31, 2001
were $599.8 million, increasing 5.7 percent in US dollars and 10.0 percent in
local currencies over the prior year period. For the nine months ended March
31, 2001, net revenues rose to $1,855.0 million from $1,602.4 million in the
corresponding period last year, resulting in US dollar growth of 15.8 percent
and local currency growth of 19.7 percent. The strengthening of the US dollar
compared with other currencies caused net revenues to decrease $24.3 million
and $62.8 million for the quarter and year-to-date periods, respectively.
In the Americas region, net revenue grew 17.8 percent in both US dollars and
local currencies over the prior year quarter. Year-to-date net revenue growth
was 28.1 percent in both US dollars and local currencies compared with last
year. Growth in the region was strongest in the fiber optic and datacom
markets.
Net revenue in the Far East North declined 17.9 percent in US dollars and
9.3 percent in local currencies compared with the prior year quarter. For the
nine months ended March 31, 2001, revenue grew 3.5 percent in US dollars and
7.7 percent in local currencies over last year. The quarter on quarter decline
was due to the general weakness of the overall export market for Japan as well
as the continued sluggishness in the Japanese economy which is weakening
domestic capital and personal consumption.
Far East South net revenue for the quarter increased 3.4 percent in US dollars
and 6.2 percent in local currencies over the prior year. For the year-to-date
period, revenue rose 13.2 percent in US dollars and 14.9 percent in local
currencies over last year. Inventory reductions by contract manufacturers and
OEMs whom the Company supplies resulted in lower than expected growth in the
region. A slow down in markets such as personal computers coupled with price
erosion which offset any volume gains also impacted results.
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In Europe, net revenue grew 21.2 percent in US dollars and 31.0 percent in
local currencies over the prior year quarter. For the nine months ended
March 31, 2001, the revenue growth over the comparable prior year period was
19.4 percent in US dollars and 35.7 percent in local currencies. Strength in
the telecommunications and fiber optic markets contributed to the growth.
For the nine months ended March 31, 2001, 58.3 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
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 36.5 percent for the quarter
ended March 31, 2001 compared with 39.0 percent last year. For the nine months
ended March 31, 2001, the gross profit percentage was 38.0 percent, down from
38.9 percent in the prior year period. Higher depreciation expenses
contributed to this decline, as well as reduced absorption of fixed costs into
inventory.
Selling and administrative expenses were $136.3 million and $433.8 million,
respectively, for the quarter and nine month period ended March 31, 2001 as
compared with $140.1 million and $402.6 million, respectively, for the
corresponding prior year periods. As a percent of net revenue, selling and
administrative expenses for the quarter were 22.7 percent compared with
24.7 percent in the prior year, and for the year-to-date periods were
23.4 percent compared with 25.1 percent in the prior year. Reduction in
selling and administrative expenses has been and will continue to be a primary
focus of the Company. Also included in selling and administrative expenses are
research and development expenditures, which for the nine months ended
March 31, 2001, decreased as a percent of net revenue to 5.7 percent from
6.1 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.
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Interest income, net of interest expense, was $1.1 million in the quarter ended
March 31, 2001 compared with $1.4 million in the prior year and was
$4.2 million for the nine months ended March 31, 2001 as compared with
$5.4 million a year ago. The decline is primarily due to a lower level of
short-term investments.
The effective income tax rate was 29.0 percent for the quarter ended
March 31, 2001 compared with 31.0 percent in the prior year period and was
30.4 percent for both nine month periods ending March 31, 2001 and 2000. The
quarterly reduction was caused by the Company's continued repatriation
strategy, reductions of pretax earnings in higher rate jurisdictions in which
the Company operates, and the ongoing global effort to reduce its income tax
burden through better planning.
Net income for the quarter was $60.7 million or 31 cents per basic and diluted
share, a 5.1 percent increase compared with $57.8 million or 29 cents per
basic and diluted share for the same quarter last fiscal year. Net income for
the nine months ended March 31, 2001 was $193.1 million or 99 cents per basic
and 98 cents per diluted share, as compared with net income of $157.4 million
or 80 cents per basic and 79 cents per diluted share, for the same period in
the prior year. Excluding the effects of currency translation, net income
increased 9.6 percent for the quarter and 26.4 percent for the nine months
ended March 31, 2001 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 nine months
ended March 31, 2001. 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 March 31,
2001 was $552.4 million, an increase from $547.6 million at June 30, 2000.
During the nine months ended March 31, 2001, the Company purchased an aggregate
of 915,000 shares of treasury stock at an aggregate cost of $31.1 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.
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Management believes that the Company's current liquidity and financial
flexibility are adequate to support its continued growth.
OUTLOOK
The outlook for the remainder of fiscal 2001 is cautious given the current
market conditions. The slow down in business appears to be leveling in the
Far East regions, shows signs of continuing further in the Americas, and is
now just beginning in Europe. A cost reduction plan was implemented in
November 2000 that reduced the number of temporary employees, froze hiring,
and reduced non-critical spending. It has now been extended to include reduced
hours for manufacturing employees, salary reductions and other appropriate cost
reductions.
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.
Molex is maintaining its research and development spending at approximately
$150 million for the fiscal year ending June 30, 2001 to ensure the
introduction of a record number of new products again this year and plans to
invest approximately $375 million in capital expenditures, primarily aimed at
new products.
Molex's global team has considerable experience in managing through difficult
market conditions and is focused on maintaining profitability while developing
the new products necessary to expand its market share. 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,
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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
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 $28.0 million of
marketable securities owned by the Company and the Company's $21.2 million of
long-term debt. The 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 on the marketable
securities, however, such risk is mitigated by the relatively short term,
less than twelve months, nature of these investments. The Company's long-term
debt is generally at fixed rates and primarily consists of industrial revenue
bonds (IRBs), bank loans and mortgages. The IRBs have prevailing interest
rates which are generally lower than market interest rates for similar debt
instruments. The Company does not enter into derivative transactions
(i.e. interest rate swaps) with respect to its long-term debt as
the current interest expense on this debt is not deemed material to operations.
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Part II - Other Information
Items 1-6. Not Applicable
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
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(Registrant)
Date May 11, 2001 /s/ ROBERT B. MAHONEY
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Robert B. Mahoney
Corporate Vice President,
Treasurer and
Chief Financial Officer
Date May 11, 2001 /s/ LOUIS A. HECHT
----------------- --------------------
Louis A. Hecht
Corporate Secretary and
General Counsel
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