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, 2002 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, 2002: Common Stock 100,004,717 shares Class A Common Stock 91,689,633 shares Class B Common Stock 94,255 shares MOLEX INCORPORATED FORM 10-Q DECEMBER 31, 2002 INDEX Page 	 ---- PART I - FINANCIAL INFORMATION Item 1. Financial Information - Unaudited Condensed Consolidated Balance Sheets -- 2 December 31, 2002 and June 30, 2002 Condensed Consolidated Statements of Income -- 3 Six Months Ended December 31, 2002 and 2001 Condensed Consolidated Statements of Cash Flows -- 4 Six Months Ended December 31, 2002 and 2001 Notes to Condensed Consolidated Financial Statements 5 Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3.	Quantitative and Qualitative Disclosure About Market Risk 14 Item 4. Controls and Procedures 15 PART II - OTHER INFORMATION 15 - 1 - MOLEX INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - In Thousands) ASSETS Dec. 31, June 30, 2002 2002 _________ _________ CURRENT ASSETS: Cash and cash equivalents $ 195,323 $ 213,477 Marketable securities 131,716 99,848 Accounts receivable - net 380,761 386,150 Inventories 166,705 167,253 Other current assets 41,890 48,615 _________ _________ Total current assets 916,395 915,343 PROPERTY, PLANT AND EQUIPMENT - NET 1,033,935 1,067,590 GOODWILL 160,198 160,180 OTHER ASSETS 130,065 110,807 _________ _________ $2,240,593 $2,253,920 _________ _________ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 159,538 $ 184,630 Accrued expenses 117,009 121,942 Other current liabilities 34,963 53,021 _________ _________ Total current liabilities 311,510 359,593 DEFERRED ITEMS 5,250 6,346 ACCRUED POSTRETIREMENT BENEFITS 47,745 41,999 LONG-TERM DEBT 13,462 14,223 OBLIGATIONS UNDER CAPITAL LEASES 516 3,626 MINORITY INTEREST 81 481 SHAREHOLDERS' EQUITY Common stock 10,654 10,628 Paid-in capital 331,223 311,631 Retained earnings 1,986,250 1,937,488 Treasury stock (407,942) (362,479) Deferred unearned compensation (33,829) (27,262) Cumulative translation and other adjustments (24,327) (42,354) _________ _________ Total shareholders' equity 1,862,029 1,827,652 _________ _________ $2,240,593 $2,253,920 _________ _________ 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, 2002 2001 2002 2001 ________ ________ ________ ________ NET REVENUE $454,609 $416,460 $923,855 $846,913 COST OF SALES 308,215 291,115 617,905 584,264 ________ ________ ________ ________ Gross Profit 146,394 125,345 305,950 262,649 OPERATING EXPENSES: Selling 40,547 37,220 81,424 74,529 Administrative 72,619 80,652 152,210 146,410 ________ _______ ________ ________ Total Operating Expenses 113,166 117,872 233,634 220,939 Income from Operations 33,228 7,473 72,316 41,710 OTHER INCOME: Impairment charge on investments in other companies - (10,000) - (10,000) Foreign currency transaction gain/(loss) (5) (2,085) (588) (3,236) Interest income, net 3,927 855 4,937 2,898 ________ ________ ________ ________ Total Other Income/(Expense) 3,922 (11,230) 4,349 (10,338) INCOME/(LOSS) BEFORE INCOME TAXES 37,150 (3,757) 76,665 31,372 INCOME TAX EXPENSE/(BENEFIT) 8,962 (8,021) 18,515 1,912 ________ ________ ________ ________ NET INCOME $ 28,188 $ 4,264 $ 58,150 $ 29,460 EARNINGS PER COMMON SHARE: BASIC $0.15 $0.02 $0.30 $0.15 DILUTED $0.15 $0.02 $0.30 $0.15 CASH DIVIDENDS PER COMMON SHARE $0.025 $0.025 $0.050 $0.050 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING DURING THE PERIOD: BASIC 192,002 194,636 192,462 194,931 DILUTED 193,312 196,247 193,863 196,515 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, 2002 2001 CASH AND CASH EQUIVALENTS, Beginning of Period $213,477 $138,438 CASH AND CASH EQUIVALENTS PROVIDED FROM (USED FOR) Operations: Net income 58,150 29,460 Add (deduct) non-cash items included in net income: Depreciation and amortization 111,225 111,593 Amortization of deferred unearned compensation 6,562 5,126 Impairment charge on investments in other companies - 10,000 Fixed asset write downs included in special charges - 3,652 Other charges to net income 3,845 1,412 Changes in working capital: Accounts receivable 8,399 64,022 Inventories 2,395 23,602 Other current assets 6,742 1,916 Accounts payable (25,673) (49,824) Accrued expenses (2,548) (18,762) Other current liabilities (15,154) (35,801) _______ _______ NET CASH PROVIDED FROM OPERATIONS 153,943 146,396 Investments: Purchases of property, plant and equipment (79,724) (89,020) Proceeds from sale of property, plant and equipment 1,165 4,232 (Increase)decrease in marketable securities (31,868) 56,855 (Increase)decrease in other assets (18,499) 4,492 _______ _______ NET CASH PROVIDED FROM(USED FOR) INVESTING ACTIVITIES (128,926) (23,441) Financing: Increase(decrease) in short-term loans (967) 959 Increase in long-term debt 21 809 Decrease in long-term debt (783) (4,724) Principal payments on capital leases (3,839) (4,768) Cash dividends paid (9,640) (9,760) Purchase of treasury stock (45,001) (35,043) Reissuance of treasury stock 707 1,223 Exercise of stock options 4,066 2,997 _______ _______ NET CASH USED FOR FINANCING ACTIVITIES (55,436) (48,307) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 12,265 1,862 _______ _______ CASH AND CASH EQUIVALENTS, End of Period $195,323 $214,948 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 2002 Annual Report to Shareholders and the 2002 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. Certain reclassifications have been made to the prior year's financial statements to conform to the fiscal year 2003 classifications. (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, 2002 2001 2002 2001 Weighted average shares outstanding - basic 192,002 194,636 192,462 194,931 Dilutive effect of stock options 1,310 1,611 1,401 1,584 _______ _______ _______ _______ Weighted average shares outstanding - diluted 193,312 196,247 193,863 196,515 (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, 2002 2001 2002 2001 Net income $28,188 $ 4,264 $58,150 $29,460 Currency translation and other adjustments 33,980 (54,969) 18,027 (10,750) _______ ________ _______ _______ Total comprehensive income $62,168 $(50,705) $76,177 $18,710 - 5 - 4) Inventories Inventories are valued at the lower of first-in, first-out cost or market. Inventories, net of reserves, in thousands of dollars, consist of the following: Dec. 31, June 30, 2002 2002 ________ ________ Raw Materials $ 25,518 $ 25,753 Work in Process 62,148 63,180 Finished Goods 79,039 78,320 ________ ________ $166,705 $167,253 5) Segment and Related Information The Company and its subsidiaries operate in one product segment: the manufacture and sale of electrical components. Revenue is recognized based on the location of the selling entity. Management operates the business by geographic segments. Information by geographic area is summarized in the following table (in thousands): As of and Inter- for the three Customer company Total Net Identifiable Months Ended: Revenue Revenue Revenue Income* Assets December 31, 2002: United States $156,753 $ 19,299 $176,052 $ 6,060 $ 980,819 Americas (Non-US) 5,219 7,046 12,265 796 70,527 Far East North 100,781 37,470 138,251 9,418 509,259 Far East South 117,043 11,308 128,351 15,913 446,446 Europe 74,795 7,423 82,218 (571) 436,489 Corporate and Other 18 - 18 (3,428) 117,149 Eliminations - (82,546) (82,546) - (320,096) Total $454,609 - $454,609 $28,188 $2,240,593 December 31, 2001: United States $157,868 $ 13,133 $171,001 $(5,618) $ 979,965 Americas (Non-US) 2,121 9,161 11,282 (247) 50,025 Far East North 87,191 33,107 120,298 7,854 450,787 Far East South 91,303 13,315 104,618 11,906 360,023 Europe 77,958 7,318 85,276 (2,153) 396,371 Corporate and Other 19 - 19 (7,478) 91,528 Eliminations - (76,034) (76,034) - (236,811) Total $416,460 - $416,460 $ 4,264 $2,091,888 - 6 - As of and Inter- for the six Customer company Total Net Identifiable Months Ended: Revenue Revenue Revenue Income* Assets December 31, 2002: United States $323,262 $ 37,576 $360,838 $14,613 $ 980,819 Americas (Non-US) 8,346 14,679 23,025 746 70,527 Far East North 203,808 79,058 282,866 21,112 509,259 Far East South 235,699 25,368 261,067 33,643 446,446 Europe 152,709 14,885 167,594 (95) 436,489 Corporate and Other 31 - 31 (11,869) 117,149 Eliminations - (171,566) (171,566) - (320,096) Total $923,855 - $923,855 $58,150 $2,240,593 December 31, 2001: United States $327,529 $ 25,973 $353,502 160 $ 979,965 Americas (Non-US) 4,242 18,322 22,564 (493) 50,025 Far East North 177,345 64,931 242,276 17,808 450,787 Far East South 185,983 25,412 211,395 22,545 360,023 Europe 151,788 14,092 165,880 (1,054) 396,371 Corporate and Other 26 - 26 (9,506) 91,528 Eliminations - (148,730) (148,730) - (236,811) Total $846,913 - $846,913 $29,460 $2,091,888 * Net income in the prior year periods includes a special charge as discussed in Note 6. 6) Other items During the second quarter of fiscal 2002, the Company recorded a pretax charge of $34.2 million ($25.3 million, net of tax benefit of $8.9 million) to reflect costs associated with a reduction in the global work force of approximately 800 people, the lower current value of investments in other companies, and asset write-down costs related to operations being closed. In addition, a one-time positive tax planning adjustment of $5.0 million related to certain operations being closed was recorded. During the fourth quarter of fiscal 2001, the Company recorded a $43.5 million ($30.3 million, net of tax benefit of $13.2 million) charge to reflect costs associated with a reduction in the global work force of approximately 950 people, write-off of slow-moving and excess inventories and asset write-offs related to operations being closed. -7- The major components of the fiscal 2001 fourth quarter and fiscal 2002 second quarter charges, and the remaining accrual balance as of December 31, 2002 were as follows: Accrued June December Cash Assets Balance at 2001 2001 Payments Disposed December 31, (In thousands) Charge Charge Made and Other 2002 _______________ _________ _________ _________ _________ _________ Severance and other benefits $27,690 $18,675 ($31,942) ($ 3,201) $11,222 Inventory write-offs 12,714 - - (12,714) - Asset write-offs 3,043 15,483 - (18,526) - ________ _________ ________ _________ _________ Total $43,447 $34,158 ($31,942) ($34,441) $11,222 All of the employment reductions have occurred with severance payments being made over a period of up to twenty-four months after the severance date. The remaining severance payments will be paid during the next ten months. 7) New accounting pronouncements The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations," and No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," as of July 1, 2002. These statements address the recognition and remeasurement of obligations associated with the retirement of tangible long-lived assets and the accounting and reporting for the impairment or disposal of long-lived assets, including discontinued operations, respectively. SFAS No. 144 establishes a single accounting model for long-lived assets to be disposed of by sale. The Company has evaluated SFAS No. 143 and SFAS No. 144 and determined that the impact on the consolidated financial statements is not material. In June 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. It also establishes that fair value is the objective for initial measurement of the liability. This statement is effective for exit or disposal activities that are initiated after December 31, 2002. In November 2002, the FASB issued -8- Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". This Interpretation establishes accounting and disclosure requirements for a company's obligations under certain guarantees that it has issued. A guarantor is required to recognize a liability for the obligation it has undertaken in issuing a guarantee, including the ongoing obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or conditions occur. The objective of the initial measurement of that liability is the fair value of the guarantee at its inception. The initial recognition and measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure provisions became effective this quarter and have been determined to have no material impact on the Company. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure", an amendment to SFAS No. 123. This standard provides alternative methods of transition for a voluntary change to the fair valued based method of accounting for stock-based employee compensation. It also amends the disclosure requirements to require prominent disclosure in both the annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The new disclosure requirements will be effective for interim periods beginning after December 15, 2002. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities". It requires that the assets, liabilities and results of the activity of variable interest entities be consolidated into the financial statements of the company that has the controlling financial interest. It also provides the framework for determining whether a variable interest entity should be consolidated based on voting interest or significant financial support provided to it. For the Company, this Interpretation is effective immediately for variable interest entities created after January 31, 2003, and effective July 1, 2003 for variable interest entities acquired before February 1, 2003. The Company does not expect the adoption of this Interpretation to have any impact on its fiscal 2004 consolidated financial statements. -9- MOLEX INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Consolidated net revenues were $454.6 million for the quarter ended December 31, 2002, up 9.2 percent in U.S. dollars and 7.7 percent in local currencies over the prior year period. For the six months ended December 31, 2002, net revenues were $923.9 million compared with $846.9 million last year, rising 9.1 percent in U.S. dollars and 6.9 percent in local currencies. The strengthening of other currencies compared with the U.S. dollar increased net revenues by $6.1 million and $18.9 million for the quarter and year-to-date periods, respectively. Net revenue in the Americas region was up 3 percent over the prior year quarter and 2 percent over the prior year-to-date period, but the telecom infrastructure and fiber optics markets continue to be a challenge in the current economic environment. Quarterly net revenue in the Far East North region increased 15 percent in U.S. dollars and in local currencies compared with last year. For the six months ended December 31, 2002, revenue rose 17 percent in U.S. dollars and 15 percent in local currencies. New products developed for the digital consumer electronics market aided the year-over-year revenue growth. Far East South net revenue for the quarter rose 23 percent in U.S. dollars and 22 percent in local currencies over the prior year quarter. Year-to-date, revenue increased 24 percent in U.S. dollars and 23 percent in local currencies over last year. The region was helped by strong demand in consumer electronics, personal computers and mobile telephones as well as our introduction of new products and the continued movement of manufacturing to the region by our global customers. In Europe, net revenue was down 4 percent in U.S. dollars and 11 percent in local currencies compared with the prior year quarter. For the six months ended December 31, 2002, revenue was up 1 percent in U.S. dollars but down 8 percent in local currencies. The decline was a result of the depressed telecom infrastructure market, reflecting a downturn which started later than those in the U.S. and Asia. The transfer of manufacturing to China by our customers has also impacted the region. - 10 - For the six months ended December 31, 2002, 65.0 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 foreign currency exposure in each country and implements strategies to respond to changing economic and political 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 32.2 percent for the quarter ended December 31, 2002 compared with 30.1 percent last year. For the six months ended December 31, 2002, the gross profit percentage was 33.1 percent compared with 31.0 percent in the prior year. The prior year gross profit margins were impacted by a $7.1 million charge taken last year. The increase for the current year was also partially due to higher revenues and absorption of fixed manufacturing costs, as well as a benefit from favorable pricing of raw materials. Selling and administrative expenses were $113.2 million and $233.6 million, respectively, for the quarter and six-month period ended December 31, 2002 as compared with $117.9 million and $220.9 million, respectively, for the corresponding periods in the prior year. As a percent of net revenue, selling and administrative expenses for the quarter were 24.9 percent compared with 28.3 percent in the prior year, and for the year-to-date period were 25.3 percent compared with 26.1 percent in the prior year. The prior year numbers include a $15.7 million charge taken last year. The current year included the reinstatement of salaries and certain employee retirement benefits to normal levels as well as increased expenses for travel and other revenue related expenses. Also included in selling and administrative expenses are research and development expenditures, which for the six months ended December 31, 2002, increased $3.3 million but decreased slightly as a percent of net revenue to 6.4 percent from 6.6 percent in the prior year period due to higher revenues. Interest income, net of interest expense, was $3.9 million in the quarter ended December 31, 2002 compared with $0.9 million in the prior year and was $4.9 million for the six months ended December 31, 2002 as compared with $2.9 million a year ago. The current year included an interest benefit from the favorable closure of corporate tax audits in several jurisdictions, as well as additional interest on our higher cash balances. - 11 - The effective tax rate was 24.0 percent for both the quarter and year-to-date periods ended December 31, 2002 compared with 213.5 percent and 6.0 percent in the comparable prior year periods. Excluding the impact of prior year charges, the effective tax rate for the six months ended December 31, 2002 was consistent with the fiscal 2002 six-month effective tax rate after adjusting the tax rate for the $5.0 million one-time tax benefit recorded in the second quarter of last year. Net income for the quarter was $28.2 million or 15 cents per basic and diluted share compared with $4.3 million or 2 cents per basic and diluted share for the same quarter last fiscal year. For the six months ended December 31, 2002, net income was $58.2 million or 30 cents per basic and diluted share, as compared with net income of $29.5 million or 15 cents per basic and diluted share for the same period last year. Currency translation had no impact on the quarter but increased net income by $0.7 million for the six-month period. The change in comprehensive income in Note 3 is mainly due to foreign currency translation adjustments due to the stronger Euro versus the U.S. dollar when comparing rates at June 30, 2002 to those at December 31, 2002. When comparing the same period last year, June 30, 2001 to December 31, 2001, foreign currencies were generally weaker versus the U.S. dollar. LIQUIDITY AND CAPITAL RESOURCES Molex continues to maintain a strong financial position, funding capital projects and working capital needs principally out of operating cash flow and cash reserves, while maintaining a relatively low level of debt. Working capital at December 31, 2002 was $604.9 million compared with $555.8 million at June 30, 2002. Net cash provided from operations was up over the prior year due to higher net income that was partially offset by an $11.0 million change in working capital and by charges taken in the prior year. Net cash used for investments was $128.9 million, a change of $105.5 million from the prior year, driven mainly by a $88.7 million change in marketable securities which increased $31.9 million in the first half of fiscal 2003 versus a $56.9 million decrease in the first half of fiscal 2002. Capital expenditures were $79.7 million, down from the prior year total of $89.0 million. - 12 - Net cash used for financing activities was $55.4 million compared with $48.3 million in the prior period. During the six months ended December 31, 2002, the Company purchased an aggregate of 1,867,500 shares of treasury stock at an aggregate cost of $45.0 million. This is in accordance with authorization by the Board of Directors allowing for the purchase of up to $100 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 current and future growth. OUTLOOK The outlook for the remainder of fiscal 2003 remains challenging based on the uncertainty of the current worldwide economic conditions and the limited visibility in our industry. We continue to see customers ordering only for their short-term requirements with little advance notice. New product development continues to remain a high priority this fiscal year. 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. 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. 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. - 13 - 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 establishment 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 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 $131.7 million of marketable securities owned by the Company and the Company's $13.5 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 bank loans and mortgages. 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. - 14 - CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures The term "disclosure controls and procedures" is defined in Rules 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934 (Exchange Act). These rules refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of a date within ninety days before the filing of this quarterly report (the Evaluation Date), and they have concluded that, as of the Evaluation Date, such controls and procedures were effective at ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act. (b) Changes in internal controls Molex maintains a system of internal accounting controls that are designed to provide reasonable assurance that the Company's books and records accurately reflect its transactions and that its established policies and procedures are followed. There were no significant changes to the Company's internal controls or in other factors that could significantly affect the internal controls based on an evaluation of controls within 90 days of the filing date of this report. Part II - Other Information Items 1-5. Not Applicable Item 6. EXHIBITS AND REPORTS ON FORM 8-K A report on Form 8-K was filed on November 8, 2002 containing: 1) the certification under Section 906 of the Sarbanes-Oxley Act of 2002 "Corporate Responsibility for Financial Reports". - 15 - 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, 2003 /s/ ROBERT B. MAHONEY ----------------- -------------------- Robert B. Mahoney Executive Vice President, Treasurer and Chief Financial Officer Date February 13, 2003 /s/ LOUIS A. HECHT ----------------- -------------------- Louis A. Hecht Corporate Secretary and General Counsel - 16 - CERTIFICATIONS I, J. Joseph King, Vice Chairman and Chief Executive Officer of Molex Incorporated, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Molex Incorporated; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 13, 2003 /s/ J.JOSEPH KING J. Joseph King Vice Chairman and Chief Executive Officer I, Robert B. Mahoney, Executive Vice President, Treasurer and Chief Financial Officer of Molex Incorporated, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Molex Incorporated; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 13, 2003 /s/ROBERT B. MAHONEY Robert B. Mahoney Executive Vice President, Treasurer and Chief Financial Officer