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, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
-------- SECURITIES EXCHANGE ACT OF 1934
For the transition period from
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Commission File Number 0-7491
MOLEX INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 36-2369491
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2222 Wellington Court, Lisle, Illinois 60532
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 708-969-4550
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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
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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, 1994:
Common Stock 31,784,401 Shares
Class A Common Stock 31,587,027 Shares
Class B Common Stock 94,255 Shares
MOLEX INCORPORATED
FORM 10-Q
MARCH 31, 1994
INDEX
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
March 31, 1994 and June 30, 1993
Condensed Consolidated Statements of Income -- 3
Three Months and the Nine Months Ended
March 31, 1994 and 1993
Condensed Consolidated Statements of Cash Flows -- 4
Nine Months Ended March 31, 1994 and 1993
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II - OTHER INFORMATION 9
-1-
MOLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In Thousands)
ASSETS
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Mar 31, June 30,
1994 1993
CURRENT ASSETS: --------- ---------
Cash $ 16,911 $ 27,160
Short-term investments 220,138 158,893
Accounts receivable - net 191,945 193,192
Inventories 112,849 104,488
Other current assets 21,938 16,484
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Total current assets 563,781 500,217
PROPERTY, PLANT AND EQUIPMENT - NET 415,483 385,828
OTHER ASSETS 61,789 75,730
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$1,041,053 $ 961,775
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable $ 81,176 $ 79,223
Accrued expenses 74,792 65,716
Other current liabilities 24,416 35,560
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Total current liabilities 180,384 180,499
DEFERRED ITEMS 11,406 11,378
ACCRUED POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 7,538 6,883
LONG-TERM DEBT, less portion due currently 7,512 7,510
MINORITY INTEREST 4,884 3,851
SHAREHOLDERS' EQUITY
Common stock 3,282 3,267
Paid-in capital 54,348 47,052
Retained earnings 701,718 637,074
Treasury stock (31,653) (31,107)
Deferred unearned compensation (7,996) (6,235)
Cumulative translation adjustments 109,630 101,603
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Total shareholders' equity 829,329 751,654
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$1,041,053 $ 961,775
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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)
THREE MONTHS ENDED NINE MONTHS ENDED
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Mar 31, Mar 31, Mar 31, Mar 31,
1994 1993 1994 1993
-------- -------- -------- --------
NET REVENUE $238,568 $206,011 $696,708 $623,699
COST OF SALES 138,465 122,844 405,548 369,697
-------- -------- -------- --------
Gross Profit 100,103 83,167 291,160 254,002
OPERATING EXPENSES:
Selling 26,862 23,670 80,641 72,406
Administrative 34,237 28,832 99,395 87,852
-------- -------- -------- --------
Total Operating Expenses 61,099 52,502 180,036 160,258
Income from Operations 39,004 30,665 111,124 93,744
OTHER INCOME (EXPENSE):
Foreign currency transaction loss (747) (910) (2,118) (3,579)
Interest 1,402 1,347 3,712 3,838
-------- -------- -------- --------
Total Other Income 655 437 1,594 259
Income before Income Taxes
and Minority Interest 39,659 31,102 112,718 94,003
INCOME TAXES 15,761 13,563 45,374 41,578
-------- -------- -------- --------
Income before Minority Interest 23,898 17,539 67,344 52,425
MINORITY INTEREST (302) (131) (961) (209)
-------- -------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 23,596 17,408 66,383 52,216
Cumulative effect of change in method of accounting for
postretirement benefits other than pensions, net of tax - - - 3,605
-------- -------- -------- --------
NET INCOME $ 23,596 $ 17,408 $ 66,383 $ 48,611
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Earnings Per Common Share before cumulative effect
of change in accounting principle $ 0.37 $ 0.28 $ 1.05 $ 0.83
Cumulative effect of change in method of accounting for
postretirement benefits other than pensions per share - - - 0.06
-------- -------- -------- --------
EARNINGS PER COMMON SHARE $ 0.37 $ 0.28 $ 1.05 $ 0.77
======== ======== ======== ========
CASH DIVIDENDS PER COMMON SHARE $ 0.0100 $ 0.0075 $ 0.0275 $ 0.0190
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD 63,402 63,041 63,285 62,959
======== ======== ======== ========
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)
NINE MONTHS ENDED
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Mar 31, Mar 31,
1994 1993
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CASH AND SHORT-TERM INVESTMENTS, Beginning of Period $186,053 $157,157
CASH AND SHORT-TERM INVESTMENTS
PROVIDED FROM (USED FOR):
Operations:
Net income 66,383 48,611
Add (Deduct) non-cash items included in net income:
Cumulative effect of change in accounting for
postretirement benefits other than pensions - 3,605
Depreciation and amortization 65,870 55,141
Minority interest 961 209
Amortization of deferred unearned compensation 2,049 1,773
Loss (gain) on sale of property, plant and equipment 371 (1,673)
Other charges to net income 118 301
Current items:
Accounts receivable 2,146 (4,915)
Inventories (7,150) (3,651)
Prepaid expenses (4,776) (640)
Accounts payable 404 (18,860)
Accrued expenses 8,994 5,542
Income taxes (11,144) (4,785)
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NET CASH PROVIDED FROM OPERATIONS 124,226 80,658
Investments:
Purchases of property, plant and equipment (92,208) (64,571)
Proceeds from sale of property, plant and equipment 2,436 4,142
Decrease in other assets 11,490 7,281
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NET CASH USED FOR INVESTMENTS (78,282) (53,148)
Financing:
Increase in long-term debt 1,164 -
Decrease in long-term debt (1,212) (990)
Cash dividends paid (1,580) (975)
Disposition of treasury stock 871 771
Exercise of stock options 2,084 1,454
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NET CASH PROVIDED FROM FINANCING 1,327 260
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND SHORT-TERM INVESTMENTS 3,725 82
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50,996 27,852
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CASH AND SHORT-TERM INVESTMENTS, End of Period $237,049 $185,009
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
-4-
MOLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Consolidated Financial Statements
The condensed consolidated financial statements have been prepared
from the Company's books 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 1993 Annual
Report to Shareholders and the 1993 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
Earnings per common share (including Common Stock, Class A Common
Stock and Class B Common Stock) have been computed using the
weighted average number of common shares outstanding during the
periods. For the periods ended March 31, 1994 and 1993, the
shares shown as outstanding in the Condensed Consolidated
Statements of Income do not require adjustments for common stock
equivalents as they do not have a material dilutive effect after
applying the treasury stock method.
(3) Inventories
Inventories are valued at the lower of first-in, first-out cost or
market.
Inventories, in thousands of dollars, consisted of the following:
March 31, June 30,
1994 1993
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Raw materials $ 19,921 $ 18,600
Work in process 43,002 39,379
Finished goods 49,926 46,509
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$112,849 $104,488
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-5-
MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues for the quarter and nine months ended
March 31, 1994 increased 15.8 percent and 11.7 percent
respectively, over net revenues for the corresponding periods
during the prior fiscal year. The generally lower value of the
U.S. dollar compared to other currencies worldwide increased net
revenues by $4.6 million for the quarter and $8.0 million for the
nine months ending March 31, 1994. Excluding the effects of
currency fluctuation, growth in net revenues would have equaled
13.6 percent for the quarter and 10.4 percent for the nine months
ending March 31, 1994.
Molex continued to gain market share, with nearly all regions
growing at a rate greater than the general connector industry.
Net revenues in the U.S. Region increased 12.0 percent for the
nine months ending March 31, 1994. The revenue growth was due to
increased customer penetration through the introduction of new
products. For the nine months ending March 31, 1994, the Americas
(Non-U.S.) Region posted revenue growth of 44.1 percent, due to
substantially increased sales in Mexico and improved sales in
Brazil.
European net revenues for the nine months ending March 31, 1994
improved 23.1 percent in local currencies, but were up 9.2
percent in U.S. dollars as the dollar continued to gain strength
against most European currencies. Increased customer demand in
the U.K., Ireland and France offset softness in the German
connector market. Net revenues in the Far East North increased
10.1 percent in U.S. dollars due to the strength of the Japanese
yen against the U.S. dollar, but declined 2.6 percent in local
currencies due to the continued recession in Japan.
The Far East South net revenues for the nine months ended
March 31, 1994 increased 10.0 percent in U.S. dollars from the
comparable period last fiscal year. However, during the third
quarter of fiscal 1993, Molex sold a manufacturing facility in
Singapore and transferred a portion of the region's harness
operations to a newly formed joint venture company. Adjusting for
this change, Far East South net revenues for the nine month period
increased 18.1 percent from the same period a year ago. This
regional growth is primarily due to increased customer penetration
at many of the U.S., Japanese and European multinational companies
who have relocated manufacturing operations to the region and to
the strong growth in the personal computer and disk drive
industries.
-6-
For the nine months ending March 31, 1994, 70 percent of Molex's
worldwide net revenues were generated by its international
operations, compared to 71 percent for the same period during the
prior fiscal year. International operations are subject to
currency fluctuations and government actions. Molex monitors its
foreign currency exposure in each country and implements
strategies responsive 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.
The gross profit percentage of 42.0 percent and 41.8 percent
for the respective quarter and nine months ending March 31, 1994
increased from the 40.4 percent and 40.7 percent reported during
the comparable periods of the previous fiscal year. The Company
was able to offset the effects of price erosion and higher
depreciation charges with improved manufacturing efficiencies,
greater absorption of fixed costs due to increased sales volume
and favorable changes in product mix. For the nine months ended
March 31, 1994, depreciation and amortization expenses have
increased 19.5 percent from a year ago. The increase is
attributed to the higher level of capital expenditures during the
past several years. This year, as last, the majority of capital
expenditures will be for new tooling and equipment directly
related to improving efficiencies and increasing revenues.
We anticipate that price erosion will continue in the connector
industry. To help offset this pressure on margins we will
continue to focus upon productivity improvements, control of
expenses and the introduction of new and innovative products.
Operating expenses as a percent of net revenue for the nine months
ending March 31, 1994 remained unchanged from the same period a
year ago, reflecting continued management focus on the control of
expenses.
Foreign currency transaction losses decreased 17.9 percent for the
quarter and 40.8 percent for the nine months ending March 31, 1994
over the prior year's losses when the Company incurred significant
losses due to the abrupt devaluation of several European
currencies.
Interest income, net of interest expense, decreased slightly
for the quarter and nine months ending March 31, 1994. The
decrease reflects lower average interest rates in countries where
Molex has significant short-term investments. Interest expense
has remained relatively unchanged from the prior year.
-7-
The effective tax rate for the quarter ending March 31, 1994
equaled 39.7 percent as compared to 43.6 percent reported for the
same period in the prior year. This decrease is primarily caused
by increased pretax profitability in countries with lower
effective tax rates and increased foreign tax credit utilization.
The effective tax rates for the comparable nine month periods
ending March 31, 1994 and 1993, of 40.3 percent and 44.2 percent
also reflect this trend.
During the fourth quarter of fiscal 1993 Molex adopted Statement
of Financial Accounting Standards No. 106, "Employees Accounting
for Postretirement Benefits Other Than Pensions." In adopting
this standard, Molex elected to immediately recognize the
cumulative effect and restate the previously reported fiscal 1993
quarterly results.
Net income for the quarter was $23.6 million or 37 cents per
share, a 35.5 percent increase compared with $17.4 million or 28
cents per share for the same quarter last fiscal year. Excluding
the effects of currency fluctuations, net income for the quarter
increased 31.4 percent over the same quarter last fiscal year.
For the nine months ending March 31, 1994, income before the
cumulative effect of change in accounting was $66.4 million or
1.05 cents per share, a 27.1 percent increase compared to $52.2
million or 83 cents per share for the same period last fiscal
year. Excluding the effects of currency fluctuations, income
before the cumulative effect of change in accounting for the nine
months increased 24.0 percent over the prior fiscal year.
LIQUIDITY AND CAPITAL
Molex maintained its strong financial position during the first
nine months of fiscal 1994. Working capital at March 31, 1994 was
$383.4 million, up from $319.7 million at June 30, 1993. Current
assets increased by $63.6 million, primarily due to an increase in
cash and short-term investments and current liabilities decreased
slightly.
Management believes that the Company's current liquidity and
financial flexibility are adequate to support its current growth.
OUTLOOK
We believe Molex remains well positioned to continue increasing
market share in all regions. Business remains strong in the Far
East South, United States and Americas (Non-U.S.). Economic
conditions remain difficult in several European countries. The
fiscal year 1994 nine month results in this region were
encouraging and we remain optimistic about the business
opportunities for Molex in the European automotive,
telecommunications and local area network markets. Local business
remains slow in Japan. While Japan's economic difficulties may
last through most of fiscal 1994, we believe that our continuing
emphasis upon new product introduction, quality, delivery
performance and improved efficiencies will generate improved long-
term results.
-8-
Part II - Other Information
Items 1 - 6. Not Applicable
-9-
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 13, 1994 /s/ JOHN C. PSALTIS
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John C. Psaltis
Corporate Vice President,
Treasurer and Chief
Financial Officer
Date May 13, 1994 /s/ LOUIS A. HECHT
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Louis A. Hecht
Corporate Secretary and
General Counsel