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, 1996
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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, 1996:
Common Stock 49,937,740 Shares
Class A Common Stock 50,753,705 Shares
Class B Common Stock 94,255 Shares
MOLEX INCORPORATED
FORM 10-Q
MARCH 31, 1996
INDEX
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
March 31, 1996 and June 30, 1995
Condensed Consolidated Statements of Income -- 3
Three Months and Nine Months Ended
March 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows -- 4
Nine Months Ended March 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION 11
-1-
MOLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In Thousands)
ASSETS
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Mar. 31, June 30,
1996 1995
CURRENT ASSETS: --------- ---------
Cash $ 199,107 $ 253,552
Marketable securities 50,711 59,563
Accounts receivable - net 267,258 282,814
Inventories 154,282 150,836
Other current assets 29,289 26,271
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Total current assets 700,647 773,036
PROPERTY, PLANT AND EQUIPMENT - NET 588,472 567,303
OTHER ASSETS 116,981 100,681
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$1,406,100 $1,441,020
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable $ 110,858 $ 128,146
Accrued expenses 91,050 85,748
Other current liabilities 49,523 64,152
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Total current liabilities 251,431 278,046
DEFERRED ITEMS 13,788 13,310
ACCRUED POSTRETIREMENT BENEFITS 29,100 32,170
LONG-TERM DEBT, less portion due currently 7,608 8,122
MINORITY INTEREST 2,779 2,104
SHAREHOLDERS' EQUITY
Common stock 5,247 4,177
Paid-in capital 113,114 101,534
Retained earnings 952,194 850,533
Treasury stock (61,124) (35,749)
Deferred unearned compensation (15,075) (13,771)
Cumulative translation adjustments 107,038 200,544
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Total shareholders' equity 1,101,394 1,107,268
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$1,406,100 $1,441,020
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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
----------------------- -------------------------
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
1996 1995 1996 1995
-------- -------- ---------- --------
NET REVENUE $347,065 $305,755 $1,029,724 $849,615
COST OF SALES 208,771 178,058 617,614 489,977
-------- -------- ---------- --------
Gross Profit 138,294 127,697 412,110 359,638
OPERATING EXPENSES:
Selling 36,130 32,100 107,625 93,766
Administrative 47,518 42,595 142,152 120,096
-------- -------- ---------- --------
Total Operating Expenses 83,648 74,695 249,777 213,862
Income from Operations 54,646 53,002 162,333 145,776
OTHER INCOME:
Foreign currency transaction gain (loss) 540 (1,302) 1,297 (1,635)
Interest 2,179 2,628 8,108 6,422
-------- -------- ---------- --------
Total Other Income 2,719 1,326 9,405 4,787
Income before Income Taxes
and Minority Interest 57,365 54,328 171,738 150,563
INCOME TAXES 21,244 22,504 65,328 63,345
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Income before Minority Interest 36,121 31,824 106,410 87,218
MINORITY INTEREST 2 (30) (73) (160)
-------- -------- ---------- --------
NET INCOME $ 36,123 $ 31,794 $ 106,337 $ 87,058
======== ======== ========== ========
EARNINGS PER COMMON SHARE $ 0.36 $ 0.31 $ 1.06 $ 0.87
======== ======== ========== ========
CASH DIVIDENDS PER COMMON SHARE $ 0.0150 $ 0.0080 $ 0.0450 $ 0.0224
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD 100,697 100,215 100,722 99,739
======== ======== ======== ========
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,
1996 1995
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CASH AND CASH EQUIVALENTS, Beginning of Period $253,552 $220,681
CASH AND CASH EQUIVALENTS
PROVIDED FROM (USED FOR):
Operations:
Net income 106,337 87,058
Add (deduct) non-cash items included in net income:
Depreciation and amortization 88,704 75,822
Minority interest 73 160
Amortization of deferred unearned compensation 3,092 2,468
(Gain) loss on sale of property, plant and equipment (134) (327)
Other (credits) charges to net income 195 (147)
Current items:
Accounts receivable (9,472) (12,241)
Inventories (17,062) (16,461)
Prepaid expenses (7,968) (1,980)
Accounts payable (2,130) 5,198
Accrued expenses 9,156 16,314
Income taxes (8,617) 3,350
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NET CASH PROVIDED FROM OPERATIONS 162,174 159,214
Investments:
Purchases of property, plant and equipment (160,918) (123,548)
Proceeds from sale of property, plant and equipment 2,645 1,259
Increase in other assets (3,656) (4,817)
Increase in marketable securities (6,167) (15,482)
Purchase of business, net of cash acquired - (16,052)
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NET CASH USED FOR INVESTMENTS (168,096) (158,640)
Financing:
Increase in long-term debt 269 -
Decrease in long-term debt (926) (238)
Increase in investment grants 790 -
Cash dividends paid (3,972) (2,184)
Purchase of treasury stock (24,992) -
Disposition of treasury stock 1,566 1,277
Exercise of stock options 2,783 1,973
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NET CASH PROVIDED FROM (USED FOR) FINANCING (24,482) 828
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (24,039) 10,285
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(54,443) 11,687
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CASH AND CASH EQUIVALENTS, End of Period $199,109 $232,368
======== ========
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 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 1995 Annual
Report to Shareholders and the 1995 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
On August 2, 1995, the Board of Directors of Molex Incorporated
declared a twenty-five percent (25%) stock dividend. One quarter
(1/4) share of Common Stock was paid on September 15, 1995 to
shareholders of record as of August 25, 1995 for each share of
Common Stock and Class B Common Stock outstanding. In addition,
one quarter (1/4) share of Class A Common Stock was distributed
for each share of Class A Common Stock outstanding. All shares
outstanding, earnings and dividends have been retroactively
restated for the stock split effected in the form of a stock
dividend.
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, 1996 and 1995, 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) Marketable Securities
Marketable securities are available for sale and consist of a
variety of highly-liquid investments with maturities generally
less than twelve months. Certain reclassifications have been made
to the prior year's financial statements in order to conform to
the 1996 classifications.
-5-
(4) 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,
1996 1995
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Raw materials $ 31,370 $ 29,424
Work in process 51,819 59,042
Finished goods 71,093 62,370
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$154,282 $150,836
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-6-
MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues were $347.1 million for the quarter
ended March 31, 1996, increasing 13.5 percent over net revenues
for the corresponding quarter of the prior fiscal year. For the
nine months ended March 31, 1996, net revenues were $1,029.7
million, an increase of 21.2 percent from the same period a year
ago. The generally higher value of the US dollar compared to
other currencies worldwide decreased net revenues by $12.4
million for the quarter and $12.1 million for the nine months
ended March 31, 1996. Excluding the effects of currency
fluctuation, growth in net revenues would have equaled 17.6
percent for the quarter and 22.6 percent for the nine months ended
March 31, 1996.
Molex continued to exceed its goal of increasing net revenues at
twice the growth rate of the worldwide connector market. All
geographic regions with the exception of the Far East North
experienced local currency growth in excess of 15 percent for the
nine months ended March 31, 1996.
For the three months ended March 31, 1996, revenues in the
Americas region (including the former U.S. Region and the Americas
Non-U.S.) increased 28.0 percent in U.S. dollars and 30.0 percent
in local currency over the same quarter in the prior year. For
the nine months ended March 31, 1996, the percentage of growth
over the same period in the prior year was 29.2 percent in U.S.
dollars and 33.4 percent in local currency. The Company continues
to see increased customer sales to the automotive market as well
as robust growth in certain advanced communication products.
Far East South net revenues for the quarter ended March 31, 1996
increased 13.5 percent in U.S. dollars and 14.9 percent in local
currency over the same quarter in the prior year. For the nine
months ended March 31, 1996, net revenues increased 16.6 percent
in U.S. dollars and 16.3 percent in local currency over the same
period in the prior year. The high demand for personal computers
and related peripheral products continues above the level of last
year. The region continues to introduce products for both local
demand and re-export.
In Europe, net revenues increased 3.4 percent in U.S. dollars and
4.5 percent in local currency over the same quarter in the prior
year. For the nine months ended March 31, 1996, net revenues
increased 19.9 percent in U.S. dollars and 15.6 percent in local
currency over the same period in the prior year. These increases
are primarily attributable to greater demand for automotive and
telecommunications products by major European customers.
-7-
Net revenues in the Far East North decreased 5.1 percent in U.S.
dollars and increased 5.2 percent in local currency for the
quarter compared to the same quarter in the prior year. Net
revenue growth was 4.7 percent in U.S. dollars and 7.8 percent in
local currency for the nine months ended March 31, 1996 when
compared to the same period in the prior year. The Japanese
economy continues to be difficult. In spite of this, Japanese
domestic sales increased slightly over the same period in the
prior year.
For the nine months ended March 31, 1996, 68 percent of Molex's
worldwide net revenues were generated from its international
operations, compared to 72 percent for the same period during the
prior fiscal year. Sales to the U.S. automotive market, coupled
with sales of its Mod-Tap subsidiary acquired in the second half
of last year, have increased the Company's domestic sales during
the nine months ended March 31, 1996 compared to the same period
in the prior year. International operations are subject to
currency fluctuations and government actions. Molex monitors its
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.
The gross profit percentage of 39.8 percent and 40.0 percent for
the quarter and nine months ended March 31, 1996, respectively,
decreased from the 41.8 percent and 42.3 percent reported for the
quarter and nine months ended March 31, 1995. Molex continues to
experience start-up costs for automotive programs in the United
States and Germany, and several new projects in Japan. For the
nine months ended March 31, 1996, depreciation and amortization
expenses have increased at a lower rate than the increase in net
revenues. Depreciation and amortization expenses currently
represent 8.6 percent of sales compared to 8.9 percent of sales
during the same period of the prior fiscal year.
Operating expenses as a percent of net revenue for the nine months
ended March 31, 1996 improved slightly from the same period a year
ago, reflecting the continued management focus on the control of
expenses.
Foreign currency transaction gains were $1.3 million for the nine
months ended March 31, 1996, compared to the $1.6 million loss in
the same period of the prior year. The foreign currency
transaction gain for the nine-month period is primarily due to the
weakening of the Japanese yen relative to the dollar when compared
to the prior year.
-8-
Interest income, net of interest expense, decreased 17.1 percent
for the quarter when compared to the same period in the prior
year. This decrease reflects the lower balance of cash and
marketable securities during the period coupled with lower average
interest rates in countries where Molex has significant short-term
investments. The 26.2 percent increase in interest income, net of
interest expense, for the nine month ended March 31, 1996 when
compared to the same period in the prior year includes the
increase in interest income due to the higher average interest
rates of the first half of the fiscal year computed on relatively
constant investment balances held during that period. Interest
expense has remained relatively unchanged from the prior year.
The effective tax rate for the quarter ended March 31, 1996
equaled 37.0 percent as compared to 41.4 percent reported for the
same period in the prior fiscal year. This decrease is primarily
caused by increased pretax profitability in countries with lower
effective tax rates coupled with the ability of the Company
to utilize its foreign tax credits. The effective tax rates of
38.0 percent and 42.1 percent for the nine month periods ended
March 31, 1996 and 1995, respectively, also reflect this trend.
Net income for the quarter was $36.1 million or 36 cents per
share, a 13.6 percent increase compared with $31.8 million or 31
cents per share for the same quarter last fiscal year. Excluding
the effects of currency fluctuations, net income for the quarter
increased 19.3 percent over the same quarter last fiscal year.
For the nine months ended March 31, 1996, net income was $106.3
million or $1.06 per share, a 22.1 percent increase compared to
$87.1 million or 87 cents per share for the same period last
fiscal year. Excluding the effects of currency fluctuations, net
income for the nine months increased 24.8 percent over the prior
fiscal year.
LIQUIDITY AND CAPITAL
One of Molex's many financial strengths is its exceptionally
strong balance sheet. Working capital at March 31, 1996 was
$449.2 million, down from $495.0 million at June 30, 1995. The
exchange effect of the stronger U.S. dollar coupled with
significant purchases of treasury stock during the nine month
ended March 31, 1996 are primarily responsible for the decline in
working capital.
The Company is authorized to purchase approximately 1,500,000
shares of common stock for the treasury during this fiscal year.
A total of 785,000 shares were purchased during the nine months
ended March 31, 1996.
Management believes that the Company's current liquidity and
financial flexibility are adequate to support its current growth.
-9-
OUTLOOK
The prospects for the remainder of fiscal 1996 continue to look
promising. Molex will continue to push into new markets and
expand its product line through the introduction of new and
innovative products. Leading edge businesses like Mod-Tap W.
Corporation (a wholly-owned subsidiary) and the Fiber Optics Group
are expected to better position Molex to expand into rapidly
growing markets like local area networks and communications.
While the Company continues to see increased demand for its
products, pricing pressures and start-up costs will continue to
exert downward pressure on gross margins.
-10-
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
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(Registrant)
Date May 10, 1996 /s/ ROBERT B. MAHONEY
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Robert B. Mahoney
Corporate Vice President
and Treasurer
Date May 10, 1996 /s/ LOUIS A. HECHT
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Louis A. Hecht
Corporate Secretary and
General Counsel