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, 1993
-------------------------------
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: 708-969-4550
------------
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, 1993:
Common Stock 31,701,523 Shares
Class A Common Stock 31,561,342 Shares
Class B Common Stock 94,255 Shares
<PAGE>
MOLEX INCORPORATED
FORM 10-Q
DECEMBER 31, 1993
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
December 31, 1993 and June 30, 1993
Condensed Consolidated Statements of Income -- 3
Three Months and the Six Months Ended
December 31, 1993 and 1992
Condensed Consolidated Statements of Cash Flows -- 4
Six Months Ended December 31, 1993 and 1992
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-
<PAGE>
<TABLE>
MOLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In Thousands)
ASSETS
------
<CAPTION>
Dec 31, June 30,
1993 1993
CURRENT ASSETS: --------- ---------
<S> <C> <C>
Cash $ 13,113 $ 27,160
Short-term investments 211,063 158,893
Accounts receivable - net 178,421 193,192
Inventories 108,066 104,488
Other current assets 21,386 16,484
--------- ---------
Total current assets 532,049 500,217
PROPERTY, PLANT AND EQUIPMENT - NET 392,731 385,828
OTHER ASSETS 60,383 75,730
--------- ---------
$ 985,163 $ 961,775
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 76,737 $ 79,223
Accrued expenses 60,544 65,716
Other current liabilities 32,269 35,560
--------- ---------
Total current liabilities 169,550 180,499
DEFERRED ITEMS 11,343 11,378
ACCRUED POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 7,320 6,883
LONG-TERM DEBT, less portion due currently 7,534 7,510
MINORITY INTEREST 4,758 3,851
SHAREHOLDERS' EQUITY
Common stock 3,277 3,267
Paid-in capital 53,206 47,052
Retained earnings 678,754 637,074
Treasury stock (31,667) (31,107)
Deferred unearned compensation (8,712) (6,235)
Cumulative translation adjustments 89,800 101,603
--------- ---------
Total shareholders' equity 784,658 751,654
--------- ---------
$ 985,163 $ 961,775
========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
-2-
</TABLE>
<PAGE>
<TABLE>
MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - In Thousands Except per Share)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- -----------------------
Dec 31, Dec 31, Dec 31, Dec 31,
1993 1992 1993 1992
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET REVENUE $224,896 $202,487 $458,140 $417,688
COST OF SALES 130,700 120,374 267,083 246,853
-------- -------- -------- --------
Gross Profit 94,196 82,113 191,057 170,835
OPERATING EXPENSES:
Selling 26,471 24,058 53,779 48,736
Administrative 32,312 28,061 65,158 59,020
-------- -------- -------- --------
Total Operating Expenses 58,783 52,119 118,937 107,756
Income from Operations 35,413 29,994 72,120 63,079
OTHER INCOME (EXPENSE):
Foreign currency transaction loss (599) (1,097) (1,371) (2,669)
Interest 1,103 1,296 2,310 2,491
-------- -------- -------- --------
Total Other Income (Expense) 504 199 939 (178)
Income before Income Taxes
and Minority Interest 35,917 30,193 73,059 62,901
INCOME TAXES 14,256 13,621 29,613 28,015
-------- -------- -------- --------
Income before Minority Interest 21,661 16,572 43,446 34,886
MINORITY INTEREST (256) (29) (659) (78)
-------- -------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 21,405 16,543 42,787 34,808
Cumulative effect of change in method of accounting for
postretirement benefits other than pensions, net of tax - - - 3,605
-------- -------- -------- --------
NET INCOME $ 21,405 $ 16,543 $ 42,787 $ 31,203
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Earnings Per Common Share before cumulative effect
of change in accounting principle $ 0.34 $ 0.26 $ 0.68 $ 0.55
Cumulative effect of change in method of accounting for
postretirement benefits other than pensions per share - - - 0.06
-------- -------- -------- --------
EARNINGS PER COMMON SHARE $ 0.34 $ 0.26 $ 0.68 $ 0.49
======== ======== ======== ========
CASH DIVIDENDS $ 0.0100 $ 0.0075 $ 0.0175 $ 0.0115
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD 63,268 62,947 63,228 62,919
======== ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
-3-
</TABLE>
<PAGE>
<TABLE>
MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In Thousands)
<CAPTION>
SIX MONTHS ENDED
-----------------------
Dec 31, Dec 31,
1993 1992
-------- --------
<S> <C> <C>
CASH AND SHORT-TERM INVESTMENTS, Beginning of Period $186,053 $157,157
CASH AND SHORT-TERM INVESTMENTS
PROVIDED FROM (USED FOR):
Operations:
Net income 42,787 31,203
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 43,774 35,432
Minority interest 659 78
Amortization of deferred unearned compensation 1,333 1,203
Loss (gain) on sale of property, plant and equipment 162 (2,488)
Other (credits) charges to net income (72) 406
Current items:
Accounts receivable 11,504 6,374
Inventories (4,626) (3,264)
Prepaid expenses (5,747) (1,903)
Accounts payable (856) (18,348)
Accrued expenses (4,118) (3,046)
Income taxes (2,527) 2,746
-------- --------
NET CASH PROVIDED FROM OPERATIONS 82,273 51,998
Investments:
Purchases of property, plant and equipment (57,532) (44,839)
Proceeds from sale of property, plant and equipment 2,164 4,185
Decrease in other assets 12,870 8,193
-------- --------
NET CASH USED FOR INVESTMENTS (42,498) (32,461)
Financing:
Increase in long-term debt 1,222 26
Decrease in long-term debt (1,139) (847)
Cash dividends paid (948) (503)
Disposition of treasury stock 532 523
Exercise of stock options 1,263 891
-------- --------
NET CASH PROVIDED FROM FINANCING 930 90
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND SHORT-TERM INVESTMENTS (2,582) (2,562)
-------- --------
38,123 17,065
-------- --------
CASH AND SHORT-TERM INVESTMENTS, End of Period $224,176 $174,222
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
-4-
</TABLE>
<PAGE>
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 December 31, 1993 and 1992, 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:
December 31, June 30,
1993 1993
----------- -----------
Raw materials $ 19,828 $ 18,600
Work in process 39,375 39,379
Finished goods 48,863 46,509
----------- -----------
$108,066 $104,488
=========== ===========
-5-
<PAGE>
MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues for the quarter and six months ended
December 31, 1993 increased 11.1 percent and 9.7 percent
respectively, over net revenues for the corresponding periods
during the prior fiscal year. The generally lower value of the US
dollar compared to other currencies worldwide increased net
revenues by $2.7 million for the quarter and $3.4 million for the
six months ending December 31, 1993. Excluding the effects of
currency fluctuation, growth in net revenues would have equaled
9.7 percent for the quarter and 8.9 percent for the six months
ending December 31, 1993.
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 11.3 percent to $141.0
million for the six months ending December 31, 1993. The revenue
growth was due to increased customer penetration through the
introduction of new products. For the six months ending December
31, 1993, the Americas (Non-U.S.) Region posted revenue growth of
46.9 percent, due to substantially increased sales in Mexico and
improved sales in Brazil.
European net revenues for the six months ending December 31, 1993
improved 23.6 percent in local currencies, but were up only 5.5
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 and
Italian connector markets. Net revenues in the Far East North
increased 10.0 percent in U.S. dollars due to the strength of the
Japanese yen against the U.S. dollar, but declined 3.4 percent in
local currencies due to the continued recession in Japan.
The Far East South net revenues for the six months ended December
31, 1993 increased 7.2 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 six month period increased
16.9 percent from the same period a year ago. This regional
growth is primarily due to many U.S., Japanese and European
companies who have moved manufacturing operations to the region
and to the strong growth in the personal computer and disk drive
industries.
-6-
<PAGE>
The gross profit percentage of 41.9 percent and 41.7 percent
for the respective quarter and six months ending December 31, 1993
increased from the 40.6 percent and 40.9 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 efficiencies, greater
absorption of fixed costs due to increased sales volume and
favorable changes in product mix. For the six months ended
December 31, 1993, depreciation and amortization expenses have
increased 23.5 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.
Operating expenses as a percent of net revenue for the six months
ending December 31, 1993 remained unchanged from the same period a
year ago.
Foreign currency transaction losses decreased 45.4 percent for the
quarter and 48.6 percent for the six months ending December 31,
1993 over the prior year's losses when the Company incurred
significant losses due to the abrupt devaluation of several
European currencies. Nearly 70 percent of the losses for the six
month period were due to the severe devaluation of the Brazilian
cruzeiro against the U.S. dollar.
Interest income, net of interest expense, decreased slightly
for the quarter and six months ending December 31, 1993. 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.
The effective tax rate for the quarter ending December 31, 1993
equaled 39.7 percent as compared to 45.1 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 six month periods
ending December 31, 1993 and 1992, of 40.5 percent and 44.5
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.
-7-
<PAGE>
Net income for the quarter was $21.4 million or 34 cents per
share, a 29.4 percent increase compared with $16.5 million or 26
cents per share for the same quarter last fiscal year. Excluding
the effects of currency fluctuations, net income for the quarter
increased 26.4 percent over the same quarter last fiscal year.
For the six months ending December 31, 1993, income before the
cumulative effect of change in accounting was $42.8 million or 68
cents per share, a 22.9 percent increase compared to $34.8 million
or 55 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 six months
increased 20.2 percent over the prior fiscal year.
Revenues derived from international operations decreased slightly
during fiscal 1994. For the six months ending December 31, 1993
international revenues represented 70 percent of total revenues,
compared to 72 percent for the same period during the prior year.
LIQUIDITY AND CAPITAL
Molex maintained its strong financial position during the first
six months of fiscal 1994. Working capital at December 31, 1993
was $362.5 million, up from $319.7 million at June 30, 1993.
Current assets increased by $31.8 million and current liabilities
decreased by $10.9 million.
Management believes that the Company's current liquidity and
financial flexibility are more than 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 Europe. The fiscal year 1994 six
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.
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. We
are also continuing to increase research and development
expenditures to help Molex grow at a rate much faster than the
rest of the worldwide connector industry.
-8-
<PAGE>
Part II - Other Information
Items 1 - 4. Not Applicable
Item 5. Other Information
On November 12, 1993, John H. Krehbiel, Sr., Chairman of the
Board of Molex, died at the age of 87. Prior to his death,
Mr. Krehbiel, Sr. was the sole trustee of the John H.
Krehbiel Trust dated May 14, 1981 (the "Trust"). Upon his
death, Mr. Krehbiel, Sr.'s sons, John H. Krehbiel, Jr. and
Frederick A. Krehbiel, became trustees of the Trust.
Pursuant to the request of the Trust, Molex filed a
registration statement with the Securities and Exchange
Commission on December 15, 1993 for a public offering by the
Trust of 7.8 million shares of non-voting Class A Common
Stock of Molex. Proceeds from the offering are expected to
be used by the Trust primarily to pay estate taxes arising
from the death of John H. Krehbiel, Sr. Molex received none
of the proceeds of this offering.
On November 18, 1993, Molex's Board of Directors elected
Frederick A. Krehbiel Chairman of the Board. Prior to that
time, he was Vice Chairman of the Board; he continues to
serve as Molex's Chief Executive Officer. John H. Krehbiel,
Jr. remains President and a director. Also on November 18,
Fred L. Krehbiel, son of John H. Krehbiel, Jr., was elected
to Molex's Board of Directors.
Item 6. Not Applicable
-9-
<PAGE>
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 11, 1994 JOHN C. PSALTIS
------------------ -----------------------
John C. Psaltis
Corporate Vice President &
Chief Financial Officer
Date February 11, 1994 LOUIS A. HECHT
------------------ -----------------------
Louis A. Hecht
Corporate Secretary and
General Counsel
