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, 1994
-------------------------------
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, 1994:
Common Stock 39,974,334 Shares
Class A Common Stock 39,545,862 Shares
Class B Common Stock 94,255 Shares
MOLEX INCORPORATED
FORM 10-Q
DECEMBER 31, 1994
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
December 31, 1994 and June 30, 1994
Condensed Consolidated Statements of Income -- 3
Three Months and Six Months Ended
December 31, 1994 and 1993
Condensed Consolidated Statements of Cash Flows -- 4
Six Months Ended December 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 7
PART II - OTHER INFORMATION 11
-1-
<PAGE>
<TABLE>
MOLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In Thousands)
ASSETS
------
<CAPTION>
Dec. 31, June 30,
1994 1994
CURRENT ASSETS: --------- ---------
<S> <C> <C>
Cash $ 23,174 $ 19,309
Short-term investments 225,493 209,617
Accounts receivable - net 224,376 221,674
Inventories 124,469 113,266
Other current assets 25,821 22,746
--------- ---------
Total current assets 623,333 586,612
PROPERTY, PLANT AND EQUIPMENT - NET 467,412 440,995
OTHER ASSETS 116,246 110,910
--------- ---------
$1,206,991 $1,138,517
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 97,048 $ 96,659
Accrued expenses 68,999 66,673
Other current liabilities 50,243 42,062
--------- ---------
Total current liabilities 216,290 205,394
DEFERRED ITEMS 14,535 14,612
ACCRUED POSTRETIREMENT BENEFITS 28,122 26,363
LONG-TERM DEBT, less portion due currently 7,350 7,350
MINORITY INTEREST 2,227 3,184
SHAREHOLDERS' EQUITY
Common stock 4,115 3,288
Paid-in capital 66,222 56,464
Retained earnings 783,384 729,547
Treasury stock (31,755) (31,749)
Deferred unearned compensation (14,492) (7,223)
Cumulative translation adjustments 130,993 131,287
--------- ---------
Total shareholders' equity 938,467 881,614
--------- ---------
$1,206,991 $1,138,517
========= =========
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,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET REVENUE $274,961 $224,896 $543,860 $458,140
COST OF SALES 158,495 130,700 311,919 267,083
-------- -------- -------- --------
Gross Profit 116,466 94,196 231,941 191,057
OPERATING EXPENSES:
Selling 31,486 26,471 61,666 53,779
Administrative 38,997 32,312 77,501 65,158
-------- -------- -------- --------
Total Operating Expenses 70,483 58,783 139,167 118,937
Income from Operations 45,983 35,413 92,774 72,120
OTHER INCOME:
Foreign currency transaction loss (279) (599) (333) (1,371)
Interest 2,157 1,103 3,794 2,310
-------- -------- -------- --------
Total Other Income 1,878 504 3,461 939
Income before Income Taxes
and Minority Interest 47,861 35,917 96,235 73,059
INCOME TAXES 19,884 14,256 40,841 29,613
-------- -------- -------- --------
Income before Minority Interest 27,977 21,661 55,394 43,446
MINORITY INTEREST (67) (256) (130) (659)
-------- -------- -------- --------
NET INCOME $ 27,910 $ 21,405 $ 55,264 $ 42,787
======== ======== ======== ========
EARNINGS PER COMMON SHARE $ 0.35 $ 0.27 $ 0.69 $ 0.54
======== ======== ======== ========
CASH DIVIDENDS PER COMMON SHARE $ 0.0100 $ 0.0080 $ 0.0180 $ 0.0140
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD 79,581 79,085 79,549 79,035
======== ======== ======== ========
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,
1994 1993
-------- --------
<S> <C> <C>
CASH AND SHORT-TERM INVESTMENTS, Beginning of Period $228,926 $186,053
CASH AND SHORT-TERM INVESTMENTS
PROVIDED FROM (USED FOR):
Operations:
Net income 55,264 42,787
Add (deduct) non-cash items included in net income:
Depreciation and amortization 49,337 43,774
Minority interest 130 659
Amortization of deferred unearned compensation 1,507 1,333
(Gain) loss on sale of property, plant and equipment (319) 162
Other credits to net income (1,325) (72)
Current items:
Accounts receivable (2,968) 11,504
Inventories (10,559) (4,626)
Prepaid expenses (3,175) (5,747)
Accounts payable 486 (856)
Accrued expenses 3,547 (4,118)
Income taxes 8,291 (2,527)
-------- --------
NET CASH PROVIDED FROM OPERATIONS 100,216 82,273
Investments:
Purchases of property, plant and equipment (74,749) (57,532)
Proceeds from sale of property, plant and equipment 1,069 2,164
(Increase) decrease in other assets (6,328) 12,870
-------- --------
NET CASH USED FOR INVESTMENTS (80,008) (42,498)
Financing:
Increase in long-term debt - 1,222
Decrease in long-term debt (185) (1,139)
Cash dividends paid (1,387) (948)
Disposition of treasury stock 934 532
Exercise of stock options 991 1,263
-------- --------
NET CASH PROVIDED FROM FINANCING 353 930
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND SHORT-TERM INVESTMENTS (820) (2,582)
-------- --------
19,741 38,123
-------- --------
CASH AND SHORT-TERM INVESTMENTS, End of Period $248,667 $224,176
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
-4-
</TABLE>
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 1994 Annual
Report to Shareholders and the 1994 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 October 21, 1994, the Board of Directors of Molex Incorporated
declared a twenty-five percent (25%) stock dividend. One quarter
(1/4) share of Molex Common Stock was distributed on November 28,
1994 to shareholders of record as of November 7, 1994 for each
share of Common Stock and Molex Class B Common Stock outstanding.
In addition, one quarter (1/4) share of Molex 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 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 December 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) Short-Term Investments
Short-term investments are available for sale and consist of a
variety of highly-liquid investments with original maturities of
three months or less. Short-term investments are carried at cost,
which approximates market.
-5-
(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,
1994 1994
----------- -----------
Raw materials $ 22,355 $ 20,940
Work in process 48,076 42,865
Finished goods 54,038 49,461
----------- -----------
$124,469 $113,266
=========== ===========
-6-
MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues reached an all-time high for the quarter
ended December 31, 1994, increasing 22.3 percent over net revenues
for the corresponding quarter of the prior fiscal year. For the
six months ended December 31, 1994, net revenues were $543.9
million, increasing 18.7 percent from the same period a year ago.
The generally lower value of the US dollar compared to other
currencies worldwide increased net revenues by $12.2
million for the quarter and $19.0 million for the six months
ended December 31, 1994. Excluding the effects of currency
fluctuation, growth in net revenues would have equaled 16.9
percent for the quarter and 14.6 percent for the six months ended
December 31, 1994.
Molex continued to exceed its goal of increasing net revenues at
twice the growth rate of the worldwide connector market. All
geographic regions experienced U.S. dollar net revenue growth in
excess of 15 percent for the quarter. Net revenues in Europe
increased 32.1 percent in U.S. dollars and 22.9 percent in local
currencies for the six months ending December 31, 1994. We are
continuing to see increased demand for interconnection products in
most of Europe, and are pleased with the increased sales we are
making to the European automotive and telecommunication markets.
For the first half of the fiscal year, the significantly increased
sales levels in Europe, along with the continued streamlining of
our warehouse operations, resulted in the net return on sales
percent increasing from approximately 5 percent during fiscal 1994
to over 8 percent during the current fiscal year.
U.S. Region net revenues for the six month period increased 13.2
percent from the prior year. Sales continue strong in this, the
largest of the world's connector markets. We continue to see
strong revenue growth in the home entertainment/appliance market
and increased customer sales to the automotive market. Fiber
optic sales continue to experience robust growth.
For the six months ended December 31, 1994, net revenues in the
Far East North increased 19.5 percent in U.S. dollars and 11.0
percent in local currencies as the value of the U.S. dollar has
declined against the Japanese yen. The Japanese economy, overall,
is showing some signs of improvement, but the domestic electronic
market remains flat as Japanese companies continue to transfer
some of their production out of Japan. In spite of this, our
Japanese domestic sales showed a modest improvement from last
year, and demand for Molex Japan products remains strong outside
the region. The recent earthquake in Kobe, Japan has not
materially disrupted any of our Japanese manufacturing operations.
-7-
Far East South net revenues for the six months ending December 31,
1994 increased 19.2 percent in U.S. dollars and 16.7 percent in
local currencies. Sales in this region remain strong due to
continued growth in the personal computer and disk drive
industries. The region is also gaining market share due to
increased customer penetration at many of the multinational
companies that have relocated manufacturing operations to the
region.
Net revenues in the Americas (Non-U.S.) Region grew 25.4 percent
in U.S. dollars and 35.4 percent in local currencies from the
prior year due to increased net revenues in Brazil and continued
strong revenue growth in Mexico. The severe devaluation of the
Mexican peso during December 1994 did not have a material effect
on the consolidated results, as Molex's operations in Mexico
primarily transact business in U.S. dollars.
For the six months ending December 31, 1994, 72 percent of Molex's
worldwide net revenues were generated from its international
operations, compared to 70 percent for the same period during the
prior fiscal 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 42.4 percent and 42.6 percent for
the respective quarter and six months ending December 31, 1994
increased from the 41.9 percent and 41.7 percent reported during
the comparable periods of the previous fiscal year. The Company
was able to offset the effects of slightly higher material prices
and price erosion in some key product lines with improved
manufacturing efficiencies, greater absorption of fixed costs due
to the increased sales volume and favorable changes in product
mix. For the six months ending December 31, 1994, depreciation
and amortization expenses have increased at a lower rate than the
increase in net revenues. Depreciation and amortization expenses
currently represent 9.1 percent of sales compared to 9.6 percent
of sales during the same period of the prior fiscal year.
Operating expenses as a percent of net revenue for the six months
ending December 31, 1994 improved slightly from the same period a
year ago, reflecting the continued management focus on the control
of expenses.
Foreign currency transaction losses decreased 53.4 percent for the
quarter and 75.7 percent for the six months ending December 31,
1994 over the prior year's losses when the Company incurred
high losses due to the devaluation of the Brazilian cruzeiro
against the U.S. dollar.
-8-
Interest income, net of interest expense, increased 95.6 percent
for the quarter and 64.2 percent for the six months ending
December 31, 1994. The increase reflects the higher balance of
cash and short-term investments during the period coupled with a
slight increase in 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, 1994
equaled 41.5 percent as compared to 39.7 percent reported for the
same period in the prior fiscal year. This increase is primarily
caused by increased pretax profitability in countries with higher
effective tax rates coupled with the inability of the Company
to utilize all of its foreign tax credits. The effective tax
rates for the comparable six month periods ending December 31,
1994 and 1993, of 42.4 percent and 40.5 percent also reflect this
trend.
Net income for the quarter was $27.9 million or 35 cents per
share, a 30.4 percent increase compared with $21.4 million or 27
cents per share for the same quarter last fiscal year. Excluding
the effects of currency fluctuations, net income for the quarter
increased 23.9 percent over the same quarter last fiscal year.
For the six months ending December 31, 1994, net income was $55.3
million or 69 cents per share, a 29.2 percent increase compared to
$42.8 million or 54 cents per share for the same period last
fiscal year. Excluding the effects of currency fluctuations, net
income for the six months increased 23.7 percent over the prior
fiscal year.
During the first quarter of fiscal 1995 Molex adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115). SFAS 115
requires that the carrying value of certain investments be
adjusted to their fair value. Adoption of the statement did not
have a material effect on the financial condition or consolidated
results of operations of the Company.
LIQUIDITY AND CAPITAL
One of Molex's many financial strengths is its exceptionally
strong balance sheet. Working capital at December 31, 1994 was
$407.0 million, up from $381.2 million at June 30, 1994. Current
assets increased by $36.7 million, primarily due to increases in
short-term investments and inventory.
For the fiscal year ending June 30, 1995, we expect capital
expenditures to increase to between $165 and $175 million from the
$129.5 million expended during fiscal year 1994. This increase
represents the required investment in plants, equipment and
technology to support the increased sales levels and meet our
customers' needs.
Management believes that the Company's current liquidity and
financial flexibility are adequate to support its current growth.
-9-
OUTOOK
The prospects for the remainder of fiscal 1995 continue to look
promising. Demand for interconnection products remains strong in
the United States, Europe and Far East South. In Japan, Molex's
business levels continue to improve modestly, although we have yet
to see evidence of a sustainable economic recovery in the
electronics industry. Molex will continue to push into new
markets and expand our product line through the introduction of
new and innovative products. On January 13, 1995, Molex announced
that it has entered into an agreement to acquire Mod-Tap W. Corp.,
a manufacturer of interconnection products and systems for data
and voice communications. This acquisition is expected to better
position Molex to expand into the rapidly growing local area
network market. The closing of the transaction is expected to
occur in February 1995.
We continue to see the effects of Molex's ability to control costs
and improve productivity. We will continue to review and
challenge all activities in the Company with the goal of improving
customer service and operating efficiencies.
-10-
Part II - Other Information
Items 1 - 3. Not Applicable
Item 4. Submission of Matters to a Vote of Security
Holders
At the Annual Meeting of Stockholders held on
October 21, 1994, the following directors were
elected to hold office for the coming year:
Frederick A. Krehbiel, J.H. Krehbiel, Jr., Fred
L. Krehbiel, Lewis E. Platt, Robert J. Potter,
Robert H. Hayes, Edjar D. Jannotta, Donald G.
Lubin.
The stockholders also approved the amendment
and restatement of The 1991 Molex Incorporated
Incentive Stock Option Plan. The amendment and
restatement of the 1991 Molex Incorporated
Incentive Stock Option Plan was adopted with
28,129,374 votes cast in favor of the
amendment, 101,574 votes against and 222,509
votes withheld.
Item 5. Other Information
On January 13, 1995, Molex Incorporated
announced that it has entered into an agreement
to acquire Mod-Tap W. Corp., a Harvard,
Massachusetts based privately owned
manufacturer of interconnection products and
systems for data and voice communications in a
transaction in which shareholders of Mod-Tap W.
Corp. would receive shares of Molex Class A
non-voting common stock. The closing of the
transaction is subject to the satisfaction or
waiver of various conditions, but is currently
expected to occur in February 1995. Annualized
sales of Mod-Tap W. Corp. are expected to be in
the range of $45 to $50 million for the fiscal
year ending June 30, 1995.
Item 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
-------------------
(Registrant)
Date February 10, 1995 /s/ JOHN C. PSALTIS
------------------ -----------------------
John C. Psaltis
Corporate Vice President,
Treasurer and Chief
Financial Officer
Date February 10, 1995 /s/ LOUIS A. HECHT
------------------ -----------------------
Louis A. Hecht
Corporate Secretary and
General Counsel
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MOLEX
INC. REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 23,174
<SECURITIES> 225,493
<RECEIVABLES> 234,675
<ALLOWANCES> (10,299)
<INVENTORY> 124,469
<CURRENT-ASSETS> 623,333
<PP&E> 1,069,253
<DEPRECIATION> (601,841)
<TOTAL-ASSETS> 1,206,991
<CURRENT-LIABILITIES> 216,290
<BONDS> 7,350
<COMMON> 4,115
0
0
<OTHER-SE> 934,352
<TOTAL-LIABILITY-AND-EQUITY> 1,206,991
<SALES> 274,961
<TOTAL-REVENUES> 274,961
<CGS> 158,495
<TOTAL-COSTS> 70,483
<OTHER-EXPENSES> 279
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,157)
<INCOME-PRETAX> 47,861
<INCOME-TAX> 19,884
<INCOME-CONTINUING> 27,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,910
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
