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, 1995
-------------------------------
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
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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
----------- ------------
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, 1995:
Common Stock 40,083,024 Shares
Class A Common Stock 40,533,379 Shares
Class B Common Stock 94,255 Shares
MOLEX INCORPORATED
FORM 10-Q
MARCH 31, 1995
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
March 31, 1995 and June 30, 1994
Condensed Consolidated Statements of Income -- 3
Three Months and Nine Months Ended
March 31, 1995 and 1994
Condensed Consolidated Statements of Cash Flows -- 4
Nine Months Ended March 31, 1995 and 1994
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>
Mar. 31, June 30,
1995 1994
CURRENT ASSETS: --------- ---------
<S> <C> <C>
Cash $ 22,382 $ 19,309
Short-term investments 228,360 209,617
Accounts receivable - net 253,289 221,674
Inventories 141,819 113,266
Other current assets 27,214 22,746
--------- ---------
Total current assets 673,064 586,612
PROPERTY, PLANT AND EQUIPMENT - NET 522,259 440,995
OTHER ASSETS 159,276 110,910
--------- ---------
$1,354,599 $1,138,517
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 113,534 $ 96,659
Accrued expenses 86,932 66,673
Other current liabilities 47,155 42,062
--------- ---------
Total current liabilities 247,621 205,394
DEFERRED ITEMS 14,526 14,612
ACCRUED POSTRETIREMENT BENEFITS 30,861 26,363
LONG-TERM DEBT, less portion due currently 8,914 7,350
MINORITY INTEREST 1,890 3,184
SHAREHOLDERS' EQUITY
Common stock 4,170 3,288
Paid-in capital 97,841 56,464
Retained earnings 814,371 729,547
Treasury stock (31,635) (31,749)
Deferred unearned compensation (13,531) (7,223)
Cumulative translation adjustments 179,571 131,287
--------- ---------
Total shareholders' equity 1,050,787 881,614
--------- ---------
$1,354,599 $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 NINE MONTHS ENDED
----------------------- -----------------------
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET REVENUE $305,755 $238,568 $849,615 $696,708
COST OF SALES 178,058 138,465 489,977 405,548
-------- -------- -------- --------
Gross Profit 127,697 100,103 359,638 291,160
OPERATING EXPENSES:
Selling 32,100 26,862 93,766 80,641
Administrative 42,595 34,237 120,096 99,395
-------- -------- -------- --------
Total Operating Expenses 74,695 61,099 213,862 180,036
Income from Operations 53,002 39,004 145,776 111,124
OTHER INCOME:
Foreign currency transaction loss (1,302) (747) (1,635) (2,118)
Interest 2,628 1,402 6,422 3,712
-------- -------- -------- --------
Total Other Income 1,326 655 4,787 1,594
Income before Income Taxes
and Minority Interest 54,328 39,659 150,563 112,718
INCOME TAXES 22,504 15,761 63,345 45,374
-------- -------- -------- --------
Income before Minority Interest 31,824 23,898 87,218 67,344
MINORITY INTEREST (30) (302) (160) (961)
-------- -------- -------- --------
NET INCOME $ 31,794 $ 23,596 $ 87,058 $ 66,383
======== ======== ======== ========
EARNINGS PER COMMON SHARE $ 0.40 $ 0.30 $ 1.09 $ 0.84
======== ======== ======== ========
CASH DIVIDENDS PER COMMON SHARE $ 0.0100 $ 0.0080 $ 0.0280 $ 0.0220
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD 80,172 79,252 79,791 79,106
======== ======== ======== ========
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>
NINE MONTHS ENDED
-----------------------
Mar. 31, Mar. 31,
1995 1994
-------- --------
<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 87,058 66,383
Add (deduct) non-cash items included in net income:
Depreciation and amortization 75,822 65,870
Minority interest 160 961
Amortization of deferred unearned compensation 2,468 2,049
(Gain) loss on sale of property, plant and equipment (327) 371
Other (credits) charges to net income (147) 118
Current items:
Accounts receivable (12,241) 2,146
Inventories (16,461) (7,150)
Prepaid expenses (1,980) (4,776)
Accounts payable 5,198 404
Accrued expenses 16,314 8,994
Income taxes 3,350 (11,144)
-------- --------
NET CASH PROVIDED FROM OPERATIONS 159,214 124,226
Investments:
Purchases of property, plant and equipment (123,548) (92,208)
Proceeds from sale of property, plant and equipment 1,259 2,436
(Increase) decrease in other assets (10,170) 11,533
Purchase of business, net of cash acquired (16,052) (43)
-------- --------
NET CASH USED FOR INVESTMENTS (148,511) (78,282)
Financing:
Increase in long-term debt - 1,164
Decrease in long-term debt (238) (1,212)
Cash dividends paid (2,184) (1,580)
Disposition of treasury stock 1,277 871
Exercise of stock options 1,973 2,084
-------- --------
NET CASH PROVIDED FROM FINANCING 828 1,327
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND SHORT-TERM INVESTMENTS 10,285 3,725
-------- --------
21,816 50,996
-------- --------
CASH AND SHORT-TERM INVESTMENTS, End of Period $250,742 $237,049
======== ========
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 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, 1995 and 1994, 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-
(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,
1995 1994
----------- -----------
Raw materials $ 24,962 $ 20,940
Work in process 56,999 42,865
Finished goods 59,858 49,461
----------- -----------
$141,819 $113,266
=========== ===========
(5) Acquisitions and Investments and Supplemental Disclosure of
Noncash Investing and Financing Activities
On February 17, 1995, Molex acquired Mod-Tap W. Corp., a
manufacturer of interconnection products and systems for data and
voice communications, for 974,988 shares of Molex Class A Common
Stock and $9.3 million in cash. The transaction has been
accounted for as a purchase and accordingly, the purchase price in
excess of the fair value of the net assets acquired has been
classified as goodwill, and included in other assets in the
accompanying condensed consolidated balance sheet and amortized
over 20 years.
Operating results have been included in the financial statements
from the date of acquisition. Mod-Tap's financial position and
operating results are not material to the Company. Accordingly,
pro forma financial information, which assumes the acquisition had
taken place as of the beginning of the fiscal year, has not been
presented.
Another acquisition accounted for as purchase transaction in
fiscal 1995 totaled $6.7 million.
-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 March 31, 1995, increasing 28.2 percent over net revenues
for the corresponding quarter of the prior fiscal year. For the
nine months ended March 31, 1995, net revenues were $849.6
million, increasing 21.9 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 $14.6
million for the quarter and $33.6 million for the nine months
ended March 31, 1995. Excluding the effects of currency
fluctuation, growth in net revenues would have equaled 22.0
percent for the quarter and 17.1 percent for the nine months ended
March 31, 1995.
Molex continued to exceed its goal of increasing net revenues at
twice the growth rate of the worldwide connector market. All
geographic regions gained market share as U.S. dollar net revenue
growth was in excess of 15 percent for the nine months ending
March 31, 1995. Net revenues in Europe increased 39.0 percent in
U.S. dollars and 27.2 percent in local currencies for the nine
months ending March 31, 1995. 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 industries. For the first nine
months 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 6 percent during fiscal 1994 to
nearly 10 percent during the current fiscal year.
U.S. Region net revenues for the nine month period increased 15.3
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 nine months ended March 31, 1995, net revenues in the Far
East North increased 22.0 percent in U.S. dollars and 12.2 percent
in local currencies as the value of the U.S. dollar continues to
decline against the Japanese yen. The Japanese domestic
electronic market is showing signs of improvement and demand
for Molex Japan products remains strong outside the region.
-7-
Far East South net revenues for the nine months ending March 31,
1995 increased 22.4 percent in U.S. dollars and 18.7 percent in
local currencies. Sales in this region remain strong due to
continued growth in the personal computer and hard 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 20.4 percent
in U.S. dollars and 42.4 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 fiscal 1995 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 nine months ending March 31, 1995, 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 42.3 percent for the nine months
ending March 31, 1995 increased from the 41.8 percent reported
during the comparable period 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 nine months ending March 31, 1995, depreciation and
amortization expenses have increased at a lower rate than the
increase in net revenues. Depreciation and amortization expenses
currently represent 8.9 percent of sales compared to 9.5 percent
of sales during the same period of the prior fiscal year.
Operating expenses as a percent of net revenue for the nine months
ending March 31, 1995 improved slightly from the same period a
year ago, reflecting the continued management focus on the control
of expenses.
Foreign currency transaction losses increased 74.3 percent for the
quarter, but decreased 22.8 percent for the nine months ending
March 31, 1995 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. The increase in the foreign
currency transaction loss for the quarter ended March 31, 1995 is
primarily due to the stronger Japanese yen.
-8-
Interest income, net of interest expense, increased 87.4 percent
for the quarter and 73.0 percent for the nine months ending March
31, 1995. 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 March 31, 1995
equaled 41.4 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 nine month periods ending March 31, 1995
and 1994, of 42.1 percent and 40.3 percent also reflect this
trend.
Net income for the quarter was $31.8 million or 40 cents per
share, a 34.7 percent increase compared with $23.6 million or 30
cents per share for the same quarter last fiscal year. Excluding
the effects of currency fluctuations, net income for the quarter
increased 26.3 percent over the same quarter last fiscal year.
For the nine months ending March 31, 1995, net income was $87.1
million or $1.09 per share, a 31.1 percent increase compared to
$66.4 million or 84 cents per share for the same period last
fiscal year. Excluding the effects of currency fluctuations, net
income for the nine months increased 24.6 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 March 31, 1995 was
$425.4 million, up from $381.2 million at June 30, 1994. Current
assets increased by $86.5 million, primarily due to increases in
short-term investments, net accounts receivable and inventory.
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 split effected in the
form of a stock dividend.
-9-
For the fiscal year ending June 30, 1995, we expect capital
expenditures to increase to between $180 and $190 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.
OUTLOOK
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. Molex will continue
to push into new markets and expand our product line through the
introduction of new and innovative products. On February 17,
1995, Molex completed the transaction 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.
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 - 4. Not Applicable
Item 5. Other Information
On February 17, 1995, Molex Incorporated
completed the transaction 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. received shares of Molex Class A
non-voting Common Stock.
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 May 12, 1995 /s/ JOHN C. PSALTIS
------------------ -----------------------
John C. Psaltis
Corporate Vice President,
Treasurer and Chief
Financial Officer
Date May 12, 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 MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 22,382
<SECURITIES> 228,360
<RECEIVABLES> 264,640
<ALLOWANCES> (11,351)
<INVENTORY> 141,819
<CURRENT-ASSETS> 673,064
<PP&E> 1,185,139
<DEPRECIATION> (662,880)
<TOTAL-ASSETS> 1,354,599
<CURRENT-LIABILITIES> 247,621
<BONDS> 8,914
<COMMON> 4,170
0
0
<OTHER-SE> 1,046,617
<TOTAL-LIABILITY-AND-EQUITY> 1,354,599
<SALES> 849,615
<TOTAL-REVENUES> 849,615
<CGS> 489,977
<TOTAL-COSTS> 213,862
<OTHER-EXPENSES> 1,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,422)
<INCOME-PRETAX> 150,563
<INCOME-TAX> 63,345
<INCOME-CONTINUING> 87,058
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,058
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
</TABLE>
