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, 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
- -----------------------------------------------------------------------
(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,
1995:
Common Stock 49,807,629
Class A Common Stock 50,645,512
Class B Common Stock 94,255
MOLEX INCORPORATED
FORM 10-Q
DECEMBER 31, 1995
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
December 31, 1995 and June 30, 1995
Condensed Consolidated Statements of Income -- 3
Three Months and Six Months Ended
December 31, 1995 and 1994
Condensed Consolidated Statements of Cash Flows -- 4
Six Months Ended December 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>
Dec. 31, June 30,
1995 1995
CURRENT ASSETS: --------- ---------
<S> <C> <C>
Cash $ 202,489 $ 253,552
Marketable securities 62,686 59,563
Accounts receivable - net 256,045 282,814
Inventories 157,492 150,836
Other current assets 26,667 26,271
--------- ---------
Total current assets 705,379 773,036
PROPERTY, PLANT AND EQUIPMENT - NET 577,626 567,303
OTHER ASSETS 106,621 100,681
--------- ---------
$1,389,626 $1,441,020
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 115,231 $ 128,146
Accrued expenses 82,853 85,748
Other current liabilities 58,933 64,152
--------- ---------
Total current liabilities 257,017 278,046
DEFERRED ITEMS 14,023 13,310
ACCRUED POSTRETIREMENT BENEFITS 30,706 32,170
LONG-TERM DEBT, less portion due currently 7,645 8,122
MINORITY INTEREST 2,860 2,104
SHAREHOLDERS' EQUITY
Common stock 5,236 4,177
Paid-in capital 103,894 101,534
Retained earnings 917,583 850,533
Treasury stock (61,289) (35,749)
Deferred unearned compensation (11,591) (13,771)
Cumulative translation adjustments 123,542 200,544
--------- ---------
Total shareholders' equity 1,077,375 1,107,268
--------- ---------
$1,389,626 $1,441,020
========= =========
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,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET REVENUE $344,483 $274,961 $682,659 $543,860
COST OF SALES 207,545 158,495 408,843 311,919
-------- -------- -------- --------
Gross Profit 136,938 116,466 273,816 231,941
OPERATING EXPENSES:
Selling 35,621 31,486 71,495 61,666
Administrative 46,871 38,997 94,634 77,501
-------- -------- -------- --------
Total Operating Expenses 82,492 70,483 166,129 139,167
Income from Operations 54,446 45,983 107,687 92,774
OTHER INCOME:
Foreign currency transaction gain (loss) 50 (279) 757 (333)
Interest 2,807 2,157 5,929 3,794
-------- -------- -------- --------
Total Other Income 2,857 1,878 6,686 3,461
Income before Income Taxes
and Minority Interest 57,303 47,861 114,373 96,235
INCOME TAXES 22,228 19,884 44,084 40,841
-------- -------- -------- --------
Income before Minority Interest 35,075 27,977 70,289 55,394
MINORITY INTEREST (18) (67) (75) (130)
-------- -------- -------- --------
NET INCOME $ 35,057 $ 27,910 $ 70,214 $ 55,264
======== ======== ======== ========
EARNINGS PER COMMON SHARE $ .35 $ 0.28 $ .70 $ 0.56
======== ======== ======== ========
CASH DIVIDENDS PER COMMON SHARE $ 0.0150 $ 0.0080 $ 0.0300 $ 0.0144
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD 100,662 99,476 100,711 99,436
======== ======== ======== ========
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,
1995 1994
-------- --------
<S> <C> <C>
CASH AND CASH EQUIVALENTS, Beginning of Period $253,552 $220,681
CASH AND CASH EQUIVALENTS
PROVIDED FROM (USED FOR):
Operations:
Net income 70,214 55,264
Add (deduct) non-cash items included in net income:
Depreciation and amortization 58,432 49,337
Minority interest 75 130
Amortization of deferred unearned compensation 2,180 1,507
(Gain) loss on sale of property, plant and equipment 204 (319)
Other (credits) charges to net income 1,216 (1,325)
Current items:
Accounts receivable 6,291 (2,968)
Inventories (18,560) (10,559)
Prepaid expenses (6,193) (3,175)
Accounts payable (20) 486
Accrued expenses 724 3,547
Income taxes 417 8,291
-------- --------
NET CASH PROVIDED FROM OPERATIONS 114,980 100,216
Investments:
Purchases of property, plant and equipment (109,776) (74,749)
Proceeds from sale of property, plant and equipment 590 1,069
Increase in other assets (8,948) (9,152)
Increase in marketable securities (3,264) (5,826)
-------- --------
NET CASH USED FOR INVESTMENTS (121,398) (88,658)
Financing:
Increase in long-term debt 272 -
Decrease in long-term debt (898) (185)
Cash dividends paid (2,464) (1,387)
Purchase of treasury stock (24,992) -
Disposition of treasury stock 1,158 934
Exercise of stock options 1,713 991
-------- --------
NET CASH USED FOR FINANCING (25,211) 353
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (19,434) (820)
-------- --------
(51,063) 11,091
-------- --------
CASH AND CASH EQUIVALENTS, End of Period $202,489 $231,772
======== ========
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 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 December 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) 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:
Dec. 31, June 30,
1995 1995
-------- --------
Raw Materials $ 31,251 $ 29,424
Work in Process 56,423 59,042
Finished Goods 69,818 62,370
-------- --------
$157,492 $150,836
======== ========
-6-
MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Consolidated net revenues were $344.5 million for the quarter
ended December 31, 1995, increasing 25.3 percent over net
revenues for the corresponding quarter of the prior fiscal year.
For the six months ended December 31, 1995, net revenues were
$682.7 million, a 25.5 percent increase from the same period a
year ago. The generally higher value of the US dollar compared
to other currencies worldwide decreased net revenues by $4.8
million for the quarter. For the six months ended December 31,
1995, currency effects have added only $.2 million to net
revenues. Excluding the effects of currency fluctuation, growth
in net revenues would have been 27.0 percent for the quarter and
25.5 percent for the six months ended December 31, 1995.
Molex continues 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
quarter and the six months ended December 31, 1995.
For the three months ended December 31, 1995, revenues in the
Americas region (including the U.S. Region and the Americas Non-
U.S.) increased 31.2 percent in U.S. dollars and 37.3 percent in
local currency over the same quarter in the prior year. For the
six months ended December 31, 1995, the percentage of growth over
the same period in the prior year was 29.8 percent in U.S.
dollars and 35.2 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.
In Europe, net revenues increased 25.1 percent in U.S. dollars
and 18.8 percent in local currency over the same quarter in the
prior year. For the six months ended December 31, 1995, net
revenues increased 30.4 percent in U.S. dollars and 22.6 percent
in local currency over the same period in the prior year. These
increases are primarily attributable to greater demand for
automotive and telecommunication products by major European
customers.
-7-
Far East South net revenues for the quarter ended December 31,
1995 increased 19.7 percent in both local currency and U.S.
dollars. For the six months ended December 31, 1995 the growth
percentages over the same period in the prior year were 18.2
percent and 17.0 percent in U.S. dollars and local currency,
respectively. 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.
Net revenues in the Far East North increased 3.4 percent in U.S.
dollars and 6.5 percent in local currency for the quarter
compared to the same quarter in the prior year. Net revenue
growth was 9.9 percent in U.S. dollars and 9.1 percent in local
currency for the six months ended December 31, 1995 when compared
to the same period in the prior year. The Japanese economy
continues to be difficult. In spite of this, Japanese domestic
sales improved slightly over the same quarter in the prior year.
For the six months ended December 31, 1995, 69 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 six months ended December 31, 1995 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 40.1 percent for
the quarter and six months ended December 31, 1995, respectively,
decreased from 42.4 percent and 42.6 percent reported for the
quarter and six months ended December 31, 1994, respectively.
Molex continues to experience start-up costs for automotive
programs in the United States and Germany, and several new
projects in Japan. For the six months ended December 31, 1995,
depreciation and amortization expenses increased at a lower rate
than the increase in net revenues. Depreciation and amortization
expenses were 8.6 percent of net revenues compared to 9.1 percent
of net revenues during the same period in the prior fiscal year.
Operating expenses as a percent of net revenue for the six months
ended December 31, 1995 improved slightly from the same period a
year ago, reflecting continued management focus on the control of
expenses.
-8-
Foreign currency transaction gains were $0.8 million for the six
months ended December 31, 1995 compared to the $0.3 million loss
in the same period of the prior year. The foreign currency
transaction gain for the six-month period is primarily due to the
weakening of the Japanese yen relative to the dollar when
compared to the prior year.
Interest income, net of interest expense, increased 30.2 percent
for the quarter ended December 31, 1995 and 56.3 percent for the
six months ended December 31, 1995 when compared to the same
period in the prior year. The increase reflects the higher
average interest rates computed on relatively constant investment
balances in countries where Molex has significant short-term
investments. Interest expense has remained relatively unchanged
from the prior year.
The effective tax rate was 38.8 percent and 38.5 percent for the
quarter and six months ended December 31, 1995, respectively, as
compared to 41.5 percent and 42.4 percent for the same respective
periods 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.
Net income for the quarter was $35.1 million or 35 cents per
share, a 25.6 percent increase compared with $27.9 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 29.7 percent over the same quarter last fiscal year.
For the six months ended December 31, 1995, net income was $70.2
million or 70 cents per share, a 27.1 percent increase compared
to $55.3 million or 56 cents per share for the same period in the
prior fiscal year. Excluding the effects of currency
fluctuations, net income for the six months increased 28 percent
over the prior fiscal year.
LIQUIDITY AND CAPITAL
Molex's balance sheet continues to be exceptionally strong.
Working capital at December 31, 1995 was $448.4 million, down
from the $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 six months ended December 31, 1995 are
primarily responsible for the decline in working capital.
The Company purchased 475,000 shares of common stock for the
treasury during the quarter, for a total of 735,000 shares
purchased during the six months ended December 31, 1995.
Management believes that the Company's current liquidity and
financial flexibility are adequate to support its continued
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 - 3. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on
October 20, 1995, 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, Edgar
D. Jannotta, Donald G. Lubin, Masahisa Naitoh,
Michael J. Birck.
The stockholders also approved the amendment to the
Certificate of Incorporation increasing the number
of authorized shares of Common Stock and Class A
Common Stock. The amendment to the Certificate of
Incorporation increasing the number of authorized
shares of Common Stock and Class A Common Stock was
adopted with 34,040,153 votes cast in favor of the
amendment, 737,613 votes against and 183,604 votes
withheld.
The stockholders also approved the amendment and
restatement of the 1990 Molex Incorporated
Executive Stock Bonus Plan. The amendment and
restatement of the 1990 Molex Incorporated
Executive Stock Bonus Plan was adopted with
34,714,086 votes cast in favor of the amendment,
168,185 votes against and 79,100 votes withheld.
Items 5 - 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 9, 1996 /s/ ROBERT B. MAHONEY
----------------- --------------------
Robert B. Mahoney
Corporate Vice President
and Treasurer
Date February 9, 1996 /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, 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 202,489
<SECURITIES> 62,686
<RECEIVABLES> 268,950
<ALLOWANCES> (12,905)
<INVENTORY> 157,492
<CURRENT-ASSETS> 705,379
<PP&E> 1,258,508
<DEPRECIATION> (680,882)
<TOTAL-ASSETS> 1,389,626
<CURRENT-LIABILITIES> 257,017
<BONDS> 7,645
<COMMON> 5,236
0
0
<OTHER-SE> 1,072,139
<TOTAL-LIABILITY-AND-EQUITY> 1,389,626
<SALES> 682,659
<TOTAL-REVENUES> 682,659
<CGS> 408,843
<TOTAL-COSTS> 166,129
<OTHER-EXPENSES> (757)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,929)
<INCOME-PRETAX> 114,373
<INCOME-TAX> 44,084
<INCOME-CONTINUING> 70,214
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,214
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
