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, 1997
-------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
------- SECURITIES EXCHANGE ACT OF 1934
----------------------
Commission File Number 0-7491
MOLEX INCORPORATED
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(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: 630-969-4550
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 March 31, 1997, as restated for the
February 1997 stock dividend:
Common Stock 61,825,159
Class A Common Stock 63,452,275
Class B Common Stock 94,255
MOLEX INCORPORATED
FORM 10-Q
MARCH 31, 1997
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
March 31, 1997 and June 30, 1996
Condensed Consolidated Statements of Income -- 3
Three Months and Nine Months Ended
March 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows -- 4
Nine Months Ended March 31, 1997 and 1996
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>
March 31, June 30,
1997 1996
CURRENT ASSETS: --------- ---------
<S> <C> <C>
Cash and cash equivalents $ 183,519 $ 242,779
Marketable securities 92,242 39,883
Accounts receivable - net 306,471 274,031
Inventories 146,167 147,612
Other current assets 33,825 30,284
--------- ---------
Total current assets 785,435 734,589
PROPERTY, PLANT AND EQUIPMENT - NET 630,804 613,125
OTHER ASSETS 102,374 113,285
--------- ---------
$1,518,613 $1,460,999
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 135,032 $ 127,557
Accrued expenses 107,893 93,104
Other current liabilities 53,614 54,521
--------- ---------
Total current liabilities 296,539 275,182
DEFERRED ITEMS 15,408 13,977
ACCRUED POSTRETIREMENT BENEFITS 28,154 30,401
LONG-TERM DEBT, less portion due currently 7,952 7,450
MINORITY INTEREST 2,916 2,718
SHAREHOLDERS' EQUITY
Common stock 6,586 6,508
Paid-in capital 119,804 115,253
Retained earnings 1,088,569 989,928
Treasury stock (79,257) (62,726)
Deferred unearned compensation ( 9,700) (13,583)
Cumulative translation adjustments 41,642 95,891
--------- ---------
Total shareholders' equity 1,167,644 1,131,271
--------- ---------
$1,518,613 $1,460,999
========= =========
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
----------------------- -----------------------
March 31, March 31, March 31, March 31,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET REVENUE $387,053 $ 347,065 $1,123,653 $1,029,724
COST OF SALES 228,712 208,771 669,433 617,614
-------- -------- -------- --------
Gross Profit 158,341 138,294 454,220 412,110
OPERATING EXPENSES:
Selling 38,526 36,130 116,785 107,625
Administrative 54,861 47,518 155,812 142,152
-------- -------- -------- --------
Total Operating Expenses 93,387 83,648 272,597 249,777
Income from Operations 64,954 54,646 181,623 162,333
OTHER INCOME:
Foreign currency transaction loss 751 540 789 1,297
Interest 2,260 2,179 7,329 8,108
-------- -------- -------- --------
Total Other Income 3,011 2,719 8,118 9,405
INCOME BEFORE INCOME TAXES 67,965 57,365 189,741 171,738
INCOME TAXES 24,774 21,242 70,499 65,401
-------- -------- -------- --------
NET INCOME $ 43,191 $ 36,123 $119,242 $106,337
======== ======== ======== ========
EARNINGS PER COMMON SHARE $ 0.34 $ 0.29 $ 0.95 $ 0.84
======== ======== ======== ========
CASH DIVIDENDS PER COMMON SHARE $ 0.0120 $ 0.0120 $ 0.0360 $ 0.0360
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD 125,508 125,871 125,766 125,903
======== ======== ======== ========
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
-----------------------
March 31, March 31,
1997 1996
-------- --------
<S> <C> <C>
CASH AND CASH EQUIVALENTS, Beginning of Period $242,779 $253,552
CASH AND CASH EQUIVALENTS
PROVIDED FROM (USED FOR):
Operations:
Net income 119,243 106,337
Add (deduct) non-cash items included in net income:
Depreciation and amortization 93,500 88,704
Amortization of deferred unearned compensation 3,883 3,092)
(Gain) loss on sale of property, plant and equipment (134)
Other charges to net income (1,227) 1,058
Current items:
Accounts receivable (50,604) (9,472)
Inventories 1,176 (17,062)
Prepaid expenses (6,190) (7,966)
Accounts payable 18,714 (2,130)
Accrued expenses 19,051 9,156
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
Proceeds from sale of marketable securities (8,948) (9,152)
Purchase of marketable securities (3,264) (5,826)
Increase in other assets
-------- --------
NET CASH USED FOR INVESTMENTS (121,398) (87,923)
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) 11,826
-------- --------
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 1996 Annual Report to
Shareholders and the 1996 Annual Report on Form 10-K. The results of
operations for the interim periods are not necessarily indicative of
results to be expected for the full year.
(2) Earnings per Common Share
On February 10, 1997, 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 April 25, 1997 to shareholders of
record as of March 31, 1997 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, 1997 and 1996, the shares shown as outstanding
in the Condensed Consolidated Statements of Income do not require
adjustments for common stock equivalents.
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, Earnings per Share, which the Company must adopt
in its fiscal 1997 quarter ended December 31, 1997, SFAS No. 128
requires the presentation of both basic and diluted earnings per share.
Basic earnings per share presents net income available to common
shareholders on a per share basis based only upon the number of common
shares outstanding without consideration of dilutive securities.
Diluted earnings per share presents the same information after giving
effect to all dilutive securities. Basic and fully diluted earnings
per share for the quarter ended March 31, 1997 under the new
presentation requirements prescribed in SFAS No. 128 would not be
materially different than the primary earnings per share amount
presented in the Condensed Consolidated Statement of Income.
(3) Reclassifications
Certain reclassifications have been made to the prior year's financial
statements in order to conform to the 1997 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,
1997 1996
Raw Materials $ 29,234 $ 33,841
Work in Process 52,620 54,687
Finished Goods 64,313 59,084
-------- ---------
$146,167 $147,612
======== =========
-6-
MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues were $387.1 million for the quarter ended
March 31, 1997, increasing 11.5 percent over net revenues for the
corresponding quarter of the prior fiscal year. For the nine months
ended March 31, 1997, net revenues were $1,123.7 million, a 9.1 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 $19.5 million for the quarter. Excluding the effects of
currency fluctuation, growth in net revenues would have been 17.1
percent for the quarter and 14.1 percent for the nine months ended
March 31, 1997.
Management believes that Molex has continued to exceed its goal of
increasing net revenues at twice the growth rate of the worldwide
connector market. All geographic regions, except Europe, experienced
local currency growth in excess of 10 percent for the quarter and the
nine months ended March 31, 1997.
Far East South net revenues for the quarter ended March 31, 1997
increased 19.6 percent in U.S. dollars and 19.8 percent in local
currencies over the same period in the prior year. For the nine months
ended March 31, 1997, the percentage of growth over the same period in
the prior year was 20.8 percent in U.S. dollars and 21.3 percent in
local currencies. Sales in this region remain strong due to continued
demand for personal computers and related peripheral products.
For the three months ended March 31, 1997, revenues in the Americas
region increased 15.9 percent in U.S. dollars and 16.3 percent in local
currencies over the same quarter in the prior year. For the nine
months ended March 31, 1997, the percentage of growth over the same
period in the prior year was 14.9 percent in U.S. dollars and 15.8
percent in local currencies. Increased customer sales to the
automotive market and strong sales of telecommunications products
continue to drive revenue growth in this region.
Net revenues in the Far East North increased 7.9 percent in U.S.
dollars for the quarter compared to the same period in the prior year
and increased 24.5 percent in local currencies. For the nine months
ended March 31, 1997, the percentage of growth over the same period in
the prior year was 4.8 percent in U.S. dollars and 19.1 percent in
local currencies. Improvement in the overall Japanese economy has
created stronger demand for interconnection products in this region.
In Europe, net revenues increased 11.2 percent in U.S. dollars and
increased 20.2 percent in local currencies over the same quarter in the
prior year. For the nine months ended March 31, 1997, net revenues
decreased 0.9 percent in U.S. dollars and increased 4.5 percent in
local currencies over the same period in the prior year. Strong sales
of telecommunications products drove revenue growth for the quarter.
- 7 -
For the nine months ended March 31, 1997, 69 percent of Molex's
worldwide net revenues were generated from its international
operations, compared to 68 percent for the same period during the prior
fiscal year. Strong sales to the automotive and telecommunications
industries have increased the Company's U.S. domestic revenue during
the nine months ended March 31, 1997 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 40.9 percent and 40.4 percent for the
quarter and nine months ended March 31, 1997, respectively, increased
from 39.8 percent and 40.0 percent reported for the quarter and nine
months ended March 31, 1996, respectively. These improvements were
primarily due to improvements in the U.S. automotive programs.
Operating expenses as a percent of net revenue for the nine months
ended March 31, 1997 did not change as compared to the same period a
year ago.
Foreign currency transaction gains were $0.8 million for the nine
months ended March 31, 1997 compared to the $1.3 million in the same
period of the prior year.
Interest income, net of interest expense, increased 3.7 percent for the
quarter ended March 31, 1997 but decreased 9.6 percent for the nine
months ended March 31, 1997 when compared to the same period in the
prior year. The decrease reflects the 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 was 36.4 percent and 37.1 percent for the
quarter and nine months ended March 31, 1997, respectively, as compared
to 37.0 percent and 38.0 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.
Net income for the quarter was $43.2 million or 34 cents per share
(reflecting the 25% stock dividend), a 19.6 percent increase compared
with $36.1 million or 29 cents per share for the same quarter last
fiscal year. Excluding the effects of currency fluctuations, net
income for the quarter increased 25.0 percent over the same quarter
last fiscal year. For the nine months ended March 31, 1997, net income
was $119.2 million or 95 cents per share, a 12.1 percent increase
compared to $106.3 million or 84 cents per share for the same period in
the prior fiscal year. Excluding the effects of currency fluctuations,
net income for the nine months increased 17.2 percent over the prior
fiscal year.
- 8 -
LIQUIDITY AND CAPITAL
Molex's balance sheet continues to be exceptionally strong. Working
capital at March 31, 1997 was $488.9 million, an increase from the
$459.4 million at June 30, 1996.
The Company purchased 419,000 shares of common stock for the treasury
during the quarter, for a total of 1,038,000 shares purchased during
the nine months ended March 31, 1997.
Management believes that the Company's current liquidity and financial
flexibility are adequate to support its continued growth.
OUTLOOK
The prospects for the remainder of fiscal 1997 continue to look
promising. To further expand the Company's global presence, offer
innovative products at an accelerated pace, and improve internal
productivity, Molex plans to invest approximately $215 million in
capital expenditures and $90 million in research and development for
the fiscal year ending June 30, 1997.
Management believes the Company is well positioned to continue growing
faster than the overall connector industry. The Company continues to
emphasize expansion in rapidly growing industry segments, product lines
and geographic regions. Molex remains committed to providing high
quality products and a full range of services to its customers
worldwide.
FORWARD LOOKING STATEMENT
This document contains various forward looking statements. Statements
that are not historical are forward looking statements and are subject
to various risks and uncertainties which could cause actual results to
vary materially from those stated. Such risks and uncertainties
include: economic conditions in various regions, product and price
competition, raw material prices, foreign currency exchange rate
changes, technology changes, patent issues, litigation results, legal
and regulatory developments, and other risks and uncertainties
described in documents filed with the Securities and Exchange
Commission.
- 9 -
Part II - Other Information
Items 1 - 6. Not Applicable
- 10 -
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 15, 1997 /s/ ROBERT B. MAHONEY
----------------- --------------------
Robert B. Mahoney
Corporate Vice President
and Treasurer
Date May 15, 1997 /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, 1997 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-30-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 186,178
<SECURITIES> 112,794
<RECEIVABLES> 320,533
<ALLOWANCES> (14,062)
<INVENTORY> 146,167
<CURRENT-ASSETS> 785,435
<PP&E> 1,338,080
<DEPRECIATION> (707,276)
<TOTAL-ASSETS> 1,518,613
<CURRENT-LIABILITIES> 296,539
<BONDS> 7,952
<COMMON> 6,586
0
0
<OTHER-SE> 1,161,058
<TOTAL-LIABILITY-AND-EQUITY> 1,518,613
<SALES> 1,123,653
<TOTAL-REVENUES> 1,123,653
<CGS> 669,433
<TOTAL-COSTS> 272,597
<OTHER-EXPENSES> (789)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,329)
<INCOME-PRETAX> 189,741
<INCOME-TAX> 70,499
<INCOME-CONTINUING> 119,242
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 119,242
<EPS-PRIMARY> .95
<EPS-DILUTED> .95
</TABLE>
