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, 1996
---------------------------
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
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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
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(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 December 31, 1996 as restated for
the February 1997 stock dividend:
Common Stock 62,134,819
Class A Common Stock 63,447,534
Class B Common Stock 94,255
MOLEX INCORPORATED
FORM 10-Q
DECEMBER 31, 1996
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
December 31, 1996 and June 30, 1996
Condensed Consolidated Statements of Income -- 3
Three Months and Six Months Ended
December 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows -- 4
Six Months Ended December 31, 1996 and 1995
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,
1996 1996
CURRENT ASSETS: --------- ---------
<S> <C> <C>
Cash and cash equivalents $ 183,519 $ 242,779
Marketable securities 92,242 39,883
Accounts receivable - net 305,518 274,031
Inventories 155,835 147,612
Other current assets 36,963 30,284
--------- ---------
Total current assets 774,077 734,589
PROPERTY, PLANT AND EQUIPMENT - NET 635,552 613,125
OTHER ASSETS 105,389 113,285
--------- ---------
$1,515,018 $1,460,999
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 126,870 $ 127,557
Accrued expenses 96,397 93,104
Other current liabilities 57,578 54,521
--------- ---------
Total current liabilities 280,845 275,182
DEFERRED ITEMS 16,746 13,977
ACCRUED POSTRETIREMENT BENEFITS 32,130 30,401
LONG-TERM DEBT, less portion due currently 7,264 7,450
MINORITY INTEREST 2,841 2,718
SHAREHOLDERS' EQUITY
Common stock 6,522 6,508
Paid-in capital 118,698 115,253
Retained earnings 1,062,911 989,928
Treasury stock (80,543) (62,726)
Deferred unearned compensation (10,995) (13,583)
Cumulative translation adjustments 78,599 95,891
--------- ---------
Total shareholders' equity 1,175,192 1,131,271
--------- ---------
$1,515,018 $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 SIX MONTHS ENDED
----------------------- -----------------------
Dec. 31, Dec. 31, Dec. 31, Dec, 31,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET REVENUE $377,005 $344,483 $736,600 $682,659
COST OF SALES 223,952 207,545 440,721 408,843
-------- -------- -------- --------
Gross Profit 153,053 136,938 295,879 273,816
OPERATING EXPENSES:
Selling 40,206 35,621 78,259 71,495
Administrative 52,072 46,871 100,951 94,634
-------- -------- -------- --------
Total Operating Expenses 92,278 82,492 179,210 166,129
Income from Operations 60,775 54,446 116,669 107,687
OTHER INCOME:
Foreign currency transaction gain (loss) (281) 50 37 757
Interest, net 2,643 2,807 5,070 5,929
-------- -------- -------- --------
Total Other Income 2,362 2,857 5,107 6,686
INCOME BEFORE INCOME TAXES 63,137 57,303 121,776 114,373
INCOME TAXES 22,940 22,246 45,724 44,159
-------- -------- -------- --------
NET INCOME $ 40,197 $ 35,057 $ 76,052 $ 70,214
======== ======== ======== ========
EARNINGS PER COMMON SHARE $ 0.32 $ 0.28 $ 0.61 $ 0.56
======== ======== ======== ========
CASH DIVIDENDS PER COMMON SHARE $ 0.012 $ 0.012 $ 0.024 $ 0.024
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD 125,813 125,828 125,903 125,889
======== ======== ======== ========
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,
1996 1995
-------- --------
<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 76,052 70,214
Add (deduct) non-cash items included in net income:
Depreciation and amortization 63,179 58,432
Amortization of deferred unearned compensation 2,588 2,180
Loss on sale of property, plant and equipment 35 204
Other charges (credits) to net income (1,315) 2,039
Current items:
Accounts receivable (37,560) 6,291
Inventories (11,478) (18,560)
Prepaid expenses (7,822) (6,193)
Accounts payable 2,861 (20)
Accrued expenses 6,339 724
Income taxes 3,899 417
-------- --------
NET CASH PROVIDED FROM OPERATIONS 96,778 115,728
Investments:
Purchases of property, plant and equipment (96,410) (109,776)
Proceeds from sale of property, plant and equipment 1,160 590
Proceeds from sale of marketable securities 1,055,767 947,428
Purchase of marketable securities (1,109,916) (950,692)
Decrease (Increase) in other assets 6,527 (8,948)
-------- --------
NET CASH USED FOR INVESTMENTS (142,872) (121,398)
Financing:
Increase in long-term debt 54 272
Decrease in long-term debt (64) (898)
Cash dividends paid (3,065) (2,464)
Purchase of treasury stock (10,571) (24,992)
Disposition of treasury stock 244 410
Exercise of stock options 2,865 1,713
-------- --------
NET CASH USED FOR FINANCING (10,537) (25,959)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (2,629) (19,434)
-------- --------
(59,260) (51,063)
-------- --------
CASH AND CASH EQUIVALENTS, End of Period $183,519 $202,489
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
-4-
</TABLE>
MOLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Condensed 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 should not be
considered 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. The dividend
is payable on April 25, 1997 to shareholders of record on March 31,
1997. One quarter (1/4) share of Common Stock will be paid for
each share of Common Stock and Class B Common Stock outstanding,
and one quarter (1/4) share of Class A Common Stock will be paid
for each share of Class A Common Stock. 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, 1996 and 1995, 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.
- 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:
Dec. 31, June 30,
1996 1996
Raw Materials $ 35,842 $ 33,841
Work in Process 57,659 54,687
Finished Goods 62,334 59,084
-------- --------
$155,835 $147,612
======== ========
(4) Reclassifications
Certain prior year amounts have been reclassified in the condensed
consolidated financial statements to conform to their current year
classifications.
-6-
MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues were $377.0 million for the quarter ended
December 31, 1996, increasing 9.4 percent over net revenues for the
corresponding quarter of the prior fiscal year. For the six months
ended December 31, 1996, net revenues were $736.6 million, a 7.9
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 $14.5 million for the quarter.
Excluding the effects of currency fluctuation, growth in net
revenues would have been 13.7 percent for the quarter and 12.5
percent for the six months ended December 31, 1996.
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 with the exception of
Europe experienced local currency growth in excess of 10 percent
for the quarter and the six months ended December 31, 1996.
Far East South net revenues for the quarter ended December 31, 1996
increased 23.9 percent in U.S. dollars and 24.1 percent in local
currencies. For the six months ended December 31, 1996, the
percentage of growth over the same period in the prior year was
21.4 percent in U.S. dollars and 22.0 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 December 31, 1996, revenues in the
Americas region increased 14.5 percent in U.S. dollars and 15.1
percent in local currency over the same quarter in the prior year.
For the six months ended December 31, 1996, the percentage of
growth over the same period in the prior year was 14.4 percent in
U.S. dollars and 15.5 percent in local currency. Increased
customer sales to the automotive market and strong sales of
communications products continue to drive revenue growth in
this region.
Net revenues in the Far East North increased 9.8 percent in U.S.
dollars for the quarter compared to the same period in the prior
year and increased 23.0 percent in local currencies. For the six
months ended December 31, 1996, the percentage of growth over the
same period in the prior year was 3.4 percent in U.S. dollars and
16.6 percent in local currencies. Improvement in the overall
Japanese economy has created increased demand for interconnection
products in the region and the weaker value of the Japanese Yen
has resulted in stronger demand for Japanese products outside
the region.
- 7 -
In Europe, net revenues declined 2.7 percent in U.S. dollars but
increased 1.5 percent in local currency over the same quarter in
the prior year. For the six months ended December 31, 1996, net
revenues decreased 7.0 percent in U.S. dollars and 3.4 percent in
local currency over the same period in the prior year. Demand
continues to be soft within the region due to difficult economic
conditions in several European countries, although some improvement
was seen during the quarter ended December 31, 1996.
For the six months ended December 31, 1996, 68 percent of Molex's
worldwide net revenues were generated from its international
operations, compared to 69 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 six months ended December 31, 1996
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 40.6 percent and 40.2 percent for
the quarter and six months ended December 31, 1996, respectively,
increased from 39.8 percent and 40.1 percent reported for the
quarter and six months ended December 31, 1995, respectively.
These improvements were primarily due to improvements in the U.S.
automotive programs.
Operating expenses as a percent of net revenue for the six months
ended December 31, 1996 improved slightly from the same period a
year ago, reflecting continued management focus on the control of
expenses.
Foreign currency transaction gains and losses did not significantly
impact net income in the quarter or year-to-date.
Interest income, net of interest expense, decreased 5.9 percent for
the quarter ended December 31, 1996 and 14.5 percent for the six
months ended December 31, 1996 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 36.3 percent and 37.5 percent for the
quarter and six months ended December 31, 1996, respectively, as
compared to 38.8 percent and 38.5 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.
- 8 -
Net income for the quarter was $40.2 million or 32 cents per share,
a 14.7 percent increase compared with $35.1 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 19.2
percent over the same quarter last fiscal year. For the six months
ended December 31, 1996, net income was $76.1 million or 61 cents
per share, an 8.3 percent increase compared to $70.2 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 13.2 percent over the prior fiscal year.
On February 10, 1997 The Board of Directors of Molex Incorporated
declared a twenty-five percent (25%) stock dividend. The dividend
is payable on April 25, 1997 to shareholders of record on March 31,
1997. One quarter (1/4) share of Common Stock will be paid for
each share of Common Stock and Class B Common Stock outstanding,
and one quarter (1/4) share of Class A Common Stock will be paid
for each share of Class A Common Stock. All shares outstanding,
earnings and dividends have been retroactively restated for the
stock split effected in the form of a stock dividend.
LIQUIDITY AND CAPITAL
Molex's balance sheet continues to be quite strong.
Working capital at December 31, 1996 was $493.2 million, an
increase from the $459.4 million at June 30, 1996.
The Company purchased 400,000 shares of common stock for the
treasury during the quarter, for a total of 619,000 shares
purchased during the six months ended December 31, 1996.
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
during 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.
- 9 -
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.
-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 25, 1996, the following directors were
elected to hold office for the coming year:
Frederick A. Krehbiel, J.H. Krehbiel, Jr., Fred L.
Krehbiel, Robert J. Potter, Edgar D. Jannotta,
Donald G. Lubin, Masahisa Naitoh, Michael J. Birck.
Items 5. Other Information
On February 10, 1997, Douglas K. Carnahan was
appointed as a Director of Molex Incorporated.
Mr. Carnahan is a Senior Vice President of Hewlett-
Packard Company and General Manager of the
company's Measurement Systems Organization. His
election expands the Molex Board to nine directors.
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 14, 1997 /s/ ROBERT B. MAHONEY
----------------- --------------------
Robert B. Mahoney
Corporate Vice President
and Treasurer
Date February 14, 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 DECEMBER 31, 1996 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-30-1997
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 183,519
<SECURITIES> 92,242
<RECEIVABLES> 318,694
<ALLOWANCES> (13,176)
<INVENTORY> 155,835
<CURRENT-ASSETS> 774,077
<PP&E> 1,353,805
<DEPRECIATION> (718,253)
<TOTAL-ASSETS> 1,515,018
<CURRENT-LIABILITIES> 280,845
<BONDS> 7,264
<COMMON> 6,522
0
0
<OTHER-SE> 1,168,670
<TOTAL-LIABILITY-AND-EQUITY> 1,515,018
<SALES> 736,600
<TOTAL-REVENUES> 736,600
<CGS> 440,721
<TOTAL-COSTS> 179,210
<OTHER-EXPENSES> (37)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,070)
<INCOME-PRETAX> 121,776
<INCOME-TAX> 45,724
<INCOME-CONTINUING> 76,052
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,052
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
