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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
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EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the transition period from
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Commission File Number 0-7491
MOLEX INCORPORATED
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(Exact name of registrant as specified in its charter)
DELAWARE 36-2369491
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(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
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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
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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 September 30, 1997:
Common Stock 61,885,171 shares
Class A Common Stock 63,506,832 shares
Class B Common Stock 94,255 shares
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MOLEX INCORPORATED
FORM 10-Q
SEPTEMBER 30, 1997
INDEX
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Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
September 30, 1997 and June 30, 1997
Condensed Consolidated Statements of Income -- 3
Three Months Ended September 30, 1997 and 1996
Condensed Consolidated Statements of Cash Flows -- 4
Three Months Ended September 30, 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
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MOLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In Thousands)
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<CAPTION>
ASSETS
Sept. 30, June 30,
1997 1997
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 183,606 199,767
Marketable securities 138,054 125,570
Accounts receivable - net 339,082 337,765
Inventories 162,946 166,660
Other current assets 47,353 43,852
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Total current assets 871,041 873,614
PROPERTY, PLANT AND EQUIPMENT - NET 659,794 665,468
OTHER ASSETS 89,365 97,849
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$ 1,620,200 $ 1,636,931
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 145,812 151,934
Accrued expenses 116,098 109,010
Other current liabilities 64,290 81,082
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Total current liabilities 326,200 342,026
DEFERRED ITEMS 13,955 14,758
ACCRUED POSTRETIREMENT BENEFITS 32,790 33,779
LONG-TERM DEBT, less portion due currently 7,350 7,350
MINORITY INTEREST 2,630 3,106
SHAREHOLDERS' EQUITY
Common stock 6,597 6,591
Paid-in capital 133,253 131,265
Retained earnings 1,192,563 1,149,720
Treasury stock (99,745) (94,494)
Deferred unearned compensation (15,004) (16,499)
Cumulative translation adjustments 19,611 59,329
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Total shareholders' equity 1,237,275 1,235,912
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$ 1,620,200 $ 1,636,931
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</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - In Thousands Except per Share)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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Sept. 30, Sept. 30,
1997 1996
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<S> <C> <C>
NET REVENUE $ 410,194 $ 359,595
COST OF SALES 239,861 216,769
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Gross Profit 170,333 142,826
OPERATING EXPENSES:
Selling 32,308 38,053
Administrative 72,152 48,905
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Total Operating Expenses 104,460 86,958
Income from Operations 65,873 55,868
OTHER INCOME:
Foreign currency transaction loss/(gain) 283 (344)
Interest expense/(income) (3,664) (2,427)
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Total Other Income (3,381) (2,771)
INCOME BEFORE INCOME TAXES 69,254 58,639
INCOME TAXES 24,798 22,784
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NET INCOME $ 44,456 $ 35,855
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EARNINGS PER COMMON SHARE $ 0.35 $ 0.29
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CASH DIVIDENDS PER COMMON SHARE $ 0.015 $ 0.012
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD 125,495 125,988
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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Sept. 30, Sept. 30,
1997 1996
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<S> <C> <C>
CASH AND CASH EQUIVALENTS, Beginning of Period $ 199,767 $ 242,779
CASH AND CASH EQUIVALENTS
PROVIDED FROM (USED FOR):
Operations:
Net income 44,456 35,855
Add (deduct) non-cash items included in net income:
Depreciation and amortization 33,900 32,560
Amortization of deferred unearned compensation 1,357 1,294
Other charges to net income 62 257
Current items:
Accounts receivable (4,179) (16,569)
Inventories 1,676 (3,039)
Prepaid expenses (3,549) (5,453)
Accounts payable (4,133) (1,039)
Accrued expenses 14,839 9,368
Income taxes (22,719) (5,949)
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NET CASH PROVIDED FROM OPERATIONS 61,710 47,285
Investments:
Purchases of property, plant and equipment (49,701) (41,835)
Proceeds from sale of marketable securities 673,477 399,585
Purchases of marketable securities (691,276) (395,949)
Increase/(decrease) in other assets 3,094 (2,918)
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NET CASH USED FOR INVESTMENTS (64,406) (41,117)
Financing:
Decrease in long-term debt -- (29)
Cash dividends paid (1,895) (1,515)
Purchase of treasury stock (5,108) (5,549)
Disposition of treasury stock 329 334
Exercise of stock options 1,779 719
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NET CASH USED FOR FINANCING (4,895) (6,040)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (8,570) (814)
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(16,161) (686)
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CASH AND CASH EQUIVALENTS, End of Period $ 183,606 $ 242,093
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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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 1997
Annual Report to Shareholders and the 1997 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. 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.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
effective for fiscal and interim periods ending after December 15, 1997. This
statement replaces primary Earnings Per Share (EPS) with basic EPS. Basic EPS
is computed by dividing net income by the weighted average number of common
shares outstanding during the period. Diluted EPS, formerly fully diluted EPS,
must be presented in all cases with basic EPS. Early adoption prior to December
15, 1997, is not permitted, but had both computations been made for the quarter
ended September 30,1997, basic and diluted EPS would not have been materially
different than the primary EPS presented.
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(3) INVENTORIES
Inventories are valued at the lower of first-in, first-out cost or market.
Inventories, in thousands of dollars, consists of the following:
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<CAPTION>
Sept. 30 June 30,
1997 1997
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Raw Materials $ 39,002 $ 38,335
Work in Process 53,191 55,309
Finished Goods 70,753 73,016
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$162,946 $166,660
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(4) NEW ACCOUNTING PRONOUNCEMENTS
In June 1997 FASB issued SFAS No. 130, "Reporting Comprehensive Income" and
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," both of which are effective for fiscal years beginning after
December 15, 1997. SFAS No. 130 establishes standards for reporting and display
of comprehensive income and its components. SFAS No. 131 establishes standards
for reporting information about operating segments and related disclosures
about products and services, geographic areas and major customers. The
requirements of both statements only impact financial statement disclosure.
Accordingly, these statements are not expected to have a material impact on the
Company's financial position or the results of its operations.
(5) RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's financial
statements in order to conform to the fiscal 1998 classifications.
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MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues were $410.2 million for the quarter ended September
30, 1997, increasing 14.1 percent over net revenues for the corresponding
quarter of the prior fiscal year. The generally higher value of the US dollar
compared to other currencies worldwide decreased net revenues by $26.5 million
for the quarter. Excluding the effects of currency fluctuation, growth in net
revenues would have been 21.4 percent for the quarter and three months ending
September 30, 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 experienced local currency sales growth in excess of 15
percent for the quarter and the three months ended September 30, 1997.
For the quarter ended September 30, 1997, revenues in the Americas region
increased 22.7 percent in U.S. dollars and 22.7 percent in local currency over
the same quarter in the prior year. Strong sales of data communications and
telecommunications products, increases in computer and computer-peripheral
products, and increased customer sales to the commercial and industrial market
continue to drive revenue growth in this region.
Net revenues in the Far East North increased 5.8 percent in U.S. dollars for
the quarter compared to the same period in the prior year and increased 15.9
percent in local currencies. Recent improvement in the electronics industry
within Japan, greater acceptance of Molex Japan advanced interconnect products
and growth for now of export sales by Japanese end-customers served by Molex
have all created stronger demand in this region.
Far East South net revenues for the quarter ended September 30, 1997 increased
11.9 percent in U.S. dollars and 18.0 percent in local currencies. Sales in
this region remain strong due to continued demand for personal computers and
related computer-peripheral products. The recent devaluations of several of the
Asian currencies have had an adverse effect on reported sales and profits, but
the majority of the company's revenue is generated outside of those countries
which have experienced the greatest decline in currency values.
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In Europe, net revenues increased 32.0 percent in U.S. dollars and
approximately 47.0 percent in local currency over the same quarter of the prior
year. Strong growth in telecommunications and personal communications product
sales, steady improvement in automotive and a general resurgence in European
markets served by Molex have all contributed to the growth. It is notable that
in the prior year, European sales were significantly depressed due to weak
economic conditions across Europe with resulting reductions in demand for
telecom and mobile communications products.
For the three months ended September 30, 1997, 66 percent of Molex's worldwide
net revenues were generated from its international operations. International
operations are subject to currency fluctuations and government actions. Molex
monitors its currency exposure in each country and continues to implement
defensive strategies to respond to changing economic 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 41.5 percent for the quarter ended September 30,
1997 increased from 39.7 percent for the quarter ended September 30, 1996. This
is primarily due to improvements in manufacturing efficiency and utilization,
significant reductions in start-up costs for the European automotive programs,
a general strengthening of the dollar which reduces the cost of foreign-sourced
operations and general declines in raw material prices worldwide.
Selling, general and administrative expenses as a percent of net revenue for
the three months ended September 30, 1997 increased to 25.5 from 24.6 for the
three corresponding months in the prior year. The Company's implementation of
it Global Information Systems and the general increase in sales levels across
the company contributed to the higher level of spending. Research and
Development increased at a slightly lower rate than the rate of revenue growth.
Interest income, net of interest expense, increased to $3.7 million in the
quarter ended September 30, 1997 as compared to $2.4 million for the same
period in the prior year. The increase reflects comparable average interest
rates versus prior year in countries where Molex has significant short-term
investments, applied to higher average cash balances.
The effective tax rate was 35.8 percent for the quarter and three months ended
September 30, 1997, as compared to 38.8 percent for the same period in the
prior fiscal year. This change is primarily caused by increased pretax margins
in countries with lower effective tax rates, as well as the successful
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restructuring of the European Region with a resulting overall lower effective
tax rate.
Net income for the quarter was $44.5 million or 35 cents per share, a 24.0
percent increase compared with $35.9 million or 29 cents per share (after the
March, 1997 25% stock dividend), for the same quarter last fiscal year. Net
income for the quarter increased 32.2 percent over the same quarter last fiscal
year, excluding the effects of the currency translation.
LIQUIDITY AND CAPITAL
Molex's balance sheet continues to be exceptionally strong. Working capital at
September 30, 1997 was $544.8 million, a slight increase from the $531.6
million at June 30, 1997.
The Company purchased 130,000 shares of treasury stock at an aggregate cost of
$5.1 million during the quarter. This is part of an up to $50 million stock
buyback authorized by the Board of Directors for the current fiscal year.
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 1998 continue to be encouraging. To
further expand the Company's global presence, offer innovative products at an
accelerated pace, and improve internal productivity, Molex plans to invest
approximately $240 million in capital expenditures and $100 million in research
and development for the fiscal year ending June 30, 1998.
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.
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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.
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PART II - OTHER INFORMATION
Items 1 - 6. Not Applicable
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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
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(Registrant)
Date 1997 /s/ ROBERT B. MAHONEY
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Robert B. Mahoney
Corporate Vice President
and Treasurer
Date 1997 /s/ LOUIS A. HECHT
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Louis A. Hecht
Corporate Secretary and
General Counsel
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS FOR 1ST QUARTER 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> $183,606
<SECURITIES> 138,054
<RECEIVABLES> 339,082
<ALLOWANCES> 0
<INVENTORY> 162,946
<CURRENT-ASSETS> 47,353
<PP&E> 659,794
<DEPRECIATION> 33,900
<TOTAL-ASSETS> 871,041
<CURRENT-LIABILITIES> 326,200
<BONDS> 0
0
0
<COMMON> 139,850
<OTHER-SE> 1,097,425
<TOTAL-LIABILITY-AND-EQUITY> 1,620,200
<SALES> 410,194
<TOTAL-REVENUES> 410,194
<CGS> 239,861
<TOTAL-COSTS> 344,321
<OTHER-EXPENSES> 104,460
<LOSS-PROVISION> 283
<INTEREST-EXPENSE> (3,664)
<INCOME-PRETAX> 69,254
<INCOME-TAX> 24,798
<INCOME-CONTINUING> 44,456
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,456
<EPS-PRIMARY> $0.35
<EPS-DILUTED> $0.35
</TABLE>
