<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1998 Commission File Number 0-7491
MOLEX INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 36-2369491
- ---------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
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
---------------
Securities registered pursuant to Section 12 (b) of the Act: None
------
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $0.05
Class A Common Stock, par value, $0.05
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
----- -----
On August 31, 1998, the following numbers of shares of the Company's common
stock were outstanding:
Common Stock 76,932,479
Class A Common Stock 79,378,329
Class B Common Stock 94,255
The aggregate market value of the voting shares (based on the closing price
of these shares on the National Association of Securities Dealers Automated
Quotation System on such date) held by non-affiliates was approximately $1.0
billion.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended June 30,
1998, are incorporated by reference into Parts I, II and IV of this report.
Portions of the Proxy Statement for the annual meeting of Stockholders, to
be held on October 23, 1998 are incorporated by reference into Part III of this
report.
Index to Exhibits listed on Pages 20 through 21.
1
<PAGE> 2
TABLE OF CONTENTS
Part I Page
----
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Part II
Item 5. Market for the Registrant's Common Equity and 10
Related Stockholder Matters
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
Item 7a. Quantitative and Qualitative Disclosures About 11
Market Risk
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements with Accountants on 12
Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the Registrant 13
Item 11. Executive Compensation 15
Item 12. Security Ownership of Certain Beneficial Owners 15
and Management.
Item 13. Certain Relationships and Related Transactions 15
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports 16
on Form 8-K
Independent Auditors' Report on Schedule 18
Statements of Changes in Shares Outstanding 19
Schedule II - Valuation and Qualifying Accounts 20
Index to Exhibits 21
Signature Page 23
2
<PAGE> 3
PART I
ITEM 1 - BUSINESS
GENERAL DEVELOPMENT OF THE BUSINESS
Molex Incorporated originated from an enterprise established in 1938. It
was incorporated in 1972 in the state of Delaware. As used herein the term
"Molex" or "Company" includes Molex Incorporated and its United States and
international subsidiaries.
GENERAL DESCRIPTION OF THE BUSINESS
Molex is a leading manufacturer of electronic, electrical and fiber optic
interconnection products and systems; switches; value-added assemblies; and
application tooling. The Company operates 49 plants in 21 countries and
employs 12,455 people worldwide. In fiscal 1998, products manufactured
and sold outside the U.S. generated 66% of sales.
Molex serves original equipment manufacturers in industries that include
automotive, computer, computer peripheral, business equipment,
telecommunications, consumer products and premise wiring. The Company
offers more than 100,000 products to customers primarily through direct
sales people and authorized distributors. The worldwide market for
electronic connectors, cable assemblies and backplanes was estimated at
$27.1 billion*. With a 6.0% market share, Molex is the second-largest
connector manufacturer in the world in what is a fragmented but highly
competitive industry.
Molex conducts business in one industry segment: the manufacture and sale
of electrical components. The Company designs, manufactures, and
distributes electrical and electronic devices such as terminals,
connectors, planer cables, cable assemblies, interconnection systems, fiber
optic interconnection systems, backplanes and mechanical and electronic
switches. Crimping machines and terminal inserting equipment (known as
"application tooling") are offered on a lease or purchase basis to the
Company's customers for the purpose of applying the Company's components to
the customers' products. Net revenue from application tooling constitutes
approximately 1% of the Company's net revenues. Molex products are
designed for use in a broad range of electrical and electronic applications
as set forth below:
* Source: Fleck International
3
<PAGE> 4
<TABLE>
<CAPTION>
Percentage of
Fiscal 1998
Market Net Revenue Products
-------- ------------- ---------------------
<S> <C> <C>
Computer/business equipment/ 52% Computers, peripheral
telecommunications equipment, calculators,
copiers, pagers and
dictation equipment
Consumer Products 22% Televisions, stereo high
fidelity systems, compact
disc players, video tape
recorders, camcorders,
electronic games, microwave
ovens, refrigerators,
freezers, dishwashers,
disposals and air
conditioners
Automotive 16% Automobiles, trucks,
recreational vehicles and
farm equipment
Other 10% Electronic medical equipment,
vending machines, security
equipment and modular office
furniture and premise wiring
</TABLE>
The Company sells its products primarily to original equipment
manufacturers and their subcontractors and suppliers. The Company's
customers include various multinational companies, including Apple, AT&T,
Canon, Compaq, Delco, Ford, Hewlett Packard, IBM, JVC, Matsushita,
Motorola, Philips, Sony, Thomson, Toshiba, and Xerox, many of which Molex
serves on a global basis. Net revenues contributed by different industry
groups fluctuate due to various factors including model changes, new
technology, introduction of new products and composition of customers. No
customer accounted for 10% or more of net revenues in fiscal years 1998,
1997 or 1996. While its customers generally make purchasing decisions on a
decentralized basis, Molex believes that, due to its financial strength and
product development capabilities, it has and will continue to benefit from
the trend of many of its customers toward the use of fewer vendors.
4
<PAGE> 5
In the United States and Canada, the Company sells its products primarily
through direct sales engineers and industrial distributors.
Internationally, Molex sells primarily through its own sales organizations
in Japan, Hong Kong, Singapore, Taiwan, Republic of Korea, Malaysia,
Thailand, China, Australia, England, Italy, Ireland, France, Spain,
Germany, the Netherlands, Switzerland, Poland, Sweden, Norway, Denmark,
South Africa, India, Canada, Mexico and Brazil.
Outside of the United States and Canada, Molex also sells its products
through manufacturers' representative organizations, some of which act as
distributors, purchasing from the Company for resale. The manufacturers'
representative organizations are granted exclusive territories and are
compensated on a commission basis. These relationships are terminable by
either party on short notice. All sales orders received are subject to
approval by the Company.
The Company promotes its products through leading trade magazines, direct
mailings, catalogs and other promotional literature. Molex is a frequent
participant in trade shows and also conducts educational seminars for its
customers and its manufacturers' representative organizations.
There was no significant change in the Company's suppliers, products,
markets or methods of distribution during the last fiscal year.
Molex generally seeks to locate manufacturing facilities to serve local
customers and currently has 49 manufacturing facilities in 21 countries on
six continents.
The principal raw materials and component parts Molex purchases for the
manufacture of its products include brass, copper, aluminum, steel, tin,
nickel, gold, silver, nylon and other molding materials, and nuts, bolts,
screws and rivets. Virtually all materials and components used in the
Company's products are available from several sources. Although the
availability of such materials has generally been adequate, no assurance
can be given that additional cost increases or material shortages or
allocations imposed by its suppliers in the future will not have a
materially adverse effect on the operations of the Company.
5
<PAGE> 6
COMPETITION
The business in which the Company is engaged is highly competitive. Most
of the Company's competitors offer products in some but not all of the
industries served by the Company. Molex believes that the ability to meet
customer delivery requirements and maintenance of product quality and
reliability are competitive factors that are as important as product
pricing. Some of the Company's competitors have been established longer
and have substantially larger manufacturing, sales, research and financial
resources.
PATENTS/TRADEMARKS
As of June 30, 1998, the Company owned 684 United States patents and had
237 patent applications on file with the United States Patent Office. The
Company also has 2,056 corresponding patents issued and 2,766 applied for
in other countries as of June 30, 1998. No assurance can be given that any
patents will be issued on pending or future applications. As the Company
develops products for new markets and uses, it normally seeks available
patent protection. The Company believes that its patents are of importance
but does not consider itself materially dependent upon any single patent or
group of related patents.
BACKLOG
The backlog of unfilled orders at June 30, 1998 was approximately $231.0
million; this compares to $260.5 million at June 30, 1997. Substantially
all of these orders are scheduled for delivery within twelve months. The
Company's experience is that orders are normally delivered within ninety
days from acceptance.
RESEARCH AND DEVELOPMENT
Molex incurred total research and development costs of $93.9 million in
1998, $89.5 million in 1997, and $85.5 million in 1996. The Company
incurred costs relating to obtaining patents of $5.4 million in 1998, $5.6
million in 1997, and $6.7 million in 1996 which are included in total
research and development costs. The Company's policy is to charge these
costs to operations as incurred.
The Company introduced many new products during the year; however, in the
aggregate, these products did not require a material investment of assets.
6
<PAGE> 7
COMPLIANCE
The Company believes it is in full compliance with federal, state and local
regulations pertaining to environmental protection. The Company does not
anticipate that the costs of compliance with such regulations will have a
material effect on its capital expenditures, earnings or competitive
position.
EMPLOYEES
As of June 30, 1998, the Company employed 12,455 people worldwide. The
Company believes its relations with its employees are favorable.
INTERNATIONAL OPERATIONS
The Company is engaged in material operations in foreign countries. Net
revenue derived from international operations for the fiscal year ended
June 30, 1998 was approximately 66% of consolidated net revenue.
The Company believes the international net revenue and earnings will
continue to be significant. The analysis of the Company's operations by
geographical area appears in footnote 10 on page 49 of the 1998 Annual
Report to Shareholders and is incorporated herein by reference.
7
<PAGE> 8
ITEM 2 - PROPERTIES
Molex owns and leases manufacturing, warehousing and office space in
several locations around the world. The total square footage of these
facilities is presented below:
Owned Leased Total
--------- ------- ---------
3,681,333 553,770 4,235,103
The leases are of varying terms with expirations ranging from fiscal 1998
through fiscal 2025. The leases in aggregate are not considered material
to the financial position of the Company.
The Company's buildings, machinery and equipment have been well maintained
and are adequate for its current needs.
A listing of principal manufacturing facilities is presented below:
AUSTRALIA IRELAND REPUBLIC OF KOREA
Melton, Victoria Millstreet Town Ansan City (2)
Shannon
BRAZIL SINGAPORE
Manaus ITALY Jurong Town
Sao Paulo Padova
SOUTH AFRICA
CANADA JAPAN Midrand
Scarborough, Ontario Kagoshima
Okayama TAIWAN
CHINA (P.R.C.) Shioya Taipei
Dongguan Shizuoka
Shanghai Yamato THAILAND
Bangkok
ENGLAND MALAYSIA
Bordon Perai, Penang UNITED STATES
Southhampton North Little Rock, Arkansas
MEXICO Maumelle, Arkansas (2)
FRANCE Guadalajara Menlo Park, California
Chateau Gontier Magdalena Orange, California
Nogales (2) Pinellas Park, Florida
GERMANY St. Petersburg, Florida
Biberach POLAND Downers Grove, Illinois
Ettlingen Starogard Lisle, Illinois (2)
Naperville, Illinois
INDIA PUERTO RICO Mooresville, Indiana
Bangalore Ponce Lincoln, Nebraska (3)
Manchester, New Hampshire
8
<PAGE> 9
ITEM 3 - LEGAL PROCEEDINGS
None deemed material to the Company's financial position or consolidated
results of operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
<PAGE> 10
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Molex is traded on the National Market System of the NASDAQ in the United
States and on the London Stock Exchange. The information set forth under
the caption "Fiscal 1998, 1997, and 1996 by Quarter (Unaudited)" on page
50 of the 1998 Annual Report to Shareholders is incorporated herein by
reference.
The following table presents quarterly dividends per common share for the
last two fiscal years. The fiscal 1998 and 1997 dividends per share have
been restated for the November, 1997 and February, 1997 25% stock
dividends.
<TABLE>
<CAPTION>
Class A
Common Stock Common Stock
Fiscal 1998 Fiscal 1997 Fiscal 1998 Fiscal 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Quarter Ended -
September 30, 0.0120 0.0100 0.0120 0.0100
December 31, 0.0150 0.0100 0.0150 0.0100
March 31, 0.0150 0.0120 0.0150 0.0120
June 30, 0.0150 0.0120 0.0150 0.0120
----------- ----------- ----------- ------------
Total 0.0570 0.0440 0.0570 0.0440
=========== =========== =========== ============
</TABLE>
Cash dividends on Common Shares have been paid every year since 1977.
A description of the Company's Common Stock appears in footnote 3 on page
44 of the 1998 Annual Report to Shareholders and is incorporated herein by
reference.
On June 6, 1997, the Company issued 59,477 shares of Class A Common Stock
to holders of a class of securities in a subsidiary of the Company in
exchange for all of the shares of that class of securities owned by such
holders. The transaction was exempt from registration under the Securities
Act of 1933 pursuant to Section 4(2) thereunder in that the issuance to
this limited group of sophisticated investors did not involve a public
offering.
10
<PAGE> 11
ITEM 6 - SELECTED FINANCIAL DATA
The information set forth under the caption "Ten Year Financial Highlight
Summary" (only the five years in the period ended June 30, 1998) on page 31
of the 1998 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth under the caption "Management's Discussion of
Financial Condition and Results of Operations" on pages 32 through 36 of
the 1998 Annual Report to Shareholders is incorporated herein by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk associated with changes in foreign
currency exchange rates, interest rates and certain commodity prices. The
Company mitigates its foreign currency exchange rate risk principally
through the establishment of local production facilities in the markets it
serves and invoicing of customers in the same currency as the source of the
products. Molex also monitors its foreign currency exposure in each country
and implements strategies to respond to changing economic and political
environments. Examples of these strategies include the prompt payment of
intercompany balances utilizing a global netting system, the establishing
of contra-currency accounts in several international subsidiaries,
development of natural hedges and occasional use of foreign exchange
contracts. One of the Company's subsidiaries utilizes derivative commodity
futures contracts to hedge against fluctuations in commodity price
fluctuations. Such commodity futures contracts are limited to a maximum
duration of eighteen months.
A formalized treasury risk management policy has been implemented by the
Company which describes the procedures and controls over derivative
financial and commodity instruments. Under the policy, the Company does
not use derivative financial or commodity instruments for trading purposes
and the use of such instruments are subject to strict approval levels by
senior officers. Typically, the use of such derivative instruments is
limited to hedging activities related to specific foreign currency cash
flows or inventory purchases. The Company's exposure related to such
transactions is, in the aggregate, not material to the Company's financial
position, results of operations and cash flows.
Interest rate exposure is principally limited to the $117.2 million of
marketable securities owned by the Company. Such securities are debt
instruments which generate interest income for the Company on temporary
excess cash balances. The Company does not actively manage the risk of
interest rate fluctuations, however, such risk is mitigated by the
relatively short term, less than twelve months, nature of these
investments.
11
<PAGE> 12
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company set forth on
pages 38 through 49 of the 1998 Annual Report to Shareholders and the
independent auditors' report set forth on page 37 of the 1998 Annual Report
to Shareholders are incorporated herein by reference:
Independent Auditors' Report
Consolidated Balance Sheets - June 30, 1998 and 1997
Consolidated Statements of Income for the years ended June 30, 1998,
1997 and 1996
Consolidated Statements of Shareholders' Equity for the years ended
June 30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended June 30,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
The supplementary data regarding quarterly results of operations, set forth
under the caption "Fiscal 1998, 1997, and 1996 by Quarter (Unaudited)" on
page 50 of the 1998 Annual Report to Shareholders, is incorporated herein
by reference.
The statement of changes in shares outstanding appears on Page 18 of this
Form 10-K.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
12
<PAGE> 13
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the caption "Election of Directors" in the Company's
Proxy Statement for the annual meeting of Stockholders to be held on
October 23, 1998 (the "Company's 1998 Proxy Statement") is incorporated
herein by reference. The information called for by Item 401 of Regulation
S-K relating to the Executive Officers is furnished below.
Executive Officers of the Registrant
The following information relates to the executive officers of the
Registrant who serve at the discretion of the Board of Directors and are
customarily elected for one-year terms at the Regular Meeting of the Board of
Directors held immediately following the Annual Stockholders' Meeting. All of
the executive officers named hold positions as officers and/or directors of one
or more subsidiaries of the Registrant. For purposes of this disclosure, only
the principal positions are set forth.
<TABLE>
<CAPTION>
Year
Employed
Positions Held with Registrant by
Name During the Last Five Years(a) Age Registrant
------------------------- ------------------------------------- --------- -------------------
<S> <C> <C> <C>
Frederick A. Krehbiel(b) Chairman (1993-) and Chief 57 1965(c)
Executive Officer (1988-).
John H. Krehbiel, Jr.(b) President (1975-) and Chief 61 1959(c)
Operating Officer (1996-).
J. Joseph King Executive Vice President (1996-);
Group Vice President-International 54 1975
Operations (1988-1996).
Raymond C. Wieser Senior Vice President, Americas
Region (1996-); Corporate Vice
President and President, 60 1965(c)
Commercial Division-U.S.
Operations (1994-1996); Group
Vice President-U.S. Operations
(1989-1994).
Robert B. Mahoney Corporate Vice President, 45 1995
Treasurer and Chief Financial
Officer (1996-); Vice President
(1994-1995) and Corporate
Controller (1990-1995) of
National Semiconductor Corporation.
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
Year
Employed
Positions Held with Registrant by
Name During the Last Five Years (a) Age Registrant
------------------- ---------------------------------- ------- --------------
<S> <C> <C> <C>
Ronald L. Schubel Corporate Vice President (1982-) 55 1981
and Regional President, Far East
South (1994-1998); President,
Commercial Division-U.S. Operations
(1982-1994).
Werner W. Fichtner Corporate Vice President 55 1981
(1987-) and Regional President,
Europe (1981-).
Goro Tokuyama Corporate Vice President 64 1985
(1990-), Regional President,
Far East North (1988-), and
President of Molex Japan Co.,
Ltd. (1985-).
Martin P. Slark Corporate Vice President 43 1976
(1990-) and Regional President,
Americas (1996-); Regional
President, U.S. (1994-1996);
Regional President, Far East
South (1988-1994).
James E. Fleischhacker Corporate Vice President 54 1984
(1994-) and Regional President,
Far East South (1998-); President,
DataComm Division-Americas
(1989-1998).
Kathi M. Regas Corporate Vice President (1994-); 42 1985
Director, Human Resources
U.S. Operations (1989-1995).
Louis A. Hecht Corporate Secretary (1977-) and 54 1974
General Counsel (1975-).
</TABLE>
__________________________________________________________________________
(a) All positions are with Registrant unless otherwise stated.
(b) John H. Krehbiel, Jr. and Frederick A. Krehbiel (the "Krehbiel
Family") are brothers. The members of the Krehbiel Family may be
considered to be "control persons" of the Registrant. The other officers
listed above have no relationship, family or otherwise, to the Krehbiel
family, Registrant or each other.
(c) Includes period employed by Registrant's predecessor.
14
<PAGE> 15
ITEM 11 - EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation" in the Company's
1998 Proxy Statement is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information under the caption "Security Ownership of Management and of
Certain Beneficial Owners" in the Company's 1998 Proxy Statement is
incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the captions "Election of Directors," "Indebtedness
of Management" and "Security Ownership of Management and of Certain
Beneficial Owners" in the Company's 1998 Proxy Statement is herein
incorporated by reference.
15
<PAGE> 16
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements contained in the
Company's 1998 Annual Report to Shareholders have been incorporated by
reference in Item 8.
<TABLE>
<CAPTION>
Page(s) in
Annual Report
Item to Shareholders
----------------------- ------------------
<S> <C>
Independent Auditors' Report 37
Consolidated Balance Sheets - June 30, 1998
and 1997 38-39
Consolidated Statements of Income - for
the years ended June 30, 1998, 1997 and 1996 40
Consolidated Statements of Shareholders' Equity -
for the years ended June 30, 1998, 1997 and 1996 41
Consolidated Statements of Cash Flows - for the
years ended June 30, 1998, 1997 and 1996 42
Notes to Consolidated Financial Statements 43-49
Fiscal 1998, 1997 and 1996 by Quarter (Unaudited) 50
(a) 2. Financial Statement Schedule
Page in the
Form 10-K
-------------
Independent Auditors' Report on Schedule 18
Statements of Changes in Shares Outstanding 19
for the years ended June 30, 1998, 1997 and 1996
Schedule II - Valuation and Qualifying Accounts 20
</TABLE>
16
<PAGE> 17
All other schedules are omitted because they are inapplicable, not required
under the instructions, or the information is included in the consolidated
financial statements or notes thereto.
Separate financial statements for the Company's unconsolidated affiliated
companies, accounted for by the equity method, have been omitted because
they do not constitute significant subsidiaries.
(a) 3. Exhibits
The exhibits listed on the accompanying Index to Exhibits are filed or
incorporated herein as part of this Report.
(b) Reports on Form 8-K
Molex filed no reports on Form 8-K with the Securities and Exchange
Commission during the last quarter of the fiscal year ended June 30, 1998.
17
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Shareholders of Molex Incorporated
Lisle, Illinois
We have audited the consolidated financial statements of Molex Incorporated and
its subsidiaries as of June 30, 1998 and 1997, and for each of the three years
in the period ended June 30, 1998, and have issued our report thereon dated July
22, 1998; such financial statements and report are included in your 1998 Annual
Report to Shareholders and are incorporated herein by reference. Our audits also
included the statements of changes in shares outstanding and the financial
statement schedule of Molex Incorporated and its subsidiaries, listed in Item
14(a)2. These statements of changes in shares outstanding and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such statements of changes in shares outstanding and financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Chicago, Illinois
July 22, 1998
18
<PAGE> 19
Molex Incorporated
Statements of Changes in Shares Outstanding
For the Years Ended June 30, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Class A Class B
Common Common Common Treasury
Stock Stock Stock Stock
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Shares outstanding at
June 30, 1995 51,895,780 52,432,699 94,255 3,484,725
Exercise of stock options 471,229
Purchase of treasury stock 785,000
Disposition of treasury stock (72,162)
Purchase of business 108,257
Issuance of stock bonus 11,812
Other (1,017)
-------------- --------------- ------------ -------------
Shares outstanding at
June 30, 1996 52,378,821 52,539,939 94,255 4,197,563
Exercise of stock options 448,849 39,447
Purchase of treasury stock 1,026,250
Purchase of business (59,477)
Stock splits effected in the form 13,214,185 13,130,067 1,164,575
of dividends
Other 11,856 (11,856) (40,933)
------------- ------------- ------------ -------------
Shares outstanding at
June 30, 1997 66,053,711 65,658,150 94,255 6,327,425
Exercise of stock options 588,395 24,744
Purchase of treasury stock 1,540,000
Disposition of treasury stock 26,131 (59,814)
Stock splits effected in the form 16,593,237 16,414,537 1,699,612
of dividends
------------- ------------- ------------ -------------
Shares outstanding at
June 30, 1998 83,261,474 82,072,687 94,255 9,531,967
============= ============= ============ =============
</TABLE>
19
<PAGE> 20
Molex Incorporated
Schedule II - Valuation and Qualifying Accounts
For the Years Ended June 30, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Allowance for Loss Balance at Balance
and Adjustments on Beginning Charged to Accounts Translation at End
Receivables: of Period Income Written Off Adjustments of Period
- ------------------ --------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
1998 $14,586 $3,707 ($644) ($535) $17,114
======= ====== ====== ====== =======
1997 $12,566 $3,019 ($488) ($511) $14,586
======= ====== ====== ====== =======
1996 $11,934 $1,831 ($548) ($651) $12,566
======= ====== ====== ====== =======
</TABLE>
20
<PAGE> 21
MOLEX INCORPORATED
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- --------------------------------------
3 3.1 Certificate of Incorporation
(as amended)
3.2 By-Laws (as amended)
(incorporated by reference to 1995
Form 10-K, Exhibit 3.2)
4 Instruments defining rights of
security holders including
indentures. See Exhibit 3.1
10 Material Contracts
10.1 The Molex Deferred Compensation
Plan (incorporated by reference
to 1984 Form 10-K, Exhibit 10.6)
10.2 The 1990 Molex Incorporated
Executive Stock Bonus Plan
(as amended)
10.3 The 1990 Molex Incorporated
Stock Option Plan (as amended)
10.4 The 1991 Molex Incorporated
Incentive Stock Option Plan
(as amended)
13 Molex Incorporated Annual report to Shareholders for
the year ended June 30, 1998. (Such Report, except to
the extent incorporated herein by reference, is being
furnished for the information of the Securities and
Exchange Commission only and is not to be deemed filed
as a part of this annual report on Form 10-K)
21
<PAGE> 22
Exhibit
Number Exhibit
- ------- --------------------------------------
22 Subsidiaries of registrant
24 Independent Auditors' Consent
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
(All other exhibits are either inapplicable or not required)
22
<PAGE> 23
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Company has duly caused this Annual Report to be signed on its
behalf by the undersigned, there unto duly authorized.
MOLEX INCORPORATED
------------------
(Company)
/s/ ROBERT B. MAHONEY
September 22, 1998 --------------------------------
By: Robert B. Mahoney
Corporate Vice President, Treasurer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
September 22, 1998 /s/ F. A. KREHBIEL
--------------------------------
F. A. Krehbiel
Chairman of the Board and
Chief Executive Officer
September 22, 1998 /s/ J. H. KREHBIEL, JR.
--------------------------------
J. H. Krehbiel, Jr.
President, Chief Operating Officer
and Director
/s/ ROBERT B. MAHONEY
--------------------------------
September 22, 1998 Robert B. Mahoney
Corporate Vice President, Treasurer
and Chief Financial Officer
September 22, 1998 /s/ F. L. KREHBIEL
--------------------------------
F. L. Krehbiel
Director
September 22, 1998 /s/ MICHAEL J. BIRCK
--------------------------------
Michael J. Birck
Director
September 22, 1998 /s/ DONALD G. LUBIN
--------------------------------
Donald G. Lubin
Director
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EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
MOLEX INCORPORATED
(Restated to include all amendments through October 28, 1997)
FIRST: The name of the corporation is
MOLEX INCORPORATED
SECOND: The address of its registered office in the State of Delaware is
NO. 100 WEST TENTH STREET, in the City of WILMINGTON, County of NEW CASTLE. The
name of its registered agent at such address is THE CORPORATION TRUST COMPANY.
THIRD: The nature of the business or purposes to be conducted or promoted
is:
Merchandise, manufacture, buy, sell, deal in and with plastic moldings,
electrical and electronic assemblies, electrical and electronic devices,
machines, tools, parts for tools or machines; and further to manufacture, buy,
sell, distribute, deal in and with goods, wares and merchandise or all kinds, at
wholesale or retail or on consignment.
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
To manufacture, purchase or otherwise acquire, invest in, own, mortgage,
pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and
deal with goods, wares and merchandise and personal property of every class and
description.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect of,
mortgage or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trade-marks and trade names, relating to
or useful in connection with any business of this corporation.
To acquire by purchase, subscription or otherwise, and to receive, hold,
own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise
dispose of or deal in and with any of the shares of the capital stock, or any
voting trust certificates in respect of the shares of capital stock, scrip,
warrants, rights, bonds, debentures, notes, trust receipts, and other
securities, obligations, choses in action and evidences of indebtedness or
interest issued or created by any corporations, joint
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stock companies, syndicates, associations, firms, trusts or persons, public or
private, or by the government of the United States of America, or by any foreign
government, or by any state, territory, province, municipality or other
political subdivision or by any governmental agency, and as owner thereof to
possess and exercise all the rights, powers and privileges of ownership,
including the right to execute consents and vote thereon, and to do any and all
acts and things necessary or advisable for the preservation, protection,
improvement and enhancement in the value thereof.
To borrow or raise moneys for any of the purposes of the corporation and,
from time to time without limit as to amount, to draw, make, accept, endorse,
execute and issue promissory notes, drafts, bills of exchange, warrants, bonds,
debentures and other negotiable or non-negotiable instruments and evidences of
indebtedness, and to secure the payment of any thereof and of the interest
thereon by mortgage upon or pledge, conveyance or assignment in trust of the
whole or any part of the property of the corporation, whether at the time owned
or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds
or other obligations of the corporation for its corporate purposes.
To purchase, receive, take by grant, gift, devise, bequest or otherwise,
lease, or otherwise acquire, own, hold, improve, employ, use and otherwise deal
in and with real or personal property, or any interest therein, wherever
situated, and to sell, convey, lease, exchange, transfer or otherwise dispose
of, or mortgage or pledge, all or any of the corporation's property and assets,
or any interest therein, wherever situated.
In general, to possess and exercise all the powers and privileges granted
by the General Corporation Law of Delaware or by any other law of Delaware or by
this certificate of incorporation together with any powers incidental thereto,
so far as such powers and privileges are necessary or convenient to the conduct,
promotion or attainment of the business or purposes of the corporation.
The business and purposes specified in the foregoing clauses shall, except
where otherwise expressed, be in nowise limited or restricted by reference to,
or inference from, the terms of any other clause in this certificate of
incorporation, but the business and purposes specified in each of the foregoing
clauses of this article shall be regarded as independent business and purposes.
FOURTH:
A. AUTHORIZED CAPITAL STOCK
(1) COMMON STOCK: The total number of shares of common stock which the
corporation shall have authority to issue is FOUR HUNDRED MILLION ONE HUNDRED
FORTY-SIX THOUSAND SEVENTY-EIGHT (400,146,078) SHARES, consisting of: (i) TWO
HUNDRED MILLION (200,000,000 SHARES OF COMMON STOCK, par value $.05 per share
(the "COMMON STOCK"), subject to PARAGRAPH E OF THIS ARTICLE FOURTH, (ii) TWO
HUNDRED MILLION (200,000,000) SHARES OF CLASS A COMMON STOCK, par value $.05 per
share (the "CLASS A COMMON STOCK"), subject to PARAGRAPH E OF THIS ARTICLE
FOURTH and (iii) ONE HUNDRED FORTY-SIX THOUSAND SEVENTY-EIGHT (146,078)
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SHARES OF CLASS B COMMON STOCK, par value $.05 per share (the "CLASS B COMMON
STOCK").
(2) PREFERRED STOCK: The total number of shares of preferred stock which
the corporation shall have authority to issue is TWENTY FIVE MILLION
(25,000,000) SHARES, par value $.01 per share ("PREFERRED STOCK"). Shares of
Preferred Stock may be dividend into and issued in series or classes as from
time to time determined by the board of directors of the corporation, the shares
of each series or class to have such voting rights, designations, preferences,
and relative, participating, optional or special rights, and qualifications,
limitations or restrictions thereof as determined by the board of directors of
the corporation as hereinafter provided. Each series or class shall be so
designated as to distinguish the shares thereof from the shares of all other
series and classes.
Authority is hereby expressly granted to the board of directors of the
corporation, subject to the provisions of this ARTICLE FOURTH and to the
limitations prescribed by the General Corporation Law of Delaware, to authorize
the issuance of one or more series or classes of Preferred Stock and with
respect to each such series or class to fix for such series or class the voting
powers, designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof. The
authority of the board of directors of the corporation with respect to each
series or class shall include, but not be limited to, the determination or
fixing of the following:
(i) the designation of such series or class;
(ii) the dividend rate of such series or class, the conditions and
dates upon which such dividends shall be payable, the relation
which such dividends shall bear to the dividends payable on any
other class or classes of stock or any other series of such
dividends shall be cumulative or non-cumulative;
(iii) whether the shares of such series or class shall be subject to
redemption by the corporation and, if made subject to such
redemption, the times, prices and other terms and conditions of
such redemption;
(iv) the terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series or class;
(v) whether or not the shares of such series or class shall be
convertible into or exchangeable for shares of any other class or
classes of any stock or any other series of any class of stock of
the corporation, and, if provision is made for conversion or
exchange, the times, prices, rates, adjustments, and other terms
and conditions of such conversion or exchange;
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(vi) the extent, if any, to which the holders of shares of such
series or class shall be entitled to vote with respect to the
election of directors or otherwise;
(vii) the restrictions, if any on the issue or reissue of any
additional Preferred Stock; and
(viii) the rights of the holders of the shares of such series or class
upon the liquidation, dissolution, or distribution of assets of
the corporation.
A statement of the designations of each class of common stock and the
powers, preferences and rights, qualifications, limitations or restrictions
thereof is as follows:
B. DIVIDENDS
After the corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as purchase, retirement of
sinking funds, and subject to the priorities and preferences of the Preferred
Stock, then and not otherwise the holders of the Common Stock, Class A Common
Stock, and Class B Common Stock shall be entitled to receive such dividends if,
as and when declared from time to time by the board of directors. Dividends and
stock splits shall be declared and paid to holders of any class of common stock
only if such dividends and stock splits are declared and paid to holders of all
classes of common stock on an equal per share basis.
If at any time a distribution of Common Stock, Class B Common Stock, Class
A Common Stock or any other securities of the company is to be made to holders
of any class of common stock (hereinafter sometimes referred to as "SHARE
DISTRIBUTION"), such share distribution may be declared and paid only as
follows:
(i) a share distribution consisting of shares of Common Stock to
holders of Common Stock and Class B Common Stock on an equal per
share basis; provided, there shall also be a simultaneous share
distribution of Class A Common Stock to holders of Class A
Common Stock consisting of shares of Class A Common Stock on an
equal per share basis;
(ii) a share distribution consisting of shares of Class A Common
Stock to holders of Class A Common Stock on an equal per share
basis; provided, there shall also be a simultaneous share
distribution of Common Stock to holders of Common Stock and
Class B Common Stock on an equal per share basis; and
(iii) a share distribution consisting of any other class of
securities of the corporation to the holders of Common
Stock, Class B Common Stock
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and Class A Common Stock on an equal per share basis.
Notwithstanding the preceding sentence, a share distribution consisting of
shares of Class A Common Stock may be declared and paid to holders of Common
Stock and Class B Common Stock on an equal per share basis if such distribution
represents the initial issuance of shares of Class A Common Stock.
C. OTHER DISTRIBUTIONS
Notwithstanding anything to the contrary contained in ARTICLE THIRTEENTH
hereof, in the event of any merger or consolidation, voluntary or involuntary
liquidation, dissolution, distribution of assets of winding-up of the
corporation and subject to the priorities and preferences of the Preferred
Stock, each share of Common Stock, Class A Common Stock, and Class B Common
Stock shall entitle the holder thereof to receive the identical consideration
with respect to whatever kind of assets are available for distribution to
holders of common stock or stock into which shares of common stock of the
corporation are converted.
D. VOTING RIGHTS AND POWERS
(1) COMMON STOCK: Each holder of Common Stock shall be entitled to one
vote for each share of Common Stock held on any matter required to be approved,
by vote or otherwise, by the stockholders of the corporation.
(2) CLASS A COMMON STOCK: No share of Class A Common Stock shall
entitle the holder thereof to any vote, consent or approval with respect to any
matter requiring approval, by vote or otherwise, by the stockholders of the
corporation except as otherwise required by law.
(3) CLASS B COMMON STOCK: Each holder of Class B Common Stock shall be
entitled to one vote for each share of Class B Common Stock held by him upon any
matter coming before any annual or special meeting of the stockholders of the
corporation; and, so long as more than fifty percent (50%) of the authorized
number of shares of Class B Common Stock are outstanding, the holders of said
shares of Class B Common Stock shall vote as a separate class upon any corporate
matter, except the election of directors of the corporation, submitted to a vote
of the stockholders of the corporation at any annual or special meeting thereof,
and the approval of the holders of said shares of Class B Common Stock, voting
as a class, shall be a prerequisite to the adoption of any matter submitted to a
vote of the stockholders.
E. CONVERSION
In the event that at any time the board of directors determines, in good
faith, that either of the following events has occurred (i) the aggregate number
of outstanding shares of Common Stock and Class B Common Stock together is less
than 10% of the aggregate number of outstanding shares
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of Common Stock, Class B Common Stock, and Class A Common Stock together, or
(ii) any "person", as such term is defined in ARTICLE THIRTEENTH, PARAGRAPH B(1)
of this Certificate of Incorporation, other than one or more members of the
Krehbiel Family (as defined below), becomes or is the Beneficial Owner, as such
term is defined in ARTICLE THIRTEENTH, PARAGRAPH B(3) of this Certificate of
Incorporation, of a majority of the outstanding shares of Common Stock; each
authorized share of Class A Common Stock (whether or not then issued) shall
automatically be converted into one share of Common Stock. Upon such
conversion, the total number of shares of Common Stock the corporation shall
have authority to issue shall be ONE HUNDRED TWENTY MILLION (120,000,000) SHARES
and the total number of shares of Class A Common Stock the corporation shall
have authority to issue shall be zero (0) shares. Such conversion ratio as set
forth in this paragraph, shall, in all events, be equitably preserved in the
event of any recapitalization of the corporation by means of a stock dividend
on, or split or combination of outstanding Common Stock or Class A Common Stock,
or in the event of any merger, consolidation or other reorganization of the
corporation with another corporation. In making such determination, the board
of directors may conclusively rely on any information or documentation available
to it, including filings made with the Securities and Exchange Commission, any
stock exchange, the National Association of Securities Dealers, Inc. or any
other governmental or regulatory agencies, or any written instrument purporting
to be authentic. Upon the board of director's determination of the happening of
either of the events set forth in (i) or (ii) above, the shares of Class A
Common Stock shall be deemed without further action to be immediately and
automatically converted into shares of Common Stock, and stock certificates
formerly representing Class A Common Stock shall thereupon and thereafter be
deemed to represent a like number of shares of Common Stock. The determination
by the board of directors that either (i) or (ii) of this paragraph has occurred
shall be conclusive and binding and the conversion of each share of Class A
Common Stock into one share of Common Stock shall remain effective regardless of
whether either (i) or (ii) of this paragraph has occurred in fact.
As used herein, the term "KREHBIEL FAMILY" shall mean:
(i) John H. Krehbiel, John H. Krehbiel Jr. and Frederick A. Krehbiel
(collectively, the "KREHBIELS"), any of their respective
descendants, and any spouse, widow or widower of any of the
Krehbiels or any of their respective descendants (collectively,
the "FAMILY MEMBERS");
(ii) any trust established by one or more of the Family Members;
(iii) any estate of a Family Member;
(iv) any foundation and any charitable organization that qualifies as
an exempt organization under the Internal Revenue Code of 1986,
as amended, or any successor statute, established by one or more
of the Family Members; and
(v) any corporation or partnership of which a majority of the voting
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power and a majority of the equity interest is held, directly or
indirectly, by or for the benefit of one or more of the Family
Members.
Shares of Class B Common Stock shall be convertible into shares of the
Common Stock of the corporation at the option of the holder thereof at any time
on a share for share basis. Such conversion ratio shall in all events be
equitably preserved in the event of any recapitalization of the corporation by
means of a stock dividend on, or stock split or combination of, outstanding
Common Stock or Class B Common Stock, or in the event of any merger,
consolidation or other reorganization of the corporation with another
corporation. Upon the conversion of Class B Common Stock into shares of Common
Stock, said shares of Class B Common Stock shall be retired and shall not be
subject to reissue.
FIFTH: The name and mailing address of each incorporator is as follows:
Name Mailing Address
---- ---------------
S.E. Widdoes 100 West Tenth Street, Wilmington, Delaware
W.J. Reif 100 West Tenth Street, Wilmington, Delaware
R.A. Finger 100 West Tenth Street, Wilmington, Delaware
SIXTH: The name and mailing address of each person, who is to serve as a
director until the first annual meeting of the stockholders or until a successor
is elected and qualified, is as follows:
Name Mailing Address
---- ---------------
John H. Krehbiel, Sr. 2222 Wellington
Lisle, Illinois 60532
John H. Krehbiel, Jr. 2222 Wellington
Lisle, Illinois 60532
Frederick A. Krehbiel 2222 Wellington
Lisle, Illinois 60532
Marie Manatte 2222 Wellington
Lisle, Illinois 60532
SEVENTH: The corporation is to have perpetual existence.
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EIGHTH: In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
To make, alter or repeal the by-laws of the corporation.
To authorize and cause to be executed the mortgages and liens upon the real
and personal property of the corporation.
To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
By a majority of the whole board, to designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. The by-laws may provide that in the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
or in the by-laws of the corporation, shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
by-laws of the corporation; and, unless the resolution or by-laws expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
NINTH:
SECTION 1. ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS.
To the fullest extent permitted by the Delaware General Corporation Law, as
the same exists or may hereafter be amended, a director of this corporation
shall not be liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director.
SECTION 2. INDEMNIFICATION AND INSURANCE.
(A) RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil,
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criminal, administrative or investigative (hereinafter a "PROCEEDING"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer, of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment), against all expenses,
liability and loss (including attorney's fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators: provided, however, that, except as provided in
paragraph (b) hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
board of directors of the corporation. The right to indemnification conferred
in this Section shall be a contract right and shall include the right to be paid
by the corporation the expenses incurred in defending any such proceeding in
advance of its final disposition: provided, however, that if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise. The corporation may, by action of its board of
directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
(B) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under paragraph (a) of
this Section is not paid in full by the corporation within thirty days after a
written claim has been received by the corporation, the claimant may at any
time thereafter bring suit against the corporation to recover the unpaid amount
of the claim and if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law
for the corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the corporation. Neither the
failure of the corporation (including its board of directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
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commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the corporation (including its board of directors, independent legal counsel,
or its stockholders) that the claimant has not met such applicable standard or
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(C) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
(D) INSURANCE. The corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
TENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
ELEVENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the by-laws may provide. The books of the corporation may be
kept (subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation. Elections of directors
need not be by written ballot unless the by-laws of the corporation shall so
provide.
TWELFTH: The corporation reserves the right to amend, alter, change or
repeal any
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provision contained in this certificate of incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
THIRTEENTH:
A. BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
Notwithstanding PARAGRAPH D OF ARTICLE FOURTH, in addition to any
affirmative vote required by law or this Certificate of Incorporation, the
affirmative vote of holders of 75% of the outstanding shares of Common Stock and
Class B Common Stock that are beneficially owned by stockholders other than the
Interested Stockholder who is a party to the Business Combination of the
corporation with an Interested Stockholder; provided however, that such 75%
voting requirement shall not be applicable if:
(i) the Business Combination is solely between the corporation
and any Subsidiary and does not have the effect of increasing
the actual or potential voting power of such Interested
Stockholder; or
(ii) the Continuing Directors of the corporation, by at least a
majority vote of such Continuing Directors, have expressly
approved such Business Combination either in advance of or
subsequent to such Interested Stockholder's having become an
Interested Stockholder; or
(iii) all of the Minimum Price and Procedural Conditions are
satisfied.
B. CERTAIN DEFINITIONS
(1) The term "INTERESTED STOCKHOLDER" shall mean (a) any person other
than the corporation or a Subsidiary which, together with its Affiliates and
Associates, is the Beneficial Owner of an aggregate of 10% or more of the
outstanding shares of voting stock of the corporation, and (b) any Affiliate or
Associate of any such person; provided however, that the term Interested
Stockholder shall not include (i) a person whose acquisition of such aggregate
percentage of Common Stock and Class B Common Stock was approved in advance by
at least a majority of the Continuing Directors or (ii) any trustee or fiduciary
when acting in such capacity with respect to employee benefit plans of the
corporation or a Subsidiary. An Interested Stockholder shall be deemed the
Beneficial Owner of all Common Stock and Class B Common Stock of which any
Affiliate or Associate of such Interested Stockholder is the Beneficial Owner.
The term "PERSON" shall mean any individual, corporation, partnership or other
entity, including any group comprised of any person and any other person with
whom such person of any Affiliate or Associate thereof has any agreement,
arrangement or understanding, directly or indirectly, for the purpose of
acquiring, holding, voting or disposing of Common Stock or Class B Common Stock.
(2) The term "BUSINESS COMBINATION" includes, when entered into by the
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corporation or a Subsidiary with, or upon the proposal by, an Interested
Stockholder, the following transactions or series of related transactions:
(i) the acquisition, merger or consolidation of the
corporation or any Subsidiary;
(ii) any sale, lease, exchange, transfer or other disposition,
including without limitation, creation of any mortgage or
security interest, of any assets of the corporation or any
Subsidiary having a fair market value, as determined by at
least a majority of the Continuing Directors, equal to 10%
or more of the total consolidated assets of the corporation
(including without limitation, any voting securities of a
Subsidiary) as of the end of its most recent fiscal year
prior to the time the determination is being made;
(iii) the issuance or transfer of any securities of the
corporation or a Subsidiary having a fair market value of
10% or more, as determined by at least a majority of the
Continuing Directors, of the total consolidated assets of
the corporation as of the end of its most recent fiscal
year prior to the time the determination is being made, in
exchange for cash or property (including stock or other
securities);
(iv) the approval of a plan or proposal for the liquidation or
dissolution of the corporation or any Subsidiary;
(v) any reclassification of securities, recapitalization,
consolidation or any other transaction that would have the
direct or indirect effect of increasing the voting power
(whether or not then exercisable) of an Interested
Stockholder in any class or series of capital stock of the
corporation or any Subsidiary; and
(vi) any agreement, contract or other arrangement providing for
directly or indirectly any of the transactions described in
this definition of Business Combination.
(3) The term "BENEFICIAL OWNER" shall mean any person who beneficially
owns any Common Stock or Class B Common Stock within the meaning ascribed in
Rule 13d-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as in effect on the date of approval of this Article by the
stockholders of the corporation, or who has the right to acquire any such
beneficial ownership (whether or not such right is exercisable immediately)
pursuant to any agreement, contract, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise.
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(4) The term "CONTINUING DIRECTOR" shall mean a director of the corporation
who is not an Interested Stockholder entering into or proposing the Business
Combination at issue and (i) who was a member of the board of directors of the
corporation immediately prior to the time that such Interested Stockholder
became an Interested Stockholder or (ii) any successor to a Continuing Director
as described in (i) of this subparagraph (4) who is recommended or elected to
succeed a Continuing Director by the affirmative vote of a majority of the
Continuing Directors then on the board of directors of the corporation, provided
that, in either such case, such Continuing Director has continued in office
after becoming a Continuing Director.
(5) An Interested Stockholder shall be deemed to have acquired a share of
Common Stock or Class B Common Stock at the time when such Interested
Stockholder became the Beneficial Owner thereof. The price deemed to have been
paid by an Interested Stockholder for Common Stock or Class B Common Stock of
which an "Affiliate" or "Associate" is the Beneficial Owner shall be the price,
as determined by vote of at least a majority of the Continuing Directors, which
is the highest of (i) the price paid upon the acquisition thereof by the
relevant "Affiliate" or "Associate" (if any, and whether or not such "Affiliate"
or "Associate" was an "Affiliate" or "Associate" at the time of such
acquisition), (ii) the highest market price of the Common Stock or Class B
Common Stock at the time when the Interested Stockholder became the Beneficial
Owner thereof and (iii) the highest price previously paid by such Interested
Stockholder or an Affiliate or Associate thereof for such Common Stock or Class
B Common Stock.
(6) The term "SUBSIDIARY" means any entity which the corporation owns,
directly or indirectly, (i) a majority of the outstanding shares of equity
securities of such entity, or (ii) shares having a majority of the voting power
represented by all of the outstanding voting stock of such entity.
(7) "MINIMUM PRICE AND PROCEDURAL CONDITIONS" shall mean all of the
following conditions:
(i) the aggregate amount of cash and Fair Market Value, as of
the date of the consummation of the Business Combination (the
"CONSUMMATION DATE"), of consideration other than cash, to be
received per share of common stock in such Business Combination by
holders thereof, shall be at least equal in value to the higher of
(a) the highest per share price, including any brokerage
commissions, transfer taxes and soliciting dealers' fees (with
appropriate adjustments for recapitalizations, reclassifications,
stock splits, reverse stock splits and stock dividends) paid by
the Interested Stockholder in acquiring any shares of Common Stock
or Class B Common Stock within the three year period immediately
prior to the first public announcement of the proposed Business
Combination or the per share price paid by the Interested
Stockholder in the transaction in which it became an Interested
Stockholder, whichever
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is higher, or (b) the Fair Market Value per share of Common Stock
as determined by the Continuing Directors on the date the
Business Combination is first publicly announced;
(ii) the Business Combination shall be consummated within the three
year period after the later of (a) the date the Interested
Stockholder became an Interested Stockholder or (b) the first
public announcement of the proposed Business Combination;
(iii) after such Interested Stockholder has become an Interested
Stockholder and prior to the Consummation Date, (a) there shall
have been (i) no reduction in the annual rate of dividends paid
on the common stock of the corporation (except as necessary to
reflect any stock dividend or stock split or distribution with
respect to the common stock,), except as approved by the
affirmative vote of a majority of the Continuing Directors, and
(ii) an increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of
the common stock, unless the failure so to increase such annual
rate is approved by the affirmative vote of a majority of the
Continuing Directors; (b) such Interested Stockholder shall not
have become the Beneficial Owner of any additional shares of
voting stock of the corporation except as part of the transaction
which results in such Interested Stockholder becoming an
Interested Stockholder; (c) neither such Interested Stockholder
nor any Affiliate or Associate thereof shall have received the
benefit, directly or indirectly (except proportionately as a
stockholder of the corporation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the corporation; and
(d) a proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the General Rules and
Regulations thereunder (or any subsequent provisions replacing
such Act, rules or regulations) and disclosing the terms and
conditions of the proposed Business Combination shall be mailed
to the stockholders of the corporation at least 30 days prior to
the Consummation Date (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or
subsequent provisions thereof).
(8) The term "FAIR MARKET VALUE" shall mean (i) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding the
date in question of
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a share of such stock on the Composite Tape for New York Stock Exchange-Listed
Stocks, or, if such stock is not reported on the Composite Tape, on the New York
Stock Exchange, or, if such stock is not listed on such Exchange, on the
principal United States securities exchange registered under the Exchange Act on
which such stock is listed or, if such stock is not listed on any such exchange,
the highest closing bid quotation with respect to a share of such stock during
the 30-day period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any similar interdealer
quotation system then in use, or, if no such quotation is available, the fair
market value on the date in question of a share of such stock as determined by a
majority of the Continuing Directors in good faith; and (ii) in the case of
property other than cash or stock, the fair market value of such property on the
date in question as determined by a majority of the Continuing Directors in good
faith.
(9) The terms "AFFILIATE" and "ASSOCIATE" shall have the same meaning as
in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934 s in effect on the date of the approval of this Article by the
stockholders of the corporation.
The Continuing Directors shall have the power to make all determinations
with respect to the definitions as set forth in this SECTION B OF ARTICLE
THIRTEENTH.
This ARTICLE THIRTEENTH shall be subject to the provisions of ARTICLE
FOURTH hereof.
C. AMENDMENTS, ALTERATION, OR REPEAL OF ARTICLE THIRTEENTH
In addition to any requirements of law and any other provisions of this
Certificate of Incorporation or any resolution or resolutions of the board of
directors adopted pursuant to this Certificate of Incorporation (and
notwithstanding the fact that a lesser percentage may be specified by law, this
Certificate of Incorporation or any such resolutions), the affirmative vote of
the holders of 75% of the then outstanding Common Stock held by stockholders
other than an Interested Stockholder and Class B Common Stock shall be required
to amend, alter or repeal, or adopt any provision inconsistent with the
requirements of, this Article.
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EXHIBIT 10.2
THE 1990 MOLEX INCORPORATED EXECUTIVE STOCK BONUS PLAN
(As Amended April 15, 1994 and July 29, 1995)
ARTICLE I. GENERAL INFORMATION REGARDING THE PLAN
1.1 TITLE - The title of the stock bonus plan which is described
herein is "The 1990 Molex Incorporated Executive Stock Bonus Plan"
(the "PLAN").
1.2 ISSUER - The issuer of the stock which is the subject of the
Plan is Molex Incorporated, a Delaware corporation, having its
principal place of business at 2222 Wellington Court, Lisle,
Illinois 60532 (the "COMPANY"). The Company's phone number is (708)
969-4550.
1.3 GENERAL PURPOSES OF THE PLAN - The Company desires to establish
the Plan to provide executive officers with an opportunity to
acquire Molex Incorporated Common Stock with a view toward rewarding
those executive officers for past services and providing an
incentive to remain in the employ of the Company. In particular,
the Company recognizes that the salaries paid to its executive
officers may not be commensurate with their abilities, efforts and
services performed for the Company, especially in years wherein the
Company's financial performance is exemplary. Accordingly, it is
the judgment of the Company that additional compensation may be due
these eligible employees for a particular fiscal year ending June 30
wherein certain growth and profit objectives have been achieved.
1.4 DURATION - The Plan shall commence with the Company's fiscal
year ending June 30, 1991 and extend to and include the fiscal year
ending June 30, 2000.
1.5 ELIGIBLE EMPLOYEES - A person shall be eligible to receive a
stock bonus award for a given fiscal year if he or she:
a. was a full-time salaried employee of the
Company or any of its subsidiaries during the entire
fiscal year; and
b. is an executive officer of the Company.
1.6 SECURITIES TO BE OFFERED - The shares reserved for award under
the Plan shall initially consist of NINE HUNDRED SEVENTY SIX
THOUSAND-FIVE HUNDRED-SIXTY TWO AND ONE-HALF (976,562.5) shares of
Molex Incorporated Common Stock, $.05 par value (the "STOCK") and
may be increased, by action of the Board of Directors, to any amount
not to exceed ONE MILLION NINE HUNDRED FIFTY THREE THOUSAND ONE
HUNDRED-TWENTY FIVE (1,953,125) shares at any time during the term
of the Plan. The Stock shall be issued from either authorized but
unissued shares or Treasury Stock as the Board of Directors, in its
judgment, deems advisable. Upon the receipt of a stock certificate
under the Plan, an employee shall have all the rights normally
associated with stock ownership including the right to vote and
receive dividends.
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1.7 SECURITIES REGULATION AND RESTRICTIONS ON RESALE - The Company shall not be
obligated to issue any shares under any bonus granted hereunder unless and
until the bonus shares are effectively registered or exempt from registration
under the Securities Act of 1933 and from any other federal or state law
governing the distribution and issuance of such shares or any securities
exchange regulation to which the Company might be subject. In the event the
Stock is not effectively registered, but can be issued by virtue of an
exemption, the Company may issue shares of Stock to an employee if the employee
represents that he is acquiring such shares received under the Plan as an
investment and not with the view to, or for sale in connection with, the
distribution of any such shares. Certificates for shares of Stock thus issued
may bear an appropriate legend reciting such representation.
ARTICLE II. ADMINISTRATION OF THE PLAN
2.1 THE COMMITTEE - The Plan shall be administered by a Committee appointed by
the Board of Directors of the Company. The Committee shall be comprised of at
least a number of persons necessary to satisfy the requirements of Section
162(m) of the Internal Revenue Code and Rule 16b-3 of the Securities Exchange
Act of 1934 as in effect from time to time. Each member of the Committee shall
qualify as an outside director for purposes of Section 162(m) of the Internal
Revenue Code and as a disinterested person for purposes of Rule 16b-3. No
compensation shall be paid the Committee members under the Plan. However, the
Board of Directors shall have the power and authority to provide for
compensation if any person appointed to the Committee is not an employee of the
Company.
2.2 ACTION BY THE COMMITTEE - A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decisions or determination reduced to writing and
signed by a majority of the members shall be fully as effective as if it had
been made by a majority vote at a meeting.
2.3 POWERS OF THE COMMITTEE - In addition to the awarding of bonuses as set
forth in paragraphs 3.1 and 4.1 hereof, the Committee, subject to the express
provisions of the Plan, shall have complete authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, and to make
all other determinations necessary or advisable for the administration of the
Plan.
ARTICLE III. STOCK BONUS AWARD
3.1 AWARDING THE STOCK BONUS - Subject to the limitations of ARTICLE V hereof,
the Committee has the complete authority, in its sole discretion, within ninety
(90) days of the beginning of each fiscal year and while the outcome of the
goals of PARAGRAPHS 5.1 AND 5.2 (the "PERFORMANCE GOALS"), to determine the
eligible employees to whom a stock bonus shall be awarded should the
Performance Goals be achieved and the number of shares comprising each such
bonus. The Committee may, in its sole discretion, eliminate or reduce the
number of shares of Stock to be awarded to any given eligible employee after
the Performance Goals have been satisfied. In making such determinations, the
Committee may take into account the nature of the services rendered by the
respective employee, his present and potential contribution to the Company's
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<PAGE> 3
success, and such other facts as the Committee in its discretion, shall deem
relevant. Prior to making a Stock award for a given fiscal year, the Committee
shall certify that the Performance Goals were satisfied.
3.2 CONSIDERATION - Inasmuch as Stock awarded pursuant to this Plan is a bonus,
no monetary consideration shall pass from an employee to the Company.
3.3 ADJUSTMENT OF THE NUMBER OF SHARES - The number of shares of Stock subject
to any bonus award under the Plan but not yet distributed and the number of
shares reserved for issuance pursuant to the Plan, but, not yet covered by a
bonus, shall be adjusted to reflect any stock dividend, stock split or any
other capital stock change. Any other adjustments shall be equitably made by
the Committee in its sole discretion. No adjustment shall require the Company
to award a fractional share.
ARTICLE IV. TAX OFFSET BONUS
4.1 AWARDING THE TAX OFFSET CASH BONUS - Subject to the limitations of ARTICLE
V and PARAGRAPH 4.2 hereof, the Committee has the complete authority, in its
sole discretion, within ninety (90) days of the beginning of each fiscal year
and while the outcome of the Performance Goals is substantially uncertain, to
set the amount of a tax offset cash bonus to a recipient of a stock bonus
award. The Committee may, in its sole discretion, eliminate or reduce the
amount of the cash bonus to be awarded to any given eligible employee after the
Performance Goals have been satisfied. It is the intention of this cash bonus
to encourage the recipient to hold any stock awarded hereunder and not sell or
liquidate the stock for the purpose of paying taxes. In determining the amount
of said cash bonus, the Committee may take into account the recipient's tax and
financial situation, applicable tax rates and such other factors as the
Committee deems relevant.
4.2 LIMITATIONS ON THE AMOUNT OF THE CASH BONUS - The cash bonus shall be an
amount fixed by the Committee at the time specified in PARAGRAPH 4.1 and cannot
exceed an amount equal to one hundred percent (100%) of the aggregate fair
market value of the stock as of the date of award.
ARTICLE V. PERFORMANCE GOALS AND LIMITATIONS
5.1 GROWTH - No shares under this Plan may be awarded for any given fiscal year
if the Company's consolidated net sales revenue for such fiscal year did not
exceed either
- the previous fiscal year's net sales revenue by FIFTEEN
PERCENT (15%) as reported by the Company in its audited financial
statements; or
- TWO (2) times the worldwide growth of the general connector
market as reported by an independent source selected by the
Committee within ninety (90) days after the beginning of such fiscal
year.
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5.2 PROFITABILITY - The value of the aggregate number of shares (determined
based on the closing price of said stock on the last trading day of the fiscal
year for which the award is made as reported by the Wall Street Journal) and
tax offset bonuses awarded under the Plan in any given fiscal year cannot
exceed an amount that would result in the Company's net profits (after taxes)
falling below TEN PERCENT (10%) of the net sales revenue for that particular
fiscal year as reported by the Company in its audited financial statements.
5.3 INDIVIDUAL SHARE LIMIT - No single employee may be awarded for any given
fiscal year a number of shares of Stock wherein the aggregate value based on
the closing price of said stock on June 30 of such fiscal year (or the last
trading day of the fiscal year) as reported by the Wall Street Journal is
greater than
a. FIFTY PERCENT (50%) of the individual employee's base salary
for that particular fiscal year if the sales growth was TWENTY
PERCENT (20%) or greater, or
b. TWENTY FIVE PERCENT (25%) of the individual employee's base
salary for that particular fiscal year if the sales growth was at
least FIFTEEN PERCENT (15%) or TWO (2) times the worldwide growth of
the general connector market but less than TWENTY PERCENT (20%).
5.4 INDIVIDUAL DOLLAR LIMIT - Notwithstanding PARAGRAPHS 4.2 and 5.3, no single
employee shall be awarded for any given fiscal year a number of shares of Stock
whose aggregate value as reported by the Wall Street Journal on the last
trading day of the fiscal year plus the cash bonus exceeds ONE MILLION DOLLARS
($1,000,000).
ARTICLE VI. DISTRIBUTION OF THE BONUS
6.1 WHEN PAYABLE - Any bonus award (stock and cash, if any) under the Plan for
a given fiscal year shall be distributed to the employee in four equal annual
installments. The first 25% shall be payable on the June 30 ending the fiscal
year for which the bonus has been awarded or as soon thereafter as practicable.
The remaining three installments shall be payable within thirty (30) days of
the next three succeeding June 30ths.
6.2 ELIGIBILITY FOR DISTRIBUTION - In order to be eligible to receive a bonus
installment, the employee must be employed by the Company or any of its
subsidiaries on the June 30 on which the installment is payable. If the
employee is not so employed on the June 30 on which the installment is payable,
that installment shall be forfeited.
6.3 ACCELERATED DISTRIBUTIONS - Notwithstanding paragraph 6.2, an employee
shall be entitled to receive distribution of all of the remaining bonus
installments within thirty (30) days after death, disablement, retirement after
age 65, or termination of employment due to a Change in Control of the Company
(as defined below).
A "Change in Control of the Company" shall be deemed to have occurred if:
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(a) any individual, entity or group other than the Company, any
member of the Krehbiel Family (as such term is defined in the Company's
Certificate of Incorporation), any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a company
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities; or
(b) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
at least 80% of the voting securities of the surviving entity immediately
after such merger or consolidation; or
(c) the stockholders of the Company approve a plan of complete
liquidation of the Company or the Company disposes of or agrees to sell
or dispose of all or substantially all the Company's assets.
ARTICLE VII. ADOPTION AND MODIFICATION
7.1 ADOPTION - After the Board of Directors approves the Plan or any amendment
thereto which requires stockholder approval in accordance with PARAGRAPH 7.2,
the Plan or amendment shall be approved by a majority of the stockholders
entitled to vote at the next regular Annual Stockholders' Meeting.
7.2 MODIFICATIONS - The Board of Directors of the Company may amend or modify
any part of the Plan without stockholder approval except for the amount of
shares reserved for the Plan set forth in paragraph 1.6 and the performance
goals and award limitations set forth in ARTICLE V and paragraph 4.2.
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EXHIBIT 10.3
RESTATEMENT OF
THE 1990 MOLEX INCORPORATED STOCK OPTION PLAN
(As Amended July 29, 1994 and April 17, 1995, and Restated as of April 17, 1995)
<PAGE> 2
1990 MOLEX INCORPORATED STOCK OPTION PLAN
(As amended July 29, 1994 and April 17, 1995, and Restated as of April 17, 1995)
ARTICLE I - GENERAL
1.1 NAME OF PLAN - The name of the plan described in detail herein shall be The
1990 Molex Incorporated Stock Option Plan ("PLAN").
1.2 PURPOSE - The purpose of the Plan is to induce certain designated employees
to remain in the employ of Molex Incorporated, a Delaware corporation, (the
"COMPANY") or any of its subsidiaries and affiliates, and to encourage such
employees to secure or increase on reasonable terms their stock ownership in
the Company. The Company believes the Plan will promote continuity of
management and increase incentive and personal interest in the welfare of the
Company by those who are primarily responsible for shaping, carrying out the
long-range plans of the Company and securing its continued growth and financial
success.
1.3 ELIGIBILITY - Any employee of Molex Incorporated or any of its subsidiary
companies and affiliated companies, subject to the terms and conditions of the
Plan, may be granted an option under this Plan. Notwithstanding the foregoing,
the following Company personnel shall be ineligible: any director or officer
of Molex Incorporated.
ARTICLE II - TERM OF PLAN
2.1 EFFECTIVE DATE - The Plan shall become effective upon adoption by the Board
of Directors of the Company.
2.2 EXPIRATION - This Plan shall expire June 30, 1999 and no option shall be
granted after such expiration date.
ARTICLE III - STOCK SUBJECT TO PLAN
3.1 CLASS OF STOCK - The stock that shall be subject to option under the Plan
shall be Molex Incorporated Common Stock, par value 5c. per share (the
"STOCK").
3.2 NUMBER OF SHARES - FIVE MILLION FIVE HUNDRED THOUSAND (5,500,000) shares of
the Stock shall be reserved for issue upon the exercise of options granted
under the Plan.
3.3 SOURCE OF STOCK - Upon the exercise of options granted under the Plan, the
Stock shall be issued from either authorized but unissued stock or Treasury
stock as directed by the Committee.
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3.4 EXPIRED, FORFEITED OR CANCELED OPTIONS - If any such options granted under
the plan shall expire, be forfeited or canceled for any reason without having
been exercised in full, the unpurchased or unexercised shares subject thereto
shall again be available for the purposes of the Plan.
ARTICLE IV - ADMINISTRATION
4.1 COMMITTEE - The Plan shall be administered by a committee (the "COMMITTEE")
under the terms and conditions and powers set forth herein.
4.2 MAKEUP OF THE COMMITTEE - The Committee shall consist of at least two
members appointed by the Board of Directors of the Company. No members of the
Committee may be eligible to participate in the Plan.
4.3 ACTION BY THE COMMITTEE - A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Unless and until the Board of Directors shall appoint
such Committee, the whole Board of Directors shall constitute the Committee.
Any decision or determination reduced to writing and signed by a majority of
the members shall be fully as effective as if it had been made by a majority
vote at a meeting duly called and held.
4.4 POWER TO GRANT OPTIONS - Subject to the express provisions of the Plan, the
Committee shall have a complete authority, in its sole discretion, to determine
the employees to whom, and the time or times at which, options shall be
granted, the option periods, the vesting schedule and the number of shares to
be subject to each option, and such other terms and provisions of the option
agreements (which need not be identical). In making such determinations, the
Committee may take into account the nature of the services rendered by the
respective employees, their present and potential contribution to the Company's
success, and such other factors as the Committee in its discretion shall deem
relevant.
4.5 POWER TO BUY OPTION STOCK - The Committee, in its sole discretion, if it
believes that a particular optionee is suffering under an undue financial
hardship, may cause the Company to buy as Treasury Stock up to fifty percent
(50%) of the option stock actually exercised by that particular optionee. In
such a case, the Company shall pay to the optionee the fair market value of the
shares of option stock at the time the Committee elects to repurchase.
4.6 OTHER POWERS - Subject to the express provisions of the Plan, the Committee
shall also have complete authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it, to determine the terms and
provisions of the respective option agreements (which need not be identical),
and to make all other determinations necessary or advisable for the
administration of the Plan.
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ARTICLE V - GRANT OF OPTION
5.1 OPTION PRICE - The option price shall be not less than TEN PERCENT (10%)
nor more than ONE HUNDRED PERCENT (100%) of the fair market value of the stock
of the Company on the date of granting the option as determined by the
Committee.
5.2 FAIR MARKET VALUE - For the purposes of this Article, fair market value
shall be the price of the Stock on the date of granting the option as reported
by the Wall Street Journal.
5.3 EVIDENCE OF OPTION - Options granted shall be evidenced by agreements,
warrants, and/or other instruments in such form as the Committee shall deem
advisable and shall contain such terms, provisions, and conditions not
inconsistent herewith as may be determined by the Committee.
5.4 RIGHTS AS A SHAREHOLDER - An optionee shall have no rights as a stockholder
with respect to shares covered by his option until the day of issuance of stock
certificate to him and after such shares are fully paid.
ARTICLE VI - EXERCISE OF OPTION
6.1 INITIAL WAITING PERIOD - No option shall be exercisable until at least one
year after the date of grant.
6.2 VESTING PERIODS - After the initial waiting period, an optionee may
exercise his option to the extent that the shares covered by said option become
vested. The vesting schedule is as follows:
a. Normal Vesting - The shares covered by such an option shall
vest in amounts and times determined by the Committee in its sole
discretion; provided that the time in which an option becomes one
hundred percent (100%) vested cannot exceed eight (8) years.
b. Accelerated Vesting - Notwithstanding the foregoing, all
options shall immediately vest one hundred percent (100%) and become
immediately exercisable for a period of one (1) year after one of
the following events:
(1) Death;
(2) Total disablement;
(3) Retirement, if all of the following conditions at
the time of termination of termination of employment:
(a) the optionee has reached age 59 1/2; and
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(b) the optionee was employed at least
fifteen (15) consecutive years with the Company and/or
any of its subsidiaries; and
(c) The Committee has determined that the
reason for termination is due to retirement.
6.3 CUMULATIVE RIGHTS - The right to exercise any option as set forth in
paragraph 6.2 shall be cumulative. That is, an optionee may exercise in any
given year those shares he could have exercised in a previous year but did not.
6.4 EXPIRATION - No option may be exercised after one (1) year from the date
the option becomes one hundred percent (100%) vested.
6.5 FORM OF EXERCISE - The option may only be exercised according to the terms
and conditions established by the Committee, consistent with the limits set
forth herein, at the time the option is granted. Subject to the foregoing
terms and conditions, an option may be exercised by a written notice delivered
to the Company's principal office of the optionee's intent to exercise the
option with respect to a specified number of shares of Stock along with payment
to the Company of the amount of the aggregate option purchase price for the
number of shares of Stock exercised. Stock that is already owned by an
optionee may be tendered as all or part of the aggregate option purchase price.
If Stock is used for payment, it shall be valued at the closing price on the
date of exercise as reported by the Wall Street Journal.
ARTICLE VII - TERMINATION OF OPTION
7.1 Every option granted to each optionee under this Plan shall terminate and
expire at the earliest of
a. the date of expiration set when such option was
granted; or
b. one (1) year after one of the events set forth
in subparagraph 6.2b; or
c. the day of termination of employment of the
optionee for any reason except if his or her employment
is terminated by reason of one of the events set forth
in subparagraph 6.2b; or
d. the day the option is canceled in accordance
with paragraph 4.5 of this Plan.
ARTICLE VIII - TRANSFERABILITY
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8.1 NON-TRANSFERABLE - Any option granted under the plan is not transferable
and can be exercised only by the optionee during his or her life subject to
paragraph 8.2 of this Article.
8.2 DEATH - In the event of the death of an optionee while still employed by
the Company or a parent or a subsidiary, his option, to the extent he or she
could have exercised it on the date of his or her death, may be exercised by
the personal representative of the estate of the optionee within one (1) year
after the date of his or her death in accordance with the terms established by
the Committee at the time the option was granted, but (as set forth in Article
VII) not later than the expiration date set forth in subparagraph 6.4.
ARTICLE IX - ADJUSTMENT OF NUMBER OF SHARES
9.1 STOCK DIVIDENDS - In the event that a dividend shall be declared upon the
Stock payable in shares of Stock, the number of shares of stock then subject to
any such option and the number of shares reserved for issuance pursuant to the
Plan, but, not yet covered by an option, shall be adjusted by addition to each
such share the number of shares which would be distributable thereon if such
share had been outstanding on the date fixed for determining the stockholders
entitled to receive such stock dividend.
9.2 REORGANIZATION - In the event that the outstanding shares of the Stock
shall be changed into or exchanged for a different number of kind of shares of
Stock or other securities of the Company, or of another corporation, whether
through reorganization, recapitalization, stock split up, combination of shares
merger or consolidation, then, there shall be substituted for each share of
Stock subject to any such option and for each share of Stock reserved for
issuance pursuant to the Plan, but, not yet covered by an option, the number
and kind of shares of Stock or other securities into which each outstanding
share of Stock shall be so changed or for which each such share of Stock shall
be exchanged.
9.3 OTHER CHANGES - In the event there shall be any change, other than as
specified above in this Article, in the number or kind of outstanding shares of
the Stock or of any stock or other securities into which such stock shall have
been changed or for which it shall have been exchanged, then, if the Committee
shall, in its sole discretion, determine that such change equitably requires an
adjustment in the number or kind of shares theretofore reserved for issuance
pursuant to the Plan, but, not yet covered by an option and of the shares then
subject to an option or options, such adjustments shall be made by the
Committee and shall be effective and binding for all purposes of the Plan and
of each stock option.
9.4 ADJUSTED OPTION PRICE - In the case of any substitution or adjustment as
provided for in this Article, the option price in each stock option agreement
for each share covered thereby prior to such substitution or adjustment will be
the option price for all shares of Stock or other securities which shall have
been substituted for such share or to which such share shall have been adjusted
pursuant to this Article.
5
<PAGE> 7
9.5 FRACTIONAL SHARES - No adjustment or substitutions provided for in this
Article shall require the Company in any stock option agreement to sell a
fractional share, and the total substitution or adjustment with respect to each
stock option agreement shall be limited accordingly.
ARTICLE X - SECURITIES REGULATION
10.1 REGISTERED STOCK - The Company shall not be obligated to sell or issue any
shares under any option granted hereunder unless and until the shares with
respect to which the option is being exercised are effectively registered or
exempt from registration under the Securities Act of 1933 and for any other
federal or state law governing the sale and issuance of such shares or any
securities exchange regulation to which the Company might be subject.
10.2 UNREGISTERED STOCK - In the event the shares are not effectively
registered, but, can be issued by virtue of an exemption, the Company may issue
option shares to an optionee if the optionee represents that he is acquiring
such shares as an investment and not with a view to, or for sale in connection
with, the distribution of any such shares. Certificates for shares of Stock
thus issued shall bear an appropriate legend reciting such representation.
6
<PAGE> 1
EXHIBIT 10.4
APPENDIX A
THE 1991 MOLEX INCORPORATED INCENTIVE STOCK OPTION PLAN
(As amended April 15, 1994)
ARTICLE I - GENERAL
1.1 NAME OF PLAN - The name of the plan described in detail herein shall
be The 1991 Molex Incorporated Incentive Stock Option Plan (the "PLAN").
1.2 PURPOSE - The purpose of the Plan is to induce certain designated
employees and the directors to remain in the employ of Molex Incorporated, a
Delaware corporation (the "COMPANY"), and any of its subsidiaries, and to
encourage such employees and directors to secure or increase on reasonable
terms their stock ownership in the Company. The Company believes the Plan will
promote continuity of management and increase incentive and personal interest
in the welfare of the Company by those who are primarily responsible for
shaping, carrying out the long-range plans of the Company and securing its
continued growth and financial success.
It is also the purpose of the Plan (except where otherwise noted) to be
qualified under Section 422(a) of the Internal Revenue Code, as amended. Thus,
all provisions of the Plan shall be interpreted and construed with this goal in
mind.
1.3 ELIGIBILITY - The following persons shall be eligible to receive a
grant under the Plan: any director or officer of Molex Incorporated.
ARTICLE II - TERM OF PLAN
2.1 EFFECTIVE DATE - The Plan shall become effective upon adoption by the
Board of Directors of the Company subject to the subsequent approval by the
stockholders of the Company within one (1) year of adoption by the Board of
Directors. If the stockholders do not approve the Plan within one (1) year of
adoption, then this Plan shall cease to exist and all options granted hereunder
shall become void.
2.2 EXPIRATION - This Plan shall expire June 30, 2000 and no option shall
be granted on or after such expiration date. However, expiration of the Plan
shall not affect outstanding unexpired options previously granted.
1
<PAGE> 2
ARTICLE III - STOCK SUBJECT TO PLAN
3.1 CLASS OF STOCK - The stock that shall be subject to option under the
Plan shall be Molex Incorporated Common Stock, par value 5c. per share (the
"STOCK").
3.2 NUMBER OF SHARES - ONE MILLION NINE HUNDRED FIFTY THREE THOUSAND ONE
HUNDRED TWENTY FIVE (1,953,125) shares of the Stock shall be reserved for issue
upon the exercise of options granted under the Plan.
3.3 EXPIRED, FORFEITED OR CANCELED OPTIONS - If any such options granted
under the Plan shall expire, be forfeited or canceled for any reason without
having been exercised in full, the unexercised shares subject thereto shall
again be available for the purpose of the Plan.
ARTICLE IV - ADMINISTRATION
4.1 COMMITTEE - The Plan shall be administered by a committee (the
"COMMITTEE") under the terms and conditions and powers set forth herein
4.2 MAKEUP OF THE COMMITTEE - The Committee shall consist of three or more
members of the Board of Directors of the Company. The Committee shall be the
Compensation Committee of the Board of Directors or any other Board members
appointed by the Board of Directors.
4.3 ACTION BY THE COMMITTEE - A majority of the members of the Committee
shall constitute a quorum. All determinations of the Committee shall be made
by a majority of its members. Any decision or determination reduced to writing
and signed by a majority of the members of the Committee shall be fully as
effective as if it had been made by a majority vote at a meeting duly called
and held.
4.4 POWER TO GRANT OPTIONS - Subject to the express provisions of the
Plan, the Committee shall have complete authority, in its sole discretion, to
determine the employees to whom, and the time or times at which, options shall
be granted, the option periods, the vesting schedule and the number of shares
to be subject to each option, and such other terms and provisions of the option
agreements (which need not be identical). In making such determinations, the
Committee may take into account the nature of the services rendered by the
respective employee, his present and potential contribution to the Company's
success, and such other factors as the Committee in its discretion shall deem
relevant. The Committee shall have no power to grant options to directors or
to set the terms and conditions thereof.
4.5 GRANTS OF INCENTIVE STOCK OPTION AND NONQUALIFIED STOCK OPTIONS - The
Committee shall have complete authority, in its sole discretion, to determine
at the time an option is granted whether such option shall be an incentive
stock option qualified under Section 422 of the Internal
2
<PAGE> 3
Revenue Code, as amended, ("ISO") or whether such option shall be a
nonqualified stock option. Unless the option agreement says otherwise, all
options granted shall be ISOs. The number of shares for which options may be
granted to any one person in any calendar year shall be limited and cannot
exceed the following:
a. OVERALL LIMITATION - With respect to any option (whether ISOs
or nonqualified), three percent (3%) of the number of shares
reserved for the Plan as set forth in Paragraph 3.2 (adjusted as set
forth in Article IX) or fifty thousand (50,000) shares (adjusted as
set forth in Article IX), whichever is less.
b. INCENTIVE STOCK OPTION - In addition, with respect to ISOs,
the number of shares which are subject to options that are first
exercisable in any given succeeding calendar year shall not have a
fair market value (as determined on the date of grant) that exceeds:
- One Hundred Thousand Dollars ($100,000)
LESS
- the aggregate fair market value (as determined at
the respective times of their grants) of those shares of all
prior ISOs that are first exercisable in said succeeding
calendar year.
4.6 AUTOMATIC GRANT OF OPTIONS TO DIRECTORS - Notwithstanding paragraphs
4.4 and 4.5, each director shall receive only an automatic nondiscretionary
stock option grant on the date of the Annual Stockholders Meeting every year
during the term of the Plan. Any option granted to a director who is an
employee of the Company shall be an incentive stock option and any option
granted to a director who is not an employee of the Company shall be a
nonqualified stock option. The amount of shares subject to the options that
will be automatically granted to each director each year shall be:
a. FOR DIRECTORS WHO ARE FULL-TIME SALARIED EMPLOYEES OF THE
COMPANY - The amount of shares equal to the largest multiple of 100
whose fair market value on the date of grant does not exceed
$100,000.00.
b. FOR OUTSIDE DIRECTORS - The amount of shares equal to 200
multiplied by the number of years of service or fraction thereof
that does not exceed 3,000 shares and whose fair market value on the
date of grant does not exceed $100,000.00. The amount of shares
shall increase to 500 multiplied by the number of years of service
or fraction thereof that does not exceed 3,000 shares and whose fair
market value on the date of grant does not exceed $100,000.00 if all
of the following financial conditions are met for the fiscal year
immediately ended prior to the grant:
3
<PAGE> 4
(1) The Company's net profits (after taxes) are at
least ten percent (10%) of the net sales revenue as reported
in the audited financial statements; and
(2) The Company's net sales revenue increase as
compared to the prior year's net sales revenue as reported in
the audited financial statements exceeds one and one-half
(1.5) times the "Worldwide Growth" of the general connector
market as determined by at least one outside independent
connector consultant. If more than one consultant is used,
the average growth shall be the Worldwide Growth. The
disinterested directors shall have the authority to choose the
consultant or consultants.
4.7 OTHER POWERS - Subject to the express provisions of the Plan, the
Committee shall also have complete authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, to determine
the terms and provisions of the respective option agreements (which need not be
identical), and to make all other determinations necessary or advisable for the
administration of the Plan.
ARTICLE V - GRANT OF OPTION
5.1 OPTION PRICE - The option price shall be the fair market value of the
Stock on the date of granting the option. Notwithstanding, the foregoing, if
an optionee owns more than ten percent (10%) of the voting power of all classes
of the Company's Stock, then the option price shall be one hundred-ten percent
(110%) of the fair market value of the Stock on the date of granting the
option.
5.2 FAIR MARKET VALUE - For the purposes of this Plan, fair market value
shall be the closing price of the Stock on the date of granting the option as
reported by the Wall Street Journal.
5.3 EVIDENCE OF OPTION - Options granted shall be evidenced by agreements,
warrants, and/or other instruments in such form as the Committee shall deem
advisable and shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Committee.
ARTICLE VI - EXERCISE OF OPTION
6.1 INITIAL WAITING PERIOD - No option shall be exercisable until at least
one (1) year after the date of grant unless one of the events set forth in
paragraph 6.4 occurs.
6.2 VESTING PERIODS - After the initial waiting period, an optionee may
exercise his option to the extent that shares covered by said option become
vested. The vesting schedule is as follows:
4
<PAGE> 5
a. If an option grant is an ISO, or if an option is granted to a
director, the shares covered by such an option shall vest to the
maximum extent of 25% of the total number of shares covered thereby
during each of the succeeding four (4) years, each commencing with
the anniversary of the grant.
b. In all other options not falling within the scope of
subparagraph 6.2a, the shares covered by an option shall vest in
amounts and at times the Committee, in its sole discretion, shall
determine, and the Committee shall specifically have the power to
change the vesting schedule of such options to a schedule which is
more favorable to the option holder; provided, however, that no such
options shall vest in amounts greater than, or at times prior to,
the amounts and times such options would have vested if such options
were within the scope of subparagraph 6.2a.
c. Notwithstanding the foregoing, all options must vest one
hundred percent (100%) within ten (10) years from the date of grant.
6.3 CUMULATIVE RIGHTS - The right to exercise any option as set forth in
paragraph 6.2 shall be cumulative. That is, an optionee may exercise in any
given year those unexpired shares he could have exercised in a previous year
but did not.
6.4 ACCELERATED VESTING - Notwithstanding the foregoing, all options shall
immediately vest and become immediately exercisable for a period of one (1)
year after one of the following events:
a. Death; or
b. Total disablement; or
c. Retirement, if all of the following conditions are met at the
time of termination of employment:
(1) The optionee has reached age 59-1/2; and
(2) The optionee was employed at least fifteen (15)
consecutive years with the Company and/or any of its
subsidiaries; and
(3) The Committee has determined that the reason for
termination is due to retirement; and
(4) The shares subject to the option are intended to
be an ISO. Notwithstanding the foregoing, if the shares
subject to the option are not intended to be an ISO, the
Committee, in its sole discretion, may allow accelerated
vesting to any extent it desires.
5
<PAGE> 6
6.5 EXPIRATION - No option may be exercised after one (1) year from the
date the option becomes one hundred percent (100%) vested.
6.6 FORM OF EXERCISE - The option may only be exercised according to the
terms and conditions established by the Committee, consistent with the limits
set forth herein, at the time the option is granted. Subject to the foregoing
terms and conditions, an option may be exercised by a written notice delivered
to the Company's principal office of intent to exercise the option with respect
to a specified number of shares of Stock and payment to the Company of the
amount of the option purchase price for the number of shares of Stock with
respect to which the option is then exercised. The payment may be either in
cash or in stock of the Company. If stock is used for payment, such stock
shall be valued at the closing price as reported by the Wall Street Journal on
the date of exercise.
6.7 RIGHTS AS A SHAREHOLDER - An optionee shall have no rights as a
stockholder with respect to shares covered by his option until the day of
issuance of a stock certificate to him and until after such shares are fully
paid.
ARTICLE VII - TERMINATION OF OPTION
7.1 Every option granted to each optionee under this Plan shall terminate
and expire at the earliest of:
a. the date of expiration set when such option was granted; or
b. one (1) year after one of the events set forth in paragraph
6.4; or
c. immediately upon termination of employment of the optionee
with the Company (or termination of position as an outside director)
or any of its subsidiaries for any reason except if his employment
is terminated by reason of one of the events set forth in paragraph
6.4.
ARTICLE VIII - TRANSFERABILITY
8.1 NON-TRANSFERABLE - Any option granted under the Plan is not
transferable and can be exercised only by the optionee during his life subject
to paragraph 8.2 of this Article.
8.2 DEATH - In the event of the death of an optionee while totally
disabled, retired, or still employed by the Company or a parent or a
subsidiary, his option, to the extent he could have exercised it on the date of
his death, may be exercised by the personal representative of the estate of the
optionee within one (1) year after the date of his death in accordance with the
terms
6
<PAGE> 7
established by the Committee at the time the option was granted, but (as
set forth in Article VII) not later than the expiration date set forth in
paragraph 6.5.
ARTICLE IX - ADJUSTMENT OF NUMBER OF SHARES
9.1 STOCK DIVIDENDS - In the event that a dividend shall be declared upon
the Stock payable in shares of stock of the Company, the number of shares of
stock then subject to any such option and the number of shares reserved for
issuance pursuant to the Plan, but, not yet covered by an option, shall be
adjusted by adding to each such share the number of shares which would be
distributable thereon (or any equivalent value of Stock as determined by the
Committee in its sole discretion) if such share had been outstanding on the
date fixed for determining the stock holders entitled to receive such stock
dividend.
9.2 REORGANIZATION - In the event that the outstanding shares of Stock
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of the Company, or of another corporation, whether
through reorganization, recapitalization, stock split up, combination of
shares, merger or consolidation, then, there shall be substituted for each
share of Stock subject to any such option and for each share of Stock reserved
for issuance pursuant to the Plan, but, not yet covered by an option, the
number and kind of shares of stock or other securities into which each
outstanding share of Stock shall be so changed or for which each such share of
Stock shall be exchanged.
9.3 OTHER CHANGES - In the event there shall be any change, other than as
specified above in this Article, in the number or kind of outstanding shares of
stock of the Company or of any stock or other securities into which such stock
shall have been changed or for which it shall have been exchanged, then, if the
Committee shall, in its sole discretion, determine that such change equitably
requires an adjustment in the number or kind of shares theretofore reserved for
issuance pursuant to the Plan, but, not yet covered by an option and of the
shares then subject to an option or options, such adjustments shall be made by
the Committee and shall be effective and binding for all purposes of the Plan
and of each stock option agreement. Notwithstanding the foregoing, with
respect to options granted to directors, the Committee shall make those
adjustments under this Article IX only to the extent necessary to preserve the
economic benefit of an unexercised option.
9.4 ADJUSTED OPTION PRICE - In the case of any substitution or adjustment
as provided for in this Article, the option price in each stock option
agreement for each share covered thereby prior to such substitution or
adjustment will be the option price for all shares of Stock or other securities
which shall have been substituted for such share or to which such share shall
have been adjusted pursuant to this Article.
7
<PAGE> 8
9.5 FRACTIONAL SHARES - No adjustment or substitutions provided for in
this Article shall require the Company to sell a fractional share, and the
total substitution or adjustment with respect to each stock option agreement
shall be limited accordingly.
ARTICLE X - SECURITIES REGULATION
10.1 REGISTERED STOCK - The Company shall not be obligated to sell or
issue any shares under any option granted hereunder unless and until the shares
with respect to which the option is being exercised are effectively registered
or exempt from registration under the Securities Act of 1933 and from any other
federal or state law governing the sale and issuance of such shares or any
securities exchange regulation to which the Company might be subject.
10.2 UNREGISTERED STOCK - In the event the shares are not effectively
registered, but, can be issued by virtue of an exemption, the Company may issue
option shares to an optionee if the optionee represents that he is acquiring
such shares as an investment and not with a view to, or for sale in connection
with, the distribution of any such shares. Certificates for shares of Stock
thus issued shall bear an appropriate legend reciting such representation.
ARTICLE XI - MISCELLANEOUS
11.1 NO CONTRACT OF EMPLOYMENT - A grant or participation under the Plan
shall not be construed as giving an optionee a future right of employment with
the Company. Employment remains at the will of the Company.
11.2 GOVERNING LAW - This Plan and all matters relating to the Plan shall
be interpreted and construed under the laws of the State of Illinois.
11.3 AMENDMENT OF PLAN - The Board of Directors, at its discretion, may
amend the Plan at any time, subject to stockholder approval if required by SEC
rules or the listing requirements of any national securities exchanges or
trading systems on which are listed any of the Company's equity securities.
11.4 TERMINATION OF PLAN - The Board of Directors may, at its discretion,
terminate the Plan at any time for any reason. Termination of the Plan shall
not affect unexpired outstanding options previously granted.
8
<PAGE> 1
EXHIBIT 13
Ten-Year Financial Highlights Summary
(in thousands, except per share data)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Operations
Net revenue $1,622,975 $1,539,712 $1,382,673 $1,197,747 $ 964,108
Gross profit 670,709 640,895 562,731 512,498 410,128
Income before income taxes
and minority interest 274,823 262,369 228,953 214,492 159,477
Income taxes 92,490 95,581 83,300 90,273 63,186
Net income 182,243 166,716 145,586 124,035 94,852
Earnings per common share:(1)
Basic 1.16 1.06 0.92 0.79 0.61
Diluted 1.15 1.05 0.92 0.79 0.61
Net income as a percent of
net revenue 11.2% 10.8% 10.5% 10.4% 9.8%
Financial Position
Current assets $ 867,791 $ 873,614 $ 734,589 $ 773,036 $ 635,104
Current liabilities 332,874 342,026 275,182 278,046 205,394
Working capital 534,917 531,588 459,407 494,990 429,710
Current ratio 2.6 2.6 2.7 2.8 3.1
Property, plant &
equipment, net 676,161 665,468 613,125 567,303 440,995
Total assets 1,639,634 1,636,931 1,460,999 1,441,020 1,138,517
Long-term debt 5,566 7,350 7,450 8,122 7,350
Shareholders' equity 1,261,570 1,235,912 1,131,271 1,107,268 881,614
Return on beginning
shareholders' equity 14.7% 14.7% 13.1% 14.1% 12.6%
Dividends per common share(1) 0.06 0.05 0.04 0.02 0.02
Weighted average common
shares outstanding:(1)
Basic 156,600 157,111 157,414 156,274 154,650
Diluted 158,377 158,679 159,055 157,931 155,861
</TABLE>
(1)Restated for the following stock split/dividends: 25%-November 1997;
25%-February 1997; 25%-August 1995; 25%-November 1994.
<PAGE> 2
Management's Discussion of Financial Condition and Results of Operations
Financial Highlights
Molex continued to produce strong revenue growth while maintaining profitability
goals in fiscal 1998, despite the difficult economic conditions in certain
geographic regions in which the Company operates. Net revenue increased 5.4
percent to a record $1.62 billion for the fiscal year. The Company's net revenue
continues to increase faster than the worldwide connector industry. Net income
increased 9.3 percent to a record $182.2 million, or 11.2 percent of net
revenue. The Company's continued growth is believed to be the result of the
Company's ability to expand and increase market share in the fastest growing
market segments and geographic regions of the world. The Company's global
presence allows it to be a primary supplier for multinational and/or
multi-market companies worldwide.
The Growth of Molex vs. the Worldwide Connector Industry
Worldwide Molex
--------- -----
1988 100 100
1989 101 114
1990 104 118
1991 105 141
1992 106 155
1993 106 171
1994 110 192
1995 134 238
1996 142 275
1997 149 306
1998 149 323
Investor Returns
Molex is committed to providing its shareholders with a high return on
their investment. The Company's total shareholder return (including reinvestment
of dividends) over the last five years has averaged an annual compounded return
of 14.7 percent on Molex Common Stock and 15.5 percent on Molex Class A Common
Stock.
A $100 investment in Molex Common Stock at June 30, 1993, together with
the reinvestment of dividends, would be worth $198 at June 30, 1998, and a
similar investment in Molex Common Class A Stock would be worth $205 at June 30,
1998.
In November 1997, the Molex Board of Directors distributed a 25 percent
stock dividend. All shares outstanding, earnings and dividends per share have
been retroactively restated for the stock dividend.
Molex Common Stock/High-Low-Close By Quarter
1994 1995 1996 1997 1998
1st QTR - High 15.6875 18 23.4375 24.15625 36.20313
Low 12.375 15.36 17.3125 17.59375 29.25
Close 14.875 17.4375 23.2 23.84 35.5
2nd QTR - High 14.9375 18.4375 23.67188 25.4375 38.40625
Low 13 15.875 19.53125 22.71875 25.75
Close 14.5625 17.75 20.32 25.04 32.125
3rd QTR - High 15.75 18.625 23.20313 25.59375 32.125
Low 13.75 15.875 17.4375 22.40625 24.8125
Close 13.8125 18.3125 22.32 22.72 27.5
4th QTR - High 15.92 20.125 23.4375 31.59375 30.5
Low 12.375 18.4375 19.35938 21.59375 23
Close 15.25 19.84 20.32 29.2 25
Five-Year Cumulative Total Return
Molex Molex S&P Peer
Common Class A MidCap Group
Stock Com Stk 400
1993 100.00 100.00 100.00 100.00
1994 122.70 131.34 99.94 108.98
1995 156.57 163.30 122.27 150.70
1996 160.66 164.58 148.66 131.40
1997 231.25 244.77 183.34 177.41
1998 198.38 205.46 233.12 173.37
International Operations
In fiscal 1998, international operations generated net revenue in excess of $1.0
billion for the second year in a row and represented 65.7 percent of total Molex
net revenue. Net revenue from international operations in fiscal 1998 was nearly
three times greater than in fiscal 1988.
International operations are subject to currency exchange rate
fluctuations and government actions. Molex monitors its foreign currency
exposure in each country and implements strategies to respond to changing
economic and political environments. Examples of these strategies include the
prompt payment of intercompany balances utilizing a global netting system, the
establishing of contra-currency accounts in several international subsidiaries,
development of natural hedges and occasional use of forward exchange contracts.
Due to the uncertainty of the foreign currency exchange markets, Molex cannot
reasonably predict future trends related to foreign currency fluctuations.
Foreign currency fluctuations have impacted the Company's results in the past
and may impact results in the future.
<PAGE> 3
Financial Position and Liquidity
Molex has an exceptionally strong balance sheet. Cash and marketable securities
at June 30, 1998 equaled $322.4 million and represented 19.7 percent of total
consolidated assets. Cash and marketable securities decreased $2.9 million
during fiscal 1998.
The Company's long-term financing strategy is to rely on internal
sources of funds for investing in plant, equipment and acquisitions. Management
is confident that the Company's liquidity and financial flexibility are adequate
to support current and future growth. Molex has historically used external
borrowings only when a clear financial advantage exists. The Company has
available lines of credit totaling $28.7 million, which remain unused at June
30, 1998.
Cash provided from operations was $304.7 million during fiscal 1998.
The Company's operations generate sufficient cash to support the current level
of capital expenditures and financing activities. In U.S. dollars, the average
days' sales outstanding in trade accounts receivable of 70 improved from the 76
days reported last fiscal year. Average inventory days in U.S. dollars have
declined to 77 days from the 71 days reported last fiscal year.
Cash used for investing activities was $234.6 million in fiscal 1998,
primarily due to capital expenditures. Molex continued its commitment to
investing in new tooling, equipment and facilities, with capital expenditures
totaling $227.2 million for fiscal 1998. Molex added new facilities in England,
Japan, Mexico and the United States. In addition, facilities were expanded in
Japan. These additions increased the worldwide facility floor space to 4.2
million square feet.
Cash used for financing activities was $52.1 million in fiscal 1998,
primarily due to the purchase of treasury stock. The Company purchased 1,661,250
shares of common stock during fiscal 1998. During fiscal 1997, Molex purchased
1,346,875 shares of common stock on the open market.
Percentage of Net Revenue
Fiscal Year Ended June 30,
<TABLE>
<CAPTION>
U.S. Dollar
Percentage Change
1998 1997 1996 1998-97 1997-96
<S> <C> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0% 5.4% 11.4%
Cost of sales 58.7 58.4 59.3 5.9 9.6
Gross profit 41.3 41.6 40.7 4.7 13.9
S, G & A expenses 25.1 25.3 25.0 4.5 12.5
Income from operations 16.2 16.3 15.7 4.9 16.1
Total other income 0.7 0.7 0.9 1.0 (11.9)
Income before income taxes 16.9 17.0 16.6 4.7 14.6
Income taxes 5.7 6.2 6.1 (3.2) 14.7
Net income 11.2% 10.8% 10.5% 9.3% 14.5%
</TABLE>
Fiscal 1998 compared to fiscal 1997
Net revenue reached another all-time-high during fiscal 1998, rising 5.4 percent
to $1.62 billion, compared to $1.54 billion during fiscal 1997. Excluding the
effect of exchange rates due to the generally stronger U.S. dollar, which had
the effect of reducing reported revenue by $124.3 million, net revenue increased
13.5 percent.
Customer net revenue in the Americas region increased 13.4 percent in
U.S. dollars and 13.5 percent in local currencies in fiscal 1998. In the
competitive commercial products market, revenue and profits continued to
increase. Molex achieved solid growth in several niche markets. The Company
continued its penetration initiative with greater automotive product sales to
the Big Three. Sales growth in the telecommunications market was enhanced by a
series of new product introductions, as well as by sales of high speed cable
assemblies. Value-added assemblies experienced strong growth with increased
sales into the computer, computer peripheral, automotive and telecommunications
markets. The sale of fiber optic products continued its rapid growth in several
market segments.
In the Far East North, customer net revenue increased 1.8 percent in
local currencies during fiscal 1998. The increase in domestic sales was achieved
despite difficult economic conditions in both Japan and the Republic of Korea.
Molex Japan recorded the highest growth rate of any connector company in Japan
for the fiscal year, while Molex Korea maintained the number one position in its
local market. Net revenue in the region decreased 9.9 percent in U.S. dollars as
the dollar strengthened considerably against both the Japanese yen and the
Korean won.
<PAGE> 4
Management's Discussion of Financial Condition and Results of Operations
(continued)
Customer revenue in the Far East South increased 10.0 percent in local
currencies, but decreased 3.9 percent in U.S. dollars due to the $41.7 million
unfavorable revenue impact of foreign currency translation in fiscal 1998.
Higher imported material costs, due primarily to currency devaluation, caused a
6.2 percentage point drop in gross profit as a percent of net revenue. This drop
was partially offset by effective cost containment programs. Despite the
difficult current economic environment characterized by a slowing PC market and
currency devaluation, the Company continued its investment to pursue further
penetration in this very attractive market. Capital expenditures, which include
expansion in China, increased in fiscal 1998.
Europe's net revenue increased 17.9 percent in U.S. dollars and 31.2
percent in local currencies. Strong growth in telecommunications and consumer
products, steady improvement in automotive and a general resurgence in European
markets served by Molex have all contributed to the growth. Higher volumes along
with the introduction of new products more than offset the effects of price
erosion, resulting in substantially improved profitability.
The consolidated gross profit as a percent of net revenue remained
relatively flat in fiscal 1998 at 41.3 percent, compared to 41.6 percent in
fiscal 1997. This gross margin performance can be attributed to higher imported
material costs in international operations, due primarily to the effect of
currency devaluation in those regions, offset by improvements in overall
manufacturing efficiencies and utilization.
Selling, general and administrative expenses as a percentage of net
revenue remained relatively flat during fiscal 1998 at 25.1 percent versus 25.3
percent in the prior year period. Net revenue per employee increased to $130,307
in fiscal 1998 from $128,879 in 1997. Employee headcount increased 4.3 percent
compared to the 5.4 percent increase in net revenue. This increase in headcount
can be attributed to continued focus on the value-added business.
Research and development expenditures increased to $93.9 million or 5.8
percent of sales, a 4.9 percent increase from the $89.5 million expended in
fiscal 1997. These expenditures contributed to the release of 428 new product
families and the granting of 498 new patents during fiscal 1998. During fiscal
1998, 30.2 percent of net revenue was derived from the sale of products released
by the Company within the last three years. Molex continued its long-term
commitment to reinvesting its profits in new product design and tooling in order
to maintain and enhance the Company's competitive position.
Net interest income increased 7.0 percent during fiscal 1998 due to a
higher level of short-term investments than in fiscal 1997 along with the
improved interest rates on those investments.
The effective tax rate declined from 36.4 percent in fiscal 1997 to
33.7 percent during fiscal 1998, due mainly to the current utilization of prior
years' foreign tax carryforwards and a change in the mix of pretax earnings
between countries.
Net income increased 9.3 percent to $182.2 million during fiscal 1998.
Excluding the effect of foreign exchange rates, which lowered net income by
$14.0 million, net income climbed 17.7 percent. Diluted earnings per share
increased to $1.15 during fiscal 1998 from $1.05 during fiscal 1997. Fiscal 1997
Compared to Fiscal 1996 Net revenue increased 11.4 percent to an all-time high
of $1.54 billion during fiscal 1997, compared to $1.38 billion during fiscal
1996. Excluding the effect of exchange rates due to the generally stronger U.S.
dollar, which had the effect of reducing reported revenue, net revenue increased
16.3 percent.
Customer net revenue in the Americas region increased 15.9 percent in
U.S. dollars and 18.8 percent in local currencies in fiscal 1997. In the
competitive commercial products market, revenue and profits continued to
increase. Molex achieved solid growth in several niche markets. Sales growth in
the telecommunications and PC markets was a result of continued strength in
these industries and the introduction of new products. The sale of fiber optic
products continued its rapid growth in several market segments. Value-added
products experienced significant growth in the computer and computer peripheral
markets.
In the Far East North, customer net revenue increased 15.4 percent in
local currencies. The increase in domestic sales in fiscal 1997 was achieved
despite difficult economic conditions in the Republic of Korea during much of
the year and continuing price erosion in Japan. Net revenue in the region
increased 2.6 percent in U.S. dollars as the dollar strengthened considerably
against both the Japanese yen and the Korean won. Development of high precision
and miniaturized products have made Molex Japan a leading supplier to the
notebook PC industry. Molex became the No. 3 connector maker in Japan. Molex
further advanced its entry into NTT-related telecommunications and mobile phone
business with release of several new interconnects.
<PAGE> 5
Customer net revenue in the Far East South increased 20.4 percent in
U.S. dollars and 21.0 percent in local currencies. The region continued to
experience revenue growth due to demand for personal computers and related
peripheral products, along with new products developed for local demand and
export.
Europe's net revenue increased 6.2 percent in U.S. dollars and 12.7
percent in local currencies. Slow growth and softened demand during the first
half of the year was compensated for by strong sales in the second half of the
year. Price erosion and increasing variable costs affecting profitability were
offset by reductions in material costs and an increase in new product sales.
The consolidated gross profit increased from 40.7 percent of net
revenue in fiscal 1996 to 41.6 percent during fiscal 1997. The gross margin
performance in fiscal 1997 can be attributed to improvement in overall
manufacturing efficiencies, general softening of raw material prices and the
Company's ability to overcome the prior year's start-up costs, which plagued
automotive and other new product programs.
Selling, general and administrative expenses as a percentage of net
revenue remained relatively steady in fiscal 1997 and fiscal 1996. Net revenue
per employee decreased to $128,879 during fiscal 1997 from $136,871 during
fiscal 1996. Employee headcount increased 18.3 percent compared to the 11.4
percent increase in net revenue. This increase in headcount can be attributed to
the aforementioned growth in revenue, as well as significant increases in the
value-added business.
Research and development expenditures increased to $89.5 million or 5.8
percent of sales, a 4.7 percent increase from the $85.5 million in fiscal 1996.
These expenditures contributed to the release of 319 new product families and
the granting of 541 new patents during fiscal 1997. During fiscal 1997, 30.5
percent of net revenue was derived from the sale of products released by the
Company within the last three years. Molex has a long-term commitment to
reinvesting its profits in new product design and tooling in order to maintain
and enhance the Company's competitive position.
The foreign currency transactions balanced out through the year,
resulting in a net de minimus gain in fiscal 1997, compared to a net gain of
$2.1 million in fiscal 1996.
Interest income decreased slightly from fiscal 1996. This decrease can
be attributed to the relatively lower interest rates earned on the cash balances
in many countries where the Company has significant short-term investments.
Interest expense remained relatively unchanged from fiscal 1996.
The effective tax rate remained unchanged at 36.4 percent from fiscal
1996 to 1997.
Net income increased 14.5 percent to $166.7 million. Diluted earnings
per share increased to $1.05 during fiscal 1997 from $0.92 during fiscal 1996.
FUTURE ACCOUNTING CHANGES
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income," and No. 131, "Disclosures about Segments of an Enterprise and Related
Information," and in February 1998, issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," all of which are effective
for fiscal years beginning after December 15, 1997, the Company's fiscal year
1999. 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. SFAS No. 132
revises employers' disclosures about pensions and other postretirement benefit
plans. The requirements of all three statements only impact financial statement
disclosure. Accordingly, these statements will not have a material impact on the
Company's financial position or the results of its operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. It establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company is assessing the impact this statement will have on
its statement of financial position and the results of its operations.
<PAGE> 6
Management's Discussion of Financial Condition and Results of Operations
(continued)
Year 2000
Molex recognizes the importance of the Year 2000 issue and has been giving high
priority to it. During fiscal 1998, the Company completed an assessment of its
business and other information systems as well as the non-information system
aspects of its business that could be impacted by the Year 2000 issue. Over the
past few years the Company has developed and is currently implementing its
Global Information System (GIS), which is Year 2000 compliant. The GIS project
is approximately 50% implemented and is expected to be fully complete by
October, 1999. The Company presently believes that with modifications to
existing software and the GIS implementation, the Year 2000 issue will not pose
material operational problems for its information systems. While considered
unlikely, management believes that the most likely, worst case Year 2000
scenario would be a delay in the completion of the GIS implementation at one or
more of its operating subsidiaries. At this time management has not determined
the impact this worst case scenario would have on its financial position,
results of operations or cash flows, but believes that its experience
implementing GIS to date mitigates this risk.
While the GIS implementation addresses many of the Company's Year 2000
issues, the Company does not consider the GIS implementation costs to be related
to the Year 2000 issue as such costs are a strategic expenditure to enhance
future operations and would be incurred regardless of the Year 2000 issue. Total
costs related to the GIS project are expected to reach $55 million once
complete. Expenditures related to the Year 2000 date conversion effort,
principally the cost to repair existing software or microprocessors embedded in
the Company's manufacturing systems, are expected to be minor and management
expects the total costs of such remediation effort to be less than $2.0 million.
Such costs will be incurred principally during fiscal 1999 and should not have a
material impact on the Company's financial position, results of operations or
cash flows.
The Company is initiating communications with its critical external
relationships to determine the extent to which the Company may be vulnerable to
such parties' failure to resolve their own Year 2000 issues. Where practicable,
the Company will assess and attempt to mitigate its risks with respect to the
failure of these entities to be Year 2000 ready. The Company cannot estimate the
cost to the Company of the failure of third parties to address their Year 2000
issues and there can be no assurance that there will not be a material adverse
effect on the Company if third parties do not convert their systems in a timely
manner and in a way that is compatible with the Company's systems.
Outlook
Fiscal 1998 resulted in another good year for Molex, despite difficult economic
conditions in many parts of the world, a slowdown in the PC industry and the
higher value of the U.S. dollar when compared with foreign currencies. Because
the Company expects these external factors to continue during the first half of
fiscal 1999, its outlook for fiscal 1999 is positive, but remains cautious.
Management believes the Company is well positioned to take immediate advantage
of recoveries in affected economies as well as the PC industry.
To further expand the Company's global presence and provide customers
with innovative products at an accelerated pace, Molex plans to invest
approximately $230 million in capital expenditures and $105 million in research
and development for the fiscal year ending June 30, 1999. The Company continues
to emphasize expansion in rapidly growing markets such as telecommunications and
automotive. Global initiatives are underway to generate new products in a more
cost effective manner through strategic alliances with key customers. Molex
remains committed to providing high quality products and a full range of
services to customers wherever they may be located in the world. During fiscal
1999, the Company plans to open new facilities in China and Australia. Further
expansion is planned for existing operations in Guadalajara, Mexico; Chateau
Gontier, France; Biberach, Germany; and Maumelle, Arkansas.
Worldwide, the connector industry is expected to experience minimal
growth. The Company expects to have dollar denominated growth rates in the high
single digits while generating a 10 percent net return on sales.
The Company is subject to environmental laws and regulations in the
countries where it operates. Molex has designed an environmental program to
reduce the generation of potentially hazardous materials during its
manufacturing process and believes it continues to meet or exceed local
governmental regulations.
<PAGE> 7
Management's Statement of Responsibility
The management of the Company is responsible for the information contained in
the consolidated financial statements and in the other parts of this report. The
accompanying consolidated financial statements of Molex Incorporated and its
subsidiaries have been prepared in accordance with generally accepted accounting
principles. In preparing these statements, management has made judgments based
upon available information. To ensure that this information will be as complete,
accurate and factual as possible, management has communicated to all appropriate
employees requirements for accurate record keeping and accounting.
The Company maintains an internal control structure designed to provide
reasonable assurance for the safeguarding of assets against loss from
unauthorized use or disposition and reliability of financial records. Management
believes that through the careful selection of employees, the division of
responsibilities and the application of formal policies and procedures, the
Company has an effective and responsive internal control structure that is
intended, consistent with reasonable cost, to provide reasonable assurance that
transactions are executed as authorized.
The Company's independent auditors, Deloitte & Touche LLP, are
responsible for conducting an audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and for
expressing their opinion as to whether these consolidated financial statements
present fairly, in all material respects, the financial position, results of
operations and cash flows of Molex Incorporated and its subsidiaries in
conformity with generally accepted accounting principles.
Frederick A. Krehbiel
Chairman of the Board and
Chief Executive Officer
John H. Krehbiel, Jr.
President and
Chief Operating Officer
Robert B. Mahoney
Corporate Vice President,
Treasurer and Chief Financial
Officer
Independent Auditors' Report
To the Shareholders and Board of Directors,
Molex Incorporated
Lisle, Illinois
We have audited the accompanying consolidated balance sheets of Molex
Incorporated and its subsidiaries as of June 30, 1998 and 1997, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended June 30, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Molex Incorporated and its
subsidiaries as of June 30, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1998, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- --------------------------
Chicago, Illinois
July 22, 1998
<PAGE> 8
Consolidated Balance Sheets
(in thousands, except per share data)
Assets June 30,
1998 1997
Current assets:
Cash and cash equivalents $ 205,262 $ 199,767
Marketable securities 117,151 125,570
Accounts receivable:
Trade, less allowance of $17,114 in 1998 and
$14,586 in 1997 for doubtful accounts 324,279 332,350
Employee 4,281 5,415
Inventories (Note 2) 184,433 166,660
Deferred income taxes (Note 5) 15,101 35,801
Prepaid expenses 17,284 8,051
Total current assets 867,791 873,614
Property, plant and equipment
at cost (Note 4):
Land and improvements 39,114 44,107
Buildings and leasehold improvements 269,607 277,020
Machinery and equipment 740,246 730,258
Molds and dies 315,537 307,627
Construction-in-progress 75,773 56,886
1,440,277 1,415,898
Less accumulated depreciation and amortization 764,116 750,430
Net property, plant and equipment 676,161 665,468
Other assets 95,682 97,849
$1,639,634 $1,636,931
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 9
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity June 30,
1998 1997
<S> <C> <C>
Current liabilities:
Accounts payable $ 140,350 $ 151,934
Accrued expenses:
Salaries, commissions and bonuses 51,231 44,111
Other 67,930 64,899
Income taxes (Note 5) 71,097 79,197
Dividends payable 2,266 1,885
Total current liabilities 332,874 342,026
Deferred items:
Investment grants 2,535 3,341
Income taxes (Note 5) 3,969 11,417
Total deferred items 6,504 14,758
Accrued postretirement benefits (Notes 6 and 7) 30,536 33,779
Long-term debt (Note 4) 5,566 7,350
Minority interest in subsidiaries 2,584 3,106
Commitments and contingencies (Note 8) -- --
Shareholders' equity (Notes 3 and 9):
Common Stock, $.05 par value; 200,000 shares authorized;
83,261 shares issued at 1998 and 82,568 shares issued at 1997 4,163 3,303
Class A Common Stock, $.05 par value; 200,000 shares authorized;
82,073 shares issued at 1998 and 82,073 shares issued at 1997 4,104 3,283
Class B Common Stock, $.05 par value; 146 shares authorized;
94 shares issued at 1998 and 1997 5 5
Paid-in capital 147,782 131,265
Retained earnings 1,322,775 1,149,720
Treasury stock (Common Stock, 6,850 shares at 1998 and 5,214
shares at 1997; Class A Common Stock, 2,682 shares at 1998
and 2,696 shares at 1997), at cost (143,714) (94,494)
Deferred unearned compensation (19,988) (16,499)
Cumulative translation and other adjustments (53,557) 59,329
Total shareholders' equity 1,261,570 1,235,912
$1,639,634 $1,636,931
</TABLE>
<PAGE> 10
Consolidated Statements of Income
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the year ended June 30,
1998 1997 1996
<S> <C> <C> <C>
Net revenue $ 1,622,975 $ 1,539,712 $ 1,382,673
Cost of sales 952,266 898,817 819,942
Gross profit 670,709 640,895 562,731
Selling, general and administrative expenses:
Selling 127,643 140,080 131,207
Administrative 279,444 249,537 215,155
Total selling, general and administrative expenses 407,087 389,617 346,362
Income from operations 263,622 251,278 216,369
Other income (expense):
Interest, net 11,134 10,405 10,562
Other 67 686 2,022
Total other income 11,201 11,091 12,584
Income before income taxes and minority interest 274,823 262,369 228,953
Income taxes (Note 5) 92,490 95,581 83,300
Income before minority interest 182,333 166,788 145,653
Minority interest (90) (72) (67)
Net income $182,243 $166,716 $ 145,586
Earnings per common share (Based upon weighted average
common shares outstanding) (Notes 2 and 3):
Basic $ 1.16 $ 1.06 $ 0.93
Diluted $ 1.15 $ 1.05 $ 0.92
Dividends per common share (Note 3) $ 0.06 $ 0.05 $ 0.04
Weighted average common shares outstanding (Notes 2 and 3):
Basic 156,600 157,111 157,414
Diluted 158,377 158,679 159,055
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 11
Consolidated Statements of Shareholders' Equity
(in thousands)
<TABLE>
<CAPTION>
For the year ended June 30,
1998 1997 1996
<S> <C> <C> <C>
Common Stock
Balance at beginning of period $ 3,303 $ 2,619 $ 2,075
Exercise of stock options 29 23 23
Issuance of stock 2 -- --
Stock split effected in the form of a dividend 829 661 521
Balance at end of period 4,163 3,303 2,619
Class A Common Stock
Balance at beginning of period 3,283 2,627 2,097
Purchase of business -- -- 6
Stock split effected in the form of a dividend 821 656 524
Balance at end of period 4,104 3,283 2,627
Class B Common Stock
Balance at beginning and end of period 5 5 5
Paid-in capital
Balance at beginning of period 131,265 116,510 101,534
Exercise of stock options 5,927 5,947 6,822
Reissuance of treasury stock 1,072 203 920
Stock options granted 11,040 8,655 4,396
Stock option cancellations (834) (955) --
Purchase of business -- 1,672 3,516
Issuance of stock bonus 962 550 367
Stock split effected in the form of a dividend (1,650) (1,317) (1,045)
Balance at end of period 147,782 131,265 116,510
Retained earnings
Balance at beginning of period 1,149,720 989,928 850,533
Net income 182,243 166,716 145,586
Cash dividends declared (9,188) (6,924) (6,191)
Balance at end of period 1,322,775 1,149,720 989,928
Treasury stock
Balance at beginning of period (94,494) (62,726) (35,749)
Purchase of treasury stock (49,255) (31,918) (26,662)
Exercise of stock options (792) (917) (1,049)
Purchase of business -- 484 --
Reissuance of treasury stock 827 583 734
Balance at end of period (143,714) (94,494) (62,726)
Deferred unearned compensation
Balance at beginning of period (16,499) (13,583) (13,771)
Stock options granted (11,040) (8,655) (4,396)
Stock option cancellations 834 682 --
Amortization of deferred unearned compensation 6,717 5,057 4,584
Balance at end of period (19,988) (16,499) (13,583)
Cumulative translation and other adjustments
Balance at beginning of period 59,329 95,891 200,544
Net effect of translation adjustment (112,486) (36,962) (104,653)
Unrealized investment gain (400) 400 --
Balance at end of period (53,557) 59,329 95,891
Total shareholders' equity $1,261,570 $1,235,912 $1,131,271
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE> 12
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
For the year ended June 30,
1998 1997 1996
<S> <C> <C> <C>
Cash and cash equivalents, beginning of period $ 199,767 $ 242,779 $ 253,552
Cash and cash equivalents were provided from (used for):
Operations:
Net income 182,243 166,716 145,586
Add (deduct) non-cash items included in net income:
Depreciation and amortization 148,920 138,675 119,909
Deferred income taxes 13,470 (13,671) (4,629)
(Gain)/loss on sale of property, plant and equipment 696 (236) (361)
Minority interest 90 72 67
Amortization of deferred unearned compensation 6,717 5,057 4,584
Amortization of deferred investment grants (608) (486) (289)
Other credits to earnings, net (1,232) (1,552) (1,055)
Current items:
Accounts receivable (31,146) (78,645) (19,533)
Inventories (31,926) (23,334) (12,355)
Prepaid expenses (13,810) (1,062) (4,451)
Accounts payable 16,780 31,143 15,784
Accrued expenses 14,843 25,842 12,878
Income taxes (382) 26,833 (2,903)
Net cash provided from operations 304,655 275,352 253,232
Investments:
Purchases of property, plant and equipment (227,188) (208,558) (222,389)
Proceeds from sale of property, plant and equipment 7,207 3,104 3,860
Purchases of businesses, net of cash acquired (1,171) -- (1,677)
Proceeds from sale of marketable securities 1,996,229 2,179,269 1,921,024
Purchases of marketable securities (2,005,512) (2,260,518) (1,901,504)
(Increase)/decrease in other assets (4,170) 8,693 (10,290)
Net cash used for investments (234,605) (278,010) (210,976)
Financing:
Increase in investment grants 511 1,067 787
Decrease in long-term debt (3,000) (857) (987)
Increase in long-term debt 1,216 654 269
Cash dividends paid (8,622) (6,924) (5,556)
Exercise of stock options 5,164 5,053 5,796
Purchase of treasury stock (49,255) (31,918) (26,662)
Reissuance of treasury stock 1,899 786 1,654
Net cash used for financing (52,087) (32,139) (24,699)
Effect of exchange rate changes on cash (12,468) (8,215) (28,330)
Net increase (decrease) in cash and cash equivalents 5,495 (43,012) (10,773)
Cash and cash equivalents, end of period $ 205,262 $ 199,767 $ 242,779
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 604 $ 628 $ 699
Income taxes $ 80,983 $ 72,372 $ 78,611
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 13
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
(1) Nature of Operations
Molex Incorporated manufactures electronic, electrical and fiber optic
interconnection products and systems; switches; value-added assemblies; and
application tooling.
(2) Summary of Significant Accounting Policies
The following is a summary of the major accounting policies and practices of
Molex Incorporated and subsidiaries that affect significant elements of the
accompanying consolidated financial statements.
(A) Principles of Consolidation
The consolidated financial statements include the accounts of Molex Incorporated
and its subsidiaries (the Company). All material intercompany balances and
transactions have been eliminated.
(B) Use of Estimates in Financial Statement Preparation
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(C)Marketable Securities
Marketable securities are available for sale and consist of a variety of highly
liquid investments, with maturities generally between three and 12 months. Gross
unrealized holding gains and losses are not material as of June 30, 1998 and
1997.
(D) Fair Value of Financial Instruments
The Company's financial instruments include accounts receivable and payable,
marketable securities and long-term debt. The carrying amounts of the financial
instruments approximate their fair value.
(E) Inventories
Inventories are valued at the lower of first-in, first-out cost or market.
Inventories at June 30 consisted of the following:
1998 1997
Raw materials $ 48,324 $ 38,335
Work in progress 49,025 55,309
Finished goods 87,084 73,016
$184,433 $166,660
(F) Property, Plant and Equipment and Related Reserves
Depreciation and amortization are provided substantially on a straight-line
basis for financial statement purposes and on accelerated methods for tax
purposes. The estimated useful lives are as follows:
Buildings 25-45 years
Machinery and equipment 3-10 years
Molds and dies 3-4 years
Costs of leasehold improvements are amortized over the terms of the
related leases using various methods. The carrying value of all long-lived
assets is evaluated periodically to determine if adjustment to the depreciation
and amortization period or to the unamortized balance is warranted.
(G) Research and Development and Patent Costs
Costs incurred in connection with the development of new products and
applications are charged to operations as incurred. Total research and
development costs equaled $93,945 in 1998; $89,450 in 1997; and $85,484 in 1996.
Included in these totals are patent costs of $5,379, $5,607
and $6,739 for the years ended June 30, 1998, 1997 and 1996, respectively.
(H) Revenue Recognition
The Company recognizes revenue at the date of shipment.
(I) Currency Translation
Assets and liabilities of international entities have been translated at current
exchange rates, and income and expenses have been translated using average
exchange rates for the period.
(J) Goodwill
Goodwill is charged to earnings on a straight-line basis over the periods
estimated to be benefited, currently not exceeding 20 years.
(K) Earnings Per Share
On December 31, 1997 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share." This statement replaces primary
and fully diluted earnings per share (EPS) with basic and diluted EPS. Basic EPS
is computed by dividing net income by the weighted average number of common
shares outstanding during the period. Diluted EPS is computed by dividing net
income by the weighted average number of common shares and dilutive securities
outstanding during the period and must be presented in all cases with basic EPS.
<PAGE> 14
The basic weighted-average shares outstanding reconciles to diluted weighted-
average shares outstanding as follows:
1998 1997 1996
Basic 156,600 157,111 157,414
Effect of dilutive
stock options 1,777 1,568 1,641
Diluted 158,377 158,679 159,055
(L) New Accounting Pronouncements
In June 1997 the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," and in February 1998, issued
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," all 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. SFAS No. 132
revises employers' disclosures about pensions and other postretirement benefit
plans. The requirements of all three statements impact only financial statement
disclosure. Accordingly, these statements will not have a material impact on the
Company's financial position or the results of its operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. It establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company is assessing the impact this statement will have on
its statement of financial position and the results of its operations.
(M) Reclassifications
Certain reclassifications have been made to the prior years' financial
statements in order to conform to the 1998 classifications.
(3) CAPITAL STOCK
The shares of Common Stock, Class A Common Stock and Class B Common Stock are
identical except as to voting rights. Class A Common Stock has no voting rights
except in limited circumstances. So long as more than 50% of the authorized
number of shares of Class B Common Stock continues to be outstanding, all
matters, other than the election of directors, submitted to a vote of the
shareholders must be approved by a majority of the Class B Common Stock, voting
as a class, and by a majority of the Common Stock, voting as a class. During
such period, holders of a majority of the Class B Common Stock could veto
corporate action that requires shareholder approval other than the election of
directors. There are 25 million shares of preferred stock authorized, none of
which were issued or outstanding during the three years ended June 30, 1998.
The Class B Common Stock can be converted into Common Stock on a
share-for-share basis at any time at the option of the holder. The authorized
Class A Common Stock would automatically convert into Common Stock on a
share-for-share basis at the discretion of the Board of Directors upon the
occurrence of certain events. Upon such conversion, the voting interests of the
holders of Common Stock and Class B Common Stock would be diluted.
The holders of the Common Stock, Class A Common Stock and Class B
Common Stock participate equally, share-for-share, in any dividends that may be
paid thereon, if, as and when declared by the Board of Directors or in any
assets available upon liquidation or dissolution of the Company.
In August 1995, February 1997 and November 1997, the Board of Directors
declared 25 percent stock dividends. One quarter share of Molex Common Stock was
distributed for each share of Common Stock and Class B Common Stock outstanding.
In addition, one quarter share of Class A Common Stock was distributed for each
share of Class A Common Stock outstanding. All stock and stock option amounts,
as well as earnings, dividends and market prices per common share have been
retroactively restated for the stock dividends.
<PAGE> 15
(4) DEBT
The details relative to long-term debt are as follows:
1998 1997
Industrial development bonds
2% to 5%, secured by certain
land, buildings and equipment;
payable in periodic installments
through November, 2009 $4,350 $7,350
Other 1,216 -
Total long-term debt $5,566 $7,350
The long-term debt as of June 30, 1998 matures as follows: $152 in
2000; $152 in 2001; $152 in 2002; $152 in 2003; and $4,958 thereafter.
At June 30, 1998, the Company had available lines of credit of $28.7
million.
(5) INCOME TAXES
The deferred tax provision is determined under the liability method. Under this
method, deferred tax assets and liabilities are recognized based on differences
between the financial statement and tax bases of assets and liabilities using
presently enacted tax rates.
Income before income taxes and minority interest is summarized as
follows:
1998 1997 1996
United States $ 89,945 $ 65,164 $ 68,713
International 184,878 197,205 160,240
$274,823 $262,369 $228,953
Income tax provisions are as follows:
1998 1997 1996
Currently payable:
U.S. federal $ 7,380 $ 33,397 $ 22,480
State 5,839 4,952 4,152
International 65,801 70,903 61,152
79,020 109,252 87,784
Deferred:
United States 7,806 (8,843) (4,049)
International 5,664 (4,828) (435)
13,470 (13,671) (4,484)
Total provision for
income taxes $ 92,490 $ 95,581 $ 83,300
The Company's tax rate differs from the U.S. federal income tax rate as follows:
1998 1997 1996
U.S. federal income
tax rate 35.0% 35.0% 35.0%
Permanent tax exemptions (4.7) (4.0) (3.9)
State income taxes,
net of federal
tax benefit 1.4 1.2 1.2
Foreign tax rates
in excess of
U.S. federal rate 2.0 4.2 4.1
33.7% 36.4% 36.4%
Net deferred income taxes arise from temporary differences as follows:
1998 1997
International/local taxes $ 1,184 $ 6,892
Employee benefit programs 10,329 13,135
Depreciation and amortization (10,634) (9,074)
Allowance for doubtful accounts 2,414 1,979
Inventory reserves 4,994 3,198
Inventory - other 3,938 5,170
Investments 1,209 3,647
Foreign tax credit carryforwards 5,670 --
Other deferred items 2,012 9,639
$ 21,116 $ 34,586
The net deferred tax accounts reported on the balance sheet as of June
30 are as follows:
1998 1997
Net deferred:
Current asset $15,101 $ 35,801
Non-current asset 10,520 10,430
Current liability (536) (228)
Non-current liability (3,969) (11,417)
$21,116 $ 34,586
U.S. income taxes are generally not provided on the accumulated undistributed
earnings of certain international subsidiaries. It is intended that these
earnings will be permanently reinvested. Should these earnings be distributed,
no additional U.S. income tax expense will be incurred, due to the availability
of foreign tax credits.
(6) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain retiree health care and life insurance benefits to
its employees. The cost of retiree insurance benefits is accrued over the period
in which the employees become eligible for such benefits. The majority of the
Company's U.S. employees may become eligible for
<PAGE> 16
these benefits if they reach age 55, with age plus years of service equal to 70.
There are no significant postretirement health care benefit plans outside of the
United States. The Company continues to fund benefit costs primarily as claims
are paid.
Net periodic postretirement benefit cost for fiscal years 1998, 1997
and 1996 included the following components:
1998 1997 1996
Service cost, benefits
attributed to
employee service
during the period $ 630 $ 668 $ 573
Interest cost on accumulated
postretirement
benefit obligation 632 563 538
Unrecognized prior
service cost (280) (214) (214)
Unrecognized net gain 3 11 (6)
Net periodic postretirement
benefit cost $ 985 $ 1,028 $ 891
The following table sets forth the plans' combined status as of
June 30:
1998 1997
Accumulated postretirement benefit obligation (APBO):
Retirees and beneficiaries $ 1,414 $ 1,210
Active employees 8,148 7,318
Total accumulated postretirement
benefit obligation 9,562 8,528
Fair value of plan assets -- --
Unfunded accumulated benefit
obligation in excess of
plan assets 9,562 8,528
Unrecognized prior service cost 2,293 2,585
Unrecognized net loss (803) (997)
Accrued postretirement benefit costs $ 11,052 $ 10,116
The discount rate used in determining the APBO was 7.0 percent, 7.5
percent and 7.0 percent at June 30, 1998, 1997 and 1996, respectively. The
assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 7.1 percent in 1998, declining per year to
an ultimate rate of 5.0 percent by 2017. The health care cost trend rate
assumption has a significant effect on the amount of the obligation and periodic
cost reported. An increase in the assumed health care cost trend rate by 1.0
percent in each year would increase the APBO as of June 30, 1998 by $1,606 and
the aggregate of the service and interest cost components of the net periodic
postretirement benefit cost for the year then ended by $257.
(7) PENSION AND PROFIT SHARING PLANS
The Company sponsors and/or contributes to pension plans, including defined
benefit plans, covering substantially all U.S. hourly employees and certain
employees in international subsidiaries. The benefits are primarily based on
years of service and the employees' compensation for certain periods during the
last years of employment.
Net periodic pension expense for the Company's defined benefit plans
consists of the following for the year ended June 30:
<TABLE>
<CAPTION>
1998 1998 1997 1997 1996 1996
U.S. Int'l U.S. Int'l U.S. Int'l
Plans Plans Plans Plans Plans Plans
<S> <C> <C> <C> <C> <C> <C>
Service costs $ 944 $2,445 $ 856 $2,642 $ 597 $2,541
Interest costs on projected benefit obligation 734 1,511 655 1,448 560 1,343
Return on plan assets (639) (868) (641) (860) (500) (793)
Net amortization and deferral 341 (201) 340 (17) 215 75
Net periodic pension expense $1,380 $2,887 $1,210 $3,213 $ 872 $3,166
</TABLE>
<PAGE> 17
The funded status for the Company's defined benefit plans is as follows:
<TABLE>
<CAPTION>
1998 1998 1997 1997
U.S. Int'l U.S. Int'l
Plans Plans Plans Plans
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $11,398 19,308 $ 7,058 $ 20,216
Nonvested benefit obligation 552 77 447 162
Accumulated benefit obligation 11,950 19,385 7,505 20,378
Projected benefit obligation 15,456 27,816 10,180 29,711
Plan assets at fair value 14,408 16,970 9,529 11,945
Plan assets less than projected benefit obligation (1,048) (10,846) (651) (17,766)
Unrecognized net transition liability 176 48 287 56
Unrecognized prior service costs 1,739 -- 1,969 --
Unrecognized net (gain)/loss 275 (4,054) (389) 1,318
Accrued pension asset (liability) included
in the consolidated balance sheet $ 1,142 (14,852) $ 1,216 $(16,392)
</TABLE>
The assumptions used in computing the above information are presented below:
<TABLE>
<CAPTION>
1998 1998 1997 1997
Int'l Int'l
Plans Plans
U.S. (weighted U.S. (weighted
Plans average) Plans average)
<S> <C> <C> <C> <C>
Discount rates 7.0% 5.1% 7.5% 5.2%
Rates of increase in compensation 4.5% 3.8% 4.5% 4.0%
Expected long-term rates of return on plan assets 7.0% 7.0% 7.5% 7.5%
</TABLE>
The Company and certain of its subsidiaries also provide discretionary savings
and other defined contribution plans covering substantially all of their
salaried employees. Employer contributions to such plans of $10,348, $7,226, and
$6,611 were charged to operations during 1998, 1997 and 1996, respectively.
(8) COMMITMENTS
The Company and its subsidiaries rent certain facilities and equipment under
lease arrangements classified as operating leases. Some of the leases have
renewal options.
Future minimum rental payments under noncancellable operating leases
with initial or remaining terms of one year or more as of June 30, 1998 are
$9,227 in 1999; $5,797 in 2000; $3,490 in 2001; $1,670 in 2002; $1,053 in 2003;
and $11,459 thereafter, totaling $32,696.
Rental expense was $9,656 in 1998; $8,541 in 1997; and $9,961 in 1996.
(9) Stock Option Plans
The Company has two stock option plans currently in effect under which future
grants may be issued: the 1990 Stock Option Plan (the "1990 Plan") and the 1991
Stock Option Plan (the "1991 Plan").
1990 Plan: The most significant terms of this plan provide that (1)
options may be granted for 5.5 million shares of Common Stock and (2) the option
price shall be 50 percent of the fair market value of the stock of the Company
on the date of grant. The option term is five to nine years from the date of the
grant.
Stock option transactions relating to the 1990 Plan are summarized as
follows:
Wtd. Avg. Price
Shares Per Share
Outstanding at 6/30/95 2,574 $ 6.93
Granted 435 10.28
Exercised 536 5.11
Canceled 79 7.31
Outstanding at 6/30/96 2,394 $ 7.94
Granted 719 11.75
Exercised 513 6.59
Canceled 101 8.82
Outstanding at 6/30/97 2,499 $ 9.28
Granted 734 15.34
Exercised 483 7.61
Canceled 91 12.47
Outstanding at 6/30/98 2,659 $ 11.18
Options exercisable at 6/30/97 504 7.39
Options exercisable at 6/30/98 503 8.91
<PAGE> 18
Under the 1990 Plan, all shares issued are nonqualified. The option price per
share is less than the fair market value at the date of grant, thus creating
deferred unearned compensation. The difference between the fair market value and
the option price was recorded as deferred unearned compensation and is charged
to operations over the term of the option. In fiscal 1998, $6,717 was charged to
operations ($5,057 in 1997 and $4,584 in 1996).
1991 Plan: The most significant terms of this plan provide that (1)
options may be granted for 3.1 million shares of Common Stock and (2) the option
price shall be the fair market value of the stock on the date of the grant. The
option term is five to 11 years from the date of the grant.
Stock option transactions relating to the 1991 Plan are summarized as
follows:
Wtd. Avg. Price
Shares Per Share
Outstanding at 6/30/95 825 $ 12.97
Granted 118 21.91
Exercised 89 11.46
Canceled 13 14.17
Outstanding at 6/30/96 841 $ 14.36
Granted 395 22.99
Exercised 144 11.27
Canceled 13 19.17
Outstanding at 6/30/97 1,079 $ 17.88
Granted 156 30.37
Exercised 164 12.28
Canceled 2 11.80
Outstanding at 6/30/98 1,069 $ 20.57
Options exercisable at 6/30/97 209 13.81
Options exercisable at 6/30/98 142 18.17
In fiscal 1997 the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." As provided by SFAS No. 123, the Company has elected to continue
to account for its stock-based compensation programs according to the provisions
of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." The Company has adopted the disclosure provisions required by SFAS
No. 123. Had the Company elected to apply the provisions of SFAS No. 123
regarding recognition of compensation expense to the extent of the calculated
fair value of stock options granted in 1997 and 1998, the effects on reported
net income and earnings per common share would have been as follows:
1998 1997 1996
Net income,
as reported $ 182,243 $ 166,716 $ 145,586
Pro forma net income 181,349 166,133 145,312
Earnings per share:
Basic 1.16 1.06 0.92
Diluted 1.15 1.05 0.92
Pro forma earnings per share:
Basic 1.16 1.05 0.92
Diluted 1.15 1.05 0.91
For purposes of computing pro forma net income and earnings per common share,
the fair value of each option grant is estimated as of the date of grant using
the Black-Scholes option pricing model with the following assumptions:
1998 1997 1996
Dividend yield 0.2% 0.2% 0.2%
Expected volatility 25.22% 30.25% 31.45%
Risk-free interest rate 6.00% 6.07-6.54% 5.21-6.18%
Expected life of
option (years) 4.25 3.01-10.50 3.01-10.62
The following table summarizes information about options outstanding at June 30,
1998:
<TABLE>
<CAPTION>
Wtd. Avg.
Range of Number Remaining Wtd. Avg. Number Wtd. Avg.
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
<S> <C> <C> <C> <C> <C>
$6.76 - $8.09 359,542 1.0 $ 7.73 260,858 $ 7.60
8.28 - 8.28 571,289 5.1 8.28 - -
8.58 - 10.88 373,516 2.0 10.06 176,049 9.86
11.04 - 11.52 373,535 3.3 11.51 66,049 11.49
12.11 - 13.52 628,931 6.9 12.89 19,694 12.54
14.00 - 16.00 675,673 6.0 15.35 12,382 14.87
16.10 - 23.68 572,120 6.5 21.85 103,904 19.18
24.64 - 29.50 152,372 6.3 29.02 6,572 25.09
35.10 - 35.10 14,796 4.3 35.10 - -
38.61 - 38.61 5,698 4.3 38.61 - -
3,727,472 645,508
</TABLE>
<PAGE> 19
(10) OPERATIONS BY GEOGRAPHIC AREA The Company and its subsidiaries operate in
one product segment: the manufacture and sale of electrical components.
Net revenue by geographic area is summarized in the following tables:
Customer Intercompany
1998 Revenue Revenue Total
United States $ 557,272 $ 69,661 $ 626,933
Americas (Non-U.S.) 93,274 5,351 98,625
Far East North 327,741 131,822 459,563
Far East South 290,908 37,021 327,929
Europe 353,575 32,796 386,371
Other 205 -- 205
Eliminations -- (276,651) (276,651)
Consolidated $ 1,622,975 $ - $ 1,622,975
Customer Intercompany
1997 Revenue Revenue Total
United States $ 503,576 $ 55,257 $ 558,833
Americas (Non-U.S.) 69,970 3,149 73,119
Far East North 363,605 127,943 491,548
Far East South 302,305 33,213 335,518
Europe 299,771 23,798 323,569
Other 485 4,000 4,485
Eliminations -- (247,360) (247,360)
Consolidated $ 1,539,712 $ - $ 1,539,712
Customer Intercompany
1996 Revenue Revenue Total
United States $443,116 $ 42,881 $ 485,997
Americas (Non-U.S.) 51,757 1,441 53,198
Far East North 354,522 103,242 457,764
Far East South 251,063 29,016 280,079
Europe 282,164 18,450 300,614
Other 51 40,213 40,264
Eliminations -- (235,243) (235,243)
Consolidated $ 1,382,673 $ - $ 1,382,673
Net income by geographic area is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
United States $ 61,516 $ 48,517 $ 43,773
Americas (Non-U.S.) 4,022 6,621 5,492
Far East North 42,907 46,560 41,592
Far East South 32,844 51,711 39,193
Europe 43,344 28,072 21,039
Other (2,528) (14,838) (5,097)
Eliminations 138 73 (406)
Consolidated $ 182,243 $ 166,716 $ 145,586
Identifiable assets by geographic area are as follows:
1998 1997 1996
United States $ 650,858 $ 571,051 $ 475,207
Americas (Non-U.S.) 52,188 39,224 27,018
Far East North 374,926 477,799 440,438
Far East South 229,495 283,022 245,280
Europe 393,699 249,642 239,236
Other 171,623 80,060 56,318
Eliminations (233,155) (63,867) (22,498)
Consolidated $ 1,639,634 $ 1,636,931 $ 1,460,999
</TABLE>
Intercompany net revenue is generally recorded at cost plus the normal
mark-up charged to unaffiliated customers. Identifiable assets are those assets
of the Company that are identified with operations in each country. During 1998,
1997 and 1996, no customer accounted for more than 10% of consolidated net
revenue.
<PAGE> 20
Fiscal 1998, 1997 and 1996 by Quarter
(in thousands, except per share data-unaudited)
Quarter 1998 1997 1996
Net revenue 1st $410,194 $359,595 $338,176
2nd 405,497 377,005 344,483
3rd 409,228 387,053 347,065
4th 398,056 416,059 352,949
Gross profit 1st 170,333 145,252 138,595
2nd 168,508 155,680 138,729
3rd 168,523 161,091 140,228
4th 163,345 178,872 145,179
Income before income taxes and minority interest
1st 69,254 58,639 57,070
2nd 69,632 63,137 57,303
3rd 69,106 67,964 57,365
4th 66,831 72,628 57,215
Income taxes 1st 24,798 22,777 21,856
2nd 24,081 22,925 22,228
3rd 22,688 24,751 21,244
4th 20,923 25,128 17,972
Net income 1st 44,456 35,855 35,157
2nd 45,551 40,197 35,057
3rd 46,418 43,190 36,123
4th 45,818 47,473 39,249
Earnings per common share(1)
Basic 1st 0.28 0.23 0.22
2nd 0.29 0.26 0.22
3rd 0.30 0.28 0.23
4th 0.29 0.30 0.25
Diluted 1st 0.28 0.23 0.22
2nd 0.29 0.25 0.22
3rd 0.29 0.27 0.23
4th 0.29 0.30 0.25
<TABLE>
<CAPTION>
LOW HIGH LOW HIGH LOW HIGH
National Market System
Price of Stock: Common Stock(1)
<S> <C> <C> <C> <C> <C> <C> <C>
1st 29 1/4 36 13/64 17 19/32 24 5/32 17 5/16 23 7/16
2nd 25 3/4 38 13/32 22 23/32 25 7/16 19 17/32 23 43/64
3rd 24 13/16 32 1/8 22 13/32 25 19/32 17 7/16 23 13/64
4th 23 30 1/2 21 19/32 31 19/32 19 23/64 23 7/16
Class A Common Stock(1)
1st 27 1/2 33 19/64 16 15/64 21 59/64 18 9/16 22 5/64
2nd 23 35 1/2 20 9/16 23 17/32 18 9/16 21 59/64
3rd 23 3/4 30 3/8 20 31/32 24 5/32 17 49/64 22 15/64
4th 21 3/4 29 1/4 20 31/32 30 3/32 17 19/32 21 19/32
</TABLE>
(1) Restated for the following 25% stock dividends: November 1997; February
1997; August 1995.
<PAGE> 1
EXHIBIT 22
----------
REGISTRANT'S SUBSIDIARIES
- -------------------------
The following list sets forth the subsidiaries of Registrant, the state
or country of incorporation or organization of each, and the names under which
the subsidiaries do business. All of the listed subsidiaries are included in
the consolidated financial statements of the Registrant. Unless otherwise
indicated, all the subsidiaries are wholly-owned by the Registrant either
directly or indirectly through one or more intermediaries.
<TABLE>
<CAPTION>
COMPANY NAME JURISDICTION OWNERSHIP
- ------------ ------------ ---------
<S> <C> <C>
Molex US Inc. Delaware, U.S.A. 100.0%
Molex Caribe Inc. Delaware, U.S.A. 100.0%
Molex-ETC Inc. Delaware, U.S.A. 100.0%
ETC Leasing Inc. Delaware, U.S.A. 100.0%
Molex S.A. de C.V. Mexico 100.0%
Molex International, Inc. Delaware, U.S.A. 100.0%
Ulti-Mate, Inc. California, U.S.A. 100.0%
Molex Eletronica Ltda. Brazil 100.0%
Molex da Amazonia Ltda. Brazil 100.0%
Molex Electronics Ltd. Canada 100.0%
Dongguan Molex South-China Connector Co. Ltd. China (P.R.C.) 95.0%
Molex (Shanghai) Co., Ltd. China (P.R.C.) 95.0%
Molex Eastern Europe S.A. dba Molex France France 100.0%
Molex Elektronik GmbH Germany 100.0%
Molex Services GmbH Germany 100.0%
Molex GmbH Germany 90.0%
Molex Hong Kong/China Ltd. Hong Kong 100.0%
Molex (India) Ltd. India 95.0%
Molex Italia S.p.A. Italy 100.0%
Zetronic S.p.A. Italy 100.0%
Molex-Japan Co., Ltd. Japan 100.0%
Molex (Malaysia) Sdn. Bhd. Malaysia 100.0%
Molex de Mexico S.A. de C.V. Mexico 100.0%
Molex B.V. Netherlands 100.0%
Molex European Distribution Center B.V. Netherlands 100.0%
Molex Far East-South Management Pte. Ltd. Singapore 100.0%
Molex Singapore Pte. Ltd. Singapore 100.0%
Molex South Africa (Pty.) Ltd. South Africa 87.0%
Molex Korea Co., Ltd. South Korea 100.0%
Molex Svenska A.B. Sweden 100.0%
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
COMPANY NAME JURISDICTION OWNERSHIP
- ------------ ------------ ---------
<S> <C> <C>
Molex Interconnect AG Switzerland 100.0%
Molex Ireland Ltd. Ireland 100.0%
Smithstown Light Engineering Ltd. Ireland 50.0%
Molex Taiwan Ltd. Taiwan (R.O.C.) 100.0%
Molex (Thailand) Ltd. Thailand 94.75%
Molex Electronics Ltd. United Kingdom 100.0%
Beta Phase, Inc. Delaware, U.S.A. 100.0%
Molex Fiber Optics Inc. Illinois, U.S.A. 100.0%
Mod-Tap W Corp. Delaware, U.S.A. 100.0%
Mod-Tap NA Corp. Massachusetts, U.S.A. 100.0%
Mod-Tap System Europe SARL France 100.0%
Mod-Tap Limited United Kingdom 100.0%
Mod-Tap (Australia) Pty. Limited Delaware, U.S.A. 100.0%
Mod-Tap GmbH Germany 100.0%
Mod-Tap Japan Limited Delaware, U.S.A. 100.0%
Mod-Tap Far East Limited Delaware, U.S.A. 100.0%
Mod-Tap Sp. z o.o. Poland 100.0%
</TABLE>
<PAGE> 1
EXHIBIT 24
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in Registration Statements (File
Nos. 33-9737, 33-9738, 33-1138, 2-87344, 2-79949, 2-74447, 2-71557, 33-32055,
33-37683 and 333-141777) of Molex Incorporated and its subsidiaries on Form S-8
of our reports dated July 22 1998, appearing in and incorporated by reference
in this Annual Report on Form 10-K of Molex Incorporated and its subsidiaries
for the year ended June 30, 1998.
/s/ Deloitte & Touche LLP
Chicago, Illinois
September 22, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 205262
<SECURITIES> 117151
<RECEIVABLES> 345674
<ALLOWANCES> 17114
<INVENTORY> 184433
<CURRENT-ASSETS> 867791
<PP&E> 1440277
<DEPRECIATION> 764116
<TOTAL-ASSETS> 1639634
<CURRENT-LIABILITIES> 332874
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