EXHIBIT 13
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Ten-Year Financial Highlights Summary (in thousands, except per share data)
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Operations
Net revenue $2,217,096 $1,711,649 $1,622,975 $1,539,712 $1,382,673
Gross profit 854,889 673,338 670,709 640,895 562,731
Income before income taxes
and minority interest 323,694 230,214 274,823 262,369 228,953
Income taxes 100,810 52,363 92,490 95,581 83,300
Net income 222,454 178,029 182,243 166,716 145,586
Earnings per common share:(1)
Basic 1.13 0.92 0.93 0.85 0.74
Diluted 1.12 0.91 0.92 0.84 0.74
Net income as a percent of
net revenue 10.0% 10.4% 11.2% 10.8% 10.5%
Financial Position
Current assets $1,023,009 $ 881,338 $ 867,791 $ 873,614 $ 734,589
Current liabilities 475,449 342,441 336,275 342,026 275,182
Working capital 547,560 538,897 531,516 531,588 459,407
Current ratio 2.2 2.6 2.6 2.6 2.7
Property, plant and
equipment, net 980,775 809,602 676,161 665,468 613,125
Total assets 2,247,106 1,902,012 1,639,634 1,636,931 1,460,999
Long-term debt 21,593 20,148 5,566 7,350 7,450
Shareholders' equity 1,705,804 1,500,537 1,261,570 1,235,912 1,131,271
Return on beginning
shareholders' equity 14.8% 14.1% 14.7% 14.7% 13.1%
Dividends per common share(1) 0.09 0.05 0.05 0.04 0.03
Weighted average common
shares outstanding:(1)
Basic 196,060 194,340 195,750 196,389 196,768
Diluted 198,208 195,631 197,971 198,349 198,819
</TABLE>
(1)Restated for the following stock dividends: 25%-January 2000;
25%-November 1997; 25%-February 1997.
Management's Discussion of Financial Condition and Results of Operations
Financial Highlights
Fiscal 2000 proved to be a very strong year for Molex. Not only did the
Company's growth surpass that of the worldwide connector industry-estimated at
nine to 10 percent-but Molex also achieved an important milestone by exceeding
the $2 billion net revenue level while maintaining its profitability goals. This
record $2.2 billion in net revenue for the fiscal year was an increase of 29.5
percent over last year. Net income was $222.5 million for fiscal 2000, an
increase of 25.0 percent from the prior year. 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.
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
25.1 percent on Molex Common Stock and 18.8 percent on Molex Class A Common
Stock. At the end of 1999, Molex was included in the S&P 500 Index, focusing
attention on the Company and increasing demand for Molex stock.
A $100 investment in Molex Common Stock at June 30, 1995, together with the
reinvestment of dividends, would be worth $306 at June 30, 2000. A similar
investment in Molex Common Class A Stock would be worth $237 at June 30, 2000.
In January 2000, 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.
Financial Position and Liquidity
Molex has an exceptionally strong balance sheet. Cash and marketable securities
at June 30, 2000 equaled $241.2 million and represented 10.7 percent of total
consolidated assets. Cash and marketable securities decreased $25.6 million
during fiscal 2000 due to cash requirements necessary for acquisitions and
investments during the year.
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 $36.0 million, of which $29.9 million
remained unused at June 30, 2000.
Cash provided from operations was $367.9 million during fiscal 2000. 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 68 days decreased from
the 71 days reported last fiscal year. Average inventory days in U.S. dollars
decreased to 56 days from the 60 days reported last fiscal year.
Cash used for investing activities was $338.2 million in fiscal 2000, primarily
due to capital expenditures and acquisitions. Molex continued its commitment to
investing in new tooling, equipment and facilities, with capital expenditures
totaling $337.3 million for fiscal 2000. Molex added new facilities in China,
Ireland, Japan, Slovakia and the United States. In addition, facilities were
either expanded or replaced in Australia, Japan, Poland and the United States.
These additions increased the worldwide facility floor space to 5.7 million
square feet.
Cash used for financing activities was $58.0 million in fiscal 2000, primarily
due to the purchase of treasury stock and payment of cash dividends. The Company
purchased 1,365,000 shares of Molex Common Stock during fiscal 2000. During
fiscal 1999, Molex purchased 1,707,323 shares of its common stock on the open
market.
Percentage of Net Revenue
Fiscal Year Ended June 30,
U.S. Dollar
Percentage Change
2000 1999 1998 2000-1999 1999-98
Net revenue 100.0% 100.0% 100.0% 29.5% 5.5%
Cost of sales 61.4 60.7 58.7 31.2 9.0
Gross profit 38.6 39.3 41.3 27.0 0.4
S, G & A expenses 24.3 26.1 25.1 20.6 9.8
Income from operations 14.3 13.2 16.2 39.6 (14.1)
Total other income 0.3 0.3 0.7 99.3 (39.7)
Income before income taxes 14.6 13.5 16.9 40.6 (16.2)
Income taxes 4.6 3.1 5.7 94.0 (43.4)
Net income 10.0% 10.4% 11.2% 25.0% (2.3)%
Fiscal 2000 Compared with Fiscal 1999
Net revenue reached another all-time-high during fiscal 2000, rising 29.5
percent to $2.2 billion, compared with $1.7 billion during fiscal 1999.
Excluding the effect of exchange rates due to the generally stronger U.S.
dollar, net revenue increased 27.9 percent. In fiscal 2000, international
operations generated net revenue of $1.3 billion or 60.9 percent of total
Molex net revenue.
Net revenue in the Americas region rose 39.1 percent in U.S. dollars and 39.0
percent in local currencies in fiscal 2000. Excluding the former Cardell
Corporation, which was acquired in June 1999, the Americas region fiscal 2000
net revenue growth was 24.3 percent in both U.S. dollars and in local
currencies. A strong U.S. economy led to impressive growth across all business
units. Outstanding growth in the fiber optic and telecom markets was driven by
high demand levels from manufacturers of telecom, networking and computer
equipment. Molex has invested heavily in fiber optics to be well positioned for
the future. The consumer and automotive markets demonstrated continued healthy
growth due to steady demand in traditional products and a strong year for the
Big Three automotive manufacturers.
In the Far East North, net revenue increased 39.7 percent in U.S. dollars and
22.2 percent in local currencies during fiscal 2000. Molex capitalized on its
miniaturization strengths with rapid new product introductions. High end
telecommunications, mobile phones, personal computers and digital audio/visual
equipment, including the game machine market, continued to play an important
role, with increased emphasis on consumer electronics, industrial, automotive
and office automation.
In the Far East South, net revenue grew 15.1 percent in U.S. dollars during
fiscal 2000 and 13.3 percent in local currencies. New business in notebook
computers and computer peripherals, consumer electronics and cellular phones
contributed to regional growth. The Asean countries had a strong year, with
contract manufacturers playing a dominant role as OEMs continue to outsource
production and assembly. The Company essentially completed the transition of
its Taiwan manufacturing operations to China. The overall economic strength
of the region, as well as the stability of its currencies is in stark contrast
with two years ago.
Europe's net revenue increased 24.9 percent in local currencies over the prior
year, however only 11.4 percent in U.S. dollars due to the strong U.S. dollar.
The region benefited from market share gains in mobile and cellular business.
The impact from severe pricing pressures that affected automotive and consumer
products last year lessened in fiscal 2000. The distribution channel was
stronger in the year just concluded compared with the prior year.
During fiscal 2000, consolidated gross profit was 38.6 percent of net
revenue-versus 40.5 percent during fiscal 1999-and 39.3 percent excluding
Cardell. The change from last year reflected higher start-up costs incurred
to meet stronger than expected demand in several new product areas, final costs
associated with the transfer of manufacturing from Taiwan to China and an
increase in inventory reserves due to GIS standardization.
Selling, general and administrative expenses as a percentage of net revenue
decreased from 25.8 percent in fiscal 1999 to 24.3 percent during fiscal 2000,
the result of expenses increasing at a lower rate than that of net revenue.
Net revenue per employee climbed to $125,615 in fiscal 2000 from $120,918 in
1999. Employee headcount increased 20.0 percent compared with the 29.5 percent
increase in net revenue.
Research and development expenditures were $128.8 million or 5.8 percent of
sales, a 21.5 percent increase from the $105.9 million expended in fiscal 1999.
These expenditures contributed to the release of 406 new product families and
the granting of 533 new patents during fiscal 2000. During fiscal 2000, 31.1
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 to maintain and
enhance the Company's competitive position.
Net interest income declined 16.5 percent during fiscal 2000 due to a lower
level of short-term investments, as well as a slightly higher level of debt than
in fiscal 1999.
The effective tax rate during fiscal 2000 was 31.1 percent. The comparable tax
rate in fiscal 1999 was 31.8 percent, which excludes a positive adjustment due
to the recognition of prior-year foreign tax credits in fiscal 1999. Including
the positive adjustment, the effective tax rate during fiscal 1999 was 22.8
percent.
Net income increased 25.0 percent to $222.5 million during fiscal 2000.
Excluding the effect of foreign exchange rates, which increased net income by
$7.3 million, net income rose 20.8 percent. Earnings per share climbed to $1.12
during fiscal 2000 from $0.91 during fiscal 1999.
Fiscal 1999 Compared with Fiscal 1998
Net revenue reached another all-time-high during fiscal 1999, rising 5.5 percent
to $1.71 billion, compared with $1.62 billion during fiscal 1998. Excluding the
effect of exchange rates, net revenue increased 5.7 percent. In fiscal 1999,
international operations generated net revenue in excess of $1.0 billion for the
third year in a row and represented 65.8 percent of total Molex net revenue.
Customer net revenue in the Americas region increased 6.1 percent in U.S.
dollars and 6.3 percent in local currencies in fiscal 1999. Slower economic
growth in traditional products and intensified price erosion tempered the
region's growth within the highly competitive commercial and computer desktop
markets. The automotive sector had another strong year helped by the healthy
U.S. automotive market and the focus on the Big Three auto manufacturers. Molex
increased penetration into the automotive market and enhanced the potential to
capture additional market share with the June 1999 acquisition of Cardell
Corporation. Cardell is a Detroit-based manufacturer of stamped and overmolded
connector products. Outstanding performance within the fiber optic and high
speed cabling markets resulted in continued rapid growth.
In the Far East North, customer net revenue increased 12.0 percent in U.S.
dollars and 9.1 percent in local currencies during fiscal 1999. Despite the
nation's stagnant economic situation, and unlike other competitors in the
market, Molex Japan increased its market share in mobile telephones, PCs, DVDs,
LCDs and games and shipped NTT-related telecommunications products. Despite the
continuing Korean economic crisis, Molex Korea maintained the number one
position in the market, with growth mainly due to sales expansion in the
automotive and telecommunications markets.
In the Far East South, customer net revenue increased 19.7 percent in local
currencies during fiscal 1999 and 14.4 percent in U.S. dollars as several
regional currencies weakened against the dollar. Despite poor economic
conditions, Molex Singapore achieved record revenue, regaining lost share in
the storage industry. Despite steep desktop market price erosion, Malaysia
surpassed last year, and Molex Thailand has positioned itself as the preferred
connector company in Thailand. Molex Taiwan increased share in the ODM-Taiwan
notebook market and the motherboard PC market and entered the LCD monitor
market. In the face of a difficult economy in Hong Kong, Molex Hong Kong and
Molex Dongguan nevertheless exceeded last year. Capital expenditures, including
investment in China, continued.
Europe's net revenue declined 3.2 percent in U.S. dollars and 4.8 percent in
local currencies. A slowdown in business coupled with a reduction in planned
volumes by some key customers impacted the mobile and cellular business, while
sales of automotive and consumer products experienced minimal growth due to
severe volume and pricing pressures.
The Company's consolidated gross profit declined to 39.3 percent of net revenue
in fiscal 1999 from 41.3 percent during fiscal 1998. The decrease was partially
due to a charge in fiscal 1999 of $20.4 million relating to the write-off of
certain production tooling and related capacity adjustments. Excluding the
charge, gross profit margin in fiscal 1999 would have been 40.5 percent.
Selling, general and administrative expenses as a percentage of net revenue
increased from 25.1 percent in fiscal 1998 to 26.1 percent during fiscal 1999,
including a charge of $6.0 million related to closing manufacturing operations
in Taiwan, South Africa and Canada, and would have been 25.8 percent in 1999
excluding the charge. Net revenue per employee decreased to $120,918 in fiscal
1999 from $123,740 in 1998. Employee headcount, excluding Cardell, increased
7.9 percent compared with the 5.5 percent increase in net revenue.
Research and development expenditures increased to $105.9 million or 6.2
percent of sales, a 12.8 percent increase from the $93.9 million expended in
fiscal 1998. These expenditures contributed to the release of 350 new product
families and the granting of 476 new patents during fiscal 1999. During fiscal
1999, 31.1 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 to
maintain and enhance the Company's competitive position.
Net interest income decreased 20.2 percent during fiscal 1999 due to a lower
level of short-term investments than in fiscal 1998.
The effective tax rate declined from 33.7 percent in fiscal 1998 to 22.8 percent
during fiscal 1999, due to the utilization of foreign tax credits, a tax
holiday in several Far East jurisdictions and resolution of various tax issues.
Net income decreased 2.3 percent to $178.0 million during fiscal 1999 with a
negligible effect from foreign exchange rates. Earnings per share were $0.91 for
fiscal 1999 and $0.92 for fiscal 1998.
Future Accounting Changes
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
standard is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. 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
has determined that the impact this statement will have on its statement of
financial position and the results of its operations is not material.
Outlook
Molex had an outstanding year in fiscal 2000, achieving double-digit growth in
all regions and realizing increased market share across all industries.
Management believes that the Company has strong overall momentum and anticipates
another good year in fiscal 2001.
To further expand the Company's global presence, offer innovative products at
an accelerated pace and improve internal productivity, Molex plans to invest
approximately $375 million in capital expenditures and approximately $150
million in research and development for the fiscal year ending June 30, 2001.
The Company continues to emphasize expansion in rapidly growing markets such as
telecommunications, networking, automotive and systems sales, while working to
further strengthen its significant position as a leader in the computer and
consumer markets. 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 2001, the Company plans to both expand existing plants
and open new facilities in the United States and China. Further expansion is
planned for existing operations in Japan and Mexico.
Worldwide, the connector industry is expected to experience growth of 5 percent
to 10 percent. The Company expects to have dollar denominated growth rates in
the range of 15 percent to 20 percent while generating a minimum 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 government regulations.
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 to protect or preserve the value
of intercompany cash flows. No foreign exchange contracts were in use at
June 30, 2000.
The Company has implemented a formalized treasury risk management policy that
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 is
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 Molex's
financial position, results of operations and cash flows.
Interest rate exposure is principally limited to the $77.0 million of
marketable securities owned by the Company. Such securities are debt instruments
that 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 nature of these
investments-less than 12 months.
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 accounting principles
generally accepted in the United States of America. 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's internal control is designed to provide reasonable assurance for
the safeguarding of assets against loss from unauthorized use or disposition and
the 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 auditing standards generally accepted in the United States of
America 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 accounting principles generally accepted in the
United States of America.
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, 2000 and 1999, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended June 30, 2000. 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 auditing standards generally accepted
in the United States of America. 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, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
2000, in conformity with accounting principles generally accepted in the United
States of America.
/S/Deloitte & Touche LLP
Chicago, Illinois
July 24, 2000
Consolidated Balance Sheets (in thousands, except per share data)
Assets June 30,
2000 1999
Current assets:
Cash and cash equivalents $ 164,288 $ 182,992
Marketable securities 76,955 83,874
Accounts receivable:
Trade, less allowance of $23,712
in 2000 and $19,215 in 1999 for
doubtful accounts 509,920 387,525
Employee 4,935 3,595
Inventories (Note 2) 236,209 188,861
Deferred income taxes (Note 5) 24,664 19,137
Prepaid expenses 6,038 15,354
Total current assets 1,023,009 881,338
Property, plant and equipment
at cost (Note 2):
Land and improvements 67,072 53,972
Buildings and leasehold improvements 411,161 355,980
Machinery and equipment 1,051,732 877,011
Molds and dies 449,673 372,272
Construction-in-progress 123,995 89,573
2,103,633 1,748,808
Less accumulated depreciation
and amortization 1,122,858 939,206
Net property, plant and equipment 980,775 809,602
Goodwill, less accumulated
amortization of $30,519 in 2000
and $22,547 in 1999 (Notes 2 and 10) 165,307 137,378
Other assets 78,015 73,694
$2,247,106 $1,902,012
The accompanying notes are an integral part of these consolidated financial
statements.
Liabilities and Shareholders' Equity June 30,
2000 1999
Current liabilities:
Short-term loans (Note 4) $ 2,115 $ 4,464
Current portion of long-term
debt (Note 4) 1,426 499
Accounts payable 277,303 156,556
Accrued expenses:
Salaries, commissions and bonuses 86,336 68,084
Other 41,821 62,885
Income taxes (Note 5) 61,548 47,553
Dividends payable 4,900 2,400
Total current liabilities 475,449 342,441
Deferred items:
Investment grants 1,700 2,460
Income taxes (Note 5) 4,734 4,508
Total deferred items 6,434 6,968
Accrued postretirement benefits (Note 6) 36,099 30,706
Long-term debt (Note 4) 21,593 20,148
Minority interest in subsidiaries 1,727 1,212
Commitments and contingencies (Note 7) - -
Shareholders' equity (Notes 3 and 8):
Common Stock, $.05 par value; 200,000
shares authorized; 108,363 shares
issued at 2000 and 107,666 shares
issued at 1999 5,418 4,306
Class A Common Stock, $.05 par value;
200,000 shares authorized; 102,629
shares issued at 2000 and 102,591
shares issued at 1999 5,132 4,104
Class B Common Stock, $.05 par value;
146 shares authorized; 94 shares
issued at 2000 and 1999 5 5
Paid-in capital 259,806 233,806
Retained earnings 1,696,162 1,491,337
Treasury stock (Common Stock, 9,945
shares at 2000 and 9,743 shares
at 1999; Class A Common Stock,
5,486 shares at 2000 and 4,306
shares at 1999), at cost (241,893) (193,317)
Deferred unearned compensation (Note 8) (25,788) (21,996)
Accumulated other comprehensive income:
Cumulative translation and
other adjustments 6,962 (17,708)
Total shareholders' equity 1,705,804 1,500,537
$2,247,106 $1,902,012
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statements of Income
(in thousands, except per share data)
For the year ended June 30,
2000 1999 1998
Net revenue $2,217,096 $1,711,649 $1,622,975
Cost of sales 1,362,207 1,038,311 952,266
Gross profit 854,889 673,338 670,709
Selling, general and
administrative expenses:
Selling 162,373 134,526 127,643
General and administrative 376,530 312,454 279,444
Total selling, general and
administrative expenses 538,903 446,980 407,087
Income from operations 315,986 226,358 263,622
Other income (expense):
Interest, net 7,417 8,883 11,134
Other 291 (5,027) 67
Total other income 7,708 3,856 11,201
Income before income taxes
and minority interest 323,694 230,214 274,823
Income taxes (Note 5) 100,810 52,363 92,490
Income before minority interest 222,884 177,851 182,333
Minority interest 430 178 (90)
Net income $ 222,454 $ 178,029 $ 182,243
Earnings per common share
(Based upon weighted average
common shares outstanding)
(Notes 2 and 3):
Basic $ 1.13 $ 0.92 $ 0.93
Diluted $ 1.12 $ 0.91 $ 0.92
Dividends per common share (Note 3) $ 0.09 $ 0.05 $ 0.05
Weighted average common shares
outstanding (Notes 2 and 3):
Basic 196,060 194,340 195,750
Diluted 198,208 195,631 197,971
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statements of Shareholders' Equity
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Deferred Other Total
-----Common Stock----- Paid-In Retained Treasury Unearned Comprehensive Shareholders'
Common Class A Class B Capital Earnings Stock Compensation Income Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 $ 3,303 $ 3,283 $ 5 $ 131,265 $1,149,720 $ (94,494) $ (16,499) $ 59,329 $1,235,912
Comprehensive income:
Net income 182,243 182,243
Translation adjustments (112,486) (112,486)
Unrealized investment loss (400) (400)
Total comprehensive income 69,357
Cash dividends declared (9,188) (9,188)
Stock dividend 829 821 (1,650) -
Stock options -granted 11,040 (11,040) -
-exercised 29 5,927 (792) 5,164
-cancelled (834) 834 -
Issuance of stock 2 2
Stock bonus 962 962
Treasury stock -purchases (49,255) (49,255)
-reissuances 1,072 827 1,899
Deferred unearned
compensation amortization 6,717 6,717
Balance, June 30, 1998 4,163 4,104 5 147,782 1,322,775 (143,714) (19,988) (53,557) 1,261,570
Comprehensive income:
Net income 178,029 178,029
Translation adjustments 36,906 36,906
Unrealized investment loss (1,057) (1,057)
Total comprehensive income 213,878
Cash dividends declared (9,467) (9,467)
Stock options -granted 9,179 (9,179) -
-exercised 28 5,672 (1,052) 4,648
-cancelled (185) (185)
Purchase of business 113 69,310 69,423
Stock bonus 2 1,067 1,069
Treasury stock -purchases (49,430) (49,430)
-reissuances 981 879 1,860
Deferred unearned
compensation amortization 7,171 7,171
Balance, July 1, 1999 4,306 4,104 5 233,806 1,491,337 (193,317) (21,996) (17,708) 1,500,537
Comprehensive income:
Net income 222,454 222,454
Translation adjustments 26,131 26,131
Unrealized investment loss (1,461) (1,461)
Total comprehensive income 247,124
Cash dividends declared (17,629) (17,629)
Stock dividend 1,086 1,026 (2,112) -
Stock options -granted 12,571 (12,571) -
-exercised 22 2 5,431 (584) 4,871
-cancelled (1,071) 1,059 (12)
Stock bonus 1 828 829
Treasury stock -purchases (49,607) (49,607)
-reissuances 1,405 1,315 2,720
Deferred unearned
compensation amortization 7,720 7,720
Stock option tax benefit
and other 3 8,948 300 9,251
Balance, June 30, 2000 $ 5,418 $ 5,132 $ 5 $ 259,806 $1,696,162 $(241,893) $ (25,788) $ 6,962 $1,705,804
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statements of Cash Flows
(in thousands)
For the year ended June 30,
2000 1999 1998
Cash and cash equivalents,
beginning of period $ 182,992 $ 205,262 $ 199,767
Cash and cash equivalents were
provided from (used for):
Operations:
Net income 222,454 178,029 182,243
Add (deduct) non-cash items
included in net income:
Depreciation and amortization 196,352 168,856 148,920
Deferred income taxes (17,942) 1,875 13,470
Loss on sale of property,
plant and equipment 325 16,383 696
Minority interest 430 (178) 90
Amortization of deferred
unearned compensation 7,720 7,171 6,717
Amortization of deferred
investment grants (599) (601) (608)
Other debits(credits) to earnings, net (1,290) 209 (1,232)
Current items:
Accounts receivable (111,734) (35,661) (31,146)
Inventories (43,066) 7,299 (31,926)
Prepaid expenses 1,585 859 (13,810)
Accounts payable 111,389 (7,720) 16,780
Accrued expenses (7,287) 4,987 14,843
Income taxes 9,590 (26,990) (382)
Net cash provided from operations 367,927 314,518 304,655
Investments:
Purchases of property, plant
and equipment (337,316) (228,722) (227,188)
Proceeds from sale of property,
plant and equipment 15,590 4,793 7,207
Purchases of businesses,
net of cash acquired (38,877) (34,935) (1,171)
Proceeds from sale of marketable
securities 4,557,854 5,096,583 1,996,229
Purchases of marketable securities (4,550,935) (5,063,306) (2,005,512)
(Increase)/decrease in other assets 15,527 (22,080) (4,170)
Net cash used for investments (338,157) (247,667) (234,605)
Financing:
Increase in investment grants - 243 511
Increase(decrease) in short-term loans (2,349) 4,464 -
Decrease in long-term debt (2,955) (41,283) (3,000)
Increase in long-term debt 4,400 6,490 1,216
Cash dividends paid (15,087) (9,333) (8,622)
Exercise of stock options 4,871 4,648 5,164
Purchase of treasury stock (49,607) (49,430) (49,255)
Reissuance of treasury stock 2,720 1,860 1,899
Net cash used for financing (58,007) (82,341) (52,087)
Effect of exchange rate changes on cash 9,533 (6,780) (12,468)
Net increase (decrease) in cash
and cash equivalents (18,704) (22,270) 5,495
Cash and cash equivalents,
end of period $ 164,288 $ 182,992 $ 205,262
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 1,740 $ 875 $ 604
Income taxes $ 78,099 $ 64,768 $ 80,983
The accompanying notes are an integral part of these consolidated financial
statements.
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 majority-owned 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 revenue and expenses during the reporting period. Actual
results could differ from those estimates.
(C) Cash and Cash Equivalents The Company considers all highly liquid
investments with original maturities of three months or less to be cash
equivalents.
(D) 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. Unrealized holding gains and losses are recognized
as a separate component of shareholders' equity.
(E) 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.
(F) Inventories Inventories are valued at the lower of first-in, first-out cost
or market. Inventories at June 30 consisted of the following:
2000 1999
Raw materials $ 44,595 $ 46,767
Work in progress 82,341 58,893
Finished goods 109,273 83,201
$ 236,209 $ 188,861
(G) 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.
(H) 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 $128,839 in 2000;
$105,940 in 1999; and $93,945 in 1998.
Included in these totals are patent costs of $6,619; $5,192; and $5,379 for
the years ended June 30, 2000, 1999 and 1998, respectively.
(I) Revenue Recognition The Company recognizes revenue at the date of shipment.
(J) Currency Translation Assets and liabilities of international entities have
been translated at period-end exchange rates, and income and expenses have been
translated using average exchange rates for the period.
(K) Goodwill Goodwill represents acquisition cost in excess of the fair value
of net assets acquired and is amortized using the straight-line method over
periods ranging from 10 to 25 years. The Company periodically re-evaluates the
original assumptions and rationale used in the establishment of the carrying
value and estimated life of this asset.
(L) Earnings Per Share (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. The
basic weighted-average shares outstanding reconciles to diluted
weighted-average shares outstanding as follows:
2000 1999 1998
Basic 196,060 194,340 195,750
Effect of dilutive stock options 2,148 1,291 2,221
Diluted 198,208 195,631 197,971
(M) New Accounting Pronouncements
During the first quarter of fiscal 2000, the Company adopted SOP 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," which provides guidance on accounting for the costs of computer
software developed or obtained for internal use. During fiscal 2000, $2.0
million of software costs was capitalized.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000. 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 has determined that the impact this statement will
have on its statement of financial position and the results of its operations
is not material.
(N) Reclassifications
Certain reclassifications have been made to the prior years' financial
statements to conform to the 2000 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 percent 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, other than the election of directors, that requires
shareholder approval. There are 25 million shares of preferred stock authorized,
none of which were issued or outstanding during the three years ended June 30,
2000.
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 January 2000 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.
(4) Debt
The details relative to long-term debt are as follows:
2000 1999
Mortgages $ 8,278 $ 8,736
Bank loans 4,890 6,292
Industrial development bonds 8,750 4,350
Other 1,101 1,269
23,019 20,647
Less current portion 1,426 499
Total long-term debt $ 21,593 $ 20,148
Mortgages consist of two loans acquired as part of the purchase of Cardell
(see Note 10). Both loans are secured by certain buildings, carry an interest
rate of 7.79 percent and require periodic principal payments through 2012.
The Company has two bank loans with interest rates of 4.5 percent and 4.75
percent, respectively, payable in periodic installments through March 2007.
Industrial development bonds, secured by certain land, buildings and equipment,
have interest rates ranging from two percent to five percent, with periodic
principal payments through August 2029.
The long-term debt as of June 30, 2000 matures as follows: $1,360 in 2002;
$1,403 in 2003; $1,452 in 2004; $1,503 in 2005; and $15,875 thereafter.
At June 30, 2000, the Company had available lines of credit of $36.0 million.
Short-term loans bear interest rates ranging from 3.8 percent to 5.4 percent
and mature within a 12-month period.
(5) Income Taxes
The provision for income taxes is determined under the liability method
pursuant to SFAS No. 109. 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:
2000 1999 1998
United States $ 117,517 $ 54,820 $ 89,945
International 206,177 175,394 184,878
$ 323,694 $ 230,214 $ 274,823
Income tax provisions are as follows:
2000 1999 1998
Currently payable:
U.S. federal $ 22,237 $ (20,399) $ 7,380
State 2,691 1,755 5,839
International 93,824 69,132 65,801
118,752 50,488 79,020
Deferred:
United States (5,717) 856 7,806
International (12,225) 1,019 5,664
(17,942) 1,875 13,470
Total provision for
income taxes $ 100,810 $ 52,363 $ 92,490
The Company's tax rate differs from the U.S. federal income tax rate as follows:
2000 1999 1998
U.S. federal income
tax rate 35.0% 35.0% 35.0%
Permanent tax exemptions (2.6) (6.0) (4.7)
Foreign tax credit - (14.5) -
State income taxes, net
of federal tax benefit 0.8 0.8 1.4
Foreign tax rates in
excess of U.S. federal
rate (net) (1.0) 7.5 2.0
Other (1.1) - -
31.1% 22.8% 33.7%
Net deferred income taxes arise from temporary differences as follows:
2000 1999
International/local taxes $ 2,038 $ 2,060
Employee benefit programs 26,617 12,196
Depreciation and amortization (15,211) (13,361)
Allowance for doubtful accounts 5,441 3,674
Inventory reserves 15,287 4,186
Inventory-other 4,387 3,956
Investments (1,917) 368
Patent costs 3,298 -
Foreign tax credit carryforwards 4,610 5,396
Other deferred items 7,017 5,973
$ 51,567 $ 24,448
The net deferred tax accounts reported on the balance sheet as of June 30
are as follows:
2000 1999
Net deferred:
Current asset $ 24,664 $ 19,137
Non-current asset 31,639 10,697
Current liability (2) (878)
Non-current liability (4,734) (4,508)
$ 51,567 $ 24,448
U.S. income taxes are generally not provided on the accumulated undistributed
earnings of certain international subsidiaries as 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) Pension and Other Postretirement Benefits Effective for fiscal 1999, the
Company adopted SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." The provisions of SFAS No. 132 revise employers'
disclosures about pensions and other postretirement benefit plans, but do not
change the measurement or recognition of these plans.
Pension
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
their last years of employment.
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 $14,141; $10,903;
and $10,348 were charged to operations during 2000, 1999 and 1998, respectively.
Other Postretirement Benefits
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 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 pension and postretirement benefit costs for the Company's plans
consist of the following for the year ended June 30:
<TABLE>
<CAPTION>
Interest Costs Recognized Amortization of Net
on Projected Expected Prior Unrecognized Recognized Periodic
Service Benefit Return on Service Transition (Gains) Pension
Costs Obligation Plan Assets Cost Obligation Losses Expense
<S> <C> <C> <C> <C> <C> <C> <C>
2000: Pension
U.S. Plans $ 1,383 $ 1,216 $ (1,526) $ 231 $ 66 $ - $ 1,370
International Plans 3,677 1,861 (1,304) - 90 (915) 3,409
Postretirement
Other Plans 587 607 - (292) - (21) 881
1999: Pension
U.S. Plans 1,233 1,070 (1,331) 231 110 - 1,313
International Plans 2,871 1,532 (1,227) - 3 (1,248) 1,931
Postretirement
Other Plans 635 651 - (313) - - 973
1998: Pension
U.S. Plans 944 734 (639) 231 110 - 1,380
International Plans 2,445 1,511 (868) - (201) - 2,887
Postretirement
Other Plans 630 632 - (280) - 3 985
</TABLE>
The following provides a reconciliation of benefit obligations, plan assets
and funded status of the plans.
<TABLE>
<CAPTION>
2000 1999
Pension Postretirement Pension Postretirement
U.S. Int'l Other U.S. Int'l Other
Plans Plans Plans Plans Plans Plans
<S> <C> <C> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at
beginning of year $ 16,971 $ 38,999 $ 8,763 $ 15,456 $ 32,676 $ 9,439
Service cost 1,383 3,677 587 1,233 2,871 635
Interest cost 1,215 1,861 607 1,070 1,532 651
Participants contributions - 212 - - 191 -
Benefits paid (415) (2,071) (111) (329) (1,576) (155)
Liability (gains) losses (2,899) 7,016 1,878 (459) 1,413 (1,807)
Changes in foreign currency - 2,272 - - 1,892 -
Benefit obligation at
end of year $ 16,255 $ 51,966 $ 11,724 $ 16,971 $ 38,999 $ 8,763
Change in plan assets
Fair value of plan assets
at beginning of year $ 17,157 $ 19,942 $ - $ 14,408 $ 19,186 $ -
Actual return on plan assets 1,948 2,060 - 1,984 1,357 -
Employer contributions - 299 255 1,094 286 302
Participants contributions - 212 - - 191 -
Benefits paid (415) (1,573) (255) (329) (27) (302)
Asset gains (losses) - - - - - -
Changes in foreign currency - 379 - - (1,051) -
Fair value of plan assets
at end of year $ 18,690 $ 21,319 $ - $ 17,157 $ 19,942 $ -
Funded status $ 2,435 $(30,647) $ (11,724) $ 186 $(19,057) $ (8,763)
Unrecognized net transition liability - 1,407 - 66 1,456
Unrecognized net actuarial(gain) loss (4,159) 6,229 793 (837) (1,234) (1,106)
Unrecognized prior service cost 1,277 - (1,710) 1,508 - (2,002)
Accrued pension asset (liability)
included in the consolidated
balance sheet $ (447) $(23,011) $ (12,641) $ 923 $(18,835) $ (11,871)
</TABLE>
The weighted average assumptions used in computing the previous information
are presented below:
<TABLE>
<CAPTION>
2000 1999
Post- Post-
Pension retirement Pension retirement
U.S. Int'l Other U.S. Int'l Other
Plans Plans Plans Plans Plans Plans
<S> <C> <C> <C> <C> <C> <C>
Discount rates 8.0% 4.0% 8.0% 7.25% 4.6% 7.25%
Rates of increase in compensation 4.5% 3.6% - 4.5% 3.3% -
Expected long-term rates of return
on plan assets 9.0% 7.2% - 9.0% 6.8% -
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 6.4 percent in 2000, declining annually
to an ultimate rate of 5.0 percent by 2016. The health care cost trend rate
assumption has a significant effect on the amount of the obligation and periodic
cost reported. A one-percentage-point change in assumed health care cost trend
rates would have the following effects:
1 Percentage 1 Percentage
Point Increase Point Decrease
Effect on total of service and
interest cost components $ 267 $ (176)
Effect on postretirement
benefit obligation $ 2,102 $ (1,676)
(7) 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, 2000 are $12,622
in 2001; $8,318 in 2002; $3,751 in 2003; $1,220 in 2004; $7,963 in 2005 and
thereafter, totaling $33,874.
Rental expense was $15,053 in 2000; $9,999 in 1999; and $9,656 in 1998.
(8) Stock Option Plans
The Company has three stock option plans currently in effect, two of which may
issue future grants: the 1990 Stock Option Plan (the "1990 Plan"), the 1991
Stock Option Plan (the "1991 Plan") and the 1998 Stock Option Plan (the "1998
Plan").
1990 Plan: This plan expired as of June 30, 1999. Future grants cannot be
issued from this plan, but all grants issued prior to this date can be
exercised. 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.
Under the 1990 Plan, all shares issued are nonqualified.
Stock option transactions relating to the 1990 Plan are summarized as follows:
Wtd. Avg. Price
Shares Per Share
Outstanding at 6/30/97 3,124 $ 7.42
Granted 918 12.27
Exercised 604 6.09
Canceled 114 9.95
Outstanding at 6/30/98 3,324 $ 8.94
Granted 29 10.37
Exercised 613 7.47
Canceled 47 10.14
Outstanding at 6/30/99 2,693 $ 9.28
Granted - -
Exercised 481 8.55
Canceled 63 10.84
Outstanding at 6/30/00 2,149 $ 9.40
Options exercisable at 6/30/99 494 $ 8.57
Options exercisable at 6/30/00 369 $ 9.87
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 6/30/97 1,349 $ 14.30
Granted 195 24.30
Exercised 205 9.82
Canceled 3 7.87
Outstanding at 6/30/98 1,336 $ 16.46
Granted 627 20.91
Exercised 119 13.12
Canceled 3 9.35
Outstanding at 6/30/99 1,841 $ 18.20
Granted 400 27.40
Exercised 82 16.84
Canceled 3 14.25
Outstanding at 6/30/00 2,156 $ 19.96
Options exercisable at 6/30/99 169 $ 17.88
Options exercisable at 6/30/00 181 $ 19.67
1998 Plan: The most significant terms of this plan provide that (1) options may
be granted for 10 million shares of Class A Common Stock and (2) the option
price shall be not less than 10 percent nor more than 100 percent of the
fair market value of the Class A stock of the Company on the date of grant.
The option term is five to nine years from the date of grant.
Stock option transactions relating to the 1998 Plan are summarized as follows:
Wtd. Avg. Price
Shares Per Share
Outstanding at 6/30/98 - $ -
Granted 964 9.43
Exercised - -
Canceled 10 9.43
Outstanding at 6/30/99 954 $ 9.43
Granted 925 13.71
Exercised 51 9.67
Canceled 90 11.11
Outstanding at 6/30/00 1,738 $ 11.64
Options exercisable at 6/30/00 68 $ 9.69
The option price per share for certain options in the 1990 and 1998 plans was
less than the fair market value at the date of grant, thus creating deferred
unearned compensation. Deferred unearned compensation is charged to operations
over the term of the option. In fiscal 2000, $7,720 was charged to operations
($7,171 in 1999 and $6,717 in 1998).
As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company has elected 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,
the effects on reported net income and earnings per common share would have
been as follows:
2000 1999 1998
Net income, as reported $ 222,454 $ 178,029 $ 182,243
Pro forma net income 220,341 177,880 181,349
Earnings per share:
Basic 1.13 0.92 0.93
Diluted 1.12 0.91 0.92
Pro forma earnings per share:
Basic 1.12 0.91 0.93
Diluted 1.11 0.91 0.92
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:
2000 1999 1998
Dividend yield 0.2% 0.2% 0.2%
Expected volatility 41.31% 29.84% 25.22%
Risk-free interest rate 6.00% 6.00% 6.00%
Expected life of option (years) 4.20 4.86 4.25
The following table summarizes information about options outstanding at
June 30, 2000:
<TABLE>
<CAPTION>
Wtd. Avg.
Range of Number Remaining Wtd. Avg. Number Wtd. Avg.
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
Common
<S> <C> <C> <C> <C> <C> <C>
$ 6.63 - $ 9.22 1,071 2.4 $ 7.41 261 $ 8.75
9.69 - 11.80 1,130 5.4 10.78 10 10.52
11.84 - 18.94 876 4.7 16.20 199 14.67
19.71 - 27.30 1,170 7.5 23.30 67 22.73
27.95 - 30.89 57 3.4 28.84 13 28.86
Class A
$ 9.20 - $ 9.20 459 7.7 $ 9.20 - $ -
9.40 - 9.40 1 3.8 9.40 1 9.40
9.60 - 9.60 385 3.3 9.60 63 9.60
9.63 - 11.90 25 3.9 10.82 4 10.90
12.00 - 12.88 868 4.8 13.87 - 12.05
6,042 618
</TABLE>
(9) Segment and Related Information
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" for fiscal 1999, which requires the Company to report
information about its operating segments based on how management views its
business. The Company and its subsidiaries operate in one product segment: the
manufacture and sale of electrical components. Management operates the
business by geographic segments. The Americas region consists primarily of
operations in North America. The Far East North region is substantially Japan,
but also includes Korea, while the Far East South region includes China,
Singapore and the remaining countries in Asia. European operations are primarily
located in western Europe. Information by geographic area is summarized in the
following table:
<TABLE>
<CAPTION>
United Americas Far East Far East Corporate
States (Non-U.S.) North South Europe and Other Eliminations Total
2000
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Customer revenue $ 867,765 $ 72,836 $ 521,165 $ 394,067 $ 361,166 $ 97 $ - $ 2,217,096
Intercompany revenue 98,371 14,063 196,259 48,373 50,168 - (407,234) -
Total revenue 966,136 86,899 717,424 442,440 411,334 97 (407,234) 2,217,096
Depreciation and amortization 67,731 2,898 66,826 21,058 29,112 8,727 - 196,352
Tax expense 46,026 (952) 46,550 11,530 5,733 (8,077) - 100,810
Net income 90,104 (1,496) 81,819 45,884 29,157 (23,014) - 222,454
Identifiable assets 975,217 47,571 616,027 329,064 402,900 135,275 (258,948) 2,247,106
Capital expenditures 99,373 2,676 130,185 42,541 51,199 11,342 - 337,316
1999
Customer revenue $ 585,120 $ 88,683 $ 364,606 $ 341,526 $ 331,711 $ 3 $ - $ 1,711,649
Intercompany revenue 86,971 6,758 149,105 38,817 40,908 - (322,559) -
Total revenue 672,091 95,441 513,711 380,343 372,619 3 (322,559) 1,711,649
Depreciation and amortization 59,801 3,158 50,753 27,744 27,883 (483) - 168,856
Tax expense 31,337 2,011 46,390 7,920 3,317 (38,612) - 52,363
Net income 59,530 1,573 57,793 33,547 24,141 1,445 - 178,029
Identifiable assets 895,634 51,112 459,700 272,203 397,917 121,819 (296,373) 1,902,012
Capital expenditures 92,016 5,950 62,581 17,604 50,081 490 - 228,722
1998
Customer revenue $ 557,272 $ 93,274 $ 327,741 $ 290,908 $ 353,575 $ 205 $ - $ 1,622,975
Intercompany revenue 69,661 5,351 131,822 37,021 32,796 - (276,651) -
Total revenue 626,933 98,625 459,563 327,929 386,371 205 (276,651) 1,622,975
Depreciation and amortization 48,534 2,452 43,664 21,190 22,686 10,394 - 148,920
Tax expense 33,499 2,627 43,038 8,096 8,587 (3,357) - 92,490
Net income 61,516 4,022 42,907 32,844 43,344 (2,528) 138 182,243
Identifiable assets 650,858 52,188 374,926 229,495 393,699 171,623 (233,155) 1,639,634
Capital expenditures 82,553 7,796 62,370 30,894 43,382 193 - 227,188
</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 2000, 1999 and 1998, no customer accounted
for more than 10% of consolidated net revenue.
(10) Acquisitions
On March 20, 2000, the Company acquired all of the assets and assumed certain
liabilities of the Beau Interconnect Division of Axsys Technologies for $32.5
million in cash. Beau is a manufacturer of electronic interconnect devices.
On March 1, 2000, Molex acquired the remaining 30 percent of the common stock
of Silent Systems, Inc. for $6.3 million in cash.
On June 16, 1999, the Company acquired Cardell Corporation, an automotive
terminal and connector manufacturer. The purchase price of $129.0 million
consists of the issuance of $69.4 million of Molex common stock (approximately
2.26 million shares) to Cardell shareholders, cash of $18.5 million and the
repayment of $41.1 million in debt of Cardell assumed upon acquisition.
On September 4, 1998, the Company acquired 70 percent of the common stock of
Silent Systems, Inc., a manufacturer of acoustic noise reduction, heat sink and
thermal management products, for $14.8 million in cash.
On August 19, 1998, the Company acquired 51 percent of Mafatlal Micron, which
primarily supplies connectors to the telecommunications industry in India, for
$1.7 million in cash.
These acquisitions were accounted for by the purchase method of accounting.
The results of operations of the acquired businesses are included in the
consolidated financial statements from their dates of acquisition. These
acquisitions are not material to the results of operations of the Company,
therefore proforma financial data is not presented. The purchase price for
the acquisitions was preliminarily allocated to the assets acquired based on
their estimated fair values as follows:
(In thousands) 2000 1999
Current assets $ 5,858 $ 21,694
Property, plant and equipment 5,959 52,160
Intangibles and other assets 28,981 107,258
Liabilities assumed (1,921) (35,637)
Net assets acquired 38,877 145,475
Value of stock issued - (69,423)
Long-term debt repaid at acquisition - (41,117)
Cash paid for acquisitions $ 38,877 $ 34,935
Fiscal 2000, 1999 and 1998 by Quarter
(in thousands, except per share data-unaudited)
Quarter 2000 1999 1998
Net revenue 1st $ 491,870 $ 409,892 $ 410,194
2nd 543,009 429,718 405,497
3rd 567,569 426,178 409,228
4th 614,648 445,861 398,056
Gross profit 1st 193,423 165,577 170,333
2nd 209,455 176,597 168,508
3rd 221,137 173,674 168,523
4th 230,874 157,490 163,345
Income before income taxes
and minority interest 1st 65,305 58,831 69,254
2nd 77,504 64,570 69,632
3rd 84,019 63,971 69,106
4th 96,866 42,842 66,831
Income taxes 1st 19,808 19,590 24,798
2nd 23,386 20,699 24,081
3rd 26,224 19,181 22,688
4th 31,392 (7,107) 20,923
Net income 1st 45,497 39,173 44,456
2nd 54,118 43,873 45,551
3rd 57,795 44,960 46,418
4th 65,044 50,023 45,818
Earnings per common share(1)
Basic 1st 0.23 0.20 0.22
2nd 0.28 0.22 0.23
3rd 0.29 0.23 0.24
4th 0.33 0.26 0.23
Diluted 1st 0.23 0.20 0.22
2nd 0.27 0.22 0.23
3rd 0.29 0.23 0.23
4th 0.33 0.26 0.23
<TABLE>
<CAPTION>
LOW HIGH LOW HIGH LOW HIGH
National Market System
Price of Stock:
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stock(1) 1st 24 13/32 30 1/2 18 29/32 24 51/64 23 13/32 28 31/32
2nd 25 27/32 45 19/32 19 21/32 31 13/64 20 19/32 30 23/32
3rd 37 19/64 63 3/4 20 13/32 30 13/32 19 27/32 25 45/64
4th 42 1/2 58 7/8 21 61/64 29 45/64 18 13/32 24 13/32
Class A Common Stock(1) 1st 26 7/8 33 7/8 17 51/64 22 16/32 22 26 41/64
2nd 29 1/16 46 5/8 17 13/32 27 29/32 18 13/32 28 13/32
3rd 35 1/8 47 1/4 18 25 19/32 19 24 19/64
4th 31 3/4 43 3/4 18 13/64 25 13/64 17 13/32 23 13/32
</TABLE>
(1) Restated for the following 25% stock dividends: January 2000 and November
1997.
During the fourth quarter of fiscal 1999, gross profit was impacted by a
charge of $20.4 million relating to the write-off of certain production
tooling and related capacity adjustments. Selling, general and administrative
expenses included a charge of $6.0 million related to the costs to close
manufacturing operations in Taiwan, South Africa and Canada. These combined
charges reduced net income by $20.7 million (net of tax benefit of $5.7
million). The fourth quarter also included a $20.7 million favorable tax
adjustment due to the utilization of foreign tax credits, a tax holiday in
several Far East jurisdictions and resolution of various tax issues.
