UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission File Number 0-7491
MOLEX INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 36-2369491
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2222 Wellington Court, Lisle, Illinois 60532
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 630-969-4550
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date (applicable only to corporate
registrants). At March 31, 2000 as restated for the January 2000 stock
dividend:
Common Stock 98,332,872 shares
Class A Common Stock 97,744,623 shares
Class B Common Stock 94,255 shares
MOLEX INCORPORATED
FORM 10-Q
MARCH 31, 2000
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
March 31, 2000 and June 30, 1999
Condensed Consolidated Statements of Income -- 3
Three and Nine Months Ended March 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows -- 4
Nine Months Ended March 31, 2000 and 1999
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 10
PART II - OTHER INFORMATION 11
-1-
MOLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In Thousands)
<TABLE>
<CAPTION>
ASSETS Mar. 31, June 30,
2000 1999
_________ _________
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 163,439 $ 182,992
Marketable securities 46,153 83,874
Accounts receivable - net 486,258 391,120
Inventories 244,194 188,861
Other current assets 26,365 34,491
Total current assets 966,409 881,338
PROPERTY, PLANT AND EQUIPMENT - NET 941,091 809,602
GOODWILL 165,686 137,378
OTHER ASSETS 209,978 73,694
$2,283,164 $1,902,012
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 231,728 $ 156,556
Accrued expenses 145,359 130,969
Other current liabilities 29,622 54,916
Total current liabilities 406,709 342,441
DEFERRED ITEMS 3,068 6,968
ACCRUED POSTRETIREMENT BENEFITS 40,810 30,706
LONG-TERM DEBT 22,584 20,148
MINORITY INTEREST 2,323 1,212
SHAREHOLDERS' EQUITY
Common stock 8,441 8,415
Paid-in capital 241,119 233,806
Retained earnings 1,636,203 1,491,337
Treasury stock (226,856) (193,317)
Deferred unearned compensation (19,204) (21,996)
Cumulative translation and
other adjustments 167,967 (17,708)
Total shareholders' equity 1,807,670 1,500,537
$2,283,164 $1,902,012
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- 2 -
MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - In Thousands Except per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
NET REVENUE $567,569 $426,178 $1,602,448 $1,265,788
COST OF SALES 346,432 252,504 978,433 749,941
Gross Profit 221,137 173,674 624,015 515,847
OPERATING EXPENSES:
Selling 43,023 34,771 122,608 104,035
Administrative 97,091 75,328 279,985 227,003
Total Operating Expenses 140,114 110,099 402,593 331,038
Income from Operations 81,023 63,575 221,422 184,809
OTHER INCOME:
Foreign currency transaction
gain/(loss) 1,600 (1,562) (37) (4,217)
Interest income, net 1,396 1,958 5,443 6,780
Total Other Income 2,996 396 5,406 2,563
INCOME BEFORE INCOME TAXES 84,019 63,971 226,828 187,372
INCOME TAXES 26,224 19,011 69,418 59,366
NET INCOME $ 57,795 $ 44,960 $ 157,410 $ 128,006
EARNINGS PER COMMON SHARE:
BASIC $0.29 $0.23 $0.80 $0.66
DILUTED $0.29 $0.23 $0.79 $0.65
CASH DIVIDENDS PER COMMON SHARE $0.025 $0.012 $0.065 $0.036
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD: BASIC 196,044 193,771 196,157 194,228
DILUTED 198,463 195,008 198,175 195,520
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- 3 -
MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In Thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
Mar. 31, Mar. 31,
2000 1999
<S> <C> <C>
CASH AND CASH EQUIVALENTS, Beginning of Period $182,992 $205,262
CASH AND CASH EQUIVALENTS
PROVIDED FROM (USED FOR):
Operations:
Net income 157,410 128,006
Add (deduct) non-cash items included
in net income:
Depreciation and amortization 141,143 117,579
Amortization of deferred unearned compensation 3,254 5,329
Other charges to net income 596 162
Current items:
Accounts receivable (82,970) (20,747)
Inventories (50,017) (9,972)
Other current assets 6,122 (4,643)
Accounts payable 64,878 (15,777)
Accrued expenses 21,408 710
Other current liabilities (29,192) (20,957)
NET CASH PROVIDED FROM OPERATIONS 232,632 179,690
Investments:
Purchases of property, plant and equipment (244,691) (157,861)
Proceeds from sale of property, plant
and equipment 7,130 1,916
Proceeds from sale of marketable securities 3,568,467 3,975,107
Purchases of marketable securities (3,530,746)(3,961,563)
Increase in other assets (16,278) (43,023)
NET CASH USED FOR INVESTMENTS (216,118) (185,424)
Financing:
Increase in long-term debt 4,457 4,401
Decrease in long-term debt (2,021) -
Cash dividends paid (10,194) (6,932)
Purchase of treasury stock (34,216) (39,284)
Reissuance of treasury stock 2,460 1,855
Exercise of stock options 3,998 3,755
NET CASH USED FOR FINANCING (35,516) (36,205)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (551) 42,179
CASH AND CASH EQUIVALENTS, End of Period $163,439 $205,502
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- 4 -
MOLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Condensed Consolidated Financial Statements
The condensed consolidated financial statements have been prepared from the
Company's books and records without audit and are subject to year-end
adjustments. The interim financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of
information for the interim periods presented. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Molex Incorporated 1999
Annual Report to Shareholders and the 1999 Annual Report on Form 10-K. The
results of operations for the interim periods should not be considered
indicative of results to be expected for the full year.
(2) Earnings per Common Share
On January 28, 2000 the Board of Directors of Molex Incorporated declared a
twenty-five percent (25%) stock dividend. The dividend was payable on March 6,
2000 to shareholders of record on February 14, 2000. One quarter (1/4) share
of Common Stock was paid for each share of Common Stock and each share of Class
B Common Stock outstanding, and one quarter (1/4) share of Class A Common Stock
was paid for each share of Class A Common Stock outstanding. All shares
outstanding, earnings and dividends have been retroactively restated for the
stock split effected in the form of a stock dividend.
The reconciliation of common shares outstanding to dilutive common shares
outstanding is as follows as restated for the January 2000 stock dividend:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Weighted average shares outstanding - basic 196,044 193,771 196,157 194,228
Dilutive effect of stock options 2,419 1,237 2,018 1,292
Weighted average shares outstanding - diluted 198,463 195,008 198,175 195,520
</TABLE>
-5-
(3) Comprehensive Income
Comprehensive income includes all non-shareowner changes in equity and consists
of net income, foreign currency translation adjustments and unrealized gains
and losses on available-for-sale securities. Total comprehensive income, in
thousands of dollars, is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net income $ 57,795 $44,960 $157,410 $128,006
Currency translation and other adjustments 56,681 (38,956) 185,675 39,507
Total comprehensive income $114,476 $ 6,004 $343,085 $167,513
</TABLE>
4) Inventories
Inventories are valued at the lower of first-in, first-out cost or market.
Inventories, in thousands of dollars, consist of the following:
Mar. 31, June 30,
2000 1999
Raw Materials $ 40,295 $ 46,767
Work in Process 98,312 58,893
Finished Goods 105,587 83,201
$244,194 $188,861
(5) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
Originally effective for all fiscal quarters of all fiscal years beginning
after June 15, 1999, it has since been delayed one year. 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.
-6-
MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues for the third fiscal quarter ended March 31, 2000
were $567.6 million, increasing 33.2 percent in US dollars and 32.6 percent in
local currencies over the prior year period. For the nine months ended
March 31, 2000, net revenues rose to $1,602.4 million from $1,265.8 million in
the corresponding period last year, resulting in US dollar growth of 26.6
percent and local currency growth of 24.8 percent. Excluding revenues of the
Cardell acquisition, growth for the current quarter and year-to-date periods
would have been 27.0 percent and 20.2 percent, respectively. The strengthening
of other currencies against the US dollar caused net revenues to increase $2.3
million and $22.4 million for the quarter and year-to-date periods,
respectively.
Management believes that Molex continues to grow at a rate higher than the
worldwide connector market. All geographic regions experienced sales growth
for the quarter as well as the nine months ended March 31, 2000.
In the Americas, net revenue grew 38.0 percent in both US dollars and
local currencies over the prior year quarter. Year-to-date net revenue growth
was 33.8 percent in US dollars and local currencies compared with last year.
Excluding the sales of the Cardell acquisition, net revenue rose 24.0 percent
and 18.7 percent for the quarter and year-to-date periods, respectively.
Growth in the region was a result of strong demand in all major markets,
including business through distributors.
Net revenue in the Far East North rose 46.0 percent in US dollars and 32.2
percent in local currencies compared with the prior year quarter. For the nine
months ended March 31, 2000, revenue grew 38.7 percent in US dollars and 20.8
percent in local currencies over last year. In both Japan and Korea,
increasing investment in new products is contributing to market share gains,
especially in the fast growing computer, consumer and telecom markets.
Far East South net revenue for the quarter increased 15.2 percent in US dollars
and 13.4 percent in local currencies over the prior year. For the year-to-date
period, revenue rose 12.2 percent in US dollars and 10.7 percent in local
currencies over last year due to increased demand in the personal computer and
computer-peripheral product markets.
In Europe, net revenue grew 25.6 percent in US dollars and 42.9 percent in
local currencies over the prior year quarter. For the nine months ended
March 31, 2000, the revenue growth over the comparable prior year period was
10.2 percent in US dollars and 23.1 percent in local currencies. Strength in
-7-
the telecommunications and fiber optic markets contributed to the growth.
For the nine months ended March 31, 2000, 61.8 percent of Molex's worldwide
net revenue was generated from its international operations. International
operations are subject to currency fluctuations and government actions. Molex
monitors its currency exposure in each country and continues to implement
strategies to respond to changing economic environments. Due to the
uncertainty of the foreign exchange markets, Molex cannot reasonably predict
future trends related to foreign currency fluctuations. Foreign currency
fluctuations have impacted results in the past and may impact results in the
future.
Gross profit as a percent of net revenue was 39.0 percent for the quarter ended
March 31, 2000 compared with 40.8 percent last year. For the nine months ended
March 31, 2000, the gross profit percentage was 38.9 percent, down from 40.8
percent in the prior year period. This year's margins were impacted by
inclusion of the results of the Cardell division, which currently has a lower
gross profit margin than the overall Molex gross margin, and higher operating
costs incurred to meet customer demands.
Selling and administrative expenses were $140.1 million and $402.6 million,
respectively, for the quarter and nine month period ended March 31, 2000 as
compared with $110.1 million and $331.0 million, respectively, for the
corresponding prior year periods. As a percent of net revenue, selling and
administrative expenses for the quarter were 24.7 percent compared with 25.8
percent in the prior year, and for the year-to-date periods were 25.1 percent
compared with 26.2 percent in the prior year. Also included in selling and
administrative expenses are research and development expenditures, which
remained steady as a percent of net revenue at 6.1 percent for both nine month
periods ended March 31, 2000 and 1999.
Interest income, net of interest expense, was $1.4 million in the quarter ended
March 31, 2000 compared with $2.0 million in the prior year and was $5.4
million for the nine months ended March 31, 2000 as compared with $6.8 million
a year ago. The year-to-date decline is primarily due to a lower level of
short-term investments than in the prior year as well as an increased level of
debt.
The effective income tax rate was 31.0 percent for the quarter ended March 31,
2000 compared with 30.0 percent in the prior year period and was 30.4 percent
for the nine month period compared with 31.7 percent last year. The
year-to-date reduction was caused by the Company's continued repatriation
strategy, tax rate reductions in some of the jurisdictions in which the Company
operates, and the ongoing global effort to reduce its income tax burden through
better planning.
Net income for the quarter was $57.8 million or 29 cents per basic and diluted
-8-
share, a 28.5 percent increase compared with $45.0 million or 23 cents per
basic and diluted share for the same quarter last fiscal year. Net income for
the nine months ended March 31, 2000 was $157.4 million or 80 cents per basic
and 79 cents per diluted share, as compared with net income of $128.0 million
or 66 cents per basic and 65 cents per diluted share, for the same period in
the prior year. Excluding the effects of currency translation, net income
increased 25.8 percent for the quarter and 18.9 percent for the nine months
ended March 31, 2000 from the comparable prior year periods.
LIQUIDITY AND CAPITAL RESOURCES
Molex's balance sheet continues to be exceptionally strong. Working capital at
March 31, 2000 was $559.7 million, an increase from $538.9 million at June 30,
1999.
During the nine months ended March 31, 2000, the Company purchased an aggregate
of 1,187,500 shares of treasury stock at an aggregate cost of $34.2 million.
This is in accordance with authorization by the Board of Directors allowing for
the purchase of up to $50 million of Company stock during the current fiscal
year.
Management believes that the Company's current liquidity and financial
flexibility are adequate to support its continued growth.
OUTLOOK
The outlook for the remainder of fiscal 2000 is positive, based on improved
business levels to date, good momentum and a very strong backlog. 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.
To further expand the Company's global presence, offer innovative products at
an accelerated pace, and improve internal productivity, Molex plans to invest
approximately $271 million in capital expenditures and approximately $129
million in research and development for the fiscal year ending June 30, 2000.
Management believes the Company is well positioned to continue growing faster
than the overall connector industry. The Company continues to emphasize
expansion in rapidly growing industry segments, product lines and geographic
regions. Molex remains committed to providing high quality products and a full
range of services to its customers worldwide.
-9-
FORWARD LOOKING STATEMENT
This document contains various forward looking statements. Statements that are
not historical are forward looking statements and are subject to various risks
and uncertainties which could cause actual results to vary materially from
those stated. Such risks and uncertainties include: economic conditions in
various regions, product and price competition, raw material prices, foreign
currency exchange rates, technology changes, patent issues, litigation results,
legal and regulatory developments, and other risks and uncertainties described
in documents filed with the Securities and Exchange Commission.
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.
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. 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 $46.2 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.
-10-
Part II - Other Information
Items 1-4. Not Applicable
Item 5. Other Information
On March 20, 2000, Molex acquired substantially all of
the assets and assumed certain liabilities of the Beau
Interconnect Division of Axsys Technologies. Beau is
a leading manufacturer of electronic interconnect
devices in many industrial and commercial markets.
Item 6. Not Applicable
-11-
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MOLEX INCORPORATED
--------------------
(Registrant)
Date May 12, 2000 /s/ ROBERT B. MAHONEY
----------------- --------------------
Robert B. Mahoney
Corporate Vice President,
Treasurer and
Chief Financial Officer
Date May 12, 2000 /s/ LOUIS A. HECHT
----------------- --------------------
Louis A. Hecht
Corporate Secretary and
General Counsel
-12-
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 163439
<SECURITIES> 46153
<RECEIVABLES> 507423
<ALLOWANCES> 21165
<INVENTORY> 244194
<CURRENT-ASSETS> 966409
<PP&E> 2019792
<DEPRECIATION> 1078701
<TOTAL-ASSETS> 2283164
<CURRENT-LIABILITIES> 406709
<BONDS> 0
0
0
<COMMON> 249560
<OTHER-SE> 1558110
<TOTAL-LIABILITY-AND-EQUITY> 2283164
<SALES> 1602448
<TOTAL-REVENUES> 1602448
<CGS> 978433
<TOTAL-COSTS> 1381026
<OTHER-EXPENSES> 402593
<LOSS-PROVISION> 37
<INTEREST-EXPENSE> (5443)
<INCOME-PRETAX> 226828
<INCOME-TAX> 69418
<INCOME-CONTINUING> 157410
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 157410
<EPS-BASIC> .80
<EPS-DILUTED> .79
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