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 September 30, 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 September 30, 2000:
Common Stock 98,642,474 shares
Class A Common Stock 96,811,422 shares
Class B Common Stock 94,255 shares
MOLEX INCORPORATED
FORM 10-Q
SEPTEMBER 30, 2000
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
September 30, 2000 and June 30, 2000
Condensed Consolidated Statements of Income -- 3
Three Months Ended September 30, 2000 and 1999
Condensed Consolidated Statements of Cash Flows -- 4
Three Months Ended September 30, 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 9
PART II - OTHER INFORMATION 10
-1-
MOLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In Thousands)
ASSETS Sept. 30, June 30,
2000 2000
_________ _________
CURRENT ASSETS:
Cash and cash equivalents $ 121,976 $ 164,288
Marketable securities 38,534 76,955
Accounts receivable - net 538,627 514,855
Inventories 260,111 236,209
Other current assets 35,104 30,702
Total current assets 994,352 1,023,009
PROPERTY, PLANT AND EQUIPMENT - NET 1,018,741 980,775
GOODWILL 163,007 165,307
OTHER ASSETS 78,415 78,015
$2,254,515 $2,247,106
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 253,532 $ 274,900
Accrued expenses 147,814 130,560
Other current liabilities 56,118 69,989
Total current liabilities 457,464 475,449
DEFERRED ITEMS 7,563 6,434
ACCRUED POSTRETIREMENT BENEFITS 41,927 36,099
LONG-TERM DEBT 21,286 21,593
MINORITY INTEREST 2,329 1,727
SHAREHOLDERS' EQUITY
Common stock 10,563 10,555
Paid-in capital 263,857 259,806
Retained earnings 1,755,732 1,696,162
Treasury stock (254,624) (241,893)
Deferred unearned compensation (23,247) (25,788)
Cumulative translation and
other adjustments (28,335) 6,962
Total shareholders' equity 1,723,946 1,705,804
$2,254,515 $2,247,106
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)
THREE MONTHS ENDED
Sept. 30, Sept. 30,
2000 1999
NET REVENUE $625,925 $491,870
COST OF SALES 381,235 298,447
Gross Profit 244,690 193,423
OPERATING EXPENSES:
Selling 50,474 37,904
Administrative 100,414 91,227
Total Operating Expenses 150,888 129,131
Income from Operations 93,802 64,292
OTHER INCOME (EXPENSE):
Impairment charge (2,763) -
Foreign currency transaction gain/(loss) 728 (638)
Interest income, net 1,870 1,651
Total Other Income/(Expense), Net (165) 1,013
INCOME BEFORE INCOME TAXES 93,637 65,305
INCOME TAXES 29,115 19,808
NET INCOME $64,522 $45,497
EARNINGS PER COMMON SHARE:
BASIC $0.33 $0.23
DILUTED $0.33 $0.23
CASH DIVIDENDS PER COMMON SHARE $0.025 $0.020
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD: BASIC 195,638 196,239
DILUTED 198,142 197,848
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)
THREE MONTHS ENDED
Sept. 30, Sept. 30,
2000 1999
CASH AND CASH EQUIVALENTS, Beginning of Period $164,288 $182,992
CASH AND CASH EQUIVALENTS
PROVIDED FROM (USED FOR):
Operations:
Net income 64,522 45,497
Add (deduct) non-cash items included
in net income:
Depreciation and amortization 50,458 45,669
Amortization of deferred unearned compensation 2,540 800
Impairment charge 2,763 -
Other charges to net income 1,405 3,963
Current items:
Accounts receivable (33,993) (18,527)
Inventories (28,147) (15,837)
Other current assets (4,812) (8)
Accounts payable (15,787) 19,040
Accrued expenses 23,657 (2,224)
Other current liabilities (9,550) (27,381)
NET CASH PROVIDED FROM OPERATIONS 53,056 50,992
Investments:
Purchases of property, plant and equipment (104,435) (58,943)
Proceeds from sale of property, plant
and equipment 888 4,480
Proceeds from sale of marketable securities 1,421,196 821,679
Purchases of marketable securities (1,382,775) (830,261)
Increase in other assets (10,268) (9,921)
NET CASH USED FOR INVESTMENTS (75,394) (72,966)
Financing:
Increase in long-term debt 284 4,413
Decrease in long-term debt (591) (251)
Cash dividends paid (4,892) (2,358)
Purchase of treasury stock (12,489) (13,658)
Reissuance of treasury stock 728 301
Exercise of stock options 1,433 678
NET CASH USED FOR FINANCING (15,527) (10,875)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (4,447) 17,506
CASH AND CASH EQUIVALENTS, End of Period $121,976 $167,649
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 2000
Annual Report to Shareholders and the 2000 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
The reconciliation of common shares outstanding to dilutive common shares
outstanding is as follows:
Three Months Ended
September 30,
2000 1999
Weighted average shares outstanding - basic 195,638 196,239
Dilutive effect of stock options 2,504 1,609
Weighted average shares outstanding - diluted 198,142 197,848
(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:
Three Months Ended
September 30,
2000 1999
Net income $64,522 $45,497
Currency translation and other adjustments (35,297) 45,941
Total comprehensive income $29,225 $91,438
-5-
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:
Sept. 30, June 30,
2000 2000
Raw Materials $ 47,202 $ 44,595
Work in Process 101,507 82,341
Finished Goods 111,402 109,273
$260,111 $236,209
-6-
MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues were $625.9 million for the quarter ended September
30, 2000, increasing 27.3 percent in US dollars and 28.9 percent in local
currencies over the first quarter of last year. The strengthening of the US
dollar compared with other currencies caused net revenues to decrease $8.3
million for the quarter.
Management believes that Molex continues to grow at a rate higher than the
worldwide connector market. All geographic regions experienced double-digit
sales growth for the quarter.
Net revenue in the Americas region rose 37.7 percent in both US dollars and
local currencies over the prior year period. Growth in the region was fueled
by strong demand in all major markets, including fiber optics,
telecommunications, networking and distribution.
Quarterly net revenue in the Far East North grew 34.5 percent in US dollars and
29.5 percent in local currencies compared with last year due to continuing
strength in the consumer markets. Investment in new products, especially in the
computer, consumer and telecom markets is resulting in market share gains in
both Japan and Korea.
Far East South net revenue for the quarter increased 23.3 percent in US dollars
and 23.2 percent in local currencies over the prior year quarter generated by
strong sales in the personal computer and computer-peripheral product markets.
In Europe, net revenue was up 35.9 percent in local currencies compared with
the same period last year but rose only 17.7 percent in US dollars as a result
of the weakened Euro. Demand remains strong in the fiber optic and
telecommunications markets.
For the three months ended September 30, 2000, 58.0 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 defensive strategies to respond to changing economic environments.
Due to the uncertainty of the foreign exchange markets, Molex cannot reasonably
predict future trends related to foreign currency fluctuations. Foreign
currency fluctuations have impacted results in the past and may impact results
in the future.
Gross profit as a percent of net revenue was 39.1 percent for the quarter ended
September 30, 2000 compared to 39.3 percent last year.
-7-
Selling and administrative expenses were $150.9 million for the first quarter
of fiscal 2001 compared with $129.1 million in the prior year period. As a
percent of net revenue, selling and administrative expenses were 24.1 percent
compared with 26.3 percent for the same period last year. Also included in
selling and administrative expenses are research and development expenditures,
which for the three months ended September 30, 2000, decreased as a percent of
net revenue to 5.8 percent from 6.6 percent in the prior year period.
The Company recorded an impairment charge on certain available-for-sale
securities during the first quarter of fiscal 2001 based on depressed market
values over the holding period, which is expected to be permanent.
Interest income, net of interest expense, was $1.9 million in the quarter ended
September 30, 2000 compared with $1.7 million in the prior year.
The effective tax rate was 31.0 percent for the first quarter compared with
30.2 percent in the prior year period as a result of increased revenues in
jurisdictions where higher tax rates apply.
Net income for the quarter was $64.5 million or 33 cents per basic and diluted
share, a 41.8 percent increase compared with $45.5 million or 23 cents per
basic and diluted share for the same quarter last fiscal year. Excluding the
effects of currency translation, net income increased 41.9 percent for the
quarter ended September 30, 2000 from the comparable prior year period.
LIQUIDITY AND CAPITAL RESOURCES
Molex's balance sheet continues to be strong. Working capital at September 30,
2000 was $536.9 million compared with $547.6 million at June 30, 2000.
During the three months ended September 30, 2000, the Company purchased an
aggregate of 340,000 shares of treasury stock at an aggregate cost of $12.5
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 fiscal 2001 is encouraging based on the strong sales and
backlog achieved in the first quarter. 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.
-8-
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 during the fiscal year ending June 30, 2001.
Management believes the Company is well positioned to continue to grow 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.
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 establishment 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.
-9-
Interest rate exposure is principally limited to the $38.5 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.
Part II - Other Information
Items 1-3. Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held on October 20,
2000, the following directors were elected to hold
office for their respective terms according to their
class: Fred L. Krehbiel, Douglas K. Carnahan, J. Joseph
King and Martin P. Slark. No candidate for director
received less than 88,266,098 votes in favor of their
election nor more than 1,245,336 votes withheld.
Three other proposals before the stockholders, adoption
of the 2000 Molex Incorporated Incentive Stock Option
Plan, the 2000 Molex Incorporated Executive Stock Bonus
Plan and the 2000 Molex Incorporated Long-Term Stock Plan
which are set forth in detail in the proxy statement
dated September 12, 2000, were approved.
Item 5-6. Not applicable
-10-
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 November 13, 2000 /s/ ROBERT B. MAHONEY
----------------- --------------------
Robert B. Mahoney
Corporate Vice President,
Treasurer and
Chief Financial Officer
Date November 13, 2000 /s/ LOUIS A. HECHT
----------------- --------------------
Louis A. Hecht
Corporate Secretary and
General Counsel
-11-
