-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T3SC2wdBBk4N3bdGOACiXp8IUns3wHOKKl91iM7fDD+qnyFf6KkxXM+mOXINJkmP 6qH9DBbd33I9oy3B8ctydg== 0000067472-04-000028.txt : 20040217 0000067472-04-000028.hdr.sgml : 20040216 20040217134031 ACCESSION NUMBER: 0000067472-04-000028 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOLEX INC CENTRAL INDEX KEY: 0000067472 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 362369491 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-07491 FILM NUMBER: 04606737 BUSINESS ADDRESS: STREET 1: 2222 WELLINGTON CT CITY: LISLE STATE: IL ZIP: 60532 BUSINESS PHONE: 6309694550 MAIL ADDRESS: STREET 1: 2222 WELLINGTON COURT CITY: LISLE STATE: IL ZIP: 60532 10-Q/A 1 a2nd10q1.txt AMENDED 10-Q FILING FOR Q2 FY04 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended December 31, 2003 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) 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 December 31, 2003: Common Stock 100,423,567 shares Class A Common Stock 89,879,851 shares Class B Common Stock 94,255 shares MOLEX INCORPORATED INDEX PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets -- 2 December 31, 2003 and June 30, 2003 Condensed Consolidated Statements of Income -- 3 Three and Six Months Ended December 31, 2003 and 2002 Condensed Consolidated Statements of Cash Flows -- 4 Six Months Ended December 31, 2003 and 2002 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 11 Item 3. Quantitative and Qualitative Disclosure About Market Risk 13 Item 4. Controls and Procedures 14 PART II - OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURES 20 1 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS MOLEX INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) ASSETS December 31, June 30, 2003 2003 _________ _________ (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 157,443 $ 178,976 Marketable securities 170,109 171,235 Accounts receivable - net 490,395 396,780 Inventories 216,386 179,256 Other current assets 45,362 35,866 _________ _________ Total current assets 1,079,695 962,113 PROPERTY, PLANT AND EQUIPMENT - NET 1,027,870 1,007,948 GOODWILL 160,743 160,732 OTHER ASSETS 221,846 204,097 _________ _________ $2,490,154 $2,334,890 _________ _________ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 203,926 $ 175,815 Accrued expenses 125,665 117,994 Other current liabilities 58,809 62,339 _________ _________ Total current liabilities 388,400 356,148 OTHER NON-CURRENT LIABILITIES 6,470 6,123 ACCRUED PENSION AND POSTRETIREMENT BENEFITS 64,675 58,430 LONG-TERM DEBT 10,731 13,137 OBLIGATIONS UNDER CAPITAL LEASES 3,175 3,731 MINORITY INTEREST 1,295 753 SHAREHOLDERS' EQUITY Common stock 10,712 10,680 Paid-in capital 364,417 341,530 Retained earnings 2,067,204 2,003,440 Treasury stock (463,280) (437,234) Deferred unearned compensation (41,134) (32,094) Cumulative translation and other adjustments 77,489 10,246 _________ _________ Total shareholders' equity 2,015,408 1,896,568 _________ _________ $2,490,154 $2,334,890 _________ _________ 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 SIX MONTHS ENDED December 31, December 31, ___________________ ___________________ 2003 2002 2003 2002 ________ ________ _________ ________ NET REVENUE $548,982 $454,609 $1,045,745 $923,855 COST OF SALES 368,129 308,215 695,511 617,905 ________ ________ _________ ________ Gross Profit 180,853 146,394 350,234 305,950 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling 48,845 40,547 93,261 81,424 General and Administrative 81,429 72,619 162,985 152,210 ________ ________ _________ ________ Total selling, general and administrative expenses 130,274 113,166 256,246 233,634 Income from operations 50,579 33,228 93,988 72,316 OTHER INCOME (EXPENSE): Gain on sale of affiliate stock 10,363 - 10,363 - Impairment and write-down of investments (4,986) - (4,986) - Interest, net 1,089 3,927 2,324 4,937 Other income (expense) (352) (5) (1,018) (588) ________ ________ _________ ________ Total other income (expense) 6,114 3,922 6,683 4,349 INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 56,693 37,150 100,671 76,665 INCOME TAXES AND MINORITY INTEREST 15,477 8,962 27,393 18,515 ________ ________ _________ ________ NET INCOME $ 41,216 $ 28,188 $ 73,278 $ 58,150 ________ ________ _________ ________ EARNINGS PER COMMON SHARE: BASIC $ 0.22 $ 0.15 $ 0.38 $ 0.30 DILUTED $ 0.21 $ 0.15 $ 0.38 $ 0.30 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: BASIC 190,459 192,002 190,599 192,462 DILUTED 192,450 193,312 192,462 193,863 CASH DIVIDENDS PER COMMON SHARE $ 0.025 $ 0.025 $ 0.050 $ 0.050
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) SIX MONTHS ENDED December 31, ___________________ 2003 2002 ________ ________ CASH AND CASH EQUIVALENTS, Beginning of Period $178,976 $213,477 OPERATING ACTIVITIES: Net income 73,278 58,150 Add (deduct) non-cash items included in net income - Depreciation and amortization 109,599 111,225 Amortization of deferred unearned compensation 6,210 6,562 Other charges to net income (1,921) 3,845 Changes in assets and liabilities, excluding effects of foreign currency adjustments - Accounts receivable (72,384) 8,399 Inventories (29,359) 2,395 Other current assets (5,793) 6,742 Accounts payable 16,848 (25,673) Accrued expenses 2,186 (2,548) Other liabilities (4,626) (15,154) _______ _______ CASH PROVIDED FROM OPERATING ACTIVITIES 94,038 153,943 INVESTING ACTIVITIES: Capital expenditures (83,939) (79,724) Proceeds from sale of property, plant and equipment 2,265 1,165 (Increase)decrease in marketable securities 1,126 (31,868) Other investing activities (3,363) (18,499) _______ _______ CASH USED FOR INVESTING ACTIVITIES (83,911) (128,926) FINANCING ACTIVITIES: Net decrease in debt (3,062) (1,729) Principal payments on capital lease obligations (2,569) (3,839) Cash dividends paid (9,535) (9,640) Purchase of treasury stock (25,406) (45,001) Reissuance of treasury stock 1,022 707 Exercise of stock options 4,946 4,066 _______ _______ CASH USED FOR FINANCING ACTIVITIES (34,604) (55,436) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 2,944 12,265 _______ _______ CASH AND CASH EQUIVALENTS, End of Period $157,443 $195,323 _______ _______ The accompanying notes are an integral part of these condensed consolidated financial statements. 4 MOLEX INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) Basis of Presentation Molex Incorporated manufactures electronic components, including electrical and fiber optic interconnection products and systems; switches; integrated products; and application tooling in 58 plants in 19 countries. The unaudited financial statements have been prepared from the Company's books and records and reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of information for the interim periods presented. The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and therefore, do not include all information and footnote disclosures included in the annual consolidated financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Molex Incorporated 2003 Annual Report to Shareholders and the 2003 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. Certain reclassifications have been made to the prior year's financial statements to conform to the fiscal year 2004 classifications. (2) Earnings Per Common Share The reconciliation of basic average common shares outstanding to dilutive average common shares outstanding is as follows (in thousands): Three Months Ended Six Months Ended December 31, December 31, __________________ __________________ 2003 2002 2003 2002 ________ ________ ________ ________ Weighted average shares outstanding - basic 190,459 192,002 190,599 192,462 Dilutive effect of stock options 1,991 1,310 1,863 1,401 ________ ________ ________ ________ Weighted average shares outstanding - diluted 192,450 193,312 192,462 193,863 ________ ________ ________ ________ (3) Comprehensive Income Total comprehensive income is summarized as follows (in thousands): Three Months Ended Six Months Ended December 31, December 31, __________________ __________________ 2003 2002 2003 2002 ________ ________ ________ ________ Net Income $41,216 $28,188 $ 73,278 $58,150 Foreign currency translation adjustments 45,234 33,991 66,932 18,115 Unrealized gain (loss) on available-for-sale securities 69 (11) 311 (88) ________ ________ ________ ________ Total comprehensive income $86,519 $62,168 $140,521 $76,177 ________ ________ ________ ________ 5 MOLEX INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4) New Accounting Pronouncements The Financial Accounting Standards Board (FASB) has issued Staff Position (FSP) No. 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (The "Act")." The purpose of this FSP is to permit a one-time election to defer recognition of the effects of the Act until the FASB issues accounting guidance, and to provide disclosure guidance based on that election. Molex has elected to defer recognition of the effects of the Act until accounting guidance is provided by the FASB. 5) Inventories Inventories are valued at the lower of first-in, first-out cost or market. Inventories, net of reserves, consist of the following (in thousands): December 31, June 30, 2003 2003 ___________ __________ Raw Materials $ 30,719 $ 26,155 Work in Process 78,372 63,807 Finished Goods 107,295 89,294 ___________ __________ $216,386 $179,256 ___________ __________ 6 MOLEX INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 6) Stock Option Plans As permitted by Statement of Financial Accounting Standards (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." 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 share would have been as follows (in thousands, except per share data): Three Months Ended Six Months Ended December 31, December 31, __________________ _________________ 2003 2002 2003 2002 _______ _______ _______ _______ Net Income, as reported $41,216 $28,188 $73,278 $58,150 Add: Stock-based compensation expense included in reported net income, net of tax 2,338 2,494 4,534 4,988 Deduct: Total stock-based compensation expense determined under fair value method for all awards, net of tax (4,545) (4,274) (8,095) (8,548) _______ _______ _______ _______ Pro forma net income $39,009 $26,408 $69,717 $54,590 _______ _______ _______ _______ Earnings per share: Basic $ 0.22 $ 0.15 $ 0.38 $ 0.30 Diluted 0.21 0.15 0.38 0.30 Pro forma earnings per share: Basic $ 0.20 $ 0.14 $ 0.37 $ 0.28 Diluted 0.20 0.14 0.37 0.28 7) Other Charges During the fourth quarter of fiscal 2003, the Company recorded a pretax charge of $40.1 million ($28.6 million, net of a tax benefit of $11.5 million). This charge included $23.1 million relating to write-offs of manufacturing assets and facilities, $11.9 million for severance costs related to a workforce reduction of 537 people and $5.1 million for the write-off of investments. Some employment reductions occurred during fiscal 2003, and all remaining employment reductions occurred in the first half of fiscal 2004. Most severance payments will continue for up to a year. During the fourth quarter of fiscal 2001 and the second quarter of fiscal 2002, the Company recorded charges for severance and other termination benefits of $46.4 million associated with global workforce reductions of approximately 1,750 employees. At December 31, 2003, $1.4 million of severance payments related to these workforce reduction actions remained in the consolidated balance sheet. 7 MOLEX INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The change in the accrued severance balance is summarized as follows (in thousands): June 2003 Dec. 2001 June 2001 Charge Charge Charge Total _________ _________ _________ _________ Balance at June 30, 2003 $10,126 $ 1,831 $ 757 $ 12,714 Charges to expense - - - - Cash payments (2,086) (484) (316) (2,886) _________ _________ _________ _________ Balance at September 30, 2003 8,040 1,347 441 9,828 Charges to expense - - - - Cash payments (1,537) (337) (61) (1,935) _________ _________ _________ _________ Balance at December 31, 2003 $ 6,503 $ 1,010 $ 380 $ 7,893 _________ _________ _________ _________ During the second quarter of fiscal 2004, the Company recorded a pretax charge of $5.0 million to exit other investments in start-up technologies. 8) Other Income (Expense) The Company recognized a pretax gain of $10.4 million from the sale of stock of an affiliate and an equity gain resulting from the IPO completed by this affiliate. Molex retains a 20 percent ownership. 8 MOLEX INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 9) Segment and Related Information The Company and its subsidiaries operate in one product segment: the manufacture and sale of electronic components. Management operates the business by geographic region and information by geographic region is summarized as follows (in thousands): Inter- Three Customer company Total Net Months Ended: Revenue Revenue Revenue Income December 31, 2003 - ________ ________ ________ _______ Americas $167,478 $ 41,791 $209,269 $11,346 Far East North 131,283 57,688 188,971 21,597 Far East South 152,665 24,007 176,672 13,033 Europe 85,395 10,172 95,567 (5,779) Corporate and Other 12,161 19,363 31,524 1,019 Eliminations - (153,021) (153,021) - ________ ________ ________ _______ Total $548,982 - $548,982 $41,216 ________ ________ ________ _______ December 31, 2002 - Americas $158,721 $ 25,762 $184,483 $ 7,458 Far East North 100,781 37,470 138,251 9,418 Far East South 114,194 9,719 123,913 15,943 Europe 70,266 6,787 77,053 622 Corporate and Other 10,647 23,109 33,756 (5,253) Eliminations - (102,847) (102,847) - ________ ________ ________ _______ Total $454,609 - $454,609 $28,188 ________ ________ ________ _______ Inter- Six Customer company Total Net Months Ended: Revenue Revenue Revenue Income December 31, 2003 - ________ ________ ________ _______ Americas $ 318,969 $ 80,660 $ 399,629 $21,929 Far East North 247,596 106,381 353,977 35,251 Far East South 295,537 41,535 337,072 30,515 Europe 159,802 18,537 178,339 (7,382) Corporate and Other 23,841 6,034 29,875 (7,035) Eliminations - (253,147) (253,147) - ________ ________ ________ _______ Total $1,045,745 - $1,045,745 $73,278 ________ ________ ________ _______ December 31, 2002 - Americas $324,518 $ 50,955 $375,473 $16,409 Far East North 203,808 79,058 282,866 21,112 Far East South 230,561 21,770 252,331 33,834 Europe 143,235 13,736 156,971 1,597 Corporate and Other 21,733 6,047 27,780 (14,802) Eliminations - (171,566) (171,566) - ________ ________ ________ _______ Total $923,855 - $923,855 $58,150 ________ ________ ________ _______ Revenue is recognized based on the location of the selling entity. 9 MOLEX INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 10) Pending Acquisition On October 28, 2003, Molex announced that it had reached a tentative agreement to purchase in a cash transaction, the assets and business of Connecteurs Cinch S.A. and its subsidiaries in India, China and Portugal from the Snecma Group, its Paris, France based parent. The parties are working together toward finalization of a definitive Asset Purchase and Sale Agreement. Completion of the transaction, currently expected in late third quarter or early fourth quarter of fiscal 2004, is subject to receipt of certain regulatory approvals and to approval by the Board of Directors of Molex and the Board of Directors of Snecma S.A. 10 MOLEX INCORPORATED Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Second Quarter Results Consolidated revenue was $549.0 million for the second quarter ended December 31, 2003, an increase of $94.4 million, or 20.8 percent, over the prior year period. The strengthening of other currencies compared with the U.S. dollar increased revenue by $28.0 million for the second quarter. Second quarter customer revenue in the Americas region of $167.5 million increased 5.5 percent from the prior year quarter based on a broad improvement in end markets. In the Far East North region (Japan and Korea), customer revenue for the second quarter was $131.3 million, up 30.3 percent from the prior year period. New products, especially for the digital, mobile and personal electronics markets, drove this growth. Revenue was also favorably impacted by foreign currency translation of $12.1 million. Customer revenue in the Far East South region for the second quarter was $152.7 million, an increase of 33.7 percent, primarily driven by the digital consumer, personal computers and mobile phone markets. In Europe, revenue for the three months ended December 31, 2003 increased $15.1 million, or 21.5 percent, to $85.4 million. Foreign currency translation, driven by the stronger euro, favorably impacted sales by $13.1 million. Gross profit was $180.9 million for the quarter ended December 31, 2003, up $34.5 million over the prior year quarter. Gross profit as a percent of revenue was 32.9 percent for the quarter ended December 31, 2003 compared with 32.2 percent in the prior year period. The increase was principally due to the gross profit impact of the higher sales volume. Selling and administrative expenses were $130.3 million for the second quarter as compared with $113.2 million in the prior year. As a percent of revenue, selling and administrative expenses for the quarter were 23.7 percent compared with 24.9 percent in the prior year. Other income (expense) included a pretax gain of $10.4 million from the sale of stock of an affiliate and an equity gain resulting from the IPO completed by this affiliate. Molex retains a 20 percent ownership. In addition, the Company recorded a pretax charge of $5.0 million to exit other investments in start-up technologies. Interest income, net of interest expense, was $1.1 million in the quarter ended December 31, 2003 compared with $3.9 million in the prior year quarter. The prior year included an interest benefit from the favorable closure of corporate tax audits in certain jurisdictions. The effective tax rate was 27 percent for the quarter ended December 31, 2003 compared with 24 percent in the prior year period as a result of increased pretax income in jurisdictions with higher tax rates. Net income for the quarter was $41.2 million, or $0.22 per basic and $0.21 per diluted share. This compares with $28.2 million, or $0.15 per basic and diluted share, for the same quarter last fiscal year. Foreign currency translation increased net income by $1.0 million for the second quarter. 11 Six Months Results Consolidated revenue was $1,045.7 million for the first six months ended December 31, 2003, compared with $923.9 million last year. The strengthening of other currencies compared with the U.S. dollar increased revenue by $38.4 million in the first six months of fiscal 2004. Customer revenue in the Americas region of $319.0 million was down slightly compared with the prior year revenue of $324.5 million. Year-to-date customer revenue in the Far East North region increased 21.5 percent to $247.6 million, as compared with last year's first six months of $203.8 million. Demand for new products such as mobile phones, digital still cameras, flat panel displays and DVDs, was especially strong and foreign currency translation increased revenue by $12.6 million. In the Far East South region, revenue for the six months ended December 31, 2003 was $295.5 million, up 28.2 percent over the prior year period. Strong demand in the digital consumer, mobile telephone, and notebook and desktop computer markets drove the increase. In Europe, revenue was $159.8 million, as compared with $143.2 million in the prior year period. Foreign currency translation, driven by the stronger euro, favorably impacted sales by $22.5 million. Gross profit was $350.2 million for the six months ended December 31, 2003, up $44.3 million from the prior year. The increase was primarily due to leverage from the higher sales. Gross profit as a percent of revenue was 33.5 percent for the six months ended December 31, 2003 compared with 33.1 percent last year. Selling and administrative expenses were $256.2 million for the first six months as compared with $233.6 million for the corresponding period in the prior year. As a percent of revenue, selling and administrative expenses for the first half of fiscal 2004 were 24.5 percent compared with 25.3 percent in the prior year. Other income (expense) included the gain of $10.4 million and charge of $5.0 million related to investment transactions discussed above. Interest income, net of interest expense, was $2.3 million in the six months ended December 31, 2003 compared with $4.9 million in the prior year period. The effective tax rate was 27 percent for six months ended December 31, 2003 compared with 24 percent in the prior year period as a result of increased pretax income in jurisdictions with higher tax rates. Year-to-date net income was $73.3 million, or $0.38 per basic and diluted share, a 26.0 percent increase from $58.2 million, or $0.30 per basic and diluted share, reported for last year's first six months. Foreign currency translation increased net income by $0.7 million for the six-month period. FINANCIAL CONDITION AND LIQUIDITY The Company's long-term financing strategy is to rely on internal sources of funds for investing in plant, equipment and acquisitions. Management remains confident that the Company's liquidity and financial flexibility are adequate to support both current, as well as future growth. Molex has historically used external borrowings only when a clear financial advantage exists. Long-term debt at December 31, 2003 totaled $10.7 million. 12 Cash provided from operating activities of $94.0 million was down from the prior year due primarily to an increase in working capital. A higher level of revenue in the current year resulted in higher levels of accounts receivable and inventory than in the prior year. Working capital at December 31, 2003 was $691.3 million compared with $606.0 million at June 30, 2003. Cash used for investing activities was $83.9 million, a decrease of $45.0 million from the prior year. Capital expenditures were $83.9 million, an increase of $4.2 million over the prior year spending of $79.7 million. Marketable securities decreased $1.1 million in the six months ended December 31, 2003, as compared with a $31.9 million increase in the same period of fiscal 2003. Cash used for financing activities was $34.6 million compared with $55.4 million in the prior period. During the six months ended December 31, 2003, the Company purchased an aggregate of 995,000 shares of treasury stock at an aggregate cost of $25.4 million. This is in accordance with authorization by the Company's Board of Directors for the purchase of up to $100 million of Common stock during fiscal 2004. OUTLOOK Although visibility remains difficult beyond the third quarter, management believes that a majority of the Company's global markets continues to improve and that inventory in the majority of the Company's worldwide sales channels remains below normal levels. The level of new orders remains encouraging, especially in the Far East and the Americas. 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. For the third quarter ending March 31, 2004, management is forecasting revenues in a range of $550 to $560 million. Based on these revenues, earnings per share is expected in the range of $0.21 to $0.23. 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. CRITICAL ACCOUNTING POLICIES See the information concerning the Company's critical accounting policies included under Management's Discussion of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2003, which is incorporated in this Form 10-Q by reference. Item 3. 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 13 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 to protect or preserve the value of intercompany cash flows. No material foreign exchange contracts were in use at December 31, 2003 and 2002. 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 speculative purposes, and the use of such instruments is subject to strict approval levels by senior officers. Typically, the use of derivative instruments is limited to hedging activities related to specific foreign currency cash flows. The Company's $170.1 million of marketable securities are principally debt instruments that generate interest income for the Company on temporary excess cash balances. These instruments contain embedded derivative features that enhance the liquidity of the portfolio by enabling the Company to liquidate the instrument prior to the stated maturity date. The Company's exposure related to derivative instrument transactions is, in the aggregate, not material to the Company's financial position, results of operations or cash flows. Interest rate exposure is principally limited to the $170.1 million of marketable securities owned by the Company and the Company's $10.7 million of long-term debt. The Company does not actively manage the risk of interest rate fluctuations. However, such risk is mitigated by the relatively short-term nature of its investments - less than twelve months - and the fixed-rate nature of its long-term debt. Molex does not have material exposure to off-balance-sheet arrangements, including special purpose entities and activities that include non-exchange traded contracts accounted for at fair value. Due to the nature of its operations, Molex is not subject to significant concentration risks relating to customers, products or geographic locations. The Company monitors the environmental laws and regulations in the countries in which it operates. Molex has implemented 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. Item 4. CONTROLS AND PROCEDURES As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the 'Exchange Act')). Based on this evaluation, the principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission's rules and forms. There have been no 14 changes in the Company's internal control over financial reporting during the Company's most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Not Applicable Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On October 24, 2003, the Company issued options to purchase 13,200 shares of Class A Common Stock to the eight non-employee directors of the Company, pursuant to the terms of The 2000 Molex Incorporated Incentive Stock Option Plan. In addition, on October 24, 2003 and November 4, 2003, options to purchase 46,000 shares were issued to employee directors pursuant to the terms of the plan. The issuance of these options to purchase shares of Class A Common Stock was exempt from registration under the Securities Act of 1933, as a transaction not involving a public offering under Section 4(2). Per the terms of the plan, the option price is the fair market value of the stock on the date of grant, and the option term is four to ten years from the date of grant. Items 3-4 Not applicable Item 5. OTHER INFORMATION a. Cautionary 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 that 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. b. CORPORATE GOVERNANCE UPDATE On January 29, 2004, the Board of Directors adopted changes to its corporate governance policies and procedures in three general areas: 1. The Nominating Committee changed its name and mission to include corporate governance initiatives and adopted a new charter to reflect these changes. 2. Michelle L. Collins, an independent director, was appointed as the third member of the newly constituted Nominating and Corporate Governance Committee. 15 3. Certain corporate governance policies were adopted, many of which formalized the corporate governance environment already in place. 1. RECONSITITUTED NOMINATING AND CORPORATE GOVERNANCE COMMITTEE The revised charter, (see Exhibit 99) incorporates the following changes: * In addition to recommending Board nominees, the Committee will review issues and developments relating to corporate governance and make recommendations to the Board on how best to implement any new initiatives. * The revised charter makes it clearer that the Committee is responsible for assessing the effectiveness of the Board and its different committees. * The minimum number of members of the Committee is increased from two to three. * The revised charter makes it clearer that the Committee is responsible for recommending who should serve on the different committees of the Board. * In view of the latest SEC and NASD rules changes, the Committee will be responsible for developing policies and procedures regarding how shareholders may interact with the Board for the purpose of submitting nominations. * The Chairman of the Committee will lead the executive sessions of the Board when management is absent. * The Committee will be responsible for overseeing that corporate executive succession planning is reviewed with the Board annually. 2. MICHELLE L. COLLINS APPOINTED TO THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE Michelle L. Collins, who has served on Molex's Board of Directors since February 2003, became the third member of the newly constituted Nominating and Corporate Governance Committee. Ms. Collins is a managing director of Svoboda Collins LLC, a private equity firm. She currently serves on the board of directors of CDW Corporation and Coldwater Creek, Inc. 3. NEWLY FORMALIZED CORPORATE GOVERNANCE POLICIES The Board of Directors adopted the following policies: * BOARD SERVICE LIMITATION - Because of the increasing demands of board service, the number of public company boards of directors on which any director or executive officer may serve will be restricted. This is to ensure that each of the members of this Board and the executive officers will have enough time to devote to the interests of this Corporation. In 16 addition to board service with Molex, the following policies were adopted for each person listed below: o Outside directors shall be limited to service on three other public company boards of directors. o The CEO and COO shall be limited to service on two other public company boards of directors. o All other executive officers, except the Chairman or any Co-Chairman, shall be limited to service on one other public company board of directors subject to the approval of the Molex Board of Directors. * RESIGNATION UPON CHANGE OF EMPLOYMENT - A director's change of employment might affect an individual's qualifications or desirability for Board membership. Accordingly, upon change of employment, a director will be required to submit his or her resignation to the Board of Directors. * ATTENDANCE AT MEETINGS - It was decided to formalize a policy that has always been implied that directors are expected to attend the annual stockholder meetings, the board of directors meetings and his or her committee meetings. This is to ensure that the individual members of the Board can discharge his or her respective duties and obligations and address any issues and questions first hand. * RATIFICATION OF INDEPENDENT AUDITORS - In the future, the Corporation will seek stockholder ratification of the independent auditors at the annual stockholders' meeting. * EXECUTIVE OFFICER STOCK OWNERSHIP GUIDELINES - New executive officer stock ownership guidelines shall be instituted. This is to show the investors that top management has a suitable and substantial equity stake in the Corporation. With respect to officers, stock ownership guidelines are usually expressed in terms of the ratio of the value of the stock ownership to the base salary. At this time, the 9 officers (excluding the Krehbiel Family) have a stock ownership ratio that ranges from under 1 to over 14. A ratio of at least 2 times the base salary is adopted with certain exceptions. Only two officers currently do not comply, but they would fall under one of the exceptions noted below. The exceptions to the ownership guidelines would include o someone who is retiring within 3 years; or o someone who is new to Molex or his or her corporate executive officer position will have 5 years to achieve the ratio; or o special circumstances, e.g., someone who, in the opinion of the Committee, would suffer hardship. * DIRECTOR STOCK OWNERSHIP GUIDELINES - Like the executive officers, the outside directors should also have stock ownership guidelines. These are expressed in terms of number of shares. The outside directors are able to participate in the ownership or its equivalent either by acquiring Molex stock in the open market, by exercising stock options that are granted annually and/or by participating in the deferred compensation plan that pays in cash based on the value of phantom stock units that track the 17 price of Molex stock. It was decided that each director should own at least 500 shares of Molex stock or phantom stock units after 3 years of service and 1,000 shares after 6 years of service. The only exception to the ownership guidelines is special circumstances, e.g., someone who, in the opinion of the Committee, would suffer hardship. * BOARD SIZE - Currently, the By-Laws of the Corporation call for the size of the Board to be a number chosen by the Board that is not less than 6 or more than 15. As a matter of current policy, the number of directors will be not less than 12 or more than 15. This size gives the Board an opportunity to have a number of directors to accommodate a sufficient representation of inside directors while maintaining the overall independence of the Board. In addition, this size affords the ability to have a broad cross section of the types of business and personal experiences that would be an asset to Molex while not making the Board too large that its effectiveness might be compromised. * TERM LIMITS AND RETIREMENT - The pros and cons of limiting the term that a director may serve on the Board or adopting a strict retirement age were considered. It was decided that the experience acquired over a long tenure with Molex outweighs any potentially negative consequences. Molex is in a specialized global industry that is not easily understood. The experience obtained at Molex over a prolonged period through different business cycles in the marketplace is an extremely valuable asset. * SHAREHOLDER COMMUNICATIONS AND NOMINATIONS - It is recognized that there is no legal compulsion to give access to shareholders - only the disclosure of whether we do and the procedures for doing so. It was decided to address this matter in June or July 2004 prior to the next Annual Stockholders' Meeting. Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 31 Rule 13a-14(a)/15d-14(a) Certifications 31.1 Section 302 certification by Chief Executive Officer 31.2 Section 302 certification by Chief Financial Officer 32 Section 1350 Certifications 32.1 Section 906 certification by Chief Executive Officer 32.2 Section 906 certification by Chief Financial Officer 99 Corporate Governance and Nominating Committee Charter 18 b. A Report on Form 8-K was filed on: October 15, 2003 containing: 1) A press release announcing its results of operations for the first fiscal quarter ended September 30, 2003 19 SIGNATURES 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 February 17, 2004 /s/ DIANE S. BULLOCK ----------------- -------------------- Diane S. Bullock Vice President, Treasurer and Chief Financial Officer Date February 17, 2004 /s/ LOUIS A. HECHT ----------------- -------------------- Louis A. Hecht Corporate Secretary and General Counsel 20 EX-31 3 ex31q2fy04.txt EXHIBIT 31 EXHIBIT 31.1 CERTIFICATION I, J. Joseph King, Vice Chairman and Chief Executive Officer of Molex Incorporated, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Molex Incorporated; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 17, 2004 /s/ J.JOSEPH KING __________________ J. Joseph King Vice Chairman and Chief Executive Officer EXHIBIT 31.2 CERTIFICATION I, Diane S. Bullock, Vice President, Treasurer and Chief Financial Officer of Molex Incorporated, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Molex Incorporated; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 17, 2004 /s/ DIANE S. BULLOCK ________________________ Diane S. Bullock Vice President, Treasurer and Chief Financial Officer EX-32 4 ex32q2fy04.txt EXHIBIT 32 EXHIBIT 32.1 CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 "CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS" I, J. Joseph King, Vice Chairman and Chief Executive Officer of Molex Incorporated, certify that: 1. The quarterly report on Form 10-Q for the quarter ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in this quartrely report fairly presents, in all material respects, the financial condition of the Company. Date: February 17, 2004 /S/ J. JOSEPH KING ___________________ J. Joseph King Vice Chairman and Chief Executive Officer EXHIBIT 32.2 CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 "CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS" I, Diane S. Bullock, Vice President, Treasurer and Chief Financial Officer of Molex Incorporated, certify that: 1. The quarterly report on Form 10-Q for the quarter ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in this quarterly report fairly presents, in all material respects, the financial condition of the Company. Date: February 17, 2004 /S/ DIANE S. BULLOCK ______________________ Diane S. Bullock Vice President, Treasurer and Chief Financial Officer EX-99 5 exhibit99.txt EXHIBIT 99 EXHIBIT 99 MOLEX INCORPORATED CORPORATE GOVERNANCE & NOMINATING COMMITTEE CHARTER ___________________________________________________ I. PURPOSE The Corporate Governance & Nominating Committee (the "Committee") shall have the following goals and objectives: 1. To identify individuals qualified to become members of the Company's Board of Directors (the "Board") and recommend which members should serve on its committees. 2. To recommend to the Board which qualified candidates should be nominated to stand for election at each annual meeting of stockholders. 3. To monitor a process to assess Board effectiveness. 4. To develop and implement the Company's corporate governance guidelines that comply with the applicable National Association of Securities Dealers, Inc. ("NASD") Marketplace Listing Rules ("Rules"). II. COMPOSITION The Committee shall consist of no fewer than three members recommended by the Committee, and appointed by the Board annually. The Board shall have the power at any time to change the membership of the Committee and to fill vacancies in it, subject to the new members satisfying the criteria set forth below. Members of the Committee shall serve until their successors are appointed and qualify. Each member of the Committee shall satisfy the independence requirements of the NASD Rules and other appropriate laws, rules and regulations. III. MEETINGS The Committee shall meet as it deems appropriate but in no event less than two times each fiscal year. The Committee may meet and/or take action in person, via teleconference, via written consent or any other means agreed to by the Committee. The Secretary (or a duly designated person) shall prepare minutes for all meetings of the Committee to document the Committee's discharge of its responsibilities. The draft minutes shall be approved at a subsequent meeting of the Committee and shall be retained as part of the Company's corporate records. IV. POWERS AND AUTHORITY The Committee shall have the following powers and authority in discharging the responsibilities set forth in the next section: 1. To fix it own rules of procedure, unless expressly provided in this Charter or the Company's by-laws. 2. To retain and terminate any outside advisor or consultant as it deems necessary or appropriate, including any search firm to be used to identify director candidates, and shall have the authority to approve the consultant's fees and other retention terms. 3. To delegate authority to subcommittees when appropriate. V. RESPONSIBILITIES AND DUTIES The Committee shall have the following duties and responsibilities, in addition to any additional similar matters that may be referred to the Committee from time to time by the full Board or the Chairman: A. Review and Recommend the Size and Composition of the Board The Committee shall periodically review the composition and the number of members comprising the Board and make recommendations to the Board taking into the account factors it deems appropriate including the following: 1. The independence requirements of NASD Rules and other applicable laws, rules and regulations. 2. The number of non-management/independent directors necessary to staff the Board and its committees. 3. The benefit of having key members of executive management of the Company serving on the Board. 4. The time and logistics necessary to function effectively by having meaningful discussions and making timely decisions. 5. The skills and qualifications of the candidates. B. Set Board Member Qualifications The Committee shall develop qualification criteria for Board members. The initial qualifications are attached as Exhibit A that may be changed from time to time at the discretion of the Committee. C. Recommend Board Candidates The Committee will do the following: 1. Actively seek, interview and screen individuals qualified to become Board members for recommendation to the Board. 2. Consider nominees proffered by other directors, management, employees, stockholders, consultants hired by the Committee to locate qualified candidates and such other persons as may be deemed appropriate. The Committee will create a policy and develop procedures regarding the submission of nominees by shareholders. 3. Make recommendations to the full Board concerning all nominees for Board membership, including the re-election of existing Board members. D. Review and Recommend Director Compensation The Committee will review and make recommendations regarding the compensation paid to the directors by the Company both as to the amount and the form of the compensation. E. Recommend Composition and Functions of Board Committees The Committee will do the following with respect to the committees of the Board: 1. Recommend to the Board the number, accountability, types and functions of the different Board committees. 2. Consider the qualifications for membership and recommend to the Board the members for each Board committee. 3. Determine policies with regard to the rotation of directors among the committees including any limitations on the tenure a director should serve as a chairman or member of any particular committee. F. Review and Recommend Corporate Governance Improvements The Committee shall regularly review issues and developments relating to corporate governance and make recommendations to the full Board regarding how to best comply with any new laws or rules in addition to any other changes that might enhance communication with and effective representation of the Company's shareholders. G. Evaluate Director and Committee Performance The Committee will have responsibility to: 1. establish processes for evaluating the performance of the Board, the Board committees, including this Committee. 2. periodically oversee the evaluation of the directors of the Company and make recommendations as appropriate. H. Provide the Chairman of Any Executive Session The Chairman of the Committee shall serve as the chairman with respect to any executive sessions of the Board that involve non-management directors only and shall provide the interface between the outside directors and management. I. Ensure Familiarity With New Developments The Committee will keep abreast of any new developments pertaining to matters within the scope of the responsibilities delegated to the Committee under this charter via training, continuing education or other appropriate means. J. Provide Board Membership Orientation and Transition The Committee will work with the Board to provide orientation regarding new directors and to ensure a smooth transition as Board members approach retirement. K. Provide Succession Planning The Committee will be responsible for overseeing the succession planning process and will periodically report its recommendations to the Board. L. Report To the Full Board of Directors The Committee shall make regular reports to the Board. M. Amendment of the By-Laws or Committee Charter The Committee shall review and reassess the adequacy of the Company's by-laws and this Charter and recommend any proposed changes to the Board for approval. EXHIBIT A CRITERIA FOR MEMBERSHIP ON THE BOARD OF DIRECTORS PERSONAL CHARACTERISTICS TO BE SOUGHT IN CANDIDATES FOR THE BOARD: 1. Well regarded in the community with long-term, good reputation for highest ethical and moral standards. 2. Good common sense and judgment. 3. An independent, objective, candid and constructive approach. 4. The ability to contribute from a diversity of perspectives including geographical, cultural and professional. 5. A strategic perspective, an awareness of the dynamics of change and the ability to anticipate and capitalize on business opportunities. 6. A history of significant business or professional responsibilities leading to a positive record of accomplishment in present and prior positions. 7. Business and/or professional knowledge and experience applicable to the Company's business. 8. The time, energy, interest, and willingness to assume the full responsibilities of being a member of the Board. -----END PRIVACY-ENHANCED MESSAGE-----