-----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, V8Rkg+IJp4L7H4fcmuypbg6LeMyWHrbX/IvqGF7qCAuOuazo29k624jkWN6YZESZ px1M80IszStKRrS+vQNAKw== 0000950124-99-001022.txt : 19990215 0000950124-99-001022.hdr.sgml : 19990215 ACCESSION NUMBER: 0000950124-99-001022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990212 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 SEC ACT: SEC FILE NUMBER: 000-07491 FILM NUMBER: 99534311 BUSINESS ADDRESS: STREET 1: 2222 WELLINGTON CT CITY: LISLE STATE: IL ZIP: 60532 BUSINESS PHONE: 7089694550 MAIL ADDRESS: STREET 1: 2222 WELLINGTON COURT CITY: LISLE STATE: IL ZIP: 60532 10-Q 1 FORM 10-Q 1 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 December 31, 1998 ---------------------------------- 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 December 31, 1998: Common Stock 76,341,813 shares Class A Common Stock 78,831,078 shares Class B Common Stock 94,255 shares 2 MOLEX INCORPORATED FORM 10-Q DECEMBER 31, 1998 INDEX Page ---- PART I - FINANCIAL INFORMATION Item 1. Financial Information - Unaudited Condensed Consolidated Balance Sheets -- 2 December 31, 1998 and June 30, 1998 Condensed Consolidated Statements of Income -- 3 Three and Six Months Ended December 31, 1998 and 1997 Condensed Consolidated Statements of Cash Flows -- 4 Six Months Ended December 31, 1998 and 1997 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION 12 -1- 3 MOLEX INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - In Thousands)
ASSETS Dec. 31, June 30, 1998 1998 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents $ 193,773 $ 205,262 Marketable securities 100,800 117,151 Accounts receivable - net 365,329 328,560 Inventories 201,401 184,433 Other current assets 36,051 32,385 ---------- ---------- Total current assets 897,354 867,791 PROPERTY, PLANT AND EQUIPMENT - NET 756,901 676,161 OTHER ASSETS 127,534 95,682 ---------- ---------- $1,781,789 $1,639,634 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 136,933 $ 140,350 Accrued expenses 129,848 119,161 Other current liabilities 70,543 73,363 ---------- ---------- Total current liabilities 337,324 332,874 DEFERRED ITEMS 5,815 6,504 ACCRUED POSTRETIREMENT BENEFITS 34,074 30,536 LONG-TERM DEBT, less portion due currently 5,663 5,566 MINORITY INTEREST 2,579 2,584 SHAREHOLDERS' EQUITY Common stock 8,289 8,272 Paid-in capital 152,259 147,782 Retained earnings 1,400,871 1,322,775 Treasury stock (174,824) (143,714) Deferred unearned compensation (16,436) (19,988) Cumulative translation and other adjustments 26,175 (53,557) ---------- ---------- Total shareholders' equity 1,396,334 1,261,570 ---------- ---------- $1,781,789 $1,639,634 ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. - 2 - 4 MOLEX INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited - In Thousands Except per Share)
THREE MONTHS ENDED SIX MONTHS ENDED -------------------- -------------------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, 1998 1997 1998 1997 -------- -------- -------- -------- NET REVENUE $429,718 $405,497 $839,610 $815,691 COST OF SALES 253,121 236,989 497,437 476,850 -------- -------- -------- -------- Gross Profit 176,597 168,508 342,173 338,841 OPERATING EXPENSES: Selling 35,452 33,062 69,264 65,370 Administrative 75,561 68,442 151,675 140,595 -------- -------- -------- -------- Total Operating Expenses 111,013 101,504 220,939 205,965 Income from Operations 65,584 67,004 121,234 132,876 OTHER INCOME: Foreign currency transaction gain/(loss) (2,388) 76 (2,655) (206) Interest income, net 1,374 2,552 4,822 6,216 -------- -------- -------- -------- Total Other Income/(Loss) (1,014) 2,628 2,167 6,010 INCOME BEFORE INCOME TAXES 64,570 69,632 123,401 138,886 INCOME TAXES 20,697 24,081 40,355 48,879 -------- -------- -------- -------- NET INCOME $ 43,873 $ 45,551 $ 83,046 $ 90,007 ======== ======== ======== ======== EARNINGS PER COMMON SHARE: BASIC $ 0.28 $ 0.29 $ 0.53 $ 0.57 ======== ======== ======== ======== DILUTED $ 0.28 $ 0.29 $ 0.53 $ 0.57 ======== ======== ======== ======== CASH DIVIDENDS PER COMMON SHARE $ 0.015 $ 0.015 $ 0.030 $ 0.027 ======== ======== ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING DURING THE PERIOD: BASIC 155,329 156,729 155,561 156,791 ======== ======== ======== ======== DILUTED 156,525 159,029 156,622 159,119 ======== ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. - 3 - 5 MOLEX INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - In Thousands)
SIX MONTHS ENDED ----------------------- Dec. 31, Dec. 31, 1998 1997 -------- -------- CASH AND CASH EQUIVALENTS, Beginning of Period $205,262 $199,767 CASH AND CASH EQUIVALENTS PROVIDED FROM (USED FOR): Operations: Net income 83,046 90,007 Add (deduct) non-cash items included in net income: Depreciation and amortization 78,615 74,555 Amortization of deferred unearned compensation 3,552 2,852 Other (credits)/charges to net income 2,611 (573) Current items: Accounts receivable (3,547) (10,454) Inventories (6,519) (19,368) Other current assets (3,313) (6,246) Accounts payable (30,473) (15,076) Accrued expenses 5,324 11,404 Income taxes (7,778) (10,328) -------- -------- NET CASH PROVIDED FROM OPERATIONS 121,518 116,773 Investments: Purchases of property, plant and equipment (103,146) (108,148) Proceeds from sale of property, plant and equipment 2,010 3,137 Proceeds from sale of marketable securities 2,522,536 1,024,384 Purchases of marketable securities (2,538,887) (1,051,550) (Increase) decrease in other assets (21,701) 5,746 -------- -------- NET CASH USED FOR INVESTMENTS (139,188) (126,431) Financing: Increase in long-term debt - 1,231 Decrease in long-term debt - (3,000) Cash dividends paid (2,330) (3,835) Purchase of treasury stock (31,480) (20,851) Reissuance of treasury stock 1,192 1,155 Exercise of stock options 2,603 3,331 -------- -------- NET CASH USED FOR FINANCING (30,015) (21,969) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 36,196 (17,283) -------- -------- CASH AND CASH EQUIVALENTS, End of Period $193,773 $150,857 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. - 4 - 6 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 1998 Annual Report to Shareholders and the 1998 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 Six Months Ended --------------------- --------------------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, 1998 1997 1998 1997 ------- ------- ------- ------- Weighted average shares outstanding - basic 155,329 156,729 155,561 156,791 Dilutive effect of stock options 1,196 2,300 1,061 2,328 ------- ------- ------- ------- Weighted average shares outstanding - diluted 156,525 159,029 156,622 159,119 ======= ======= ======= =======
(3) COMPREHENSIVE INCOME Effective July 1, 1998, the Company adopted the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components. 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. -5- 7 Total comprehensive income, in thousands of dollars, is as follows:
Three Months Ended Six Months Ended -------------------- --------------------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, 1998 1997 1998 1997 ------- ------- ------- ------- Net income $43,873 $ 45,551 $ 83,046 $ 90,007 Currency translation and other adjustments 52,645 (45,764) 78,462 (85,482) ------- -------- -------- -------- Total comprehensive income $96,518 $ (213) $161,508 $ 4,525 ======= ======== ======== ========
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:
Dec. 31, June 30, 1998 1998 -------- -------- Raw Materials $ 50,508 $ 48,324 Work in Process 52,145 49,025 Finished Goods 98,748 87,084 -------- -------- $201,401 $184,433 ======== ========
(4) NEW ACCOUNTING PRONOUNCEMENTS In 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." In 1998, FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." Both are effective for fiscal years beginning after December 15, 1997, or the Company's fiscal year ending June 30, 1999. SFAS No. 131 establishes standards for reporting information about operating segments and related disclosures about products and services, geographic areas and major customers. SFAS No. 132 revises employers' disclosures about pensions and other postretirement benefit plans. The requirements of these statements only impact financial statement disclosure. Accordingly, these statements will have no impact on the Company's financial position or the results of its operations. Also in 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. It establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an -6- 8 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. -7- 9 MOLEX INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Consolidated net revenues were $429.7 million for the quarter ended December 31, 1998, increasing 6.0 percent in US dollars and 4.4 percent in local currencies over the corresponding quarter of the prior fiscal year. For the six months ended December 31, 1998 revenue grew to $839.6 million from $815.7 million in the prior year, resulting in growth of 2.9 percent in US dollars and 5.8 percent in local currencies. The generally higher value of the US dollar compared to other currencies worldwide decreased net revenue by $23.1 million for the six months ended December 31, 1998, but for the quarter, the strengthening of other currencies caused net revenue to increase $6.5 million. Management believes that Molex continues to grow at a rate higher than the worldwide connector market. All geographic regions experienced local currency sales growth for the quarter as well as the six months ended December 31, 1998. For the quarter ended December 31, 1998, revenue in the Americas region increased 1.5 percent in US dollars and 1.7 percent in local currencies over the prior year period which was exceptionally strong. For the six months ended December 31, 1998, the revenue growth over the same period in the prior year was 4.9 percent in US dollars and 5.2 percent in local currencies. Improved sales of data communications and telecommunications products as well as strong sales of fiber optic products were partially offset by a softening in distribution sales of commercial products. Quarterly net revenue in the Far East North increased 14.7 percent in US dollars and 8.2 percent in local currencies compared to the prior year. For the six months ended December 31, 1998, revenue remained relatively flat over the prior year period in US dollars but increased by 5.1 percent in local currencies. Market share gains from the introduction of new products and the penetration of new market areas contributed to the local currency growth. Far East South net revenue for the quarter ended December 31, 1998 increased 18.8 percent in US dollars and 20.6 percent in local currencies from the prior year. For the six months ended December 31, 1998, revenue increased over the same period in the prior year by 8.8 percent in US dollars and 18.8 percent in local currencies. Personal computer and computer-peripheral products continue to produce strong results. In Europe, net revenue increased 8.4 percent in US dollars and 3.6 percent in local currencies over a very strong prior year quarter. -8- 10 For the six months ended December 31, 1998, the revenue growth for the comparable prior year period was 7.4 percent in US dollars and 4.0 percent in local currencies. Evidence of a slowdown in the region, especially in the U.K., has impacted local currency growth. For the six months ended December 31, 1998, 68.2 percent of Molex's worldwide net revenue was generated from its international operations. International operations are subject to currency fluctuations and government actions. The devaluations of several Asian currencies have had an adverse effect on reported sales and profits for the six month period, but showed improvement during the second quarter. 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 41.1 percent for the quarter ended December 31, 1998 compared to 41.2 percent for the quarter ended December 31, 1997. For the six months ended December 31, 1998 the gross profit percentage was 40.8 percent, down from 41.5 percent for the same period in the prior year. This decrease is primarily due to depreciation expense associated with the Company's increased level of capital investments in new products and manufacturing capacity. Selling and administrative expenses were $111.0 million and $220.9 million, respectively, for the quarter and six month period ended December 31, 1998 as compared to $101.5 million and $206.0 million, respectively, for the comparable periods in the prior year. For the quarter and six months ended December 31, 1998, selling and administrative expenses as a percent of net revenue were 25.8 percent and 26.3 percent, respectively, as compared to 25.0 percent and 25.3 percent, respectively, for the same period in the prior year. The Company's implementation of its Global Information Systems and the general increase in sales levels across the Company contributed to the slightly higher spending. Also included in selling and administrative expenses are research and development expenditures which for the six months ended December 31, 1998, increased at a higher rate as a percent of net revenues than the prior year period, 6.1 percent versus 5.8 percent, respectively. Interest income, net of interest expense, was $1.4 million in the quarter ended December 31, 1998 as compared to $2.5 million in the prior year and was $4.8 million for the six months ended December 31, 1998 as compared to $6.2 million a year ago. The effective tax rate was 32.1 percent for the quarter ended December 31, 1998, as compared to 34.6 percent in the prior year period and was 32.7 percent for the six months ended December 31, 1998 as compared to 35.2 percent last year. The overall change was caused by the Company implementing a more aggressive repatriation strategy offset by increased revenues in countries with higher income tax rates. -9- 11 Net income for the quarter was $43.9 million or 28 cents per basic and diluted share, a 3.7 percent decrease compared with $45.6 million or 29 cents per basic and diluted share for the same quarter last fiscal year. Net income for the six months ended December 31, 1998 was $83.0 million or 53 cents per basic and diluted share, as compared to net income of $90.0 million or 57 cents per basic and diluted share, for the same period in the prior year. Excluding the effects of currency translation, net income decreased 6.4 percent for the quarter and 4.6 percent for the six months ended December 31, 1998 from the comparable prior year periods. LIQUIDITY AND CAPITAL RESOURCES Molex's balance sheet continues to be exceptionally strong. Working capital at December 31, 1998 was $560.0 million, an increase from $544.8 million at June 30, 1998. During the six months ended December 31, 1998, the Company has purchased an aggregate of 1,087,000 shares of treasury stock at an aggregate cost of $31.5 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. YEAR 2000 Molex recognizes the importance of the Year 2000 issue and has been giving high priority to it. The Company has completed an assessment of its business and other information systems as well as the non-information system aspects of its business that could be impacted by the Year 2000 issue. Over the past few years, the Company has developed and is currently implementing its Global Information System (GIS), which is Year 2000 compliant. The GIS project is approximately 65 percent implemented and is expected to be substantially complete by October 1999. The Company presently believes that with modifications to existing software and the GIS implementation, the Year 2000 issue will not pose material operational problems for its information systems. While considered unlikely, management believes that the most likely, worst case Year 2000 scenario would be a delay in the completion of the GIS implementation at one or more of its operating subsidiaries and the need for rapid remediation of legacy systems to make them Year 2000 compliant. At this time management has not determined the impact this worst case scenario would have on its financial position, results of operations or cash flows, but believes that its experience implementing GIS to date mitigates this risk. -10- 12 While the GIS implementation addresses many of the Company's Year 2000 issues, the Company does not consider the GIS implementation costs to be related to the Year 2000 issue as such costs are a strategic expenditure to enhance future operations and would be incurred regardless of the Year 2000 issue. Total costs related to the GIS project are expected to reach $55-60 million once complete. Expenditures related to the Year 2000 date conversion effort, principally the cost to remediate existing software or microprocessors embedded in the Company's manufacturing systems, are not expected to be significant and management expects the total costs of such remediation effort to range from $2-5 million. Such costs will be incurred principally during calendar 1999 and should not have a material impact on the Company's financial position, results of operations or cash flows. Part of the risk inherent in the Year 2000 issue results from the general uncertainty of the readiness of material third-party relationships. Although the Company cannot know or foresee every eventuality that suppliers and customers may face which could impact its operations, the Company has been initiating communications with its critical external relationships to determine the extent to which the Company may be vulnerable to such parties' failure to resolve their own Year 2000 issues. At present, the Company has not developed specific contingency plans, but where practicable, the Company will assess and attempt to mitigate its risks with respect to the failure of these entities to be Year 2000 ready. The Company cannot estimate the cost to the Company of the failure of third parties to address their Year 2000 issues and there can be no assurance that there will not be a material adverse effect on the Company if third parties do not convert their systems in a timely manner and in a way that is compatible with the Company's systems. OUTLOOK The outlook for the remainder of fiscal 1999 remains cautious for Molex in light of continuing difficult economic conditions in many parts of the world, particularly in Asia. Notwithstanding the significantly adverse effect of currency devaluation, the underlying Molex growth rates in this part of the world are encouraging. With the evidence of a slow down in Europe and the moderation of growth in the Americas, the outlook for the remaining year is one of guarded optimism. To further expand the Company's global presence, offer innovative products at an accelerated pace, and improve internal productivity, Molex plans to invest approximately $230 million in capital expenditures and approximately $105 million in research and development for the fiscal year ending June 30, 1999. 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. -11- 13 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. PART II - OTHER INFORMATION Items 1 - 6. Not Applicable -12- 14 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 February 12, 1999 /s/ ROBERT B. MAHONEY ----------------- -------------------- Robert B. Mahoney Corporate Vice President, Treasurer and Chief Financial Officer Date February 12, 1999 /s/ LOUIS A. HECHT ----------------- -------------------- Louis A. Hecht Corporate Secretary and General Counsel EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS JUN-30-1999 DEC-31-1998 $193,773 100,800 365,329 0 201,401 36,051 756,901 78,615 1,781,789 337,324 0 0 0 160,548 1,235,786 1,781,789 839,610 839,610 497,437 718,376 220,939 (2,655) 4,822 123,401 40,355 83,046 0 0 0 83,046 $0.53 $0.53
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