-----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, AzSzf9vvxgRLTsT0SYcCddB42rNRVkQdbl3dspYtP4YpkEa1wiYvXPHybjEsaE3Z bG1rZNaM2pyBZCWnQ+7iow== 0000950137-96-001786.txt : 19960930 0000950137-96-001786.hdr.sgml : 19960930 ACCESSION NUMBER: 0000950137-96-001786 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960927 SROS: NASD 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-07491 FILM NUMBER: 96636068 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-K 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1996 Commission File number 0-7491 MOLEX INCORPORATED ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 36-2369491 ------------------------------------- -------------------- (State or other jurisdiction of (I.R.S. Employer 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 ------------------- Securities registered pursuant to Section 12 (b) of the Act: None ---- Securities registered pursuant to Section 12 (g) of the Act: Common Stock, par value $0.05 ------------------------------ Class A Common Stock, par value, $0.05 -------------------------------------- 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 --- --- On August 30, 1996, the following numbers of shares of the Company's common stock were outstanding: Common Stock 50,090,034 Class A Common Stock 50,749,436 Class B Common Stock 94,255 The aggregate market value of the voting shares (based on the closing price of these shares on the National Association of Securities Dealers Automated Quotation System on such date) held by non-affiliates was approximately $890.4 million. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- Portions of the Annual Report to Shareholders for the year ended June 30, 1996, are incorporated by reference into Parts I, II and IV of this report. Portions of the Proxy Statement for the annual meeting of Stockholders, to be held on October 25, 1996 are incorporated by reference into Part III of this report. Index to Exhibits listed on Pages 21 through 22. 1 2 TABLE OF CONTENTS Part I Page ---- Item 1. Business 3 Item 2. Properties 8 Item 3. Legal Proceedings 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Executive Officers of the Registrant 10 Part II Item 5. Market for the Registrant's Common Equity and 12 Related Stockholder Matters Item 6. Selected Financial Data 12 Item 7. Management's Discussion and Analysis of Financial 13 Condition and Results of Operations Item 8. Financial Statements and Supplementary Data 13 Item 9. Changes in and Disagreements with Accountants on 13 Accounting and Financial Disclosure Part III Item 10. Directors and Executive Officers of the Registrant 14 Item 11. Executive Compensation 14 Item 12. Security Ownership of Certain Beneficial Owners 14 and Management. Item 13. Certain Relationships and Related Transactions 14 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports 15 on Form 8-K Statements of Changes in Shares Outstanding 17 Schedule II-Valuation and Qualifying Accounts 18 Independent Auditors' Report on Schedule 19 Signature Page 20 Index to Exhibits 21
2 3 PART I ITEM 1 - BUSINESS GENERAL DEVELOPMENT OF THE BUSINESS Molex Incorporated originated from an enterprise established in 1938. It was incorporated in 1972 in the state of Delaware. As used herein the term "Molex" or "Company" includes Molex Incorporated and its United States and international subsidiaries. GENERAL DESCRIPTION OF THE BUSINESS Molex is a leading manufacturer of electronic, electrical and fiber optic interconnection products and systems; switches; and application tooling. Molex operates 46 plants in 21 countries and employs more than 10,000 people worldwide. More than 67% of Fiscal 1996 sales were generated from products manufactured and sold outside the U.S. Molex serves original equipment manufacturers in industries that include automotive, computer, business equipment, consumer products, telecommunications and premise wiring. Molex offers more than 100,000 products to customers primarily through direct sales people and authorized distributors. The worldwide market for electronic connectors, cable assemblies and backplanes was estimated at $25.8 billion*. With a 5.4% market share, Molex is the second-largest connector manufacturer in the world in what is a fragmented but highly competitive industry. Molex conducts business in one industry segment: the manufacture and sale of electrical components. The Company designs, manufactures, and distributes electrical and electronic devices such as terminals, connectors, planer cables, cable assemblies, interconnection systems, fiber optic interconnection systems, backplanes and mechanical and electronic switches. Crimping machines and terminal inserting equipment (known as "application tooling") are offered on a lease or purchase basis to the Company's customers for the purpose of applying the Company's components to the customers' products. Net revenue from application tooling constitutes approximately 2% of the Company's net revenues. Molex products are designed for use in a broad range of electrical and electronic applications as set forth below: * Source: Fleck International 3 4
Percentage of Fiscal 1996 Market Net Revenue Products - ------ --- ------- -------- Computer/business equipment/ 49% Computers, peripheral telecommunications equipment, calculators, copiers, pagers and dictation equipment Consumer Products 28% Televisions, stereo high fidelity systems, compact disc players, video tape recorders, camcorders and electronic games, microwave ovens, refrigerators, freezers, dishwashers, disposals and air conditioners Automotive 15% Automobiles, trucks, recreational vehicles and farm equipment. Other 8% Electronic medical equipment, vending machines, security equipment and modular office furniture and premise wiring
The Company sells its products primarily to original equipment manufacturers and their subcontractors and suppliers. The Company's customers include various multinational companies, including Apple, AT&T, Canon, Compaq, Delco, Ford, Hewlett Packard, IBM, JVC, Matsushita, Motorola, Philips, Sony, Thomson, Toshiba, and Xerox, many of which Molex serves on a global basis. Net revenues contributed by different industry groups fluctuate due to various factors including model changes, new technology, introduction of new products and composition of customers. No customer accounted for 10% or more of net revenues in fiscal years 1996, 1995 or 1994. While its customers generally make purchasing decisions on a decentralized basis, Molex believes that, due to its financial strength and product development capabilities, it has and will continue to benefit from the trend of many of its customers towards the use of fewer vendors. 4 5 In the United States and Canada, the Company sells its products primarily through direct sales engineers and industrial distributors. Internationally, Molex sells primarily through its own sales organizations in Japan, Hong Kong, Singapore, Taiwan, South Korea, Malaysia, Thailand, China, Australia, England, Italy, Ireland, France, Spain, Germany, the Netherlands, Switzerland, Poland, Sweden, Norway, Denmark, South Africa, India, Canada, Mexico and Brazil. Outside of the United States and Canada, Molex also sells its products through manufacturers' representative organizations, some of which act as distributors, purchasing from the Company for resale. The manufacturers' representative organizations are granted exclusive territories and are compensated on a commission basis. These relationships are terminable by either party on short notice. All sales orders received are subject to approval by the Company. The Company promotes its products through leading trade magazines, direct mailings, catalogs and other promotional literature. Molex is a frequent participant in trade shows and also conducts educational seminars for its customers and its manufacturers' representative organizations. There was no significant change in the Company's suppliers, products, markets or methods of distribution during the last fiscal year. Molex generally seeks to locate manufacturing facilities to serve local customers and currently has 46 manufacturing facilities in 21 countries on six continents. The principal raw materials and component parts Molex purchases for the manufacture of its products include brass, copper, aluminum, steel, tin, nickel, gold, silver, nylon and other molding materials, and nuts, bolts, screws and rivets. Virtually all materials and components used in the Company's products are available from several sources. Although the availability of such materials has generally been adequate, no assurance can be given that additional cost increases or material shortages or allocations imposed by its suppliers in the future will not have a materially adverse effect on the operations of the Company. 5 6 COMPETITION The business in which the Company is engaged is highly competitive. Most of the Company's competitors offer products in some but not all of the industries served by the Company. Molex believes that the ability to meet customer delivery requirements and maintenance of product quality and reliability are competitive factors that are as important as product pricing. Some of the Company's competitors have been established longer and have substantially larger manufacturing, sales, research and financial resources. PATENTS/TRADEMARKS As of June 30, 1996, the Company owned 592 United States patents and had 169 patent applications on file with the United States Patent Office. The Company also has 1,183 corresponding patents issued and 2,348 applied for in other countries as of June 30, 1996. No assurance can be given that any patents will be issued on pending or future applications. As the Company develops products for new markets and uses, it normally seeks available patent protection. The Company believes that its patents are of importance but does not consider itself materially dependent upon any single patent or group of related patents. BACKLOG The backlog of unfilled orders at June 30, 1996 was approximately $225.7 million; this compares to $245.7 million at June 30, 1995. Substantially all of these orders are scheduled for delivery within twelve months. The Company's experience is that orders are normally delivered within ninety days from acceptance. RESEARCH AND DEVELOPMENT Molex incurred total research and development costs of $85.5 million in 1996, $78.1 million in 1995, and $64.8 million in 1994. The Company incurred costs relating to obtaining patents of $6.7 million in 1996, $4.9 million in 1995, and $3.3 million in 1994 which are included in total research and development costs. The Company's policy is to charge these costs to operations as incurred. The Company introduced many new products during the year; however, in the aggregate, these products did not require a material investment of assets. 6 7 COMPLIANCE The Company believes it is in full compliance with federal, state and local regulations pertaining to environmental protection. The Company does not anticipate that the costs of compliance with such regulations will have a material effect on its capital expenditures, earnings or competitive position. EMPLOYEES As of June 30, 1996, the Company employed 10,100 persons worldwide. The Company believes its relations with its employees are favorable. INTERNATIONAL OPERATIONS The Company is engaged in material operations in foreign countries. Net revenue derived from international operations for the fiscal year ended June 30, 1996 was approximately 68% of consolidated net revenue. The Company believes the international net revenue and earnings will continue to be significant. The analysis of the Company's operations by geographical area appears in footnote 10 on pages 49 - 50 of the 1996 Annual Report to Shareholders and is incorporated herein by reference. 7 8 ITEM 2 - PROPERTIES Molex owns and leases manufacturing, warehousing and office space in over 110 locations around the world. The total square footage of these facilities is presented below:
Owned Leased Total - ----- ------ ----- 3,334,000 477,000 3,811,000
The leases are of varying terms with expirations ranging from fiscal 1997 through fiscal 2025. The leases in aggregate are not considered material to the financial position of the Company. The Company's buildings, machinery and equipment have been well maintained and are adequate for its current needs. A listing of principal manufacturing facilities is presented below: AUSTRALIA IRELAND REPUBLIC OF KOREA Melton, Victoria Millstreet Town Ansan City (2) Shannon BRAZIL SINGAPORE Manaus ITALY Jurong Town Sao Paulo Padova SOUTH AFRICA CANADA JAPAN Bergvlei (Johannesburg) Scarborough, Ontario Kagoshiam Okayama Shioya Shizuoka TAIWAN CHINA (P.R.C.) Yamato City Taipei Shilong Town Shanghai THAILAND Bangkok ENGLAND MALAYSIA Bordon Prai, Penang UNITED STATES Southhampton Huntsville, Alabama MEXICO North Little Rock, Arkansas FRANCE Guadalajara Maumelle, Arkansas Chateau Gontier Magdalena Orange, California Nogales Pinellas Park, Florida GERMANY St. Petersburg, Florida Biberach POLAND Downers Grove, Illinois Ettlingen Starogard Lisle, Illinois Naperville, Illinois INDIA PUERTO RICO Lincoln, Nebraska (3) Bangalore Ponce (2) Manchester, New Hampshire
8 9 ITEM 3 - LEGAL PROCEEDINGS None deemed material to the Company's financial position or consolidated results of operations. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 9 10 Executive Officers of the Registrant The following information relates to the executive officers of the Registrant who serve at the discretion of the Board of Directors and are customarily elected for one-year terms at the Regular Meeting of the Board of Directors held immediately following the Annual Stockholders' Meeting. All of the executive officers named hold positions as officers and/or directors of one or more subsidiaries of the Registrant. For purposes of this disclosure, only the principal positions are set forth.
Year Employed Positions Held with Registrant by Name During the Last Five Years Age Registrant - ------------------------ ----------------------------------------- --- ---------- Frederick A. Krehbiel(a) Chairman (1993-); Chief Executive Officer 55 1965(b) (1988-);Vice Chairman (1988-1993). John H. Krehbiel, Jr.(a) President (1975-); Chief 59 1959(b) Operating Officer (1996-). J. Joseph King Executive Vice President 52 1975 (1996-); Group Vice President- International Operations (1988- 1996). Raymond C. Wieser Senior Vice President, Americas 58 1965(b) Region (1996-); Corporate Vice President and President, Commercial Division-U.S. Operations (1994-1996); Group Vice President-U.S. Operations (1989-1994). Robert B. Mahoney Corporate Vice President, 43 1995 Treasurer and Chief Financial Officer (1996-). Ronald L. Schubel Corporate Vice President (1982-) 53 1981 and Regional President, Far East South (1994-); President, Commercial Division-U.S. Operations (1982-1994).
10 11
Year Employed Positions Held with Registrant by Name During the Last Five Years Age Registrant - ------------------ ----------------------------- ----- ----------- Werner W. Fichtner Corporate Vice President 53 1981 (1987-) and Regional President, Europe (1981-). Goro Tokuyama Corporate Vice President 62 1985 (1990-), Regional President, Far East North (1988-) and President of Molex Japan Co., Ltd. (1985-). Martin P. Slark Corporate Vice President 41 1976 (1990-) and Regional President, Americas (1996-); Regional President, U.S. (1994-1996); Regional President, Far East South (1988-1994). James E. Fleischhacker Corporate Vice President 52 1984 (1994-) and President, DataComm Division Americas (1989-). Kathi M. Regas Corporate Vice President 40 1985 (1994-); Director, Human Resources-U.S. Operations (1989-1994). Louis A. Hecht Corporate Secretary (1977-) 52 1974 and General Counsel (1975-).
(a) John H. Krehbiel, Jr. and Frederick A. Krehbiel (the "Krehbiel Family") are brothers. The members of the Krehbiel Family may be considered to be "control persons" of the Registrant. The other officers listed above have no relationship, family or otherwise, to the Krehbiel family, Registrant or each other. (b) Includes period employed by Registrant's predecessor. 11 12 PART II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) Molex is traded on the National Market System of the NASDAQ in the & United States and on the London Stock Exchange. The information set forth under the captions (b) "Financial Highlights" and "Fiscal 1996, 1995, and 1994 by Quarter (Unaudited)" in the foldout and page 51, respectively, of the 1996 Annual Report to Shareholders is incorporated herein by reference. (c) The following table presents quarterly dividends per common share for the last two fiscal years. The fiscal 1995 dividends per share have been restated for the August, 1995 25% stock dividend and November, 1994 25% stock dividend.
Class A Common Stock Common Stock Fiscal 1996 Fiscal 1995 Fiscal 1996 Fiscal 1995 ---------------- --------------- --------------- --------------- Quarter Ended - September 30, 0.0150 0.0064 0.0150 0.0064 December 31, 0.0150 0.0080 0.0150 0.0080 March 31, 0.0150 0.0080 0.0150 0.0080 June 30, 0.0150 0.0080 0.0150 0.0080 ------ ------ ------ ------ Total 0.0600 0.0304 0.0600 0.0304 ====== ====== ====== ======
Cash dividends on Common Shares have been paid every year since 1977. A description of the Company's Common Stock appears in footnote 3 on page 46 of the 1996 Annual Report to Shareholders and is incorporated herein by reference. ITEM 6 - SELECTED FINANCIAL DATA The information set forth under the caption "Ten Year Financial Highlight Summary" (only the five years ended June 30, 1996) on page 33 of the 1996 Annual Report to Shareholders is incorporated herein by reference. 12 13 ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth under the caption "Management's Discussion of Financial Condition and Results of Operations" on pages 34 through 38 of the 1996 Annual Report to Shareholders is incorporated herein by reference. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements of the Company set forth on pages 40 through 50 of the 1996 Annual Report to Shareholders and the independent auditors' report set forth on page 39 of the 1996 Annual Report to Shareholders are incorporated herein by reference: Independent Auditors' Report Consolidated Balance Sheets - June 30, 1996 and 1995 Consolidated Statements of Income for the years ended June 30, 1996, 1995 and 1994 Consolidated Statements of Shareholders' Equity for the years ended June 30, 1996, 1995 and 1994 Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994 Notes to Consolidated Financial Statements The supplementary data regarding quarterly results of operations, set forth under the caption "Fiscal 1996, 1995, and 1994 by Quarter (Unaudited)" on page 51 of the 1996 Annual Report to Shareholders, is incorporated herein by reference. The statement of changes in shares outstanding appears on Page 17 of this Form 10-K. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 13 14 PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information under the caption "Election of Directors" in the Company's Proxy Statement for the annual meeting of Stockholders to be held on October 25, 1996 (The "Company's 1996 Proxy Statement") is incorporated herein by reference. The information called for by Item 401 of Regulation S-K relating to the Executive Officers is furnished in a separate item captioned "Executive Officers of the Registrant" in Part I of this report. ITEM 11 - EXECUTIVE COMPENSATION The information under the caption "Executive Compensation" in the Company's 1996 Proxy Statement is incorporated herein by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information under the caption "Security Ownership of Management and of Certain Beneficial Owners" in the Company's 1996 Proxy Statement is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information under the captions "Election of Directors", "Indebtedness of Management" and "Security Ownership of Management and of Certain Beneficial Owners" in the Company's 1996 Proxy Statement is herein incorporated by reference. 14 15 PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Financial Statements The following consolidated financial statements contained in the Company's 1996 Annual Report to Shareholders have been incorporated by reference in Item 8.
Page(s) in Annual Report Item to Shareholders ------------------------------ --------------- Independent Auditors' Report 39 Consolidated Balance Sheets - June 30, 1996 and 1995 40-41 Consolidated Statements of Income - for the years ended June 30, 1996, 1995 and 1994 42 Consolidated Statements of Shareholders' Equity - for the years ended June 30, 1996, 1995 and 1994 43 Consolidated Statements of Cash Flows - for the years ended June 30, 1996, 1995 and 1994 44 Notes to Consolidated Financial Statements 45-50 Fiscal 1996, 1995 and 1994 by Quarter (Unaudited) 51 (a) 2. Financial Statement Schedule Page in the Form 10-K --------- Schedule II - Valuation and Qualifying Accounts 18
15 16 All other schedules are omitted because they are inapplicable, not required under the instructions, or the information is included in the consolidated financial statements or notes thereto. Separate financial statements for the Company's unconsolidated affiliated companies, accounted for by the equity method, have been omitted because they do not constitute significant subsidiaries. (a) 3. Exhibits The exhibits listed on the accompanying Index to Exhibits are filed or incorporated herein as part of this Report. (b) Reports on Form 8-K Molex filed no reports on Form 8-K with the Securities and Exchange Commission during the last quarter of the fiscal year ended June 30, 1996. 16 17 MOLEX INCORPORATED Statements of Changes in Shares Outstanding For the Year Ended June 30, 1996, 1995, and 1994
Class A Class B Common Common Common Treasury Stock Stock Stock Stock ----------- ---------- --------- --------- Shares outstanding at June 30, 1993 32,637,286 32,599,585 94,255 2,172,208 Exercise of stock options 281,551 155,704 Purchase of treasury stock 30,849 Disposition of treasury stock (32,770) ----------- ---------- --------- --------- Shares outstanding at June 30, 1994 32,918,837 32,755,289 94,255 2,170,287 Exercise of stock options 310,593 24,528 Purchase of treasury stock 125,452 Disposition of treasury stock (47,247) Purchase of business 974,998 Stock splits effected in the form 18,666,350 18,677,884 1,236,233 of dividends ----------- ---------- --------- --------- Shares outstanding at June 30, 1995 51,895,780 52,432,699 94,255 3,484,725 Exercise of stock options 471,229 Purchase of treasury stock 785,000 Disposition of treasury stock (72,162) Purchase of business 108,257 Issuance of stock bonus 11,812 Other (1,017) ----------- ---------- --------- --------- Shares outstanding at June 30, 1996 52,378,821 52,539,939 94,255 4,197,563 =========== ========== ========= =========
17 18 MOLEX INCORPORATED Schedule II - Valuation and Qualifying Accounts For the Year Ended June 30, 1996, 1995, and 1994
Allowance for Losses Balance at Balance and Adjustments on Beginning Charged to Accounts Translation at End Receivables: of Period Income Written Off Adjustments of Period - ------------------- --------- ---------- ----------- ----------- --------- 1996 $11,934 $ 1,831 ($548) ($651) $12,566 ======= ======= ===== ===== ======= 1995 $ 8,916 $ 3,332 ($828) $514 $11,934 ======= ======= ===== ===== ======= 1994 $ 8,789 $ 2,354 ($2,344) $117 $ 8,916 ======= ======= ===== ===== =======
18 19 INDEPENDENT AUDITORS REPORT To the Board of Directors and Shareholders of Molex Incorporated Lisle, Illinois We have audited the consolidated financial statements of Molex Incorporated and its subsidiaries as of June 30, 1996 and 1995, and for each of the three years in the period ended June 30, 1996, and have issued our report thereon dated July 25, 1996; such financial statements and report are included in your 1996 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the statements of changes in shares outstanding and the financial statement schedule of Molex Incorporated and its subsidiaries, listed in Item 14 (a) 2. These statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such statements of changes in shares outstanding and financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. /s/ Deloitte & Touche LLP Chicago, Illinois July 1996 19 20 S I G N A T U R E S Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Company has duly caused this Annual Report to be signed on its behalf by the undersigned, there unto duly authorized. MOLEX INCORPORATED ------------------ (Company) /s/ JOHN C. PSALTIS ---------------------------------------- September 20, 1996 By: John C. Psaltis Corporate Vice President, Treasurer and Chief Financial Officer (Retired) /s/ ROBERT B. MAHONEY September 20, 1996 ---------------------------------------- By: Robert B. Mahoney Corporate Vice President, Treasurer and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. September 20, 1996 /s/ F. A. KREHBIEL --------------------------------------- F. A. Krehbiel Chairman of the Board and Chief Executive Officer September 20, 1996 /s/ J. H. KREHBIEL, JR. --------------------------------------- J. H. Krehbiel, Jr. President, Chief Operating Officer and Director September 20, 1996 /s/ JOHN C. PSALTIS --------------------------------------- John C. Psaltis Corporate Vice President, Treasurer and Chief Financial Officer (Retired) September 20, 1996 /s/ ROBERT B. MAHONEY --------------------------------------- Robert B. Mahoney Corporate Vice President, Treasurer and Chief Financial Officer September 20, 1996 /s/ F. L. KREHBIEL --------------------------------------- F. L. Krehbiel Director September 20, 1996 /s/ MICHAEL J. BIRCK --------------------------------------- Michael J. Birck Director September 20, 1996 /s/ E. D. JANNOTTA --------------------------------------- E. D. Jannotta Director 21
MOLEX INCORPORATED EXHIBIT INDEX Exhibit Number Exhibit - ------ --------------------------------------------- 3 3.1 Certificate of Incorporation (incorporated by reference to 1990 Form 10-K, Exhibit 3.1) 3.2 By-Laws (as amended) (incorporated by reference to 1995 Form 10-K, Exhibit 3.2) 4 Instruments defining rights of security holders including indentures. See Exhibit 3.1 10 Material Contracts 10.1 The Molex Deferred Compensation Plan (incorporated by reference to 1984 Form 10-K, Exhibit 10.6) 10.2 The 1990 Molex Incorporated Executive Stock Bonus Plan (incorporated by reference to 1991 From 10-K, Exhibit 10.4) 10.3 The 1990 Molex Incorporated Stock Option Plan (incorporated by reference to 1991 Form 10-K, Exhibit 10.5) 10.4 The 1991 Molex Incorporated Incentive Stock Option Plan (incorporated by reference to Appendix A of the registrant's Proxy Statement for 1991). 13 Molex Incorporated Annual report to Shareholders for the year ended June 30, 1996. (Such Report, except to the extent incorporated herein by reference, is being furnished for the information of the Securities and Exchange Commission only and is not to be deemed filed as a part of this annual report on Form 10-K)
Exhibit Number Exhibit - ------ -------------------------- 22 Subsidiaries of registrant 24 Independent Auditors' Consent 27 Financial Data Schedule (All other exhibits are either inapplicable or not required) EX-13 2 MOLEX ANNUAL REPORT 1 *FOLDOUT FINANCIAL HIGHLIGHTS (in thousands, except per share data)
1996 1995 Change - --------------------------------------------------------------------------------------------- OPERATIONS - --------------------------------------------------------------------------------------------- Net revenue $1,382,673 $ 1,197,747 15% Income before income taxes and minority interest 228,953 214,492 7% Net income 145,586 124,035 17% Net income as a percent of net revenue 10.5% 10.4% - Return on beginning shareholders' equity 13.1% 14.1% - PER SHARE - --------------------------------------------------------------------------------------------- Net income 1.45 1.24 17% Dividends per common share .06 .03 100% Book value 11.22 10.97 2% Outstanding shares of stock 100,815,452 100,938,010 - Number of shareholders: Common Stock 6,159 6,062 - Class A Common Stock 4,565 3,639 - FINANCIAL POSITION - --------------------------------------------------------------------------------------------- Total assets $1,460,999 $ 1,441,020 1% Working capital 459,407 494,990 (7%) Long term debt 7,450 8,122 (8%) Backlog 225,737 245,702 (8%) Shareholders' equity 1,131,271 1,107,268 2% Long term debt/Shareholders' equity 0.7% 0.7% - Number of employees 10,100 9,500 6% Current ratio 2.7/1 2.8/1 - - ---------------------------------------------------------------------------------------------
USE OF NET REVENUES 27.6% Materials 19.9% Energy, Rent, Insurance, Interest, etc. 8.6% Taxes: Business, Income and Payroll 0.4% Dividends [PIE CHART] 24.3% Wages, Salaries, Benefits 8.7% Depreciation and Amortization 10.5% Net Income 19.2% Reinvested in Business MOLEX SALES BY REGION 35.8% Americas $494.9 Million 17.9% Far East South $247.4 Million 20.2% Europe $279.6 Million [PIE CHART] 25.6% Far East North $354.5 Million 0.5% Other $6.3 Million MOLEX SALES BY INDUSTRY 15% Automotive 36% Computer/Business Equipment 13% Telecommunications [PIE CHART] 28% Consumer Products 8% Other The global connector market is estimated at $25.8 billion.* As the world's second-largest supplier, Molex has a 5.4% market share. There are more than 900 connector suppliers worldwide. *Source: Fleck International 2 Ten-Year Financial Highlights Summary (in thousands, except per share data)>>
1996 1995 1994 1993(2) 1992 - ---------------------------------------------------------------------- OPERATIONS Net revenue $1,382,673 $1,197,747 $964,108 $859,283 $776,192 Gross profit 555,284 505,697 406,079 352,603 318,361 Income before income taxes and minority interest 228,953 214,492 159,477 133,478 117,412 Income taxes 83,300 90,273 63,186 58,371 49,814 Net income 145,586 124,035 94,852 71,055 67,464 Earnings per common share(1) 1.45 1.24 .96 .72 .69 Net income as a percent of net revenue 10.5% 10.4% 9.8% 8.3% 8.7% - ---------------------------------------------------------------------- FINANCIAL POSITION Current assets $ 734,589 $ 773,036 $635,104 $497,560 $434,277 Current liabilities 275,182 278,046 205,394 165,368 168,209 Working capital 459,407 494,990 429,710 332,192 266,068 Current ratio 2.7 2.8 3.1 3.0 2.6 Property, plant & equipment, net 613,125 567,303 440,995 385,828 362,719 Total assets 1,460,999 1,441,020 1,138,517 961,775 849,689 Long-term debt 7,450 8,122 7,350 7,510 7,949 Shareholders' equity 1,131,271 1,107,268 881,614 751,654 660,389 Return on beginning shareholders' equity 13.1% 14.1% 12.6% 10.8% 12.2% Dividends per common share(1) 0.06 0.03 0.02 0.02 0.01 Weighted average common shares outstanding (1) 100,745 100,015 98,976 98,439 97,892 - ---------------------------------------------------------------------- (1)Restated for the following stock split/dividends: 25%-August, 1995; 25%-November, 1994; 25%-November, 1992; 100%- June, 1990. (2)1993 results include a charge of $3,605, net of tax, for the cumulative effect of the change in accounting for postretirement benefits other than pensions.
p33 Molex 3 Management's Discussion of Financial Condition and Results of Operations FINANCIAL HIGHLIGHTS Molex continued to produce strong revenue growth and improved profitability in fiscal 1996, despite difficult economic conditions in several geographic regions in which the Company operates. Net revenue increased 15.4 percent to a record $1.4 billion for the fiscal year. The Company's net revenue continues to increase faster than the worldwide connector industry, which is estimated to have grown between 5 and 6 percent during fiscal 1996. Net income increased 17.4 percent to a record of $146 million, or 10.5 percent of net revenue. The Company's continued growth is believed by management to be the result of the Company's ability to expand in the fastest growing market segments and geographic regions of the world. The Company's global presence allows it to be a primary supplier for global and multinational companies worldwide. - -------------------------------------------------------------------------------- THE GROWTH OF MOLEX VS. THE WORLDWIDE CONNECTOR INDUSTRY [CHART] The Growth of Molex vs the Worldwide Connector Industry Using 1986 as a base year. Worldwide Molex --------- ----- 1986 100 100 1987 116 132 1988 130 172 1989 131 196 1990 135 204 1991 136 243 1992 137 266 1993 137 294 1994 143 330 1995 174 410 1996 184 474 INVESTOR RETURNS Molex is committed to providing its shareholders with a high return on their investment. The Company's total shareholder return (including reinvestment of dividends) over the last five years has averaged an annual compounded return of 18.0 percent on Molex Common Stock and 17.1 percent on Molex Class A Common Stock, compared to the 16.7 percent return of the S & P MidCap 400 over the same period of time. A $100 investment in Molex Common Stock at June 30, 1991, together with the reinvestment of dividends, would be worth $229 at June 30, 1996 and the same investment in Molex Class A Common Stock would be worth $220 at June 30, 1996. In September, 1995, the Molex Board of Directors distributed a 25 percent stock dividend. In addition, the Board of Directors increased the annual cash dividend to $0.06 per share, a total increase of 87.5 percent including the impact of the stock dividend. This is the seventh stock dividend Molex has paid to shareholders within the last 13 years. All shares outstanding, earnings and dividends per share have been retroactively restated for the stock dividend. - -------------------------------------------------------------------------------- MOLEX COMMON STOCK/HIGH-LOW-CLOSE BY QUARTER [CHART] HI LO CLOSE GRAPH High Low Close FY'92 Q1 17.84 14.08 14.976 FY'92 Q2 18.56 14.64 18.304 FY'92 Q3 20.24 15.52 15.872 FY'92 Q4 17.68 15.12 16 FY'93 Q1 19.36 15.28 17.92 FY'93 Q2 19.76 16.64 17.043 FY'93 Q3 21.12 16.48 20.48 FY'93 Q4 20.64 18.4 19.84 FY'94 Q1 24.48 19.36 23.2 FY'94 Q2 23.36 20.32 22.72 FY'94 Q3 24.64 21.44 21.44 FY'94 Q4 24.88 19.36 24.32 FY'95 Q1 28.16 24 27.25 FY'95 Q2 28.8 24.8 27.625 FY'95 Q3 29.1 24.8 28.625 FY'95 Q4 31.4 28.2 31 FY'96 Q1 36.625 30.8 36.25 FY'96 Q2 37 30.5 31.75 FY'96 Q3 36.25 27.25 34.875 FY'96 Q4 36.625 30.25 31.75 INTERNATIONAL OPERATIONS - -------------------------------------------------------------------------------- SALES BY REGION JUNE 30, - -------------------------------------------------------------------------------- 1996 1986 [PIE CHART] ------ ------ International 68% International 63.5% United States 32% United States 36.5% In fiscal 1968, Molex entered the international connector market with annual net revenue of $54 thousand. Today, 28 years later, international customer sales have grown to $940 million and represent approximately 68 percent of the Company's worldwide net revenue in U.S. dollars. Domestic revenue, as a percent of total net revenue, increased from 29 percent in fiscal 1995 to 32 percent in fiscal 1996. Sales to the U.S. automotive market, in addition to the sales of the Company's Mod-Tap subsidiary p34 Molex 4 acquired in the second half of fiscal 1995, increased the Company's total net revenue by $109.9 million or 9.2 percent in fiscal 1996, while international net revenue growth remained strong. International operations are subject to currency exchange rate fluctuations and government actions. Molex 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, and occasional use of forward exchange contracts. 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. FINANCIAL POSITION AND LIQUIDITY Molex has an exceptionally strong balance sheet. Cash and marketable securities at June 30, 1996, equaled $282.7 million and represented 19.3 percent of total consolidated assets. Cash and marketable securities decreased $30.5 million during fiscal 1996. The exchange effect of the stronger U.S. dollar, coupled with significant purchases of treasury stock during the year, are primarily responsible for the decline in cash and marketable securities. The Company's long-term financing strategy is to utilize internal sources of funds for investing in plant, equipment and acquisitions. Management is confident that the Company's liquidity and financial flexibility are adequate to support its current and future growth. Molex has historically used external borrowings only when a clear financial advantage exists. The Company has available lines of credit totaling $57.4 million, $57.3 million of which remains unused at June 30, 1996. Cash provided from operations was $253.2 million during fiscal 1996. At this level, the Company's operations generate sufficient cash to support all investing and financing activities. In U.S. dollars, the average day's sales outstanding in trade accounts receivable of 76 improved from the 79 days reported last fiscal year. Average inventory days in U.S. dollars have improved to 73 days from the 76 days reported last fiscal year. Cash used for investing activities increased $6.6 million over fiscal 1995 as Molex continued its commitment to investing in new tooling, equipment and facilities. Capital expenditures equaled $222.4 million for fiscal 1996, increasing 19.0 percent from $186.9 million expended during the previous fiscal year. Molex invested $19.4 million to add new facilities in Japan and South Africa. In addition, facilities were expanded in Singapore, Mexico, Ireland and Nebraska. These additions increased the worldwide facility floor space to 3.8 million square feet. During fiscal 1996, $1.7 million was invested and 108,257 shares of Class A Common Stock were issued to acquire or increase the Company's ownership in various operations. These expenditures were much lower than fiscal 1995 when $16.3 million was expended along with the issuance of 1.2 million shares of Class A Common Stock for similar activities. The weighted average shares outstanding of Common Stock, Class A Common Stock and Class B Common Stock for the current fiscal year increased to 100.7 million from the 100.0 million for fiscal 1995. The Company purchased 785,000 shares of common stock for the treasury during fiscal year 1996. During fiscal 1995, Molex purchased 125,000 shares of treasury stock on the open market. The Company is subject to environmental laws and regulations in the countries where it operates. Molex has designed an environmental program to reduce the generation of potentially hazardous materials during its manufacturing process and believes it continues to meet or exceed local governmental regulations. The Company is a defendant in several pending proceedings incidental to the normal conduct of business. Management believes that the ultimate disposition of these matters will not have a materially adverse impact on the financial condition or consolidated results of operations of the Company.
PERCENTAGE OF NET REVENUE Fiscal Year Ended June 30, U.S. Dollar Percentage Change 1996 1995 1994 1996-95 1995-94 - -------------------------------------------------------------------- Net revenue 100.0% 100.0% 100.0% 15.4% 24.2% Cost of sales 59.8 57.8 57.9 19.6% 24.0% - -------------------------------------------------------------------- Gross profit 40.2 42.2 42.1 9.8% 24.5% Operating expenses 24.5 24.9 25.8 13.6% 20.0% - -------------------------------------------------------------------- Income from operations 15.7 17.3 16.3 4.4% 31.7% Total other income 0.9 0.6 0.2 74.2% 249.6% - -------------------------------------------------------------------- Income before income taxes 16.6 17.9 16.5 6.7% 34.5% Income taxes 6.1 7.5 6.7 -7.7 42.9% - -------------------------------------------------------------------- Net income 10.5% 10.4% 9.8% 17.4% 30.8% ====================================================================
p35 Molex 5 Management's Discussion of Financial Condition and Results of Operations (Continued) FISCAL 1996 COMPARED TO FISCAL 1995 Net revenue increased 15.4 percent to an all-time high of $1.4 billion during fiscal 1996, compared to $1.2 billion during fiscal 1995. Excluding the change in exchange rates due to the generally stronger U.S. dollar which had the affect of reducing reported revenue, net revenue increased 19.0 percent. In the Far East North, customer net revenue increased 3.7 percent in local currencies. The increase in domestic sales in fiscal 1996 was achieved despite difficult economic conditions in Japan during much of the year and the impact of price erosion. Net revenue in the region decreased 3.6 percent in U.S. dollars as the dollar strengthened against the Japanese yen. Molex Japan's development of high precision and miniaturized products have made them a leading supplier to the notebook PC industry, as well as positioning the Company to enter other growth industries such as telecommunications and automotive. Customer net revenue in the Americas region (which includes the former U.S. and Americas non-U.S. regions) increased 29.2 percent in U.S. dollars and 32.6 percent in local currencies in fiscal 1996, including the net revenue for Mod-Tap for the full fiscal year. In the U.S. Commercial Division, sales to the automotive market increased substantially over the prior year as several major programs began commercial production in fiscal 1996. Revenues and profits in the U.S. Data/Comm Division were strong in the first half of the fiscal year, with slower growth in the second half. Price erosion in this sector continues to offset unit growth. Fiber optics and related telecommunication products continue to be the fastest growing market segments in the Americas region. The newly-formed Value-Added Division, centered in Mexico, experienced strong growth during the year. Molex is well-positioned to take advantage of opportunities in this rapidly growing market as well. Customer net revenue in the Far East South increased 16.7 percent in U.S. dollars and 14.0 percent in local currencies. The region continues to experience revenue growth due to demand for personal computers and related peripheral products, as well as introduction of new products for local demand and export. Europe's net revenues increased 10.6 percent in U.S. dollars and 9.5 percent in local currencies. Net revenue increased 23.1 percent in U.S. dollars when the European sales of Mod-Tap are included. Sales to the mobile telephone and automotive industries were strong during the first half of the fiscal year, but demand softened during the second half and revenue growth slowed somewhat. Start-up costs for automotive programs placed pressure on profitability in the region during much of the year. The consolidated gross profit decreased from 42.2 percent of net revenue in fiscal 1995 to 40.2 percent during fiscal 1996. Price erosion, coupled with start-up costs for automotive programs in the U.S. and Europe and new products in Japan, placed pressure on margins during fiscal 1996. Operating expenses as a percentage of net revenue decreased slightly from 24.9 percent in fiscal 1995 to 24.5 percent in fiscal 1996. Net revenue per employee increased to $136.9 thousand in fiscal 1996 from $126.1 thousand during fiscal 1995. Employee headcount increased only 6.3 percent as compared to the 15.4 percent increase in net revenue. Research and development expenditures reached an all-time high of $85.5 million or 6.2 percent of sales, a 9.5 percent increase from the $78.1 million spent in fiscal 1995. These expenditures, coupled with the efforts of the engineering department, resulted in the release of 283 new product families and the granting of 519 new patents during fiscal 1996. During fiscal 1996, 27.5 percent of net revenue was derived from the sale of products released by the Company within the last three years. Molex has a long-term commitment to reinvesting its profits in new product design and tooling in order to maintain and improve the Company's competitive position. Foreign currency transactions resulted in a net gain of $2.1 million in fiscal 1996 compared to a net loss of $2.8 million in fiscal 1995 mainly due to the weakening of the Japanese yen when compared to the U.S. dollar. Interest income, net of interest expense for fiscal 1996 increased 5.2 percent from fiscal 1995. This increase is the result of higher interest rates earned on relatively constant cash balances in many of the countries where the Company has significant short-term investments. Interest expense remained relatively unchanged from fiscal 1995. The effective tax rate decreased to 36.4 percent during fiscal 1996 from 42.1 percent during fiscal 1995. The decrease was due to the mix of pretax earnings between the U.S. and Japan and to changes in the valuation reserve for losses which can be p36 Molex 6 recognized for tax purposes. Net income increased 17.4 percent to $145.6 million. Earnings per share increased to $1.45 during fiscal 1996 from $1.24 during fiscal 1995. Excluding the effects of currency fluctuation, net income increased 21.1 percent over fiscal 1995 income. FISCAL 1995 COMPARED TO FISCAL 1994 During fiscal 1995, net revenues increased 24.2 percent to $1.2 billion, compared to $964.1 million during fiscal 1994. Excluding the change in exchange rates due to the generally weaker U.S. dollar, net revenue increased 18.2 percent. Net revenues of Mod-Tap added $16.5 million or 1.7 percent to fiscal 1995 net revenue. Customer net revenues in the Far East North increased 21.3 percent in U.S. dollars and 8.9 percent in local currencies as the value of the Japanese yen strengthened against the U.S. dollar. Domestic sales in Japan improved slightly from fiscal 1994 as business levels in the electronic industry improved modestly. Price erosion continued to impact sales, but strong demand for new products, including micro-miniature connectors, helped to overcome this pressure. Sales and profits in Korea were very strong due to the robust growth in the automotive and telecommunications industries. Customer net revenues in the Americas Region increased 19.5 percent during fiscal 1995. Included in this total were the sales from Mod-Tap since the date of acquisition. Excluding the impact of Mod-Tap's net revenue, customer sales in the U.S. Region increased 14.3 percent from fiscal 1994. The U.S. Commercial Division's sales were strong due to increased demand in the home appliance, automotive and the high-end TV market. Revenue in the U.S. Data/Comm Division was somewhat depressed during the first six months of fiscal 1995, but improved during the second half. Unit sales volume to the computer notebook and workstation markets increased, but intense price erosion continued to impact operating margins. Fiber optic sales were the fastest growing segment of the U.S. Region as fiber optics was becoming the wiring of choice in the telecommunications industry. The severe devaluation of the Mexican peso during fiscal 1995 did not have a material effect on the consolidated results, as the Company's operations in Mexico transact business primarily in U.S. dollars. The Far East South was the fastest growing connector market in the world. Customer revenue in the region increased 22.2 percent in U.S. dollars and 17.8 percent in local currencies. Sales in this region were strong due to continued growth in the personal computer and hard disk drive industries. In addition to the strong revenue growth, profits increased from 13.4 percent of sales in fiscal 1994 to 15.0 percent in fiscal 1995, despite continuing price erosion. In Europe, customer net revenues increased 42.4 percent in U.S. dollars and 28.8 percent in local currencies as the value of the U.S. dollar weakened against most of the major European currencies. Overall, the European connector market emerged from several years of recession and negative growth. Revenues increased significantly to the mobile telecommunication and automotive industries. Molex made significant market share gains in the European cellular phone industry. The increase in sales, continued tight control of expenses and the favorable effects of ongoing restructuring, increased the net return on sales to 9.2 percent in fiscal 1995 from 6.7 percent of sales during fiscal 1994. The consolidated gross profit improved slightly to 42.2 percent of net revenues during fiscal 1995 from 42.1 percent during fiscal 1994. The Company was able to offset the effects of higher raw material prices and price erosion with improved factory utilization and product mix. Operating expenses as a percent of net revenue decreased slightly from 25.8 percent in fiscal 1994 to 24.9 percent in fiscal 1995. This decrease is the result of controlled headcount additions despite the 24.2 percent increase in net revenue. Net revenue per employee increased from $118.1 thousand in fiscal 1994 to $126.1 thousand in fiscal 1995. Research and development expenditures reached an all-time high of $78.1 million and represented 6.5 percent of sales during fiscal 1995, decreasing from 6.7 percent of sales during fiscal 1994. Approximately 23 percent of fiscal 1995 net revenue resulted from the sale of products that Molex released within the prior three years. These expenditures, coupled with the efforts of the engineering department, resulted in the release of a record 207 new product families and the granting of 259 new patents during fiscal 1995. Foreign currency transaction losses decreased 16.2 percent from fiscal 1994 losses when the Company incurred high losses in Brazil as a result of the severe devaluation of the cruzeiro against the U.S. dollar. Interest income, net of interest expense for fiscal 1995 increased 86.8 percent from fiscal 1994. This increase was the result of higher short-term investment balances during fiscal 1995 coupled with the return of higher interest rates earned in many of the p37 Molex 7 Management's Discussion of Financial Condition and Results of of Operations (Continued) countries where the Company has significant short-term investments. Interest expense remained relatively unchanged from fiscal 1994. The effective tax rate increased to 42.1 percent during fiscal 1995 from 39.6 percent during fiscal 1994. The increase reflects increased pretax profitability in countries with higher effective tax rates, coupled with the inability of the Company to utilize all of its foreign tax credits generated during fiscal 1995. Net income increased 30.8 percent to $124.0 million. Earnings per share increased to $1.24 during fiscal 1995 from $0.96 during fiscal 1994. Excluding the effects of currency fluctuations, net income increased 23 percent over fiscal 1994 net income. OUTLOOK Fiscal 1996 was an outstanding year for Molex, with sales growing significantly faster than the overall connector industry. The outlook for fiscal 1997 is for another good year. Management anticipates more modest growth in sales and earnings during the first half, with stronger growth in the second half as the Japanese economy continues to improve and the impact of year-over-year currency comparison eases. To further expand the Company's global presence and provide customers with innovative products at an accelerated pace, Molex plans to invest approximately $215 million in capital expenditures and $95 million in research and development for the fiscal year ending June 30, 1997. During fiscal 1997, the Company plans to open a new facility in China and further expand the facilities in Singapore, Korea, India and Lisle, Illinois. Worldwide, the connector industry is expected to increase between 5 and 6 percent. The Company expects to, once again, surpass its goals of growing at twice the connector industry rate and generating a 10 percent net return on sales for the fiscal year ending June 30, 1997. Management believes that Molex is well-positioned to continue growing faster than the overall connector industry while achieving its profit goals. 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 the customer, wherever they may be located in the world. Management's Statement of Responsibility The management of the Company is responsible for the information contained in the consolidated financial statements and in the other parts of this report. The accompanying consolidated financial statements of Molex Incorporated and its subsidiaries have been prepared in accordance with generally accepted accounting principles. In preparing these statements, management has made judgments based upon available information. To ensure that this information will be as complete, accurate and factual as possible, management has communicated to all appropriate employees requirements for accurate record keeping and accounting. The Company maintains an internal control structure designed to provide reasonable assurance for the safeguarding of assets against loss from unauthorized use or disposition and reliability of financial records. Management believes that through the careful selection of employees, the division of responsibilities and the application of formal policies and procedures, the Company has an effective and responsive internal control structure that is intended, consistent with reasonable cost, to provide reasonable assurance that transactions are executed as authorized. The Company's independent auditors, Deloitte & Touche LLP, are responsible for conducting an audit of the Company's consolidated financial statements in accordance with generally accepted auditing standards and for expressing their opinion as to whether these consolidated financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of Molex Incorporated and its subsidiaries in conformity with generally accepted accounting principles. /S/ Frederick A. Krehbiel - ------------------------- Frederick A. Krehbiel Chairman of the Board and Chief Executive Officer /S/ John H. Krehbiel, Jr. - -------------------------- John H. Krehbiel, Jr. President and Chief Operating Officer /S/John C. Psaltis - ------------------------------ John C. Psaltis Corporate Vice President, Treasurer and Chief Financial Officer (Retired) /S/Robert B. Mahoney - ------------------------------- Robert B. Mahoney Corporate Vice President, Treasurer and Chief Financial Officer p38 Molex 8 Independent Auditors' Report TO THE SHAREHOLDERS AND BOARD OF DIRECTORS, MOLEX INCORPORATED LISLE, ILLINOIS We have audited the accompanying consolidated balance sheets of Molex Incorporated and its subsidiaries as of June 30, 1996 and 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Molex Incorporated and its subsidiaries as of June 30, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1996 in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE LLP Chicago, Illinois July 25, 1996 p39 Molex 9 Consolidated Balance Sheets (in thousands, except per share data)
ASSETS June 30, 1996 1995 ----------------------------------------------------------------------- Current assets: Cash and cash equivalents $242,779 $253,552 Marketable securities 39,883 59,563 Accounts receivable: Trade, less allowance of $12,566 in 1996 and $11,934 in 1995 for doubtful accounts 269,675 277,993 Employee 4,356 4,821 Inventories 147,612 150,836 Deferred income taxes (Note 5) 22,562 19,874 Prepaid expenses 7,722 6,397 ----------------------------------------------------------------------- Total current assets 734,589 773,036 ----------------------------------------------------------------------- Property, plant and equipment ----------------------------------------------------------------------- at cost (Note 4): Land and improvements 43,504 49,919 Buildings and leasehold improvements 266,643 249,104 Machinery and equipment 683,310 658,655 Molds and dies 299,440 308,627 ----------------------------------------------------------------------- 1,292,897 1,266,305 Less accumulated depreciation and amortization 679,772 699,002 ----------------------------------------------------------------------- Net property, plant and equipment 613,125 567,303 ----------------------------------------------------------------------- Other assets 113,285 100,681 ----------------------------------------------------------------------- $1,460,999 $1,441,020 ======================================================================= The accompanying notes are an integral part of these consolidated financial statements.
p40 Molex 10
LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 1996 1995 - ------------------------------------------------------------------------------------------ Current liabilities: Current portion of long-term debt (Note 4) $ 103 $ 152 Accounts payable 127,557 128,146 Accrued expenses: Salaries, commissions and bonuses 28,384 33,535 Other 63,205 51,405 Income taxes (Note 5) 54,418 64,000 Dividends payable 1,515 808 - ------------------------------------------------------------------------------------------ Total current liabilities 275,182 278,046 - ------------------------------------------------------------------------------------------ Deferred items: Investment grants 2,991 2,574 Income taxes (Note 5) 10,986 10,736 - ------------------------------------------------------------------------------------------ Total deferred items 13,977 13,310 - ------------------------------------------------------------------------------------------ Accrued postretirement benefits (Notes 6 and 7) 30,401 32,170 - ------------------------------------------------------------------------------------------ Long-term debt (Note 4) 7,450 8,122 - ------------------------------------------------------------------------------------------ Minority interest in subsidiaries 2,718 2,104 - ------------------------------------------------------------------------------------------ Shareholders' equity (Notes 3 and 9): Common Stock, $.05 par value; 100,000 shares authorized; 52,379 shares issued at 1996 and 51,896 shares issued at 1995 2,619 2,075 Class A Common Stock, $.05 par value; 100,000 shares authorized; 52,540 shares issued at 1996 and 52,433 shares issued at 1995 2,627 2,097 Class B Common Stock, $.05 par value; 146 shares authorized; 94 shares issued at 1996 and 1995 5 5 Paid-in capital 116,510 101,534 Retained earnings 989,928 850,533 Treasury stock (Common Stock, 2,412 shares at 1996 and 1,706 shares at 1995; Class A Common Stock, 1,785 shares at 1996 and 1,779 shares at 1995), at cost (62,726) (35,749) Deferred unearned compensation (13,583) (13,771) Cumulative translation adjustments 95,891 200,544 - ------------------------------------------------------------------------------------------- Total shareholders' equity 1,131,271 1,107,268 - ------------------------------------------------------------------------------------------- $1,460,999 $1,441,020 ===========================================================================================
p41 Molex 11
Consolidated Statements of Income (in thousands, except per share data) For the year ended June 30, 1996 1995 1994 - ----------------------------------------------------------------------------------------- Net revenue $1,382,673 $1,197,747 $964,108 Cost of sales 827,389 692,050 558,029 - ----------------------------------------------------------------------------------------- Gross profit 555,284 505,697 406,079 - ----------------------------------------------------------------------------------------- Operating expenses: Selling 142,805 129,152 109,531 Administrative 196,202 169,331 139,153 - ------------------------------------------------------------------------------------------ Total operating expenses 339,007 298,483 248,684 - ------------------------------------------------------------------------------------------ Income from operations 216,277 207,214 157,395 - ------------------------------------------------------------------------------------------ Other income (expense): Foreign currency transaction gain (loss) 2,114 (2,759) (3,291) Interest, net 10,562 10,037 5,373 - ------------------------------------------------------------------------------------------ Total other income 12,676 7,278 2,082 - ------------------------------------------------------------------------------------------ Income before income taxes and minority interest 228,953 214,492 159,477 Income taxes (Note 5) 83,300 90,273 63,186 - ------------------------------------------------------------------------------------------ Income before minority interest 145,653 124,219 96,291 Minority interest (67) (184) (1,439) - ------------------------------------------------------------------------------------------ Net income $145,586 $124,035 $94,852 ========================================================================================== Earnings per common share (Based upon weighted average common shares outstanding) $1.45 $1.24 $.96 - ------------------------------------------------------------------------------------------ Dividends per common share (Note 3) $.0600 $.0304 $.0240 - ------------------------------------------------------------------------------------------ Weighted average common shares outstanding (Note 3) 100,745 100,015 98,976 - ----------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
p42 Molex 12
Consolidated Statements of Shareholders' Equity (in thousands) For the year ended June 30, 1996 1995 1994 - ----------------------------------------------------------------------------------- Common Stock Balance at beginning of period $2,075 $1,646 $1,632 Exercise of stock options 23 16 14 Stock split effected in the form of a dividend 521 413 -- - ----------------------------------------------------------------------------------- Balance at end of period 2,619 2,075 1,646 Class A Common Stock Balance at beginning of period 2,097 1,637 1,630 Exercise of stock options -- 1 7 Purchase of business 6 49 -- Stock split effected in the form of a dividend 524 410 -- - ----------------------------------------------------------------------------------- Balance at end of period 2,627 2,097 1,637 Class B Common Stock Balance at beginning and end of period 5 5 5 Paid-in capital Balance at beginning of period 101,534 56,464 47,052 Exercise of stock options 6,822 4,493 4,952 Disposition of treasury stock 920 1,112 650 Stock options granted 4,396 9,983 3,810 Purchase of business 3,516 30,420 -- Issuance of stock bonus 367 -- -- Stock split effected in the form of a dividend (1,045) (938) -- - ----------------------------------------------------------------------------------- Balance at end of period 116,510 101,534 56,464 Retained earnings Balance at beginning of period 850,533 729,547 637,074 Net income 145,586 124,035 94,852 Cash dividends (6,191) (3,049) (2,379) - ----------------------------------------------------------------------------------- Balance at end of period 989,928 850,533 729,547 Treasury stock Balance at beginning of period (35,749) (31,749) (31,107) Purchase of treasury stock (26,662) (3,712) -- Exercise of stock options (1,049) (898) (1,120) Disposition of treasury stock 734 610 478 - ----------------------------------------------------------------------------------- Balance at end of period (62,726) (35,749) (31,749) Deferred unearned compensation Balance at beginning of period (13,771) (7,223) (6,235) Stock options granted (4,396) (9,983) (3,810) Amortization of deferred unearned compensation 4,584 3,435 2,822 - ----------------------------------------------------------------------------------- Balance at end of period (13,583) (13,771) (7,223) Cumulative translation adjustments Balance at beginning of period 200,544 131,287 101,603 Net effect of translation adjustment (104,653) 69,257 29,684 - ----------------------------------------------------------------------------------- Balance at end of period 95,891 200,544 131,287 - ----------------------------------------------------------------------------------- Total shareholders' equity $1,131,271 $1,107,268 $881,614 ===================================================================================
The accompanying notes are an integral part of these consolidated financial statements. p43 Molex 13
Consolidated Statements of Cash Flows (in thousands) For the year ended June 30, 1996 1995 1994 - ---------------------------------------------------------------------------------------------- Cash and cash equivalents, beginning of period $253,552 $220,681 $174,526 Cash and cash equivalents were provided from (used for): Operations: Net income 145,586 124,035 94,852 Add (deduct) non-cash items included in net income: Depreciation and amortization 119,909 104,857 88,787 Deferred income taxes (4,629) (603) (1,212) Gain on sale of property, plant and equipment (361) (51) (1,047) Minority interest 67 184 1,439 Amortization of deferred unearned compensation 4,584 3,435 2,822 Amortization of deferred investment grants (289) (187) (240) Other (credits) charges to earnings--net (1,055) (553) 613 Current items: Accounts receivable (19,533) (35,289) (23,903) Inventories (12,355) (23,705) (4,454) Prepaid expenses (4,451) (257) 172 Accounts payable 15,784 16,846 12,615 Accrued expenses 12,878 15,482 17,285 Income taxes (2,903) 20,455 3,385 - ---------------------------------------------------------------------------------------------- Net cash provided from operations 253,232 224,649 191,114 - ---------------------------------------------------------------------------------------------- Investments: Purchases of property, plant and equipment (222,389) (186,877) (129,458) Proceeds from sale of property, plant and equipment 3,860 3,041 4,709 Purchases of businesses, net of cash acquired (1,677) (16,338) (3,106) Proceeds from sale of marketable securities 1,921,024 1,454,008 942,239 Purchases of marketable securities (1,901,504) (1,456,834) (966,077) Increase in other assets (10,290) (1,329) (3,601) - ---------------------------------------------------------------------------------------------- Net cash used for investments (210,976) (204,329) (155,294) - ---------------------------------------------------------------------------------------------- Financing: Increase in investment grants 787 -- -- Decrease in long-term debt (987) (945) (169) Increase in long-term debt 269 -- -- Cash dividends paid (5,556) (2,998) (2,217) Exercise of stock options 5,796 2,992 2,915 Purchase of treasury stock (26,662) (3,712) -- Disposition of treasury stock 1,654 1,722 1,128 - ---------------------------------------------------------------------------------------------- Net cash (used for) provided from financing (24,699) (2,941) 1,657 - ---------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (28,330) 15,492 8,678 - ---------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (10,773) 32,871 46,155 - ---------------------------------------------------------------------------------------------- Cash and cash equivalents, end of period $242,779 $253,552 $220,681 ============================================================================================== Supplemental disclosure of cash flow information Cash paid during the period for: Interest $ 1,140 $ 931 $ 795 Income taxes $ 78,611 $ 70,251 $ 57,721 - ---------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
p44 Molex 14 Notes to Consolidated Financial Statements (dollars in thousands, except per share data) (1) NATURE OF OPERATIONS Molex Incorporated manufactures a broad line of electronic, electrical and fiber optic connectors, flat cables, switches and associated application tooling. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the major accounting policies and practices of Molex Incorporated and subsidiaries that affect significant elements of the accompanying consolidated financial statements. Supplemental disclosure of noncash investing and financing activities are included in note 11. (A) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Molex Incorporated (the Parent Company) and its subsidiaries. All material intercompany balances and transactions have been eliminated. (B) USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (C) MARKETABLE SECURITIES Marketable securities are available for sale and consist of a variety of highly-liquid investments, with maturities generally less than twelve months. Gross unrealized holding gains and losses are not material as of June 30, 1996 and 1995. (D) FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments include accounts receivable and payable, marketable securities and long-term debt. The carrying amounts of the financial instruments approximate their fair value. (E) INVENTORIES Inventories are valued at the lower of first-in, first-out cost or market. Inventories at June 30 consisted of the following: 1996 1995 - ------------------------------------ Raw materials $ 33,841 $ 29,424 Work in progress 54,687 59,042 Finished goods 59,084 62,370 - ------------------------------------ $147,612 $150,836
=========================================================== (F) Property, Plant and Equipment and Related Reserves Depreciation and amortization are provided substantially on a straight-line basis for financial statement purposes and on accelerated methods for tax purposes. The estimated useful lives are as follows: Buildings 25-45 years Machinery and equipment 3-10 years Molds and dies 3-4 years
Costs of leasehold improvements are amortized over the terms of the related leases using various methods. The carrying value of all long-lived assets is evaluated annually to determine if adjustment to the depreciation and amortization period or to the unamortized balance is warranted. (G) RESEARCH AND DEVELOPMENT AND PATENT COSTS Costs incurred in connection with the development of new products and applications are charged to operations as incurred. Total research and development costs equaled $ 85,484 in 1996; $78,092 in 1995; and $64,772 in 1994. Included in these totals are patent costs of $ 6,739, $4,895, and $3,252 for the years ended June 30, 1996, 1995 and 1994, respectively. (H) REVENUE RECOGNITION The Company recognizes revenue at the date of shipment. (I) CURRENCY TRANSLATION Assets and liabilities of international entities have been translated at current exchange rates, and income and expenses have been translated using average exchange rates. (J) GOODWILL Goodwill is charged to earnings on a straight-line basis over the periods estimated to be benefited, currently not exceeding 20 years. (K) CHANGES IN ACCOUNTING POLICY In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123) which the Company must adopt in fiscal 1997. This statement allows for, and the Company intends to, retain the current method of accounting for stock-based compensation expense with certain additional disclosures. Therefore, the new standard will have no effect on the Company's net income or financial position. p45 Molex 15 Notes to Consolidated Financial Statements (Continued) (L) RECLASSIFICATIONS Certain reclassifications have been made to the prior years' financial statements in order to conform to the 1996 classifications. (3) CAPITAL STOCK The shares of Common Stock, Class A Common Stock and Class B Common Stock are identical except as to voting rights. Class A Common Stock has no voting rights except in limited circumstances. So long as more than 50% of the authorized number of shares of Class B Common Stock continue to be outstanding, all matters, other than the election of directors, submitted to a vote of the shareholders must be approved by a majority of the Class B Common Stock, voting as a class, and by a majority of the Common Stock, voting as a class. During such period, holders of a majority of the Class B Common Stock could veto corporate action that requires shareholder approval other than the election of directors. There are 25 million shares of preferred stock authorized, none of which were issued or outstanding during the three years ended June 30, 1996. The Class B Common Stock can be converted into Common Stock on a share-for-share basis at any time at the option of the holder. The authorized Class A Common Stock would automatically convert into Common Stock on a share-for-share basis at the discretion of the Board of Directors upon the occurrence of certain events. Upon such conversion, the voting interests of the holders of Common Stock and Class B Common Stock would be diluted. The holders of the Common Stock, Class A Common Stock, and Class B Common Stock participate equally, share for share, in any dividends that may be paid thereon, if, as and when declared by the Board of Directors, or in any assets available upon liquidation or dissolution of the Company. On October 21, 1994 and August 2, 1995, the Board of Directors declared 25% stock dividends. One quarter share of Molex Common Stock was distributed for each share of Common Stock and Class B Common Stock outstanding. In addition, one quarter share of Class A Common Stock was distributed for each share of Class A Common Stock outstanding. The October, 1994 stock dividend was distributed on November 28, 1994 to shareholders of record as of November 7, 1994. The August, 1995 stock dividend was distributed on September 15, 1995 to shareholders of record as of August 25, 1995. All stock and stock option amounts, as well as earnings, dividends and market prices per common share have been retroactively restated for the stock dividends. (4) DEBT
The details relative to long-term debt are as follows: 1996 1995 -------------------------------------------------------------------------- Industrial development bonds 2% to 5%, secured by certain land, buildings and equipment; payable in periodic installments through November, 2009 $7,350 $7,350 Other 203 924 --------------------------------------------------------------------------- 7,553 8,274 Less current portion 103 152 --------------------------------------------------------------------------- Long-term portion $7,450 $8,122 ===========================================================================
The long-term portion as of June 30, 1996, is due as follows: $77 in 1998, $23 in 1999, and $7,350 in 2002 and thereafter. The provisions of certain loan agreements contain restrictive covenants, the more significant of which require the Company to maintain specified liquidity and debt-to-equity ratios. (5) INCOME TAXES The deferred tax provision is determined under the liability method. Under this method, deferred tax assets and liabilities are recognized based on differences between the financial statement and tax bases of assets and liabilities using presently enacted tax rates. Income before income taxes and minority interest is summarized as follows:
1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------- United States $ 68,713 $ 52,740 $ 46,584 International 160,240 161,752 112,893 - --------------------------------------------------------------------------------------------------------------------- $228,953 $ 214,492 $159,477 =====================================================================================================================
Income tax provisions are as follows:
1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------- Currently payable: U.S. federal $22,480 $ 21,685 $ 9,921 State 4,152 3,130 2,426 International 61,152 66,350 52,031 - ----------------------------------------------------------------------------------------------------------------------- 87,784 91,165 64,378 - ----------------------------------------------------------------------------------------------------------------------- Deferred: United States (4,049) (307) (359) International (435) (585) (833) - ------------------------------------------------------------------------------------------------------------------------ (4,484) (892) (1,192) - ------------------------------------------------------------------------------------------------------------------------ Total provision for income taxes $83,300 $90,273 $ 63,186 =========================================================================================================================
p46 Molex 16 The Company's tax rate differs from the U.S. federal income tax rate as follows:
1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------------- U.S. federal income tax rate 35.0% 35.0% 35.0% Certain tax exemptions (3.9) (3.8) (4.4) State income taxes, net of federal tax benefit 1.2 1.0 1.0 International tax rates different from U.S. federal rate 4.1 9.9 8.0 - --------------------------------------------------------------------------------------------------------------------------- 36.4% 42.1% 39.6% =============================================================================================================================
Net deferred taxes arise from temporary differences as follows:
1996 1995 - --------------------------------------------------------------------------------------------------------------------- International/local taxes $4,084 $3,825 Employee benefit plans 8,562 9,713 Depreciation and amortization (8,110) (5,421) Allowance for doubtful accounts 1,682 1,920 Inventory reserves 2,677 2,106 Inventory - other 4,318 3,528 Other deferred items 8,495 6,604 - --------------------------------------------------------------------------------------------------------------------- $21,708 $22,275 =====================================================================================================================
The net deferred tax accounts reported on the balance sheet as of June 30 are as follows:
1996 1995 - --------------------------------------------------------------------------------------------------------------------- Net deferred: Current asset $22,562 $19,874 Long-term asset 10,502 13,684 Current liability (370) (547) Long-term liability (10,986) (10,736) - ---------------------------------------------------------------------------------------------------------------------- $21,708 $22,275 ======================================================================================================================
Income taxes are generally not provided on the accumulated undistributed earnings of certain international subsidiaries. It is intended that these earnings will be permanently reinvested. Should these earnings be distributed, foreign withholding taxes can be used, with limitations, to reduce U.S. income taxes. (6) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Parent Company and certain of its subsidiaries provide certain retiree health care and life insurance benefits to its employees. The cost of retiree insurance benefits is accrued over the period in which the employees become eligible for such benefits. The majority of the Parent Company employees may become eligible for these benefits if they reach age 55, with age plus years of service equal to 70. There are no significant postretirement health care benefit plans outside of the United States. The Company continues to fund benefit costs primarily as claims are paid. Net periodic postretirement benefit cost for fiscal years 1996, 1995 and 1994 included the following components:
1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------ Service cost, benefits attributed to employee service during the period $ 573 $ 515 $ 492 Interest cost on accumulated postretirement benefit obligation 538 422 405 Unrecognized prior service cost (515) (354) (107) Unrecognized net gain 295 118 -- - --------------------------------------------------------------------------------------------------------------- Net periodic postretirement benefit cost $891 $ 701 $ 790 ================================================================================================================
The following table sets forth the plans' combined status as of June 30:
1996 1995 - ----------------------------------------------------------------------------------------------------------------- Accumulated postretirement benefit obligation (APBO): Retirees and beneficiaries $ 801 $ 614 Active employees 7,320 6,185 - ------------------------------------------------------------------------------------------------------------------ Total accumulated postretirement benefit obligation 8,121 6,799 Fair value of plan assets -- -- - ------------------------------------------------------------------------------------------------------------------- Unfunded accumulated benefit obligation in excess of plan assets 8,121 6,799 Unrecognized prior service cost 1,907 2,121 Unrecognized net loss (915) (557) - ------------------------------------------------------------------------------------------------------------------- Accrued postretirement benefit costs $9,113 $8,363 ===================================================================================================================
The discount rate used in determining the APBO was 7.0% at June 30, 1996 and 7.5% at June 30, 1995 and 1994. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 7.0% in 1996, declining per year to an ultimate rate of 4.5% by 2016. The health care cost trend rate assumption has a significant effect on the amount of the obligation and periodic cost reported. An increase in the assumed health care cost trend rate by 1% in each year would increase the APBO as of June 30, 1996 by $1,392 and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost for the year then ended by $219. p47 Molex 17 Notes to Consolidated Financial Statements (Continued (7) PENSION AND PROFIT SHARING PLANS The Company sponsors and/or contributes to pension plans covering substantially all U.S. hourly employees and certain employees in international subsidiaries. The Company also sponsors several defined benefit plans for certain domestic and international employees. The benefits are primarily based on years of service and the employees' compensation for certain periods during the last years of employment. Total pension expense for all benefit plans, including defined benefit plans, amounted to $5,613 in 1996, $5,575 in 1995, and $4,775 in 1994. Net periodic pension expense for the Company's defined benefit plans consists of the following for the year ended June 30:
1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------------- INTERNATIONAL International International U.S. PLANS PLANS U.S. Plans Plans U.S. Plans Plans - --------------------------------------------------------------------------------------------------------------------------------- Service costs $ 597 $ 2,541 $ 515 $ 2,211 $ 412 $ 1,826 Interest costs on projected benefit obligation 560 1,343 487 1,356 368 1,039 Actual return on plan assets (1,061) (793) (207) (585) (198) (444) Net amortization and deferral 776 75 (99) 343 (142) 33 - --------------------------------------------------------------------------------------------------------------------------------- Net periodic pension expense $ 872 $ 3,166 $ 696 $ 3,325 $ 440 $ 2,454 =================================================================================================================================
The funded status for the Company's defined benefit plans is as follows:
1996 1995 - ---------------------------------------------------------------------------------------------------------------- INTERNATIONAL International U.S. PLANS PLANS U.S. Plans Plans - ---------------------------------------------------------------------------------------------------------------- Actuarial present value of: Vested benefit obligation $ 7,006 $ 16,497 $ 5,379 $ 15,537 Nonvested benefit obligation 296 4,152 211 2,949 - --------------------------------------------------------------------------------------------------------------- Accumulated benefit obligation 7,302 20,649 5,590 18,486 Projected benefit obligation 9,987 26,642 7,448 24,424 Plan assets at fair value 8,998 10,238 7,118 8,254 - ---------------------------------------------------------------------------------------------------------------- Plan assets in excess of (less than) projected benefit obligation (989) (16,404) (330) (16,170) Unrecognized net transition liability 397 62 507 67 Unrecognized prior service costs 2,200 -- 2,431 -- Unrecognized net gain (732) 654 (2,260) (2,346) - ------------------------------------------------------------------------------------------------------------------ Accrued pension asset (liability) included in the consolidated balance sheet $ 876 $(15,688) $348 $(18,449) ===================================================================================================================
The assumptions used in computing the above information are presented below:
1996 1995 - ---------------------------------------------------------------------------------------------------------------- INTERNATIONAL International PLANS Plans (WEIGHTED (Weighted U.S. PLANS AVERAGE) U.S. Plans average) - ---------------------------------------------------------------------------------------------------------------- Discount rates 7.0% 5.4% 8.0% 6.2% Rates of increase in compensation 4.5% 4.3% 4.5% 4.1% Expected long-term rates of return on plan assets 7.0% 8.5% 7.0% 9.0% - ----------------------------------------------------------------------------------------------------------------
The Parent Company and certain of its subsidiaries also provide discretionary savings and other defined contribution plans covering substantially all of their salaried employees. Employer contributions of $6,611, $5,626, and $4,892 were charged to operations during 1996, 1995 and 1994, respectively. p48 Molex 18 (8) COMMITMENTS The Company and its subsidiaries rent certain facilities and equipment under lease arrangements classified as operating leases. Some of the leases have renewal options. Future minimum rental payments under noncancellable operating leases with initial or remaining terms of one year or more as of June 30, 1996 are as follows:
Fiscal Year Amount - ----------------------------------------------------------- 1997 $ 7,007 1998 4,207 1999 2,752 2000 2,577 2001 1,530 Thereafter 9,259 - ----------------------------------------------------------- $27,332 ===========================================================
Rental expense was $9,961 in 1996, $11,132 in 1995, and $9,872 in 1994. (9) STOCK OPTION PLANS: 1990 Stock Option Plan: The most significant terms of this plan provide that (1) options may be granted for 3 million shares of Common Stock, and (2) the option price shall be fifty percent (50%) of the fair market value of the stock of the Company on the date of grant. The options expire five years from the date of the grant. Stock option transactions relating to the 1990 Plan are summarized as follows:
Shares Price in thousands) Per Share - ---------------------------------------------------------- Outstanding at 6/30/94 1,188 $ 4.93-$11.36 Granted 799 $12.64-$14.60 Exercised 310 $ 4.93-$11.36 Cancelled 30 - ----------------------------------------------------------- Outstanding at 6/30/95 1,647 $ 4.93-$14.60 Granted 278 $15.88-$17.44 Exercised 343 $ 4.99-$14.60 Cancelled 50 - ----------------------------------------------------------- Outstanding at 6/30/96 1,532 $ 7.42-$17.44 Options exercisable at 6/30/95 342 Options exercisable at 6/30/96 338 - -----------------------------------------------------------
Under the 1990 Stock Option Plan, all shares issued are nonqualified. The option price per share is less than the fair market value at the date of grant, thus creating deferred unearned compensation. The difference between the fair market value and the option price was recorded as deferred unearned compensation and is charged to operations over the term of the option. In fiscal 1996, $4,584 was charged to operations ($3,435 in 1995 and $2,822 in 1994). 1991 Stock Option Plan: The most significant terms of this plan provide that (1) options may be granted for 2 million shares of Common Stock, and (2) the option price shall be the fair market value of the stock on the date of the grant. The options expire five years from the date of the grant. Stock option transactions relating to the 1991 Plan are summarized as follows:
Shares Price (in thousands) Per Share - ----------------------------------------------------------------------------------------- Outstanding at 6/30/94 481 $15.49-$24.12 Granted 89 $25.88-$30.62 Exercised 42 $15.49-$24.12 - ------------------------------------------------------------------------------------------ Outstanding at 6/30/95 528 $15.49-$30.62 Granted 75 $33.25-$38.50 Exercised 57 $15.49-$27.84 Cancelled 8 - ----------------------------------------------------------------------------------------- Outstanding at 6/30/96 538 $15.49-$38.50 Options exercisable at 6/30/95 117 Options exercisable at 6/30/96 145 - -----------------------------------------------------------------------------------------
(10) OPERATIONS BY GEOGRAPHIC AREA The Company and its subsidiaries operate in one product segment: the manufacture and sale of electrical components. Net revenue by geographic area is summarized in the following tables:
Customer Intercompany 1996 Revenue Revenue Total - ------------------------------------------------------------ United States $ 443,116 $ 42,881 $ 485,997 Americas (Non-U.S.) 51,757 1,441 53,198 Far East North 354,522 103,242 457,764 Far East South 247,360 27,765 275,125 Europe 279,564 18,449 298,013 Other 6,354 41,465 47,819 Eliminations -- (235,243) (235,243) - ------------------------------------------------------------ Consolidated $1,382,673 -- $1,382,673 ============================================================
p49 Molex 19
Customer Intercompany 1995 Revenue Revenue Total - ----------------------------------------------------------------------- United States $ 344,653 $ 38,548 $ 383,201 Americas (Non-U.S.) 38,353 1,405 39,758 Far East North 367,689 95,727 463,416 Far East South 211,943 23,500 235,443 Europe 227,159 11,874 239,033 Other 7,950 42,014 49,964 Eliminations -- (213,068) (213,068) - ----------------------------------------------------------------------- Consolidated $1,197,747 -- $1,197,747 =======================================================================
Customer Intercompany 1994 Revenue Revenue Total - -------------------------------------------------------------------------- United States $ 288,732 $ 28,729 $ 317,461 Americas (Non-U.S.) 31,841 811 32,652 Far East North 303,161 68,161 371,322 Far East South 173,425 18,151 191,576 Europe 159,553 11,479 171,032 Other 7,396 31,016 38,412 Eliminations -- (158,347) (158,347) - -------------------------------------------------------------------------- Consolidated $ 964,108 -- $ 964,108 ==========================================================================
Net income by geographic area is as follows: 1996 1995 1994 - -------------------------------------------------------------------------------------- United States $ 43,773 $ 34,655 $ 30,020 Americas (Non-U.S.) 5,492 3,209 1,099 Far East North 41,592 50,623 40,083 Far East South 39,326 35,264 25,656 Europe 21,017 22,057 11,529 Other (5,208) (21,947) (13,362) Eliminations (406) 174 (173) - ----------------------------------------------------------------------------------------- Consolidated $ 145,586 $ 124,035 $ 94,852 ==========================================================================================
Identifiable assets by geographic area are as follows: 1996 1995 1994 - ------------------------------------------------------------------------------------ United States $ 475,207 $ 423,971 $ 357,261 Americas (Non-U.S.) 27,018 18,395 17,102 Far East North 440,438 543,557 447,384 Far East South 235,676 200,843 157,975 Europe 236,328 207,817 149,604 Other 68,830 68,062 40,218 Eliminations (22,498) (21,625) (31,027) - -------------------------------------------------------------------------------------- Consolidated $1,460,999 $1,441,020 $ 1,138,517 ======================================================================================
Intercompany net revenues are generally recorded at cost plus the normal mark-up charged to unaffiliated customers. Identifiable assets are those assets of the Company that are identified with operations in each country. During 1996, 1995 and 1994, the largest single customer accounted for less than 10% of consolidated net revenues. (11) ACQUISITIONS AND INVESTMENTS The Company periodically engages in the acquisition and/or divestiture of companies within the connector industry. These transactions have not been material to the financial position or results of operations of the Company, either individually or in the aggregate and therefore proforma financial data is not presented. On February 17, 1995, Molex acquired Mod-Tap W. Corp., a manufacturer of interconnection products and systems for data and voice communications, for 1.2 million shares of Molex Class A Common Stock and $9.3 million in cash. The transaction has been accounted for as a purchase and accordingly, the purchase price in excess of the fair value of the net assets acquired has been classified as goodwill and included in other assets in the accompanying consolidated balance sheet and is being amortized over 20 years. In fiscal 1996, 108,257 shares of Class A Common Stock were issued pursuant to the Mod-Tap W. Corp. acquisition. The majority owned investments have been accounted for as purchases. Operating results have been included in the financial statements from the date of acquisition and did not have a significant effect on consolidated operating results. The minority investments have been accounted for on the equity basis of accounting. p50 Molex 20
Fiscal 1996, 1995 and 1994 by Quarter (in thousands, except per share data-unaudited) Quarter 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------------- Net revenue 1st $ 338,176 $ 268,899 $ 233,244 2nd 344,483 274,961 224,896 3rd 347,065 305,755 238,568 4th 352,949 348,132 267,400 Gross profit 1st 136,878 115,475 96,861 2nd 136,938 116,466 94,196 3rd 138,294 127,697 100,103 4th 143,174 146,059 114,919 Income before income taxes and minority interest 1st 57,070 48,374 37,142 2nd 57,303 47,861 35,917 3rd 57,365 54,328 39,659 4th 57,215 63,929 46,759 Income taxes 1st 21,856 20,957 15,357 2nd 22,228 19,884 14,256 3rd 21,244 22,504 15,761 4th 17,972 26,928 17,812 Net income 1st 35,157 27,354 21,382 2nd 35,057 27,910 21,405 3rd 36,123 31,794 23,596 4th 39,249 36,977 28,469 Earnings per common share(1) 1st 0.35 0.28 0.22 2nd 0.35 0.28 0.21 3rd 0.36 0.31 0.24 4th 0.39 0.37 0.29 LOW HIGH LOW HIGH LOW HIGH - ------------------------------------------------------------------------------------------------------------------------- National Market System Price of Stock: Common Stock(1) 1st 30 51/64 36 5/8 24 28 1/8 19 3/8 24 1/2 2nd 30 1/2 37 24 3/4 28 3/4 20 3/8 23 3/8 3rd 27 1/4 36 1/4 24 3/4 29 1/8 21 1/2 24 5/8 4th 30 1/4 36 5/8 28 1/4 31 3/8 19 3/8 24 7/8 Class A Common Stock(1) 1st 29 34 1/2 23 26 1/4 17 5/8 22 3/8 2nd 29 34 1/4 22 3/4 27 18 7/8 22 1/4 3rd 27 3/4 34 3/4 23 5/8 27 3/4 20 7/8 23 1/2 4th 27 1/2 33 3/4 26 5/8 30 19 3/8 23 1/2 - ---------------------------------------------------------------------------------------------------------------------------- (1) Restated for the following 25% stock dividends: August, 1995; November, 1994.
p51 Molex EX-22 3 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT 22 - -------------------------------------------------------------------------------- REGISTRANT'S SUBSIDIARIES - ------------------------- The following list sets forth the subsidiaries of Registrant, the state or country of incorporation or organization of each, and the names under which the subsidiaries do business. All of the listed subsidiaries are included in the consolidated financial statements of the Registrant. Unless otherwise indicated, all the subsidiaries are wholly-owned by the Registrant either directly or indirectly through one or more intermediaries.
COMPANY NAME JURISDICTION OWNERSHIP - ------------ ------------ --------- Molex US Inc. Delaware, U.S.A. 100.0% Molex Caribe Inc. Delaware, U.S.A. 100.0% * Molex Electrical Systems Inc. Delaware, U.S.A. 100.0% Molex-ETC Inc. Delaware, U.S.A. 100.0% ETC Leasing Inc. Delaware, U.S.A. 100.0% Molex S.A. de C.V. Mexico 100.0% Molex International, Inc. Delaware, U.S.A. 100.0% Ulti-Mate, Inc. California, U.S.A. 100.0% Molex Overseas Inc. dba Molex Espana Delaware, U.S.A. 100.0% Molex Eletronica Ltda. Brazil 100.0% Molex da Amazonia Ltda. Brazil 100.0% Molex Electronics Ltd. Canada 100.0% Dongguan Molex South-China Connector Co. Ltd. China (P.R.C.) 90.0% Molex (Shanghai) Co., Ltd. China (P.R.C.) 95.0% G. Ostervig-Molex A/S Denmark 30.0% Molex Eastern Europe S.A. dba Molex France France 100.0% Decoupage Moulage De Savoie S.A. France 19.0% Molex Elektronik GmbH Germany 100.0% Molex Services GmbH Germany 100.0% Molex GmbH Germany 90.0% * Molex Hong Kong Ltd. Hong Kong 100.0% Molex Hong Kong/China Ltd. Hong Kong 100.0% Molex (India) Ltd. India 87.0% Molex Italia S.p.A. Italy 100.0% Zetronic S.p.A. Italy 49.0% Molex-Japan Co., Ltd. Japan 100.0% Molex (Malaysia) Sdn. Bhd. Malaysia 100.0% Molex de Mexico S.A. de C.V. Mexico 100.0% Molex B.V. Netherlands 100.0% Molex European Distribution Center B.V. Netherlands 100.0% COMPANY NAME JURISDICTION OWNERSHIP - ------------ ------------ --------- Molex - G. Knutsen A/S Norway 25.0% Molex Far East-South Management Pte. Ltd. Singapore 100.0% Molex Singapore Pte. Ltd. Singapore 100.0% MEC International Pte. Ltd. Singapore 30.0% Hi-P Tool & Die Pte.Ltd. Singapore 34.0% Moltes s.r.o. Slovak Republic 48.0% Sylex s.r.o. Slovak Republic 35.0% * Molex Property Holding Pty. Ltd. South Africa 100.0% Molex South Africa (Pty.) Ltd. South Africa 87.0% Molex Korea Co., Ltd. South Korea 100.0% * Suministro Iberico de Conexiones S.A. Spain 25.0% Molex Svenska A.B. Sweden 100.0% Molex Interconnect AG Switzerland 100.0% Molex Illinois S.A. Switzerland 100.0% Molex Ireland Ltd. Ireland 100.0% Smithstown Light Engineering Ltd. Ireland 50.0% * Molex Electronics (Ireland) Ltd. Ireland 100.0% Molex Taiwan Ltd. Taiwan (R.O.C.) 100.0% Land Win Electronic Corporation Taiwan (R.O.C.) 20.0% Molex (Thailand) Ltd. Thailand 94.75% Molex Electronics Ltd. United Kingdom 100.0% * Molex European Management Ltd. United Kingdom 100.0% * Molex Ltd. United Kingdom 100.0% Beta Phase, Inc. Delaware, U.S.A. 100.0% Molex Fiber Optics Inc. Illinois, U.S.A. 100.0% *Molex Alin International, Incorporated British Virgin Is. 100.0% Mod-Tap W Corp. Delaware, U.S.A. 100.0% Mod-Tap NA Corp. Massachusetts, U.S.A. 100.0% Mod-Tap System Europe SARL France 100.0% Mod-Tap Limited United Kingdom 100.0% Mod-Tap (Australia) Pty. Limited Delaware, U.S.A. 100.0% Mod-Tap GmbH Germany 100.0% Mod-Tap Japan Limited Delaware, U.S.A. 100.0% Mod-Tap Far East Limited Delaware, U.S.A. 100.0% Mod-Tap Sp. z.o.o. Poland 100.0%
- ----------------- *Inactive company EX-24 4 INDEPENDENT AUDITOR'S CONSENT 1 EXHIBIT 24 INDEPENDENT AUDITORS CONSENT We consent to the incorporation by reference in Registration Statements (File Nos. 33-9737, 33-9738, 33-1138, 2-87344, 2-79949, 2-74447, 2-71557, 33-32055 and 33-37683) of Molex Incorporated and its subsidiaries on Form S-8 of our reports dated July 25, 1996, appearing in and incorporated by reference in this Annual Report on Form 10-K of Molex Incorporated and its subsidiaries for the year ended June 30, 1996. /s/ Deloitte & Touche LLP Chicago, Illinois September 27, 1996 EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MOLEX ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS YEAR JUN-30-1996 JUN-30-1996 1 242,779 39,883 282,241 (12,566) 147,612 734,589 1,292,897 (679,772) 1,460,999 275,182 7,450 0 0 5,251 1,126,020 1,460,999 1,382,673 1,382,673 827,389 339,007 2,114 0 (10,562) 228,953 83,300 145,653 0 0 0 145,586 1.45 1.45
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