UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission File Number 0-7491
MOLEX INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 36-2369491
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2222 Wellington Court, Lisle, Illinois 60532
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 630-969-4550
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date (applicable only to corporate
registrants). At March 31, 2002:
Common Stock 99,454,747 shares
Class A Common Stock 93,974,024 shares
Class B Common Stock 94,255 shares
MOLEX INCORPORATED
FORM 10-Q
MARCH 31, 2002
INDEX
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Condensed Consolidated Balance Sheets -- 2
March 31, 2002 and June 30, 2001
Condensed Consolidated Statements of Income -- 3
Three and Nine Months Ended March 31, 2002 and 2001
Condensed Consolidated Statements of Cash Flows -- 4
Nine Months Ended March 31, 2002 and 2001
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 16
PART II - OTHER INFORMATION 17
-1-
MOLEX INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In thousands)
ASSETS March 31, June 30,
2002 2001
_________ _________
CURRENT ASSETS:
Cash and cash equivalents $ 229,692 $ 138,438
Marketable securities 14,165 69,394
Accounts receivable - net 355,806 415,798
Inventories 176,089 213,637
Other current assets 51,077 54,598
Total current assets 826,829 891,865
PROPERTY, PLANT AND EQUIPMENT - NET 1,035,775 1,092,567
GOODWILL 157,529 156,697
OTHER ASSETS 57,382 72,498
$2,077,515 $2,213,627
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 133,095 $ 178,035
Accrued expenses 116,788 148,934
Other current liabilities 12,029 47,137
Total current liabilities 261,912 374,106
DEFERRED ITEMS 8,806 8,398
ACCRUED POSTRETIREMENT BENEFITS 41,523 37,660
LONG-TERM DEBT 14,852 19,351
OBLIGATIONS UNDER CAPITAL LEASES 4,401 6,114
MINORITY INTEREST 2,388 2,358
SHAREHOLDERS' EQUITY
Common stock 10,618 10,597
Paid-in capital 306,283 289,683
Retained earnings 1,914,999 1,880,450
Treasury stock (341,646) (281,469)
Deferred unearned compensation (27,892) (28,407)
Cumulative translation and
other adjustments (118,729) (105,214)
Total shareholders' equity 1,743,633 1,765,640
$2,077,515 $2,213,627
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - In thousands except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
March 31, March 31,
2002 2001 2002 2001
NET REVENUE $408,307 $599,801 $1,255,220 $1,855,045
COST OF SALES 276,035 380,765 860,299 1,150,470
Gross Profit 132,272 219,036 394,921 704,575
OPERATING EXPENSES:
Selling 34,442 45,458 108,971 144,884
Administrative 72,654 90,826 219,064 288,936
Total Operating Expenses 107,096 136,284 328,035 433,820
Income from Operations 25,176 82,752 66,886 270,755
OTHER INCOME:
Impairment charge on investments
in other companies (2,570) - (12,570) (2,763)
Foreign currency transaction
gain/(loss) (22) 998 (302) 3,496
Interest income, net 1,148 1,094 4,046 4,203
Other income/(expense) 2,147 949 (809) 2,190
Total Other Income/(Loss) 703 3,041 (9,635) 7,126
INCOME BEFORE INCOME TAXES 25,879 85,793 57,251 277,881
INCOME TAX EXPENSE 6,196 25,058 8,108 84,790
NET INCOME $ 19,683 $ 60,735 $ 49,143 $ 193,091
EARNINGS PER COMMON SHARE:
BASIC $0.10 $0.31 $0.25 $0.99
DILUTED $0.10 $0.31 $0.25 $0.98
CASH DIVIDENDS PER COMMON SHARE $0.025 $0.025 $0.075 $0.075
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD: BASIC 194,034 195,360 194,636 195,491
DILUTED 195,793 197,380 196,231 197,763
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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MOLEX INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In thousands)
NINE MONTHS ENDED
March 31,
2002 2001
CASH AND CASH EQUIVALENTS, Beginning of Period $138,438 $164,288
CASH AND CASH EQUIVALENTS PROVIDED FROM (USED FOR):
Operations:
Net income 49,143 193,091
Add (deduct) non-cash items included in net income:
Depreciation and amortization 166,379 156,653
Amortization of deferred unearned compensation 8,501 7,621
Impairment charge on investments in other companies 12,570 2,763
Fixed asset write downs included in special charges 3,652 -
(Gain)/Loss on sale of property, plant and equipment 1,343 1,964
Deferred income taxes (883) 1,385
Other charges to net income (176) (1,941)
Current items:
Accounts receivable 57,108 (6,356)
Inventories 37,133 (35,402)
Other current assets 3,401 (4,578)
Accounts payable (41,938) (47,856)
Accrued expenses (20,284) 15,352
Other current liabilities (41,639) (21,547)
NET CASH PROVIDED FROM OPERATIONS 234,310 261,149
Investments:
Purchases of property, plant and equipment (127,013) (297,994)
Proceeds from sale of property, plant and equipment 1,252 2,247
Proceeds from sale of marketable securities 3,654,201 3,615,309
Purchases of marketable securities (3,598,972)(3,566,378)
(Increase)/decrease in other assets 12,818 (12,987)
NET CASH USED FOR INVESTMENTS (57,714) (259,803)
Financing:
Decrease in short-term loans (286) -
Increase in long-term debt 318 52
Decrease in long-term debt (4,818) (383)
Principal payments on capital leases (7,108) -
Cash dividends paid (14,620) (14,668)
Purchase of treasury stock (60,134) (31,136)
Reissuance of treasury stock 964 1,771
Exercise of stock options 4,412 7,113
NET CASH USED FOR FINANCING (81,272) (37,251)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (4,070) (8,820)
CASH AND CASH EQUIVALENTS, End of Period $229,692 $119,563
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- 4 -
MOLEX INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER AND NINE MONTHS ENDED MARCH 31, 2002 AND 2001
(1) Condensed Consolidated Financial Statements
The condensed consolidated financial statements have been prepared from the
Company's books and records without audit and are subject to year-end
adjustments. The interim financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of
information for the interim periods presented. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Molex Incorporated 2001
Annual Report to Shareholders and the 2001 Annual Report on Form 10-K. The
results of operations for the interim periods should not be considered
indicative of results to be expected for the full year.
(2) Earnings per Common Share
The reconciliation of common shares outstanding to dilutive common shares
outstanding is as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
2002 2001 2002 2001
Weighted average shares
outstanding - basic 194,034 195,360 194,636 195,491
Dilutive effect of
stock options 1,759 2,020 1,595 2,272
Weighted average shares
outstanding - diluted 195,793 197,380 196,231 197,763
(3) Comprehensive Income
Comprehensive income includes all non-shareowner changes in equity and consists
of net income, foreign currency translation adjustments and unrealized gains
and losses on available-for-sale securities. Total comprehensive income, in
thousands of dollars, is as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
2002 2001 2002 2001
Net income $ 19,683 $ 60,735 $49,143 $193,091
Currency translation and
other adjustments (2,765) (43,519) (13,515) (93,962)
Total comprehensive income $ 16,918 $ 17,216 $35,628 $ 99,129
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4) Inventories
Inventories are valued at the lower of first-in, first-out cost or market.
Inventories, in thousands of dollars, consist of the following:
March 31, June 30,
2002 2001
Raw Materials $ 24,766 $ 33,729
Work in Process 71,264 87,776
Finished Goods 80,059 92,132
$176,089 $213,637
(5) Segment and Related Information
The Company and its subsidiaries operate in one product segment: the
manufacture and sale of electrical components. Management operates the
business by geographic segments. Information by geographic area is summarized
in the following table:
As of and Inter-
for the Nine Customer company Total Net Identifiable
Months Ended: Revenue Revenue Revenue Income Assets
March 31, 2002
United States $ 492,572 $ 58,078 $ 550,650 $ 12,090 $ 963,452
Americas (Non-US) 6,612 10,517 17,129 (202) 74,648
Far East North 255,520 90,317 345,837 24,207 449,290
Far East South 275,348 37,484 312,832 35,046 381,836
Europe 225,121 20,152 245,273 1,045 396,950
Corporate and Other 47 - 47 (23,043) 82,251
Eliminations - (216,548) (216,548) - (270,912)
Total $1,255,220 $ - $1,255,220 $ 49,143 $2,077,515
March 31, 2001
United States $ 773,370 $ 97,324 $ 870,694 $ 91,052 $1,007,931
Americas (Non-US) 55,807 10,955 66,762 (434) 57,990
Far East North 396,474 139,357 535,831 64,612 514,283
Far East South 317,994 45,476 363,470 43,988 348,359
Europe 311,332 42,898 354,230 22,471 416,850
Corporate and Other 68 - 68 (28,598) 152,202
Eliminations - (336,010) (336,010) - (257,225)
Total $1,855,045 $ - $1,855,045 $ 193,091 $2,240,390
- 6 -
6) Other items
During the second quarter of fiscal 2002, the Company recorded a pretax charge
of $34.2 million ($25.3 million, net of tax benefit of $8.9 million) comprised
of $18.7 million to reflect costs associated with a further reduction in the
global work force of approximately 800 people, $10.0 million to reflect the
lower current value of investments in other companies, and $5.5 million of
asset write down costs related to operations being closed. Of the approximately
800 people included in the work force reduction, approximately 400 were
directly involved in manufacturing operations and approximately 400 were
involved in sales and administrative positions. Employment reductions of
approximately 600 occurred during the second quarter of fiscal 2002, resulting
in cash payments of $5.7 million. The remaining employment reductions will
occur during the second half of fiscal 2002, and severance payments will
continue for up to a year for certain individuals.
Pretax charges of $7.1 million were recorded in cost of sales, $15.6 million
in selling, general and administrative expenses, and $11.5 million in other
expenses. The charges relating to asset and investment write downs were
credited to the respective items on the balance sheet, and the unpaid amounts
relating to employment reductions were included in accrued expenses.
During the fourth quarter of fiscal 2001, the Company recorded a charge to
reflect costs associated with a reduction in the global work force of
approximately 950 people, write-off of slow-moving and excess inventories and
asset write-offs related to operations being closed.
Pretax charges recorded in the fourth quarter of fiscal 2001 totaled $43.5
million ($30.3 million, net of tax benefit of $13.2 million) of which $16.4
million were recorded in cost of sales and $27.1 million in selling, general
and administrative expenses.
- 7 -
The major components of the fiscal 2001 fourth quarter and fiscal 2002 second
quarter charges, and the remaining accrual balance as of March 31, 2002 were
as follows:
Accrued
June December Cash Assets Balance at
2001 2001 Payments Disposed March 31,
(In thousands) Charge Charge Made and Other 2002
_______________ _________ _________ _________ _________ _________
Severance and other
benefits $27,690 $18,675 ($27,438) ($ 3,201) $15,726
Inventory write-offs 12,714 - - (12,714) -
Asset write-offs 3,043 15,483 - (14,984) 3,542
_________ _________ _________ _________ _________
Total $43,447 $34,158 ($27,438) ($30,899) $19,268
In addition, during the second quarter of fiscal 2002, a one time positive tax
planning adjustment related to operations being closed of $5.0 million was
recorded.
7) New accounting pronouncements
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 141, "Business Combinations" as of July 1, 2001. This statement requires
the use of the purchase method of accounting for all business combinations,
thereby eliminating use of the pooling-of-interests method. The Company has
always used the purchase method when accounting for past business combinations
and thus no change in procedures will be required going forward.
The Company has also adopted SFAS No. 142, "Goodwill and Other Intangible
Assets" as of July 1, 2001. This statement changes the accounting for
intangible assets and goodwill, which are no longer amortized unless, in the
case of intangible assets, the asset has a finite life. Goodwill and
intangible assets with indefinite lives are now subject to an annual
impairment test. Upon adoption, an initial testing of impairment is required.
The required initial benchmark evaluation was performed as of July 1, 2001
resulting in no impairment in the value of the Company's goodwill and other
intangible assets.
- 8 -
Comparative information on prior periods as if goodwill had not been amortized
in those periods is as follows:
For the Quarter For the Nine Months
Ended March 31, Ended March 31,
(In thousands except
for EPS amounts) 2002 2001 2002 2001
Reported net income $ 19,683 $60,735 $49,143 $193,091
Add back: Goodwill amortization - 2,561 - 7,497
Adjusted net income $ 19,683 $63,296 $49,143 $200,588
Basic earnings per share:
Reported net income $ 0.10 $ 0.31 $ 0.25 $ 0.99
Goodwill amortization - 0.01 - 0.04
Adjusted net income $ 0.10 $ 0.32 $ 0.25 $ 1.03
Diluted earnings per share:
Reported net income $ 0.10 $ 0.31 $ 0.25 $ 0.98
Goodwill amortization - 0.01 - 0.03
Adjusted net income $ 0.10 $ 0.32 $ 0.25 $ 1.01
On August 16, 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 143, "Accounting for Asset Retirement Obligations". This pronouncement
addresses the recognition and remeasurement of obligations associated with
the retirement of tangible long-lived assets. On October 3, 2001, the FASB
issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", which addresses accounting and reporting for the impairment or
disposal of long-lived assets, including discontinued operations. It
establishes a single accounting model for long-lived assets to be disposed of
by sale. Both statements will be effective for the Company's fiscal year
beginning July 1, 2002. The Company is evaluating SFAS No. 143 and SFAS
No. 144 to determine their impact on the consolidated financial statements.
8) Subsequent event
On April 30, 2002, Sheldahl, Inc. filed a voluntary petition for Chapter 11
reorganization with the US Bankruptcy Court and indicated its intention to sell
substantially all of its assets as part of the reorganization. Sheldahl is a
supplier to the Company and the Company currently holds subordinated, secured
and unsecured notes receivable from Sheldahl. The Company also has invested in
the common and preferred shares of Sheldahl in previous years.
- 9 -
Over the past two fiscal years, the Company has recognized the deteriorating
financial position of Sheldahl and has recorded impairment charges against its
cost-basis investment whenever management believed that its investment in
Sheldahl had permanently declined in value. At this time, the Company is
unable to determine what impact, if any, the bankruptcy filing by Sheldahl will
have on the recoverability of the Sheldahl subordinated secured and unsecured
notes receivable that it holds or its remaining investment in Sheldahl. However,
in the event of a liquidation of Sheldahl, the Company feels the previously
recorded impairment charges and the remaining security position it holds are
such that liquidation of Sheldahl would not have a material effect on the
Company's financial statements.
Subsequent to the bankruptcy filing, the Company has provided Sheldahl with
$500,000 of debtor-in-posession financing. In addition, the bankruptcy filing
indicated that the Company along with two other Sheldahl investors may try to
acquire the assets of Sheldahl as part of the reorganization.
- 10 -
MOLEX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net revenues were $408.3 million for the quarter ended March 31,
2002, down 31.9 percent in US dollars and 29.8 percent in local currencies over
the same period last year. For the nine months ended March 31, 2002, net
revenues were $1.26 billion compared with $1.86 billion in the corresponding
period last year, declining 32.3 percent in US dollars and 30.3 percent in
local currencies. The strengthening of the US dollar compared with other
currencies caused a decrease in net revenues to $12.8 million and $37.3 million
for the quarter and year-to-date periods, respectively.
Net revenue in the Americas region was down 38.6 percent in both US dollars
and local currencies from the prior year quarter while year-to-date net
revenue declined 39.7 percent in both US dollars and local currencies compared
with a strong prior year period. The telecom infrastructure and fiber optics
markets have been challenging throughout this fiscal year. However, the
increased level of bookings seen in several other markets of this region drives
our expectations of sequential improvements going forward.
Quarterly net revenue in the Far East North decreased 33.5 percent in US
dollars and 26.6 percent in local currencies compared to the prior year. For
the nine months ended March 31, 2002, revenue declined 35.5 percent in US
dollars and 28.2 percent in local currencies from last year. Although
business conditions have been extremely difficult in this region during the
fiscal year, we are seeing improvements in the level of orders in the telecom
and data infrastructure markets.
Far East South net revenue for the quarter was down 7.8 percent in US dollars
and 5.4 percent in local currencies from the prior year. For the year-to-date
period, revenue declined 13.8 percent in US dollars and 11.5 percent in local
currencies from last year. While this region has been impacted by the slowing
in global demand for technology products throughout the fiscal year, results
are improving due to proactive cost control, customers moving manufacturing to
the region, and a recent strength in demand experienced in the personal
computer, computer-peripheral and mobile products markets.
- 11 -
In Europe, net revenue decreased 37.8 percent in US dollars and 35.3 percent in
local currencies from the prior year quarter. For the nine months ended
March 31, 2002, the revenue decline from the comparable prior year period was
31.8 percent in US dollars and 31.4 percent in local currencies. The region
shows signs of improvement based upon the level of new orders during the
quarter, but at a slower rate due to the continued low demand in the telecom
infrastructure market that has impacted the region during this fiscal year.
For the nine months ended March 31, 2002, 60.8 percent of Molex's worldwide
net revenue was generated from its international operations. International
operations are subject to currency fluctuations and government actions. Molex
monitors its currency exposure in each country and continues to implement
defensive strategies to respond to changing economic environments. Due to the
uncertainty of the foreign exchange markets, Molex cannot reasonably predict
future trends related to foreign currency fluctuations. Foreign currency
fluctuations have impacted results in the past and may impact results in the
future.
During the second quarter of fiscal 2002, the Company recorded a pretax charge
of $34.2 million ($25.3 million, net of tax benefit of $8.9 million) comprised
of $18.7 million to reflect costs associated with a further reduction in the
global work force of approximately 800 people, $10.0 million to reflect the
lower current value of investments in other companies, and $5.5 million of
asset write down costs related to operations being closed.
Gross profit as a percent of net revenue was 32.4 percent for the quarter
ended March 31, 2002 compared with 36.5 percent last year. For the nine months
ended March 31, 2002, the gross profit percentage was 31.5 percent, down from
38.0 percent in the prior year period. The fiscal 2002 nine-month gross profit
margin includes $7.1 million of the second quarter charge taken primarily due
to costs from the manufacturing related employment reductions. Gross profit
margin is also down due to higher depreciation expenses and under utilization
of factory capacity as a result of reduced demand. For the nine-month period,
depreciation expenses as a percent of net revenue were 12.9 percent compared
with 8.0 percent last year. The impact from price erosion and a change in the
product mix toward lower margin products was also a factor in the reduction of
gross profit.
Selling and administrative expenses were $107.1 million and $328.0 million,
respectively, for the quarter and nine month period ended March 31, 2002 as
compared with $136.3 million and $433.8 million, respectively, for the
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corresponding periods in the prior year. As a percent of net revenue, selling
and administrative expenses for the quarter were 26.2 percent compared with
22.7 percent in the prior year, and for the year-to-date periods were 26.1
percent compared with 23.4 percent in the prior year. The year-to-date
increase is mainly due to the inclusion in selling and administrative
expenses of $15.7 million of the second quarter charge related to employment
reductions in selling and administrative areas. Excluding the second quarter
charge, selling and administrative expenses as a percent of net revenue for
the year-to-date period were 24.9 percent. Also included in selling and
administrative expenses are research and development expenditures, which for
both the quarter and nine months ended March 31, 2002, increased as a percent
of net revenue to 6.7 percent from 5.7 percent in both respective prior year
periods.
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No.142, "Goodwill and Other Intangible Assets" as of July 1, 2001. This
statement changes the accounting for intangible assets and goodwill, which are
no longer amortized unless, in the case of intangible assets, the asset has a
finite life. Goodwill amortization included in selling, general and
administrative expenses for the three and nine months ended March 31, 2001
was $2.6 million and $7.5 million, respectively.
The Company recorded a $2.6 million impairment charge on certain
available-for-sale securities during the third quarter of fiscal 2002 based on
depressed market values which are expected to be permanent.
The foreign currency loss for the nine months ended March 31, 2002 includes
$1.4 million related to the recognition of accumulated foreign currency losses
for operations being closed.
Interest income, net of interest expense, was $1.1 million in both quarters
ended March 31, 2002 and March 31, 2001 and was $4.0 million for the nine
months ended March 31, 2002 as compared with $4.2 million a year ago.
The effective tax rate was 24.0% for the quarter ended March 31, 2002 compared
with 29.0 percent in the prior year period and was 14.1 percent for the nine
month period compared with 30.4 percent last year. The rate for the nine-month
period was affected by a $5.0 million one time tax benefit related to
operations being closed as a result of the fiscal 2002 second quarter charge.
For the nine-month period, this tax benefit and the tax impact of the second
quarter charge reduced the effective tax rate by almost ten percentage
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points. In addition to the impact of the positive tax adjustment, the reduction
in the effective tax rate versus the prior year was a result of a change in the
mix of the Company's pretax earnings from higher rate jurisdictions in which
the Company operates to lower rate jurisdictions, principally in the Far East
South, as well as the ongoing global effort to reduce its income tax burden
through a disciplined repatriation strategy and better planning.
Net income for the quarter was $19.7 million or 10 cents per basic and diluted
share, compared with $60.7 million or 31 cents per basic and diluted share for
the same quarter last fiscal year. Net income for the nine months ended March
31, 2002 was $49.1 million or 25 cents per basic and diluted share, as compared
with net income of $193.1 million or 99 cents per basic and 98 cents per
diluted share, for the same period in the prior year. Currency translation
decreased net income by $0.8 million for the quarter and by $3.1 million for
the nine-month period.
The change in comprehensive income in Note 3 is almost entirely due to foreign
currency translation adjustments. During the quarter and nine months ended
March 31, 2002, the US dollar was weaker versus the Japanese yen when compared
with the prior year. This impact was partially offset by a slightly stronger
Euro currency in the nine-month period.
LIQUIDITY AND CAPITAL RESOURCES
Molex continues to maintain a strong financial position, funding capital
projects and working capital needs principally out of operating cash flow and
cash reserves, while maintaining a relatively low level of debt. Working
capital at March 31, 2002 was $564.9 million, compared with $517.8 million at
June 30, 2001.
Net cash provided from operations was down from the prior year due to lower net
income offset by a $94.2 million change in working capital. Accounts
receivable and inventories were lower due to the reduced sales activity when
compared with the prior year.
Net cash used for investments was $57.7 million compared with $259.8 million
last year. Capital expenditures were $127.0 million, down from the prior year
total of $298.0 million. Molex plans to invest approximately $170 million in
capital expenditures and approximately $111 million in research and development
during the fiscal year ending June 30, 2002.
- 14 -
Net cash used for financing activities was $81.3 million compared with $37.3
million in the prior period. During the nine months ended March 31, 2002, the
Company purchased an aggregate of 2,237,000 shares of treasury stock at an
aggregate cost of $60.1 million. This is in accordance with authorization by
the Board of Directors allowing for the purchase of up to $100 million of
Company stock during the current fiscal year. The Company also reduced
outstanding debt by $4.8 million and had principal payments on capital leases
of $7.1 million.
Management believes that the Company's current liquidity and financial
flexibility are adequate to support its continued growth based upon the
current cash balances relative to the projected capital spending, stock buyback
authorization and low level of debt.
OUTLOOK
While the Company is seeing positive signs of economic recovery in the
industry, that visibility is limited and so the outlook for the remainder of
fiscal 2002 remains cautious. Molex is actively managing its costs and has
significantly improved its overall cost structure through the actions it has
taken over the past three quarters. New product development remains a high
priority this fiscal year. Molex's global team has considerable experience
in managing through difficult market conditions and is focused on maintaining
profitability while developing the new products necessary to expand its market
share. The Company continues to emphasize expansion in rapidly growing
industry segments, product lines and geographic regions. Molex remains
committed to providing high quality products and a full range of services to
its customers worldwide.
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.
FORWARD LOOKING STATEMENT
This document contains various forward looking statements. Statements that are
not historical are forward looking statements and are subject to various risks
and uncertainties which could cause actual results to vary materially from those
stated. Such risks and uncertainties include: economic conditions in various
regions, product and price competition, raw material prices,
- 15 -
foreign currency exchange rates, technology changes, patent issues, litigation
results, legal and regulatory developments, and other risks and uncertainties
described in documents filed with the Securities and Exchange Commission.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk associated with changes in foreign
currency exchange rates, interest rates and certain commodity prices. The
Company mitigates its foreign currency exchange rate risk principally through
the establishment of local production facilities in the markets it serves and
invoicing of customers in the same currency as the source of the products.
Molex also monitors its foreign currency exposure in each country and
implements strategies to respond to changing economic and political
environments. Examples of these strategies include the prompt payment of
intercompany balances utilizing a global netting system, the establishing of
contra-currency accounts in several international subsidiaries, development of
natural hedges and occasional use of foreign exchange contracts.
A formalized treasury risk management policy has been implemented by the
Company which describes the procedures and controls over derivative financial
and commodity instruments. Under the policy, the Company does not use
derivative financial or commodity instruments for trading purposes and the use
of such instruments are subject to strict approval levels by senior officers.
Typically, the use of such derivative instruments is limited to hedging
activities related to specific foreign currency cash flows. The Company's
exposure related to such transactions is, in the aggregate, not material to
the Company's financial position, results of operations and cash flows.
Interest rate exposure is principally limited to the $14.2 million of
marketable securities owned by the Company and the Company's $14.9 million of
long-term debt. The securities are debt instruments which generate interest
income for the Company on temporary excess cash balances. The Company does not
actively manage the risk of interest rate fluctuations on the marketable
securities. However, such risk is mitigated by the relatively short term,
less than twelve months, nature of these investments. The Company's long-term
debt is generally at fixed rates and primarily consists of bank loans and
mortgages. The company does not enter into derivative transactions (i.e.
interest rate swaps) with respect to its long-term debt as the current interest
expense on this debt is not deemed material to operations.
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Part II - Other Information
Items 1-6. Not Applicable
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S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MOLEX INCORPORATED
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(Registrant)
Date May 13, 2002 /s/ ROBERT B. MAHONEY
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Robert B. Mahoney
Corporate Vice President,
Treasurer and
Chief Financial Officer
Date May 13, 2002 /s/ LOUIS A. HECHT
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Louis A. Hecht
Corporate Secretary and
General Counsel
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