UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
|
|
þ
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
|
For the Quarterly Period Ended
March 31, 2008
|
|
|
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
|
For the transition period
from
to
|
Commission File Number 0-7491
MOLEX INCORPORATED
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
(State or other jurisdiction of
incorporation or organization)
|
|
36-2369491
(I.R.S. Employer
Identification No.)
|
2222 Wellington Court, Lisle, Illinois 60532
(Address of principal executive offices)
Registrants 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
þ
No
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company. See definition of large
accelerated filer, accelerated filer and
smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated filer
þ
|
|
Accelerated
filer
o
|
|
Non-accelerated
filer
o
(Do not check if a smaller
reporting company)
|
|
Smaller reporting
company
o
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act). Yes
o
No
þ
On April 25, 2008, the following numbers of shares of the Companys common stock were outstanding:
|
|
|
|
|
Common Stock
|
|
|
98,606,672
|
|
Class A Common Stock
|
|
|
79,782,456
|
|
Class B Common Stock
|
|
|
94,255
|
|
1
Molex Incorporated
INDEX
2
PART I
Item 1. Financial Statements
Molex Incorporated
Condensed Consolidated Balance Sheets
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
453,854
|
|
|
$
|
378,361
|
|
Marketable securities
|
|
|
38,361
|
|
|
|
82,549
|
|
Accounts receivable, less allowances of $40,970 and $31,064, respectively
|
|
|
746,705
|
|
|
|
685,666
|
|
Inventories
|
|
|
457,974
|
|
|
|
392,680
|
|
Other current assets
|
|
|
57,766
|
|
|
|
51,571
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,754,660
|
|
|
|
1,590,827
|
|
Property, plant and equipment, net
|
|
|
1,191,337
|
|
|
|
1,121,369
|
|
Goodwill
|
|
|
373,451
|
|
|
|
334,791
|
|
Other assets
|
|
|
315,782
|
|
|
|
269,121
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,635,230
|
|
|
$
|
3,316,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
309,634
|
|
|
$
|
279,847
|
|
Accrued expenses
|
|
|
210,162
|
|
|
|
187,890
|
|
Other current liabilities
|
|
|
149,421
|
|
|
|
63,214
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
669,217
|
|
|
|
530,951
|
|
Other non-current liabilities
|
|
|
26,105
|
|
|
|
25,612
|
|
Accrued pension and postretirement benefits
|
|
|
118,890
|
|
|
|
108,693
|
|
Long-term debt
|
|
|
155,689
|
|
|
|
127,821
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
969,901
|
|
|
|
793,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
11,077
|
|
|
|
11,020
|
|
Paid-in capital
|
|
|
553,386
|
|
|
|
520,037
|
|
Retained earnings
|
|
|
2,752,450
|
|
|
|
2,650,470
|
|
Treasury stock
|
|
|
(973,968
|
)
|
|
|
(799,894
|
)
|
Accumulated other comprehensive income
|
|
|
322,384
|
|
|
|
141,398
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,665,329
|
|
|
|
2,523,031
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
3,635,230
|
|
|
$
|
3,316,108
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
3
Molex Incorporated
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Net revenue
|
|
$
|
822,285
|
|
|
$
|
807,014
|
|
|
$
|
2,456,455
|
|
|
$
|
2,474,026
|
|
Cost of sales
|
|
|
567,824
|
|
|
|
556,026
|
|
|
|
1,712,729
|
|
|
|
1,695,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
254,461
|
|
|
|
250,988
|
|
|
|
743,726
|
|
|
|
778,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
167,639
|
|
|
|
162,471
|
|
|
|
493,973
|
|
|
|
496,463
|
|
Restructuring costs and asset impairments
|
|
|
6,399
|
|
|
|
|
|
|
|
16,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
174,038
|
|
|
|
162,471
|
|
|
|
510,259
|
|
|
|
496,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
80,423
|
|
|
|
88,517
|
|
|
|
233,467
|
|
|
|
282,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
|
|
|
4,462
|
|
|
|
1,699
|
|
|
|
7,241
|
|
|
|
5,308
|
|
Interest income, net
|
|
|
2,044
|
|
|
|
2,080
|
|
|
|
6,964
|
|
|
|
6,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
6,506
|
|
|
|
3,779
|
|
|
|
14,205
|
|
|
|
11,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
86,929
|
|
|
|
92,296
|
|
|
|
247,672
|
|
|
|
293,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
36,623
|
|
|
|
26,978
|
|
|
|
84,846
|
|
|
|
85,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
50,306
|
|
|
$
|
65,318
|
|
|
$
|
162,826
|
|
|
$
|
208,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.28
|
|
|
$
|
0.36
|
|
|
$
|
0.90
|
|
|
$
|
1.13
|
|
Diluted
|
|
$
|
0.28
|
|
|
$
|
0.35
|
|
|
$
|
0.89
|
|
|
$
|
1.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share
|
|
$
|
0.1125
|
|
|
$
|
0.0750
|
|
|
$
|
0.3375
|
|
|
$
|
0.2250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
179,385
|
|
|
|
183,985
|
|
|
|
181,260
|
|
|
|
183,922
|
|
Diluted
|
|
|
180,086
|
|
|
|
185,271
|
|
|
|
182,156
|
|
|
|
185,591
|
|
See accompanying notes to condensed consolidated financial statements.
4
Molex Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
162,826
|
|
|
$
|
208,046
|
|
Add non-cash items included in net income:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
184,675
|
|
|
|
177,138
|
|
Share-based compensation
|
|
|
18,539
|
|
|
|
19,616
|
|
Other non-cash items
|
|
|
3,568
|
|
|
|
4,763
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
12,604
|
|
|
|
24,488
|
|
Inventories
|
|
|
(22,540
|
)
|
|
|
(29,724
|
)
|
Accounts payable
|
|
|
(6,179
|
)
|
|
|
(56,396
|
)
|
Other current assets and liabilities
|
|
|
8,915
|
|
|
|
(64,444
|
)
|
Other assets and liabilities
|
|
|
(9,551
|
)
|
|
|
(8,233
|
)
|
|
|
|
|
|
|
|
Cash provided from operating activities
|
|
|
352,857
|
|
|
|
275,254
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(163,440
|
)
|
|
|
(219,435
|
)
|
Proceeds from sales of property, plant and equipment
|
|
|
11,417
|
|
|
|
3,891
|
|
Proceeds from sales or maturities of marketable securities
|
|
|
843,493
|
|
|
|
4,449,264
|
|
Purchases of marketable securities
|
|
|
(798,921
|
)
|
|
|
(4,349,497
|
)
|
Acquisitions
|
|
|
(42,503
|
)
|
|
|
(237,207
|
)
|
Other investing activities
|
|
|
(9,733
|
)
|
|
|
3,575
|
|
|
|
|
|
|
|
|
Cash used for investing activities
|
|
|
(159,687
|
)
|
|
|
(349,409
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from revolving credit facility
|
|
|
65,000
|
|
|
|
44,000
|
|
Payments on revolving credit facility
|
|
|
|
|
|
|
(44,000
|
)
|
Proceeds from issuance of long-term debt
|
|
|
|
|
|
|
131,045
|
|
Payments of long-term debt
|
|
|
(1,705
|
)
|
|
|
(26,570
|
)
|
Cash dividends paid
|
|
|
(54,557
|
)
|
|
|
(41,382
|
)
|
Exercise of stock options
|
|
|
8,534
|
|
|
|
7,967
|
|
Purchase of treasury stock
|
|
|
(166,199
|
)
|
|
|
(19,967
|
)
|
Other financing activities
|
|
|
(900
|
)
|
|
|
384
|
|
|
|
|
|
|
|
|
Cash (used for) provided by financing activities
|
|
|
(149,827
|
)
|
|
|
51,477
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
32,150
|
|
|
|
9,437
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
75,493
|
|
|
|
(13,241
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
378,361
|
|
|
|
332,815
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
453,854
|
|
|
$
|
319,574
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
Molex Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
Molex Incorporated (together with its subsidiaries, except where the context otherwise
requires, we, us, and our) manufactures electronic components, including electrical and fiber
optic interconnection products and systems, switches and integrated products in 61 plants in 19
countries.
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance
with accounting principles generally accepted in the United States (GAAP) for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments consisting of normal recurring accruals
considered necessary for a fair statement of results for the interim period have been included.
Operating results for the three months ended March 31, 2008 are not necessarily an indication of
the results that may be expected for the year ending June 30, 2008. The Condensed Consolidated
Balance Sheet as of June 30, 2007 was derived from our audited consolidated financial statements
for the year ended June 30, 2007. These financial statements and related notes should be read in
conjunction with the financial statements and notes thereto included in our Annual Report on Form
10-K for the year ended June 30, 2007.
The preparation of the unaudited financial statements in conformity with GAAP requires the use
of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses
and related disclosures. Significant estimates and assumptions are used in the estimation of
income taxes, pension and retiree health care benefit obligations, stock options, allowances for
accounts receivable and inventory and impairment reviews for goodwill, intangible and other
long-lived assets. Estimates are revised periodically. Actual results could differ from these
estimates.
2. Restructuring Costs and Asset Impairments
During fiscal 2007, we undertook a restructuring plan designed to reduce costs and to improve
return on invested capital as a result of a new global organization that was effective July 1,
2007. A majority of the plan relates to facilities located in North America and Europe and in
general, the movement of manufacturing activities at these plants to other facilities. Net
restructuring cost during the quarter ended March 31, 2008 was $6.4 million, resulting in
cumulative costs since we announced the restructuring of $53.2 million. We expect to incur total
restructuring and asset impairment costs related to these actions ranging from $100 to $125
million, of which the impact on each segment will be determined as the actions become more certain.
Management and the Board of Directors approved several actions related to this plan. A portion of
this plan involves cost savings or other actions that do not result in incremental expense, such as
better utilization of assets, reduced spending and organizational efficiencies. This plan includes
employee reduction targets throughout the company, and we expect to achieve these targets through
ongoing employee attrition and terminations. We expect to substantially complete the actions under
this plan by June 30, 2009.
6
The following table sets forth restructuring costs by segment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trans-
|
|
|
Custom &
|
|
|
Corporate
|
|
|
|
|
|
|
Connector
|
|
|
portation
|
|
|
Electrical
|
|
|
and Other
|
|
|
Total
|
|
Cumulative costs at June 30, 2007
|
|
$
|
3,492
|
|
|
$
|
5,914
|
|
|
$
|
12,206
|
|
|
$
|
15,257
|
|
|
$
|
36,869
|
|
Net restructuring costs during
the first quarter
|
|
|
500
|
|
|
|
528
|
|
|
|
426
|
|
|
|
1,175
|
|
|
|
2,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative costs at Sept. 30, 2007
|
|
$
|
3,992
|
|
|
$
|
6,442
|
|
|
$
|
12,632
|
|
|
$
|
16,432
|
|
|
$
|
39,498
|
|
Net restructuring costs during
the second quarter
|
|
|
1,254
|
|
|
|
954
|
|
|
|
(1,107
|
)
|
|
|
6,157
|
|
|
|
7,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative costs at Dec. 31, 2007
|
|
$
|
5,246
|
|
|
$
|
7,396
|
|
|
$
|
11,525
|
|
|
$
|
22,589
|
|
|
$
|
46,756
|
|
Net restructuring costs during
the third quarter
|
|
|
43
|
|
|
|
1,002
|
|
|
|
2,638
|
|
|
|
2,716
|
|
|
|
6,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative costs at March 31, 2008
|
|
$
|
5,289
|
|
|
$
|
8,398
|
|
|
$
|
14,163
|
|
|
$
|
25,305
|
|
|
$
|
53,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The cumulative change in the accrued severance balance related to restructuring charges is
summarized as follows (in thousands):
|
|
|
|
|
Balance at June 30, 2007
|
|
$
|
32,165
|
|
Cash payments
|
|
|
(8,059
|
)
|
Charges to expense
|
|
|
3,295
|
|
Non-cash related costs
|
|
|
(323
|
)
|
|
|
|
|
Balance at September 30, 2007
|
|
$
|
27,078
|
|
Cash payments
|
|
|
(4,700
|
)
|
Charges to expense
|
|
|
8,706
|
|
Non-cash related costs
|
|
|
(364
|
)
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
30,720
|
|
Cash payments
|
|
|
(10,500
|
)
|
Charges to expense
|
|
|
5,257
|
|
Non-cash related costs
|
|
|
(462
|
)
|
|
|
|
|
Balance at March 31, 2008
|
|
$
|
25,015
|
|
|
|
|
|
The accrued severance balance includes $3.7 million related to eliminating redundant costs and
improving efficiencies in operations in connection with the acquisition of Woodhead Industries,
Inc. on August 9, 2006. Additionally, $3.0 million remains in the accrued severance balance related
to a restructuring plan announced in fiscal 2005 that was substantially complete as of June 30,
2006.
3. Acquisition
On July 19, 2007, we completed the acquisition of a U.S.-based company in an all cash
transaction approximating $42.5 million. We recorded goodwill of $24.4 million in connection with
this acquisition. The purchase price allocation for this acquisition is preliminary and subject to
revision as more detailed analyses are completed and additional information about the fair value of
assets and liabilities becomes available.
7
4. Earnings Per Share
A reconciliation of the basic average common shares outstanding to diluted average common
shares outstanding is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Basic average common shares outstanding
|
|
|
179,385
|
|
|
|
183,985
|
|
|
|
181,260
|
|
|
|
183,922
|
|
Effect of dilutive stock options
|
|
|
701
|
|
|
|
1,286
|
|
|
|
896
|
|
|
|
1,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average common shares outstanding
|
|
|
180,086
|
|
|
|
185,271
|
|
|
|
182,156
|
|
|
|
185,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Comprehensive Income
Total comprehensive income is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Net income
|
|
$
|
50,306
|
|
|
$
|
65,318
|
|
|
$
|
162,826
|
|
|
$
|
208,046
|
|
Translation adjustments
|
|
|
88,758
|
|
|
|
21,851
|
|
|
|
172,559
|
|
|
|
47,750
|
|
Unrealized investment gain
|
|
|
1,942
|
|
|
|
(535
|
)
|
|
|
8,427
|
|
|
|
4,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
141,006
|
|
|
$
|
86,634
|
|
|
$
|
343,812
|
|
|
$
|
260,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Inventories
Inventories are valued at the lower of first-in, first-out cost or market. Inventories, net
of allowances, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
Raw materials
|
|
$
|
71,503
|
|
|
$
|
85,320
|
|
Work in process
|
|
|
144,433
|
|
|
|
107,394
|
|
Finished goods
|
|
|
242,038
|
|
|
|
199,966
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
457,974
|
|
|
$
|
392,680
|
|
|
|
|
|
|
|
|
8
7. Pensions and Other Postretirement Benefits
The components of pension benefit cost are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Service cost
|
|
$
|
2,346
|
|
|
$
|
2,057
|
|
|
$
|
7,037
|
|
|
$
|
6,185
|
|
Interest cost
|
|
|
2,148
|
|
|
|
1,700
|
|
|
|
6,443
|
|
|
|
5,082
|
|
Expected return on plan assets
|
|
|
(2,533
|
)
|
|
|
(1,723
|
)
|
|
|
(7,598
|
)
|
|
|
(5,137
|
)
|
Amortization of prior service cost
|
|
|
53
|
|
|
|
55
|
|
|
|
159
|
|
|
|
169
|
|
Recognized actuarial losses
|
|
|
85
|
|
|
|
45
|
|
|
|
255
|
|
|
|
135
|
|
Amortization of transition obligation
|
|
|
10
|
|
|
|
10
|
|
|
|
31
|
|
|
|
30
|
|
Curtailment adjustment
|
|
|
|
|
|
|
|
|
|
|
(5,444
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit cost
|
|
$
|
2,109
|
|
|
$
|
2,144
|
|
|
$
|
883
|
|
|
$
|
6,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the nine months ended March 31, 2008, we recognized a $2.3 million reduction in
selling, general and administrative expense due to a curtailment adjustment. The curtailment
adjustment resulted from the freezing of benefits in a defined benefit plan after the participants
transferred to another plan without credit for prior service. Separately, we also recognized a $3.1
million reduction in restructuring costs resulting from a curtailment adjustment for the early
termination of participants in connection with the ongoing restructuring plan.
The components of retiree health care benefit cost are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Service cost
|
|
$
|
767
|
|
|
$
|
587
|
|
|
$
|
2,291
|
|
|
$
|
1,740
|
|
Interest cost
|
|
|
815
|
|
|
|
662
|
|
|
|
2,434
|
|
|
|
1,963
|
|
Amortization of prior service cost
|
|
|
(175
|
)
|
|
|
(170
|
)
|
|
|
(523
|
)
|
|
|
(504
|
)
|
Recognized actuarial losses
|
|
|
330
|
|
|
|
278
|
|
|
|
986
|
|
|
|
823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit cost
|
|
$
|
1,737
|
|
|
$
|
1,357
|
|
|
$
|
5,188
|
|
|
$
|
4,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Long-Term Debt
Long-term debt of $155.7 million as of March 31, 2008 consists principally of two unsecured
borrowing agreements approximating 15 billion Japanese yen ($150.4 million). The
agreements have three-year terms with weighted-average fixed interest rates of approximately 1.3%.
Interest on the loans is payable semi-annually with the principal due in September 2009.
9. Income Taxes
The effective tax rate was 42.1% and 34.3% for the three and nine months ended March 31, 2008,
respectively, and was 29.2% for the three and nine months ended March 31, 2007. During the three
months ended March 31, 2008, we recorded an income tax charge of $10.5 million due to lower actual
than estimated 2007 foreign tax credits and a lowered estimate of 2008 foreign tax credits. In
addition, the effective tax rate for the first three quarters of fiscal 2008 is higher than the
prior year period due to our anticipation of greater earnings during fiscal year 2008 in countries
with tax rates that are higher relative to the fiscal year 2007 earnings mix.
9
We adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No.
48, Accounting for the Uncertainty in Income Taxes an interpretation of FASB Statement No.
109, (FIN 48) effective July 1, 2007. The adoption of FIN 48 did not have a material impact on our
statement of financial position or on results of operations
.
As of July 1, 2007, unrecognized tax benefits were $12.6 million, of which, $10.5 million
represents the amount of unrecognized tax benefits that, if recognized, would affect the effective
income tax rate. Due to the various jurisdictions in which we file income tax returns, it is
reasonably possible that there will be changes in the amount of unrecognized tax benefits over the
next twelve months but the amounts of these changes cannot be estimated. Changes in the amount of
unrecognized tax benefits in the three and nine months ended March 31, 2008 were not significant.
We are subject to tax in U.S. Federal, State and foreign tax jurisdictions. We have
substantially completed all U.S. federal income tax matters for tax years through 2001. The
examination of federal income tax returns for 2002 and 2003 has been completed and we expect to
receive the final report from the Internal Revenue Service during fiscal 2008. The tax years 2004
through 2007 remain open to examination by all other major taxing jurisdictions to which we are
subject.
It is our practice to recognize interest or penalties related to income tax matters in tax
expense. As of July 1, 2007, there were no material interest or penalty amounts to accrue.
10. New Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board (the FASB) issued Statement of
Financial Accounting Standards No. 141R, Business Combinations (SFAS 141R). SFAS 141R states that
acquisition-related costs are to be recognized separately from the acquisition and expensed as
incurred with restructuring costs being expensed in periods after the acquisition date. SFAS 141R
also states that business combinations will result in all assets and liabilities of the acquired
business being recorded at their fair values. We are required to adopt SFAS No. 141R effective
July 1, 2009. The impact of the adoption of SFAS No. 141R will depend on the nature and extent of
business combinations occurring on or after the effective date.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51 (SFAS
160). SFAS 160 requires identification and presentation of ownership interests in subsidiaries
held by parties other than us in the consolidated financial statements within the equity section
but separate from the equity. It also requires that (1) the amount of consolidated net income
attributable to the parent and to the noncontrolling interest be clearly identified and presented
on the face of the consolidated statement of income, (2) changes in ownership interest be accounted
for similarly, as equity transactions and (3) when a subsidiary is deconsolidated, any retained
noncontrolling equity investment in the former subsidiary and the gain or loss on the
deconsolidation of the subsidiary be measured at fair value. This statement is effective for us on
July 1, 2009. We are currently evaluating the requirements of SFAS 160 but do not expect it to
have a material impact on our financial statements.
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161,
Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement
No. 133 (SFAS 161). SFAS 161 requires enhanced disclosures about an entitys derivative and hedging
activities and thus improves the transparency of financial reporting. This statement is effective
for us on July 1, 2009. We are currently evaluating the requirements of SFAS 161 but do not expect
it to have a material impact on our financial statements.
10
11. Segments and Related Information
On July 1, 2007, we reorganized our operations, which changed the configuration of our
segments into the Connector, Transportation and Custom & Electrical segments. A summary of the
segments follows:
|
|
|
The Connector segment designs and manufactures products for high-speed,
high-density, high signal-integrity applications as well as fine-pitch, low-profile
connectors for the consumer and commercial markets.
|
|
|
|
|
The Transportation segment designs and manufactures products that withstand
environments such as heat, cold, dust, dirt, liquid and vibration for automotive
and other transportation applications.
|
|
|
|
|
The Custom & Electrical segment designs and manufactures integrated and
customizable electronic components across all industries that provide original,
differentiated solutions to customer requirements. It also leverages expertise in
the use of signal, power and interface technology in industrial automation and
other harsh environment applications.
|
Information by segment is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trans-
|
|
|
Custom &
|
|
|
Corporate
|
|
|
|
|
|
|
Connector
|
|
|
portation
|
|
|
Electrical
|
|
|
& Other
|
|
|
Total
|
|
For the three months ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
457,542
|
|
|
$
|
127,410
|
|
|
$
|
234,246
|
|
|
$
|
3,087
|
|
|
$
|
822,285
|
|
Income (loss) from operations
|
|
|
68,826
|
|
|
|
3,297
|
|
|
|
19,867
|
|
|
|
(11,567
|
)
|
|
|
80,423
|
|
Depreciation & amortization
|
|
|
41,128
|
|
|
|
9,613
|
|
|
|
8,454
|
|
|
|
4,123
|
|
|
|
63,318
|
|
Capital expenditures
|
|
|
32,853
|
|
|
|
13,419
|
|
|
|
2,754
|
|
|
|
11,997
|
|
|
|
61,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
458,678
|
|
|
$
|
125,685
|
|
|
$
|
219,239
|
|
|
$
|
3,412
|
|
|
$
|
807,014
|
|
Income (loss) from operations
|
|
|
85,646
|
|
|
|
27
|
|
|
|
13,698
|
|
|
|
(10,854
|
)
|
|
|
88,517
|
|
Depreciation & amortization
|
|
|
36,974
|
|
|
|
9,699
|
|
|
|
8,918
|
|
|
|
3,851
|
|
|
|
59,442
|
|
Capital expenditures
|
|
|
39,531
|
|
|
|
13,078
|
|
|
|
6,075
|
|
|
|
4,945
|
|
|
|
63,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
1,400,085
|
|
|
$
|
370,389
|
|
|
$
|
678,411
|
|
|
$
|
7,570
|
|
|
$
|
2,456,455
|
|
Income (loss) from operations
|
|
|
226,418
|
|
|
|
7,824
|
|
|
|
54,001
|
|
|
|
(54,776
|
)
|
|
|
233,467
|
|
Depreciation & amortization
|
|
|
118,236
|
|
|
|
29,004
|
|
|
|
26,119
|
|
|
|
11,316
|
|
|
|
184,675
|
|
Capital expenditures
|
|
|
91,977
|
|
|
|
30,033
|
|
|
|
11,717
|
|
|
|
29,713
|
|
|
|
163,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
1,441,829
|
|
|
$
|
344,366
|
|
|
$
|
673,790
|
|
|
$
|
14,041
|
|
|
$
|
2,474,026
|
|
Income (loss) from operations
|
|
|
290,441
|
|
|
|
877
|
|
|
|
46,722
|
|
|
|
(55,597
|
)
|
|
|
282,443
|
|
Depreciation & amortization
|
|
|
107,278
|
|
|
|
29,186
|
|
|
|
28,266
|
|
|
|
12,408
|
|
|
|
177,138
|
|
Capital expenditures
|
|
|
136,927
|
|
|
|
41,855
|
|
|
|
25,705
|
|
|
|
14,948
|
|
|
|
219,435
|
|
Corporate & other includes expenses primarily related to corporate operations that are not
allocated to segments such as executive management, human resources, legal, finance and information
technology. We also include in Corporate & other the assets of certain plants that are not specific
to a particular division.
11
Segment assets, which are comprised of accounts receivable, inventory and fixed assets, are
summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trans-
|
|
|
Custom &
|
|
|
Corporate
|
|
|
|
|
|
|
Connector
|
|
|
portation
|
|
|
Electrical
|
|
|
& Other
|
|
|
Total
|
|
March 31, 2008
|
|
$
|
1,320,211
|
|
|
$
|
410,797
|
|
|
$
|
494,573
|
|
|
$
|
170,435
|
|
|
$
|
2,396,016
|
|
June 30, 2007
|
|
|
1,167,163
|
|
|
|
407,034
|
|
|
|
454,730
|
|
|
|
170,788
|
|
|
|
2,199,715
|
|
The reconciliation of segment assets to consolidated total assets is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
Segment net assets
|
|
$
|
2,396,016
|
|
|
$
|
2,199,715
|
|
Other current assets
|
|
|
549,981
|
|
|
|
512,481
|
|
Non current assets
|
|
|
689,233
|
|
|
|
603,912
|
|
|
|
|
|
|
|
|
Consolidated total assets
|
|
$
|
3,635,230
|
|
|
$
|
3,316,108
|
|
|
|
|
|
|
|
|
Amounts for the three and nine months ended March 31, 2007 and as of June 30, 2007, were
recast to conform to the new organization structure. The recast data required the use of judgment
in determining certain allocations of expense and assets related to manufacturing facilities and
administrative services that are shared between segments.
12
Molex Incorporated
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated or the content otherwise requires, the terms we, us and our
and other similar terms in this Quarterly Report on Form 10-Q refer to Molex Incorporated and its
subsidiaries.
The following discussion and analysis should be read in conjunction with our condensed
consolidated financial statements and accompanying notes contained herein and our consolidated
financial statements and accompanying notes and managements discussion and analysis of results of
operations and financial condition contained in our Annual Report on Form 10-K for the fiscal year
ended June 30, 2007. This discussion and analysis contains forward-looking statements that involve
risks, uncertainties and assumptions. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors, including but not
limited to those described below under the heading Cautionary Statement Regarding Forward-Looking
Information.
Overview
Our core business is the manufacture and sale of electromechanical components. Our products
are used by a large number of leading original equipment manufacturers (OEMs) throughout the world.
We design, manufacture and sell more than 100,000 products including terminals, connectors, planar
cables, cable assemblies, interconnection systems, backplanes, integrated products and mechanical
and electronic switches in 61 plants in 19 countries. We also provide manufacturing services to
integrate specific components into a customers product.
On July 1, 2007, we reorganized our operations, which changed the configuration of our
segments into the Connector, Transportation and Custom & Electrical segments. A summary of the
segments follows:
|
|
|
The Connector segment designs and manufactures products for high-speed,
high-density, high signal-integrity applications as well as fine-pitch, low-profile
connectors for the consumer and commercial markets.
|
|
|
|
|
The Transportation segment designs and manufactures products that withstand
environments such as heat, cold, dust, dirt, liquid and vibration for automotive
and other transportation applications.
|
|
|
|
|
The Custom & Electrical segment designs and manufactures integrated and
customizable electronic components across all industries that provide original,
differentiated solutions to customer requirements. It also leverages expertise in
the use of signal, power and interface technology in industrial automation and
other harsh environment applications.
|
In connection with our reorganization, we undertook a multi-year restructuring plan in fiscal
2007 designed to reduce costs and to improve return on invested capital as a result of a new global
organization that was effective July 1, 2007. A majority of the plan relates to the movement of
manufacturing activities within facilities located in North America and Europe and activities from
North America and Europe to Asia.
Net restructuring cost during the quarter ended March 31, 2008 was $6.4 million, resulting in
cumulative costs since we announced the restructuring of $53.2 million. We expect to incur
restructuring and asset impairment costs related to these actions ranging from $100 to $125
million, of which the impact on each segment will be determined as the actions become more certain.
Management and the Board of Directors approved several actions related to this plan. A portion of
this plan involves cost savings or other actions that do not result in incremental expense, such as
better utilization of assets, reduced spending and organizational efficiencies. This plan includes
employee reduction targets throughout the company, and we expect to achieve these targets through
ongoing employee attrition and terminations. See Note 2 of the Notes to the Condensed Consolidated
Financial Statements for further discussion.
13
Our financial results are influenced by factors in the markets in which we operate and by our
ability to successfully execute our business strategy. Marketplace factors include competition for
customers, raw material prices, product and price competition, economic conditions in various
geographic regions, foreign currency exchange rates, interest rates, changes in technology,
fluctuations in customer demand, patent and intellectual property issues, litigation results and
legal and regulatory developments. We expect that the marketplace environment will remain highly
competitive. Our ability to execute our business strategy successfully will require that we meet a
number of challenges, including our ability to accurately forecast sales demand and calibrate
manufacturing to such demand, manage rising raw material costs, develop, manufacture and
successfully market new and enhanced products and product lines, control operating costs, and
attract, motivate and retain key personnel to manage our operational, financial and management
information systems.
Critical Accounting Policies and Estimates
This discussion and analysis of financial condition and results of operations is based on our
condensed consolidated financial statements, which have been prepared in conformity with accounting
principles generally accepted in the United States. The preparation of these financial statements
requires the use of estimates and assumptions related to the reporting of assets, liabilities,
revenues, expenses and related disclosures. In preparing these financial statements, we have made
our best estimates and judgments of certain amounts included in the financial statements. Estimates
are revised periodically. Actual results could differ from these estimates.
Except for the July 1, 2007 accounting change described below, the information concerning our
critical accounting policies can be found under Managements Discussion of Financial Condition and
Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2007
filed with the Securities and Exchange Commission, which is incorporated by reference in this Form
10-Q.
Income Taxes
As a result of the implementation of Financial Accounting Standards Board (FASB)
interpretation No. 48, Accounting for the Uncertainty in Income Taxes an interpretation of FASB
Statement No. 109 (FIN 48), effective July 1, 2007, we recognize liabilities for uncertain tax
positions based on the two-step process prescribed within the interpretation. The first step is to
evaluate the tax position for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step requires us to
estimate and measure the tax benefit as the largest amount that is more than 50% likely to be
realized upon ultimate settlement. It is inherently difficult and subjective to estimate such
amounts, as this requires us to determine the probability of various possible outcomes. We
re-evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors
including, but not limited to, changes in facts or circumstances, changes in tax law, effectively
settled issues under audit and new audit activity. Such a change in recognition or measurement
would result in the recognition of a tax benefit or an additional charge to the tax provision in
the period.
14
Results of Operations
The following table sets forth consolidated statements of income data as a percentage of net
revenue for the three months ended March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
Percentage
|
|
|
|
2008
|
|
|
of Revenue
|
|
|
2007
|
|
|
of Revenue
|
|
Net revenue
|
|
$
|
822,285
|
|
|
|
100.0
|
%
|
|
$
|
807,014
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
567,824
|
|
|
|
69.1
|
%
|
|
|
556,026
|
|
|
|
68.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
254,461
|
|
|
|
30.9
|
%
|
|
|
250,988
|
|
|
|
31.1
|
%
|
|
|
|
|
|
Selling, general & administrative
|
|
|
167,639
|
|
|
|
20.4
|
%
|
|
|
162,471
|
|
|
|
20.1
|
%
|
Restructuring costs and asset impairments
|
|
|
6,399
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
80,423
|
|
|
|
9.8
|
%
|
|
|
88,517
|
|
|
|
11.0
|
%
|
|
|
|
|
|
Other income, net
|
|
|
6,506
|
|
|
|
0.8
|
%
|
|
|
3,779
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
86,929
|
|
|
|
10.6
|
%
|
|
|
92,296
|
|
|
|
11.5
|
%
|
Income taxes
|
|
|
36,623
|
|
|
|
4.5
|
%
|
|
|
26,978
|
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
50,306
|
|
|
|
6.1
|
%
|
|
$
|
65,318
|
|
|
|
8.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth consolidated statements of income data as a percentage of
net revenue for the nine months ended March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
Percentage
|
|
|
|
2008
|
|
|
of Revenue
|
|
|
2007
|
|
|
of Revenue
|
|
Net revenue
|
|
$
|
2,456,455
|
|
|
|
100.0
|
%
|
|
$
|
2,474,026
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
1,712,729
|
|
|
|
69.7
|
%
|
|
|
1,695,120
|
|
|
|
68.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
743,726
|
|
|
|
30.3
|
%
|
|
|
778,906
|
|
|
|
31.5
|
%
|
|
|
|
|
|
Selling, general & administrative
|
|
|
493,973
|
|
|
|
20.1
|
%
|
|
|
496,463
|
|
|
|
20.1
|
%
|
Restructuring costs and asset impairments
|
|
|
16,286
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
233,467
|
|
|
|
9.5
|
%
|
|
|
282,443
|
|
|
|
11.4
|
%
|
|
|
|
|
|
Other income, net
|
|
|
14,205
|
|
|
|
0.6
|
%
|
|
|
11,477
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
247,672
|
|
|
|
10.1
|
%
|
|
|
293,920
|
|
|
|
11.9
|
%
|
Income taxes
|
|
|
84,846
|
|
|
|
3.5
|
%
|
|
|
85,874
|
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
162,826
|
|
|
|
6.6
|
%
|
|
$
|
208,046
|
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue
We sell our products in five primary markets. The estimated change in revenue from each
market during the third fiscal quarter of 2008 compared with the same quarter last year (Comparable
Quarter) and the second quarter of 2008 (Sequential Quarter) follows:
|
|
|
|
|
|
|
|
|
|
|
Comparable
|
|
|
Sequential
|
|
|
|
Quarter
|
|
|
Quarter
|
|
Consumer
|
|
|
1.7
|
%
|
|
|
(7.6)
|
%
|
Telecommunications
|
|
|
5.7
|
|
|
|
0.4
|
|
Automotive
|
|
|
5.4
|
|
|
|
3.6
|
|
Data
|
|
|
8.7
|
|
|
|
(5.3
|
)
|
Industrial
|
|
|
(18.4
|
)
|
|
|
(1.0
|
)
|
The automotive market increased both quarter-over-quarter and sequentially due to higher
demand in Europe and Asia. Increases in the automotive market are also due to new products
reflecting higher electronic content in automobiles and an increase in revenue of our standard
products to traditional customers. We
15
believe that the number of automobiles manufactured by our customers during the first nine
months of fiscal 2008 is lower than the number in the same period last year; however, our customers
have trended toward reducing their vendor list, which when coupled with the higher electronic
content used in new automobiles, has resulted in an increase in our market share. The data market
increased 8.7% over the prior year period due to our customers releases of new high end products
and their expansion in new optical and high speed technologies, for which we offer a strong product
line. Storage networking is our best performing sector in the data market. Both data and consumer
displayed their normal seasonal pattern of being down sequentially from December. Comparable
quarter growth in telecommunications was primarily related to the infrastructure sector. The
industrial market declined 18.4% due largely to a cable assembly product that had high revenue
levels in the comparable quarter but little revenue in the current quarter because our customer was
enhancing their product. The lower revenue was also a result of the divestiture of a subsidiary of
Woodhead Industries, Inc. (Woodhead), acquired August 9, 2006, that had revenue of $4.5 million
during the comparable quarter.
The following table shows the percentage of our net revenue by geographic region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Americas
|
|
|
27
|
%
|
|
|
29
|
%
|
|
|
28
|
%
|
|
|
28
|
%
|
Northern Asia
|
|
|
16
|
|
|
|
15
|
|
|
|
15
|
|
|
|
15
|
|
Southeast Asia and Australia
|
|
|
36
|
|
|
|
34
|
|
|
|
37
|
|
|
|
37
|
|
Europe
|
|
|
21
|
|
|
|
22
|
|
|
|
20
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides an analysis of the change in net revenue compared with the
prior fiscal year periods (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Mar. 31, 2008
|
|
|
Mar. 31, 2008
|
|
Net revenue for prior year period
|
|
$
|
807,014
|
|
|
$
|
2,474,026
|
|
Components of net revenue increase (decrease):
|
|
|
|
|
|
|
|
|
Organic net revenue decline
|
|
|
(35,838
|
)
|
|
|
(122,018
|
)
|
Currency translation
|
|
|
51,109
|
|
|
|
104,447
|
|
|
|
|
|
|
|
|
Total change in net revenue from prior year period
|
|
|
15,271
|
|
|
|
(17,571
|
)
|
|
|
|
|
|
|
|
Net revenue for current year period
|
|
$
|
822,285
|
|
|
$
|
2,456,455
|
|
|
|
|
|
|
|
|
Organic net revenue decline as a percentage of
net revenue for prior year period
|
|
|
(4.4
|
)%
|
|
|
(4.9
|
)%
|
The general weakening of the U.S. dollar increased revenue by approximately $51.1
million for the third quarter of fiscal 2008 over the prior year period. The following tables show
the effect on the change in geographic net revenue from foreign currency translations to the U.S.
dollar (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2008
|
|
|
Nine Months Ended March 31, 2008
|
|
|
|
Local
|
|
|
Currency
|
|
|
Net
|
|
|
Local
|
|
|
Currency
|
|
|
Net
|
|
|
|
Currency
|
|
|
Translation
|
|
|
Change
|
|
|
Currency
|
|
|
Translation
|
|
|
Change
|
|
Americas
|
|
$
|
(12,433
|
)
|
|
$
|
1,184
|
|
|
$
|
(11,249
|
)
|
|
$
|
(36,416
|
)
|
|
$
|
2,777
|
|
|
$
|
(33,639
|
)
|
Northern Asia
|
|
|
(4,333
|
)
|
|
|
12,535
|
|
|
|
8,202
|
|
|
|
(1,431
|
)
|
|
|
13,243
|
|
|
|
11,812
|
|
Southeast Asia and Australia
|
|
|
(1,619
|
)
|
|
|
16,346
|
|
|
|
14,727
|
|
|
|
(44,990
|
)
|
|
|
38,975
|
|
|
|
(6,015
|
)
|
Europe
|
|
|
(18,959
|
)
|
|
|
21,044
|
|
|
|
2,085
|
|
|
|
(42,914
|
)
|
|
|
49,452
|
|
|
|
6,538
|
|
Corporate & other
|
|
|
1,506
|
|
|
|
|
|
|
|
1,506
|
|
|
|
3,733
|
|
|
|
|
|
|
|
3,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change
|
|
$
|
(35,838
|
)
|
|
$
|
51,109
|
|
|
$
|
15,271
|
|
|
$
|
(122,018
|
)
|
|
$
|
104,447
|
|
|
$
|
(17,571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
The change in revenue on a local currency basis was as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2008
|
|
Americas
|
|
|
(5.3
|
)%
|
|
|
(5.2
|
)%
|
Northern Asia
|
|
|
(3.6
|
)
|
|
|
(0.4
|
)
|
Southern Asia and Australia
|
|
|
(0.6
|
)
|
|
|
(4.9
|
)
|
Europe
|
|
|
(10.9
|
)
|
|
|
(8.8
|
)
|
|
|
|
|
|
|
|
Total
|
|
|
(4.4
|
)%
|
|
|
(4.9
|
)%
|
|
|
|
|
|
|
|
The following table sets forth information on revenue by segment as of the three months
ended March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
Percentage
|
|
|
|
2008
|
|
|
of Revenue
|
|
|
2007
|
|
|
of Revenue
|
|
Connector
|
|
$
|
457,542
|
|
|
|
55.6
|
%
|
|
$
|
458,678
|
|
|
|
56.8
|
%
|
Transportation
|
|
|
127,410
|
|
|
|
15.5
|
|
|
|
125,685
|
|
|
|
15.6
|
|
Custom & Electrical
|
|
|
234,246
|
|
|
|
28.5
|
|
|
|
219,239
|
|
|
|
27.2
|
|
Corporate & Other
|
|
|
3,087
|
|
|
|
0.4
|
|
|
|
3,412
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
822,285
|
|
|
|
100.0
|
%
|
|
$
|
807,014
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth information on revenue by segment as of the nine months
ended March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
Percentage
|
|
|
|
2008
|
|
|
of Revenue
|
|
|
2007
|
|
|
of Revenue
|
|
Connector
|
|
$
|
1,400,085
|
|
|
|
57.0
|
%
|
|
$
|
1,441,829
|
|
|
|
58.3
|
%
|
Transportation
|
|
|
370,389
|
|
|
|
15.1
|
|
|
|
344,366
|
|
|
|
13.9
|
|
Custom & Electrical
|
|
|
678,411
|
|
|
|
27.6
|
|
|
|
673,790
|
|
|
|
27.2
|
|
Corporate & Other
|
|
|
7,570
|
|
|
|
0.3
|
|
|
|
14,041
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,456,455
|
|
|
|
100.0
|
%
|
|
$
|
2,474,026
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
The following table provides a summary of gross profit and gross margin for the three and nine
months ended March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Gross profit
|
|
$
|
254,461
|
|
|
$
|
250,988
|
|
|
$
|
743,726
|
|
|
$
|
778,906
|
|
Gross margin
|
|
|
30.9
|
%
|
|
|
31.1
|
%
|
|
|
30.3
|
%
|
|
|
31.5
|
%
|
The reduction in gross margin was primarily due to higher commodity cost and price erosion
partially offset by general cost reductions, a portion of which is related to restructuring
activities. Commodity costs were higher during the three and nine months ended March 31, 2008
compared with the prior year periods primarily due to an increase in gold prices. Gold prices
during the current quarter, which averaged $925 per troy ounce, increased 42% compared with the
prior year quarter. For the nine-month period, the average gold price of $796 per troy ounce
increased 27% compared with the prior year period. We mitigated the impact of the increase in gold
prices by hedging approximately 40% of our gold purchases.
17
In addition to commodity costs, the increase (decrease) of certain other significant impacts
on gross profit compared with the prior year periods was as follows for the three and nine months
ended March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Mar. 31, 2008
|
|
|
Mar. 31, 2008
|
|
Price erosion
|
|
$
|
(30,356
|
)
|
|
|
(108,676
|
)
|
Currency translation
|
|
|
14,909
|
|
|
|
30,524
|
|
Currency transaction
|
|
|
(6,417
|
)
|
|
|
(5,971
|
)
|
Certain products that we manufacture in Japan and Europe are sold in other regions of the
world at selling prices primarily denominated in or closely linked to the U.S. dollar. As a
result, changes in currency exchange rates may affect our cost of sales reported in U.S. dollars
without a corresponding effect on net revenue. The decrease in gross profit due to currency
transactions was primarily due to a general weakening of the U.S. dollar against other currencies
during the three and nine months ended March 31, 2008.
Operating Expenses
Operating expenses were as follows as of March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Selling, general and administrative
|
|
$
|
167,639
|
|
|
$
|
162,471
|
|
|
$
|
493,973
|
|
|
$
|
496,463
|
|
Selling, general and administrative
as a percentage of revenue
|
|
|
20.4
|
%
|
|
|
20.1
|
%
|
|
|
20.1
|
%
|
|
|
20.1
|
%
|
Restructuring costs and asset impairments
|
|
$
|
6,399
|
|
|
$
|
|
|
|
|
$16,286
|
|
|
$
|
|
|
Selling, general and administrative expenses increased as a percent of net revenue over the
prior year quarter primarily due to the impact of a $3.8 million foreign currency transaction loss
in the current quarter. The impact of currency translation increased selling, general and
administrative expenses by approximately $11.1 million and $22.2 million for the three and nine
months ended March 31, 2008, respectively, as compared with the prior year periods. These increases
were offset by lower costs resulting from restructuring activities.
Research and development expenditures, which are classified as selling, general and
administrative expense, were approximately 5.1% and 4.9% of net revenue for the nine months ended
March 31, 2008 and 2007, respectively.
Restructuring costs during the nine months ended March 31, 2008 included $14.2 million for
employee termination benefits and $2.1 million for asset impairments. This expense primarily
relates to actions taken during the second and third quarters of fiscal 2008 to reduce selling,
general and administrative expense in the corporate office.
Effective Tax Rate
The effective tax rate was 42.1% and 34.3% for the three and nine months ended March 31, 2008,
respectively, and was 29.2% for the three and nine months ended March 31, 2007. During the three
months ended March 31, 2008, we recorded an income tax charge of $10.5 million due to lower actual
than estimated 2007 foreign tax credits and a lowered estimate of 2008 foreign tax credits. In
addition, the effective tax rate for the first three quarters of fiscal 2008 is higher than the
prior year period due to our anticipation of greater earnings during fiscal year 2008 in countries
with tax rates that are higher relative to the fiscal year 2007 earnings mix.
18
Backlog
Our order backlog on March 31, 2008 was approximately $460.7 million compared with $345.9
million at March 31, 2007. Backlog increased due to orders received in the telecommunications and
data markets and foreign currency translation. Foreign currency translation increased the backlog
by $31.6 million compared with March 31, 2007. Orders for the third quarter of fiscal 2008 were
$897.9 million compared with $782.8 million for the prior year period. Orders increased due to an
increase in the telecommunications market and foreign currency translation. Foreign currency
translation increased orders by $52.9 million.
Segments
Connector
The following table provides an analysis of the change in net revenue compared with the prior
fiscal year (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Mar. 31, 2008
|
|
|
Mar. 31, 2008
|
|
Net revenue for prior year period
|
|
$
|
458,678
|
|
|
$
|
1,441,829
|
|
Components of net revenue increase (decrease):
|
|
|
|
|
|
|
|
|
Organic net revenue decline
|
|
|
(31,163
|
)
|
|
|
(98,389
|
)
|
Currency translation
|
|
|
30,027
|
|
|
|
56,645
|
|
|
|
|
|
|
|
|
Total change in net revenue from prior year period
|
|
|
(1,136
|
)
|
|
|
(41,744
|
)
|
|
|
|
|
|
|
|
Net revenue for current year period
|
|
$
|
457,542
|
|
|
$
|
1,400,085
|
|
|
|
|
|
|
|
|
Organic net revenue decline as a percentage of
net revenue for prior year period
|
|
|
(6.8
|
)%
|
|
|
(6.8
|
)%
|
The Connector segment sells primarily to the telecommunication, data products and
consumer markets, which are discussed above. Segment revenue was down in the third quarter of
fiscal 2008 with currency translation offsetting an organic revenue decline. Organic revenue
declined in the three and nine months ended March 31, 2008, compared with the prior year period
primarily due to lower revenue in the mobile sector of the telecommunications market and high-end
computer sector of the data market. Additionally, price erosion is generally higher in the
Connector segment compared with our other segments, particularly in the mobile business.
The following table provides information on income from operations and operating margins for
the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Income from operations
|
|
$
|
68,826
|
|
|
$
|
85,646
|
|
|
$
|
226,418
|
|
|
$
|
290,441
|
|
Operating margin
|
|
|
15.0
|
%
|
|
|
18.7
|
%
|
|
|
16.2
|
%
|
|
|
20.1
|
%
|
Connector segment operating income decreased compared with the prior year periods due to lower
organic revenue, price erosion and higher raw material cost. Most of the price erosion that we
experienced was in the connector division.
19
Transportation
The following table provides an analysis of the change in net revenue compared with the prior
fiscal year (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Mar. 31, 2008
|
|
|
Mar. 31, 2008
|
|
Net revenue for prior year period
|
|
$
|
125,685
|
|
|
$
|
344,366
|
|
Components of net revenue increase (decrease):
|
|
|
|
|
|
|
|
|
Organic net revenue (decline) growth
|
|
|
(6,879
|
)
|
|
|
7,857
|
|
Currency translation
|
|
|
8,604
|
|
|
|
18,166
|
|
|
|
|
|
|
|
|
Total change in net revenue from prior year period
|
|
|
1,725
|
|
|
|
26,023
|
|
|
|
|
|
|
|
|
Net revenue for current year period
|
|
$
|
127,410
|
|
|
$
|
370,389
|
|
|
|
|
|
|
|
|
Organic net revenue (decline) growth as a percentage of
net revenue for prior year period
|
|
|
(5.5
|
)%
|
|
|
2.3
|
%
|
Transportation segment revenue increased in fiscal 2008 due to an increase in the
automotive market revenue discussed above. Revenue for the current quarter was negatively impacted
by $7.5 million due to a workers strike at one of our customers.
The following table provides information on income from operations and operating margins for
the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Income from operations
|
|
$
|
3,297
|
|
|
$
|
27
|
|
|
$
|
7,824
|
|
|
$
|
877
|
|
Operating margin
|
|
|
2.6
|
%
|
|
|
|
|
|
|
2.1
|
%
|
|
|
0.3
|
%
|
Segment operating income increased in the three months ended March 31, 2008 compared with the
same period last year due to higher gross margins resulting from cost reductions in connection with
the restructuring activities that began in June 2007. Segment operating income increased in the
nine months ended March 31, 2008, compared with the same period last year due to the increase in
revenue, a more efficient use of capacity in fiscal 2008 and cost reductions in connection with the
restructuring activities. Capacity utilization improved due to completion of the transition of
manufacturing operations that was ongoing during the first half of fiscal 2007.
20
Custom & Electrical
The following table provides an analysis of the change in net revenue compared with the prior
fiscal year (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Mar. 31, 2008
|
|
|
Mar. 31, 2008
|
|
Net revenue for prior year period
|
|
$
|
219,239
|
|
|
$
|
673,790
|
|
Components of net revenue increase (decrease):
|
|
|
|
|
|
|
|
|
Organic net revenue growth (decline)
|
|
|
2,739
|
|
|
|
(24,580
|
)
|
Currency translation
|
|
|
12,268
|
|
|
|
29,201
|
|
|
|
|
|
|
|
|
Total change in net revenue from prior year period
|
|
|
15,007
|
|
|
|
4,621
|
|
|
|
|
|
|
|
|
Net revenue for current year period
|
|
$
|
234,246
|
|
|
$
|
678,411
|
|
|
|
|
|
|
|
|
Organic net revenue growth (decline) as a percentage of
net revenue for prior year period
|
|
|
1.2
|
%
|
|
|
(3.6
|
)%
|
Custom and Electrical organic segment revenue declined year-to-date in fiscal 2008 due to
the decline in the industrial market discussed above. A current year acquisition contributed $5.1
million and $14.1 million to the quarter and year-to-date revenue, respectively, offset by a
divestiture in the third quarter of fiscal 2007 that had comparable revenue during the same prior
year periods.
The following table provides information on income from operations and operating margins for
the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Income from operations
|
|
$
|
19,867
|
|
|
$
|
13,698
|
|
|
$
|
54,001
|
|
|
$
|
46,722
|
|
Operating margin
|
|
|
8.5
|
%
|
|
|
6.2
|
%
|
|
|
8.0
|
%
|
|
|
6.9
|
%
|
Segment operating income increased during the third quarter and year-to-date periods of fiscal
2008 compared with the respective prior year periods primarily due to
an increase in revenue in the telecommunications sector. Operating income also increased during the year-to-date
period due to efficiencies achieved with the Woodhead integration.
Non-GAAP Financial Measures
Organic net revenue growth, which is included in the discussion above, is a non-GAAP financial
measure. The difference between reported net revenue growth (the most directly comparable GAAP
financial measure) and organic net revenue growth (the non-GAAP measure) consists of the impact
from acquisitions and foreign currency exchange rates. Organic net revenue growth is a useful
measure which we use to measure the underlying results and trends in our business. It excludes
items that are not completely under managements control, such as the impact of changes in foreign
currency exchange rates, and items that do not reflect the underlying growth of the company, such
as acquisition activity.
We believe organic net revenue growth provides useful information to investors because it
reflects the underlying growth from the ongoing activities of our business. Furthermore, it
provides investors with a view of our operations from managements perspective. We use organic net
revenue growth to monitor and evaluate performance, as it is an important measure of the underlying
results of our operations. Management uses organic net revenue growth together with GAAP measures
such as net revenue growth and operating income in its decision making processes related to the
operations of our reporting segments and our overall company. We believe that investors benefit
from having access to the same financial measures that management uses in evaluating operations.
The discussion and analysis of organic net revenue growth in Results of Operations above utilizes
organic net revenue growth as management does internally. Because organic net revenue growth
21
calculations may vary among other companies, organic net revenue growth amounts presented
above may not be comparable with similarly titled measures of other companies. Organic net revenue
growth is a non-GAAP financial measure that is not meant to be considered in isolation or as a
substitute for GAAP measures. The limitation of this measure is that it excludes items that have an
impact on our net sales. This limitation is best addressed by using net revenue growth in
combination with our U.S. GAAP net revenue. The tables presented in Results of Operations above
provide reconciliations of U.S. GAAP reported net revenue growth to organic net revenue growth.
Financial Condition and Liquidity
Our financial position remains relatively strong and we continue to fund capital projects and
working capital needs principally out of operating cash flows and cash reserves. Cash, cash
equivalents and marketable securities totaled $492.2 million and $461.0 million at March 31, 2008
and June 30, 2007, respectively, of which $458.3 million was in non-U.S. accounts as of March 31,
2008. Transferring cash, cash equivalents or marketable securities to U.S. accounts from non-U.S.
accounts could subject us to additional U.S. repatriation income tax. The primary source of our
cash flow is cash generated by operations. Principal uses of cash are capital expenditures, share
repurchases, dividend payments and business investments. Our long-term financing strategy is
principally to rely on internal sources of funds for investing in plant, equipment and
acquisitions, although we may elect to leverage our strong balance sheet with debt financing. We
believe that our liquidity and financial flexibility are adequate to support both current and
future growth. Long-term debt at March 31, 2008 totaled $155.7 million.
Cash Flows
Below is a table setting forth the key lines of our Consolidated Statements of Cash Flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Cash provided from operating activities
|
|
$
|
352,857
|
|
|
$
|
275,254
|
|
Cash used for investing activities
|
|
|
(159,687
|
)
|
|
|
(349,409
|
)
|
Cash (used for) provided by financing activities
|
|
|
(149,827
|
)
|
|
|
51,477
|
|
Effect of exchange rate changes on cash
|
|
|
32,150
|
|
|
|
9,437
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
$
|
75,493
|
|
|
$
|
(13,241
|
)
|
|
|
|
|
|
|
|
Operating Activities
Cash provided from operating activities increased by $77.6 million from the prior year period
due mainly to lower use of funds to finance working capital needs in the current year period
compared with the prior year, partially offset by lower net income. The sequential nine-month
growth in net revenue was higher in the prior year period, requiring a greater use of funds to
build working capital. Working capital is defined as current assets minus current liabilities.
Investing Activities
On July 19, 2007, we completed an acquisition of a U.S.-based company in an all cash
transaction approximating $42.5 million. On August 9, 2006, we completed the acquisition of
Woodhead in an all cash transaction for approximately $238.1 million, including the assumption of
debt and net of cash acquired.
Capital expenditures were $163.4 million for the nine months ended March 31, 2008 compared
with $219.4 million in the prior year period, reflecting our efforts to increase asset efficiency
by lowering the incremental investment required to drive future growth. Capital expenditures for
the nine months ended March 31, 2008 were primarily related to construction of a new plant in China
and increasing capacity in other Asian entities.
22
Financing Activities
On August 10, 2007 our Board of Directors authorized the repurchase of up to an aggregate
$200.0 million of common stock though June 30, 2008. Approximately $33.8 million was remaining
under the authorization as of March 31, 2008. We purchased 6,750,000 shares of Common Stock and
Class A Common Stock during the nine months ended March 31, 2008, at an aggregate cost of $166.2
million and 702,500 shares of Class A Common Stock during the nine months ended March 31, 2007, at
an aggregate cost of $20.0 million.
We borrowed $65.0 million on our unsecured revolving credit line in order to fund stock
repurchases approximating $54.4 million in the three months ended March 31, 2008.
As part of our growth strategy, in the future we may acquire other companies in the same or
complementary lines of business and pursue other business ventures. The timing and size of any new
business ventures or acquisitions we complete may impact our cash requirements.
Contractual Obligations and Commercial Commitments
We have contractual obligations and commercial commitments as described in Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations
Contractual Obligations and Commercial Commitments of our Annual Report on Form 10-K filed with
the Securities and Exchange Commission (the Commission) for the year ended June 30, 2007. In
addition, we have obligations under open purchase orders and the long-term liabilities reflected in
our consolidated balance sheet, which principally consist of pension and retiree health care
benefit obligations. There have been no material changes in our contractual obligations and
commercial commitments since June 30, 2007 arising outside of the ordinary course of business.
Cautionary Statement Regarding Forward-Looking Information
This Quarterly Report contains forward-looking statements that are based on current
expectations, estimates, forecasts and projections about our future performance, our business, our
beliefs, and our managements assumptions. In addition, we, or others on our behalf, may make
forward-looking statements in press releases or written statements, or in our communications and
discussions with investors and analysts in the normal course of business through meetings, web
casts, phone calls, and conference calls. Words such as expect, anticipate, outlook,
forecast, could, project, intend, plan, continue, believe, seek, estimate,
should, may, assume, variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties, and assumptions that are difficult to
predict. We describe our respective risks, uncertainties, and assumptions that could affect the
outcome or results of operations in Part 1, Item 1A of our Annual Report on Form 10-K for the year
ended June 30, 2007 (Form 10-K). You should carefully consider the risks described in our Form
10-K. Such risks are not the only ones facing our Company. Additional risks and uncertainties not
presently known to us or that we currently believe to be immaterial may also impair our business
operations. If any of the risks occur, our business, financial condition or operating results
could be materially adversely affected.
We have based our forward-looking statements on our managements beliefs and assumptions based
on information available to our management at the time the statements are made. We caution you that
actual outcomes and results may differ materially from what is expressed, implied, or forecast by
our forward-looking statements. Reference is made in particular to forward looking statements
regarding growth strategies, industry trends, financial results, cost reduction initiatives,
acquisition synergies, manufacturing strategies, product development and sales, regulatory
approvals, and competitive strengths. Except as required under the federal securities laws, we do
not have any intention or obligation to update publicly any forward-looking statements
23
after the distribution of this report, whether as a result of new information, future events,
changes in assumptions, or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to market risk associated with changes in foreign currency exchange rates,
interest rates and certain commodity prices.
We mitigate our foreign currency exchange rate risk principally through the establishment of
local production facilities in the markets we serve. This creates a natural hedge since
purchases and sales within a specific country are both denominated in the same currency and
therefore no exposure exists to hedge with a foreign exchange forward or option contract
(collectively, foreign exchange contracts). Natural hedges exist in most countries in which we
operate, although the percentage of natural offsets, compared with offsets that need to be hedged
by foreign exchange contracts, will vary from country to country.
We also monitor our foreign currency exposure in each country and implement 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 the development of natural
hedges and use of foreign exchange contracts to protect or preserve the value of cash flows. No
material foreign exchange contracts were in use at March 31, 2008 or 2007.
We have implemented a formalized treasury risk management policy that describes procedures and
controls over derivative financial and commodity instruments. Under the policy, we do not use
derivative financial or commodity instruments for speculative or trading purposes, and the use of
such instruments is subject to strict approval levels by senior management. Typically, the use of
derivative instruments is limited to hedging activities related to specific foreign currency cash
flows or commodity costs, and net receivable and payable balances.
The translation of the financial statements of the non-North American operations is impacted
by fluctuations in foreign currency exchange rates. The increase in consolidated net revenue and
income from operations was impacted by the translation of our international financial statements
into U.S. dollars resulting in increased net revenue of $104.4 million and increased income from
operations of $7.9 million for the nine months ended March 31, 2008, compared with the results for
the comparable period in the prior year.
Our $38.4 million of marketable securities at March 31, 2008 are principally invested in time
deposits.
Interest rate exposure is generally limited to our marketable securities and long-term debt.
We do not actively manage the risk of interest rate fluctuations. However, such risk is mitigated
by the relatively short-term nature of our investments (less than 12 months) and the fixed-rate
nature of our long-term debt.
Due to the nature of our operations, we are not subject to significant concentration risks
relating to customers or products.
We monitor the environmental laws and regulations in the countries in which we operate. We
have implemented an environmental program to reduce the generation of potentially hazardous
materials during our manufacturing process and believe we continue to meet or exceed local
government regulations.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information
relating to Molex is timely communicated to the officers who certify our financial reports and to
other members of our
24
management and Board of Directors.
Based upon their evaluation as of March 31, 2008, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act))
are effective in providing reasonable assurance that information required to be disclosed by us in
our Exchange Act filings is recorded, processed, summarized and reported within the time periods
specified in the Commissions rules and forms.
Internal Control Over Financial Reporting
During the three months ended March 31, 2008, there were no changes in our internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or in
other factors that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
PART II
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
There have been no material changes from the risk factors disclosed in Part 1, Item 1A, of our
Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On August 13, 2007, our Board of Directors authorized the purchase of up to $200.0 million of
Common Stock and/or Class A Common Stock during the period ending June 30, 2008. Share purchases of
Molex Common and/or Class A Common Stock for the quarter ended March 31, 2008 were as follows (in
thousands, except price per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
|
Total Number
|
|
|
|
|
|
|
Purchased as
|
|
|
|
of Shares
|
|
|
Average Price
|
|
|
Part of Publicly
|
|
|
|
Purchased
|
|
|
Paid per Share
|
|
|
Announced Plan
|
|
January 1 January 31
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Class A Common Stock
|
|
|
191
|
|
|
$
|
23.66
|
|
|
|
185
|
|
February 1 February 29
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
275
|
|
|
$
|
23.38
|
|
|
|
275
|
|
Class A Common Stock
|
|
|
1,470
|
|
|
$
|
22.60
|
|
|
|
1,350
|
|
March 1 March 31
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
50
|
|
|
$
|
22.26
|
|
|
|
50
|
|
Class A Common Stock
|
|
|
550
|
|
|
$
|
21.92
|
|
|
|
550
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,536
|
|
|
$
|
22.61
|
|
|
|
2,410
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008, the dollar value of shares that may yet be purchased under the plan
was $33.8 million.
25
Item 6. Exhibits
|
|
|
|
|
|
|
|
|
Number
|
|
Description
|
|
|
|
|
|
|
31
|
|
|
Rule 13a-14(a)/15d-14(a) Certifications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1 Section 302 certification by Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
31.2 Section 302 certification by Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
Section 1350 Certifications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1 Section 906 certification by Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
32.2 Section 906 certification by Chief Financial Officer
|
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
MOLEX INCORPORATED
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: April 30, 2008
|
/S/ DAVID D. JOHNSON
|
|
|
David D. Johnson
Executive Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
|
|
|
27
Molex Incorporated (MM) (NASDAQ:MOLX)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Molex Incorporated (MM) (NASDAQ:MOLX)
Historical Stock Chart
Von Jul 2023 bis Jul 2024