UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Quarterly Period Ended March 31, 2009
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission File Number 0-7491
MOLEX INCORPORATED
(Exact name of registrant as specified in its charter)
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Delaware
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36-2369491
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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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 the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes
o
No
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 27, 2009, the following numbers of shares of the Companys common stock were outstanding:
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Common Stock
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95,551,858
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Class A Common Stock
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77,630,150
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Class B Common Stock
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94,255
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Molex Incorporated
INDEX
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Page
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PART I FINANCIAL INFORMATION
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Item 1. Financial Statements
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Condensed Consolidated Balance Sheets as of
March 31, 2009 and June 30, 2008
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3
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Condensed Consolidated Statements of Income for the
three and nine months ended March 31, 2009 and 2008
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4
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Condensed Consolidated Statements of Cash Flows for the
nine months ended March 31, 2009 and 2008
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5
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Notes to Condensed Consolidated Financial Statements
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6
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Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
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14
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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26
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Item 4. Controls and Procedures
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26
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PART II OTHER INFORMATION
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Item 1. Legal Proceedings
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27
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Item 1A. Risk Factors
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27
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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27
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Item 3. Defaults Upon Senior Securities
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27
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Item 4. Submission of Matters to a Vote of Security Holders
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28
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Item 5. Other Information
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28
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Item 6. Exhibits
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28
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SIGNATURES
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29
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Section 302 Certification of Chief Executive Officer
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Section 302 Certification of Chief Financial Officer
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Section 906 Certification of Chief Executive Officer
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Section 906 Certification of Chief Financial Officer
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2
PART I
Item 1. Financial Statements
Molex Incorporated
Condensed Consolidated Balance Sheets
(in thousands)
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Mar. 31,
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June 30,
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2009
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2008
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(Unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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457,548
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$
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475,507
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Marketable securities
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48,384
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34,298
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Accounts receivable, less allowances of $30,336 and $40,243 respectively
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444,617
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740,827
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Inventories
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360,776
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458,295
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Other current assets
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110,795
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74,033
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Total current assets
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1,422,120
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1,782,960
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Property, plant and equipment, net
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1,081,469
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1,172,395
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Goodwill
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294,359
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373,623
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Other assets
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275,193
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270,559
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Total assets
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$
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3,073,141
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$
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3,599,537
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities:
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Accounts payable
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$
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182,363
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$
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350,413
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Accrued expenses
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205,426
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154,015
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Current portion of long-term debt and short-term borrowings
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280,897
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66,687
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Other current liabilities
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4,285
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78,323
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Total current liabilities
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672,971
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649,438
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Other non-current liabilities
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23,884
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21,346
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Accrued pension and postretirement benefits
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98,376
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105,574
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Long-term debt
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5,167
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146,333
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Total liabilities
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800,398
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922,691
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Commitments and contingencies
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Stockholders equity:
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Common stock
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11,130
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11,107
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Paid-in capital
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592,675
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569,046
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Retained earnings
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2,602,472
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2,785,099
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Treasury stock
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(1,088,258
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(1,009,021
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Accumulated other comprehensive income
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154,724
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320,615
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Total stockholders equity
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2,272,743
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2,676,846
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Total liabilities and stockholders equity
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$
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3,073,141
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$
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3,599,537
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See accompanying notes to condensed consolidated financial statements.
3
Molex Incorporated
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share data)
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Three Months Ended
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Nine Months Ended
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March 31,
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March 31,
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2009
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2008
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2009
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2008
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Net revenue
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$
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505,539
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$
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822,285
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$
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2,011,252
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$
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2,456,455
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Cost of sales
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412,143
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567,824
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1,492,312
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1,712,729
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Gross profit
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93,396
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254,461
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518,940
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743,726
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Selling, general and administrative
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139,071
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167,639
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450,034
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493,973
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Restructuring costs and asset impairments
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44,344
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6,399
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105,904
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16,286
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Goodwill impairment
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93,140
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Total operating expenses
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183,415
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174,038
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649,078
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510,259
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Income (loss) from operations
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(90,019
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80,423
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(130,138
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)
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233,467
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Interest income, net
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251
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2,044
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2,287
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6,964
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Other income
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3,259
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4,462
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24,252
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7,241
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Total other income
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3,510
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6,506
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26,539
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14,205
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Income (loss) before income taxes
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(86,509
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)
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86,929
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(103,599
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)
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247,672
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Income taxes
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(27,909
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)
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36,623
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(2,052
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)
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84,846
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Net (loss) income
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$
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(58,600
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)
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$
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50,306
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$
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(101,547
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)
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$
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162,826
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Earnings (loss) per share:
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Basic
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$
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(0.34
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)
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$
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0.28
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$
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(0.58
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)
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$
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0.90
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Diluted
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$
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(0.34
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)
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$
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0.28
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$
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(0.58
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$
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0.89
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Dividends declared per share
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$
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0.1525
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$
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0.1125
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$
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0.4575
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$
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0.3375
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Average common shares outstanding:
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Basic
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173,228
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179,385
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174,985
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181,260
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Diluted
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173,228
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180,086
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174,985
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182,156
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See accompanying notes to condensed consolidated financial statements.
4
Molex Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
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Nine Months Ended
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March 31,
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2009
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2008
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Operating activities:
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Net (loss) income
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$
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(101,547
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$
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162,826
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Add non-cash items included in net (loss) income:
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Depreciation and amortization
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190,085
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184,675
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Share-based compensation
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19,393
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18,539
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Goodwill impairment
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93,140
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Other non-cash items
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9,392
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3,568
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Changes in assets and liabilities:
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Accounts receivable
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282,082
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12,604
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Inventories
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93,916
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(22,540
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)
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Accounts payable
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(167,781
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)
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(6,179
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)
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Other current assets and liabilities
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(50,148
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)
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8,915
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Other assets and liabilities
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(56,947
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)
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(9,551
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)
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Cash provided from operating activities
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311,585
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352,857
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Investing activities:
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Capital expenditures
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(127,688
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)
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(163,440
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)
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Proceeds from sales of property, plant and equipment
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7,561
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|
11,417
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Proceeds from sales or maturities of marketable securities
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11,694
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843,493
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Purchases of marketable securities
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(33,399
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)
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(798,921
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)
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Acquisitions
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(73,447
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)
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(42,503
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)
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Other investing activities
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|
|
655
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|
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|
(9,733
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)
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|
|
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|
|
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Cash used for investing activities
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|
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(214,624
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)
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|
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(159,687
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)
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|
|
|
|
Financing activities:
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|
|
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Proceeds from revolving credit facility
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|
|
115,000
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|
|
|
65,000
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Payments on revolving credit facility
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|
|
(105,000
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)
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|
|
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|
Net change in long-term debt
|
|
|
47,300
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|
|
|
(1,705
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)
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Cash dividends paid
|
|
|
(73,222
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)
|
|
|
(54,557
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)
|
Exercise of stock options
|
|
|
1,233
|
|
|
|
8,534
|
|
Purchase of treasury stock
|
|
|
(76,342
|
)
|
|
|
(166,199
|
)
|
Other financing activities
|
|
|
(870
|
)
|
|
|
(900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used for financing activities
|
|
|
(91,901
|
)
|
|
|
(149,827
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(23,019
|
)
|
|
|
32,150
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(17,959
|
)
|
|
|
75,493
|
|
Cash and cash equivalents, beginning of period
|
|
|
475,507
|
|
|
|
378,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
457,548
|
|
|
$
|
453,854
|
|
|
|
|
|
|
|
|
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 45 manufacturing
locations in 18 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 and nine months ended March 31, 2009 are not necessarily an
indication of the results that may be expected for the year ending June 30, 2009. The Condensed
Consolidated Balance Sheet as of June 30, 2008 was derived from our audited consolidated financial
statements for the year ended June 30, 2008. 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, 2008.
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 in connection with a new global organization that was effective July 1,
2007. A majority of the plan relates to facilities located in North America, Europe and Japan and,
in general, the movement of manufacturing activities at these plants to other facilities. Net
restructuring cost during the quarter ended March 31, 2009 was $44.3 million, consisting of $15.4
million of asset impairments and $28.9 million for employee termination benefits. These costs
included $13.0 million relating to planned plant closings in Japan and Korea. Restructuring costs
during the nine months ended March 31, 2009 included $22.5 million for asset impairments and $83.4
million for employee termination benefits. The cumulative expense since we announced the
restructuring plan totals $174.0 million.
We expect to incur total restructuring and asset impairment costs related to these actions
ranging from $240 $250 million, of which the impact on each segment will be determined as the
actions become more certain. Management approved several actions related to this plan. The total
cost estimates increased as we formulated detailed plans for the latest additions to the
restructuring actions, which will include a reduction from five
product focused divisions to three product focused
divisions. 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 complete
the actions under this plan by June 30, 2010 with estimated annual cost savings ranging from $190
$210 million.
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, 2008
|
|
$
|
15,466
|
|
|
$
|
8,474
|
|
|
$
|
15,543
|
|
|
$
|
28,633
|
|
|
$
|
68,116
|
|
Net restructuring costs during
the first quarter
|
|
|
280
|
|
|
|
14,991
|
|
|
|
3,779
|
|
|
|
2,728
|
|
|
|
21,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative costs at Sept. 30, 2008
|
|
$
|
15,746
|
|
|
$
|
23,465
|
|
|
$
|
19,322
|
|
|
$
|
31,361
|
|
|
$
|
89,894
|
|
Net restructuring costs during
the second quarter
|
|
|
12,075
|
|
|
|
14,766
|
|
|
|
6,324
|
|
|
|
6,617
|
|
|
|
39,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative costs at Dec. 31, 2008
|
|
$
|
27,821
|
|
|
$
|
38,231
|
|
|
$
|
25,646
|
|
|
$
|
37,978
|
|
|
$
|
129,676
|
|
Net restructuring costs during
the third quarter
|
|
|
17,557
|
|
|
|
13,021
|
|
|
|
7,452
|
|
|
|
6,314
|
|
|
|
44,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative costs at Mar. 31, 2009
|
|
$
|
45,378
|
|
|
$
|
51,252
|
|
|
$
|
33,098
|
|
|
$
|
44,292
|
|
|
$
|
174,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The cumulative change in the accrued employee termination benefits balance related to
restructuring charges is summarized as follows (in thousands):
|
|
|
|
|
Balance at June 30, 2008
|
|
$
|
19,842
|
|
Cash payments
|
|
|
(5,321
|
)
|
Charges to expense
|
|
|
19,106
|
|
Non-cash related costs
|
|
|
(2,978
|
)
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2008
|
|
$
|
30,649
|
|
Cash payments
|
|
|
(6,713
|
)
|
Charges to expense
|
|
|
35,362
|
|
Non-cash related costs
|
|
|
327
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
59,625
|
|
Cash payments
|
|
|
(23,311
|
)
|
Charges to expense
|
|
|
28,946
|
|
Non-cash related costs
|
|
|
(999
|
)
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2009
|
|
$
|
64,261
|
|
|
|
|
|
The accrued employee termination benefits balance at March 31, 2009 is recorded in accrued
expenses and includes $1.7 million related to a restructuring plan announced in fiscal 2005 that
was substantially complete as of June 30, 2006.
3. Goodwill Impairment
We recorded a $93.1 million goodwill impairment charge during the second quarter of fiscal
2009 to write-off goodwill based on lower projected future revenue and profit growth in our
Transportation segment. During the second quarter, we determined that there were indicators of
impairment in our Transportation segment resulting from the sudden economic downturn and potential
liquidity risk in the automotive industry. The economic downturn had a negative impact on the
segments operating results and the potential liquidity risk extended our estimate for the
industrys economic recovery. These factors resulted in lower growth and profit expectations for
the segment, which resulted in the goodwill impairment charge.
Our goodwill impairment review required a two-step process. The first step of the review
compared the estimated fair value of the reporting unit against its aggregate carrying value,
including goodwill. We estimated the fair value of our Transportation segment using the income
method of valuation, which included the use of estimated discounted cash flows. Based on this
analysis, we determined the carrying value of the segment exceeded its fair value.
7
Accordingly, we performed the second step of the test, comparing the implied fair value of the
divisions goodwill with the carrying value of that goodwill. Based on this assessment, we
determined that the goodwill had no value and recorded an impairment charge of $93.1 million to
write-off the full value of the goodwill.
4. Acquisitions
On July 1, 2008, we completed the acquisition of a flexible circuit company and recorded
additional goodwill of $24.4 million. On December 19, 2008, we completed an asset purchase of a
company in Japan and have initially recorded additional goodwill of $3.1 million. The purchase
price allocation for these acquisitions is preliminary and subject to revision as more detailed
analysis is completed and additional information about the fair value of assets and liabilities
becomes available.
5. Earnings (Loss) 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,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Basic average common shares outstanding
|
|
|
173,228
|
|
|
|
179,385
|
|
|
|
174,985
|
|
|
|
181,260
|
|
Effect of dilutive stock options
|
|
|
|
|
|
|
701
|
|
|
|
|
|
|
|
896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average common shares outstanding
|
|
|
173,228
|
|
|
|
180,086
|
|
|
|
174,985
|
|
|
|
182,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months and nine months ended March 31, 2009, we incurred a net loss. As
common stock equivalents had an anti-dilutive effect on the net loss, the equivalents were not
included in the computation of diluted loss per share for the three and nine months ended March 31,
2009.
6. Comprehensive Income (Loss)
Total
comprehensive income (loss) is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Net (loss) income
|
|
$
|
(58,600
|
)
|
|
$
|
50,306
|
|
|
$
|
(101,547
|
)
|
|
$
|
162,826
|
|
Translation adjustments
|
|
|
(67,650
|
)
|
|
|
88,758
|
|
|
|
(159,939
|
)
|
|
|
172,559
|
|
Unrealized investment gain (loss)
|
|
|
5,564
|
|
|
|
1,942
|
|
|
|
(5,952
|
)
|
|
|
8,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss) income
|
|
$
|
(120,686
|
)
|
|
$
|
141,006
|
|
|
$
|
(267,438
|
)
|
|
$
|
343,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
7. 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):
|
|
|
|
|
|
|
|
|
|
|
Mar. 31,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
Raw materials
|
|
$
|
57,402
|
|
|
$
|
81,407
|
|
Work in process
|
|
|
118,466
|
|
|
|
144,683
|
|
Finished goods
|
|
|
184,908
|
|
|
|
232,205
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
360,776
|
|
|
$
|
458,295
|
|
|
|
|
|
|
|
|
8. Investments
At March 31, 2009, we owned approximately 20% of a publicly traded affiliate accounted for
under the equity method. Our portion of the market value of the investment based on per share
quoted market prices was $54.1 million as of March 31, 2009 compared with the carrying value of
$77.7 million. We concluded that any impairment of our investment was temporary. The market value
of the investment based on per share quoted market prices approximated the carrying value as of
June 30, 2008.
9. Pensions and Other Postretirement Benefits
During
the three months ended March 31, 2009, we recognized curtailment
expenses of $1.2 million related to our U.S. and Japan pension
plans and a $0.3 million special termination benefits expense in
our postretirement medical benefit plan in connection with the early
termination of participants resulting from our restructuring plans.
During the nine months ended March 31, 2009, we also recognized
a $4.0 million curtailment gain in our postretirement medical
benefit plan by reducing the number of employees eligible for retiree
medical coverage. The curtailment adjustments and special termination
benefits reduced cost of sales by $1.6 million and reduced
selling, general and administrative expense by $2.4 million and
increased restructuring expense by $1.5 million for the nine
months ended March 31, 2009.
During
the nine months ended March 31, 2008, we recognized curtailment
gains of $5.4 million. 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. 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.
9
Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans (SFAS 158) required re-measurement of our postretirement
medical benefit plan liability in connection with the curtailment, that otherwise was required on
June 30, 2009. The adoption of SFAS 158 resulted in a $1.4 million reduction in retained earnings
during the nine months ended March 31, 2009.
The components of pension benefit cost are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Service cost
|
|
$
|
2,066
|
|
|
$
|
2,346
|
|
|
$
|
6,198
|
|
|
$
|
7,037
|
|
Interest cost
|
|
|
2,064
|
|
|
|
2,148
|
|
|
|
6,192
|
|
|
|
6,443
|
|
Expected return on plan assets
|
|
|
(2,180
|
)
|
|
|
(2,533
|
)
|
|
|
(6,540
|
)
|
|
|
(7,598
|
)
|
Amortization of prior service cost
|
|
|
11
|
|
|
|
53
|
|
|
|
33
|
|
|
|
159
|
|
Recognized actuarial losses
|
|
|
62
|
|
|
|
85
|
|
|
|
186
|
|
|
|
255
|
|
Amortization of transition obligation
|
|
|
106
|
|
|
|
10
|
|
|
|
318
|
|
|
|
31
|
|
Curtailment adjustment
|
|
|
1,151
|
|
|
|
|
|
|
|
1,151
|
|
|
|
(5,444
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit cost
|
|
$
|
3,280
|
|
|
$
|
2,109
|
|
|
$
|
7,538
|
|
|
$
|
883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
components of retiree health care benefit cost are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Service cost
|
|
$
|
611
|
|
|
$
|
767
|
|
|
$
|
1,833
|
|
|
$
|
2,291
|
|
Interest cost
|
|
|
796
|
|
|
|
815
|
|
|
|
2,388
|
|
|
|
2,434
|
|
Amortization of prior service cost
|
|
|
(160
|
)
|
|
|
(175
|
)
|
|
|
(480
|
)
|
|
|
(523
|
)
|
Recognized actuarial losses
|
|
|
157
|
|
|
|
330
|
|
|
|
471
|
|
|
|
986
|
|
Curtailment adjustment
|
|
|
299
|
|
|
|
|
|
|
|
(3,701
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit cost
|
|
$
|
1,703
|
|
|
$
|
1,737
|
|
|
$
|
511
|
|
|
$
|
5,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. Debt
The current portion of our long-term debt as of March 31, 2009 consists principally of three
unsecured borrowing agreements approximating 20 billion Japanese yen ($204.2 million), with
weighted-average fixed interest rates approximating 1.3%. Interest on the loans is payable
semi-annually with the principal due in September 2009. As of March 31, 2009, we had short-term
borrowings in the U.S. of $75.7 million, including borrowings on uncommitted lines of credit
totaling $60 million.
11. Income Taxes
The effective tax rate was 32.3% for the three months ended March 31, 2009 and 42.1% for the
three months ended March 31, 2008. During the three months ended March 31, 2008, we recorded an
income tax charge of $10.5 million due primarily to a lowered estimate of available foreign tax
credits. As of March 31, 2009, unrecognized tax benefits were $12.4 million, which if recognized,
would reduce the effective income tax rate. Changes in the amount of unrecognized tax benefits in
the nine months ended March 31, 2009 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 2003. The tax
years 2004 through 2008 remain open to examination by all major taxing jurisdictions to which we
are subject.
10
It is our practice to recognize interest and/or penalties related to income tax matters in tax
expense. As of March 31, 2009, there were no material interest or penalty amounts to accrue.
12. Fair Value Measurements
Effective July 1, 2008, we adopted Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157) for financial assets and liabilities recognized or disclosed on a
recurring basis. The purpose of SFAS 157 is to define fair value, establish a framework for
measuring fair value, and enhance disclosures about fair value measurements. The adoption of this
statement had no effect on our consolidated financial statements and resulted only in increased
disclosures.
In accordance with SFAS 157, fair value measurements are classified under the following
hierarchy:
|
|
|
Level 1: Observable inputs such as quoted prices for identical assets or
liabilities in active markets.
|
|
|
|
|
Level 2: Observable inputs other than quoted prices substantiated by market data
and observable, either directly or indirectly for the asset or liability. This
includes quoted prices for similar assets or liabilities in active markets.
|
|
|
|
|
Level 3: Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets and liabilities.
|
The following table summarizes our financial assets and liabilities which are measured at fair
value on a recurring basis and subject to the disclosure requirements of SFAS 157 as of March 31,
2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Significant
|
|
|
|
|
|
|
Total
|
|
|
Markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
Measured
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
at Fair
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Available for sale securities
|
|
$
|
4,821
|
|
|
$
|
4,821
|
|
|
$
|
|
|
|
$
|
|
|
Derivative financial instruments, net
|
|
|
1,054
|
|
|
|
|
|
|
|
1,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,875
|
|
|
$
|
4,821
|
|
|
$
|
1,054
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We
determine the fair value of our available for sale securities based on quoted market prices (Level 1). We
generally use derivatives for hedging purposes pursuant to SFAS No. 133 and SFAS No. 149, which are
valued based on Level 2 inputs in the SFAS 157 fair value hierarchy. The fair value of our
financial instruments is determined by a mark to market valuation based on forward curves using
observable market prices.
13. 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 141R effective July 1,
2009. The impact of the adoption of SFAS 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 (3) and 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
11
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 February 2008, the FASB issued FASB Staff Position No. 157-2, which delays the effective
date of SFAS 157 for nonfinancial assets and liabilities, which are not measured at fair value on a
recurring basis (at least annually) until fiscal years beginning after November 15, 2008. This
statement is effective for us on July 1, 2009. We are currently evaluating the requirements of SFAS
157 for nonfinancial assets and liabilities, 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.
In December 2008, the FASB issued FASB Staff Position No. 132(R)-1, Employers Disclosures
about Postretirement Benefit Plan Assets (FAS 132R-1). FAS 132R-1 requires disclosures about plan
assets of a defined benefit pension or other postretirement plan. This statement is effective for
us on July 1, 2009. The adoption of FAS 132R-1 will result in enhanced disclosures, but will not
otherwise have an impact on our financial statements.
14. 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.
|
12
Information by segment is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trans-
|
|
Custom &
|
|
Corporate
|
|
|
|
|
Connector
|
|
portation
|
|
Electrical
|
|
& Other
|
|
Total
|
For the three months ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
289,329
|
|
|
$
|
60,505
|
|
|
$
|
155,178
|
|
|
$
|
527
|
|
|
$
|
505,539
|
|
Income (loss) from operations
|
|
|
(13,850
|
)
|
|
|
(37,627
|
)
|
|
|
586
|
|
|
|
(39,128
|
)
|
|
|
(90,019
|
)
|
Depreciation & amortization
|
|
|
42,522
|
|
|
|
8,888
|
|
|
|
8,111
|
|
|
|
4,215
|
|
|
|
63,736
|
|
Capital expenditures
|
|
|
17,657
|
|
|
|
6,739
|
|
|
|
2,985
|
|
|
|
3,671
|
|
|
|
31,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
1,141,807
|
|
|
$
|
240,743
|
|
|
$
|
626,706
|
|
|
$
|
1,996
|
|
|
$
|
2,011,252
|
|
Income (loss) from operations
|
|
|
74,758
|
|
|
|
(187,120
|
)
|
|
|
36,749
|
|
|
|
(54,525
|
)
|
|
|
(130,138
|
)
|
Depreciation & amortization
|
|
|
124,550
|
|
|
|
27,307
|
|
|
|
25,260
|
|
|
|
12,968
|
|
|
|
190,085
|
|
Capital expenditures
|
|
|
72,381
|
|
|
|
26,693
|
|
|
|
15,613
|
|
|
|
13,001
|
|
|
|
127,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
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. The loss from operations for the Transportation segment for the nine months ended March
31, 2009 includes a $93.1 million goodwill impairment charge during the second quarter.
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, 2009
|
|
$
|
1,013,287
|
|
|
$
|
310,887
|
|
|
$
|
393,788
|
|
|
$
|
168,900
|
|
|
$
|
1,886,862
|
|
June 30, 2008
|
|
|
1,293,342
|
|
|
|
413,233
|
|
|
|
500,197
|
|
|
|
164,745
|
|
|
|
2,371,517
|
|
The reconciliation of segment assets to consolidated total assets is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Mar. 31,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
Segment net assets
|
|
$
|
1,886,862
|
|
|
$
|
2,371,517
|
|
Other current assets
|
|
|
616,727
|
|
|
|
583,838
|
|
Non current assets
|
|
|
569,552
|
|
|
|
644,182
|
|
|
|
|
|
|
|
|
|
Consolidated total assets
|
|
$
|
3,073,141
|
|
|
$
|
3,599,537
|
|
|
|
|
|
|
|
|
13
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, 2008. 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 45 manufacturing locations in 18 countries. We also provide
manufacturing services to integrate specific components into a customers product.
Our three operating segments consist of the Connector, Transportation and Custom & Electrical
segments. A summary of the segments follows:
|
|
|
The Connector segment manufactures and sells 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 manufactures and sells 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.
|
Our sales are dependent on end markets impacted by consumer, industrial and infrastructure
spending, and our operating results can be adversely affected by reduced demand in those markets.
Worldwide economic conditions and the current instability in the global economy led to a
significant drop in demand for our connectors during the three and nine months ended March 31, 2009
compared to the prior year periods. The drop in revenue was significant as our customers attempted
to manage their inventory. As a result, we experienced lower net revenue and reduced gross margins
and an operating loss during the three and nine months ended March 31, 2009 compared to the prior
year periods.
As a result of the deteriorating economic conditions, in the second quarter of fiscal 2009 we
increased the scope of our restructuring program that we began in fiscal 2007 to reduce costs and
to improve return on invested capital in connection with a new global organization that was
effective July 1, 2007. A majority of the plan relates to facilities located in North America,
Europe and Japan and, in general, the movement of manufacturing activities at these plants to other
facilities. Net restructuring cost during the quarter ended March 31, 2009 was $44.3 million,
consisting of $15.4 million of asset impairments and $28.9 million for employee termination
benefits. These costs included $13.0 million relating to planned plant closings in Japan and Korea.
Restructuring costs during the nine months ended March 31, 2009 included $22.5 million for asset
impairments and $83.4 million for employee termination benefits. The cumulative expense since we
announced the restructuring plan totals $174.0 million.
14
We expect to incur total restructuring and asset impairment costs related to these actions
ranging from $240 $250 million, of which the impact on each segment will be determined as the
actions become more certain. Management approved several actions related to this plan. The total
cost estimates increased as we formulated detailed plans for the latest additions to the
restructuring actions, which include a reduction from five product focused divisions to three product focused
divisions. 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 reductions throughout the company, and we expect to
achieve these reductions through ongoing employee attrition and terminations. We expect to complete
the actions under this plan by June 30, 2010 with estimated annual cost savings ranging from $190 -
$210 million. See Note 2 of the Notes to the Condensed Consolidated Financial Statements for
further discussion.
We recorded a $93.1 million goodwill impairment charge during the second quarter of fiscal
2009 to write-off goodwill based on lower projected future revenue growth in our Transportation
segment. During the second quarter, we determined that there were indicators of impairment in our
Transportation segment resulting from the sudden economic downturn and potential liquidity risk in
the automotive industry. The economic downturn had a negative impact on the segments operating
results and the potential liquidity risk extended our estimate for the industrys economic
recovery.
During the second and third quarters of fiscal 2009, we executed actions to reduce headcount
and lower the cost of employee benefits. These actions included a reduction in headcount, salary
reductions, changes in retirement medical benefits, a reduction in planned contributions to the
profit sharing trust and a reduction in the planned incentive bonus payout. In addition,
manufacturing employees worked reduced hours in the plants most impacted by the economic slowdown.
The one-time cost reductions relating to employee benefits decreased cost of sales and selling,
general and administrative expense by $14.2 million during the second quarter. Due to the
strengthening of the U.S. dollar in the second quarter, we recognized foreign currency exchange
gains of $12.9 million for the nine months ended March 31, 2009.
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, availability of credit
and general market liquidity, 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
volatile raw material costs, develop, manufacture and successfully market new and enhanced products
and product lines, control operating costs through successful execution of our restructuring plans,
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.
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, 2008 filed with the Securities and Exchange Commission, which is
incorporated by reference in this Form 10-Q.
15
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
|
|
|
|
2009
|
|
|
of Revenue
|
|
|
2008
|
|
|
of Revenue
|
|
Net revenue
|
|
$
|
505,539
|
|
|
|
100.0
|
%
|
|
$
|
822,285
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
412,143
|
|
|
|
81.5
|
%
|
|
|
567,824
|
|
|
|
69.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
93,396
|
|
|
|
18.5
|
%
|
|
|
254,461
|
|
|
|
30.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative
|
|
|
139,071
|
|
|
|
27.5
|
%
|
|
|
167,639
|
|
|
|
20.4
|
%
|
Restructuring costs and asset impairments
|
|
|
44,344
|
|
|
|
8.8
|
%
|
|
|
6,399
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(90,019
|
)
|
|
|
(17.8
|
)%
|
|
|
80,423
|
|
|
|
9.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
3,510
|
|
|
|
0.7
|
%
|
|
|
6,506
|
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(86,509
|
)
|
|
|
(17.1
|
)%
|
|
|
86,929
|
|
|
|
10.6
|
%
|
Income taxes
|
|
|
(27,909
|
)
|
|
|
(5.5
|
)%
|
|
|
36,623
|
|
|
|
4.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(58,600
|
)
|
|
|
(11.6
|
)%
|
|
$
|
50,306
|
|
|
|
6.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
2009
|
|
|
of Revenue
|
|
|
2008
|
|
|
of Revenue
|
|
Net revenue
|
|
$
|
2,011,252
|
|
|
|
100.0
|
%
|
|
$
|
2,456,455
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
1,492,312
|
|
|
|
74.2
|
%
|
|
|
1,712,729
|
|
|
|
69.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
518,940
|
|
|
|
25.8
|
%
|
|
|
743,726
|
|
|
|
30.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative
|
|
|
450,034
|
|
|
|
22.4
|
%
|
|
|
493,973
|
|
|
|
20.1
|
%
|
Restructuring costs and asset impairments
|
|
|
199,044
|
|
|
|
9.9
|
%
|
|
|
16,286
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(130,138
|
)
|
|
|
(6.5
|
)%
|
|
|
233,467
|
|
|
|
9.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
26,539
|
|
|
|
1.3
|
%
|
|
|
14,205
|
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(103,599
|
)
|
|
|
(5.2
|
)%
|
|
|
247,672
|
|
|
|
10.1
|
%
|
Income taxes
|
|
|
(2,052
|
)
|
|
|
(0.1
|
)%
|
|
|
84,846
|
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(101,547
|
)
|
|
|
(5.1
|
)%
|
|
$
|
162,826
|
|
|
|
6.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue
We sell our products in five primary markets. Revenue has declined significantly across all of
the primary markets due to contracting global economic conditions starting in November 2008 and
subsequent inventory reductions in the supply chain, which decreased our production levels and
demand for components. The estimated decrease in revenue from each market during the third fiscal
quarter of 2009 compared with the same quarter last year (Comparable Quarter) and the second
quarter of 2009 (Sequential Quarter) follows:
|
|
|
|
|
|
|
|
|
|
|
Comparable
|
|
Sequential
|
|
|
Quarter
|
|
Quarter
|
Consumer
|
|
|
(27.3
|
)%
|
|
|
(24.7
|
)%
|
Telecommunications
|
|
|
(38.5
|
)
|
|
|
(27.2
|
)
|
Automotive
|
|
|
(53.7
|
)
|
|
|
(23.4
|
)
|
Data
|
|
|
(34.4
|
)
|
|
|
(23.6
|
)
|
Industrial
|
|
|
(39.7
|
)
|
|
|
(20.2
|
)
|
16
Following are highlights of revenue changes by these primary markets:
|
|
|
Consumer market revenue decreased against both the comparable quarter and the
sequential quarter in home entertainment and home appliance products. The declines in
both the comparable and sequential quarters were partially offset by our customers
release of lower end computer products.
|
|
|
|
|
Telecommunications market revenue decreased against both the comparable quarter and
the sequential quarter due to lower demand for mobile products and supply chain
inventory reductions in fiscal 2009. We had strong revenue growth during the first
quarter of fiscal 2009 and the second half of fiscal 2008 in our antenna products for
mobile devices, but demand decreased significantly in the second and third quarters of
fiscal 2009.
|
|
|
|
|
Automotive market revenue declined against both the comparable quarter and the
sequential quarter due to a sharp decrease in demand related to the current economic
conditions. During fiscal 2008, the automotive market benefited from new products
reflecting higher electronic content in automobiles. The number of automobiles
manufactured by our customers continues to decrease as automotive manufacturing
companies continue to reduce inventories in the automotive supply chain.
|
|
|
|
|
Data market revenue for the third quarter of fiscal 2009 decreased over the
comparable and sequential quarters due to a decrease in demand for storage networking
products, computers and peripherals.
|
|
|
|
|
Industrial market revenue for fiscal 2009 decreased compared with fiscal 2008 due to
declines in residential and commercial construction, lower demand in the industrial
communications business worldwide, particularly in North America and Europe, and lower
demand for factory automation as the manufacturing sector contracts. The decreased
revenue compared to the comparable quarter was partially offset by increased demand for
production equipment.
|
The following table shows the percentage of our net revenue by geographic region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
Americas
|
|
|
27
|
%
|
|
|
27
|
%
|
|
|
27
|
%
|
|
|
28
|
%
|
Asia Pacific
|
|
|
54
|
|
|
|
52
|
|
|
|
54
|
|
|
|
52
|
|
Europe
|
|
|
19
|
|
|
|
21
|
|
|
|
19
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides an analysis of the change in net revenue compared with the prior
fiscal year period (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Mar. 31, 2009
|
|
|
Mar. 31, 2009
|
|
Net revenue for prior year period
|
|
$
|
822,285
|
|
|
$
|
2,456,455
|
|
Components of net revenue change:
|
|
|
|
|
|
|
|
|
Organic net revenue decline
|
|
|
(309,894
|
)
|
|
|
(491,171
|
)
|
Currency translation
|
|
|
(11,977
|
)
|
|
|
33,148
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
5,125
|
|
|
|
12,820
|
|
|
|
|
|
|
|
|
Total change in net revenue
from prior year period
|
|
|
(316,746
|
)
|
|
|
(445,203
|
)
|
|
|
|
|
|
|
|
Net revenue for current year period
|
|
$
|
505,539
|
|
|
$
|
2,011,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic net revenue decline as a
percentage
of net revenue from prior year period
|
|
|
(37.7
|
)%
|
|
|
(20.0
|
)%
|
The decline in organic revenue due to poor global economic conditions has impacted all of our
market areas. Of our five primary markets, the automotive market has experienced the sharpest
decline in demand over the three quarters of fiscal 2009 as consumers are not purchasing as many
new automobiles in the current
17
economic environment. Concerns about the global economy have also significantly impacted the
market for mobile devices as demand continues to be lower than fiscal 2008.
During the three months ended March 31, 2009, revenue decreased $12.0 million due to a weaker
euro over the prior year period. Revenue increased by approximately $33.1 million for the nine
months ended March 31, 2009 due to the strengthening Japanese yen 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, 2009
|
|
|
Nine Months Ended March 31, 2009
|
|
|
|
Local
|
|
|
Currency
|
|
|
Net
|
|
|
Local
|
|
|
Currency
|
|
|
Net
|
|
|
|
Currency
|
|
|
Translation
|
|
|
Change
|
|
|
Currency
|
|
|
Translation
|
|
|
Change
|
|
Americas
|
|
$
|
(83,586
|
)
|
|
$
|
(1,225
|
)
|
|
$
|
(84,811
|
)
|
|
$
|
(117,653
|
)
|
|
$
|
(1,903
|
)
|
|
$
|
(119,556
|
)
|
Asia Pacific
|
|
|
(153,727
|
)
|
|
|
1,850
|
|
|
|
(151,877
|
)
|
|
|
(240,193
|
)
|
|
|
34,648
|
|
|
|
(205,545
|
)
|
Europe
|
|
|
(66,165
|
)
|
|
|
(12,602
|
)
|
|
|
(78,767
|
)
|
|
|
(125,625
|
)
|
|
|
403
|
|
|
|
(125,222
|
)
|
Corporate & other
|
|
|
(1,291
|
)
|
|
|
|
|
|
|
(1,291
|
)
|
|
|
5,120
|
|
|
|
|
|
|
|
5,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change
|
|
$
|
(304,769
|
)
|
|
$
|
(11,977
|
)
|
|
$
|
(316,746
|
)
|
|
$
|
(478,351
|
)
|
|
$
|
33,148
|
|
|
$
|
(445,203
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The change in revenue on a local currency basis was as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Nine Months
|
|
|
Ended
|
|
Ended
|
|
|
Mar. 31, 2009
|
|
Mar. 31, 2009
|
Americas
|
|
|
(37.4
|
)%
|
|
|
(17.5
|
)%
|
Asia Pacific
|
|
|
(36.5
|
)
|
|
|
(18.7
|
)
|
Europe
|
|
|
(37.5
|
)
|
|
|
(25.3
|
)
|
Total
|
|
|
(37.1
|
)%
|
|
|
(19.5
|
)%
|
The following table sets forth information on revenue by segment as of the three months ended
March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
Percentage
|
|
|
|
2009
|
|
|
of Revenue
|
|
|
2008
|
|
|
of Revenue
|
|
Connector
|
|
$
|
289,329
|
|
|
|
57.2
|
%
|
|
$
|
457,542
|
|
|
|
55.6
|
%
|
Transportation
|
|
|
60,505
|
|
|
|
12.0
|
|
|
|
127,410
|
|
|
|
15.5
|
|
Custom & Electrical
|
|
|
155,178
|
|
|
|
30.7
|
|
|
|
234,246
|
|
|
|
28.5
|
|
Corporate & Other
|
|
|
527
|
|
|
|
0.1
|
|
|
|
3,087
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
505,539
|
|
|
|
100.0
|
%
|
|
$
|
822,285
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth information on revenue by segment as of the nine months ended
March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
Percentage
|
|
|
|
2009
|
|
|
of Revenue
|
|
|
2008
|
|
|
of Revenue
|
|
Connector
|
|
$
|
1,141,807
|
|
|
|
56.8
|
%
|
|
$
|
1,400,085
|
|
|
|
57.0
|
%
|
Transportation
|
|
|
240,743
|
|
|
|
12.0
|
|
|
|
370,389
|
|
|
|
15.1
|
|
Custom & Electrical
|
|
|
626,706
|
|
|
|
31.1
|
|
|
|
678,411
|
|
|
|
27.6
|
|
Corporate & Other
|
|
|
1,996
|
|
|
|
0.1
|
|
|
|
7,570
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,011,252
|
|
|
|
100.0
|
%
|
|
$
|
2,456,455
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
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,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
Gross profit
|
|
$
|
93,396
|
|
|
$
|
254,461
|
|
|
$
|
518,940
|
|
|
$
|
743,726
|
|
Gross margin
|
|
|
18.5
|
%
|
|
|
30.9
|
%
|
|
|
25.8
|
%
|
|
|
30.3
|
%
|
The
reduction in gross margin was primarily due to lower absorption from
the sharp drop in our production caused by the poor global economic
conditions during the second and third quarters of fiscal 2009. While
we were unable to reduce factory-related costs as quickly as
production declined, the expansion of our restructuring program
should improve our gross margins over time. During the second and
third quarters of fiscal 2009, we reduced employee salaries and
benefits, reduced the size of our labor force and implemented other
cost reduction initiatives.
A significant portion of our material cost is comprised of copper and gold costs. We purchased
approximately 12 million pounds of copper and approximately 64,000 troy ounces of gold during the
nine months ended March 31, 2009. The following table shows the average prices related to our
purchases of copper and gold for the three months and nine months ended March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
Copper (price per pound)
|
|
$
|
1.56
|
|
|
$
|
3.19
|
|
|
$
|
2.96
|
|
|
$
|
3.38
|
|
Gold (price per troy ounce)
|
|
|
908.00
|
|
|
|
925.00
|
|
|
|
854.30
|
|
|
|
797.07
|
|
Generally, we are able to pass through to our customers only a small portion of changes in
cost of copper and gold. However, we mitigate the impact of any significant increases in gold and
copper prices by hedging with call options a portion of our projected net global purchases of gold
and copper. The hedges did not materially affect operating results for the three and nine months
ended March 31, 2009 and 2008.
The effect of certain 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, 2009
|
|
Mar. 31, 2009
|
Price erosion
|
|
$
|
(20,284
|
)
|
|
$
|
(73,976
|
)
|
Currency translation
|
|
|
(4,159
|
)
|
|
|
10,924
|
|
Currency transaction
|
|
|
(7,222
|
)
|
|
|
(12,057
|
)
|
Price erosion reduces our gross profit, particularly in our Connector segment, where we have
the largest impacts of price erosion. 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 stronger Japanese yen, partially offset
by a weaker euro against the U.S. dollar during the three months ended March 31, 2009 and a
stronger Japanese yen against the U.S. dollar during the three months ended March 31, 2009.
19
Operating Expenses
Operating expenses were as follows as of March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
Selling, general and administrative
|
|
$
|
139,071
|
|
|
$
|
167,639
|
|
|
$
|
450,034
|
|
|
$
|
493,973
|
|
Selling, general and administrative
as a percentage of revenue
|
|
|
27.5
|
%
|
|
|
20.4
|
%
|
|
|
22.4
|
%
|
|
|
20.1
|
%
|
Restructuring costs and asset impairments
|
|
$
|
44,344
|
|
|
$
|
6,399
|
|
|
$
|
105,904
|
|
|
$
|
16,286
|
|
Goodwill impairment
|
|
$
|
|
|
|
$
|
|
|
|
$
|
93,140
|
|
|
$
|
|
|
Selling, general and administrative expenses increased as a percent of net revenue over the
prior year periods primarily due to the significant drop in revenue during the second and third
quarters. Year to date selling, general and administrative expenses included a $9.1 million
decrease in expense related to reductions in employee benefits during the second quarter. The
impact of currency translation decreased selling, general and administrative expenses by
approximately $1.7 million for the three months ended March 31, 2009 and increased selling, general
and administrative expenses by $9.9 million for the nine months ended March 31, 2009. We also
reduced selling, general and administrative expenses through a lower cost structure resulting from
our restructuring initiative and specific cost containment activities.
Research and development expenditures, which are classified as selling, general and
administrative expense, were approximately 5.9% and 5.1% of net revenue for the nine months ended
March 31, 2009 and 2008, respectively. Improvements in new design activity increased research and
development expenditures in the three months ended March 31, 2009, and consistent with the
companys goal of remaining a technology leader, we expect to increase research and development
expenditures in future quarters.
Net restructuring cost during the quarter ended March 31, 2009 was $44.3 million, consisting
of $15.4 million of asset impairments and $28.9 million for employee termination benefits. These
costs included $13.0 million relating to planned plant closings in Japan and Korea. Restructuring
costs during the nine months ended March 31, 2009 included $22.5 million for asset impairments and
$83.4 million for employee termination benefits. The cumulative expense since we announced the
restructuring plan totals $174.0 million.
We recorded a $93.1 million goodwill impairment charge during the second quarter of fiscal
2009 to write-off goodwill based on lower projected future revenue growth in our Transportation
segment. During the second quarter, we determined that there were indicators of impairment in our
Transportation segment resulting from the sudden economic downturn and potential liquidity risk in
the automotive industry. The economic downturn had a negative impact on the segments operating
results and the potential liquidity risk extended our estimate for the industrys economic
recovery. These factors resulted in lower growth and profit expectations for the segment, which
resulted in the goodwill impairment charge. Additional goodwill impairment charges could occur in
the future depending upon the severity and length of the economic downturn.
Other Income
Other income for the three and nine months ended March 31, 2009 was $3.5 million and $26.5
million, respectively, compared with $6.5 million and $14.2 million for the same prior year
periods. The increase in the nine months ended March 31, 2009 primarily related to foreign currency
exchange gains during the second quarter of fiscal 2009 resulting from strengthening of the U.S.
dollar against most currencies. Foreign currency exchange gains were $12.9 million for the nine
months ended March 31, 2009.
20
Effective Tax Rate
The effective tax rate was 32.3% and 2.0% for the three and nine months ended March 31, 2009,
respectively. The lower effective tax rate for the nine months ended March 31, 2009 reflects the
goodwill impairment charge recorded during the second quarter that does not result in a tax
benefit. The effective tax rate was 42.1% and 34.3% for the three and nine months ended March 31,
2008, respectively. During the three months ended March 31, 2008, we recorded an income tax charge
of $10.5 million due primarily to a lowered estimate of available foreign tax credits.
Backlog
Our order backlog on March 31, 2009 was approximately $251.0 million compared with $460.7
million at March 31, 2008. Orders for the third quarter of fiscal 2009 were $474.5 million compared
with $897.9 million for the prior year period, representing the sharp decline in demand due to the
global economic conditions and subsequent supply chain inventory reductions compared with the prior
year period.
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, 2009
|
|
|
Mar. 31, 2009
|
|
Net revenue for prior year period
|
|
$
|
457,542
|
|
|
$
|
1,400,085
|
|
Components of net revenue change:
|
|
|
|
|
|
|
|
|
Organic net revenue decline
|
|
|
(171,755
|
)
|
|
|
(294,698
|
)
|
Currency translation
|
|
|
(41
|
)
|
|
|
32,837
|
|
Acquisitions
|
|
|
3,583
|
|
|
|
3,583
|
|
|
|
|
|
|
|
|
|
Total change in net revenue from prior year period
|
|
|
(168,213
|
)
|
|
|
(258,278
|
)
|
|
|
|
|
|
|
|
|
Net revenue for current year period
|
|
$
|
289,329
|
|
|
$
|
1,141,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic net revenue decline as a percentage of
net revenue for prior year period
|
|
|
(37.5
|
)%
|
|
|
(21.0
|
)%
|
The Connector segment sells primarily to the telecommunication, data products and consumer
markets, which are discussed above. Segment revenue decreased in the first three quarters of fiscal
2009 with currency translation partially offsetting an organic revenue decline. Organic revenue
declined in the three and nine months ended March 31, 2009, compared with the prior year period
primarily due to lower revenue in the mobile sector of the telecommunications market. The mobile
sector was growing during the first two quarters of fiscal 2008. 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,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
Income from operations
|
|
$
|
(13,850
|
)
|
|
$
|
68,826
|
|
|
$
|
74,758
|
|
|
$
|
226,418
|
|
Operating margin
|
|
|
(4.8
|
)%
|
|
|
15.0
|
%
|
|
|
6.5
|
%
|
|
|
16.2
|
%
|
Connector segment income from operations decreased compared with the prior year periods due to
the drop in demand resulting from the uncertainty in the global economies and price erosion. Lower
selling, general and
21
administrative expenses compared to prior year periods partially offset the drop in revenue.
Income from operations was also unfavorably impacted by fiscal 2009 restructuring charges of $45.4
million.
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, 2009
|
|
|
Mar. 31, 2009
|
|
Net revenue for prior year period
|
|
$
|
127,410
|
|
|
$
|
370,389
|
|
Components of net revenue change:
|
|
|
|
|
|
|
|
|
Organic net revenue decline
|
|
|
(63,274
|
)
|
|
|
(131,216
|
)
|
Currency translation
|
|
|
(3,631
|
)
|
|
|
1,570
|
|
|
|
|
|
|
|
|
|
Total change in net revenue from prior year period
|
|
|
(66,905
|
)
|
|
|
(129,646
|
)
|
|
|
|
|
|
|
|
|
Net revenue for current year period
|
|
$
|
60,505
|
|
|
$
|
240,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic net revenue decline as a percentage of
net revenue for prior year period
|
|
|
(49.6
|
)%
|
|
|
(35.4
|
)%
|
Transportation segment revenue decreased in fiscal 2009 due to a decrease in the automotive
market revenue discussed above.
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,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
Income from operations
|
|
$
|
(37,627
|
)
|
|
$
|
3,297
|
|
|
$
|
(187,120
|
)
|
|
$
|
7,824
|
|
Operating margin
|
|
|
(62.2
|
)%
|
|
|
2.6
|
%
|
|
|
(77.7
|
)%
|
|
|
2.1
|
%
|
Segment operating income decreased in the three and nine months ended March 31, 2009, compared
with the same periods last year due to the decrease in revenue and a goodwill impairment charge.
Fiscal 2009 income from operations was unfavorably impacted by restructuring charges of $51.3
million and a goodwill impairment charge of $93.1 million due to lower projected future segment
revenue and profit. The sharp revenue decline was partially offset by reduced selling, general and
administrative expenses against the prior year periods.
22
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, 2009
|
|
|
Mar. 31, 2009
|
|
Net revenue for prior year period
|
|
$
|
234,246
|
|
|
$
|
678,411
|
|
Components of net revenue change:
|
|
|
|
|
|
|
|
|
Organic net revenue decline
|
|
|
(72,326
|
)
|
|
|
(59,630
|
)
|
Currency translation
|
|
|
(8,284
|
)
|
|
|
(1,312
|
)
|
Acquisitions
|
|
|
1,542
|
|
|
|
9,237
|
|
|
|
|
|
|
|
|
|
Total change in net revenue from prior year period
|
|
|
(79,068
|
)
|
|
|
(51,705
|
)
|
|
|
|
|
|
|
|
|
Net revenue for current year period
|
|
$
|
155,178
|
|
|
$
|
626,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic net revenue decline as a percentage of
net revenue for prior year period
|
|
|
(30.9
|
)%
|
|
|
(8.8
|
)%
|
Custom and Electrical segment revenue declined in the three and nine months ended March 31,
2009 due to the decline in the industrial market discussed above. We also acquired a flexible
circuit manufacturing business during first quarter of fiscal 2009 and a fiber optics manufacturing
business during the first quarter of 2008.
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,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
Income from operations
|
|
$
|
586
|
|
|
$
|
19,867
|
|
|
$
|
36,749
|
|
|
$
|
54,001
|
|
Operating margin
|
|
|
0.4
|
%
|
|
|
8.5
|
%
|
|
|
5.9
|
%
|
|
|
8.0
|
%
|
Segment operating income decreased over the first three quarters of fiscal 2009 compared with
the prior year period primarily due to slowing global demand. Selling, general and administrative
expenses increased in fiscal 2009 against the comparable periods in fiscal 2008. Income from
operations was also unfavorably impacted by fiscal 2009 restructuring charges of $33.1 million.
Non-GAAP Financial Measures
Organic net revenue growth, which is included in the discussion above, is a non-GAAP financial
measure. The tables presented in Results of Operations above provide reconciliations of U.S. GAAP
reported net revenue growth (the most directly comparable GAAP financial measure) to organic net
revenue growth.
We believe organic net revenue growth provides useful information to investors because it
reflects the underlying growth from the ongoing activities of our business and 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. 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. 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.
Financial Condition and Liquidity
Our financial position remains strong and we continue to fund capital projects and working
capital needs
23
principally out of operating cash flows and cash reserves. Cash, cash equivalents and
marketable securities totaled $505.9 million and $509.8 million at March 31, 2009 and June 30,
2008, respectively, of which $485.5 million was in non-U.S. accounts as of March 31, 2009.
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 to secure a committed line
of credit. We believe that our liquidity and financial flexibility are adequate to support both
current and future growth.
Our outstanding debt and short-term borrowings at March 31, 2009 totaled $286.1 million. The
current portion of our long-term debt as of March 31, 2009 consists principally of three unsecured
borrowing agreements approximating 20 billion Japanese yen ($204.2 million), with weighted-average
fixed interest rates approximating 1.3%. Interest on the loans is payable semi-annually with the
principal due in September 2009. As of March 31, 2009, we had short-term borrowings in the U.S. of
$75.7 million, including borrowings on uncommitted lines of credit totaling $60 million. We expect
to refinance the debt in Japan by September 2009, although no assurances can be made regarding the
cost and availability of future financing.
Cash Flows
Our cash balance decreased $18.0 million during the nine months ended March 31, 2009.
Operating cash flow was $311.6 million, of which we used $127.7 million to fund capital
expenditures. Our primary sources of cash were operating cash flows and $57.0 million in net
borrowings. We used capital during the period to acquire businesses totaling $73.4 million, fund
capital expenditures, repurchase stock of $76.3 million and pay dividends of $73.2 million. The
translation of our cash to U.S. dollars reduced our cash balance by $23.0 million as compared with
the balance as of June 30, 2008.
Below is a table setting forth the key lines of our Consolidated Statements of Cash Flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
Cash provided from operating activities
|
|
$
|
311,585
|
|
|
$
|
352,857
|
|
Cash used for investing activities
|
|
|
(214,624
|
)
|
|
|
(159,687
|
)
|
Cash used for financing activities
|
|
|
(91,901
|
)
|
|
|
(149,827
|
)
|
Effect of exchange rate changes on cash
|
|
|
(23,019
|
)
|
|
|
32,150
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
|
|
$
|
(17,959
|
)
|
|
$
|
75,493
|
|
|
|
|
|
|
|
|
Operating Activities
Cash provided from operating activities declined by $41.3 million from the prior year period
due mainly to lower revenue and income, partially offset by a related decline in working capital
needs in the current year period compared with the prior year. 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. We anticipate the
need for more working capital to finance expected increases in production and revenue during the
fourth quarter, which may result in a reduction of cash flows from operations for that quarter.
Investing Activities
Capital expenditures were $127.7 million for the nine months ended March 31, 2009 compared
with $163.4 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, 2009 were primarily related to capital improvements in the U.S. and
certain Asian entities. We invested $73.4 million in acquisitions during the first nine months of
fiscal 2009 compared with $42.5 million in the prior year period. In fiscal 2009, we had net
purchases of $21.7 million in marketable securities, which decreased cash flow and a net decrease
of $44.6 million in marketable securities in fiscal 2008, which increased cash flow.
24
Financing Activities
We used less cash from financing activities during the nine months ended March 31, 2009, as
compared with the prior year period because we repurchased less treasury stock.
On August 1, 2008 our Board of Directors authorized the repurchase of up to an aggregate
$200.0 million of common stock through June 30, 2009. We did not repurchase any shares under this
plan during the three months ended March 31, 2009 and we temporarily suspended the purchase of
additional treasury shares as long as the economy remains weak. Approximately $123.7 million was
remaining under the authorization as of March 31, 2009. We purchased 4,507,000 shares of Common
Stock and Class A Common Stock during the nine months ended March 31, 2009, at an aggregate cost of
$76.3 million and 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.
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, 2008. 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, 2008 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, 2008 (Form 10-K) and in Part II, Item 1A of our Quarterly Report on Form 10-Q for
the quarter ended September 30, 2008 (Form 10-Q). You should carefully consider the risks
described in our Form 10-K and Form 10-Q. 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 after the
distribution of this report, whether as a result of new information, future events, changes in
assumptions, or otherwise.
25
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, 2009 or June 30, 2008.
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, net receivable and payable balances and call options on certain commodities. No material
derivative instruments were in use at March 31, 2009 or June 30, 2008.
The translation of the financial statements of the non-North American operations is impacted
by fluctuations in foreign currency exchange rates. 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 $33.1 million and increased income from operations of
$1.8 million for the nine months ended March 31, 2009, compared with the estimated results for the
comparable period in the prior year.
Our $48.4 million of marketable securities at March 31, 2009 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 accumulated and timely communicated to the Chief Executive Officer, Chief
Financial Officer and other members of our management.
Based upon their evaluation as of March 31, 2009, 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
26
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, 2009, 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 or Part II, Item 1A of our Form 10-Q for the quarterly period ended September 30, 2008.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On August 1, 2008, 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, 2009. Share purchases of
Molex Common and/or Class A Common Stock for the quarter ended March 31, 2009 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
|
|
|
3
|
|
|
$
|
12.25
|
|
|
|
|
|
Class A Common Stock
|
|
|
|
|
|
$
|
|
|
|
|
|
|
February 1 February 28
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
62
|
|
|
$
|
11.81
|
|
|
|
|
|
Class A Common Stock
|
|
|
|
|
|
$
|
|
|
|
|
|
|
March 1 March 31
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Class A Common Stock
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
65
|
|
|
$
|
11.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
The shares purchased include exercises of employee stock options.
|
As of March 31, 2009, the dollar value of shares that may yet be purchased under the plan was
$123.7 million.
Item 3. Defaults Upon Senior Securities
None
27
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
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
|
28
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, 2009
|
|
/S/ DAVID D. JOHNSON
David D. Johnson
|
|
|
|
|
Executive Vice President, Treasurer and
Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
|
29
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