Molex Incorporated (NASDAQ: MOLX) (NASDAQ: MOLXA), a global
electronic components company, today reported financial results for
the quarter ended March 31, 2010.
Three Months
Ended
USD millions, except per share
data
Mar 31,2010
Dec 31,2009
Mar 31,2009
Net revenue
$756.3
$729.6
$505.5
Net income (loss) 23.8 19.3 (58.6) Earnings (loss) per share 0.14
0.11 (0.34) Non-GAAP net income (loss)* 51.0 41.4 (24.6) Non-GAAP
earnings (loss) per share* 0.29 0.24 (0.14)
*A reconciliation of non-GAAP measures can be found on page
5
Revenue for the March 2010 quarter of $756.3 million exceeded
the high end of the guidance provided on January 26, 2010 of $735
million and increased 3.7% from the December 2009 quarter and 49.6%
from the March 2009 quarter. The increase in local currency was
4.9% sequentially and 45.5% compared with the prior year. Orders
for the quarter were $838 million, an increase of 7.7% from the
December 2009 quarter and 76.6% from the prior year quarter.
Net income for the March 2010 quarter was $23.8 million or $0.14
per share, compared with net income of $19.3 million or $0.11 per
share, for the December 2009 quarter. For the March 2010 quarter,
net income included a pretax restructuring charge of $9.0 million
($7.4 million after-tax or $0.04 per share) and a pretax loss of
$31.0 million ($19.8 million after-tax or $0.11 per share) related
to unauthorized activities in Molex Japan. The effective tax rate
for the quarter was 30.5%.
On a non-GAAP basis, net income for the March 2010 quarter was
$51.0 million or $0.29 per share, compared with net income of $41.4
million or $0.24 per share, in the December 2009 quarter. This
result exceeded the upper end of the guidance for non-GAAP earnings
per share of $0.26 per share. For the quarter, non-GAAP net income
excluded the restructuring charge and loss for unauthorized
activities in Molex Japan previously mentioned.
“Business conditions in our key markets continue to improve,
resulting in strong operating leverage due to our new,
post-restructuring cost structure,” commented Martin P. Slark,
Molex’s Chief Executive Officer. “Revenue benefitted from a broad
based recovery in all end markets and geographies with particular
strength in the Industrial market, continued growth in the
Automotive market as well as better than seasonal performance in
the Data and Consumer markets. We are optimistic that the recovery
will continue as global economic conditions improve and as our
customers introduce new products. Our operating margin, excluding
special charges, was 10.5% for the quarter. With further
restructuring savings to be realized and revenue growth developing,
we see a clear path to achieving our target operating margin of
14%.”
Other financial highlights for
the quarter ended March 31, 2010:
- Gross profit margin improved to
31.2%, compared with 29.1% in the December 2009 quarter due to
higher revenue and the benefit of the restructuring program.
- SG&A expense was $156.4
million, an increase of $6.3 million from the December 2009
quarter. The increase was largely due to research and development
costs related to new product introductions, variable sales costs
for royalties and sales incentive compensation due to the rapid
increase in sales.
- Capital expenditures were $56.7
million or 7.5% of revenue.
- Depreciation and amortization
expense was $59.4 million or 7.9% of revenue.
- The book-to-bill ratio was 1.11
and was above 1.0 in all primary end markets.
- Backlog was $422.2 million, an
increase of $81.6 million or 24% from the December 2009
quarter.
- Cash flow from operations was
$40.1 million.
Nine-Month
Results
Revenue for the nine months ended March 31, 2010 was $2.2
billion, an increase of 7.4% compared with the nine months ended
March 31, 2009. The increase in local currency was 5.1%. Net income
of $31.5 million or $0.18 per share included a pretax restructuring
charge of $90.6 million ($67.7 million after-tax or approximately
$0.39 per share), a tax adjustment related to stock compensation of
$4.8 million or $0.03 per share and a pretax loss of $31.0 million
($19.8 million after-tax or $0.11 per share) related to
unauthorized activities in Molex Japan.
Unauthorized Activities in
Molex Japan
In April 2010, Molex launched an investigation into unauthorized
activities in its Japanese subsidiary because it learned that an
individual had obtained unauthorized loans and entered into
unauthorized trading activities in Molex Japan’s name. This
individual has admitted to forging documentation in arranging and
concealing the transactions. At this time, the total amount
involved in this fraud scheme has been estimated to be
approximately $193.2 million, of which Molex Japan has recognized a
pretax loss in the March 2010 quarter of $31.0 million ($19.8
million after-tax or $0.11 per share) and disclosed a contingent
liability of $162.2 million. The loss of $31.0 million is comprised
of $20.2 million for misappropriated cash and $10.8 million for the
repayment of an unauthorized loan subsequent to March 31, 2010. The
contingent liability represents the current balance of unauthorized
borrowings in Japan.
Restructuring
Update
The Company expects to complete its restructuring program by
June 2010 and estimates a total pretax charge for the entire
program of approximately $300 million. The expected cost savings
from the restructuring program is approximately $205 million on an
annual basis.
Outlook
The Company estimates revenue in a range of $810 to $830 million
for the June 2010 quarter. At this level of revenue, the Company
expects earnings per share in a range of $0.30 to $0.34, assuming
an effective tax rate of 30%. Included in these estimates is a
pretax restructuring charge of approximately $11.5 million or $0.06
per share after-tax. These estimates exclude any additional losses
related to, or costs of the investigation into, unauthorized
activities in Molex Japan.
Earnings Conference Call
Information
A conference call will be held on Tuesday, April 27, 2010 at
4:00 pm central time. Please dial (888) 679-8018 to participate in
the call. International callers should dial (617) 213-4845. Please
dial in at least five minutes prior to the start of the call and
refer to participant pass code 65759347. Internet users will be
able to access the web-cast, including slide materials, live and in
replay in the “Investors” section of the Company’s website at
www.molex.com. A 48-hour telephone replay will be available at
approximately 6:00 pm central time at (888) 286-8010 or (617)
801-6888 / pass code 62586357.
Other Investor
Events
May 13, 2010 – Credit Suisse Semi-Cap and Electronics Supply
Chain Conference in Boston
May 18, 2010 – Houlihan Lokey’s 5th Annual Global Industrials
Conference in New York
May 26, 2010 – Barrington Research Industrial Conference in
Chicago
June 09, 2010 – UBS 2010 Global Technology and Services
Conference in New York
June 10, 2010 – RBC Capital Markets 2010 Technology, Media and
Communications Conf in New York
June 16, 2010 – William Blair & Company 2010 Growth Stock
Conference in Chicago
August 03, 2010 – Molex FY10 Q4 Earnings Release
August 04, 2010 – Molex Analysts Meeting in Lisle, Illinois
Forward-Looking
Statements
Statements in this release that are not historical are
forward-looking and are subject to various risks and uncertainties
that could cause actual results to vary materially from those
stated. Words such as “anticipates,” “expects,” “believes,”
“intends,” “plans,” “projects,” “estimates,” and similar
expressions are used to identify these forward-looking statements.
Forward-looking statements are based on currently available
information and include, among others, the discussion under
“Outlook.” These statements are not guarantees of future
performance and are subject to risks, uncertainties and assumptions
including those associated with the operation of our business,
including the risk that customer demand will decrease either
temporarily or permanently, whether due to the Company's actions or
the demand for the Company's products, and that the Company may not
be able to respond through cost reductions in a timely and
effective manner; the risk that the value of our inventory may
decline; price cutting, new product introductions and other actions
by our competitors; fluctuations in the costs of raw materials that
the Company is not able to pass through to customers because of
existing contracts or market factors; the availability of credit
and general market liquidity; fluctuations in currency exchange
rates; the financial condition of our customers; the challenges
attendant to plant closings and restructurings, including the
difficulty of predicting plant closing and relocation costs, the
difficulty of commencing or increasing production at existing
facilities, and the reactions of customers, governmental units,
employees and other groups, the challenges attendant to plant
construction; the ability to realize cost savings from
restructuring activities; and losses resulting from unauthorized
activities in Molex Japan.
Other factors, risks and uncertainties are set forth in Item 1A
“Risk Factors” of the Company’s Form 10-K for the year ended June
30, 2009, and the Form 10-Q for the quarters ended September 30,
2009 and December 31, 2009 which are incorporated by reference and
in other reports that Molex files or furnishes with the Securities
and Exchange Commission. Forward-looking statements are based upon
assumptions as to future events that may not prove to be accurate.
Actual outcomes and results may differ materially from what is
expressed in these forward-looking statements. As a result, this
release speaks only as of its date and Molex disclaims any
obligation to revise these forward-looking statements or to provide
any updates regarding information contained in this release
resulting from new information, future events or otherwise.
Molex Incorporated is a 71-year-old global manufacturer of
electronic, electrical and fiber optic interconnection systems.
Based in Lisle, Illinois, USA, the Company operates 40
manufacturing locations in 17 countries. The Molex website is
www.molex.com.
Editor’s note: Molex is traded on the NASDAQ Global Select
Market (MOLX and MOLXA) in the United States and on the London
Stock Exchange. The Company’s voting common stock (MOLX) is
included in the S&P 500 Index.
Molex Incorporated
Non-GAAP Measures
(in thousands, except per share data) Mar. 31,
Dec. 31, Mar. 31,
2010
2009 2009 Three months ended: Net income (loss) $ 23,826 $ 19,286 $
(58,600 ) Restructuring costs and asset impairments 7,440 22,154
34,009 Loss on unauthorized activities in Molex Japan 19,741
- - Non-GAAP net income (loss) $ 51,007 $
41,440 $ (24,591 ) Earnings (loss) per share $ 0.14 $
0.11 $ (0.34 ) Restructuring costs and asset impairments 0.04 0.13
0.20 Loss on unauthorized activities in Molex Japan 0.11
- - Non-GAAP earnings (loss) per share $ 0.29
$ 0.24 $ (0.14 )
Non-GAAP net income (loss) and non-GAAP earnings (loss) per
share are non-GAAP financial measures. We refer to non-GAAP net
income (loss) and non-GAAP earnings (loss) per share to describe
earnings and earnings per share excluding the items referenced
above. We believe that non-GAAP net income (loss) and non-GAAP
earnings (loss) per share provide useful information to investors
because both provide information about the estimated financial
performance of Molex’s ongoing business. Non-GAAP net income (loss)
and non-GAAP earnings (loss) per share are used by management in
its financial and operational decision-making and evaluation of
overall operating performance and segment level core operating
performance. Non-GAAP net income (loss) and non-GAAP earnings
(loss) per share may be different from similar measures used by
other companies.
Molex Incorporated
Condensed Consolidated Balance
Sheets
(in thousands) Mar. 31, June 30, 2010
2009
(Unaudited)
ASSETS
Current assets: Cash and cash equivalents $ 431,754
$
424,707 Marketable securities 11,636 43,234 Accounts receivable,
less allowances of $42,445 and $32,593 respectively 657,280 528,907
Inventories 419,864 354,337 Deferred income taxes 42,793 27,939
Other current assets 70,093 68,449 Total current
assets 1,633,420 1,447,573 Property, plant and equipment, net
1,054,575 1,080,417 Goodwill 130,099 128,494 Non-current deferred
income taxes 78,163 89,332 Other assets 189,549
196,341 Total assets $ 3,085,806
$
2,942,157
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities: Current portion of long-term debt and
short-term borrowings $ 103,048
$
224,340 Accounts payable 325,398 266,633 Accrued expenses 253,121
218,429 Income taxes payable 7,493 4,750 Total
current liabilities 689,060 714,152 Other non-current liabilities
19,330 21,862 Accrued pension and postretirement benefits 114,949
113,268 Long-term debt 182,459 30,311 Total
liabilities 1,005,798 879,593 Commitments and
contingencies Stockholders’ equity: Common stock 11,193
11,138 Paid-in capital 631,848 601,459 Retained earnings 2,307,993
2,355,991 Treasury stock (1,097,518 ) (1,089,322 ) Accumulated
other comprehensive income 226,492 183,298 Total
stockholders’ equity 2,080,008 2,062,564 Total
liabilities and stockholders’ equity $ 3,085,806 $ 2,942,157
Molex Incorporated
Condensed Consolidated
Statements of Operations
(Unaudited) (in thousands, except per share data)
Three Months Ended
Nine Months Ended
March 31, March 31, 2010 2009 2010 2009 Net
revenue $ 756,294 $ 505,539 $ 2,159,903 $ 2,011,252 Cost of
sales 520,564 412,143 1,520,218
1,492,312 Gross profit 235,730 93,396 639,685
518,940 Selling, general and administrative 156,374
139,071 452,108 450,034 Restructuring costs and asset impairments
9,068 44,344 90,596 105,904 Loss on unauthorized activities in
Molex Japan 30,967 - 30,967 - Goodwill impairment - -
- 93,140 Total operating expenses 196,409
183,415 573,671 649,078 Income (loss)
from operations 39,321 (90,019 ) 66,014 (130,138 ) Interest
(expense) income, net (2,298 ) 251 (4,584 ) 2,287 Other (expense)
income (2,721 ) 3,259 62 24,252 Total
other (expense) income (5,019 ) 3,510 (4,522 )
26,539 Income (loss) before income taxes 34,302
(86,509 ) 61,492 (103,599 ) Income taxes 10,476
(27,909 ) 29,975 (2,052 ) Net income
(loss) $ 23,826 $ (58,600 ) $ 31,517 $ (101,547 ) Earnings
(loss) per share: Basic $ 0.14 $ (0.34 ) $ 0.18 $ (0.58 ) Diluted $
0.14 $ (0.34 ) $ 0.18 $ (0.58 ) Dividends declared per share
$ 0.1525 $ 0.1525 $ 0.4575 $ 0.4575 Average common shares
outstanding: Basic 173,858 173,228 173,689 174,985 Diluted 174,838
173,228 174,523 174,985
Molex Incorporated
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(in thousands) Nine Months Ended March 31, 2010
2009 Operating activities: Net income (loss) $ 31,517
$ (101,547 ) Add non-cash items included in net income (loss):
Depreciation and amortization 180,699 190,085 Share-based
compensation 21,024 19,393 Goodwill impairment - 93,140 Non-cash
restructuring and other costs, net 20,041 20,041 Other non-cash
items 21,817 (10,649 ) Changes in assets and liabilities: Accounts
receivable (122,127 ) 282,082 Inventories (62,059 ) 93,916 Accounts
payable 48,808 (167,781 ) Other current assets and liabilities
31,147 (50,148 ) Other assets and liabilities 11,059
(56,947 ) Cash provided from operating activities 181,926 311,585
Investing activities: Capital expenditures (150,001 )
(127,688 ) Proceeds from sales of property, plant and equipment
8,082 7,561 Proceeds from sales or maturities of marketable
securities 47,339 11,694 Purchases of marketable securities (15,259
) (33,399 ) Acquisitions (10,097 ) (73,447 ) Other investing
activities (5,308 ) 655 Cash used for investing
activities (125,244 ) (214,624 ) Financing activities:
Proceeds from revolving credit facility and short term loans
154,000 115,000 Payments on revolving credit facility (79,000 )
(105,000 ) Net change in long-term debt (53,194 ) 47,300 Cash
dividends paid (79,420 ) (73,222 ) Exercise of stock options 2,257
1,233 Purchase of treasury stock - (76,342 ) Other financing
activities (2,056 ) (870 ) Cash used for financing
activities (57,413 ) (91,901 ) Effect of exchange rate
changes on cash 7,778 (23,019 ) Net increase
(decrease) in cash and cash equivalents 7,047 (17,959 ) Cash and
cash equivalents, beginning of period 424,707 475,507
Cash and cash equivalents, end of period $ 431,754 $ 457,548
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