MOLX Molex Incorporated (MM)

Molex Incorporated (NASDAQ: MOLX and MOLXA), a global electronic components company, today reported results for its fiscal 2011 third quarter ended March 31, 2011.

  Three Months Ended Mar. 31,   Dec. 31,   Mar. 31,

USD millions, except per share data

2011 2010 2010   Net revenue $ 874.5 $ 901.5 $ 756.3 Net income 68.1 78.3 38.4 Earnings per share 0.39 0.45 0.22

Revenue for the March 2011 quarter of $874.5 million increased 16% from the March 2010 quarter and declined 3% from the December 2010 quarter. Revenue in local currencies increased 13% compared with the prior year quarter and declined 4% compared with the December 2010 quarter. Orders for the quarter were $880 million, an increase of 5% from the prior year quarter and 1% from the December 2010 quarter.

Net income for the March 2011 quarter was $68.1 million or $0.39 per share, compared with net income of $38.4 million, or $0.22 per share, for the March 2010 quarter and $78.3 million, or $0.45 per share, for the December 2010 quarter. The effective tax rate for the current quarter was 30.4%. These periods include costs related to unauthorized activities in Japan as outlined below in our update on this matter. The March 2010 quarter also included restructuring costs of $9.1 million ($7.4 million after-tax or $0.04 per share).

“We were fortunate that the recent natural disasters in Japan had only a minor impact on Molex this quarter. Our employees are safe and our facilities are operational,” commented Martin P. Slark, Molex’s Chief Executive Officer. “Financial results for the March quarter were generally in line with our guidance and expectations; however, we do expect additional impact on our results in the June quarter due to supply chain disruptions in Japan. Fortunately, we have significant new product introductions and strong new orders outside of Japan which will help to mitigate this situation.”

“The rate of expansion of mobile computing, investments in data and communication infrastructure and growth of the middle class in emerging markets continues to accelerate, driving increased demand for our many products. Our new organization structure, Focus Account program and portfolio management initiatives position Molex to benefit from these strong trends.”

Other financial highlights for the quarter ended March 31, 2011:

• Gross profit margin was 29.8% in the March 2011 quarter, compared with 31.2% in the March 2010 quarter and 30.1% in the December 2010 quarter.
• SG&A expense was $159.4 million, or 18.2% of revenue compared with 20.7% in the March 2010 quarter and 17.6% in the December 2010 quarter.
• Capital expenditures were $64.2 million or 7.3% of revenue.
• Depreciation and amortization was $60.9 million or 7.0% of revenue.
• Backlog was $425.4 million, an increase of $11.7 million or 2.8% from the December 2010 quarter. The book-to-bill ratio was 1.01 for the March 2011 quarter.

Unauthorized Activities in Japan

As previously disclosed, in April 2010 Molex launched an investigation into unauthorized activities in its Japanese subsidiary after it was learned that an individual had obtained unauthorized loans and entered into unauthorized trading in Molex Japan’s name. The Company retained outside legal counsel and they retained forensic accountants to investigate the matter and that investigation has been completed. On August 31, 2010, the bank which holds the unauthorized loans filed a complaint in Tokyo District Court requesting payment from Molex Japan. Molex Japan intends to vigorously contest the enforceability of the outstanding unauthorized loans and any attempt by the lender to obtain payment.

Net income for the March 2011, December 2010 and March 2010 quarters were impacted by costs related to the unauthorized activities in Japan of $2.9 million ($1.8 million after-tax or $0.01 per share), $2.7 million ($1.7 million after-tax or $0.01 per share), and $8.0 million ($5.1 million after-tax or $0.03 per share), respectively.

Increase in Cash Dividend

The Board of Directors has approved an increase in the quarterly cash dividend to $0.20 per share, an increase of 14.3% from the previous cash dividend of $0.175 per share. The increase is effective for the cash dividend payable on July 25, 2011 to shareholders of record on June 30, 2011, for each share of Common Stock (MOLX), Class A Common Stock (MOLXA) and Class B Common Stock, and will continue quarterly until further action by the Board.

Outlook

The Company has considered the estimated impact on revenue and earnings from the natural disasters in Japan in setting its guidance for the coming quarter. In consideration of these factors and assuming constant foreign currency rates and commodity prices, the Company estimates revenue in a range of $900 to $930 million for the June 2011 quarter, even after a reduction of approximately $20 million due to supply chain disruptions in Japan. At this level of revenue, the Company expects earnings per share in a range of $0.42 to $0.48 assuming an effective tax rate of 30%. In addition, the guidance assumes unusual costs due to the events in Japan including freight, production inefficiencies and asset related charges totaling $3 to $4 million.

Earnings Conference Call Information

A conference call will be held on Tuesday, May 3, 2011 at 4:00 pm central time. Please dial (888) 680-0894 to participate in the call. International callers should dial (617) 213-4860. Please dial in at least five minutes prior to the start of the call and refer to participant pass code 73185691. Internet users will be able to access the webcast, 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 47915877.

Other Investor Events

May 24, 2011 / 5th Annual Barrington Research Industrial & Business Services Conf / Chicago June 16, 2011 / William Blair & Company’s 31st Annual Growth Stock Conference / Chicago June 21, 2011 / NASDAQ OMX 26th Investor Program / London

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,” “potential,” 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; natural disasters; the financial condition of our customers; labor cost increases; the challenges attendant to plant closings and restructurings, the difficulty of commencing or increasing production at existing facilities, and the reactions of customers, governmental units, employees and other groups; and the ability to realize cost savings from restructuring activities, the outcome of legal proceedings 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, 2010, and for the Form 10-Q for the quarters ended September 30, 2010 and December 31, 2010, 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 72-year-old global manufacturer of electronic, electrical and fiber optic interconnection systems. Based in Lisle, Illinois, USA, the Company operates 39 manufacturing locations in 16 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

Condensed Consolidated Balance Sheets

(in thousands)

  Mar. 31,   June 30, 2011 2010 (unaudited)

ASSETS

Current assets: Cash and cash equivalents $ 447,796 $ 376,352 Marketable securities 20,400 18,508 Accounts receivable, less allowances of $47,275 and $43,650 respectively 780,761 734,932 Inventories 546,080 469,369 Deferred income taxes 115,278 112,531 Other current assets   36,978   64,129 Total current assets 1,947,293 1,775,821 Property, plant and equipment, net 1,139,918 1,055,144 Goodwill 148,422 131,910 Non-current deferred income taxes 81,767 94,191 Other assets   189,571   179,512 Total assets $ 3,506,971 $ 3,236,578  

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities: Current portion of long-term debt and short-term borrowings $ 116,724 $ 110,070 Accounts payable 353,188 395,474 Accrued expenses: Accrual for unauthorized activities in Japan 178,339 165,815 Income taxes payable 20,906 21,505 Other   214,809   219,832 Total current liabilities 883,966 912,696 Other non-current liabilities 22,244 19,869 Accrued pension and postretirement benefits 130,033 135,448 Long-term debt   202,549   183,434 Total liabilities   1,238,792   1,251,447 Commitments and contingencies Total stockholders’ equity   2,268,179   1,985,131 Total liabilities and stockholders’ equity $ 3,506,971 $ 3,236,578      

Molex Incorporated

Condensed Consolidated Statements of Income

(unaudited) (in thousands, except per share data)     Three Months Ended   Nine Months Ended March 31, March 31, 2011   2010 2011   2010   Net revenue $ 874,531 $ 756,294 $ 2,673,668 $ 2,159,903 Cost of sales   613,917     520,564     1,866,933     1,520,218   Gross profit   260,614     235,730     806,735     639,685     Selling, general and administrative 159,448 156,374 475,548 452,108 Restructuring costs and asset impairments - 9,068 - 90,596 Unauthorized activities in Japan   2,855     8,032     11,110     22,129   Total operating expenses   162,303     173,474     486,658     564,833     Income from operations 98,311 62,256 320,077 74,852   Interest (expense) income, net (1,726 ) (2,298 ) (4,849 ) (4,584 ) Other income (expense)   1,325     (2,721 )   5,766     62   Total other (expense) income   (401 )   (5,019 )   917     (4,522 )   Income before income taxes 97,910 57,237 320,994 70,330   Income taxes   29,765     18,790     99,462     33,179     Net income $ 68,145   $ 38,447   $ 221,532   $ 37,151     Earnings per share: Basic $ 0.39 $ 0.22 $ 1.27 $ 0.21 Diluted $ 0.39 $ 0.22 $ 1.26 $ 0.21   Dividends declared per share $ 0.1750 $ 0.1525 $ 0.5025 $ 0.4575   Average common shares outstanding: Basic 174,957 173,858 174,666 173,689 Diluted 176,449 174,838 175,678 174,523      

Molex Incorporated

Condensed Consolidated Statements of Cash Flows

(unaudited) (in thousands)     Nine Months Ended March 31, 2011   2010   Operating activities: Net income $ 221,532 $ 37,151 Add non-cash items included in net income: Depreciation and amortization 181,716 180,699 Share-based compensation 17,009 21,024 Non-cash restructuring and other costs, net - 20,041 Other non-cash items 17,719 21,817 Changes in assets and liabilities: Accounts receivable (2,143 ) (122,127 ) Inventories (43,112 ) (62,059 ) Accounts payable (63,725 ) 48,809 Other current assets and liabilities 3,903 21,701 Other assets and liabilities   (5,968 )   14,870   Cash provided from operating activities   326,931     181,926     Investing activities: Capital expenditures (196,915 ) (150,001 ) Proceeds from sales of property, plant and equipment 1,460 8,082 Proceeds from sales or maturities of marketable securities 5,568 47,339 Purchases of marketable securities (6,062 ) (15,259 ) Acquisitions (18,847 ) (10,097 ) Other investing activities   (196 )   (5,308 ) Cash used for investing activities (214,992 ) (125,244 )   Financing activities: Proceeds from revolving credit facility 85,000 154,000 Payments on revolving credit facility (20,000 ) (79,000 ) Proceeds from short-term loans 28,856 - Payments on short-term loans (31,843 ) - Net change in long-term debt (47,908 ) (53,194 ) Cash dividends paid (83,766 ) (79,420 ) Exercise of stock options 5,935 2,257 Other financing activities   (2,990 )   (2,056 ) Cash used for financing activities (66,716 ) (57,413 )   Effect of exchange rate changes on cash   26,221     7,778   Net increase in cash and cash equivalents 71,444 7,047 Cash and cash equivalents, beginning of period   376,352     424,707   Cash and cash equivalents, end of period $ 447,796   $ 431,754