Molex Reports Record Revenue and Earnings Per Share

 
TIDMMOL 
 
 

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Molex Incorporated (NASDAQ: MOLX and MOLXA), a global electronic components company, today reported results for its fiscal 2011 second quarter ended December 31, 2010.

 
                                      Three Months Ended 
                                      Dec. 31,   Sept. 30,   Dec. 31, 
USD millions, except per share data   2010       2010        2009 
Net revenue                           $ 901.5    $ 897.7     $ 729.6 
Net income                              78.3       75.1        13.8 
Earnings per share                      0.45       0.43        0.08 
 
 

Revenue for the December 2010 quarter of $901.5 million exceeded the high end of the guidance provided on October 26, 2010, increased 24% from the December 2009 quarter and was incrementally higher than the September 2010 quarter. Revenue in local currencies increased 22% compared with the prior year but decreased 2% compared with the September 2010 quarter. Orders for the quarter were $872 million, an increase of 12% from the prior year quarter and in line with the September 2010 quarter.

Net income for the December 2010 quarter was $78.3 million or $0.45 per share, exceeding the high end of guidance, compared with net income of $13.8 million, or $0.08 per share, for the December 2009 quarter and $75.1 million, or $0.43 per share, for the September 2010 quarter. Net income for the current quarter was impacted by legal costs related to unauthorized activities in Japan of $2.7 million ($1.7 million after-tax or $0.01 per share). In the December 2009 quarter, net income included restructuring costs of $25.6 million ($22.2 million after-tax or $0.13 per share) and costs from unauthorized activities in Japan of $8.5 million ($5.4 million after-tax or $0.03 per share). In the September 2010 quarter, net income included legal costs related to unauthorized activities in Japan of $5.5 million ($3.5 million after-tax or $0.02 per share). The effective tax rate for the current quarter was 30.3%.

"Fiscal 2011 is off to a strong start with successive quarters of revenue and earnings per share records," commented Martin P. Slark, Molex's Chief Executive Officer. "We expect our expanded and more diversified customer base, coupled with our robust new product pipeline, to position us for a strong second half to our fiscal year. In addition to these organic growth opportunities, in January we announced the purchase of Luxtera's active optical cable business which will give us a more complete offering in our high speed cable business and offer us considerable growth potential both now and for next generation technology. With our new, low cost platform, a strong balance sheet, our extensive presence in Asia and significant growth opportunities in the expanding global electronics market, we believe we are well positioned for the future."

Other financial highlights for the quarter ended December 31, 2010:

 
 
    -- Gross profit margin was 30.1% in the December 2010 quarter, compared 

with 29.1% in the December 2009 quarter and 30.6% in the September

2010 quarter.

 
    -- SG&A expense was $159.0 million, or 17.6% of revenue compared with 

20.6% in the December 2009 quarter and 17.5% in the September 2010

quarter.

 
    -- Capital expenditures were $61.5 million or 6.8% of revenue. 
 
    -- Depreciation and Amortization was $61.7 million or 6.8% of revenue. 
 
    -- Backlog was $413.7 million, a decrease of $31.8 million or 7.1% from 

the September 2010 quarter. The book-to-bill ratio was 0.97 for the

December 2010 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 now 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.

Outlook

The Company has considered the seasonal trends and the continued uncertainty in the global electronics market 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 $850 to $890 million for the March 2011 quarter. At this level of revenue, the Company expects earnings per share in a range of $0.39 to $0.43 assuming an effective tax rate of 30%.

Earnings Conference Call Information

A conference call will be held on Tuesday, January 25, 2011 at 4:00 pm central time. Please dial [phone] to participate in the call. International callers should dial [phone]. Please dial in at least five minutes prior to the start of the call and refer to participant pass code 90919051. 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 [phone] or [phone] / pass code 81610425.

Other Investor Events

 
February 16, 2011 / Goldman Sachs Technology and 
Internet Conference  2011 / San Francisco 
March 3, 2011 / Morgan Stanley Technology, Media 
and Telecom  Conference / San Francisco 
 
 

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; 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 quarter ended September 30, 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) 
                                               Dec. 31,      June 30, 
                                               2010          2010 
                                               (unaudited) 
ASSETS 
Current assets: 
Cash and cash equivalents                      $ 392,390     $ 376,352 
Marketable securities                            18,239        18,508 
Accounts receivable, less allowances             759,814       734,932 
of $50,390 and $43,650  respectively 
Inventories                                      559,637       469,369 
Deferred income taxes                            114,944       112,531 
Other current assets                             55,713        64,129 
Total current assets                             1,900,737     1,775,821 
Property, plant and equipment, net               1,129,141     1,055,144 
Goodwill                                         134,218       131,910 
Non-current deferred income taxes                85,222        94,191 
Other assets                                     180,731       179,512 
Total assets                                   $ 3,430,049   $ 3,236,578 
LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities: 
Current portion of long-term debt              $ 107,668     $ 110,070 
and short-term borrowings 
Accounts payable                                 377,592       395,474 
Accrued expenses: 
Accrual for unauthorized activities in Japan     180,074       165,815 
Income taxes payable                             18,842        21,505 
Other                                            207,267       219,832 
Total current liabilities                        891,443       912,696 
Other non-current liabilities                    19,103        19,869 
Accrued pension and postretirement benefits      129,420       135,448 
Long-term debt                                   198,639       183,434 
Total liabilities                                1,238,605     1,251,447 
Commitments and contingencies 
Total stockholders' equity                       2,191,444     1,985,131 
Total liabilities and stockholders' equity     $ 3,430,049   $ 3,236,578 
 
 
Molex Incorporated 
Condensed 
Consolidated 
Statements 
of Operations 
(in thousands, 
except 
per share data) 
(unaudited) 
                     Three Months Ended        Six Months Ended 
                     December 31,              December 31, 
                     2010         2009         2010           2009 
Net revenue          $ 901,465    $ 729,576    $ 1,799,137    $ 1,403,609 
Cost of sales          630,420      517,040      1,253,016      999,654 
Gross profit           271,045      212,536      546,121        403,955 
Selling, general       159,044      150,105      316,100        295,734 
and 
administrative 
Restructuring        -              25,635     -                81,528 
costs and 
asset impairments 
Unauthorized           2,713        8,543        8,255          14,097 
activities 
in Japan 
Total operating        161,757      184,283      324,355        391,359 
expenses 
Income from            109,288      28,253       221,766        12,596 
operations 
Interest (expense)     (1,788  )    (1,286  )    (3,123    )    (2,286    ) 
income, net 
Other income           4,792        (701    )    4,441          2,783 
(expense) 
Total other income     3,004        (1,987  )    1,318          497 
(expense) 
Income before          112,292      26,266       223,084        13,093 
income taxes 
Income taxes           34,009       12,426       69,697         14,389 
Net income (loss)    $ 78,283     $ 13,840     $ 153,387      $ (1,296    ) 
Earnings (loss) 
per share: 
Basic                $ 0.45       $ 0.08       $ 0.88         $ (0.01     ) 
Diluted              $ 0.45       $ 0.08       $ 0.88         $ (0.01     ) 
Dividends declared   $ 0.1750     $ 0.1525     $ 0.3275       $ 0.3050 
per share 
Average common 
shares 
outstanding: 
Basic                  174,664      173,743      174,510        173,605 
Diluted                175,556      174,575      175,329        173,605 
 
 
Molex Incorporated 
Condensed Consolidated Statements of Cash Flows 
(in thousands) 
(unaudited) 
                                                 Six Months Ended 
                                                 December 31, 
                                                 2010          2009 
Operating activities: 
Net income (loss)                                $ 153,387     $ (1,296  ) 
Add non-cash items included 
in net income (loss): 
Depreciation and amortization                      120,804       121,263 
Share-based compensation                           11,460        15,127 
Non-cash restructuring and other costs, net      -               19,922 
Other non-cash items                               7,275         27,428 
Changes in assets and liabilities: 
Accounts receivable                                3,221         (58,715 ) 
Inventories                                        (67,631  )    (18,589 ) 
Accounts payable                                   (36,945  )    9,128 
Other current assets and liabilities               (11,280  )    14,687 
Other assets and liabilities                       2,184         12,883 
Cash provided from operating activities            182,475       141,838 
Investing activities: 
Capital expenditures                               (132,728 )    (93,320 ) 
Proceeds from sales of property,                   1,400         6,554 
plant and equipment 
Proceeds from sales or maturities                  5,203         35,319 
of marketable securities 
Purchases of marketable securities                 (3,612   )    (1,485  ) 
Acquisitions                                     -               (10,090 ) 
Other investing activities                       -               222 
Cash used for investing activities                 (129,737 )    (62,800 ) 
Financing activities: 
Proceeds from revolving credit                     50,000        110,000 
facility and short-term loans 
Payments on revolving credit facility              (15,000  )    (70,000 ) 
Payments of short-term and long-term debt          (36,051  )    (15,336 ) 
Cash dividends paid                                (53,186  )    (52,919 ) 
Exercise of stock options                          1,820         991 
Other financing activities                         (1,954   )    (1,183  ) 
Cash used for financing activities                 (54,371  )    (28,447 ) 
Effect of exchange rate changes on cash            17,671        11,020 
Net increase in cash and cash equivalents          16,038        61,611 
Cash and cash equivalents, beginning of period     376,352       424,707 
Cash and cash equivalents, end of period         $ 392,390     $ 486,318 
 
 

Molex IncorporatedSteve Martens, Vice President of Investor Relations(630) 527-4344