Attached files
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EX-10 - EX-10 - MOLEX INC | c55841exv10.htm |
EX-32.2 - EX-32.2 - MOLEX INC | c55841exv32w2.htm |
EX-31.1 - EX-31.1 - MOLEX INC | c55841exv31w1.htm |
EX-31.2 - EX-31.2 - MOLEX INC | c55841exv31w2.htm |
EX-32.1 - EX-32.1 - MOLEX INC | c55841exv32w1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the Quarterly Period Ended December 31, 2009
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 0-7491
MOLEX INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
36-2369491 (I.R.S. Employer Identification No.) |
2222 Wellington Court, Lisle, Illinois 60532
(Address of principal executive offices)
Registrants telephone number, including area code: (630) 969-4550
(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):
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant 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 January 25, 2010, the following numbers of shares of the Companys common stock were outstanding:
Common Stock | 95,560,076 | |
Class A Common Stock | 78,148,338 | |
Class B Common Stock | 94,255 |
Molex Incorporated
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements | Page | |||||
Condensed Consolidated Balance Sheets as of December 31, 2009 and June 30, 2009 | 3 | |||||
Condensed Consolidated Statements of Operations for the three and six months ended December 31, 2009 and 2008 | 4 | |||||
Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2009 and 2008 | 5 | |||||
Notes to Condensed Consolidated Financial Statements | 6 | |||||
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 14 | ||||
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk | 26 | ||||
Item 4.
|
Controls and Procedures | 27 | ||||
PART II OTHER INFORMATION
|
||||||
Item 1.
|
Legal Proceedings | 27 | ||||
Item 1A.
|
Risk Factors | 27 | ||||
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds | 28 | ||||
Item 4.
|
Submission of Matters to a Vote of Security Holders | 28 | ||||
Item 6.
|
Exhibits | 29 | ||||
SIGNATURES
|
30 |
Section 302 Certification of Chief Executive Officer
Section 302 Certification of Chief Financial Officer
Section 906 Certification of Chief Executive Officer
Section 906 Certification of Chief Financial Officer
2
PART I
Item 1. | Financial Statements |
Molex Incorporated
Condensed Consolidated Balance Sheets
(in thousands)
Condensed Consolidated Balance Sheets
(in thousands)
Dec. 31, | June 30, | |||||||
2009 | 2009 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 486,318 | $ | 424,707 | ||||
Marketable securities |
9,645 | 43,234 | ||||||
Accounts receivable, less allowances of $40,679 and $32,593, respectively |
626,449 | 528,907 | ||||||
Inventories |
372,166 | 354,337 | ||||||
Deferred income taxes |
25,068 | 27,939 | ||||||
Other current assets |
63,091 | 68,449 | ||||||
Total current assets |
1,582,737 | 1,447,573 | ||||||
Property, plant and equipment, net |
1,064,197 | 1,080,417 | ||||||
Goodwill |
129,306 | 128,494 | ||||||
Non-current deferred income taxes |
79,396 | 89,332 | ||||||
Other assets |
190,564 | 196,341 | ||||||
Total assets |
$ | 3,046,200 | $ | 2,942,157 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt and short-term loans |
$ | 3,821 | $ | 224,340 | ||||
Accounts payable |
285,904 | 266,633 | ||||||
Accrued expenses |
239,355 | 218,429 | ||||||
Income taxes payable |
17,492 | 4,750 | ||||||
Total current liabilities |
546,572 | 714,152 | ||||||
Other non-current liabilities |
20,353 | 21,862 | ||||||
Accrued pension and postretirement benefits |
116,342 | 113,268 | ||||||
Long-term debt |
287,232 | 30,311 | ||||||
Total liabilities |
970,499 | 879,593 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock |
11,170 | 11,138 | ||||||
Paid-in capital |
620,092 | 601,459 | ||||||
Retained earnings |
2,315,918 | 2,355,991 | ||||||
Treasury stock |
(1,092,414 | ) | (1,089,322 | ) | ||||
Accumulated other comprehensive income |
220,935 | 183,298 | ||||||
Total stockholders equity |
2,075,701 | 2,062,564 | ||||||
Total liabilities and stockholders equity |
$ | 3,046,200 | $ | 2,942,157 | ||||
See accompanying notes to condensed consolidated financial statements.
3
Molex Incorporated
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net revenue |
$ | 729,576 | $ | 666,728 | $ | 1,403,609 | $ | 1,505,713 | ||||||||
Cost of sales |
517,040 | 490,656 | 999,654 | 1,080,169 | ||||||||||||
Gross profit |
212,536 | 176,072 | 403,955 | 425,544 | ||||||||||||
Selling, general and administrative |
150,105 | 144,612 | 295,734 | 310,963 | ||||||||||||
Restructuring costs and asset impairments |
25,635 | 39,782 | 81,528 | 61,560 | ||||||||||||
Goodwill impairment |
| 93,140 | | 93,140 | ||||||||||||
Total operating expenses |
175,740 | 277,534 | 377,262 | 465,663 | ||||||||||||
Income (loss) from operations |
36,796 | (101,462 | ) | 26,693 | (40,119 | ) | ||||||||||
Interest (expense) income, net |
(1,286 | ) | 843 | (2,286 | ) | 2,036 | ||||||||||
Other (expense) income |
(701 | ) | 18,386 | 2,783 | 20,993 | |||||||||||
Total other (expense) income |
(1,987 | ) | 19,229 | 497 | 23,029 | |||||||||||
Income (loss) before income taxes |
34,809 | (82,233 | ) | 27,190 | (17,090 | ) | ||||||||||
Income taxes |
15,523 | 5,011 | 19,499 | 25,857 | ||||||||||||
Net income (loss) |
$ | 19,286 | $ | (87,244 | ) | $ | 7,691 | $ | (42,947 | ) | ||||||
Earnings (loss) per share: |
||||||||||||||||
Basic |
$ | 0.11 | $ | (0.50 | ) | $ | 0.04 | $ | (0.24 | ) | ||||||
Diluted |
$ | 0.11 | $ | (0.50 | ) | $ | 0.04 | $ | (0.24 | ) | ||||||
Dividends declared per share |
$ | 0.1525 | $ | 0.1525 | $ | 0.3050 | $ | 0.3050 | ||||||||
Average common shares outstanding: |
||||||||||||||||
Basic |
173,743 | 174,636 | 173,605 | 175,736 | ||||||||||||
Diluted |
174,575 | 174,636 | 174,356 | 175,736 |
See accompanying notes to condensed consolidated financial statements.
4
Molex Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Six Months Ended | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
Operating activities: |
||||||||
Net income (loss) |
$ | 7,691 | $ | (42,947 | ) | |||
Add non-cash items included in net income (loss): |
||||||||
Depreciation and amortization |
121,263 | 126,349 | ||||||
Share-based compensation |
15,127 | 13,075 | ||||||
Goodwill impairment |
| 93,140 | ||||||
Non-cash restructuring and other costs, net |
19,922 | 7,092 | ||||||
Other non-cash items |
27,428 | (7,326 | ) | |||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
(58,715 | ) | 141,592 | |||||
Inventories |
(18,589 | ) | 2,637 | |||||
Accounts payable |
9,128 | (110,047 | ) | |||||
Other current assets and liabilities |
9,511 | 10,822 | ||||||
Other assets and liabilities |
9,072 | (44,144 | ) | |||||
Cash provided from operating activities |
141,838 | 190,243 | ||||||
Investing activities: |
||||||||
Capital expenditures |
(93,320 | ) | (96,637 | ) | ||||
Proceeds from sales of property, plant and equipment |
6,554 | 2,324 | ||||||
Proceeds from sales or maturities of marketable securities |
35,319 | 7,230 | ||||||
Purchases of marketable securities |
(1,485 | ) | (15,111 | ) | ||||
Acquisitions |
(10,090 | ) | (73,447 | ) | ||||
Other investing activities |
222 | (188 | ) | |||||
Cash used for investing activities |
(62,800 | ) | (175,829 | ) | ||||
Financing activities: |
||||||||
Proceeds from revolving credit facility and short term loans |
110,000 | 115,000 | ||||||
Payments on revolving credit facility |
(70,000 | ) | (50,000 | ) | ||||
Payments on long-term debt |
(15,336 | ) | (197 | ) | ||||
Cash dividends paid |
(52,919 | ) | (46,807 | ) | ||||
Exercise of stock options |
991 | 1,187 | ||||||
Purchase of treasury stock |
| (76,342 | ) | |||||
Other financing activities |
(1,183 | ) | (960 | ) | ||||
Cash used for financing activities |
(28,447 | ) | (58,119 | ) | ||||
Effect of exchange rate changes on cash |
11,020 | (13,229 | ) | |||||
Net increase (decrease) in cash and cash equivalents |
61,611 | (56,934 | ) | |||||
Cash and cash equivalents, beginning of period |
424,707 | 475,507 | ||||||
Cash and cash equivalents, end of period |
$ | 486,318 | $ | 418,573 | ||||
See accompanying notes to condensed consolidated financial statements.
5
Molex Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(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 41 manufacturing
locations in 17 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 six months ended December 31, 2009 are not necessarily an
indication of the results that may be expected for the year ending June 30, 2010. The Condensed
Consolidated Balance Sheet as of June 30, 2009 was derived from our audited consolidated financial
statements for the year ended June 30, 2009. 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, 2009.
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. Material subsequent events are evaluated and disclosed through the report issuance
date, January 29, 2010.
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 and Europe and, in
general, the movement of manufacturing activities at these plants to other facilities. Net
restructuring cost during the three months ended December 31, 2009 was $25.6 million, consisting of
$6.8 million in asset impairments and $18.8 million of employee termination benefits. Net
restructuring cost during the three months ended September 30, 2009 was $55.9 million, consisting
of $13.2 million of asset impairments and $42.7 million for employee termination benefits that were
net of $3.8 million pension curtailment gain. Net restructuring costs during the three months ended
December 31, 2008, was $39.8 million, consisting of $4.4 million in asset impairments and $35.4
million of severance. The cumulative restructuring costs and related asset impairments since we
announced the restructuring plan totaled $279.4 million.
We expect to incur total restructuring and asset impairment costs related to restructuring
actions approximating $300 million. 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 included reorganization of our global product divisions in fiscal
2009. 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.
6
The following table sets forth restructuring costs and asset impairments by segment (in
thousands):
Custom & | Corporate | |||||||||||||||
Connector | Electrical | and Other | Total | |||||||||||||
Cumulative costs at June 30, 2009 |
$ | 116,066 | $ | 38,555 | $ | 43,278 | $ | 197,899 | ||||||||
Net restructuring costs during the first quarter: |
||||||||||||||||
Severance costs |
37,469 | 4,639 | 595 | 42,703 | ||||||||||||
Asset impairments |
13,191 | | | 13,191 | ||||||||||||
Cumulative restructuring costs and asset
impairments at Sept 30, 2009 |
$ | 166,726 | $ | 43,194 | $ | 43,873 | $ | 253,793 | ||||||||
Net restructuring costs during the second quarter: |
||||||||||||||||
Severance costs |
12,209 | 3,189 | 3,455 | 18,853 | ||||||||||||
Asset impairments |
6,119 | 459 | 204 | 6,782 | ||||||||||||
Cumulative restructuring costs and asset
impairments at Dec. 31, 2009 |
$ | 185,054 | $ | 46,842 | $ | 47,532 | $ | 279,428 | ||||||||
The cumulative change in the accrued employee termination benefits balance related to
restructuring charges is summarized as follows (in thousands):
Balance at June 30, 2009 |
$ | 69,928 | ||
Cash payments |
(17,677 | ) | ||
Charges to expense |
46,604 | |||
Non-cash related costs |
3,598 | |||
Balance at September 30, 2009 |
$ | 102,453 | ||
Cash payments |
(31,754 | ) | ||
Charges to expense |
18,853 | |||
Non-cash related costs |
(5,538 | ) | ||
Balance at December 31, 2009 |
$ | 84,014 | ||
The accrued employee termination benefits balance at December 31, 2009 is recorded in accrued
expenses.
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 business unit. During the second quarter of fiscal 2009, we determined that there
were indicators of impairment in our Transportation business unit resulting from the sudden
economic downturn and potential liquidity risk in the automotive industry. The economic downturn
had a negative impact on the business units 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 business unit, which resulted in the goodwill impairment charge.
4. Acquisitions
On November 18, 2009, we completed an asset purchase of a company in China for $10.1
million and recorded goodwill of $1.9 million. The purchase price allocation for this
acquisition 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. On
December 19, 2008, we completed an asset purchase of a company in Japan and recorded goodwill of
$3.5 million. On July 1, 2008, we completed the acquisition of a company in Taiwan and recorded
goodwill of $23.0 million.
7
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 | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Basic average common shares outstanding |
173,743 | 174,636 | 173,605 | 175,736 | ||||||||||||
Effect of dilutive stock options |
832 | | 751 | | ||||||||||||
Diluted average common shares outstanding |
174,575 | 174,636 | 174,356 | 175,736 | ||||||||||||
Excluded from the computations above were anti-dilutive shares of 6.8 million and 8.4 million
for the three months and six months ended December 31, 2009, respectively, compared to 9.8 million
and 8.7 million for the same prior year periods. During the three months and six months ended
December 31, 2008, we incurred a net loss. As common stock equivalents have 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 six months ended December 31, 2008.
6. Comprehensive Income (Loss)
Total comprehensive income (loss) is summarized as follows (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net income (loss) |
$ | 19,286 | $ | (87,244 | ) | $ | 7,691 | $ | (42,947 | ) | ||||||
Translation adjustments |
(2,306 | ) | (19,176 | ) | 40,530 | (92,289 | ) | |||||||||
Accumulated actuarial loss |
| | (5,831 | ) | | |||||||||||
Unrealized investment gain (loss) |
2,584 | (5,985 | ) | (2,893 | ) | (11,516 | ) | |||||||||
Total comprehensive income (loss) |
$ | 19,564 | $ | (112,405 | ) | $ | 39,497 | $ | (146,752 | ) | ||||||
During the six months ended December 31, 2009, we recognized a pension liability remeasurement
of $5.2 million related to the merger of two pension plans and $0.6 million related to a pension
curtailment.
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):
Dec. 31, | June 30, | |||||||
2009 | 2009 | |||||||
Raw materials |
$ | 73,903 | $ | 58,720 | ||||
Work in process |
118,161 | 113,782 | ||||||
Finished goods |
180,102 | 181,835 | ||||||
Total inventories |
$ | 372,166 | $ | 354,337 | ||||
8. Pensions and Other Postretirement Benefits
During the six months ended December 31, 2009, we recognized a $3.8 million pension
curtailment gain from the merger of two pension plans. During the three months ended December 31,
2008, we recognized a curtailment in our postretirement medical benefit plan from reducing the
number of employees eligible for retiree medical coverage. The curtailment adjustment reduced cost
of sales by $1.6 million and reduced selling, general and administrative expense by $2.4 million
for the three months ended December 31, 2008.
8
The components of pension benefit cost are as follows (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Service cost |
$ | 1,990 | $ | 2,066 | $ | 3,980 | $ | 4,132 | ||||||||
Interest cost |
2,041 | 2,064 | 4,082 | 4,128 | ||||||||||||
Expected return on plan assets |
(1,696 | ) | (2,180 | ) | (3,392 | ) | (4,360 | ) | ||||||||
Amortization of prior service cost |
10 | 11 | 20 | 22 | ||||||||||||
Recognized actuarial losses |
57 | 62 | 114 | 124 | ||||||||||||
Amortization of transition obligation |
624 | 106 | 1,248 | 212 | ||||||||||||
Curtailment adjustment |
| | (3,849 | ) | | |||||||||||
Benefit cost |
$ | 3,026 | $ | 2,129 | $ | 2,203 | $ | 4,258 | ||||||||
The components of retiree health care benefit cost are as follows (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Service cost |
$ | 271 | $ | 611 | $ | 542 | $ | 1,222 | ||||||||
Interest cost |
621 | 796 | 1,242 | 1,592 | ||||||||||||
Amortization of prior service cost |
(516 | ) | (160 | ) | (1,032 | ) | (320 | ) | ||||||||
Recognized actuarial losses |
175 | 157 | 350 | 314 | ||||||||||||
Curtailment adjustment |
| (4,000 | ) | | (4,000 | ) | ||||||||||
Benefit (credit) cost |
$ | 551 | $ | (2,596 | ) | $ | 1,102 | $ | (1,192 | ) | ||||||
Our overall investment strategy for the assets in the pension funds is to achieve a balance
between the goals of growing plan assets and keeping risks at a reasonable level over a long-term
investment horizon. In order to reduce unnecessary risk, the pension funds are diversified across
several asset classes with a focus on total return. We measure the fair value of our plan assets
using quoted prices in active markets, which is level 1 in the fair value hierarchy.
The fair value of plan assets and weighted-average asset allocations for our pension plans at
June 30 are as follows (in thousands):
2009 | 2008 | |||||||||||||||
Non-U.S. | Non-U.S. | |||||||||||||||
U.S. Plan | Plan | U.S. Plan | Plan | |||||||||||||
Assets | Assets | Assets | Assets | |||||||||||||
Fair value of plan assets at June 30 |
$ | 48,565 | $ | 46,577 | $ | 58,840 | $ | 66,463 | ||||||||
Asset category: |
||||||||||||||||
Equity |
65 | % | 58 | % | 65 | % | 64 | % | ||||||||
Bonds |
35 | % | 29 | % | 35 | % | 19 | % | ||||||||
Other |
| 13 | % | | 17 | % |
9. Debt
We had available lines of credit totaling $232.8 million at December 31, 2009 expiring between
2009 and 2013. In June 2009, we entered into a $195.0 million committed, unsecured, three-year
revolving credit facility, amended in January 2010, that matures in June 2012 (the Credit
Facility). Borrowings under the Credit Facility bear interest at a fluctuating interest rate (based
on London InterBank Offered Rate) plus an applicable percentage based on our consolidated leverage.
The applicable percentage was 250 basis points as of December 31, 2009. On up to two occasions we
may, at our option, increase the credit line by an amount not to exceed $75.0 million upon
satisfaction of certain conditions. The instrument governing the Credit Facility contains customary
covenants regarding liens, debt, substantial asset sales and mergers, dividends and investments.
9
The Credit Facility also requires us to maintain financial covenants pertaining to, among other things,
our consolidated leverage, fixed charge coverage and liquidity. As of December 31, 2009, we were in
compliance with all of these covenants and had outstanding borrowings of $65 million.
In September 2009, we refinanced three unsecured borrowing agreements into a three-year term
loan approximating 20 billion Japanese yen ($217.3 million) with a fixed rate of 1.64% (the Term
Loan). Interest on the loan is payable semi-annually with the principal due in September 2012.
The current portion of our long-term debt and short-term loans as of December 31, 2009
consists principally of unsecured term loans approximating $3.8 million with weighted-average fixed
interest rates approximating 9.7%. Our long-term debt approximates $287.2 million, including an
outstanding balance of $65.0 million on the Credit Facility at December 31, 2009, the Term Loan
approximating $217.3 million and other unsecured term loans approximating $4.9 million.
10. Income Taxes
The effective tax rate was 44.6% for the three months ended December 31, 2009, reflecting the
tax cost of repatriating dividends during fiscal 2010 from certain non-U.S. subsidiaries having
earnings that had previously been indefinitely reinvested. Additionally, the effective tax rate
increased due to tax losses generated in non-U.S. jurisdictions for which no tax benefit has been
recognized. The effective tax rate for the six months ended December 31, 2009, was also impacted by
income tax expense recognized for the reversal of an estimated tax benefit resulting from a
significant number of employee stock options that expired unexercised.
The effective tax rate was 6.1% for the three months ended December 31, 2008, reflecting the
goodwill impairment charge that does not result in a tax benefit.
As of December 31, 2009, unrecognized tax benefits were $20.5 million, which if recognized,
would reduce the effective income tax rate. Changes in the amount of unrecognized tax benefits in
the six months ended December 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 2005. The tax
years 2006 through 2009 remain open to examination by all other major taxing jurisdictions to which
we are subject.
It is our practice to recognize interest and/or penalties related to income tax matters in tax
expense. As of December 31, 2009, there were no material interest or penalty amounts to accrue.
11. Fair Value Measurement
The following table summarizes our financial assets and liabilities as of December 31, 2009,
which are measured at fair value on a recurring basis (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 |
$ | 19,216 | $ | 19,216 | $ | | $ | | ||||||||
Derivative financial instruments, net |
7,182 | | 7,182 | | ||||||||||||
Total |
$ | 26,398 | $ | 19,216 | $ | 7,182 | $ | | ||||||||
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, which are valued based on
Level 2 inputs in the 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.
The carrying value of our long-term debt approximates fair value.
10
12. New Accounting Pronouncements
Effective September 30, 2009, we adopted ASC 105, the Financial Accounting Standards Board
(the FASB) Accounting Standards Codification (ASC) and the Hierarchy of Generally Accepted
Accounting Principles. The Codification is now the single source of authoritative GAAP for all
non-governmental entities. ASC 105, which was effective July 1, 2009, changes the referencing and
organization of accounting guidance. The adoption of ASC 105 will only affect how specific
references to GAAP literature are disclosed in the notes to our consolidated financial statements.
We adopted ASC 805-10, Business Combinations, effective July 1, 2009. ASC 805-10 requires that
acquisition-related costs are recognized separately from an acquisition and expensed as incurred
and that restructuring costs are expensed in periods after the acquisition date. ASC 805-10 also
requires that acquired assets and liabilities are recorded at fair value. The impact of the
adoption of ASC 805-10 did not have a material impact on our financial statements.
We adopted ASC 810-10, Consolidation, effective July 1, 2009. ASC 810-10 requires interests in
subsidiaries held by parties other than us to be reported separately within the equity section of
the consolidated financial statements and purchases or sales of equity interests that do not result
in a change of control be accounted for as equity transactions. It also requires net income
attributable to the noncontrolling interest be clearly identified and presented on the face of the
consolidated statement of income and when a subsidiary is deconsolidated, any retained
noncontrolling interest in a former subsidiary and resulting gain or loss on the deconsolidation of
the subsidiary, is measured at fair value. The adoption of ASC 810-10 did not have a material
impact on our financial statements.
We adopted ASC 815-10, Derivatives and Hedging, effective July 1, 2009. ASC 815-10 requires
enhanced disclosures about an entitys derivative and hedging activities. The adoption of ASC
815-10 did not have a material impact on our financial statements.
In October 2009, the FASB issued Accounting Standard Update (ASU) No. 2009-13, Revenue
Recognition (Topic 605). The accounting standard update addresses the accounting for
multiple-deliverable arrangements to enable vendors to account for products or services separately
rather than as a combined unit. Specifically, this subtopic addresses how to separate deliverables
and how to measure and allocate arrangement consideration to one or more units of accounting. ASU
2009-13 will be effective for us on July 1, 2010. We are currently evaluating the requirements of
ASU 2009-13, but do not expect it to have a material impact on our consolidated financial
statements.
In June 2009, the FASB expanded ASC 810-10, to provide guidance for variable interest entities
(VIEs). The change modifies our approach for determining the primary beneficiary of a VIE by
assessing whether we have control over such entities. This change is effective for us on July 1,
2010. We are currently evaluating the requirements of the VIE provisions of ASC 810-10, but do not
expect it to have a material impact on our consolidated financial statements.
13. Segments and Related Information
Our reportable segments consist of the Connector and Custom & Electrical segments:
| 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. It also 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. |
11
Information by segment is summarized as follows (in thousands):
Custom & | Corporate | |||||||||||||||
Connector | Electrical | & Other | Total | |||||||||||||
For the three months ended: |
||||||||||||||||
December 31, 2009: |
||||||||||||||||
Revenues from external customers |
$ | 534,997 | $ | 194,137 | $ | 442 | $ | 729,576 | ||||||||
Income (loss) from operations (1) |
45,388 | 19,728 | (28,320 | ) | 36,796 | |||||||||||
Depreciation & amortization |
48,709 | 8,315 | 3,650 | 60,674 | ||||||||||||
Capital expenditures |
38,487 | 4,909 | 4,290 | 47,686 | ||||||||||||
December 31, 2008: |
||||||||||||||||
Revenues from external customers |
$ | 451,606 | $ | 214,194 | $ | 928 | $ | 666,728 | ||||||||
Income (loss) from operations (1) |
(119,389 | ) | 13,633 | 4,294 | (101,462 | ) | ||||||||||
Depreciation & amortization |
50,110 | 8,535 | 4,191 | 62,836 | ||||||||||||
Capital expenditures |
37,357 | 6,487 | 7,501 | 51,345 | ||||||||||||
For the six months ended: |
||||||||||||||||
December 31, 2009: |
||||||||||||||||
Revenues from external customers |
$ | 1,024,138 | $ | 378,908 | $ | 563 | $ | 1,403,609 | ||||||||
Income (loss) from operations (1) |
50,063 | 30,879 | (54,249 | ) | 26,693 | |||||||||||
Depreciation & amortization |
97,222 | 16,698 | 7,343 | 121,263 | ||||||||||||
Capital expenditures |
79,078 | 7,508 | 6,734 | 93,320 | ||||||||||||
December 31, 2008: |
||||||||||||||||
Revenues from external customers |
$ | 1,032,716 | $ | 471,528 | $ | 1,469 | $ | 1,505,713 | ||||||||
Income (loss) from operations (1) |
(60,885 | ) | 36,163 | (15,397 | ) | (40,119 | ) | |||||||||
Depreciation & amortization |
100,447 | 17,149 | 8,753 | 126,349 | ||||||||||||
Capital expenditures |
74,678 | 12,628 | 9,331 | 96,637 |
(1) | Operating results include the following restructuring costs and asset impairments (in thousands): |
Custom & | Corporate | |||||||||||||||
Connector | Electrical | & Other | Total | |||||||||||||
Three months ended: |
||||||||||||||||
December 31, 2009 |
$ | 18,328 | $ | 3,648 | $ | 3,659 | $ | 25,635 | ||||||||
December 31, 2008 |
26,841 | 6,324 | 6,617 | 39,782 | ||||||||||||
Six months ended: |
||||||||||||||||
December 31, 2009 |
$ | 68,988 | $ | 8,287 | $ | 4,253 | $ | 81,528 | ||||||||
December 31, 2008 |
42,112 | 10,103 | 9,345 | 61,560 |
Corporate & Other includes expenses primarily related to corporate operations that are not
allocated to segments such as executive management, human resources, legal, finance and information
technology. We also include in Corporate & Other the assets of certain plants that are not
specific to a particular division. The loss from operations for the Connector segment includes a
$93.1 million goodwill impairment charge in our Transportation business unit during the second
quarter of fiscal 2008.
12
Segment assets, which are comprised of accounts receivable, inventory and fixed assets, are
summarized as follows (in thousands):
Custom & | Corporate | |||||||||||||||
Connector | Electrical | & Other | Total | |||||||||||||
December 31, 2009 |
$ | 1,551,593 | $ | 407,400 | $ | 103,819 | $ | 2,062,812 | ||||||||
June 30, 2009 |
1,388,110 | 390,906 | 184,645 | 1,963,661 |
The reconciliation of segment assets to consolidated total assets is as follows (in thousands):
Dec. 31, | June 30, | |||||||
2009 | 2009 | |||||||
Segment net assets |
$ | 2,062,812 | $ | 1,963,661 | ||||
Other current assets |
584,122 | 564,329 | ||||||
Other non-current assets |
399,266 | 414,167 | ||||||
Consolidated total assets |
$ | 3,046,200 | $ | 2,942,157 | ||||
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, 2009. 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 41 manufacturing locations in 17 countries. We also provide
manufacturing services to integrate specific components into a customers product.
Our reportable segments consist of the Connector and Custom & Electrical segments:
| 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. It also 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. |
Worldwide economic conditions and instability in the global economy led to a significant drop
in demand for our connectors beginning in the second quarter of fiscal 2009. The drop in revenue
was significant as our customers attempted to manage their inventory. Customer demand improved in
fiscal 2010 due to rapid recovery in the worlds gross domestic product, particularly in Asia. The
stronger end market demand and new product strength increased net revenue and gross margins during
the three months ended December 31, 2009 compared with the prior year period and the three months
ended September 30, 2009. Selling, general and administrative expenses as a percent of revenue also
decreased during the three months ended December 31, 2009 compared with the prior year period and
the three months ended September 30, 2009 due to our lower cost structure resulting from our
restructuring efforts and specific cost containment activities.
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 and Europe and, in
general, the movement of manufacturing activities at these plants to other facilities. Net
restructuring cost during the three months ended December 31, 2009 was $25.6 million, consisting of
$6.8 million in asset impairments and $18.8 million of employee termination benefits. Net
restructuring cost during the three months ended September 30, 2009 was $55.9 million, consisting
of $13.2 million of asset impairments and $42.7 million for employee termination benefits that were
net of $3.8 million pension curtailment gain. Net restructuring costs during the three months ended
December 31, 2008, was $39.8, consisting of $4.4 million in asset impairments, $35.4 million of
severance. The cumulative restructuring costs and related asset impairments since we announced the
restructuring plan totaled $279.4 million.
14
We expect to incur total restructuring and asset impairment costs related to these actions
approximating $300 million. Management approved several actions related to this plan. The total
cost estimates increased due to additional non-cash impairments for buildings resulting from
continued weakness in the commercial real estate markets and the latest additions to the
restructuring actions, which included reorganization of our global product divisions in fiscal
2009. A portion of this plan involves cost savings or other actions that do not result in
incremental expense, such as better utilization of assets, reduced spending and organizational
efficiencies. This plan includes employee reduction targets throughout the company, and we expect
to achieve these targets through ongoing employee attrition and terminations. See Note 2 of the
Notes to the Consolidated Financial Statements for further discussion. We expect to complete the
actions under this plan by June 30, 2010 with estimated annual cost savings of $205 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
business unit. During the second quarter, we determined that there were indicators of impairment in
our Transportation business unit resulting from the sudden economic downturn and potential
liquidity risk in the automotive industry. The economic downturn had a negative impact on the
business units operating results and the potential liquidity risk extended our estimate for the
industrys economic recovery.
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, and attract, motivate and retain key personnel to
manage our operational, financial and management information systems. Our sales are also dependent
on end markets impacted by consumer, industrial and infrastructure spending, and our operating
results can be adversely affected by reduced demand in those end markets.
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, 2009 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 operations data as a percentage of
net revenue for the three months ended December 31 (in thousands):
Percentage | Percentage | |||||||||||||||
2009 | of Revenue | 2008 | of Revenue | |||||||||||||
Net revenue |
$ | 729,576 | 100.0 | % | $ | 666,728 | 100.0 | % | ||||||||
Cost of sales |
517,040 | 70.9 | % | 490,656 | 73.6 | % | ||||||||||
Gross profit |
212,536 | 29.1 | % | 176,072 | 26.4 | % | ||||||||||
Selling, general & administrative |
150,105 | 20.6 | % | 144,612 | 21.7 | % | ||||||||||
Restructuring costs and asset impairments |
25,635 | 3.5 | % | 39,782 | 5.9 | % | ||||||||||
Goodwill impairment |
| 0.0 | % | 93,140 | 14.0 | % | ||||||||||
Income (loss) from operations |
36,796 | 5.0 | % | (101,462 | ) | (15.2 | )% | |||||||||
Other (expense) income, net |
(1,987 | ) | (0.3 | )% | 19,229 | 2.9 | % | |||||||||
Income (loss) before income taxes |
34,809 | 4.7 | % | (82,233 | ) | (12.3 | )% | |||||||||
Income taxes |
15,523 | 2.1 | % | 5,011 | 0.8 | % | ||||||||||
Net income (loss) |
$ | 19,286 | 2.6 | % | $ | (87,244 | ) | (13.1 | )% | |||||||
The following table sets forth consolidated statements of operations data as a percentage of
net revenue for the six months ended December 31 (in thousands):
Percentage | Percentage | |||||||||||||||
2009 | of Revenue | 2008 | of Revenue | |||||||||||||
Net revenue |
$ | 1,403,609 | 100.0 | % | $ | 1,505,713 | 100.0 | % | ||||||||
Cost of sales |
999,654 | 71.2 | % | 1,080,169 | 71.7 | % | ||||||||||
Gross profit |
403,955 | 28.8 | % | 425,544 | 28.3 | % | ||||||||||
Selling, general & administrative |
295,734 | 21.1 | % | 310,963 | 20.7 | % | ||||||||||
Restructuring costs and asset impairments |
81,528 | 5.8 | % | 61,560 | 4.1 | % | ||||||||||
Goodwill impairment |
| | 93,140 | 6.2 | % | |||||||||||
Income (loss) from operations |
26,693 | 1.9 | % | (40,119 | ) | (2.7 | )% | |||||||||
Other income, net |
497 | | 23,029 | 1.6 | % | |||||||||||
Income (loss) before income taxes |
27,190 | 1.9 | % | (17,090 | ) | (1.1 | )% | |||||||||
Income taxes |
19,499 | 1.4 | % | 25,857 | 1.7 | % | ||||||||||
Net income (loss) |
$ | 7,691 | 0.5 | % | $ | (42,947 | ) | (2.8 | )% | |||||||
Net Revenue
We sell our products in five primary markets. Revenue increased across all markets during the
second quarter of fiscal 2010 compared with the first quarter of fiscal 2010 (sequential quarter)
and the second quarter of fiscal 2009 (comparable quarter), except for Telecommunications which
decreased over the comparable quarter. Revenue increased significantly during fiscal 2010 as
economic conditions in key geographies improved over the prior year. The change in revenue from
each market during the second quarter of fiscal year 2010 compared with the comparable quarter and
the sequential quarter follows:
16
Comparable | Sequential | |||||||
Quarter | Quarter | |||||||
Telecommunications |
(2.8 | )% | 6.0 | % | ||||
Consumer |
13.1 | 0.2 | ||||||
Data |
23.8 | 14.5 | ||||||
Industrial |
0.1 | 6.1 | ||||||
Automotive |
29.8 | 14.3 |
Telecommunications market revenue declined against the comparable quarter as demand for our
mobile products has not returned to levels realized prior to the significant slow down and related
supply chain inventory reductions during the second and third quarters of fiscal 2009.
Telecommunications market revenue increased sequentially due in part to increased infrastructure
spending, higher demand for smartphones and our customers introduction of new smartphone models
that include our connector and antenna products.
Consumer market revenue increased against the comparable quarter. Revenue returned to levels
prior to the significant slow down in fiscal 2009 due to government incentives in certain
countries, customers replenishing inventory levels and increased demand for our components in
portable navigation devices and flat panel display televisions. The increased revenue from consumer
markets was partially offset by price erosion. Consumer market revenue increased modestly against
the sequential quarter as the first quarter benefitted from pre-holiday production volumes based on
our customers anticipation of increased consumer spending during the holiday season.
Data market revenue increased against the comparable and sequential quarter primarily because
of increased demand for notebook, networking, server and storage products. Data market revenue also
increased against the comparable quarter due to deferred enterprise spending in the prior year.
Industrial market revenue had modest revenue growth against the comparable quarter as the
recovery in the industrial market was slower than our other primary markets. Industrial market
revenue increased against the sequential quarter as our customers increased production to meet
demand after delaying many industrial automation projects in prior quarters due to poor economic
conditions.
Automotive market revenue increased substantially against the comparable quarter as global car
sales have increased, particularly in China and Europe, due to government stimulus programs.
Automotive market revenue increased sequentially as more consumers took advantage of global
government incentive programs before they expired at the end of the 2009 calendar year. The
automotive market also benefited from our customers increasing electronic content in automobiles,
such as rear view cameras, navigational systems, mobile communication and entertainment systems.
The following table shows the percentage of our net revenue by geographic region:
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Americas |
23 | % | 29 | % | 23 | % | 28 | % | ||||||||
Asia Pacific |
61 | 54 | 61 | 54 | ||||||||||||
Europe |
16 | 17 | 16 | 18 | ||||||||||||
Total |
100 | % | 100 | % | 100 | % | 100 | % | ||||||||
17
The following table provides an analysis of the change in net revenue compared with the
prior fiscal year period (in thousands):
Three Months | Six Months | |||||||
Ended | Ended | |||||||
Dec. 31, 2009 | Dec. 31, 2009 | |||||||
Net revenue for prior year period |
$ | 666,728 | $ | 1,505,713 | ||||
Components of net revenue change: |
||||||||
Organic net revenue change |
24,168 | (139,733 | ) | |||||
Currency translation |
31,923 | 26,137 | ||||||
Acquisitions |
6,757 | 11,492 | ||||||
Total change in net revenue from prior year period |
62,848 | (102,104 | ) | |||||
Net revenue for current year period |
$ | 729,576 | $ | 1,403,609 | ||||
Organic net revenue change as a percentage of net revenue from prior year period |
3.6 | % | (9.3 | )% |
Organic revenue increased during the three months ended December 31, 2009 compared with
the prior year period as customer demand improved in the consumer, data and automotive markets.
Revenue decreased during fiscal 2009 across all of our primary markets due to deterioration in
global economic conditions and subsequent inventory reductions in the supply chain. This decrease
in demand for our products began during the second quarter of fiscal 2009, which caused the organic
revenue decline for the six months ended December 31, 2009 compared with the prior year period.
The general weakening of the U.S. dollar against the euro and Japanese yen increased revenue
by approximately $31.9 million and $26.1 million for the three and six months ended December 31,
2009, respectively. 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 December 31, 2009 | Six Months Ended December 31, 2009 | |||||||||||||||||||||||
Local | Currency | Net | Local | Currency | Net | |||||||||||||||||||
Currency | Translation | Change | Currency | Translation | Change | |||||||||||||||||||
Americas |
$ | (20,854 | ) | $ | 339 | $ | (20,515 | ) | $ | (86,531 | ) | $ | 41 | $ | (86,490 | ) | ||||||||
Asia Pacific |
65,549 | 22,487 | 88,036 | 16,367 | 27,654 | 44,021 | ||||||||||||||||||
Europe |
(8,756 | ) | 9,097 | 341 | (47,791 | ) | (1,558 | ) | (49,349 | ) | ||||||||||||||
Corporate & other |
(5,014 | ) | | (5,014 | ) | (10,286 | ) | | (10,286 | ) | ||||||||||||||
Net change |
$ | 30,925 | $ | 31,923 | $ | 62,848 | $ | (128,241 | ) | $ | 26,137 | $ | (102,104 | ) | ||||||||||
The change in revenue on a local currency basis was as follows:
Three Months | Six Months | |||||||
Ended | Ended | |||||||
Dec. 31, 2009 | Dec. 31, 2009 | |||||||
Americas |
(10.9 | )% | (20.9 | )% | ||||
Asia Pacific |
18.4 | 2.0 | ||||||
Europe |
(7.6 | ) | (17.5 | ) | ||||
Total |
4.6 | % | (8.5 | )% |
18
The following table sets forth information on revenue by segment as of the three months ended
December 31 (in thousands):
Percentage | Percentage | |||||||||||||||
2009 | of Revenue | 2008 | of Revenue | |||||||||||||
Connector |
$ | 534,997 | 73.3 | % | $ | 451,606 | 67.7 | % | ||||||||
Custom & Electrical |
194,137 | 26.6 | 214,194 | 32.1 | ||||||||||||
Corporate & Other |
442 | 0.1 | 928 | 0.2 | ||||||||||||
Total |
$ | 729,576 | 100.0 | % | $ | 666,728 | 100.0 | % | ||||||||
The following table sets forth information on revenue by segment as of the six months ended
December 31 (in thousands):
Percentage | Percentage | |||||||||||||||
2009 | of Revenue | 2008 | of Revenue | |||||||||||||
Connector |
$ | 1,024,138 | 72.9 | % | $ | 1,032,716 | 68.6 | % | ||||||||
Custom & Electrical |
378,908 | 27.0 | 471,528 | 31.3 | ||||||||||||
Corporate & Other |
563 | 0.1 | 1,469 | 0.1 | ||||||||||||
Total |
$ | 1,403,609 | 100.0 | % | $ | 1,505,713 | 100.0 | % | ||||||||
Gross Profit
The following table provides a summary of gross profit and gross margin for the three and six
months ended December 31 (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Gross profit |
$ | 212,536 | $ | 176,072 | $ | 403,955 | $ | 425,544 | ||||||||
Gross margin |
29.1 | % | 26.4 | % | 28.8 | % | 28.3 | % |
The increase in gross margin for the three and six month periods ended December 31, 2009 was
primarily due to the expansion of our restructuring program, which has improved margins over time,
and higher absorption from increased production. The increase in gross margin was partially offset
by the impact of price erosion and material price increases.
A significant portion of our material cost is comprised of copper and gold. We purchased
approximately 10 million pounds of copper and approximately 53,000 troy ounces of gold during the
first two quarters of fiscal 2010. The following table shows the change in average prices related
to our purchases of copper and gold for the three months and six months ended December 31 (in
thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Copper (price per pound) |
$ | 3.01 | $ | 2.66 | $ | 2.83 | $ | 3.20 | ||||||||
Gold (price per troy ounce) |
1,099 | 795 | 1,030 | 834 |
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 six months
ended December 31, 2009 and 2008.
19
The effect of certain significant impacts on gross profit compared with the prior year periods
was as follows for the three and six months ended December 31 (in thousands):
Three Months | Six Months | |||||||
Ended | Ended | |||||||
Dec. 31, 2009 | Dec. 31, 2009 | |||||||
Price erosion |
$ | (36,163 | ) | $ | (72,502 | ) | ||
Currency translation |
7,857 | 7,351 | ||||||
Currency transaction |
(8,621 | ) | (10,947 | ) |
Price erosion is measured as the reduction in prices of our products year over year, which
reduces our gross profit, particularly in our Connector segment, where we have the largest impacts
of price erosion.
The increase in gross profit due to currency translation was primarily due to a weaker U.S.
dollar against other currencies during the three and six months ended December 31, 2009.
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 the weakening U.S. dollar against the Japanese yen and euro during the three and
six months ended December 31, 2009.
Operating Expenses
Operating expenses were as follows as of December 31 (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Selling, general and administrative |
$ | 150,105 | $ | 144,612 | $ | 295,734 | $ | 310,963 | ||||||||
Selling, general and administrative
as a percentage of revenue |
20.6 | % | 21.7 | % | 21.1 | % | 20.7 | % | ||||||||
Restructuring costs and asset impairments |
$ | 25,635 | $ | 39,782 | $ | 81,528 | $ | 61,560 | ||||||||
Goodwill impairment |
| 93,140 | | 93,140 |
Selling, general and administrative expenses decreased as a percent of net revenue for the
three months ended December 31, 2009 over the prior year period primarily due to our lower cost
structure resulting from our restructuring efforts and specific cost containment activities.
One-time cost reductions related to employee benefits reduced selling, general and administrative
expenses by $9.2 million in the second quarter of fiscal 2009. Selling, general and administrative
expenses increased as a percent of net revenue for the six months ended December 31, 2009 over the
prior year period primarily due to the significant drop in revenue during the second quarter of
fiscal 2009. The impact of currency translation increased selling, general, and administrative
expenses by approximately $7.3 million and $6.6 million for the three and six months ended December
31, 2009, respectively, versus the comparable period.
Research and development expenditures, which are classified as selling, general and
administrative expense, were approximately $36.7 million, or 5.0% of net revenue and $73.2 million,
or 5.2% of net revenue for the three and six months ended December 31, 2009, respectively, compared
to $41.2 million or 6.2% of net revenue and $84.7 million, or 5.6% of net revenue for the same
prior year periods.
Net restructuring cost during the six months ended December 31, 2009 was $81.5 million,
consisting of $20.0 million of asset impairments and $61.5 million for employee termination
benefits. Net restructuring costs during the six months ended December 31, 2008 included $54.5
million for employee termination benefits and $7.1 million for asset impairments. Net
restructuring cost during the quarter ended September 30, 2009 was $55.9 million, consisting of $13.2 million of asset impairments and $42.7 million of employee
termination benefits. The cumulative expense since we announced the restructuring plan
totals $279.4 million.
20
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
business unit. During the second quarter, we determined that there were indicators of impairment in
our Transportation business unit resulting from the sudden economic downturn and potential
liquidity risk in the automotive industry. The economic downturn had a negative impact on the
business units 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 business unit, which resulted in the goodwill impairment charge.
Other Income
Other income consists primarily of net interest income, investment income and currency
exchange gains or losses. We recorded a loss of $2.0 million and a gain of $0.5 million for the
three and six months ended December 31, 2009, respectively, compared with gains of $19.2 million
and $23.0 million for the same prior year periods. The decrease between the three months ended
December 31, 2009 and the prior year period 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 during that period.
Effective Tax Rate
The effective tax rate was 44.6% for the three months ended December 31, 2009, reflecting the
tax cost of repatriating dividends during fiscal 2010 from certain non-U.S. subsidiaries having
earnings that had previously been indefinitely reinvested. The
dividends support the completion of our restructuring activities. Additionally, the effective tax rate
increased due to tax losses generated in non-U.S. jurisdictions for which no tax benefit has been
recognized. The effective tax rate for the six months ended December 31, 2009, was also impacted by
income tax expense recognized for the reversal of an estimated tax benefit resulting from a
significant number of employee stock options that expired unexercised.
The effective tax rate was 6.1% for the three months ended December 31, 2008, reflecting the
goodwill impairment charge that does not result in a tax benefit.
Backlog
Our order backlog on December 31, 2009 was approximately $340.6 million, an increase of 19.4%
compared with order backlog of $285.3 million at December 31, 2008. Orders for the second quarter
of fiscal 2010 were $777.9 million compared with $562.2 million for the prior year period,
representing the significant increase in demand during fiscal 2010 as economic conditions in key
geographies improved over the prior year. Orders during the second quarter of fiscal 2010 improved
in all of our primary markets compared with the prior year period.
21
Segments
Connector
The following table provides an analysis of the change in net revenue compared with the prior
fiscal year (in thousands):
Three Months | Six Months | |||||||
Ended | Ended | |||||||
Dec. 31, 2009 | Dec. 31, 2009 | |||||||
Net revenue for prior year period |
$ | 451,606 | $ | 1,032,716 | ||||
Components of net revenue change: |
||||||||
Organic net revenue change |
51,348 | (46,564 | ) | |||||
Currency translation |
26,819 | 28,027 | ||||||
Acquisitions |
5,224 | 9,959 | ||||||
Total change in net revenue from prior year period |
83,391 | (8,578 | ) | |||||
Net revenue for current year period |
$ | 534,997 | $ | 1,024,138 | ||||
Organic net revenue change as a percentage of
net revenue for prior year period |
11.4 | % | (4.5 | )% |
The Connector segment sells primarily to the telecommunication, data products, consumer and
automotive markets, which are discussed above. Revenue increased in the three months ended December
31, 2009, compared with the prior year period primarily due to data, consumer and automotive
growth, partially offset by lower revenue in the mobile sector of the telecommunications market and
price erosion, which is generally higher in the Connector segment compared with our other segment.
Revenue declined across all markets in the six months ended December 31, 2009, compared with the
prior year period, due to the poor global economic conditions that began during the second quarter
of fiscal 2009. Currency translation favorably impacted revenue for the three and six month periods
ended December 31, 2009. We also completed an asset purchase of a company in Japan during the
second quarter of fiscal 2009.
The following table provides information on income from operations and operating margins for
the Connector segment for the periods indicated (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Income from operations |
$ | 45,388 | $ | (119,389 | ) | $ | 50,063 | $ | (60,885 | ) | ||||||
Operating margin |
8.5 | % | (26.4 | )% | 4.9 | % | (5.9 | )% |
Connector segment income from operations increased compared with the prior year periods
primarily due to the $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 business unit. Connector segment income from operations also improved due to lower
selling, general and administrative costs in fiscal 2010. Selling, general and administrative
expenses decreased $11.5 million and $25.5 million for the three and six months ended December 31,
2009, respectively, compared with the prior year period due to savings from restructuring and
specific cost-containment actions. Income from operations was unfavorably impacted by restructuring
costs of $18.3 million and $69.0 million for the three and six months ended December 31, 2009,
respectively, compared with $26.8 million and $42.1 million for the same 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 | Six Months | |||||||
Ended | Ended | |||||||
Dec. 31, 2009 | Dec. 31, 2009 | |||||||
Net revenue for prior year period |
$ | 214,194 | $ | 471,528 | ||||
Components of net revenue change: |
||||||||
Organic net revenue decline |
(26,692 | ) | (92,281 | ) | ||||
Currency translation |
5,102 | (1,872 | ) | |||||
Acquisitions |
1,533 | 1,533 | ||||||
Total change in net revenue from prior year period |
(20,057 | ) | (92,620 | ) | ||||
Net revenue for current year period |
$ | 194,137 | $ | 378,908 | ||||
Organic net revenue decline as a percentage of
net revenue for prior year period |
(12.5 | )% | (19.6 | )% |
The sale of Custom and Electrical segments products is concentrated in the industrial,
telecommunications and data markets. Custom and Electrical segment revenue declined in the three
and six month periods ended December 31, 2009 due to the slower recovery in the industrial market
discussed above.
The following table provides information on income from operations and operating margins for
the Custom & Electrical segment for the periods indicated (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Income from operations |
$ | 19,728 | $ | 13,633 | $ | 30,879 | $ | 36,163 | ||||||||
Operating margin |
10.2 | % | 6.4 | % | 8.1 | % | 7.7 | % |
Custom & Electrical segment operating margin increased compared with the prior year periods
primarily due to lower selling, general and administrative costs. Selling, general and
administrative costs declined approximately $10.0 million and $22.6 million during the three and
six months ended December 31, 2009, respectively, compared with the prior year periods due to
savings from restructuring and specific cost-containment activities. Income from operations was
unfavorably impacted by restructuring costs of $3.6 million and $8.3 million for the three and six
months ended December 31, 2009, respectively, compared with $6.3 million and $10.1 million in the
same prior year periods.
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.
23
Financial Condition and Liquidity
We fund capital projects and working capital needs principally out of operating cash flows and
cash reserves. Cash, cash equivalents and marketable securities totaled $496.0 million and $467.9
million at December 31, 2009 and June 30, 2009, respectively, of which $489.0 million was in
non-U.S. accounts as of December 31, 2009. During the three months ended December 31, 2009, we
transferred cash to U.S. accounts from non-U.S. accounts to support the completion of our
restructuring activities, which resulted in 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, dividend payments and business investments.
Our long-term financing strategy is to primarily rely on internal sources of funds for
investing in plant, equipment and acquisitions. Long-term debt and obligations under capital leases
totaled $287.2 million and $30.3 million at December 31, 2009 and June 30, 2009, respectively. We
had available lines of credit totaling $232.8 million at December 31, 2009, including a $195.0
million committed, unsecured, three-year revolving credit facility with $130.0 million available as
of December 31, 2009. The Credit Facility also requires us to maintain financial covenants
pertaining to, among other things, our consolidated leverage, fixed charge coverage and liquidity.
As of December 31, 2009, we were in compliance with all of these covenants. Additionally, in
September 2009, we refinanced three unsecured borrowing agreements into a three-year term loan
approximating 20 billion Japanese yen ($217.3 million) with a fixed rate of 1.64%.
Cash Flows
Our cash balance increased $61.6 million during the six months ended December 31, 2009.
Operating cash flow for the six months ended December 31, 2009 was $141.8 million, of which we used
$93.3 million to fund capital expenditures. Our primary sources of cash were operating cash flows
and $24.6 million in net borrowings. We used capital during the period to fund capital expenditures
of $93.3 million, acquire a business totaling $10.1 million, and pay dividends of $52.9 million.
The translation of our cash to U.S. dollars increased our cash balance by $11.0 million as compared
with the balance as of June 30, 2009.
Below is a table setting forth the key lines of our Consolidated Statements of Cash Flows (in thousands):
Six Months Ended | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
Cash provided from operating activities |
$ | 141,838 | $ | 190,243 | ||||
Cash used for investing activities |
(62,800 | ) | (175,829 | ) | ||||
Cash used for financing activities |
(28,447 | ) | (58,119 | ) | ||||
Effect of exchange rate changes on cash |
11,020 | (13,229 | ) | |||||
Net increase (decrease) increase in cash |
$ | 61,611 | $ | (56,934 | ) | |||
24
Operating Activities
Cash provided from operating activities declined by $48.4 million from the prior year period
due mainly to an increase in working capital needs in the current year period compared with the
prior year. Working capital is defined as current assets minus current liabilities. Our
restructuring accrual as of December 31, 2009 was $84.0 million, which we expect to reduce through
cash outlays during fiscal 2010 and 2011.
Investing Activities
Capital expenditures were $93.3 million for the six months ended December 31, 2009 compared
with $96.6 million in the prior year period, reflecting our efforts to increase asset efficiency by
lowering the incremental investment required to drive future growth. Cash used for investing
activities declined by $113.0 million from the prior year period due mainly to $10.1 million
invested in acquisitions during the first six months of fiscal 2010 compared to $73.4 million in
the prior year period. Additionally, in fiscal 2010, we had $35.3 million in net sales of
marketable securities, which increased cash flow and we had $1.5 million of net purchases in fiscal
2009, which decreased cash flow.
Financing Activities
Cash used for financing activities decreased $28.4 million during the six months ended
December 31, 2009, as compared with the prior year period primarily due to repurchases of treasury
stock during fiscal 2009.
We borrowed $110.0 million against our $195.0 million committed, unsecured, three-year
revolving credit facility, which was used to pay down other uncommitted debt balances. Total
borrowings against the credit facility were $65.0 million as of December 31, 2009.
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, 2009. 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, 2009 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, 2009 (Form 10-K) and in Part II, Item 1A of our Quarterly Report on Form 10-Q for
the quarter ended December 31, 2009 (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 affect our business operations. If any of the risks occur, our business, financial condition
or operating results could be materially adversely affected.
25
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.
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 December 31, 2009 or June 30, 2009.
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 December 31, 2009 or June 30, 2009.
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 $26.1 million and increased income from operations of
$2.0 million for the six months ended December 31, 2009, compared with the estimated results for
the comparable period in the prior year.
Our $9.6 million of marketable securities at December 31, 2009 are principally invested in
time deposits.
Interest rate exposure is generally limited to our marketable securities and three-year
unsecured credit facility. We do not actively manage the risk of interest rate fluctuations. Our
marketable securities mature in less than 12 months. We had $65.0 million outstanding on our $195.0
million credit facility with an interest rate of approximately 2.7% at December 31, 2009.
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.
26
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our chief
executive officer and chief financial officer, the effectiveness of 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)) as of the end of the period covered by this report. Based on that
evaluation, our chief executive officer and chief financial officer have concluded that, as of the
end of the period covered by this report, our disclosure controls and procedures are effective in
ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded,
processed, summarized and reported within the time periods specified in SECs rules and forms, and
(2) accumulated and communicated to our management, including our chief executive officer and chief
financial officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
During the three months ended December 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 to the risk factors disclosed in Part 1, Item 1A, of our
Annual Report on Form 10-K for the year ended June 30, 2009.
27
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Share purchases of Molex Common and/or Class A Common Stock for the quarter ended December 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 | ||||||||||
October 1 October 31 |
||||||||||||
Common Stock |
| $ | | | ||||||||
Class A Common Stock |
26 | $ | 17.32 | | ||||||||
November 1 November 30 |
||||||||||||
Common Stock |
| $ | | | ||||||||
Class A Common Stock |
8 | $ | 16.55 | | ||||||||
December 1 December 31 |
||||||||||||
Common Stock |
| $ | | | ||||||||
Class A Common Stock |
4 | $ | 17.59 | | ||||||||
Total |
38 | $ | 17.19 | | ||||||||
The shares purchased represent exercises of employee stock options.
Item 4. | Submission of Matters to a Vote of Security Holders |
Our annual meeting of stockholders was held on October 30, 2009. Our stockholders elected
all of the Boards nominees for director and ratified the selection of Ernst & Young LLP as our
independent auditors for the fiscal year ending June 30, 2010. The voting results were as follows:
(1) Election of Directors
Director | For | Withheld | ||
Michelle L. Collins |
82,239,854 | 1,504,001 | ||
Fred L. Krehbiel |
80,621,840 | 3,122,015 | ||
David L. Landsittel |
81,980,642 | 1,763,213 | ||
Joe W. Laymon |
76,862,730 | 6,881,125 | ||
James S. Metcalf |
82,468,793 | 1,275,062 |
The terms of the following directors continued after the annual meeting:
Michael J. Birck
|
John H. Krehbiel, Jr. | |
Anirudh Dhebar
|
Donald G. Lubin | |
Edgar D. Jannotta
|
Robert J. Potter | |
Frederick A. Krehbiel
|
Martin P. Slark |
(2) Ratification of the selection of Ernst & Young LLP
For: 82,565,123
Against: 1,148,632
Abstentions: 30,099
Broker Nonvotes: 0
Against: 1,148,632
Abstentions: 30,099
Broker Nonvotes: 0
28
Item 6. | Exhibits |
Number | Description | |||||
10 | Amendment No. 1 to Credit Agreement dated June 24, 2009 among Molex Incorporated, the Lenders named therein, J.P.Morgan Chase Bank, N.A., as Administrative Agent, Standard Charter Bank as Syndication Agent, The Northern Trust Company as Documentation Agent | |||||
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 |
29
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: January 29, 2010 | /s/ DAVID D. JOHNSON | |||
David D. Johnson | ||||
Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer) |
||||
30