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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2011

 

¨ 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   36-2369491

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

2222 Wellington Court, Lisle, Illinois 60532

(Address of principal executive offices)

Registrant’s 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  x    No  ¨

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  x    No  ¨

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   x    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

On January 18, 2012, the following numbers of shares of the Company’s common stock were outstanding:

 

Common Stock

     95,560,076   

Class A Common Stock

     80,389,577   

Class B Common Stock

     94,255   

 

 

 


Table of Contents

Molex Incorporated

INDEX

 

         Page  

PART I – FINANCIAL INFORMATION

  

Item 1. Financial Statements

  
 

Condensed Consolidated Balance Sheets as of December 31, 2011 and June 30, 2011

     3   
 

Condensed Consolidated Statements of Income for the three and six months ended December 31, 2011 and 2010

     4   
 

Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2011 and 2010

     5   
 

Notes to Condensed Consolidated Financial Statements

     6   

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     15   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     27   

Item 4.

 

Controls and Procedures

     28   

PART II – OTHER INFORMATION

  

Item 1.

 

Legal Proceedings

     29   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     29   

Item 6.

 

Exhibits

     30   

SIGNATURES

     31   
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


Table of Contents

PART I

Item  1. Financial Statements

Molex Incorporated

Condensed Consolidated Balance Sheets

(in thousands)

 

     Dec. 31, 2011     June 30, 2011  
     (Unaudited)        
ASSETS   

Current assets:

    

Cash and cash equivalents

   $ 607,336      $ 532,599   

Marketable securities

     11,230        13,947   

Accounts receivable, less allowances of $38,525 and $42,297 respectively

     708,197        811,449   

Inventories

     552,264        535,953   

Deferred income taxes

     130,759        129,158   

Other current assets

     39,084        32,239   
  

 

 

   

 

 

 

Total current assets

     2,048,870        2,055,345   

Property, plant and equipment, net

     1,135,735        1,168,448   

Goodwill

     166,409        149,452   

Non-current deferred income taxes

     37,273        38,178   

Other assets

     181,831        186,429   
  

 

 

   

 

 

 

Total assets

   $ 3,570,118      $ 3,597,852   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY   

Current liabilities:

    

Current portion of long-term debt and short-term borrowings

   $ 127,631      $ 119,764   

Accounts payable

     317,103        359,812   

Accrued expenses:

    

Accrual for unauthorized activities in Japan

     188,601        182,460   

Income taxes payable

     27,672        2,383   

Other

     215,233        217,628   
  

 

 

   

 

 

 

Total current liabilities

     876,240        882,047   

Other non-current liabilities

     20,538        23,879   

Accrued pension and postretirement benefits

     93,056        100,866   

Long-term debt

     196,671        222,794   
  

 

 

   

 

 

 

Total liabilities

     1,186,505        1,229,586   
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ equity:

    

Common stock

     11,319        11,285   

Additional paid-in capital

     690,572        674,494   

Retained earnings

     2,482,317        2,408,083   

Treasury stock

     (1,110,147     (1,106,039

Accumulated other comprehensive income

     309,552        380,443   
  

 

 

   

 

 

 

Total stockholders’ equity

     2,383,613        2,368,266   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 3,570,118      $ 3,597,852   
  

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

3


Table of Contents

Molex Incorporated

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands, except per share data)

 

     Three Months Ended
December 31,
    Six Months Ended
December 31,
 
     2011     2010     2011     2010  

Net revenue

   $ 857,598      $ 901,465      $ 1,793,583      $ 1,799,137   

Cost of sales

     594,661        630,420        1,237,918        1,253,016   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     262,937        271,045        555,665        546,121   
  

 

 

   

 

 

   

 

 

   

 

 

 

Selling, general and administrative

     163,073        159,044        332,298        316,100   

Unauthorized activities in Japan

     2,723        2,713        5,645        8,255   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     165,796        161,757        337,943        324,355   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     97,141        109,288        217,722        221,766   

Interest (expense) income, net

     (2,094     (1,788     (3,485     (3,123

Other income

     1,482        4,792        1,758        4,441   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other (expense) income, net

     (612     3,004        (1,727     1,318   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     96,529        112,292        215,995        223,084   

Income taxes

     32,513        34,009        71,462        69,697   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 64,016      $ 78,283      $ 144,533      $ 153,387   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 0.36      $ 0.45      $ 0.82      $ 0.88   

Diluted

   $ 0.36      $ 0.45      $ 0.82      $ 0.88   

Dividends declared per share

   $ 0.2000      $ 0.1750      $ 0.4000      $ 0.3275   

Average common shares outstanding:

        

Basic

     175,830        174,664        175,656        174,510   

Diluted

     176,985        175,556        176,778        175,329   

See accompanying notes to condensed consolidated financial statements.

 

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Molex Incorporated

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

     Six Months Ended
December 31,
 
     2011     2010  

Operating activities:

    

Net income

   $ 144,533      $ 153,387   

Add non-cash items included in net income:

    

Depreciation and amortization

     121,174        120,804   

Share-based compensation

     11,402        11,460   

Other non-cash items

     5,213        7,275   

Changes in assets and liabilities:

    

Accounts receivable

     94,400        3,221   

Inventories

     (26,442     (67,631

Accounts payable

     (40,976     (36,945

Other current assets and liabilities

     (7,183     (11,280

Other assets and liabilities

     (10,608     2,184   
  

 

 

   

 

 

 

Cash provided from operating activities

     291,513        182,475   

Investing activities:

    

Capital expenditures

     (95,055     (132,728

Acquisitions

     (24,000     —     

Proceeds from sales of property, plant and equipment

     2,202        1,400   

Proceeds from sales or maturities of marketable securities

     6,553        5,203   

Purchases of marketable securities

     (4,787     (3,612
  

 

 

   

 

 

 

Cash used for investing activities

     (115,087     (129,737

Financing activities:

    

Proceeds from revolving credit facility

     75,000        50,000   

Payments on revolving credit facility

     (220,000     (15,000

Payments on short-term loans

     (27,389     (11,479

Proceeds from issuance of long-term debt

     150,000        —     

Payments of long-term debt

     (287     (24,572

Cash dividends paid

     (70,186     (53,186

Exercise of stock options

     2,630        1,820   

Other financing activities

     (2,087     (1,954
  

 

 

   

 

 

 

Cash used for financing activities

     (92,319     (54,371

Effect of exchange rate changes on cash

     (9,370     17,671   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     74,737        16,038   

Cash and cash equivalents, beginning of period

     532,599        376,352   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 607,336      $ 392,390   
  

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

5


Table of Contents

Molex Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1. Basis of Presentation

Molex Incorporated (together with its subsidiaries, except where the context otherwise requires, “we,” “us,” and “our”) manufactures electronic components, including electrical and fiber optic interconnection products and systems, switches and integrated products in 40 manufacturing locations in 16 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, 2011 are not necessarily an indication of the results that may be expected for the year ending June 30, 2012. The Condensed Consolidated Balance Sheet as of June 30, 2011 was derived from our audited consolidated financial statements for the year ended June 30, 2011. 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, 2011.

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, accrual for unauthorized activities in Japan, 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.

 

2. Unauthorized Activities in Japan

As previously reported in our Annual Report on Form 10-K for the year ended June 30, 2011, we investigated unauthorized activities at Molex Japan Ltd. Based on the results of the completed investigation, we recorded an accrued liability of $165.8 million for accounting purposes for the effect of unauthorized activities pending the resolution of the legal proceedings reported in Note 14.

We believe these unauthorized activities and related losses occurred from at least as early as 1988 through 2010. The accrued liability for these unauthorized activities was $188.6 million as of December 31, 2011, including $22.8 million in cumulative foreign currency translation, which was recorded as a component of other comprehensive income. To the extent we prevail in not having to pay all or any portion of the unauthorized loans ($165.8 million), we would recognize a gain. In addition, we have a contingent liability of $45.9 million for other loan-related expenses, interest expense and delay damages on the outstanding unauthorized loans.

 

3. Restructuring Costs and Asset Impairments

On June 30, 2010 we completed a multi-year 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 related to facilities located in North America, Europe and Japan and, in general, the movement of manufacturing activities from these plants to lower-cost facilities.

 

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Table of Contents

Changes in the restructuring accrual balance are summarized as follows (in thousands):

 

Balance at June 30, 2011

   $ 14,049   

Cash payments

     (752

Non-cash related costs

     (569
  

 

 

 

Balance at September 30, 2011

   $ 12,728   

Cash payments

     (806

Non-cash related costs

     (353
  

 

 

 

Balance at December 31, 2011

   $ 11,569   
  

 

 

 

 

4. Acquisitions

During the second quarter of fiscal 2012, we completed an asset purchase of a specialty wire and cable company for $24.0 million and recorded goodwill of $18.0 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.

During the third quarter of fiscal 2011, we completed an asset acquisition of an active optical cable business for $24.6 million and recorded goodwill of $14.6 million. The purchase price includes contingent consideration up to $5.8 million payable through fiscal 2013 upon the seller meeting certain criteria. The purchase price allocation for this acquisition is complete.

 

5. Earnings 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
December 31,
     Six Months Ended
December 31,
 
     2011      2010      2011      2010  

Net income

   $ 64,016       $ 78,283       $ 144,533       $ 153,387   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic average common shares outstanding

     175,830         174,664         175,656         174,510   

Effect of dilutive stock options

     1,155         892         1,122         819   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted weighted average common shares outstanding

     176,985         175,556         176,778         175,329   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share:

           

Basic

   $ 0.36       $ 0.45       $ 0.82       $ 0.88   

Diluted

   $ 0.36       $ 0.45       $ 0.82       $ 0.88   

Excluded from the computations above were anti-dilutive shares of 5.1 million and 5.8 million for the three and six months ended December 31, 2011, respectively, compared with 7.4 million and 6.4 million for the same prior year periods.

 

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Table of Contents
6. Comprehensive Income

Total comprehensive income is summarized as follows (in thousands):

 

     Three Months Ended
December 31,
     Six Months Ended
December 31,
 
     2011     2010      2011     2010  

Net income

   $ 64,016      $ 78,283       $ 144,533      $ 153,387   

Translation adjustments

     (7,551     14,045         (66,275     86,011   

Pension liability remeasurement

     —          11,824         —          11,824   

Unrealized investment (loss) gain

     (3,492     2,452         (4,616     790   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total comprehensive income

   $ 52,973      $ 106,604       $ 73,642      $ 252,012   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

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,
2011
     June 30,
2011
 

Raw materials

   $ 98,076       $ 91,362   

Work in process

     152,185         143,888   

Finished goods

     302,003         300,703   
  

 

 

    

 

 

 

Total inventories

   $ 552,264       $ 535,953   
  

 

 

    

 

 

 

 

8. Pensions and Other Postretirement Benefits

The components of pension benefit cost are as follows (in thousands):

 

     Three Months Ended
December 31,
    Six Months Ended
December 31,
 
     2011     2010     2011     2010  

Service cost

   $ 1,381      $ 451      $ 2,762      $ 2,648   

Interest cost

     2,123        487        4,246        2,454   

Expected return on plan assets

     (2,166     (472     (4,332     (2,284

Amortization of prior service cost

     65        13        130        66   

Recognized actuarial losses

     290        893        580        1,786   

Amortization of transition obligation

     10        9        20        18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Benefit cost

   $ 1,703      $ 1,381      $ 3,406      $ 4,688   
  

 

 

   

 

 

   

 

 

   

 

 

 

The components of retiree health care benefit cost are as follows (in thousands):

 

     Three Months Ended
December 31,
    Six Months Ended
December 31,
 
     2011     2010     2011     2010  

Service cost

   $ 274      $ 342      $ 548      $ 684   

Interest cost

     586        617        1,172        1,234   

Amortization of prior service cost

     (516     (516     (1,032     (1,032

Recognized actuarial losses

     82        333        164        666   
  

 

 

   

 

 

   

 

 

   

 

 

 

Benefit cost

   $ 426      $ 776      $ 852      $ 1,552   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents
9. Debt

Total debt consisted of the following (in thousands):

 

     Average Interest
Rate
   Maturity    December 31,
2011
     June 30,
2011
 

Long-term debt:

           

Private Placement

   2.91 – 4.28%    2016 – 2021    $ 150,000       $ —     

U.S. Credit Facility

   1.77%    2016      40,000         185,000   

Unsecured bonds and term loans

   1.31 – 1.65%    2012 – 2013      65,394         89,342   

Other debt

   Varies    2012 – 2013      1,331         1,528   
        

 

 

    

 

 

 

Total long-term debt

           256,725         275,870   

Less current portion of long-term debt:

           

Unsecured bonds and term loans

   1.31 – 1.65%         59,043         52,156   

Other debt

   Varies         1,011         920   
        

 

 

    

 

 

 

Long-term debt, less current portion

           196,671         222,794   

Short-term borrowings

           

Overdraft loan

   2.48%    2012      64,150         62,060   

Other short-term borrowings

   Varies         3,427         4,628   
        

 

 

    

 

 

 

Total short-term borrowings

           67,577         66,688   
        

 

 

    

 

 

 

Total debt

         $ 324,302       $ 342,558   
        

 

 

    

 

 

 

On August 18, 2011, we issued senior notes totaling $150.0 million through an unregistered, private placement of debt (the Private Placement). The Private Placement consists of three $50.0 million series notes: Series A with an interest rate of 2.91% matures on August 18, 2016; Series B with an interest rate of 3.59% matures on August 18, 2018; and Series C with an interest rate of 4.28% matures on August 18, 2021. The Note Purchase Agreement contains customary covenants regarding liens, debt, substantial asset sales and mergers. The Note Purchase Agreement also requires us to maintain financial covenants pertaining to, among other things, our consolidated leverage and interest rate coverage. As of December 31, 2011, we were in compliance with these covenants and the balance of the senior notes was $150.0 million.

In June 2009, we entered into a $195.0 million unsecured, three-year revolving credit facility in the United States, amended in January 2010, September 2010 and March 2011, that was initially scheduled to mature in June 2012 (the U.S. Credit Facility). In connection with the September 2010 amendment, we increased the credit line on the U.S. Credit Facility to $270.0 million. In March 2011, we further amended the credit facility to increase the credit line to $350.0 million and extend the term to March 2016. Borrowings under the U.S. 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 150 basis points as of December 31, 2011. The Credit Agreement contains customary covenants regarding liens, debt, substantial asset sales and mergers, dividends and investments. The Credit Agreement also requires us to maintain financial covenants pertaining to, among other things, our consolidated leverage and fixed charge coverage. As of December 31, 2011, we were in compliance with these covenants and had outstanding borrowings of $40.0 million.

In September 2011, Molex Japan renewed a ¥5.0 billion overdraft loan, with a six month term and an interest rate of approximately 2.48%. At December 31, 2011, the balance of the overdraft loan, which requires full repayment by the end of the term if not renewed, approximated $64.2 million.

In March 2010, Molex Japan entered into a ¥3.0 billion syndicated term loan for three years, with interest rates equivalent to the six month Tokyo Interbank Offered Rate plus 75 basis points and scheduled principal payments of ¥0.5 billion every six months. At December 31, 2011, the balance of the syndicated term loan approximated $19.2 million, of which $12.9 million was current.

In September 2009, Molex Japan issued unsecured bonds totaling ¥10.0 billion with a term of three years, an interest rate of approximately 1.65% and scheduled principal payments of ¥1.6 billion every six months. At December 31, 2011, the outstanding balance of the unsecured bonds approximated $46.2 million which is classified as current.

 

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Certain assets, including equipment, secure a portion of our long-term debt. Principal payments on long-term debt obligations are due in the following calendar years (in thousands):

 

2012

   $ 60,054   

2013

     6,671   

2014

     —     

2015

     —     

2016

     90,000   

Thereafter

     100,000   
  

 

 

 

Total long-term debt obligations

   $ 256,725   
  

 

 

 

We had available lines of credit totaling $405.7 million at December 31, 2011, including a $350.0 million unsecured, five-year revolving credit facility with $310.0 million available as of December 31, 2011. The lines of credit expire between 2012 and 2021.

 

10. Income Taxes

The effective tax rate was 33.7% for the three months ended December 31, 2011 and 30.3% for the three months ended December 31, 2010. During the three months ended December 31, 2011, we recorded a one-time charge for additional income tax expense of $2.7 million. This charge reflects the cumulative effect of a reduction in future tax benefits from deferred tax assets in Japan resulting from the decrease in the Japanese statutory corporate tax rate. The reduction in the Japanese statutory tax rate was enacted in November 2011.

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 2007. The tax years 2008 and after remain open to examination by all major taxing jurisdictions to which we are subject.

It is our practice to recognize interest and penalties related to income tax matters in tax expense. As of December 31, 2011, there were no material interest or penalty amounts to accrue.

 

11. Fair Value Measurements

The following table summarizes our financial assets and liabilities as of December 31, 2011, which are measured at fair value on a recurring basis (in thousands):

 

     Total
Measured
at Fair
Value
     Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

Available for sale and trading securities

   $ 23,325       $ 23,325       $ —         $ —     

Derivative financial instruments, net

     5,896         —           5,896         —     

We determine the fair value of our marketable and 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.

 

12. Derivative Instruments and Hedging Activities

We use derivative instruments to manage our foreign exchange and commodity cost exposures. All derivative instruments are recognized at fair value in other current assets or liabilities.

 

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Derivatives Not Designated as Hedging Instruments

We use one-month foreign currency forward contracts (forward contracts) to offset the impact of exchange rate volatility on certain assets and liabilities, including intercompany receivables and payables denominated in non-functional currencies. These forward contracts have not been designated as hedges, and the gains or losses on these forward contracts, along with the offsetting losses or gains due to the fluctuation of exchange rates on the underlying foreign currency denominated assets and liabilities, are recognized in other income (expense). The notional amounts of the forward contracts were $232.9 million and $175.6 million at December 31, 2011 and June 30, 2011, respectively, with corresponding fair values of a $0.9 million asset at December 31, 2011 and a $2.7 million asset at June 30, 2011.

Cash Flow Hedges

We use derivatives in the form of call options to hedge the variability of gold and copper costs. These derivative instruments are designated as cash flow hedges and hedge approximately 60% of our planned gold and copper purchases. Gains and losses of the effective hedges are recorded as a component of accumulated other comprehensive income and reclassified to cost of sales during the period the product containing the commodity is sold. The fair values of the call options were $6.2 million and $7.8 million at December 31, 2011 and June 30, 2011, respectively. These call options have maturities of 12 months or less.

For the three and six months ended December 31, 2011 and 2010, the impact to accumulated other comprehensive income (AOCI) and earnings from cash flow hedges follows (in thousands):

 

     Three Months Ended
December 31,
    Six Months Ended
December 31,
 
     2011     2010     2011     2010  

Unrealized (loss) gain recognized in AOCI

     (6,089     4,795        (4,587     4,073   

Gain (loss) reclassified into earnings

     3,564        (132     5,409        2,004   

At December 31, 2011, $6.1 million is expected to be reclassified from AOCI to cost of sales within the next 12 months.

 

13. New Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (the FASB) issued updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This new guidance is effective for us beginning July 1, 2012, with early adoption permitted. This new guidance will not have a material impact on our consolidated financial statements.

In June 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220). This new guidance requires the components of net income and other comprehensive income to be either presented in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. This new guidance eliminates the current option to report other comprehensive income and its components in the statement of stockholders’ equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance is effective for us for the quarter ended September 30, 2012 and will amend our presentation of the components of comprehensive income.

 

14. Contingencies

We are currently a party to various legal proceedings, claims and investigations including those disclosed in this note. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially adversely impact our financial position or overall trends in operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or other events could occur. If unfavorable final outcomes were to occur, then there exists the possibility of a material adverse impact.

 

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Employment and Benefits Litigation

In 2009, Molex Automotive SARL (MAS), decided to close a facility it operated in Villemur-sur-Tarn, France. MAS submitted a social plan to MAS’s labor representatives providing for payments to approximately 280 terminated employees. This social plan was adopted by MAS in 2009 and payments were made to those employees until September 2010. In September 2010, former employees of MAS who were covered under the social plan filed suit against MAS and AGS (a state fund for wage guarantee) in the Toulouse Labor Court, requesting additional compensation. The total amount sought by the former employees is approximately €24.0 million ($31.1 million). Molex International initiated liquidation of MAS, and pursuant to a court proceeding, a liquidator was appointed in November 2010. One of the liquidator’s responsibilities is to assess and respond to the lawsuits involving MAS. In June 2011, the former employees of MAS noticed Molex Incorporated (Molex) as a defendant to the Toulouse Labor Court proceedings. In their court submission, the former employees claim that Molex was a co-employer of the former employees and thus jointly liable for any additional compensation the court awards. The former employees also claim that there was no economic justification for their dismissal, that MAS decided to close the facility before it consulted with the employees and their representatives and that MAS did not adequately comply with its obligation to assist the terminated employees in obtaining alternative employment. The liquidator has filed a submission on behalf of MAS and argues that the dismissal was economically justified, that the former employees have not proven the damages they are seeking but nonetheless Molex was co-employer and thus liable for any additional payments that may be awarded to the former employees. AGS filed its submission, adopting essentially the same substantive position as the liquidator on the dismissal of the former employees but arguing that Molex was the employer.

Molex filed its briefs in reply on January 6, 2012 arguing the plaintiff’s claims be dismissed. In the reply briefs, Molex argued it was not the co-employer of the plaintiffs and the court should find that it lacks jurisdiction over Molex to hear the dispute. In the alternative, Molex argued there was no breach of the information consultation process with the employees and their representatives, the dismissals were valid and based on economic grounds, MAS complied with its redeployment obligations and the court dismiss the claims for damages. Molex also argued if the court were to award compensation, then any judgment against Molex be several but not jointly with MAS, and the amount awarded to plaintiffs not exceed six months’ salary, approximately €2.0 million ($2.6 million). The Toulouse Labor Court has scheduled two hearings, one on March 5, 2012 for employees who fall within the executives section and another on April 5, 2012 for all other employees. We intend to vigorously contest the attempt by the former employees to seek additional compensation from Molex.

Molex Japan Co., Ltd

As we previously reported in our fiscal 2010 Annual Report on Form 10-K, we launched an investigation into unauthorized activities at Molex Japan Co., Ltd. in April 2010. We learned that an individual working in Molex Japan’s finance group obtained unauthorized loans from third party lenders, that included in at least one instance the attempted unauthorized pledge of Molex Japan facilities as security, in Molex Japan’s name that were used to cover losses resulting from unauthorized trading, including margin trading, in Molex Japan’s name. We also learned that the individual misappropriated funds from Molex Japan’s accounts to cover losses from unauthorized trading. The individual admitted to forging documentation in arranging and concealing the transactions. We retained outside legal counsel, and they retained forensic accountants, to investigate the matter. The investigation has been completed.

On August 31, 2010, Mizuho Bank (Mizuho), which holds the unauthorized loans, filed a complaint in Tokyo District Court requesting the court to find Molex Japan liable for the payment of the outstanding unauthorized loans and to enter a judgment for such payment. Mizuho is claiming payment of outstanding principal borrowings of ¥3 billion ($38.5 million), ¥5 billion ($64.2 million), ¥5 billion ($64.2 million) and ¥2 billion ($25.7 million), other loan-related expenses of approximately ¥106 million ($1.4 million) and interest and delay damages of approximately ¥3.5 billion ($44.5 million) as of December 31, 2011. On October 13, 2010, Molex Japan filed a written answer requesting the court to dismiss the complaint and subsequently both parties have submitted additional briefs to the court. In addition, the parties have begun to submit witness statements. The next court hearing is scheduled for February 29, 2012. We intend to vigorously contest the enforceability of the outstanding unauthorized loans and any attempt by the lender to obtain payment. See Note 2 for accounting treatment of the accrual for unauthorized activities in Japan.

 

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Table of Contents

As we reported on April 29, 2011, the Securities and Exchange Commission (the SEC) has informed us that the SEC has issued a formal order of private investigation in connection with the activities in Molex Japan. We are fully cooperating with the SEC’s investigation.

 

15. 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, including connectors, 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.

Information by segment is summarized as follows (in thousands):

 

     Connector      Custom &
Electrical
     Corporate
& Other
    Total  

For the three months ended:

          

December 31, 2011:

          

Revenues from external customers

   $ 602,885       $ 254,713       $ —        $ 857,598   

Income (loss) from operations

     77,351         47,597         (27,807     97,141   

Depreciation & amortization

     49,333         6,753         3,847        59,933   

Capital expenditures

     43,673         4,235         4,343        52,251   

December 31, 2010:

          

Revenues from external customers

   $ 665,230       $ 236,046       $ 189      $ 901,465   

Income (loss) from operations

     105,915         32,005         (28,632     109,288   

Depreciation & amortization

     50,669         6,886         4,141        61,696   

Capital expenditures

     58,229         1,526         1,781        61,536   

For the six months ended:

          

December 31, 2011:

          

Revenues from external customers

   $ 1,281,665       $ 511,507       $ 411      $ 1,793,583   

Income (loss) from operations

     183,613         89,505         (55,396     217,722   

Depreciation & amortization

     99,408         13,880         7,886        121,174   

Capital expenditures

     78,375         11,149         5,531        95,055   

December 31, 2010:

          

Revenues from external customers

   $ 1,326,366       $ 472,077       $ 694      $ 1,799,137   

Income (loss) from operations

     204,562         74,571         (57,367     221,766   

Depreciation & amortization

     98,205         14,409         8,190        120,804   

Capital expenditures

     116,985         8,780         6,963        132,728   

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 investigative and legal costs related to the unauthorized activities in Japan and the assets of certain plants that are not specific to a particular division.

 

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Table of Contents

Segment assets, which are comprised of accounts receivable, inventory and fixed assets, are summarized as follows (in thousands):

 

     Connector      Custom &
Electrical
     Corporate
& Other
     Total  

December 31, 2011

   $ 1,818,260       $ 468,381       $ 109,555       $ 2,396,196   

June 30, 2011

     1,913,675         503,443         98,732         2,515,850   

The reconciliation of segment assets to consolidated total assets is as follows (in thousands):

 

     Dec. 31, 2011      June 30, 2011  

Segment assets

   $ 2,396,196       $ 2,515,850   

Other current assets

     788,409         707,943   

Other non-current assets

     385,513         374,059   
  

 

 

    

 

 

 

Consolidated total assets

   $ 3,570,118       $ 3,597,852   
  

 

 

    

 

 

 

 

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Molex Incorporated

Item 2. Management’s 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 management’s 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, 2011. 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 40 manufacturing locations in 16 countries. We also provide manufacturing services to integrate specific components into a customer’s product.

We have two global product segments: Connector and Custom & Electrical.

 

   

The Connector segment manufactures and sells products for high-speed, high-density, high signal-integrity applications as well as fine-pitch, low-profile connectors for the consumer and commercial markets. 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.

Net revenue decreased during the three months ended December 31, 2011 compared with the prior year period primarily due to slower customer demand caused by uncertainties in the global economy, particularly in the industrial and consumer markets, and the impact of supply chain disruptions from the floods in Thailand, which occurred during October and November 2011. Net revenue for the six months ended December 31, 2011 was consistent with the prior year period as strong demand in the infotech and automotive markets during the first quarter partially offset the slower demand during the second quarter. Despite the lower net revenue, gross margins improved during the three and six months ended December 31, 2011 due to a favorable mix of product sales. We increased prices during the six months ended December 31, 2011 to partially offset rising material costs, which also improved gross margins compared with the prior year period. Despite the gross margin improvements and specific cost control efforts, income from operations decreased during the three and six months ended December 31, 2011 based on the lower net revenue compared with the prior year periods.

The markets in which we compete are highly competitive. Our financial results may be influenced by the following factors: our ability to successfully execute our business strategy; 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; natural disasters; litigation results; investigations and legal proceedings and regulatory developments. 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

 

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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.

Unauthorized Activities in Japan

As previously reported in our Annual Report on Form 10-K for the year ended June 30, 2011, we investigated unauthorized activities at Molex Japan Ltd. Based on the results of the completed investigation, we recorded an accrued liability of $165.8 million for accounting purposes for the effect of unauthorized activities pending the resolution of the legal proceedings reported in Note 14 of the Notes to the Condensed Consolidated Financial Statements.

We believe these unauthorized activities and related losses occurred from at least as early as 1988 through 2010. The accrued liability for these unauthorized activities was $188.6 million as of December 31, 2011, including $22.8 million in cumulative foreign currency translation, which was recorded as a component of other comprehensive income. To the extent we prevail in not having to pay all or any portion of the unauthorized loans ($165.8 million), we would recognize a gain. In addition, we have a contingent liability of $45.9 million for other loan-related expenses, interest expense and delay damages on the outstanding unauthorized loans.

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 Management’s Discussion of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2011 filed with the Securities and Exchange Commission, which is incorporated by reference in this Form 10-Q.

Results of Operations

The following table sets forth consolidated statements of income data as a percentage of net revenue for the three months ended December 31 (in thousands):

 

     2011     Percentage
of
Revenue
    2010      Percentage
of
Revenue
 

Net revenue

   $ 857,598        100.0   $ 901,465         100.0

Cost of sales

     594,661        69.3     630,420         69.9
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     262,937        30.7     271,045         30.1

Selling, general & administrative

     163,073        19.0     159,044         17.6

Unauthorized activities in Japan

     2,723        0.4     2,713         0.4
  

 

 

   

 

 

   

 

 

    

 

 

 

Income from operations

     97,141        11.3     109,288         12.1

Other (expense) income, net

     (612     0.0     3,004         0.4
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes

     96,529        11.3     112,292         12.5

Income taxes

     32,513        3.8     34,009         3.8
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

   $ 64,016        7.5   $ 78,283         8.7
  

 

 

   

 

 

   

 

 

    

 

 

 

 

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Table of Contents

The following table sets forth consolidated statements of income data as a percentage of net revenue for the six months ended December 31 (in thousands):

 

     2011     Percentage
of
Revenue
    2010      Percentage
of
Revenue
 

Net revenue

   $ 1,793,583        100.0   $ 1,799,137         100.0

Cost of sales

     1,237,918        69.0     1,253,016         69.6
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     555,665        31.0     546,121         30.4

Selling, general & administrative

     332,298        18.5     316,100         17.6

Unauthorized activities in Japan

     5,645        0.4     8,255         0.5
  

 

 

   

 

 

   

 

 

    

 

 

 

Income from operations

     217,722        12.1     221,766         12.3

Other (expense) income, net

     (1,727     (0.1 %)      1,318         0.1
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes

     215,995        12.0     223,084         12.4

Income taxes

     71,462        4.0     69,697         3.9
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

   $ 144,533        8.0   $ 153,387         8.5
  

 

 

   

 

 

   

 

 

    

 

 

 

Net Revenue

We sell our products in five primary markets. Our connectors, interconnecting devices and assemblies are used principally in the telecommunications, infotech, consumer, industrial and automotive markets. Our products are used in a wide range of applications including notebook computers, computer peripheral equipment, mobile products such as smartphones and tablets, digital electronics such as cameras and flat panel display televisions, automobile engine control units and adaptive braking systems, factory robotics and diagnostic equipment.

Net revenue during the second quarter of fiscal 2012 declined as global economic uncertainty affected end demand and our customers managed inventory lower. Our consumer and infotech markets were impacted more than our other markets by the disruption from the floods in Thailand, which occurred in October and November 2011. The increase (decrease) in net revenue from each market during the second quarter of fiscal 2012 compared with the second quarter of fiscal 2011 (comparable quarter) and the first quarter of fiscal 2012 (sequential quarter) follows:

 

     Comparable
Quarter
    Sequential
Quarter
 

Telecommunications

     (5 )%      2

Infotech

     3        (14

Consumer

     (11     (14

Industrial

     (14     (12

Automotive

     1        (6

 

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Table of Contents

Telecommunications market net revenue decreased against the comparable quarter due to decreases in demand for certain mobile products partially offset by increased infrastructure spending on networking. Telecommunications market net revenue increased against the sequential quarter as improvements in infrastructure spending offset the slightly weaker demand for mobile products.

Infotech market net revenue increased against the comparable quarter primarily due to increased content and demand for tablet devices and servers. Infotech market net revenue decreased against the sequential quarter as the strong demand from the first quarter weakened due to global economic uncertainty and the supply chain disruptions caused by the floods in Thailand.

Consumer market net revenue decreased against both the comparable and sequential quarters due to global economic uncertainty and the supply chain disruptions caused by the floods in Thailand, which affected the consumer market net revenue during the second quarter. The decrease against the comparable quarter was primarily due to lower demand in home entertainment, partially offset by increased demand in gaming equipment. Net revenue decreased against the sequential quarter as the first quarter benefitted from pre-holiday production volumes in home entertainment.

Industrial market net revenue decreased against the comparable and sequential quarters due to softening demand for semiconductor and production equipment from our customers’ decreased production, companies’ reluctance to invest in automation projects or deferral of projects in the current economic environment and relatively high levels of inventory in the distribution channel.

Automotive market net revenue increased modestly against the comparable quarter due to higher global automobile production and our customers’ increasing electronic content in automobiles, such as navigational and entertainment systems, mobile communication and products to improve fuel efficiency. The automotive market decreased against the sequential quarter due to slowing automobile production, particularly in Europe.

The following table shows the percentage of our net revenue by geographic region:

 

     Three Months
Ended
December 31,
    Six Months
Ended
December 31,
 
     2011     2010     2011     2010  

Americas

     26     23     25     24

Asia Pacific

     61        63        62        63   

Europe

     13        14        13        13   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

The following table provides an analysis of the change in net revenue compared with the prior fiscal year period (in thousands):

 

     Three Months
Ended
Dec. 31, 2011
    Six Months
Ended
Dec. 31, 2011
 

Net revenue for prior year period

   $ 901,465      $ 1,799,137   

Components of net revenue change:

    

Organic net revenue change

     (61,949     (80,544

Currency translation

     15,252        68,127   

Acquisitions

     2,830        6,863   
  

 

 

   

 

 

 

Total change in net revenue from prior year period

     (43,867     (5,554
  

 

 

   

 

 

 

Net revenue for current year period

   $ 857,598      $ 1,793,583   
  

 

 

   

 

 

 

Organic net revenue change as a percentage of net revenue for prior year period

     (6.9 )%      (4.5 )% 

Organic net revenue decreased during the three and six months ended December 31, 2011 compared with the prior year periods as customer demand decreased in the consumer, industrial and telecommunications markets based on uncertainties about end customer demand. We completed an asset acquisition of an active optical cable business during the third quarter of fiscal 2011. The asset acquisition of the specialty wire and cable company completed at the end of the second quarter of fiscal 2012 did not affect net revenue for the three months ended December 31, 2011.

Foreign currency translation increased net revenue approximately $15.3 million and $68.1 million for the three and six months ended December 31, 2011, respectively, principally due to a stronger Japanese yen. 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, 2011     Six Months Ended December 31, 2011  
     Local
Currency
    Currency
Translation
     Net
Change
    Local
Currency
    Currency
Translation
     Net
Change
 

Americas

   $ 10,286      $ 33       $ 10,319      $ 14,121      $ 417       $ 14,538   

Asia Pacific

     (56,683     14,531         (42,152     (64,869     51,419         (13,450

Europe

     (13,138     688         (12,450     (22,148     16,291         (5,857

Corporate & other

     416        —           416        (785     —           (785
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Net change

   $ (59,119   $ 15,252       $ (43,867   $ (73,681   $ 68,127       $ (5,554
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

The change in net revenue on a local currency basis was as follows:

 

     Three Months
Ended
Dec. 31, 2011
    Six Months
Ended
Dec. 31, 2011
 

Americas

     5.0     3.3

Asia Pacific

     (10.0     (5.8

Europe

     (10.5     (9.0

Total

     (6.6 )%      (4.1 )% 

 

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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
December 31,
    Six Months Ended
December 31,
 
     2011     2010     2011     2010  

Gross profit

   $ 262,937      $ 271,045      $ 555,665      $ 546,121   

Gross margin

     30.7     30.1     31.0     30.4

The decrease in gross profit for the three months ended December 31, 2011 was primarily due to lower net revenue. Despite the lower net revenue, gross margin improved during the three and six months ended December 31, 2011 due to a favorable mix of product sales. Gross profit and gross margin for the six months ended December 31, 2011 also improved due to price increases to partially offset rising material costs. The increases in gross margin were 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 10.5 million pounds of copper and approximately 53,900 troy ounces of gold during the first two quarters of fiscal 2012. The following table shows the change in average prices related to our purchases of copper and gold for the three and six months ended December 31 (in thousands):

 

     Three Months Ended
December 31,
     Six Months Ended
December 31,
 
     2011      2010      2011      2010  

Copper (price per pound)

   $ 3.41       $ 3.93       $ 3.78       $ 3.57   

Gold (price per troy ounce)

     1,683.00         1,370.00         1,693.00         1,298.00   

Generally, we are able to pass through to our customers only a small portion of changes in the cost of copper and gold. However, we mitigate the impact of any significant increases in copper and gold prices by hedging with call options a portion of our projected net global purchases of copper and gold. The hedges reduced cost of sales by $3.6 million and $5.4 million for the three and six months ended December 31, 2011, respectively, and reduced cost of sales by $2.0 million for the six months ended December 31, 2010. The hedges did not materially affect operating results for the three months ended December 31, 2010.

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
Ended
Dec. 31, 2011
    Six Months
Ended
Dec. 31, 2011
 

Price erosion

   $ (20,765   $ (44,783

Currency translation

     5,565        22,540   

Currency transaction

     (8,595     (26,013

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. A significant portion of our price erosion occurred in mobile phone connector products as our customers introduced new versions of mobile products. Mobile phones and smartphones are part of our telecommunications market.

The increase in gross profit due to currency translation during the three and six months ended December 31, 2011, was primarily due to a stronger Japanese yen against other currencies compared with the prior year periods.

Certain products that we manufacture in Japan and Europe are sold in other regions of the world at selling prices primarily denominated in or closely linked to the U.S. dollar. As a result, changes in currency exchange rates may affect our cost of sales reported in U.S. dollars without a corresponding effect on net revenue. The decrease in gross profit due to currency transactions was primarily due to a stronger Japanese yen and a general weakening of the U.S dollar against most currencies during the three and six months ended December 31, 2011.

 

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Operating Expenses

Operating expenses were as follows as of December 31 (in thousands):

 

     Three Months Ended
December 31,
    Six Months Ended
December 31,
 
     2011     2010     2011     2010  

Selling, general and administrative

   $ 163,073      $ 159,044      $ 332,298      $ 316,100   

Unauthorized activities in Japan

     2,723        2,713        5,645        8,255   

Selling, general and administrative as a percentage of revenue

     19.0     17.6     18.5     17.6

Selling, general and administrative expenses increased $4.0 million and $16.2 million for the three and six months ended December 31, 2011, compared with the prior year periods. The increase is primarily due to foreign currency translation. The impact of foreign currency translation increased selling, general and administrative expenses approximately $8.9 million and $10.8 million for the three and six months ended December 31, 2011, respectively, versus the prior year periods. Excluding the impact of foreign currency translation, selling, general and administrative expenses decreased $4.9 million for the three months ended December 31, 2011 compared with the prior year period as specific efforts to contain costs offset increases in research and development expenditures. Excluding the impact of foreign currency translation, selling, general and administrative expenses increased $5.4 million for the six months ended December 31, 2011 compared with the prior year period primarily due to investments in research and development to drive future growth.

Research and development expenditures, which are classified as selling, general and administrative expense, were approximately $44.8 million, or 5.2% of net revenue and $88.7 million, or 4.9% of net revenue for the three and six months ended December 31, 2011, respectively, compared with $42.2 million, or 4.7% of net revenue and $82.7 million, or 4.6% of net revenue, for the comparable prior year periods.

Unauthorized activities in Molex Japan for the three and six months ended December 31, 2011 represent investigative and legal fees. See Note 2 of the Notes to the Condensed Consolidated Financial Statements.

Other (Expense) Income

Other (expense) income consists primarily of net interest expense, investment income and currency exchange gains or losses. We recorded net expense of $0.6 million and $1.7 million for the three and six months ended December 31, 2011, respectively, as investment income partially offset interest expense and foreign currency gains or losses in both periods. Other income of $3.0 million and $1.3 million for the three and six months ended December 31, 2010 was primarily due to investment income, partially offset by foreign currency exchange losses from a general weakening of the U.S. dollar against other currencies.

 

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Effective Tax Rate

The effective tax rate was 33.7% for the three months ended December 31, 2011. During the three months ended December 31, 2011, we recorded a one-time charge for additional income tax expense of $2.7 million. This charge reflects the cumulative effect of a reduction in future tax benefits from deferred tax assets in Japan resulting from the decrease in the Japanese statutory corporate tax rate. The reduction in the Japanese statutory tax rate was enacted in November 2011.

Our effective tax rate reflects tax benefits derived from significant operations outside the United States, which, other than Japan, are generally taxed at rates lower than the U.S. statutory rate of 35.0%. A change in the mix of income before income taxes from these various jurisdictions can have a significant impact on our periodic effective rate.

The effective tax rate was 30.3% for the three months ended December 31, 2010.

Backlog

Our order backlog on December 31, 2011 was approximately $346.3 million compared with order backlog of $413.7 million at December 31, 2010 and $387.2 million at September 30, 2011. Orders for the three months ended December 31, 2011 were $815.3 million compared with $871.7 million for the prior year period, representing slower customer demand caused by uncertainties in the global economy. Orders were flat or declined in all of our primary markets compared with the prior year period, but the largest declines were in our telecommunications and consumer markets. Our consumer and infotech markets were impacted more than our other markets by the disruption from the floods in Thailand, which occurred in October and November 2011.

Segments

The following table sets forth information on net revenue by segment as of the three months ended December 31 (in thousands):

 

     2011      Percentage
of
Revenue
    2010      Percentage
of
Revenue
 

Connector

   $ 602,885         70.3   $ 665,230         73.8

Custom & Electrical

     254,713         29.7        236,046         26.2   

Corporate & Other

     —           —          189         —     
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 857,598         100.0   $ 901,465         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

The following table sets forth information on net revenue by segment as of the six months ended December 31 (in thousands):

 

     2011      Percentage
of
Revenue
    2010      Percentage
of
Revenue
 

Connector

   $ 1,281,665         71.5   $ 1,326,366         73.7

Custom & Electrical

     511,507         28.5        472,077         26.2   

Corporate & Other

     411         —          694         0.1   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 1,793,583         100.0   $ 1,799,137         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

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Connector

The following table provides an analysis of the change in net revenue compared with the prior fiscal year (in thousands):

 

     Three Months
Ended

Dec. 31,  2011
    Six Months
Ended

Dec. 31, 2011
 

Net revenue for prior year period

   $ 665,230      $ 1,326,366   

Components of net revenue change:

    

Organic net revenue change

     (76,722     (100,636

Currency translation

     14,377        55,935   
  

 

 

   

 

 

 

Total change in net revenue from prior year period

     (62,345     (44,701
  

 

 

   

 

 

 

Net revenue for current year period

   $ 602,885      $ 1,281,665   
  

 

 

   

 

 

 

Organic net revenue change as a percentage of net revenue for prior year period

     (11.5 )%      (7.6 )% 

The Connector segment sells primarily to the telecommunication, infotech, consumer and automotive markets. Organic net revenue and segment net revenue decreased during the three and six months ended December 31, 2011 compared with the prior year periods. The decrease was primarily due to slower customer demand, particularly in the telecommunications and consumer markets. Price erosion, which is generally higher in the Connector segment compared with our other segment, also negatively impacted organic net revenue and segment net revenue. The decrease was partially offset by foreign currency translation, which favorably impacted net revenue by $14.4 million and $55.9 million for the three and six months ended December 31, 2011, respectively.

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
December 31,
    Six Months Ended
December 31,
 
     2011     2010     2011     2010  

Income from operations

   $ 77,351      $ 105,915      $ 183,613      $ 204,562   

Operating margin

     12.8     15.9     14.3     15.4

Connector segment income from operations declined over the prior year periods primarily due to lower net revenue and higher commodity costs. We increased prices to partially offset rising material costs and minimize the decline in gross profit and gross margin. Lower production levels due to decreasing customer demand also led to lower absorption of our fixed costs. Foreign currency translation increased selling, general and administrative expenses primarily due to a stronger Japanese yen against other currencies during the three and six months ended December 31, 2011, compared with the prior year periods.

 

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Table of Contents

Custom & Electrical

The following table provides an analysis of the change in net revenue compared with the prior fiscal year (in thousands):

 

     Three Months
Ended

Dec. 31,  2011
    Six Months
Ended

Dec. 31, 2011
 

Net revenue for prior year period

   $ 236,046      $ 472,077   

Components of net revenue change:

    

Organic net revenue change

     14,961        20,356   

Currency translation

     876        12,211   

Acquisitions

     2,830        6,863   
  

 

 

   

 

 

 

Total change in net revenue from prior year period

     18,667        39,430   
  

 

 

   

 

 

 

Net revenue for current year period

   $ 254,713      $ 511,507   
  

 

 

   

 

 

 

Organic net revenue change as a percentage of net revenue for prior year period

     6.3     4.3

The Custom & Electrical segment sells primarily to the industrial, telecommunications and infotech markets. Custom & Electrical segment net revenue increased in the three and six months ended December 31, 2011 compared with the prior year periods due to increased customer demand in the infotech market and favorable foreign currency translation. We completed an asset acquisition of an active optical cable business during the third quarter of fiscal 2011. The asset acquisition of the specialty wire and cable company completed at the end of the second quarter of fiscal 2012 did not affect net revenue for the three months ended December 31, 2011.

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
December 31,
    Six Months Ended
December 31,
 
     2011     2010     2011     2010  

Income from operations

   $ 47,597      $ 32,005      $ 89,505      $ 74,571   

Operating margin

     18.7     13.6     17.5     15.8

Custom & Electrical income from operations increased compared with the prior year periods due to increased net revenue and efforts to control costs. Gross margin increased primarily due to favorable mix of product sales, higher absorption and foreign currency translation. Selling, general and administrative expenses as a percent of net revenue for the three and six months ended December 31, 2011 improved over the same prior year periods, due primarily to increased net revenue and specific cost containment actions.

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 management’s 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 management’s 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.

 

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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 $618.6 million and $546.5 million at December 31, 2011 and June 30, 2011, respectively, of which $605.0 million was in non-U.S. accounts, including $197.0 million in China, as of December 31, 2011. Transferring cash, cash equivalents, or marketable securities to U.S. accounts from non-U.S. accounts could subject us to additional U.S. repatriation income tax. The primary source of our cash flow is cash generated by operations. Principal uses of cash are capital expenditures, 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.

On August 18, 2011, we issued senior notes totaling $150.0 million through a private placement of debt (the Private Placement). The Private Placement consists of three $50.0 million series notes: Series A with an interest rate of 2.91% matures on August 18, 2016; Series B with an interest rate of 3.59% matures on August 18, 2018; and Series C with an interest rate of 4.28% matures on August 18, 2021. The Note Purchase Agreement requires us to maintain financial covenants pertaining to, among other things, our consolidated leverage and interest rate coverage. As of December 31, 2011, we were in compliance with these covenants.

In June 2009, we entered into a $195.0 million unsecured, three-year revolving credit facility in the United States, amended in January 2010, September 2010 and March 2011, that was initially scheduled to mature in June 2012 (the U.S. Credit Facility). In connection with the September 2010 amendment, we increased the credit line on the U.S. Credit Facility to $270.0 million. In March 2011, we further amended the credit facility to increase the credit line to $350.0 million and extend the term to March 2016.

Total debt including obligations under capital leases totaled $324.3 million and $342.6 million at December 31, 2011 and June 30, 2011, respectively. We had available lines of credit totaling $405.7 million at December 31, 2011, including a $350.0 million unsecured, five-year revolving credit facility with $310.0 million available as of December 31, 2011. The credit facility requires us to maintain financial covenants pertaining to, among other things, our consolidated leverage and fixed charge coverage. As of December 31, 2011, we were in compliance with these covenants. Additionally, we have three unsecured borrowing agreements in Japan totaling ¥10.1 billion ($129.5 million) as of December 31, 2011, with weighted average fixed interest rates of 1.56%. See Note 9 of the Notes to the Condensed Consolidated Financial Statements.

Cash Flows

Our cash and cash equivalents balance increased $74.7 million during the six months ended December 31, 2011. Our primary source of cash was operating cash flows of $291.5 million, the majority of which is generated outside the United States. We used cash during the period to fund capital expenditures of $95.1 million and pay dividends of $70.2 million. The translation of our cash to U.S. dollars decreased our cash balance by $9.4 million compared with the balance as of June 30, 2011.

Below is a table setting forth the key lines of our Consolidated Statements of Cash Flows (in thousands):

 

     Six Months Ended
December 31,
 
     2011     2010  

Cash provided from operating activities

   $ 291,513      $ 182,475   

Cash used for investing activities

     (115,087     (129,737

Cash used for financing activities

     (92,319     (54,371

Effect of exchange rate changes on cash

     (9,370     17,671   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

   $ 74,737      $ 16,038   
  

 

 

   

 

 

 

 

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Table of Contents

Operating Activities

Cash provided from operating activities increased by $109.0 million from the prior year period due mainly to a $132.4 million decrease in working capital needs in the current year period compared with the prior year. Working capital needs decreased during the six months ended December 31, 2011 compared with the prior year period as we collected outstanding receivable balances and maintained inventory levels after increasing inventory in the prior year due to customer demand and the conversion from air shipment to sea shipment. Working capital is defined as current assets minus current liabilities.

Investing Activities

Cash used for investing activities decreased by $14.7 million from the prior year period due mainly to a $37.7 million decrease in capital expenditures, partially offset by a $24.0 million acquisition of a specialty wire and cable company in the second quarter of fiscal 2012. Capital expenditures were $95.1 million for the six months ended December 31, 2011 compared with $132.7 million in the prior year period.

Financing Activities

Cash used for financing activities increased $37.9 million during the six months ended December 31, 2011, compared with the prior year period primarily due to the increased quarterly cash dividend and net payments on debt.

Our quarterly cash dividend was $0.2000 per share in fiscal 2012, an increase of 14.3% from the previous cash dividend of $0.1750 per share in the prior fiscal year. The increase was effective to shareholders of record on June 30, 2011.

We issued senior notes totaling $150.0 million on August 18, 2011. Proceeds were used to pay down a portion of the U.S. Credit Facility. Net borrowings on the revolving credit facility were $20.0 million for the three months ended December 31, 2011 and net payments were $145.0 million for the six months ended December 31, 2011, compared with net borrowings of $25.0 million and $35.0 million in the prior year periods.

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. To the extent we are required to pay all or any portion of the unauthorized loans in Japan our cash requirements may also be impacted.

Contractual Obligations and Commercial Commitments

We have contractual obligations and commercial commitments as described in Item 7, “Management’s 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, 2011. 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. Since June 30, 2011, there have been no material changes in our contractual obligations and commercial commitments arising outside of the ordinary course of business other than the Private Placement. The Private Placement consists of three $50.0 million series notes: Series A that matures on August 18, 2016; Series B that matures on August 18, 2018; and Series C that matures on August 18, 2021. See Note 9 of the Notes to the Condensed Consolidated Financial Statements.

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, business, beliefs, and management’s 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,”

 

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Table of Contents

“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, 2011 (Form 10-K). You should carefully consider the risks described in our Form 10-K. Such risks are not the only ones we are facing; additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. If any of the risks occur, our business, financial condition or operating results could be materially adversely affected.

We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to 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, unauthorized activities in Japan, acquisition synergies, manufacturing strategies, product development and sales, regulatory approvals, competitive strengths, natural disasters and investigations and legal proceedings. 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 quarterly 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. See Note 12 of the Notes to the Condensed Consolidated Financial Statements for discussion of foreign exchange contracts in use at December 31, 2011 and June 30, 2011.

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. See Note 12 of the Notes to the Condensed Consolidated Financial Statements for discussion of derivative instruments in use at December 31, 2011 and June 30, 2011.

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 $68.1 million and increased income from operations of $11.7 million for the six months ended December 31, 2011, compared with the estimated results for the comparable period in the prior year.

Our $11.2 million of marketable securities at December 31, 2011 are principally invested in time deposits.

Interest rate exposure is generally limited to our marketable securities, five-year unsecured credit facility and syndicated term loan. We do not actively manage the risk of interest rate fluctuations. Our marketable securities mature in less than 12 months. We had $40.0 million outstanding on our $350.0 million credit facility with an interest rate of approximately 1.77% at December 31, 2011.

 

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Table of Contents

Due to the nature of our operations, we are not subject to significant concentration risks relating to customers or products.

We monitor the environmental laws and regulations in the countries in which we operate. We have implemented an environmental program to reduce the generation of potentially hazardous materials during our manufacturing process and believe we continue to meet or exceed local government regulations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our chief executive officer (CEO) and chief financial officer (CFO), 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 CEO and CFO 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 SEC’s rules and forms, and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

During the three months ended December 31, 2011, 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.

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by intentionally falsified documentation, by collusion of two or more individuals within Molex or third parties, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

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Table of Contents

PART II

Item 1. Legal Proceedings

Currently, we are involved in a number of legal proceedings. For a discussion of contingencies related to legal proceedings, see Note 14 of the Notes to the Condensed Consolidated Financial Statements, which is hereby incorporated by reference.

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, 2011 were as follows (in thousands, except price per share data):

 

     Total
Number
of Shares
Purchased
     Average
Price
Paid per
Share
     Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plan
 

October 1 – October 31

        

Common Stock

     —         $ —           —     

Class A Common Stock

     140       $ 17.66         —     

November 1 – November 30

        

Common Stock

     —         $ —           —     

Class A Common Stock

     *       $ 19.62         —     

December 1 – December 31

        

Common Stock

     —         $ —           —     

Class A Common Stock

     —         $ —           —     
  

 

 

    

 

 

    

 

 

 

Total

     140       $ 17.67         —     
  

 

 

    

 

 

    

 

 

 

The shares purchased represent exercises of employee stock options.

 

* Less than 1,000 shares.

 

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Item 6. Exhibits

 

Number

  

Description

  10.1    2008 Molex Stock Incentive Plan, as amended and restated. Incorporated by reference to Appendix A to our 2011 Proxy Statement (File No. 000-07491).
  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

101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document

 

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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 26, 2012

 

/S/ DAVID D. JOHNSON

  David D. Johnson
  Executive Vice President, Treasurer and
  Chief Financial Officer
  (Principal Financial Officer)

 

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