Q3 2013 Earnings Call Transcript

Transcript Call Date 04/23/2013

Operator: Good day, ladies and gentlemen, and welcome to the Third Quarter 2013 Molex Incorporated Press Release Conference Call. My name is Gwynn and I'll be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Steve Martens. Please proceed.

Steve Martens - VP, IR: Thank you, Gwynn. Good morning, everyone. I'm here this morning with Martin Slark, our Chief Executive Officer who will provide an overview of the quarter results and comments by market; and Dave Johnson, our CFO who will cover our financial results and guidance for the June quarter. During our prepared remarks, we will be referring to a small slide deck, which is available in the Investors Relations section of our website, A replay of this call will also be available on the site.

Before we begin, I have a few comments regarding our Safe Harbor statements, which are on Slides 1 and 2 of the presentation. During the course of this presentation, we will be providing forward-looking information and referring to non-GAAP measures. Please read carefully the forward-looking statement section of our press release and Form 10-K for an understanding of the risks and uncertainties associated with forward-looking information and the reconciliation of non-GAAP measures to GAAP.

And now, I'll turn the call over to Martin.

Martin P. Slark - Vice Chairman and CEO: Thank you, Steve, and good morning, everybody, and welcome to our third quarter call. If you would, please turn to Page 3 now which is the first of the slides that actually provide some information on the quarter. I'll now give you a quick overview of what we think were the key items that occurred this quarter. First of all, after two years of litigation, we settled the lawsuit brought by Mizuho Bank over activities in our Japanese subsidiary as we explained to all of you occurred many years ago. We've been incurring ongoing legal fees to try and defend our position and we were facing significant potential interest penalties. Therefore, we decided to settle this case, so that we could focus on executing our business strategies. I have to tell you that we weren't happy with the final outcome of this case, but as we stated many times in Investor Meetings, we were a U.S. company fighting a Japanese bank in Japan.

Dave will explain the final charges and the cash impact of the settlement in a few minutes and hopefully we can then put this issue behind us.

Revenue was much weaker than we anticipated during the March quarter with significant sequential declines in components for mobile phones and tablets. The decreases were largely due to lower sales to one customer for new program that was introduced in the September and December quarters. Excluding this program, we would have experienced a normal seasonal revenue decline of about 4% sequentially.

Profitability was relatively strong, considering the weak demand environment. Margins were in line an SG&A was better than our guidance for the quarter. Consistent with our capital allocation priorities, the Board of Directors has approved a 9% increase to dividend effective in the September quarter. The new annual rate will be $0.96 per share. This reflects the Board's view that cash flows will continue to grow as we move forward.

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