XNAS:MOLXA Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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 March 31, 2012

 

¨ 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 April 19, 2012, the following numbers of shares of the Company’s common stock were outstanding:

Common Stock

     95,560,076   

Class A Common Stock

     80,704,172   

Class B Common Stock

     94,255   

 

 

 


Table of Contents

Molex Incorporated

INDEX

 

PART I – FINANCIAL INFORMATION

  
          Page  

Item 1. Financial Statements

  
           Condensed Consolidated Balance Sheets as of March 31, 2012 and June 30, 2011      3   
           Condensed Consolidated Statements of Income for the three and nine months ended March 31, 2012 and 2011      4   
           Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2012 and 2011      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)

 

     Mar. 31,
2012
    June 30,
2011
 
     (Unaudited)        
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 608,809      $ 532,599   

Marketable securities

     13,654        13,947   

Accounts receivable, less allowances of $39,970 and $42,297, respectively

     724,141        811,449   

Inventories

     546,909        535,953   

Deferred income taxes

     125,807        129,158   

Other current assets

     39,454        32,239   
  

 

 

   

 

 

 

Total current assets

     2,058,774        2,055,345   

Property, plant and equipment, net

     1,126,467        1,168,448   

Goodwill

     161,143        149,452   

Non-current deferred income taxes

     41,434        38,178   

Other assets

     175,795        186,429   
  

 

 

   

 

 

 

Total assets

   $ 3,563,613      $ 3,597,852   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current liabilities:

    

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

   $ 100,976      $ 119,764   

Accounts payable

     314,999        359,812   

Accrued expenses:

    

Accrual for unauthorized activities in Japan

     177,338        182,460   

Income taxes payable

     49,737        2,383   

Other

     210,115        217,628   
  

 

 

   

 

 

 

Total current liabilities

     853,165        882,047   

Other non-current liabilities

     20,870        23,879   

Accrued pension and postretirement benefits

     91,284        100,866   

Long-term debt

     155,128        222,794   
  

 

 

   

 

 

 

Total liabilities

     1,120,447        1,229,586   
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ equity:

    

Common stock

     11,351        11,285   

Additional paid-in capital

     703,781        674,494   

Retained earnings

     2,511,045        2,408,083   

Treasury stock

     (1,112,567     (1,106,039

Accumulated other comprehensive income

     329,556        380,443   
  

 

 

   

 

 

 

Total stockholders’ equity

     2,443,166        2,368,266   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 3,563,613      $  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
March 31,
    Nine Months Ended
March 31,
 
     2012     2011     2012     2011  

Net revenue

   $ 837,080      $ 874,531      $ 2,630,663      $ 2,673,668   

Cost of sales

     581,904        613,917        1,819,822        1,866,933   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     255,176        260,614        810,841        806,735   
  

 

 

   

 

 

   

 

 

   

 

 

 

Selling, general and administrative

     163,853        159,448        496,151        475,548   

Unauthorized activities in Japan

     2,521        2,855        8,166        11,110   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     166,374        162,303        504,317        486,658   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     88,802        98,311        306,524        320,077   

Interest (expense) income, net

     (1,212     (1,726     (4,697     (4,849

Other income

     1,561        1,325        3,319        5,766   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense), net

     349        (401     (1,378     917   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     89,151        97,910        305,146        320,994   

Income taxes

     24,268        29,765        95,730        99,462   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 64,883      $ 68,145      $ 209,416      $ 221,532   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 0.37      $ 0.39      $ 1.19      $ 1.27   

Diluted

   $ 0.36      $ 0.39      $ 1.18      $ 1.26   

Dividends declared per share

   $ 0.2000      $ 0.1750      $ 0.6000      $ 0.5025   

Average common shares outstanding:

        

Basic

     176,164        174,957        175,830        174,666   

Diluted

     178,134        176,449        177,152        175,678   

See accompanying notes to condensed consolidated financial statements.

 

4


Table of Contents

Molex Incorporated

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

     Nine Months Ended
March 31,
 
     2012     2011  

Operating activities:

    

Net income

   $ 209,416      $ 221,532   

Add non-cash items included in net income:

    

Depreciation and amortization

     179,664        181,716   

Share-based compensation

     17,248        17,009   

Other non-cash items

     8,914        17,719   

Changes in assets and liabilities:

    

Accounts receivable

     71,833        (2,143

Inventories

     (20,896     (43,112

Accounts payable

     (38,382     (63,725

Other current assets and liabilities

     (4,747     3,903   

Other assets and liabilities

     7,328        (5,968
  

 

 

   

 

 

 

Cash provided from operating activities

     430,378        326,931   

Investing activities:

    

Capital expenditures

     (149,427     (196,915

Acquisitions

     (24,000     (18,847

Proceeds from sales of property, plant and equipment

     3,373        1,460   

Proceeds from sales or maturities of marketable securities

     8,348        5,568   

Purchases of marketable securities

     (8,881     (6,062

Other investing activities

     11,000        (196
  

 

 

   

 

 

 

Cash used for investing activities

     (159,587     (214,992

Financing activities:

    

Proceeds from revolving credit facility

     75,000        85,000   

Payments on revolving credit facility

     (255,000     (20,000

Proceeds from short-term loans and current portion of long-term debt

     —          28,856   

Payments on short-term loans and current portion of long-term debt

     (53,615     (31,843

Proceeds from issuance of long-term debt

     150,000        —     

Payments of long-term debt

     (479     (47,908

Cash dividends paid

     (105,375     (83,766

Exercise of stock options

     6,867        5,935   

Other financing activities

     (3,199     (2,990
  

 

 

   

 

 

 

Cash used for financing activities

     (185,801     (66,716

Effect of exchange rate changes on cash

     (8,780     26,221   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     76,210        71,444   

Cash and cash equivalents, beginning of period

     532,599        376,352   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 608,809      $ 447,796   
  

 

 

   

 

 

 

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 nine months ended March 31, 2012 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 $177.3 million as of March 31, 2012, including $11.5 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 $49.5 million for other loan-related expenses, interest expense and delay damages on the outstanding unauthorized loans.

Unauthorized activities in Molex Japan for the three and nine months ended March 31, 2012 and 2011 represent investigative and legal fees.

 

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.

 

6


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   

Cash payments

     (585

Non-cash related costs

     95   
  

 

 

 

Balance at March 31, 2012

   $ 11,079   
  

 

 

 

 

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 $12.3 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
March 31,
     Nine Months Ended
March 31,
 
     2012      2011      2012      2011  

Net income

   $ 64,883       $ 68,145       $ 209,416       $ 221,532   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic average common shares outstanding

     176,164         174,957         175,830         174,666   

Effect of dilutive stock options

     1,970         1,492         1,322         1,012   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted weighted average common shares outstanding

     178,134         176,449         177,152         175,678   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share:

           

Basic

   $ 0.37       $ 0.39       $ 1.19       $ 1.27   

Diluted

   $ 0.36       $ 0.39       $ 1.18       $ 1.26   

Excluded from the computations above were anti-dilutive shares of 2.4 million and 5.2 million for the three and nine months ended March 31, 2012, respectively, compared with 3.3 million and 6.6 million for the same prior year periods.

 

7


Table of Contents
6. Comprehensive Income

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

 

     Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2012      2011     2012     2011  

Net income

   $ 64,883       $ 68,145      $ 209,416      $ 221,532   

Translation adjustments

     17,643         32,710        (48,632     118,721   

Pension liability remeasurement

     —           —          —          11,824   

Unrealized investment gain (loss)

     2,361         (3,058     (2,255     (2,268
  

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income

   $ 84,887       $ 97,797      $ 158,529      $ 349,809   
  

 

 

    

 

 

   

 

 

   

 

 

 

 

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):

 

     Mar. 31,
2012
     June 30,
2011
 

Raw materials

   $ 91,996       $ 91,362   

Work in process

     149,216         143,888   

Finished goods

     305,697         300,703   
  

 

 

    

 

 

 

Total inventories

   $ 546,909       $ 535,953   
  

 

 

    

 

 

 

 

8. Pensions and Other Postretirement Benefits

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

 

     Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2012     2011     2012     2011  

Service cost

   $ 1,381      $ 451      $ 4,143      $ 3,099   

Interest cost

     2,123        487        6,369        2,941   

Expected return on plan assets

     (2,166     (472     (6,498     (2,756

Amortization of prior service cost

     65        13        195        79   

Recognized actuarial losses

     290        893        870        2,679   

Amortization of transition obligation

     10        9        30        27   
  

 

 

   

 

 

   

 

 

   

 

 

 

Benefit cost

   $ 1,703      $ 1,381      $ 5,109      $ 6,069   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

     Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2012     2011     2012     2011  

Service cost

   $ 274      $ 342      $ 822      $ 1,026   

Interest cost

     586        617        1,758        1,851   

Amortization of prior service cost

     (516     (516     (1,548     (1,548

Recognized actuarial losses

     82        333        246        999   
  

 

 

   

 

 

   

 

 

   

 

 

 

Benefit cost

   $ 426      $ 776      $ 1,278      $ 2,328   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

8


Table of Contents
9. Debt

Total debt consisted of the following (in thousands):

 

     Average
Interest Rate
    Maturity      March 31,
2012
     June 30,
2011
 

Long-term debt:

          

Private Placement

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

U.S. Credit Facility

     1.74     2016         5,000         185,000   

Unsecured bonds and term loans

     1.31-1.65     2012 – 2013         36,144         89,342   

Other debt

     Varies        2012 – 2013         1,193         1,528   
       

 

 

    

 

 

 

Total long-term debt

          192,337         275,870   

Less current portion of long-term debt:

          

Unsecured bonds and term loans

     1.31-1.65        36,144         52,156   

Other debt

     Varies           1,065         920   
       

 

 

    

 

 

 

Long-term debt, less current portion

          155,128         222,794   

Short-term borrowings

          

Overdraft loan

     1.98     2012         60,320         62,060   

Other short-term borrowings

     Varies           3,447         4,628   
       

 

 

    

 

 

 

Total short-term borrowings

          63,767         66,688   
       

 

 

    

 

 

 

Total debt

        $ 256,104       $ 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 March 31, 2012, 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 U.S. 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 March 31, 2012. The U.S. Credit Facility contains customary covenants regarding liens, debt, substantial asset sales and mergers, dividends and investments. The U.S. Credit Facility also requires us to maintain financial covenants pertaining to, among other things, our consolidated leverage and fixed charge coverage. As of March 31, 2012, we were in compliance with these covenants and had outstanding borrowings of $5.0 million.

In March 2012, Molex Japan renewed a ¥5.0 billion overdraft loan, with a six month term and an interest rate of approximately 1.98%. At March 31, 2012, the balance of the overdraft loan, which requires full repayment by the end of the term if not renewed, approximated $60.3 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 March 31, 2012, the balance of the syndicated term loan approximated $12.0 million, which is classified as 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 March 31, 2012, the outstanding balance of the unsecured bonds approximated $24.1 million, which is classified as current.

 

9


Table of Contents

Certain assets, including equipment, secure a portion of our long-term debt. Principal payments on long-term debt obligations are due as follows as of March 31, 2012 (in thousands):

 

Year one

   $ 37,209   

Year two

     128   

Year three

     —     

Year four

     —     

Year five

     55,000   

Thereafter

     100,000   
  

 

 

 

Total long-term debt obligations

   $ 192,337   
  

 

 

 

We had available lines of credit totaling $421.6 million at March 31, 2012, including $345.0 million available on the U.S. Credit Facility. The lines of credit expire between 2012 and 2021.

 

10. Income Taxes

The effective tax rate was 27.2% for the three months ended March 31, 2012 and 30.4% for the three months ended March 31, 2011. During the three months ended March 31, 2012, we recorded a one-time charge of $1.6 million for the cumulative effect of a reduction in future tax benefits from deferred tax assets in Shanghai due to a decrease in the Shanghai corporate tax rate. We also recorded a one-time benefit of $4.6 million from releasing valuation allowances no longer required on net operating losses recorded in certain foreign jurisdictions.

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 March 31, 2012, 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 March 31, 2012, 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

   $ 26,366       $ 26,366       $ —         $ —     

Derivative financial instruments, net

     7,480         —           7,480         —     

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.

 

10


Table of Contents

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 $222.3 million and $175.6 million at March 31, 2012 and June 30, 2011, respectively, with corresponding fair values of a $0.2 million asset at March 31, 2012 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 (AOCI) and reclassified to cost of sales during the period the product containing the commodity is sold. The fair values of the call options were $7.5 million and $7.8 million at March 31, 2012 and June 30, 2011, respectively. These call options have maturities of 12 months or less.

For the three and nine months ended March 31, 2012 and 2011, the impact to accumulated other comprehensive income and earnings from cash flow hedges follows (in thousands):

 

     Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2012      2011     2012     2011  

Unrealized gain (loss) recognized in AOCI

     $2,060         $ (2,105     $ (2,527     $ 1,968   

Gain reclassified into earnings

     699         2,233        6,108        4,237   

At March 31, 2012, $2.6 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.

 

11


Table of Contents

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 ($32.0 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 ($2.7 million).

On February 24, 2012, the five employees who fall within the executive section submitted a reply brief and requested a postponement of the March 5, 2012 court date. The court granted the request and rescheduled separate court dates in 2012 for each plaintiff as follows: June 25, July 9, September 24, October 8 and December 17.

On April 5, 2012, the Toulouse Labor Court held a hearing for the other employees, who fall within the industry section, and the parties presented their arguments regarding whether the court has jurisdiction over Molex. The court adjourned the hearing to consider the question of jurisdiction over Molex and will issue the results of its consideration on June 28, 2012. In addition, the liquidator has filed an action against Molex claiming it is responsible for the liabilities of MAS that remain as a result of the liquidation.

We intend to vigorously contest the attempt by the former employees to seek additional compensation from Molex, and the liquidator’s attempt to hold Molex responsible for the liabilities of MAS.

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.

 

12


Table of Contents

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 ($36.2 million), ¥5 billion ($60.3 million), ¥5 billion ($60.3 million) and ¥2 billion ($24.1 million), other loan-related expenses of approximately ¥106 million ($1.3 million) and interest and delay damages of approximately ¥4.0 billion ($48.3 million) as of March 31, 2012. 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 and witness statements to the court. The court has scheduled two hearing dates, May 9 and May 16, 2012, for witness examinations. 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.

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.

 

13


Table of Contents

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

 

     Connector      Custom &
Electrical
     Corporate
& Other
    Total  

For the three months ended:

          

March 31, 2012:

          

Revenues from external customers

   $ 583,364       $ 253,629       $ 87      $ 837,080   

Income (loss) from operations

     76,268         39,741         (27,207     88,802   

Depreciation & amortization

     47,838         6,696         3,955        58,489   

Capital expenditures

     43,638         4,876         5,858        54,372   

March 31, 2011:

          

Revenues from external customers

   $ 628,367       $ 245,434       $ 730      $ 874,531   

Income (loss) from operations

     86,989         36,399         (25,077     98,311   

Depreciation & amortization

     49,967         6,927         4,017        60,911   

Capital expenditures

     56,208         4,613         3,367        64,188   

For the nine months ended:

          

March 31, 2012:

          

Revenues from external customers

   $ 1,865,029       $ 765,136       $ 498      $ 2,630,663   

Income (loss) from operations

     259,882         129,245         (82,603     306,524   

Depreciation & amortization

     147,247         20,575         11,842        179,664   

Capital expenditures

     122,013         16,025         11,389        149,427   

March 31, 2011:

          

Revenues from external customers

   $ 1,954,733       $ 717,511       $ 1,424      $ 2,673,668   

Income (loss) from operations

     291,551         110,969         (82,443     320,077   

Depreciation & amortization

     148,172         21,337         12,207        181,716   

Capital expenditures

     173,193         13,393         10,329        196,915   

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 segment.

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

 

     Connector      Custom &
Electrical
     Corporate
& Other
     Total  

March 31, 2012

   $ 1,797,481       $ 483,656       $ 116,380       $ 2,397,517   

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):

 

     Mar. 31,
2012
     June 30,
2011
 

Segment assets

   $ 2,397,517       $ 2,515,850   

Other current assets

     787,724         707,943   

Other non-current assets

     378,372         374,059   
  

 

 

    

 

 

 

Consolidated total assets

   $ 3,563,613       $ 3,597,852   
  

 

 

    

 

 

 

 

 

14


Table of Contents

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 and nine months ended March 31, 2012 compared with the prior year periods primarily due to slower customer demand caused by uncertainties in the global economy, particularly in the consumer markets. Decreases in demand for certain mobile products in the telecommunications markets also contributed to the net revenue decrease. Despite the lower net revenue, gross margins improved during the three and nine months ended March 31, 2012 compared to the prior year periods due to a favorable mix of product sales and rigorous control over costs. We increased prices during the nine months ended March 31, 2012 to partially offset rising material costs, which also contributed to the 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 nine months ended March 31, 2012 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 new and enhanced products and product lines, control operating costs and attract, motivate and retain key personnel

 

15


Table of Contents

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 $177.3 million as of March 31, 2012, including $11.5 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 $49.5 million for other loan-related expenses, interest expense and delay damages on the outstanding unauthorized loans.

Unauthorized activities in Molex Japan for the three and nine months ended March 31, 2012 and 2011 represent investigative and legal fees.

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 March 31 (in thousands):

 

     2012      Percentage
of Revenue
    2011     Percentage
of Revenue
 

Net revenue

   $ 837,080         100.0   $ 874,531        100.0

Cost of sales

     581,904         69.5     613,917        70.2
  

 

 

    

 

 

   

 

 

   

 

 

 

Gross profit

     255,176         30.5     260,614        29.8

Selling, general & administrative

     163,853         19.6     159,448        18.2

Unauthorized activities in Japan

     2,521         0.3     2,855        0.4
  

 

 

    

 

 

   

 

 

   

 

 

 

Income from operations

     88,802         10.6     98,311        11.2

Other income (expense), net

     349         0.1     (401     —  
  

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     89,151         10.7     97,910        11.2

Income taxes

     24,268         2.9     29,765        3.4
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income

   $ 64,883         7.8   $ 68,145        7.8
  

 

 

    

 

 

   

 

 

   

 

 

 

 

16


Table of Contents

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

 

     2012     Percentage
of Revenue
    2011      Percentage
of Revenue
 

Net revenue

   $ 2,630,663        100.0   $ 2,673,668         100.0

Cost of sales

     1,819,822        69.2     1,866,933         69.8
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     810,841        30.8     806,735         30.2

Selling, general & administrative

     496,151        18.9     475,548         17.8

Unauthorized activities in Japan

     8,166        0.2     11,110         0.4
  

 

 

   

 

 

   

 

 

    

 

 

 

Income from operations

     306,524        11.7     320,077         12.0

Other (expense) income, net

     (1,378     (0.1 %)      917         —  
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes

     305,146        11.6     320,994         12.0

Income taxes

     95,730        3.6     99,462         3.7
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

   $ 209,416        8.0   $ 221,532         8.3
  

 

 

   

 

 

   

 

 

    

 

 

 

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 third quarter of fiscal 2012 declined as global economic uncertainty affected end demand, particularly in our consumer market, and our customers managed inventory lower. The increase (decrease) in net revenue from each market during the third quarter of fiscal 2012 compared with the third quarter of fiscal 2011 (comparable quarter) and the second quarter of fiscal 2012 (sequential quarter) follows:

 

     Comparable
Quarter
    Sequential
Quarter
 

Telecommunications

     (13 )%      (17 )% 

Infotech

     4        3   

Consumer

     (10     (8

Industrial

     (7     7   

Automotive

     5        12   

 

17


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 demand for networking products. Telecommunications market net revenue decreased against the sequential quarter due to weaker demand for mobile products and infrastructure spending.

Infotech market net revenue increased against the comparable quarter primarily due to increased content and demand for tablet devices and servers, partially offset by slower demand for notebook computers. Infotech market net revenue increased against the sequential quarter primarily due to increased content and demand for tablet devices, partially offset by slower demand for servers.

Consumer market net revenue decreased against the comparable quarter due to economic uncertainty and lower demand in home entertainment and gaming equipment. Consumer market net revenue decreased against the sequential quarter due to lower sales in home entertainment products and seasonal lower demand.

Industrial market net revenue decreased against the comparable quarter 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. Industrial market net revenue increased against the sequential quarter as demand increased for industrial distribution and transportation production equipment.

Automotive market net revenue increased against both the comparable and sequential quarters due to higher global automobile production, particularly in North America and Japan, and increasing electronic content in automobiles, such as navigational and entertainment systems, mobile communication and products to improve fuel efficiency.

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

 

     Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2012     2011     2012     2011  

Americas

     28     25     25     24

Asia Pacific

     57        60        61        62   

Europe

     15        15        14        14   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

     Three Months
Ended

Mar. 31,  2012
    Nine Months
Ended

Mar. 31, 2012
 

Net revenue for prior year period

   $ 874,531      $ 2,673,668   

Components of net revenue change:

    

Organic net revenue change

     (44,555     (125,099

Currency translation

     4,231        72,358   

Acquisitions

     2,873        9,736   
  

 

 

   

 

 

 

Total change in net revenue from prior year period

     (37,451     (43,005
  

 

 

   

 

 

 

Net revenue for current year period

   $ 837,080      $ 2,630,663   
  

 

 

   

 

 

 

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

     (5.1 )%      (4.7 )% 

Organic net revenue decreased during the three and nine months ended March 31, 2012 compared with the prior year periods as customer demand slowed in the consumer markets due to uncertainties about end customer demand. Decreases in demand for certain mobile products in the telecommunications markets also contributed to

 

18


Table of Contents

the organic net revenue decrease. We completed an asset acquisition of a specialty wire and cable company during the second quarter of 2012 and completed an asset acquisition of an active optical cable business during the third quarter of fiscal 2011.

Foreign currency translation increased net revenue approximately $4.2 million for the three months ended March 31, 2012, primarily due to a stronger Japanese yen against the U.S. dollar, partially offset by a weaker euro against the U.S. dollar, compared to the prior year period. Foreign currency translation increased net revenue approximately $72.4 million for the nine months ended March 31, 2012, due to a stronger Japanese yen against the U.S. dollar compared with the prior year period. 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 March 31, 2012     Nine Months Ended March 31, 2012  
     Local
Currency
    Currency
Translation
    Net
Change
    Local
Currency
    Currency
Translation
     Net
Change
 

Americas

   $ 14,079      $ (84   $ 13,995      $ 28,200      $ 333       $ 28,533   

Asia Pacific

     (50,141     8,472        (41,669     (115,010     59,891         (55,119

Europe

     (7,089     (4,157     (11,246     (29,237     12,134         (17,103

Corporate & other

     1,469        —          1,469        684        —           684   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net change

   $ (41,682   $ 4,231      $ (37,451   $ (115,363   $ 72,358       $ (43,005
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

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

 

     Three Months Ended
Mar. 31,  2012
    Nine Months Ended
Mar. 31, 2012
 

Americas

     6.4     4.4

Asia Pacific

     (9.6     (7.0

Europe

     (5.3     (7.7

Total

     (4.8 )%      (4.3 )% 

Gross Profit

The following table provides a summary of gross profit and gross margin for the three and nine months ended March 31 (in thousands):

 

     Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2012     2011     2012     2011  

Gross profit

   $ 255,176      $ 260,614      $ 810,841      $ 806,735   

Gross margin

     30.5     29.8     30.8     30.2

The decrease in gross profit for the three months ended March 31, 2012 was primarily due to lower net revenue. Despite the lower net revenue, gross margin improved during the three and nine months ended March 31, 2012 due to a favorable mix of product sales and rigorous control over costs. Gross profit and gross margin for the nine months ended March 31, 2012 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.

 

19


Table of Contents

A significant portion of our material cost is comprised of copper and gold. We purchased approximately 15.0 million pounds of copper and approximately 77,100 troy ounces of gold during the first three quarters of fiscal 2012. The following table shows the average prices related to our purchases of copper and gold for the three and nine months ended March 31 (in thousands):

 

     Three Months Ended
March 31,
     Nine Months Ended
March 31,
 
     2012      2011      2012      2011  

Copper (price per pound)

   $ 3.79       $ 4.38       $ 3.78       $ 3.77   

Gold (price per troy ounce)

     1,691.00         1,388.00         1,693.00         1,321.00   

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 $0.7 million and $6.1 million for the three and nine months ended March 31, 2012, respectively, and reduced cost of sales by $2.2 million and $4.2 million for the three and nine months ended March 31, 2011, respectively.

The effect of certain significant impacts on gross profit compared with the prior year periods was as follows for the three and nine months ended March 31 (in thousands):

 

     Three Months
Ended

Mar. 31,  2012
    Nine Months
Ended

Mar. 31,  2012
 

Price erosion

   $ (25,254   $ (77,731

Currency translation

     2,497        25,037   

Currency transaction

     (6,742     (33,012

Price erosion is measured as the reduction in prices of our products year over year. The largest impact from price erosion is in our Connector segment. A significant portion of our price erosion occurred in mobile phone connector products, which are part of our telecommunications market. The impact of price erosion is generally offset through cost reduction, price management, and increases in demand for new products.

The increase in gross profit due to currency translation during the three months ended March 31, 2012 was primarily due to a stronger Japanese yen against the U.S. dollar, partially offset by a weaker euro against the U.S. dollar, compared with the prior year period. The increase in gross profit due to currency translation during the nine months ended March 31, 2012 was primarily due to a stronger Japanese yen against the U.S. dollar compared with the prior year period.

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 generally weaker U.S. dollar during the three and nine months ended March 31, 2012, compared with the prior year periods.

 

20


Table of Contents

Operating Expenses

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

 

     Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2012     2011     2012     2011  

Selling, general and administrative

   $ 163,853      $ 159,448      $ 496,151      $ 475,548   

Unauthorized activities in Japan

     2,521        2,855        8,166        11,110   

Selling, general and administrative as a percentage of revenue

     19.6     18.2     18.9     17.8

Selling, general and administrative expenses increased $4.4 million and $20.6 million for the three and nine months ended March 31, 2012, compared with the prior year periods. The increase in selling, general and administrative expenses for the three months ended March 31, 2012 compared to the prior year period is primarily due to investments in research and development to penetrate new markets, acquire new customers and drive future growth. The increase in selling, general and administrative expenses for the nine months ended March 31, 2012 is primarily due to foreign currency translation. The impact of foreign currency translation increased selling, general and administrative expenses approximately $11.6 million for the nine months ended March 31, 2012, versus the prior year period. Excluding the impact of foreign currency translation, selling, general and administrative expenses increased $9.0 million for the nine months ended March 31, 2012 compared with the prior year period primarily due to investments in research and development to penetrate new markets, acquire new customers and drive future growth.

Research and development expenditures, which are classified as selling, general and administrative expense, were approximately $45.7 million, or 5.5% of net revenue and $134.4 million, or 5.1% of net revenue for the three and nine months ended March 31, 2012, respectively, compared with $43.6 million, or 5.0% of net revenue and $126.3 million, or 4.7% of net revenue, for the comparable prior year periods.

Unauthorized activities in Molex Japan for the three and nine months ended March 31, 2012 represent investigative and legal fees. See Note 2 of the Notes to the Condensed Consolidated Financial Statements.

Other Income (Expense)

Other income (expense) consists primarily of net interest expense, investment income and currency exchange gains or losses. We recorded other income of $0.3 million and other expense of $1.4 million for the three and nine months ended March 31, 2012, respectively, compared with other expense of $0.4 million and other income of $0.9 million for the three and nine months ended March 31, 2011, respectively. Fluctuations in other income (expense) are primarily due to changes in foreign currency gains and losses.

 

21


Table of Contents

Effective Tax Rate

The effective tax rate was 27.2% for the three months ended March 31, 2012. During the three months ended March 31, 2012, we recorded income tax expense of $24.3 million. During the three months ended March 31, 2012, we recorded a one-time charge of $1.6 million for the cumulative effect of a reduction in future tax benefits from deferred tax assets in Shanghai due to a decrease in the Shanghai corporate tax rate. We also recorded a one-time benefit of $4.6 million from releasing valuation allowances no longer required on net operating losses recorded in certain foreign jurisdictions.

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 30.4% for the three months ended March 31, 2011.

Backlog

Our order backlog on March 31, 2012 was approximately $376.9 million compared with order backlog of $346.3 million at December 31, 2011 and $425.4 million at March 31, 2011. Orders for the three months ended March 31, 2012 were $872.6 million compared with $815.3 million and $880.3 million for the three months ended December 31, 2011 and March 31, 2011, respectively. Orders increased $57.3 million over the sequential quarter and exceeded net revenue during the three months ended March 31, 2012. The increase in demand indicates stabilizing business conditions as orders for the three months ended March 31, 2012 were comparable to the prior year period.

Segments

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

 

     2012      Percentage
of Revenue
    2011      Percentage
of Revenue
 

Connector

   $ 583,364         69.7   $ 628,367         71.9

Custom & Electrical

     253,629         30.3        245,434         28.0   

Corporate & Other

     87         —          730         0.1   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 837,080         100.0   $ 874,531         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

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

 

     2012      Percentage
of Revenue
    2011      Percentage
of Revenue
 

Connector

   $ 1,865,029         70.9   $ 1,954,733         73.1

Custom & Electrical

     765,136         29.1        717,511         26.8   

Corporate & Other

     498         —          1,424         0.1   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 2,630,663         100.0   $ 2,673,668         100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

22


Table of Contents

Connector

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

 

     Three Months
Ended

Mar. 31,  2012
    Nine Months
Ended

Mar. 31, 2012
 

Net revenue for prior year period

   $ 628,367      $ 1,954,733   

Components of net revenue change:

    

Organic net revenue change

     (50,688     (151,324

Currency translation

     5,685        61,620   
  

 

 

   

 

 

 

Total change in net revenue from prior year period

     (45,003     (89,704
  

 

 

   

 

 

 

Net revenue for current year period

   $ 583,364      $ 1,865,029   
  

 

 

   

 

 

 

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

     (8.1 )%      (7.7 )% 

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 nine months ended March 31, 2012 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 $5.7 million and $61.6 million for the three and nine months ended March 31, 2012, 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
March 31,
    Nine Months Ended
March 31,
 
     2012     2011     2012     2011  

Income from operations

   $ 76,268      $ 86,989      $ 259,882      $ 291,551   

Operating margin

     13.1     13.8     13.9     14.9

Connector segment income from operations declined for the three and nine months ended March 31, 2012 compared with the prior year periods primarily due to lower net revenue, increased selling, general and administrative expenses and higher gold and resin 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. Selling, general and administrative expenses for the three and nine months ended March 31, 2012 increased primarily due to investments in research and development to penetrate new markets, acquire customers and drive future growth and foreign currency translation. Foreign currency translation increased selling, general and administrative expenses primarily due to a stronger Japanese yen against other currencies during the three and nine months ended March 31, 2012, compared with the prior year periods.

 

23


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

Mar. 31,  2012
    Nine Months
Ended

Mar. 31,  2012
 

Net revenue for prior year period

   $ 245,434      $ 717,511   

Components of net revenue change:

    

Organic net revenue change

     6,788        27,144   

Currency translation

     (1,466     10,745   

Acquisitions

     2,873        9,736   
  

 

 

   

 

 

 

Total change in net revenue from prior year period

     8,195        47,625   
  

 

 

   

 

 

 

Net revenue for current year period

   $ 253,629      $ 765,136   
  

 

 

   

 

 

 

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

     2.8     3.8

The Custom & Electrical segment sells primarily to the industrial, telecommunications and infotech markets. Custom & Electrical segment net revenue increased in the three and nine months ended March 31, 2012 compared with the prior year periods due to increased customer demand in the infotech market. Foreign currency translation decreased net revenue $1.5 million for the three months ended March 31, 2012, primarily due to a weaker euro against the U.S. dollar compared to the prior year period. Foreign currency translation increased net revenue $10.7 million for the nine months ended March 31, 2012, primarily due to a generally weaker U.S. dollar compared to the prior year period. We completed an asset acquisition of a specialty wire and cable company during the second quarter of fiscal 2012 and completed an asset acquisition of an active optical cable business during the third quarter of fiscal 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
March 31,
    Nine Months Ended
March 31,
 
     2012     2011     2012     2011  

Income from operations

   $ 39,741      $ 36,399      $ 129,245      $ 110,969   

Operating margin

     15.7     14.8     16.9     15.5

Custom & Electrical income from operations increased for the three and nine months ended March 31, 2012 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 and higher absorption. Selling, general and administrative expenses as a percent of net revenue for the three and nine months ended March 31, 2012 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.

 

24


Table of Contents

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 $622.5 million and $546.5 million at March 31, 2012 and June 30, 2011, respectively. Cash, cash equivalents and marketable securities as of March 31, 2012 included $593.0 million held in non-U.S. accounts, including $199.0 million in countries where we may experience administrative delays in withdrawing and transferring cash to U.S. accounts. 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 March 31, 2012, 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 U.S. 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 $256.1 million and $342.6 million at March 31, 2012 and June 30, 2011, respectively. We had available lines of credit totaling $421.6 million at March 31, 2012, including $345.0 million available on the U.S. Credit Facility. The U.S. Credit Facility requires us to maintain financial covenants pertaining to, among other things, our consolidated leverage and fixed charge coverage. As of March 31, 2012, we were in compliance with these covenants. Additionally, we have three unsecured borrowing agreements in Japan with an outstanding balance of ¥8.0 billion ($96.4 million) as of March 31, 2012, and weighted average fixed interest rates of 1.81%. See Note 9 of the Notes to the Condensed Consolidated Financial Statements.

Cash Flows

Our cash and cash equivalents balance increased $76.2 million during the nine months ended March 31, 2012. Our primary source of cash was operating cash flows of $430.4 million, the majority of which is generated outside the United States. We used cash during the period to fund capital expenditures of $149.4 million and pay dividends of $105.4 million. The translation of our cash to U.S. dollars decreased our cash balance by $8.8 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):

 

     Nine Months Ended
March 31,
 
     2012     2011  

Cash provided from operating activities

   $ 430,378      $ 326,931   

Cash used for investing activities

     (159,587     (214,992

Cash used for financing activities

     (185,801     (66,716

Effect of exchange rate changes on cash

     (8,780     26,221   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

   $ 76,210      $ 71,444   
  

 

 

   

 

 

 

 

25


Table of Contents

Operating Activities

Cash provided from operating activities increased by $103.4 million from the prior year period due mainly to a $112.9 million decrease in working capital needs in the current year period compared with the prior year. Working capital needs decreased during the nine months ended March 31, 2012 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 $55.4 million from the prior year period due mainly to a $47.5 million decrease in capital expenditures and $11.0 million of proceeds from the sale of an investment during the three months ended March 31, 2012. Capital expenditures were $149.4 million for the nine months ended March 31, 2012, compared with $196.9 million in the prior year period.

Financing Activities

Cash used for financing activities increased $119.1 million during the nine months ended March 31, 2012, compared with the prior year period primarily due to the increased quarterly cash dividend and net payments on debt.

Our quarterly cash dividend was $0.20 per share in fiscal 2012, an increase of 14.3% from the previous cash dividend of $0.175 per share in the prior fiscal year.

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 payments on the revolving U.S. Credit Facility were $180.0 million for the nine months ended March 31, 2012, compared with net borrowings of $65.0 million in the prior year period. In addition, net payments on short-term loans were $53.6 million for the nine months ended March 31, 2012, compared with net payments of $3.0 million in the prior year period.

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,”

 

26


Table of Contents

“assume,” “potential,” 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, global economic conditions, success of customers, cost of raw materials, value of inventory, availability of credit, currency exchange rates, labor costs, protection of intellectual property, cost reduction initiatives, unauthorized activities in Japan, acquisition synergies, manufacturing strategies, product development introduction and sales, regulatory changes, competitive strengths, natural disasters, 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 March 31, 2012 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 March 31, 2012 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 $72.4 million and increased income from operations of $13.5 million for the nine months ended March 31, 2012, compared with the estimated results for the comparable period in the prior year.

Our $13.7 million of marketable securities at March 31, 2012 are principally invested in time deposits.

 

27


Table of Contents

Interest rate exposure is generally limited to our marketable securities, five-year unsecured U.S. 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 $5.0 million outstanding on our $350.0 million U.S. Credit Facility with an interest rate of approximately 1.74% at March 31, 2012.

Due to the nature of our operations, net revenue from specific customers or products fluctuates over time, but our broad base of customers in several markets mitigates the concentration risk relating to any one customer or product.

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 March 31, 2012, 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.

 

28


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 March 31, 2012 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
 

January 1 – January 31

        

Common Stock

     —         $ —           —     

Class A Common Stock

     1       $ 20.91         —     

February 1 – February 29

        

Common Stock

     —         $ —           —     

Class A Common Stock

     104       $ 22.30         —     

March 1 – March 31

        

Common Stock

     —         $ —           —     

Class A Common Stock

     4       $ 22.85         —     
  

 

 

    

 

 

    

 

 

 

Total

     109       $ 22.31         —     
  

 

 

    

 

 

    

 

 

 

The shares purchased represent exercises of employee stock options.

 

29


Table of Contents

Item 6. Exhibits

 

Number

  

Description

  10.1    Retirement and Waiver and Release Agreement between James E. Fleischhacker and Molex Incorporated dated February 22, 2012. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 27, 2012. (File No. 000-07491)
  10.2    Consulting Agreement between James E. Fleischhacker and Molex Incorporated dated February 22, 2012. Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on February 27, 2012. (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

 

30


Table of Contents

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: April 26, 2012

 

/S/ DAVID D. JOHNSON

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

 

31

XNAS:MOLXA Quarterly Report 10-Q Filling

XNAS:MOLXA Stock - Get Quarterly Report SEC Filing of XNAS:MOLXA stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XNAS:MOLXA Quarterly Report 10-Q Filing - 3/31/2012
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Title |  Date |  Author |  Collection |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Title |  Date |  Company |  Symbol |  Interest |  Popularity

Previous: XNAS:MOLXA Insider Activity 4 Filing - 9/4/2012  |  Next: XNAS:MORN Morningstar Inc Insider Activity 3 Filing - 5/31/2012