Molex Reports First Quarter Results

October 27, 2009 4:00 PM EDT

Orders Increase 26% Sequentially

Revenue Increases 18% Sequentially

LISLE, Ill.--(BUSINESS WIRE)-- Molex Incorporated (NASDAQ: MOLX and MOLXA), a global electronic components company, today reported financial results for the quarter ended September 30, 2009 that exceeded previously issued guidance.

                                     Three Months Ended

                                     Sept. 30,  June 30,    Sept. 30,

USD millions, except per share data  2009       2009        2008

Revenue                              $ 674.0    $ 570.6     $ 839.0

Net income (loss)                      (11.6 )    (219.7 )    44.3

Earnings (loss) per share              (0.07 )    (1.27  )    0.25

Non-GAAP net income (loss)*            31.7       (16.5  )    60.0

Non-GAAP earnings (loss) per share*    0.18       (0.09  )    0.34

*A reconciliation of non-GAAP measures can be found on page 4

Revenue for the September 2009 quarter of $674.0 million exceeded the high end of the outlook provided on September 21, 2009 of $665.0 million and increased 18% from the June 2009 quarter. The increase in local currency was 16%. Orders for the quarter were $724.4 million, an increase of 26% from the June 2009 quarter. Recovery in the data, consumer electronics and telecom markets exceeded expectations.

Net loss for the September 2009 quarter was $11.6 million, or $0.07 per share, compared with a net loss of $219.7 million, or $1.27 per share, for the June 2009 quarter. The range for the earnings per share outlook provided on September 21, 2009 was a loss of $0.08 to $0.12 per share.

On a non-GAAP basis, net income for the September 2009 quarter was $31.7 million, or $0.18 per share, compared with a net loss of $16.5 million, or $0.09 per share, in the June 2009 quarter. This result exceeded the upper end of the outlook for non-GAAP earnings per share of $0.16 per share. For the quarter, non-GAAP net income excluded a pretax restructuring charge of $55.9 million ($38.5 million after-tax or $0.22 per share) and a tax adjustment related to stock compensation of $4.8 million or $0.03 per share. The tax adjustment is primarily due to the reversal of a tax benefit for a significant number of employee stock options that expired unexercised during the quarter.

Molex Chief Executive Officer, Martin P. Slark, commented on the quarter, "We continue to see month over month improvements in revenue and orders in virtually all of our key markets. The increase in orders of 26% from the June quarter was the second consecutive quarter of increasing orders and gives us strong momentum going into the December quarter. Order rates in two key markets, consumer electronics and data, surpassed prior year levels. As in the June quarter, we saw significant operating leverage as gross margin benefited from the increase in revenue and ongoing cost containment actions. This is strong evidence that our restructuring program is yielding the intended results. Looking forward, we are assessing the sustainability of the recovery as well as the impact of rising raw material costs and the weaker dollar."

Other financial highlights for the quarter ended September 30, 2009:

    --  Gross profit margin improved to 28.4%, compared with 24.1% in the June
        2009 quarter.
    --  SG&A expense was $145.6 million, an increase of $8.9 million from the
        June 2009 quarter; unfavorable currency translation contributed $3.4
        million to the increase.
    --  Capital expenditures were $45.6 million or 6.8% of revenue.
    --  The effective tax rate was (52.2)%. Excluding the impact from
        restructuring costs, asset impairments and the tax adjustment, the tax
        rate was 34.2%.
    --  The Book-to-Bill ratio was 1.07.
    --  Backlog was $304.2 million, an increase of $51.2 million from the June
        2009 quarter.
    --  Cash flow from operations was $70.6 million.
    --  The term loan in Japan was refinanced during the quarter for a 3-year
        term at a fixed interest rate of 1.64%. The amount of the loan is 20
        billion Japanese Yen.

Outlook

The Company estimates revenue in a range of $680 to $720 million for the December 2009 quarter. At this level of revenue, the Company expects earnings per share in a range of $0.11 to $0.15, assuming an effective tax rate of 30%. Included in these estimates is a pretax restructuring charge of approximately $19 million or $0.07 per share after-tax. Due to the limited visibility caused by current economic conditions, the Company will not provide full year guidance at this time.

Earnings Conference Call Information

A conference call will be held on Tuesday, October 27, 2009 at 4:00 pm central. Please dial (888) 680-0865 to participate in the conference call. International callers please dial (617) 213-4853. Please dial in at least five minutes prior to the start of the call and refer to participant pass code 50811125. Internet users will be able to access the web-cast, including slide materials, live and in replay in the "Investors" section of the Company's website at www.molex.com. A 48-hour telephone replay will be available at approximately 6:00 pm central at (888) 286-8010 or (617) 801-6888 / pass code 27765123.

Other Investor Events

October 30, 2009 - Molex Incorporated Annual Meeting of Stockholders in Lisle, IL

December 2, 2009 - NASDAQ OMX 23rd Investor Program in London

December 3, 2009 - Credit Suisse 2009 Annual Technology Conference in Scottsdale, AZ

Forward-Looking Statements

Statements in this release that are not historical are forward-looking and are subject to various risks and uncertainties that could cause actual results to vary materially from those stated. Words such as "anticipates," "expects," "believes," "intends," "plans," "projects," "estimates," and similar expressions are used to identify these forward-looking statements. Forward-looking statements are based on currently available information and include, among others, the discussion under "Outlook." These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions including those associated with the operation of our business, including the risk that customer demand will decrease either temporarily or permanently, whether due to the Company's actions or the demand for the Company's products, and that the Company may not be able to respond through cost reductions in a timely and effective manner; the risk that the value of our inventory may decline; price cutting, new product introductions and other actions by our competitors; fluctuations in the costs of raw materials that the Company is not able to pass through to customers because of existing contracts or market factors; the availability of credit and general market liquidity; fluctuations in currency exchange rates; the financial condition of our customers; the challenges attendant to plant closings and restructurings, including the difficulty of predicting plant closing and relocation costs, the difficulty of commencing or increasing production at existing facilities, and the reactions of customers, governmental units, employees and other groups, the challenges attendant to plant construction; and the ability to realize cost savings from restructuring activities.

Other factors, risks and uncertainties are set forth in Item 1A "Risk Factors" of the Company's Form 10-K for the year ended June 30, 2009 which is incorporated by reference and in other reports that Molex files or furnishes with the Securities and Exchange Commission. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed in these forward-looking statements. As a result, this release speaks only as of its date and Molex disclaims any obligation to revise these forward-looking statements or to provide any updates regarding information contained in this release resulting from new information, future events or otherwise.

Molex Incorporated is a 71-year-old global manufacturer of electronic, electrical and fiber optic interconnection systems. Based in Lisle, Illinois, USA, the Company operates 41 manufacturing locations in 17 countries. The Molex website is www.molex.com.

Editor's note: Molex is traded on the NASDAQ Global Select Market (MOLX and MOLXA) in the United States and on the London Stock Exchange. The Company's voting common stock (MOLX) is included in the S&P 500 Index.

Molex Incorporated

Non-GAAP Measures

(in thousands, except per share data)

                                           Sept. 30,    June 30,      Sept. 30,

                                           2009         2009          2008

Three months ended:

Net income (loss)                          $ (11,595 )  $ (219,740 )  $ 44,297

Restructuring costs and asset impairments    38,547       32,224        15,666

Tax adjustment - stock compensation          4,795      -             -

Goodwill impairment                        -              171,000     -

Non-GAAP net income (loss)                 $ 31,747     $ (16,516  )  $ 59,963

Earnings (loss) per share                  $ (0.07   )  $ (1.27    )  $ 0.25

Restructuring costs and asset impairments    0.22         0.19          0.09

Tax adjustment - stock compensation          0.03       -             -

Goodwill impairment                        -              0.99        -

Non-GAAP earnings (loss) per share         $ 0.18       $ (0.09    )  $ 0.34

Non-GAAP net income (loss) and non-GAAP earnings (loss) per share are non-GAAP financial measures. We refer to Non-GAAP net income (loss) and non-GAAP earnings (loss) per share to describe earnings and earnings per share excluding the items referenced above. We believe that Non-GAAP net income (loss) and non-GAAP earnings (loss) per share provide useful information to investors because both provide information about the estimated financial performance of Molex's ongoing business. Non-GAAP net income (loss) and non-GAAP earnings (loss) per share are used by management in its financial and operational decision-making and evaluation of overall operating performance and segment level core operating performance. Non-GAAP net income (loss) and non-GAAP earnings (loss) per share may be different from similar measures used by other companies.

Molex Incorporated

Condensed Consolidated Balance Sheets

(in thousands)

                                                  Sept. 30,       June 30,

                                                  2009            2009

                                                  (Unaudited)

ASSETS

Current assets:

Cash and cash equivalents                         $ 520,999       $ 424,707

Marketable securities                               9,132           43,234

Accounts receivable, less allowances of $37,850     614,900         528,907
and $32,593 respectively

Inventories                                         350,220         354,337

Deferred income taxes                               25,068          27,939

Other current assets                                88,679          68,449

Total current assets                                1,608,998       1,447,573

Property, plant and equipment, net                  1,093,780       1,080,417

Goodwill                                            127,372         128,494

Non-current deferred income taxes                   105,094         89,332

Other assets                                        192,205         196,341

Total assets                                      $ 3,127,449     $ 2,942,157

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of long-term debt and short-term  $ 16,777        $ 224,340
loans

Accounts payable                                    308,514         266,633

Accrued expenses                                    277,399         218,429

Income taxes payable                                14,642          4,750

Total current liabilities                           617,332         714,152

Other non-current liabilities                       20,332          21,862

Accrued pension and postretirement benefits         118,143         113,268

Long-term debt                                      303,190         30,311

Total liabilities                                   1,058,997       879,593

Commitments and contingencies

Stockholders' equity:

Common stock                                        11,164          11,138

Paid-in capital                                     610,476         601,459

Retained earnings                                   2,317,910       2,355,991

Treasury stock                                      (1,091,755 )    (1,089,322 )

Accumulated other comprehensive income              220,657         183,298

Total stockholders' equity                          2,068,452       2,062,564

Total liabilities and stockholders' equity        $ 3,127,449     $ 2,942,157

Molex Incorporated

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands, except per share data)

                                           Three Months Ended

                                           September 30,

                                           2009         2008

Net revenue                                $ 674,033    $ 838,985

Cost of sales                                482,614      589,513

Gross profit                                 191,419      249,472

Selling, general and administrative          145,628      166,351

Restructuring costs and asset impairments    55,894       21,778

Total operating expenses                     201,522      188,129

Income (loss) from operations                (10,103 )    61,343

Interest (expense) income, net               (1,000  )    1,193

Other income                                 3,484        2,607

Total other income, net                      2,484        3,800

Income (loss) before income taxes            (7,619  )    65,143

Income taxes                                 3,976        20,846

Net (loss) income                          $ (11,595 )  $ 44,297

Earnings (loss) per share:

Basic                                      $ (0.07   )  $ 0.25

Diluted                                    $ (0.07   )  $ 0.25

Dividends declared per share               $ 0.1525     $ 0.1525

Average common shares outstanding:

Basic                                        173,486      176,911

Diluted                                      173,486      177,594

Molex Incorporated

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

                                                        Three Months Ended

                                                        September 30,

                                                        2009         2008

Operating activities:

Net (loss) income                                       $ (11,595 )  $ 44,297

Add non-cash items included in net (loss) income:

Depreciation and amortization                             60,589       63,513

Share-based compensation                                  7,092        6,230

Non-cash restructuring and other costs, net               13,191       2,672

Other non-cash items                                      6,625        6,854

Changes in assets and liabilities, excluding the
effects of foreign

Currency adjustment and acquisitions:

Accounts receivable                                       (72,586 )    (25,761 )

Inventories                                               1,482        (22,847 )

Accounts payable                                          32,131       (24,732 )

Other current assets and liabilities                      35,551       47,090

Other assets and liabilities                              (1,862  )    (8,340  )

Cash provided from operating activities                   70,618       88,976

Investing activities:

Capital expenditures                                      (45,634 )    (45,292 )

Proceeds from sales of property, plant and equipment      3,192        2,665

Proceeds from sales or maturities of marketable           35,303       3,858
securities

Purchases of marketable securities                        (958    )    (2,834  )

Acquisitions, net of cash acquired                        -            (53,446 )

Other investing activities                                (355    )    (187    )

Cash used for investing activities                        (8,452  )    (95,236 )

Financing activities:

Proceeds from revolving credit facility and short term    90,000       58,000
loans

Payments on revolving credit facility                     (40,000 )    (15,000 )

Proceeds from issuance of long-term debt                  -            187

Payment of long-term debt                                 (196    )    -

Cash dividends paid                                       (26,486 )    (19,962 )

Exercise of stock options                                 266          983

Excess tax benefits from share-based compensation         -            426

Purchase of treasury stock                                -            (38,846 )

Other financing activities                                (700    )    (766    )

Cash provided from (used for) financing activities        22,884       (14,978 )

Effect of exchange rate changes on cash                   11,242       (15,248 )

Net increase (decrease) in cash and cash equivalents

                                                          96,292       (36,486 )

Cash and cash equivalents, beginning of period            424,707      475,507

Cash and cash equivalents, end of period                $ 520,999    $ 439,021

    Source: Molex Incorporated

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