Lisle, Illinois, United States
Molex Incorporated (NASDAQ: MOLX)(NASDAQ: MOLXA), a global electronic components company, has reported results for its 2007 fourth fiscal quarter and announced a 50% increase in the cash dividend.
2007 Fourth Fiscal Quarter Results
Revenue for the quarter ended June 30, 2007 was $791.8 million, an increase of 1.0% over the same period last fiscal year. Revenue in local currencies declined 0.9% as currency translation increased revenue by $14.9 million, compared with last year's June quarter. Revenue for the quarter included $54.7 million from Woodhead Industries, which the Company acquired on August 10, 2006.
Net income for the June quarter was $32.7 million, or $0.18 per share. Included in the current quarter results was a charge of $36.9 million ($30.3 million after-tax or approximately $0.16 per share), relating to the previously announced restructuring program. Also included in the current quarter was the favorable resolution of an income tax contingency and other items amounting to approximately $0.04 per share. This compares with net income of $70.5 million, or $0.38 per share in the prior year quarter that included restructuring charges of $10.7 million ($7.4 million after-tax or approximately $0.04 per share). Currency translation increased net income by $0.3 million when compared to the prior year quarter.
Martin P. Slark, CEO and Vice-Chairman commented, "The June quarter operating results were within our revised outlook announced on June 18, 2007. When compared with last year's June quarter, revenue increased in the industrial, automotive, medical and military portions of our business. However, the June quarter was significantly impacted by difficulties in the mobile phone market where revenue declined 15% from the March quarter, and by 30% compared to last year's June quarter. While the majority of these declines are customer specific, the overall mobile phone market is currently being driven by growth in entry level phones having lower functionality and connector content. We believe this is the result of initial demand in the developing economies, and that these large markets will eventually transition to more sophisticated higher content devices. Revenue in both the consumer and data markets declined by 5 - 6% compared with last year's June quarter, due in part to concerns regarding consumer spending as well as lingering inventory corrections at some larger customers."
Gross profit margin for the June quarter was 30.0%, compared with 31.1% in the March quarter, and 33.0% in last year's June quarter. The reduction from the March quarter was primarily due to revenue declines in several of the Company's more profitable markets, resulting in higher fixed manufacturing costs as a percentage of revenue. SG&A expense for the June quarter was 20.4% of revenue, compared with 20.1% in the March quarter, and 19.6% in last year's June quarter. The effective tax rate for the June quarter was 26.2%, reflecting a reduction in income tax expense due to the favorable resolution of an income tax contingency in the amount of $4.6 million, a change in mix of earnings in countries with tax rates that are lower than the U.S. tax rate, offset by various tax adjustments.
2007 Fiscal Full Year Results
Revenue for the twelve months ended June 30, 2007 was $3.27 billion, an increase of 14.1% compared with the prior fiscal year. Revenue in local currencies increased 11.8% as currency translation increased revenue by $60.2 million compared with the prior fiscal year. Revenue for the year included $202.5 million from Woodhead Industries, which the Company acquired on August 10, 2006. Revenue increased 9% in the consumer market, 3% in the telecom market (including both infrastructure and mobile), and 6% in the data market. Revenue in the automotive market increased 11%. Revenue in the industrial market, including the acquisition of Woodhead Industries increased 100% and by 16% excluding Woodhead.
Net income was $240.8 million, or $1.30 per share. Included in the fiscal year results was a restructuring charge of $36.9 million ($30.3 million after-tax or approximately $0.16 per share). Also included in the fiscal year were favorable tax and other adjustments of approximately $0.04 per share. Currency translation increased net income by $1.2 million when compared to the prior year. These results compare with net income of $236.1 million, or $1.26 per share for the prior year. Included in the prior year results was a restructuring charge of $26.4 million ($19.2 million after-tax or $0.10 per share).
Orders and Backlog
Orders for the June quarter were $775.8 million, compared with $785.2 million in the prior year June quarter, and $782.8 million in the March quarter. The Company's order backlog on June 30, 2007 was $332.5 million, compared with $370.0 million in the prior year June quarter, and $345.9 million in the March quarter. Woodhead Industries contributed bookings of $58.6 million to the current quarter, and had a backlog of $24.3 million on June 30, 2007.
Research and Development and Capital Spending
Research and development expenditures for the June quarter were $37.4 million, compared with $35.7 million in the prior year June quarter. Capital expenditures for the June quarter were $77.4 million, compared with $82.9 million in the prior year June quarter. Depreciation expense was $59.9 million, compared with $53.7 million in the prior year June quarter.
Cash and Working Capital
During the June quarter total cash increased by $87.8 million to $460.9 million. Accounts receivable declined by $7.2 million and the level of accounts receivable outstanding improved by 2 days. Inventory declined by $22.7 million with a reduction in days outstanding of 2 days.
Increase in Cash Dividend
The Company also announced that its Board of Directors has approved an increase in the regular quarterly cash dividend to $0.1125 per share, an increase of 50 percent from the previous cash dividend of $0.075 per share. The new regular quarterly cash dividend will be payable on October 25, 2007 to shareholders of record on September 30, 2007 for each share of Common Stock (MOLX), Class A Common Stock (MOLXA) and Class B Common Stock, and will continue quarterly until further action by the Board. Martin P. Slark commented, "The cash dividend has been increased by 200% since the beginning of fiscal 2006. The current increase reflects our current strong financial position, and the expected improvement in return on invested capital from our reorganization and restructuring actions."
Stock Buyback Actions
During the quarter, the Company repurchased 415,000 shares of Class A Common Stock (MOLXA) and 130,000 shares of Common Stock (MOLX) at a total cost of $14.9 million. The Board of Directors previously authorized the repurchase of up to $250.0 million of common stock through September 30, 2007. As of June 30, 2007, approximately $15.2 million was remaining under this authorization.
Reorganization and Restructuring Update
The Company has transitioned to a new global organization structure effective July 1, 2007. The new structure realigns the company into five product-focused global divisions and one global sales and marketing division and replaces the previous geographic based regional organization. When the Company announced this initiative on August 2, 2006, it mentioned a major benefit would be to leverage its global resources and streamline operations. As a result, significant opportunities to reduce cost and to improve return on invested capital have been identified and are now being implemented.
On June 18, 2007 the Company announced a restructuring plan that is expected to result in pre-tax charges of $100 to $125 million. The plan includes head-count reductions, realignment of manufacturing capacity and certain plant closures. As previously mentioned, the Company recorded $36.9 million of the total pretax charge in the June 2007 quarter, including $28.2 million for employee termination costs and $8.7 million for manufacturing asset impairments or write-offs.
During fiscal years 2008 and 2009, the Company will focus on reducing operating costs consistent with its goal of improving return on invested capital. In a global industry with short order lead-times and an extremely diversified range in both number and complexity of products, the manufacturing component of restructuring must be approached sequentially to avoid any potential impact to delivery performance. This phased approach is reflected in the Company's financial guidance for fiscal 2008. Based on the current implementation schedule, the Company estimates that approximately $35 million of the remaining estimated pretax restructuring charge of $65 to $85 million will be recorded in fiscal 2008, with the remainder in fiscal 2009. The Company expects that when fully implemented by the close of fiscal year 2009, the annualized pretax savings from the restructuring activities will be in the range of $75 to $100 million. The Company estimates pretax savings of $20 to $25 million in fiscal 2008.
2008 Fiscal Year and First Fiscal Quarter Outlook
The Company believes it has a strong competitive position in its major markets which is being enhanced by the global reorganization. In addition, the Company's current financial position is strong and supportive of new product development and strategic acquisitions.
Although the direction of the global economy is uncertain, the Company believes that it is useful to provide its initial outlook for the coming year. For the fiscal year ending June 30, 2008, revenue is estimated in a range of $3.25 to $3.35 billion. The Company expects that earnings per share will be in a range of $1.25 to $1.33. These estimates include a restructuring charge of approximately $0.15 per share. The Company's revenue estimate is based upon the current level of orders and the expectation of low single-digit growth in the connector market. The outlook has been tempered by signs of a potential contraction in consumer spending primarily in the developed economies. The estimate also includes a reduction of approximately $70 million in revenue compared with fiscal year 2007 from non-core businesses the Company has exited.
The Company expects that revenue for the first fiscal quarter ending September 30, 2007, will be in a range of $770 to $800 million, and earnings per share will be in a range of $0.25 to $0.29. These estimates include a restructuring charge of approximately $0.01 per share.
The Company estimates that capital expenditures for the fiscal year ending June 30, 2008 will be in a range of $280 to $310 million. Capital expenditures were $296.9 million for the fiscal year ended June 30, 2007.
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. Forward-looking statements are based on currently available information and include, among others, the discussion under "Reorganization and Restructuring Update" and "2008 Fiscal Year and First Fiscal Quarter Outlook", as well as statements regarding the integration of, and potential synergies from the Woodhead acquisition, customer demand and inventory levels and future growth expectations. These risks and uncertainties include 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; 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 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 risks associated with the integration of the Woodhead acquisition; the challenges attendant to plant construction; and the ability to realize cost savings from restructuring activities, as well as difficulty implementing the transition to a Market-Focused Global Organization.
Other risks and uncertainties are set forth in Item 1A "Risk Factors" of its Form 10-K for the year ended June 30, 2007, which is incorporated by reference and in reports that Molex files or furnishes with the Securities and Exchange Commission. 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.
Earnings Conference Call Information
A conference call will be held on Wednesday, August 1, 2007 at 4:00 pm central. Please dial (866) 713-8562 to participate in the conference call. International callers please dial (617) 597-5310. Please dial in at least five minutes prior to the start of the call and refer to participant passcode 31476192. 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 / passcode 15729079.
Analysts Meeting Information
An analysts meeting will be held on Thursday, August 2, 2007 in Rosemont, Illinois. Internet users will be able to access the morning sessions by web-cast, including slide materials, live and in replay in the "investors" section of the Company's website as mentioned above. The sections available by web-cast are:
10:00 - 10:15 AM CDT Welcome and brief summary of meeting and FY07
review
10:15 - 10:30 Review of financial impact of restructuring
10:30 - 11:30 Looking forward
11:30 - 11:45 Question and answer session
Note: The Company's SEC filings, as well as news releases and other supplementary financial data are available on the Company's website at www.molex.com.
Molex Incorporated is a 68-year-old manufacturer of electronic components, including electrical and fiber optic interconnection products and systems, switches and integrated products, with 59 plants in 19 countries throughout the world.
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
Consolidated Balance Sheets
(in thousands, except per share data)
June 30,
-----------------------
ASSETS 2007 2006
----------- -----------
Current assets:
Cash and cash equivalents $ 378,361 $ 332,815
Marketable securities 82,549 152,728
Accounts receivable, less allowances
of $31,064 in 2007 and $26,513 in 2006 685,666 660,665
Inventories 392,680 347,312
Deferred income taxes 16,171 19,054
Prepaid expenses 35,400 35,659
----------- -----------
Total current assets 1,590,827 1,548,233
Property, plant and equipment, net 1,121,369 1,025,852
Goodwill 334,791 149,458
Non-current deferred income taxes 103,626 130,471
Other assets 165,495 120,406
----------- -----------
Total assets $3,316,108 $2,974,420
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term loans $ 1,537 $ 968
Accounts payable 279,847 305,876
Accrued expenses:
Salaries, commissions and bonuses 66,532 92,730
Other 121,358 99,004
Income taxes payable 61,677 96,234
----------- -----------
Total current liabilities 530,951 594,812
Other non-current liabilities 25,612 15,591
Accrued pension and other postretirement
benefits 108,693 75,055
Long-term debt 127,821 7,093
----------- -----------
Total liabilities 793,077 692,551
Commitments and contingencies
Stockholders' equity:
Common Stock, $0.05 par value; 200,000
shares authorized; 111,730 shares issued at
2007 and 111,297 shares issued at 2006 5,587 5,565
Class A Common Stock, $0.05 par value;
200,000 shares authorized; 108,562 shares
issued at 2007 and 106,598 shares issued at
2006 5,428 5,330
Class B Common Stock, $0.05 par value; 146
shares authorized; 94 shares issued at 2007
and 2006 5 5
Paid-in capital 520,037 442,586
Retained earnings 2,650,470 2,464,889
Treasury stock (Common Stock, 12,297 shares
at 2007 and 11,887 shares at 2006; Class A
Common Stock, 24,040 shares at 2007 and
22,497 shares at 2006), at cost (799,894) (743,219)
Accumulated other comprehensive income 141,398 106,713
----------- -----------
Total stockholders' equity 2,523,031 2,281,869
----------- -----------
Total liabilities and stockholders' equity $3,316,108 $2,974,420
=========== ===========
Molex Incorporated
Condensed Consolidated Statements of Income
(in thousands, except per share data)
Three Months Ended Year Ended
June 30, June 30,
------------------- -----------------------
2007 2006 2007 2006
--------- --------- ----------- -----------
Net revenue $791,848 $783,799 $3,265,874 $2,861,289
Cost of sales 554,046 525,182 2,249,166 1,918,659
--------- --------- ----------- -----------
Gross profit 237,802 258,617 1,016,708 942,630
--------- --------- ----------- -----------
Selling, general and
administrative 161,826 153,644 658,289 606,532
Restructuring costs 36,869 10,680 36,869 26,354
--------- --------- ----------- -----------
Total operating expenses 198,695 164,324 695,158 632,886
--------- --------- ----------- -----------
Income from operations 39,107 94,293 321,550 309,744
Gain (loss) on investment 1,197 (1,360) 1,159 (1,245)
Equity income 1,620 1,023 6,966 9,456
Interest income, net 2,413 2,304 8,582 9,929
--------- --------- ----------- -----------
Total other income, net 5,230 1,967 16,707 18,140
--------- --------- ----------- -----------
Income before income taxes 44,337 96,260 338,257 327,884
Income taxes 11,615 25,789 97,489 91,793
--------- --------- ----------- -----------
Net income $ 32,722 $ 70,471 $ 240,768 $ 236,091
========= ========= =========== ===========
Earnings per share:
Basic $ 0.18 $ 0.38 $ 1.31 $ 1.27
Diluted $ 0.18 $ 0.38 $ 1.30 $ 1.26
Average common shares
outstanding:
Basic 184,049 183,933 183,961 185,521
Diluted 185,356 186,274 185,565 187,416
Molex Incorporated
Consolidated Statements of Cash Flows
(in thousands)
Years Ended June 30,
--------------------------------------
2007 2006 2005
------------ ------------ ------------
Operating activities:
Net income 240,768 236,091 150,116
Add (deduct) non-cash items
included in net income:
Depreciation and amortization 237,912 214,657 231,364
Asset write-downs included in
restructuring costs 8,667 2,870 14,443
(Gain) loss on investments (1,154) 1,245 (2,916)
Goodwill impairment - - 22,876
Deferred income taxes 20,998 (8,501) 7,691
Loss (gain) on sale of
property, plant and
equipment 1,800 (701) 11,811
Share-based compensation 27,524 30,548 18,420
Other non-cash items 12,041 (777) 5,757
Changes in assets and
liabilities, excluding effects
of foreign
currency adjustments and
acquisition:
Accounts receivable 31,736 (107,210) (3,575)
Inventories (9,005) (47,014) (24,739)
Accounts payable (57,479) 43,875 16,400
Other current assets and
liabilities (60,421) 58,857 (3,287)
Other assets and liabilities (1,953) 19,916 (13,526)
------------ ------------ ------------
Cash provided from operating
activities 451,434 443,856 430,835
------------ ------------ ------------
Investing activities:
Capital expenditures (296,861) (276,783) (230,895)
Proceeds from sales of
property, plant and equipment 9,946 24,436 11,529
Proceeds from sales or
maturities of marketable
securities 4,856,301 1,351,165 3,460,220
Purchases of marketable
securities (4,785,080) (1,313,829) (3,543,679)
Acquisitions, net of cash
acquired (238,072) (24,565) -
Other investing activities 7,637 (1,203) 16,593
------------ ------------ ------------
Cash used for investing
activities (446,129) (240,779) (286,232)
------------ ------------ ------------
Financing activities:
Proceeds from revolving credit
facility 44,000 - -
Payments on revolving credit
facility (44,000) - -
Proceeds from issuance of long-
term debt 131,045 - -
Payments of long-term debt (26,937) (3,693) (4,177)
Cash dividends paid (55,176) (34,843) (25,965)
Exercise of stock options 15,416 15,783 12,038
Excess tax benefits from share-
based compensation 1,714 369 -
Purchase of treasury stock (34,889) (165,323) (58,217)
Other financing activities (2,644) (2,107) 632
------------ ------------ ------------
Cash used for financing
activities 28,529 (189,814) (75,689)
Effect of exchange rate changes
on cash 11,712 9,796 6,411
------------ ------------ ------------
Net increase in cash and cash
equivalents 45,546 23,059 75,325
Cash and cash equivalents,
beginning of year 332,815 309,756 234,431
------------ ------------ ------------
Cash and cash equivalents, end
of year $ 378,361 $ 332,815 $ 309,756
============ ============ ============
Supplemental cash flow
information:
Interest paid $ 2,857 $ 928 $ 921
Income taxes paid $ 95,197 $ 70,092 $ 81,377
Source: Business Wire (Business Wire India)