Molex Reports Results for 2008 First Fiscal Quarter

Business Wire, Oct 18, 2007

LISLE, Ill. -- Molex Incorporated (NASDAQ:MOLX) and (NASDAQ:MOLXA), a global electronic components company, today reported results for its 2008 first fiscal quarter.

2008 First Fiscal Quarter Results

Revenue for the quarter ended September 30, 2007 was $792.6 million, a decrease of 4.5% over the same period last fiscal year. Revenue in local currencies declined 6.4% as currency translation increased revenue by $15.9 million, compared with last year's September quarter. Revenue increased $0.8 million over the June 2007 quarter.

Net income for the September quarter was $53.3 million, or $0.29 per share. Included in the current quarter results was a pretax charge of $2.6 million or approximately $0.01 per share, relating to the previously announced restructuring program. Currency translation increased net income by $1.5 million when compared to the prior year quarter.

Martin P. Slark, CEO and Vice-Chairman commented on the quarter, "While revenue was down from last year, we were encouraged by the sequential booking and revenue improvement. When compared to the June quarter, revenue in the mobile phone market increased 9.7%, while revenue in the consumer and data markets increased by 7.7% and 5.7%, respectively. Total orders increased 4.6% sequentially, with the first positive book to bill ratio since the previous September quarter."

Gross profit margin for the September quarter was 29.8%, compared with 30.0% in the June quarter, and 32.5% in the prior year September quarter. The reduction from last year was primarily due to the lower revenue resulting in a higher fixed manufacturing ratio, as well as higher price erosion and increased material costs for purchases of copper, plastics, and gold.

SG&A expense for the September quarter was 20.3% of revenue, compared with 20.4% in the June quarter, and 20.0% in the prior year quarter. The effective tax rate for the September quarter was 30.0%.

Orders and Backlog

Orders for the September quarter were $811.5 million, compared with $864.6 million in the prior year September quarter, and $775.8 million in the June quarter. The Company's order backlog on September 30, 2007 was $353.3 million, compared with $425.5 million in the prior year September quarter, and $332.5 million in the June quarter.

Research and Development and Capital Spending

Research and development expenditures for the September quarter were $39.9 million, compared with $40.7 million in the prior year September quarter. Capital expenditures for the September quarter were $49.1 million, compared with $75.6 million in the prior year September quarter and $77.4 million in the June quarter. Depreciation expense was $58.6 million, compared with $56.4 million in the prior year September quarter and $59.9 million in the June quarter.

As mentioned in our press release on April 19, 2007, one major goal of the new product-focused organization structure is to improve return on capital by streamlining operations and leveraging existing global resources. As part of this initiative, the product divisions have identified reductions in capital expenditures. The Company now estimates that capital expenditures for the fiscal year ending June 30, 2008 will be in a range of $260 to $275 million compared with a previous estimate of $280 to $310 million.

Cash and Working Capital

During the September quarter total cash decreased by $13.6 million to $447.3 million. This includes $60.5 million used to repurchase stock. Accounts receivable and inventory days remained at approximately the same levels as in the June quarter.

Restructuring Update

On June 18, 2007, the Company announced a restructuring plan through the end of fiscal year 2009, which includes total estimated pretax charges of $100 to $125 million, and when fully completed estimated annualized pretax savings of $75 to $100 million. The plan includes headcount reductions, realignment of manufacturing capacity and certain plant closures, which should result in lower operating costs and improved return on invested capital. As previously reported, $36.9 million in restructuring charges were recorded in the June quarter and the Company estimates that fiscal 2008 restructuring charges will approximate $35.0 million, with the remainder to be recognized in fiscal 2009.

The restructuring actions to date include a reduction of 540 employees primarily in North America and Europe. To better align capacity, a manufacturing plant in Ireland and an engineering center in Germany are being closed. In addition, distribution centers in China and Japan were consolidated, while four manufacturing plants in China were combined into two larger facilities. Also, in connection with the integration of Woodhead, the closure of a facility in Wales was announced.

Stock Buyback

During the quarter, the Company repurchased 1,940,000 shares of Class A Common Stock (MOLXA) and 500,000 shares of Common Stock (MOLX) at a total cost of $60.5 million. The Board of Directors previously authorized the repurchase of up to $200.0 million of common stock through June 30, 2008, and approximately $139.5 million remains under this authorization.