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Molex Inc. Reports Operating Results (10-Q)

April 30, 2009 | About:

Molex Inc. (MOLX) filed Quarterly Report for the period ended 2009-03-31.

Molex is one of the leading manufacturers of electronic electrical and fiber optic interconnection products and systems; switches; value-added assemblies; and application tooling. Molex serves original equipment manufacturers in industries that include automotive computer computer peripheral business equipment industrial equipment telecommunications consumer products and premise wiring. Molex Inc. has a market cap of $2.89 billion; its shares were traded at around $16.67 with a P/E ratio of 20.6 and P/S ratio of 0.8. The dividend yield of Molex Inc. stocks is 3.6%. Molex Inc. had an annual average earning growth of 4.6% over the past 10 years.

Highlight of Business Operations:

As a result of the deteriorating economic conditions, in the second quarter of fiscal 2009 we increased the scope of our restructuring program that we began in fiscal 2007 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 relates to facilities located in North America, Europe and Japan and, in general, the movement of manufacturing activities at these plants to other facilities. Net restructuring cost during the quarter ended March 31, 2009 was $44.3 million, consisting of $15.4 million of asset impairments and $28.9 million for employee termination benefits. These costs included $13.0 million relating to planned plant closings in Japan and Korea. Restructuring costs during the nine months ended March 31, 2009 included $22.5 million for asset impairments and $83.4 million for employee termination benefits. The cumulative expense since we announced the restructuring plan totals $174.0 million.

We expect to incur total restructuring and asset impairment costs related to these actions ranging from $240 $250 million, of which the impact on each segment will be determined as the actions become more certain. Management approved several actions related to this plan. The total cost estimates increased as we formulated detailed plans for the latest additions to the restructuring actions, which include a reduction from five product focused divisions to three product focused divisions. A portion of this plan involves cost savings or other actions that do not result in incremental expense, such as better utilization of assets, reduced spending and organizational efficiencies. This plan includes employee reductions throughout the company, and we expect to achieve these reductions through ongoing employee attrition and terminations. We expect to complete the actions under this plan by June 30, 2010 with estimated annual cost savings ranging from $190 - $210 million. See Note 2 of the Notes to the Condensed Consolidated Financial Statements for further discussion.

During the second and third quarters of fiscal 2009, we executed actions to reduce headcount and lower the cost of employee benefits. These actions included a reduction in headcount, salary reductions, changes in retirement medical benefits, a reduction in planned contributions to the profit sharing trust and a reduction in the planned incentive bonus payout. In addition, manufacturing employees worked reduced hours in the plants most impacted by the economic slowdown. The one-time cost reductions relating to employee benefits decreased cost of sales and selling, general and administrative expense by $14.2 million during the second quarter. Due to the strengthening of the U.S. dollar in the second quarter, we recognized foreign currency exchange gains of $12.9 million for the nine months ended March 31, 2009.

During the three months ended March 31, 2009, revenue decreased $12.0 million due to a weaker euro over the prior year period. Revenue increased by approximately $33.1 million for the nine months ended March 31, 2009 due to the strengthening Japanese yen over 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):

Read the The complete ReportMOLX is in the portfolios of Dodge & Cox.

Rating: 4.0/5 (2 votes)

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