Item 1 - BUSINESS
GENERAL DEVELOPMENT OF THE BUSINESS
Molex Incorporated originated from an enterprise established in 1938. It was incorporated in 1972 in the state of Delaware. As used herein the term "Molex" or "Company" includes Molex Incorporated and its United States and international subsidiaries.
During fiscal 1994, Molex purchased the remaining shares outstanding of Molex Nanco Ltd. and acquired an additional 20 percent interest in Dongguan Molex South-China Connector Co. Ltd. During fiscal 1993, Molex increased its holdings in Molex India Ltd. (formerly Jalex Connector Systems Ltd.) to 80 percent, and made investments in Molex-G. Ostervig A/S, MEC International Pte. Ltd. and Decoupage Moulage de Savoie S.A. All of these companies operate in the international connector industry.
Molex sold its remaining interest in Flexible Automation Systems Pte. Ltd., a Singapore subsidiary of Molex, and sold a 15 percent interest in Zetronic S.p.A. during fiscal 1993.
GENERAL DESCRIPTION OF THE BUSINESS
Molex is a leading manufacturer of electrical, electronic and fiber optic interconnection systems, ribbon cable, switches and application tooling. Molex offers its customers extensive global design, engineering and manufacturing capabilities, while providing local service through 41 plants in 19 countries. Products manufactured and sold outside the United States generated approximately 70% of Molex's fiscal 1994 sales. Molex offers more than 40,000 products to original equipment manufacturers in industries that include the computer, computer peripheral, business equipment, telecommunication, home appliance, home entertainment, automotive, medical equipment and residential construction industries. Molex products are sold through direct sales, distributors and manufacturer's representatives. The worldwide market for electronic connectors, cable assemblies and backplanes was estimated to be $20.6 billion* in sales for fiscal year 1994. With a 4.7 percent market share, Molex is the second largest independent connector manufacturer in the world.
* Source: Fleck International
Molex conducts business in one industry segment: the manufacture and sale of electrical components. The Company designs, manufactures, and distributes electrical and electronic devices such as terminals, connectors, planer cables, cable assemblies,
interconnection systems, fiber optic interconnection systems, backplanes and mechanical and electronic switches. Crimping machines and terminal inserting equipment (known as "application tooling") are offered on a lease or purchase basis to the Company's customers for the purpose of applying the Company's components to the customers' products. Net revenue from application tooling constitutes approximately 2% of the Company's net revenues. Molex products are designed for use in a broad range of electrical and electronic applications as set forth below:
The Company sells its products primarily to original equipment manufacturers and their subcontractors and suppliers. The Company's customers include various multinational companies, including Apple, AT&T, Canon, Compaq, Ford, General Motors, Hewlett Packard, IBM, JVC, Matsushita, Motorola, Philips, Sony, Thomson and Xerox, many of which Molex serves on a global basis. Net revenues contributed by different industry groups fluctuate due to various factors including model changes, new technology, introduction of new products and composition of customers. No customer accounted for 10% or more of net revenues in fiscal years 1994, 1993 or 1992. While its customers generally make purchasing decisions on a decentralized basis, Molex believes that, due to its financial strength and product development capabilities, it has and will continue to benefit from the trend of many of its customers towards the use of fewer vendors.
In the United States and Canada, the Company sells its products primarily through direct sales engineers and industrial distributors. Internationally, Molex sells primarily through its own sales organizations in Japan, Hong Kong, Singapore, Taiwan, South Korea, Malaysia, Thailand, China, England, Italy, Ireland, France, Spain, Germany, the Netherlands, Sweden, Norway, Denmark, South Africa, India, Canada, Mexico and Brazil.
Outside of the United States and Canada, Molex also sells its products through manufacturers' representative organizations, some of which act as distributors, purchasing from the Company for resale. The manufacturers' representative organizations are granted exclusive territories and are compensated on a commission basis. These relationships are terminable by either party on short notice. All sales orders received are subject to approval by the Company.
The Company promotes its products through leading trade magazines, direct mailings, catalogs and other promotional literature. Molex is a frequent participant in trade shows and also conducts educational seminars for its customers and its manufacturers' representative organizations.
There was no significant change in the Company's suppliers, products, markets or methods of distribution during the last fiscal year.
Molex generally seeks to locate manufacturing facilities to serve local customers and currently has 41 manufacturing facilities in 19 countries on five continents. Molex facilities in the Far East and Europe are ISO 9000 certified, and programs are underway to obtain certification for facilities in Molex's other regions. Besides pursuing ISO 9000 quality certification in the United States, Molex is working on the suggestions outlined in its Malcolm Baldrige National Quality Award application feedback report.
The principal raw materials and component parts Molex purchases for the manufacture of its products include brass, copper, aluminum, steel, tin, nickel, gold, silver, nylon and other molding materials, and nuts, bolts, screws and rivets. Virtually all materials and components used in the Company's products are available from several sources. Although the availability of such materials has generally been adequate, no assurance can be given that additional cost increases or material shortages or allocations imposed by its suppliers in the future will not have a materially adverse effect on the operations of the Company.
COMPETITION
The business in which the Company is engaged is highly competitive. Most of the Company's competitors offer products in some but not all of the industries served by the Company. Molex
believes that the ability to meet customer delivery requirements and maintenance of product quality and reliability are competitive factors that are as important as product pricing. Some of the Company's competitors have been established longer and have substantially larger manufacturing, sales, research and financial resources.
PATENTS/TRADEMARKS
As of June 30, 1994, the Company owned 439 United States patents and had 124 patent applications on file with the United States Patent Office. The Company also has 497 corresponding patents issued and 1,841 applied for in other countries as of June 30, 1994. No assurance can be given that any patents will be issued on pending or future applications. As the Company develops products for new markets and uses, it normally seeks available patent protection. The Company believes that its patents are of importance but does not consider itself materially dependent upon any single patent or group of related patents.
BACKLOG
The backlog of unfilled orders at June 30, 1994 was approximately $175.8 million; this compares to $156.5 million at June 30, 1993. Substantially all of these orders are scheduled for delivery within twelve months. The Company's experience is that orders are normally delivered within ninety days from acceptance.
RESEARCH AND DEVELOPMENT
Molex incurred total research and development costs of $64.8 million in 1994, $56.2 million in 1993, and $47.6 million in 1992. The Company incurred costs relating to obtaining patents of $3.3 million in 1994, $2.8 million in 1993, and $2.2 million in 1992 which are included in total research and development costs. The Company's policy is to charge these costs to operations as incurred.
The Company had approximately 606 full-time employees in 1994 (558 in 1993 and 532 in 1992), engaged in research, development and engineering functions.
The Company introduced many new products during the year; however, in the aggregate, these products did not require a material investment of assets.
COMPLIANCE
The Company believes it is in full compliance with federal, state and local regulations pertaining to environmental protection. The Company does not anticipate that the costs of compliance with such regulations will have a material effect on its capital expenditures, earnings or competitive position.
EMPLOYEES
As of June 30, 1994, the Company employed over 8,100 persons worldwide. The Company believes its relations with its employees are favorable.
INTERNATIONAL OPERATIONS
The Company is engaged in material operations in foreign countries. Net revenue derived from international operations for the fiscal year ended June 30, 1994 was approximately 70% of consolidated net revenue.
The Company believes the international net revenue and earnings will continue to be significant. The analysis of the Company's operations by geographical area appears in footnote 10 on page 44 of the 1994 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 2
ITEM 2 - PROPERTIES
Molex owns and leases manufacturing, warehousing and office space in over 75 locations around the world. The total square footage of these facilities is presented below:
Owned Leased Total --------- ------- -------- 2,406,000 714,000 3,120,000
The leases are of varying terms with expirations ranging from fiscal 1995 through fiscal 2017. The leases in aggregate are not considered material to the financial position of the Company.
The Company's buildings, machinery and equipment have been well maintained and are adequate for its current needs.
A listing of principal manufacturing facilities is presented below:
BRAZIL JAPAN THAILAND Manaus Kagoshima Bangkok Okayama CANADA Shioya UNITED STATES Scarborough, Ontario Shizuoka Huntsville, Alabama Yamato City Maumelle, Arkansas CHINA (P.R.C.) Orange, California Shilong Town MALAYSIA Pinellas Park, Florida Prai, Penang St. Petersburg, Florida ENGLAND Addison, Illinois Bordon, Hampshire MEXICO Des Plaines, Illinois Guadalajara Lisle, Illinois FRANCE Magdalena Naperville, Illinois Chateau Gontier Nogales Schaumburg, Illinois Lincoln, Nebraska (3) GERMANY PUERTO RICO Biberach Ponce (2) Ettlingen REPUBLIC OF KOREA INDIA Ansan City (2) Bangalore SINGAPORE IRELAND Jurong Town Millstreet Town Shannon SOUTH AFRICA Bergvlei (Johannesburg) ITALY Padova TAIWAN (R.O.C.) Taipei
Item 3
Item 3 - LEGAL PROCEEDINGS
None deemed material to the Company's financial position or consolidated results of operations.
Item 4
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Executive Officers of the Registrant
The following information relates to the executive officers of the Registrant who serve at the discretion of the Board of Directors and are customarily elected for one-year terms at the Regular Meeting of the Board of Directors held immediately following the Annual Stockholders' Meeting. All of the executive officers named hold positions as officers and/or directors of one or more subsidiaries of the Registrant. For purposes of this disclosure, only the principal positions are set forth.
(a) John H. Krehbiel, Jr. and Frederick A. Krehbiel (the "Krehbiel Family") are brothers. The members of the Krehbiel Family may be considered to be "control persons" of the Registrant. The other officers listed above have no relationship, family or otherwise, to the Krehbiel Family, Registrant or each other.
(b) Includes period employed by Registrant's predecessor.
PART II
Item 5
Item 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Molex is traded on the National Market System of the NASDAQ in the & United States and on the London Stock Exchange. The information (b) set forth under the captions "Financial Highlights" and "Fiscal 1994, 1993, and 1992 by Quarter (Unaudited)" on the inside front cover and page 45, respectively, of the 1994 Annual Report to Shareholders is incorporated herein by reference.
(c) The following table presents quarterly dividends per common share for the last two fiscal years.
Cash dividends on Common Shares have been paid every year since 1977.
A description of the Company's Common Stock appears in footnote 2 on pages 39 and 40 of the 1994 Annual Report to Shareholders and is incorporated herein by reference.
Item 6
Item 6 - SELECTED FINANCIAL DATA
The information set forth under the caption "Ten Year Financial Highlight Summary" (only the five years ended June 30, 1994,) on page 29 of the 1994 Annual Report to Shareholders is incorporated herein by reference.
Item 7
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information set forth under the caption "Management's Discussion of Financial Condition and Results of Operations" on pages 30 through 33 of the 1994 Annual Report to Shareholders is incorporated herein by reference.
Item 8
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company set forth on pages 34 through 44 of the 1994 Annual Report to Shareholders and the independent auditors' report set forth on page 28 of the 1994 Annual Report to Shareholders are incorporated herein by reference:
Independent Auditors' Report
Consolidated Balance Sheets - June 30, 1994 and 1993
Consolidated Statements of Income for the years ended June 30, 1994, 1993 and 1992
Consolidated Statements of Shareholders' Equity for the years ended June 30, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the years ended June 30, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
The supplementary data regarding quarterly results of operations, set forth under the caption "Fiscal 1994, 1993, and 1992 by Quarter (Unaudited)" on page 45 of the 1994 Annual Report to Shareholders, is incorporated herein by reference.
The statements of changes in shares outstanding appears on Page 18 of this Form 10-K.
Item 9
Item 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the caption "Election of Directors" in the Company's Proxy Statement for the annual meeting of Shareholders to be held on October 21, 1994 (The "Company's 1994 Proxy Statement") is incorporated herein by reference. The information called for by Item 401 of Regulation S-K relating to the Executive Officers is furnished in a separate item captioned "Executive Officers of the Registrant" in Part I of this report.
Item 11
Item 11 - EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation" in the Company's 1994 Proxy Statement is incorporated herein by reference.
Item 12
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Security Ownership of Management and of Certain Beneficial Owners" in the Company's 1994 Proxy Statement is incorporated herein by reference.
Item 13
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the captions "Election of Directors", "Indebtedness of Management" and "Security Ownership of Management and of Certain Beneficial Owners" in the Company's 1994 Proxy Statement is herein incorporated by reference.
PART IV
Item 14
Item 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements contained in the Company's 1994 Annual Report to Shareholders have been incorporated by reference in Item 8.
Page(s) in Annual Report Item to Shareholders ----------------------------------------------- ---------------- Independent Auditors' Report 28
Consolidated Balance Sheets - June 30, 1994 and 1993 34-35
Consolidated Statements of Income - for the years ended June 30, 1994, 1993 and 1992 36
Consolidated Statements of Shareholders' Equity - for the years ended June 30, 1994, 1993 and 1992 37
Consolidated Statements of Cash Flows - for the years ended June 30, 1994, 1993 and 1992 38
Notes to Consolidated Financial Statements 39-44
Fiscal 1994, 1993 and 1992 by Quarter (Unaudited) 45
The independent auditors' report of Ernst & Young is included on page 17 of this Form 10-K.
(a) 2. Financial Statement Schedules
Page in the Form 10-K ------------ Schedule II - Amounts Receivable from Related 19 Parties and Underwriters, Promoters and Employees Other than Related Parties
Schedule V - Property, Plant and Equipment 20
Schedule VI - Accumulated Depreciation and 21 Amortization of Property, Plant and Equipment
Schedule VIII - Valuation and Qualifying Accounts 22
Schedule X - Supplementary Income Statement 23 Information
All other schedules are omitted because they are inapplicable, not required under the instructions, or the information is included in the consolidated financial statements or notes thereto.
Separate financial statements for the Company's unconsolidated affiliated companies, accounted for by the equity method, have been omitted because they do not constitute significant subsidiaries.
(a) 3. Exhibits
The exhibits listed on the accompanying Index to Exhibits are filed or incorporated herein as part of this Report.
(b) Reports on Form 8-K
Molex filed no reports on Form 8-K with the Securities and Exchange Commission during the last quarter of the fiscal year ended June 30, 1994.
Report of Independent Auditors
The Board of Directors Molex Incorporated
We have audited the statements of income and cash flows of the Domestic Component of Molex Incorporated (the Company), as defined in Note 1, for the year ended June 30, 1992 (not presented separately herein). We have also audited Schedules II, V, VI, VIII and X of the Company for the year ended June 30, 1992 (not presented separately herein). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the results of the Company's operations and its cash flows for the year ended June 30, 1992 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
The Company is a part of Molex Incorporated and has no separate legal status or existence; the nature and extent of the Company's activities are determined and directed by Molex Incorporated. The method of determining the portions of the assets, liabilities, income and expenses of Molex Incorporated included in the financial statements of the Company is described in Note 1.
/s/ ERNST & YOUNG
July 31, 1992
MOLEX INCORPORATED STATEMENTS OF CHANGES IN SHARES OUTSTANDING FOR THE YEAR ENDED JUNE 30, 1994, 1993 AND 1992
MOLEX INCORPORATED SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEAR ENDED JUNE 30, 1994, 1993 AND 1992 ($000)
1) Amounts represent compensation advances with interest payable at the floating six month federal interest rate (6.0% at June 30, 1994).
2) Amounts represent personal advances with interest payable at the prevailing rate offered by Banque Nationale de Paris in Paris France if the advances are not paid by maturity.
3) Amounts represent personal advances with interest payable between 5% and 8% per annum. All amounts are due on or before June 30, 1995.
4) Amounts represent interest free demand loans in order to exercise various stock options.
Note: The Company also has certain loans to employees made in connection with relocations. These loans are excluded from this schedule as they are considered to arise in the normal course of business.
MOLEX INCORPORATED SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED JUNE 30, 1994, 1993 AND 1992 ($000)
MOLEX INCORPORATED SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED JUNE 30, 1994, 1993 AND 1992 ($000)
MOLEX INCORPORATED SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED JUNE 30, 1994, 1993 AND 1992 ($000)
MOLEX INCORPORATED SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEAR ENDED JUNE 30, 1994, 1993 AND 1992 ($000)
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Molex Incorporated Lisle, Illinois
We have audited the consolidated financial statements of Molex Incorporated and its subsidiaries as of June 30, 1994 and 1993, and for each of the three years in the period ended June 30, 1994, and have issued our report thereon dated August 9, 1994; such financial statements and report are included in your 1994 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the statements of changes in shares outstanding and the financial statement schedules of Molex Incorporated and its subsidiaries, listed in Item 14(a)2. These statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, which is based upon our audits and the report of other auditors in 1992 included herein, such statements of changes in shares outstanding and financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/s/ DELOITTE & TOUCHE LLP Chicago, Illinois August 9, 1994
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Annual Report to be signed on its behalf by the undersigned, there unto duly authorized.
MOLEX INCORPORATED (Company)
/s/ JOHN C. PSALTIS September 23, 1994 By: -------------------------------------- John C. Psaltis Corporate Vice President, Treasurer and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ F. A. KREHBIEL September 23, 1994 -------------------------------------- F. A. Krehbiel Chairman of the Board and Chief Executive Officer
/s/ J. H. KREHBIEL, JR. September 23, 1994 -------------------------------------- J. H. Krehbiel, Jr. President and Director
/s/ JOHN C. PSALTIS September 23, 1994 -------------------------------------- John C. Psaltis Corporate Vice President, Treasurer and Chief Financial Officer
/s/ F. L. KREHBIEL September 23, 1994 -------------------------------------- F. L. Krehbiel Director
/s/ DR. ROBERT J. POTTER September 23, 1994 -------------------------------------- Dr. Robert J. Potter Director
/s/ E. D. JANNOTTA September 23, 1994 -------------------------------------- E. D. Jannotta Director
MOLEX INCORPORATED EXHIBIT INDEX
(All other exhibits are either inapplicable or not required)
(a) - Included only in the electronically filed copy of the report filed with the Securities Exchange Commission.