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 1995, Molex purchased the remaining shares of Molex Fiber Optics Inc. and Molex Eastern Europe, S.A., and increased its holdings in Molex (India) Ltd. and DeCoupage Moulage De Savoie S.A. In addition, $9.3 million in cash, along with 1.2 million shares of Class A Common Stock, was used to purchase Mod-Tap W. Corp. During fiscal 1994, Molex purchased the remaining shares outstanding of Molex Nanco Ltd. and acquired an additional 20 percent interest of Dongguan Molex South-China Connector Co. Ltd.
GENERAL DESCRIPTION OF THE BUSINESS
Molex is a leading manufacturer of electronic, electrical and fiber optic interconnection products and systems; switches; and application tooling. Molex operates 44 plants in 21 countries and employs 9,500 people worldwide. Molex serves original equipment manufacturers in industries that include computer, computer peripheral, business equipment, home entertainment and home appliance, automotive, telecommunications, local area network and residential construction. Molex offers more than 50,000 products to customers primarily through a network of direct sales representatives and authorized distributors. Products manufactured and sold outside the U.S. generated more than 70% of Molex sales in fiscal 1995. The worldwide market for electronic connectors, cable assemblies and backplanes was estimated at $22.4 billion* in sales for fiscal year 1995. With 5.3% of that market, Molex is the second-largest 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 1995, 1994 or 1993. 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, Australia, England, Italy, Ireland, France, Spain, Germany, the Netherlands, Switzerland, Poland, 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 44 manufacturing facilities in 21 countries on six continents. This year, the Molex factory in Little Rock, Arkansas became the first U.S. plant to receive the ISO 9000 credential, joining all of the Molex facilities in the Far East North and Far East South Regions and all but one plant in the European Region.
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, 1995, the Company owned 533 United States patents and had 133 patent applications on file with the United States Patent Office. The Company also has 675 corresponding patents issued and 2,143 applied for in other countries as of June 30, 1995. 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, 1995 was approximately $245.7 million; this compares to $175.8 million at June 30, 1994. 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 $78.1 million in 1995, $64.8 million in 1994, and $56.2 million in 1993. The Company incurred costs relating to obtaining patents of $4.9 million in 1995, $3.3 million in 1994, and $2.8 million in 1993 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 630 full-time employees in 1995 (606 in 1994 and 558 in 1993), 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, 1995, the Company employed 9,500 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, 1995 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 42 of the 1995 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 99 locations around the world. The total square footage of these facilities is presented below:
The leases are of varying terms with expirations ranging from fiscal 1996 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:
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 set forth under the captions
(b) "Financial Highlights" and "Fiscal 1995, 1994, and 1993 by Quarter (Unaudited)" on page 2 and page 43, respectively, of the 1995 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. The fiscal 1995 and fiscal 1994 dividends per share have been restated for the August, 1995 25% stock dividend and November, 1994 25% stock dividend.
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 37 and 38 of the 1995 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, 1995) on page 26 of the 1995 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 27 through 31 of the 1995 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 32 through 42 of the 1995 Annual Report to Shareholders and the independent auditors' report set forth on page 25 of the 1995 Annual Report to Shareholders are incorporated herein by reference:
Independent Auditors' Report
Consolidated Balance Sheets - June 30, 1995 and 1994
Consolidated Statements of Income for the years ended June 30, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity for the years ended June 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
The supplementary data regarding quarterly results of operations, set forth under the caption "Fiscal 1995, 1994, and 1993 by Quarter (Unaudited)" on page 43 of the 1995 Annual Report to Shareholders, is incorporated herein by reference.
The statement of changes in shares outstanding appears on Page 17 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 Stockholders to be held on October 20, 1995 (The "Company's 1995 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 1995 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 1995 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 1995 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 1995 Annual Report to Shareholders have been incorporated by reference in Item 8.
(a) 2. Financial Statement Schedules
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, 1995.
Molex Incorporated Statements of Changes in Shares Outstanding For the Year Ended June 30, 1995, 1994, and 1993
Molex Incorporated Schedule II - Valuation and Qualifying Accounts For the Year Ended June 30, 1995, 1994, and 1993
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, 1995 and 1994, and for each of the three years in the period ended June 30, 1995, and have issued our report thereon dated August 3, 1995; such financial statements and report are included in your 1995 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 schedule of Molex Incorporated and its subsidiaries, listed in Item 14(a)2. These statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such statements of changes in shares outstanding and financial statement schedule, 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 3, 1995
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 22, 1995 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.
September 22, 1995 /s/ F. A. KREHBIEL ----------------------------------- F. A. Krehbiel Chairman of the Board and Chief Executive Officer
September 22, 1995 /s/ J. H. KREHBIEL, JR. ----------------------------------- J. H. Krehbiel, Jr. President and Director
September 22, 1995 /s/ JOHN C. PSALTIS ----------------------------------- John C. Psaltis Corporate Vice President, Treasurer and Chief Financial Officer
September 22, 1995 /s/ F. L. KREHBIEL ----------------------------------- F. L. Krehbiel Director
September 22, 1995 /s/ DR. ROBERT J. POTTER ----------------------------------- Dr. Robert J. Potter Director
September 22, 1995 /s/ E. D. JANNOTTA ----------------------------------- E. D. Jannotta Director
MOLEX INCORPORATED EXHIBIT INDEX
(All other exhibits are either inapplicable or not required)