UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2006

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 0-7491

MOLEX INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		36-2369491 (I.R.S. Employer Identification No.)

2222 Wellington Court, Lisle, Illinois 60532
(Address of principal executive offices)
Registrant’s telephone number, including area code: (630) 969-4550

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

     Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

     On October 27, 2006, the following numbers of shares of the Company’s common stock were outstanding:

Common Stock			99,499,595
Class A Common Stock			84,524,280
Class B Common Stock			94,255

 

 

Explanatory Note

     As disclosed in our current report on Form 8-K filed on January 30, 2007, we are amending our quarterly report on Form 10-Q for the three months ended September 30, 2006 (the Original Filing) to reflect evolving understanding of the views of the staff of the Securities and Exchange Commission (the Commission) relating to the qualitative aspects of past stock option misdating. We will also separately amend our annual report on Form 10-K for the fiscal year ended June 30, 2006 to reflect the restatement of the consolidated financial statements and the related disclosures for the fiscal years ended 2006, 2005 and 2004 and for each of the quarters in fiscal years 2006 and 2005. Accordingly, the consolidated financial statements and related financial information contained in previously filed reports should no longer be relied upon.

     This Form 10-Q/A also reflects the restatement of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 for the three months ended September 30, 2006, and Note 2, “Restatement of Condensed Consolidated Financial Statements” in Notes to Condensed Consolidated Financial Statements. This Explanatory Note explains the history and previous disclosures on this subject, as well as presenting the financial impact of the restatement.

     Our decision to restate our consolidated financial statements was based on the results of an internal inquiry and independent investigation into our past stock option granting practices. In an August 2, 2006 press release (the August Press Release), we announced that, following the widespread publicity regarding the granting of stock options, we undertook in the fourth fiscal quarter of 2006 a voluntary internal review of our past practices related to grants of stock options. As a result of our preliminary review, our Board of Directors (the Board) formed a Special Committee of independent directors in June 2006 to commence an investigation of our stock option granting practices for the period 1995 through 2006. The Special Committee retained independent legal counsel to aid in the investigation. The Special Committee and its independent counsel, assisted by forensic accountants reviewed the facts and circumstances surrounding annual stock option grants made to executive officers, employees and non-employee directors, searched relevant physical and electronic documents and interviewed current directors, officers and employees.

     In the August Press Release, we announced that both we and the Special Committee concluded that the dates of stock option and restricted stock grants to executive officers and other employees in a number of instances differed from the dates such grants were approved by the appropriate Board committee such that the price on the approval date was higher than the price on the stated grant date. The Special Committee concluded that no stock options granted to outside directors were misdated. The Special Committee concluded that our former General Counsel was responsible for the misdating and found that he failed to ensure compliance with the terms of our stock option plans and the required granting actions by preparing minutes that did not accurately reflect the deliberations and actions of the relevant Board committee, failing to document approvals of certain grants, and selecting grant dates to provide a favorable grant price to executive officers and employees. The General Counsel was removed from his position by the Board immediately following the completion of the Special Committee’s independent investigation and has recently retired as a result of other related events.

     We provided in the August Press Release the aggregate unrecorded non-cash expense relating to misdated executive officer grants. We also stated that for grants to other employees (non-executive officers) we and the Special Committee concluded that it was impracticable to determine the actual measurement dates of the grants, but that even if all such dates were determinable there would not be a material understatement of expense. The analysis of the grants to employees relied on in this determination included a range of potential measurement dates determined by reviewing the dates on documentation such as final spreadsheets listing the employees and the number of shares to be granted to such employees, e-mails, and other correspondence.

     We announced in the August Press Release that our current executive officers agreed to repay their portion of the $685,000 in total gains realized by them as a result of the misdating and also agreed to increase the exercise prices of their unexercised options so that there would be no future gain due to misdating of grants, all of which has occurred. We also announced that we had voluntarily disclosed the misdated grants to the Commission. The facts and circumstances surrounding this issue continue to be the subject of inquiries by the Enforcement Division of the Commission and the United States Attorney’s Office for the Northern District of Illinois. We continue to cooperate in both inquiries.

     Following our August Press Release, the Commission’s Office of the Chief Accountant issued a letter on September 19, 2006 providing guidance regarding the proper accounting for various historical stock option granting practices. In light of this guidance, we undertook an effort to determine or estimate appropriate measurement dates of the misdated stock options granted to employees, other than executive officers, in order to calculate an understatement of expense relating to such options, rather than relying on a range of potential measurement dates for determining the understatement of expense. The effect of recognizing additional share-based compensation expense resulting from the investigation of past stock grants to executive officers and employees is included below in this Explanatory Note. A detailed discussion of the financial effects of these matters is included in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Restatement of Consolidated Financial Statements” and Note 2, “Restatement of Condensed Consolidated Financial Statements,” of the Notes to Condensed Consolidated Financial Statements.

     We continue to believe that the misdated grants did not result in a quantitatively material misstatement to our financial statements; however, due to evolving understanding of the views of the staff of the Commission relating to the qualitative aspects of this issue, we are making the restatement in accordance with generally accepted accounting principles to record the following:

	•		Non-cash share-based compensation expense for grants that were misdated; and
	•		Related tax effects.

     The incremental effect from recognizing share-based compensation expense resulting from the misdated grants is as follows (in thousands):

		Pre-Tax				After-Tax
		Expense				Expense
Quarter ended September 30, 2005		$	624			$	431
Quarter ended September 30, 2006			362				250

     The Original Filing was filed with the Commission on October 31, 2006. All information in this Form 10-Q/A is as of September 30, 2006 and does not reflect events occurring after the date of the Original Filing, other than the restatement and updating of certain disclosures affected by events subsequent to the date of the Original Filing. For the convenience of the reader, this Form 10-Q/A sets forth the Original Filing in its entirety, as amended and modified to reflect the restatement. The following items have been amended principally as a result of, and to reflect, the restatement, and no other information in the Original Filing is amended hereby as a result of the restatement:

     Part I — Item 1: Financial Statements;
     Part I — Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations;
     Part II — Item 1A: Risk Factors; and
     Part II — Item 6: Exhibits.

     This Form 10-Q/A should be read in conjunction with our periodic filings made with the Commission, subsequent to the date of the Original Filing, including any amendments to those filings, as well as any Current Reports filed on Form 8-K subsequent to the date of the Original Filing. In addition, in accordance with applicable rules and regulations promulgated by the Commission, this Form 10-Q/A includes updated certifications from our current Chief Executive Officer and Chief Financial Officer.

Molex Incorporated

INDEX

				Page
PART I — FINANCIAL INFORMATION
Item 1.		Financial Statements
		Condensed Consolidated Balance Sheets as of September 30, 2006 and June 30, 2006			5
		Condensed Consolidated Statements of Income for the three months ended September 30, 2006 and 2005			6
		Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2006 and 2005			7
		Notes to Condensed Consolidated Financial Statements			8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			25
Item 4.		Controls and Procedures			26
PART II — OTHER INFORMATION
Item 1.		Legal Proceedings			26
Item 1A.		Risk Factors			27
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			27
Item 4.		Submission of Matters to a Vote of Security Holders			28
Item 6.		Exhibits			28
SIGNATURES					29
Section 302 Certification of Chief Executive Officer
Section 302 Certification of Chief Financial Officer
Section 906 Certification of Chief Executive Officer
Section 906 Certification of Chief Financial Officer

PART I

Item 1. Financial Statements

Molex Incorporated
Condensed Consolidated Balance Sheets
(in thousands)

		Sept. 30,				June 30,
		2006				2006
		As				As
		Restated (1)				Restated (1)
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	334,321			$	332,815
Marketable securities			17,595				152,728
Accounts receivable, less allowances of $38,269 and $26,513, respectively			731,719				660,665
Inventories			408,220				347,312
Other current assets			82,052				54,713
Total current assets			1,573,907				1,548,233
Property, plant and equipment, net			1,090,285				1,025,852
Goodwill			301,929				149,458
Other assets			291,912				250,877
Total assets		$	3,258,033			$	2,974,420
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	324,873			$	305,876
Accrued expenses			172,023				189,390
Other current liabilities			168,063				99,546
Total current liabilities			664,959				594,812
Other non-current liabilities			16,855				14,709
Accrued pension and postretirement benefits			78,641				75,055
Long-term debt			134,503				7,093
Minority interest in subsidiaries			866				882
Total liabilities			895,824				692,551
Commitments and contingencies			—				—
Stockholders’ equity:
Common stock			10,940				10,900
Paid-in capital			473,661				442,586
Retained earnings			2,527,576				2,464,889
Treasury stock			(755,597	)			(743,219	)
Accumulated other comprehensive income			105,629				106,713
Total stockholders’ equity			2,362,209				2,281,869
Total liabilities and stockholders’ equity		$	3,258,033			$	2,974,420

See accompanying notes to condensed consolidated financial statements.

Molex Incorporated
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share data)

		Three Months Ended
		September 30,
		2006				2005
		As				As
		Restated (1)				Restated (1)
Net revenue		$	829,545			$	659,815
Cost of sales			560,136				445,996
Gross profit			269,409				213,819
Selling, general and administrative			166,301				149,674
Restructuring costs			—				4,870
Total operating expenses			166,301				154,544
Income from operations			103,108				59,275
Equity income			1,884				3,109
Interest income, net			2,080				2,313
Other income, net			3,964				5,422
Income before income taxes and minority interest			107,072				64,697
Income taxes			30,504				18,423
Minority interest			67				34
Net income		$	76,501			$	46,240
Earnings per share:
Basic		$	0.42			$	0.25
Diluted		$	0.41			$	0.25
Dividends declared per share		$	0.0750			$	0.0500
Average common shares outstanding:
Basic			183,763				187,243
Diluted			185,992				188,543

See accompanying notes to condensed consolidated financial statements.

Molex Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

		Three Months Ended
		September 30,
		2006				2005
		As				As
		Restated (1)				Restated (1)
Cash and cash equivalents, beginning of period		$	332,815			$	309,756
Operating activities:
Net income			76,501				46,240
Add non-cash items included in net income:
Depreciation and amortization			58,122				54,667
Share-based compensation			7,639				7,362
Other non-cash items			3,351				10,282
Changes in assets and liabilities:
Accounts receivable			(28,279	)			(33,929	)
Inventories			(32,722	)			(15,708	)
Accounts payable			(9,382	)			(1,234	)
Other current assets and liabilities			(37,232	)			(16,533	)
Other assets and liabilities			(1,230	)			(1,509	)
Cash provided from operating activities			36,768				49,638
Investing activities:
Capital expenditures			(75,566	)			(64,067	)
Proceeds from sales or maturities of marketable securities			3,060,202				379,402
Purchases of marketable securities			(2,925,068	)			(305,175	)
Acquisitions			(236,626	)			—
Other investing activities			4,035				(2,650	)
Cash (used for) provided by investing activities			(173,023	)			7,510
Financing activities:
Proceeds from revolving credit facility			44,000				—
Proceeds from issuance of long-term debt			131,045				—
Payments of long-term debt			(26,146	)			(2,272	)
Cash dividends paid			(13,774	)			(7,048	)
Exercise of stock options			7,362				2,586
Purchase of treasury stock			(5,017	)			(50,107	)
Other financing activities			517				123
Cash provided by (used for) financing activities			137,987				(56,718	)
Effect of exchange rate changes on cash			(226	)			(273	)
Net increase in cash and cash equivalents			1,506				157
Cash and cash equivalents, end of period		$	334,321			$	309,913

See accompanying notes to condensed consolidated financial statements.

Molex Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(in thousands, except per share data)

1. Basis of Presentation

     Molex Incorporated (together with its subsidiaries, except where the context otherwise requires, “we,” “us,” and “our”) manufactures electronic components, including electrical and fiber optic interconnection products and systems, switches and integrated products in 65 plants in 20 countries on five continents.

     The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair statement of results for the interim period have been included. Operating results for the three months ended September 30, 2006 are not necessarily an indication of the results that may be expected for the year ending June 30, 2007. The Condensed Consolidated Balance Sheet as of June 30, 2006 was derived from our audited consolidated financial statements for the year ended June 30, 2006. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K/A for the year ended June 30, 2006.

     The preparation of the unaudited financial statements in conformity with GAAP requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. Significant estimates and assumptions are used in the estimation of income taxes, pension and retiree health care benefit obligations, stock options, allowances for accounts receivable and inventory and impairment reviews for goodwill, intangible and other long-lived assets. Estimates are revised periodically. Actual results could differ from these estimates.

     Certain reclassifications have been made to the prior year financial statements to conform to the current year classifications. We made a change in accounting principle to classify shipping and handling costs associated with the distribution of finished products to our customers as cost of sales (previously recorded in selling, general and administrative expense). We made the change in principle because we believe the classification of these shipping and handling costs in cost of sales better reflects the cost of producing and distributing our products and aligns our external financial reporting with the results we use internally to evaluate segment operating performance. The impact of this change in principle was an increase to cost of goods sold and a reduction to selling, general and administrative expense of $12.4 million in the three months ended September 30, 2005.

2. Restatement of Condensed Consolidated Financial Statements

     We have restated the consolidated financial statements and the related disclosures for the fiscal year ended 2006 and for the quarters ended September 30, 2005 and 2006.

     We are restating our consolidated financial statements to reflect evolving understanding of the views of the staff of the Commission relating to the qualitative aspects of past stock option misdating. In an August 2, 2006 press release (the August Press Release), we announced that, following the widespread publicity regarding the granting of stock options, we undertook in the fourth fiscal quarter of 2006 a voluntary internal review of our past practices related to grants of stock options. As a result of our preliminary review, our Board of Directors (the Board) formed a Special Committee of independent directors in June 2006 to commence an investigation of our stock option granting practices for the period 1995 through 2006. The Special Committee retained independent legal counsel to aid in the investigation. The Special Committee and its independent counsel, assisted by forensic accountants reviewed the facts and circumstances surrounding annual stock option grants made to executive officers, employees and non-employee directors, searched relevant physical and electronic documents and interviewed current directors, officers and employees.

     In the August Press Release, we announced that both we and the Special Committee concluded that the dates of stock option and restricted stock grants to executive officers and other employees in a number of instances differed from the dates such grants were approved by the appropriate Board committee such that the price on the approval date was higher than the price on the stated grant date. The Special Committee concluded that no stock options granted to outside directors were misdated. The Special Committee concluded that our former General Counsel was responsible for the misdating and

found that he failed to ensure compliance with the terms of our stock option plans and the required granting actions by preparing minutes that did not accurately reflect the deliberations and actions of the relevant Board committee, failing to document approvals of certain grants, and selecting grant dates to provide a favorable grant price to executive officers and employees. The General Counsel was removed from his position by the Board immediately following the completion of the Special Committee’s independent investigation and has recently retired as a result of other related events.

     We provided in the August Press Release the aggregate unrecorded non-cash expense relating to misdated executive officer grants. We also stated that for grants to other employees (non-executive officers) we and the Special Committee concluded that it was impracticable to determine the actual measurement dates of the grants, but that even if all such dates were determinable there would not be a material understatement of expense. The analysis of the grants to employees relied on in this determination included a range of potential measurement dates determined by reviewing the dates on documentation such as final spreadsheets listing the employees and the number of shares to be granted to such employees, e-mails, and other correspondence.

     We announced in the August Press Release that our current executive officers agreed to repay their portion of the $685,000 in total gains realized by them as a result of the misdating and also agreed to increase the exercise prices of their unexercised options so that there would be no future gain due to misdating of grants, all of which has occurred. We also announced that we had voluntarily disclosed the misdated grants to the Commission. The facts and circumstances surrounding this issue continue to be the subject of inquiries by the Enforcement Division of the Commission and the United States Attorney’s Office for the Northern District of Illinois. We continue to cooperate in both inquiries.

     Following our August Press Release, the Commission’s Office of the Chief Accountant issued a letter on September 19, 2006 providing guidance regarding the proper accounting for various historical stock option granting practices. In light of this guidance, we undertook an effort to determine or estimate appropriate measurement dates of the misdated stock options granted to employees, other than executive officers, in order to calculate an understatement of expense relating to such options, rather than relying on a range of potential measurement dates for determining the understatement of expense. The effect of recognizing additional share-based compensation expense resulting from the investigation of past stock grants to executive officers and employees is included below.

     We are making the restatement in accordance with generally accepted accounting principles to record the following:

	•		Non-cash share-based compensation expense for grants that were misdated; and
	•		Related tax effects.

The consolidated financial statements and related financial information contained in previously filed reports should no longer be relied upon.

     Share-Based Compensation

     The effect of recognizing additional share-based compensation expense resulting from the misdated grants is as follows for fiscal years 1995 through 2006 (in thousands):

		Pre-Tax				After-Tax
		Expense				Expense
1995		$	47			$	33
1996			119				82
1997			258				178
1998			418				288
1999			836				577
2000			1,986				1,370
2001			2,926				2,019
2002			3,920				2,705
2003			4,931				3,402
Total 1995 — 2003 effect			15,441				10,654
2004			4,456				3,075
2005			3,507				2,420
2006			1,330				918
Total 2004 — 2006 effect			9,293				6,413
Total effect		$	24,734			$	17,067

     The effect of recognizing share-based compensation expense resulting from the misdated grants is as follows for the first fiscal quarters of 2006 and 2005 (in thousands):

		Pre-Tax				After-Tax
		Expense				Expense
Quarter ended September 30, 2005		$	624			$	431
Quarter ended September 30, 2006			362				250

     The following table sets forth the impact of the above adjustments and the related tax effects on our historical Condensed Consolidated Statements of Income for the quarters ended September 30, 2006 and 2005 (in thousands, except per share data):

		Three months ended September 30, 2006												Three months ended September 30, 2005
		As Previously												As Previously
		Reported				Adjustments				Restated				Reported				Adjustments				Restated
Net revenue		$	829,545			$	—			$	829,545			$	659,815			$	—			$	659,815
Cost of sales			560,136				—				560,136				445,996				—				445,996
Gross profit			269,409				—				269,409				213,819				—				213,819
Selling, general and administrative			165,939				362				166,301				149,050				624				149,674
Restructuring costs			—				—				—				4,870				—				4,870
Goodwill and other asset impairments			—				—				—				—				—				—
Total operating expenses			165,939				362				166,301				153,920				624				154,544
Income from operations			103,470				(362	)			103,108				59,899				(624	)			59,275
Gain (loss) on investments			—				—				—				—				—				—
Equity income			1,884				—				1,884				3,109				—				3,109
Interest income, net			2,080				—				2,080				2,313				—				2,313
Total other income, net			3,964				—				3,964				5,422				—				5,422
Income before income taxes			107,434				(362	)			107,072				65,321				(624	)			64,697
Income taxes			30,616				(112	)			30,504				18,616				(193	)			18,423
Minority interest			67				—				67				34				—				34
Net income		$	76,751			$	(250	)		$	76,501			$	46,671			$	(431	)		$	46,240
Earnings per share:
Basic			0.42								0.42				0.25								0.25
Diluted			0.41								0.41				0.25								0.25
Average common shares outstanding:
Basic			183,763								183,763				187,243								187,243
Diluted			185,992								185,992				188,543								188,543

     The following table sets forth the impact of the above adjustments and the related tax effects on our historical Condensed Consolidated Balance Sheets as of September 30, 2006 and June 30, 2006 (in thousands):

		September 30, 2006												June 30, 2006
		As												As
		Previously								As				Previously								As
		Reported				Adjustments				Restated				Reported				Adjustments				Restated
ASSETS
Current assets:
Cash and cash equivalents		$	334,321			$	—			$	334,321			$	332,815			$	—			$	332,815
Marketable securities			17,595				—				17,595				152,728				—				152,728
Accounts receivable			731,719				—				731,719				660,665				—				660,665
Inventories			408,220				—				408,220				347,312				—				347,312
Other current assets			82,052				—				82,052				54,713				—				54,713
Total current assets			1,573,907				—				1,573,907				1,548,233				—				1,548,233
Property, plant and equipment, net			1,090,285				—				1,090,285				1,025,852				—				1,025,852
Goodwill			301,929				—				301,929				149,458				—				149,458
Other assets			290,621				1,291				291,912				249,698				1,179				250,877
Total assets		$	3,256,742			$	1,291			$	3,258,033			$	2,973,241			$	1,179			$	2,974,420
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	324,873			$	—			$	324,873			$	305,876			$	—			$	305,876
Accrued expenses			172,023				—				172,023				189,390				—				189,390
Other current liabilities			168,063				—				168,063				99,546				—				99,546
Total current liabilities			664,959				—				664,959				594,812				—				594,812
Other non-current liabilities			16,855				—				16,855				14,709				—				14,709
Accrued pension and other postretirement benefits			78,641				—				78,641				75,055				—				75,055
Long-term debt			134,503				—				134,503				7,093				—				7,093
Minority interest in subsidiaries			866				—				866				882				—				882
Total liabilities			895,824				—				895,824				692,551				—				692,551
Commitments and contingencies			—				—				—				—				—				—
Stockholders’ equity:
Common stock			10,940				—				10,940				10,900				—				10,900
Paid-in capital			455,053				18,608				473,661				424,340				18,246				442,586
Retained earnings			2,544,893				(17,317	)			2,527,576				2,481,956				(17,067	)			2,464,889
Treasury stock			(755,597	)			—				(755,597	)			(743,219	)			—				(743,219	)
Deferred unearned compensation			—				—				—				—				—				—
Accumulated other comprehensive income			105,629				—				105,629				106,713				—				106,713
Total stockholders’ equity			2,360,918				1,291				2,362,209				2,280,690				1,179				2,281,869
Total liabilities and stockholders’ equity		$	3,256,742			$	1,291			$	3,258,033			$	2,973,241			$	1,179			$	2,974,420

     The restatement did not impact cash flows from operating, investing and financing activities as reported for the three months ended September 30, 2006 and 2005. The following table shows the effect of the restatement on the components of our previously reported cash flow from operating activities (in thousands):

		Quarter ended September 30, 2006												Quarter ended September 30, 2005
		As												As
		Previously								As				Previously								As
		Reported				Adjustments				Restated				Reported				Adjustments				Restated
Net income		$	76,751			$	(250	)		$	76,501			$	46,671			$	(431	)		$	46,240
Add (deduct) non-cash items included in net income:
Depreciation and amortization			58,122				—				58,122				54,667				—				54,667
Share-based compensation			7,277				362				7,639				6,738				624				7,362
Other non-cash items			3,463				(112	)			3,351				10,475				(193	)			10,282
Changes in working capital:
Accounts receivable			(28,279	)			—				(28,279	)			(33,929	)			—				(33,929	)
Inventories			(32,722	)			—				(32,722	)			(15,708	)			—				(15,708	)
Accounts payable			(9,382	)			—				(9,382	)			(1,234	)			—				(1,234	)
Other current assets and liabilities			(37,232	)			—				(37,232	)			(16,533	)			—				(16,533	)
Other assets and liabilities			(1,230	)			—				(1,230	)			(1,509	)			—				(1,509	)
Cash provided from operating activities		$	36,768			$	—			$	36,768			$	49,638			$	—			$	49,638

     As a result of the restatements, we adjusted the opening balance of stockholders’ equity for the year ended June 30, 2006 to reflect the cumulative effect of errors made prior to that year. The cumulative adjustments of each component of stockholders’ equity at the end of fiscal year 2006 and the first quarter of fiscal 2007 follows (in thousands):

										Net Impact
										to
		Paid-in				Retained				Stockholders’
		Capital				Earnings				Equity
Pre-tax share-based compensation		$	24,734			$	(24,734	)		$	—
Related tax effect			(6,488	)			7,667				1,179
Opening balances for the year ended June 30, 2006		$	18,246			$	(17,067	)		$	1,179
September 30, 2006			18,608				(17,317	)			1,291

3. Restructuring Charges

     During the fourth quarter of fiscal 2005, we decided to close certain operations in the Americas and European regions in order to reduce operating costs and better align our manufacturing capacity with customer needs. Production from the closed operations has been transferred to existing plants within the respective regions. Also included in the restructuring charge are costs to reduce our selling, general and administrative costs in the Americas, Europe and at the corporate office.

     The cumulative restructuring charges as of June 30, 2006 were $54.2 million, of which $27.0 million related to the Americas region, $19.2 million related to the European region and $8.0 million for corporate operations. The restructuring activities were substantially complete as of June 30, 2006.

     The change in the accrued severance balance related to the restructuring charge is summarized as follows:

Balance at June 30, 2006		$	15,941
Cash payments			(4,739	)
Balance at September 30, 2006		$	11,202

4. Acquisition

     On August 9, 2006, we completed the acquisition of Woodhead Industries, Inc. (Woodhead) in an all cash transaction valued at approximately $236.6 million, including the assumption of debt and net of cash acquired. Woodhead develops, manufactures and markets network and electrical infrastructure components engineered for performance in harsh,

demanding, and hazardous industrial environments, and the acquisition is a significant step in our strategy to expand our products and capabilities in the global industrial market.

     The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

Current assets		$	100,738
Land and depreciable assets, net			53,809
Goodwill			147,071
Intangible assets			56,500
Other assets			1,078
Assets acquired			359,196
Liabilities assumed			122,570
Net assets acquired		$	236,626

     The above purchase price allocation for this acquisition is preliminary and subject to revision as more detailed analyses are completed and additional information about the fair value of assets and liabilities becomes available. We also plan to incur costs in connection with realigning portions of the business but it is impracticable to estimate a liability for such costs at this time. Any change in the fair value of the net assets of Woodhead and any realignment costs will change the amount of the purchase price allocable to goodwill.

     The following table illustrates the effect on operating results as if we had acquired Woodhead as of the beginning of the three months ended September 30, 2005. The pro forma effect on the three months ended September 30, 2006 was not material.

Net revenue		$	712,824
Income from operations			62,835
Net income			49,042
Net income per common share — Basic		$	0.26
Net income per common share — Diluted			0.26

     The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what our results of operations would have been had we acquired Woodhead on the dates assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from synergies, if any, resulting from the combination of Molex and Woodhead.

5. Earnings Per Share

     A reconciliation of the basic average common shares outstanding to diluted average common shares outstanding is as follows:

		Three Months Ended
		September 30,
		2006				2005
Basic average common shares outstanding			183,763				187,243
Effect of dilutive stock options			2,229				1,300
Diluted average common shares outstanding			185,992				188,543

6. Comprehensive Income

     Total comprehensive income is summarized as follows:

		Three Months Ended
		September 30,
		2006				2005
Net income, as restated (see note 2)		$	76,501			$	46,240
Translation adjustments			(5,228	)			(6,804	)
Unrealized investment gain			4,143				223
Total comprehensive income		$	75,416			$	39,659

7. Inventories

     Inventories are valued at the lower of first-in, first-out cost or market. Inventories, net of allowances, consist of the following:

		Sept. 30,				June 30,
		2006				2006
Raw materials		$	86,204			$	62,288
Work in process			118,611				107,533
Finished goods			203,405				177,491
Total inventories		$	408,220			$	347,312

8. Pensions and Other Postretirement Benefits

     The components of pension benefit cost are as follows:

		Three Months Ended
		September 30,
		2006				2005
Service cost		$	1,971			$	2,219
Interest cost			1,558				1,298
Expected return on plan assets			(1,606	)			(1,274	)
Amortization of prior service cost			57				28
Recognized actuarial losses			45				353
Amortization of transition obligation			10				9
Benefit cost		$	2,035			$	2,633

     The components of retiree health care benefit cost are as follows:

		Three Months Ended
		September 30,
		2006				2005
Service cost		$	572			$	641
Interest cost			645				597
Amortization of prior service cost			(166	)			(18	)
Recognized actuarial losses			270				260
Benefit cost		$	1,321			$	1,480

9. Commitments and Contingencies

     Between March 2, 2005 and April 22, 2005 seven separate complaints were filed, each purporting to be on behalf of a class of Molex stockholders, against us, and certain of our officers and employees. The shareholder actions have been consolidated, and the consolidated amended complaint alleges, among other things, that during the period from July 27, 2004 to February 14, 2005 the named defendants made or caused to be made a series of materially false or misleading statements about our business, prospects, operations, and financial statements which constituted violations of securities laws and rules. The parties have reached a settlement in principle of this action, which is anticipated to be funded by insurance proceeds. The settlement will be subject to court approval.

     In addition, in the Fall of 2005, two stockholder derivative actions were filed against us and certain of our directors and officers. The derivative actions arise principally out of the same facts as the stockholder actions described above. These two actions have been consolidated and an amended and consolidated complaint has been filed. In August 2006, plaintiffs asked the court for permission to file a further amended complaint, which adds allegations that stock options were priced and issued improperly. We intend to move to dismiss the complaint if the plaintiffs are permitted to amend their complaint. We believe the allegations in the stockholder derivative actions are without merit and intend to vigorously contest these actions.

10. Long-Term Debt

     During the quarter ended September 30, 2006, we entered into two unsecured borrowing agreements approximating 15 billion Japanese yen ($127.7 million). Both agreements have three-year terms with weighted-average fixed interest rates approximating 1.3%. Interest on both loans is payable every six months with the principal due in September 2009.

11. New Accounting Pronouncements

     In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), which, among other things, requires applying a “more likely than not” threshold to the recognition and derecognition of tax positions. The provisions of FIN 48 will be effective for us on July 1, 2007. We are currently evaluating the impact of adopting FIN 48 on the financial statements, but we do not expect its adoption to have a significant effect.

     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB statements No. 87, 88, 106 and 132(R). This statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status through comprehensive income in the year in which the changes occur. This statement also requires an employer to measure the funded status of its plans as of the date of its year-end statement of financial position. The requirement to initially recognize the funded status of plans will be effective for us on June 30, 2007. Based on the June 30, 2006 funded status of our plans, we expect that the adoption of this pronouncement will result in increasing our pension and retiree health care benefit liability by approximately $25 million with a corresponding decrease in other comprehensive income.

12. Segments and Related Information

     We operate in one product segment, the manufacture and sale of electronic components, and four geographic regions. Revenue is recognized based on the location of the selling entity. Effective July 1, 2006, we realigned our management structure in the Asia regions. As part of the realignment, the Far East North region was renamed the Asia Pacific North region and the Far East South region was renamed the Asia Pacific South region. Additionally, our entity in Korea is now managed by Asia Pacific South and was included in Asia Pacific North prior to July 1, 2006. Our entity in Thailand is now managed by Asia Pacific North beginning July 1, 2006, and was included in Asia Pacific South prior to July 1, 2006. Regional operating results for the three months ended September 30, 2005, were reclassified to conform to the current year reporting structure. Woodhead has locations around the world but is included in the table below as corporate and other because it is aligned independently from the other regions and is immaterial for separate classification. Information by region for the three months ended September 30 is summarized as follows:

						Inter-
		Customer				Company				Net				Net
		Revenue				Revenue				Revenue				Income
2006 :														As Restated (1)
Americas		$	200,222			$	67,860			$	268,082			$	16,267
Asia Pacific North			130,321				113,355				243,676				33,257
Asia Pacific South			309,771				38,665				348,436				35,761
Europe			136,615				16,808				153,423				4,047
Corporate and other			52,616				35,056				87,672				(12,831	)
Eliminations			—				(271,744	)			(271,744	)			—
Total		$	829,545			$	—			$	829,545			$	76,501
2005:
Americas		$	185,212			$	46,946			$	232,158			$	5,662
Asia Pacific North			107,059				91,470				198,529				22,265
Asia Pacific South			238,517				35,674				274,191				30,201
Europe			114,529				10,902				125,431				(2,921	)
Corporate and other			14,498				29,315				43,813				(8,967	)
Eliminations			—				(214,307	)			(214,307	)			—
Total		$	659,815			$	—			$	659,815			$	46,240

Molex Incorporated

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     Unless otherwise indicated or the content otherwise requires, the terms “we,” “us” and “our” and other similar terms in this Quarterly Report on Form 10-Q/A refer to Molex Incorporated and its subsidiaries.

     The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and accompanying notes contained herein and our consolidated financial statements and accompanying notes and management’s discussion and analysis of results of operations and financial condition contained in our Annual Report on Form 10-K/A for the fiscal year ended June 30, 2006. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those described below under the heading “Cautionary Statement Regarding Forward-Looking Information.”

     The following information has been adjusted to reflect the restatement of our financial results, which is more fully described in the “Explanatory Note” immediately preceding Part I, Item 1 and in Note 2, “Restatement of Condensed Consolidated Financial Statements” in Notes to Condensed Consolidated Financial Statements of our Form 10-Q/A.

Overview

     Our core business is the manufacture and sale of electromechanical components. Our products are used by a large number of leading original equipment manufacturers (OEMs) throughout the world. We design, manufacture and sell more than 100,000 products including terminals, connectors, planar cables, cable assemblies, interconnection systems, backplanes, integrated products and mechanical and electronic switches in 65 plants in 20 countries on five continents. We also provide manufacturing services to integrate specific components into a customer’s product.

     On August 9, 2006, we completed the acquisition of Woodhead Industries, Inc. (Woodhead) in an all cash transaction valued at approximately $236.6 million, including the assumption of debt and net of cash acquired. Woodhead develops, manufactures and markets network and electrical infrastructure products engineered for performance in harsh, demanding, and hazardous industrial environments and is a significant step in our strategy to expand our products and capabilities in the global industrial market. The acquisition of Woodhead contributed net revenue of $33.5 million and net income of $1.0 million for the three months ended September 30, 2006.

     In September 2006 we approved a plan to close our production facilities in Brazil. We expect to complete the closure of these facilities during the three months ended March 31, 2007, which we anticipate will reduce our quarterly revenue by approximately $10 million to $15 million after the facilities are closed. We recognized impairment charges and severance costs approximating $2.5 million during the three months ended September 30, 2006 in connection with our decision to shut-down the Brazil production facilities.

     Our financial results are influenced by factors in the markets in which we operate and by our ability to successfully execute our business strategy. Marketplace factors include competition for customers, raw material prices, product and price competition, economic conditions in various geographic regions, foreign currency exchange rates, interest rates, changes in technology, fluctuations in customer demand, patent and intellectual property issues, litigation results and legal and regulatory developments. We expect that the marketplace environment will remain highly competitive. Our ability to execute our business strategy successfully will require that we meet a number of challenges, including our ability to accurately forecast sales demand and calibrate manufacturing to such demand, develop, manufacture and successfully market new and enhanced products and product lines, control overhead, and attract, motivate and retain key personnel to manage our operational, financial and management information systems.

Critical Accounting Policies and Estimates

     This discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and related disclosures. In preparing these financial statements, we have made our

best estimates and judgments of certain amounts included in the financial statements. Estimates are revised periodically. Actual results could differ from these estimates.

     See the information concerning our critical accounting policies included under Management’s Discussion of Financial Condition and Results of Operations in our Annual Report on Form 10-K/A for the fiscal year ended June 30, 2006 filed with the Securities and Exchange Commission, which is incorporated by reference in this Form 10-Q/A.

Results of Operations

     The table below shows our results of operations and the absolute and percentage change in those results from period to period (in thousands). For the three months ended September 30, 2005, shipping and handling costs of $12.4 million have been reclassified from selling, general and administrative expenses to cost of sales to conform to the current year presentation.

		Three Months Ended								$Change				% Change				Results as %
		September 30,								Favorable				Favorable				of Net Revenue
		2006				2005				(Unfavorable)				(Unfavorable)				2006				2005
Net revenue		$	829,545			$	659,815			$	169,730				25.7	%			100.0	%			100.0	%
Cost of sales			560,136				445,996				(114,140	)			(25.6	)			67.5				67.6
Gross profit			269,409				213,819				55,590				26.0				32.5				32.4
Selling, general & administrative			166,301				149,674				(16,627	)			(11.1	)			20.1				22.7
Restructuring costs			—				4,870				4,870				100.0				—				0.7
Income from operations			103,108				59,275				43,833				74.0				12.4				9.0
Other income, net			3,964				5,422				(1,458	)			(26.9	)			0.5				0.8
Income before income taxes			107,072				64,697				42,375				65.5				12.9				9.8
Income taxes & minority interest			30,571				18,457				(12,114	)			(65.6	)			3.7				2.8
Net income		$	76,501			$	46,240			$	30,261				65.4	%			9.2	%			7.0	%

Net Revenue

     We estimate that the impact of price erosion reduced revenue by approximately $17.6 million compared with the prior year quarter. We sell our products in five primary markets. The estimated change in revenue from each market during the first fiscal quarter of 2007 as compared with the same quarter last year (Comparable Quarter) and the fourth quarter of 2006 (Sequential Quarter) follows:

		Comparable				Sequential
		Quarter				Quarter
Consumer			28	%			9	%
Telecommunications			22				5
Automotive			10				(7	)
Data			16				8
Industrial			94				40

     The Woodhead acquisition added $33.5 million to revenues in the current quarter. Woodhead contributed 60% of the 94% growth in industrial sales as compared with the prior year quarter and was representative of the sequential industrial growth. The remaining increase in revenue was derived primarily from unit volume increases with existing customers and existing products and sales of new products. Automotive revenue declined sequentially as a result of an annual shut-down in our customers’ facilities.

     We operate in one product segment, the manufacture and sale of electronic components, and four regions. Revenue is recognized based on the location of the selling entity. Effective July 1, 2006, we realigned our management structure in the Asia region. As part of the realignment, the Far East North region was renamed the Asia Pacific North region and the Far East South region was renamed the Asia Pacific South region. Additionally, our entity in Korea is now managed by Asia Pacific South and was included in the Asia Pacific North prior to July 1, 2006. Our entity in Thailand is now managed by Asia Pacific North beginning July 1, 2006 and was included in the Asia Pacific South prior to July 1, 2006. Regional operating results for the three months ended September 30, 2005, were reclassified to conform to the current year reporting structure. Woodhead has locations around the world but is included in the revenue-related tables below as corporate and

other because the division is aligned independently from the other regions and is immaterial for separate classification. The following table sets forth information on customer revenue by geographic region for the periods indicated (in thousands):

		Three Months Ended								$Change				% Change				Results as %
		September 30,								Favorable				Favorable				of Net Revenue
		2006				2005				(Unfavorable)				(Unfavorable)				2006				2005
Americas		$	200,222			$	185,212			$	15,010				8.1	%			24.2	%			28.1	%
Asia Pacific North			130,321				107,059				23,262				21.7				15.7				16.2
Asia Pacific South			309,771				238,517				71,254				29.9				37.3				36.2
Europe			136,615				114,529				22,086				19.3				16.5				17.4
Corporate and other			52,616				14,498				38,118				262.9				6.3				2.1
Total		$	829,545			$	659,815			$	169,730				25.7	%			100.0	%			100.0	%

     The weakening of the U.S. dollar against certain foreign currencies, principally the euro, Singapore dollar and Korean won increased revenue by approximately $10.6 million for the three months ended September 30, 2006 over the prior year period. The following tables show the effect on the change in net revenue from foreign currency translations to the U.S. dollar:

		Three Months Ended September 30, 2006
		Local				Currency				Net
		Currency				Translation				Change
Americas		$	14,490			$	520			$	15,010
Asia Pacific North			27,163				(3,901	)			23,262
Asia Pacific South			65,380				5,874				71,254
Europe			15,268				6,818				22,086
Corporate and other			36,831				1,287				38,118
Net change		$	159,132			$	10,598			$	169,730

     The change in revenue on a local currency basis is as follows:

		Three Months
		Ended
		Sept. 30, 2006
Americas			7.8	%
Asia Pacific North			25.4
Asia Pacific South			27.4
Europe			13.3
Total			24.1

     We continued our long-term commitment to reinvesting our profits in new product design and tooling to maintain and enhance our competitive position. Revenue derived from the sale of new products we released within the last 36 months as a percentage of net revenue is as follows:

		Three Months
		Ended
		Sept. 30, 2006
Americas			23.4	%
Asia Pacific North			27.7
Asia Pacific South			29.7
Europe			26.1
Total			26.9