MOLEX INC - 10-Q Quarterly Report

Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2004
Commission File Number 0-7491
____________

MOLEX INCORPORATED
(Exact name of registrant as specified in its charter)

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

Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange
Act). Yes X No

On December 31, 2004, the following numbers of shares
of the Company's common stock were outstanding:

Common Stock 100,657,345
Class A Common Stock 87,940,187
Class B Common Stock 94,255

Molex Incorporated

INDEX

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements Page

Condensed Consolidated Balance Sheets
December 31, 2004 and June 30, 2004 3

Condensed Consolidated Statements of Income
Three and Six Months Ended December 31, 2004 and 2003 4

Condensed Consolidated Statements of Cash Flows
Six Months Ended December 31, 2004 and 2003 5

Notes to Condensed Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 14

Item 3. Quantitative and Qualitative Disclosure About
Market Risk 19

Item 4. Controls and Procedures 19

PART II - OTHER INFORMATION

Item 1. Legal Proceedings 20

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21

Item 5. Other Information 21

Item 6. Exhibits 23

SIGNATURES 24

2

PART I

Item 1. Financial Statements

Molex Incorporated
Condensed Consolidated Balance Sheets
(In thousands)

Dec. 31, June 30,
2004 2004
---------- ----------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 297,644 $ 234,431
Marketable securities 114,365 104,223
Accounts receivable, less allowances of
$20,908 and $22,901, respectively 550,278 529,630
Inventories 288,158 265,344
Other current assets 42,843 35,016
---------- ----------
Total current assets 1,293,288 1,168,644
Property, plant and equipment, net 1,047,896 1,022,378
Goodwill 164,953 164,915
Other assets 208,255 216,409
---------- ----------
Total assets $2,714,392 $2,572,346
---------- ----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 224,682 $ 234,823
Accrued expenses 138,736 143,160
Other current liabilities 56,309 50,481
---------- ----------
Total current liabilities 419,727 428,464
Other non-current liabilities 12,456 10,487
Accrued pension and postretirement benefits 55,867 52,151
Long-term debt 9,843 10,243
Obligations under capital leases 3,626 3,796
Minority interest in subsidiaries 3,503 1,211
---------- ----------
Total liabilities 505,022 506,352
---------- ----------
Shareholders' equity:
Common stock 10,764 10,734
Paid-in capital 381,381 369,660
Retained earnings 2,251,289 2,160,368
Treasury stock (534,033) (509,161)
Deferred unearned compensation (29,032) (32,180)
Accumulated other comprehensive income 129,001 66,573
---------- ----------
Total shareholders' equity 2,209,370 2,065,994
---------- ----------
Total liabilities and shareholders' equity $2,714,392 $2,572,346
---------- ----------

The accompanying notes are an integral part of these condensed
consolidated financial statements.

3

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

Three Months Ended Six Months Ended
December 31, December 31,
---------------------- ----------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------

Net revenue $ 651,818 $ 548,982 $1,292,048 $1,045,745
Cost of sales 430,298 369,685 845,246 698,424
---------- ---------- ---------- ----------
GROSS PROFIT 221,520 179,297 446,802 347,321
---------- ---------- ---------- ----------

Selling, general and administrative expenses:
Selling 54,891 48,845 108,911 93,261
General and administrative 98,872 82,327 200,137 165,375
---------- ---------- ---------- ----------
Total selling, general and administrative expenses 153,763 131,172 309,048 258,636
---------- ---------- ---------- ----------

INCOME FROM OPERATIONS 67,757 48,125 137,754 88,685

Other (income) expense:
Gain on sale of affiliate stock - (10,363) (1,624) (10,363)
Loss and write-down on investments 646 4,988 2,982 4,988
Equity income (3,151) (2,104) (5,180) (4,287)
Interest, net (1,399) (1,089) (2,324) (2,324)
---------- ---------- ---------- ----------
Total other (income) expense (3,904) (8,568) (6,146) (11,986)

INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 71,661 56,693 143,900 100,671
Income taxes 19,355 15,314 38,884 27,188
Minority interest 60 163 286 205
---------- ---------- ---------- ----------

NET INCOME $ 52,246 $ 41,216 $ 104,730 $ 73,278
---------- ---------- ---------- ----------

EARNINGS PER SHARE:
Basic $ 0.28 $ 0.22 $ 0.55 $ 0.38
Diluted $ 0.27 $ 0.21 $ 0.55 $ 0.38

DIVIDENDS PER SHARE $ 0.0375 $ 0.0250 $ 0.075 $ 0.050

AVERAGE COMMON SHARES OUTSTANDING:
Basic 188,589 190,459 188,713 190,599
Diluted 190,506 192,450 190,616 192,462

The accompanying notes are an integral part of these
condensed consolidated financial statements.

4

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

Six Months Ended
December 31,
----------------------
2004 2003
---------- ----------
Cash and cash equivalents, beginning of period $ 234,431 $ 178,976

OPERATING ACTIVITIES
Net income 104,730 73,278
Add (deduct) non-cash items included in net income:
Depreciation and amortization 117,977 109,599
Amortization of deferred unearned compensation 7,575 6,210
Changes in assets and liabilities, excluding effects of
foreign currency adjustments:
Accounts receivable 3,227 (72,384)
Inventories (9,538) (29,359)
Accounts payable (20,302) 16,848
Other current assets and liabilities (16,732) (3,607)
Other assets and liabilities (3,689) (6,547)
---------- ----------
Cash provided from operating activities 183,248 94,038

INVESTING ACTIVITIES
Capital expenditures (105,343) (83,939)
Sales (purchases) of marketable securities (9,889) 1,126
Other investing activities 14,373 (1,098)
---------- ----------
Cash used for investing activities (100,859) (83,911)

FINANCING ACTIVITIES
Net decrease in debt (392) (3,062)
Principal payments on capital leases (1,713) (2,569)
Cash dividends paid (11,799) (9,535)
Purchase of treasury stock (23,615) (25,406)
Reissuance of treasury stock 438 1,022
Exercise of stock options 5,002 4,946
---------- ----------
Cash used for financing activities (32,079) (34,604)

Effect of exchange rate changes on cash
and cash equivalents 12,903 2,944
---------- ----------
Net increase (decrease) in cash and cash equivalents 63,213 (21,533)
---------- ----------
Cash and cash equivalents, end of period $ 297,644 $ 157,443
---------- ----------

The accompanying notes are an integral part of these condensed
consolidated financial statements.

5

Molex Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Basis of Presentation

Molex Incorporated manufactures electronic components,
including electrical and fiber optic interconnection products and
systems, switches and integrated products in 55 plants in 19
countries throughout the world.

The unaudited financial statements have been prepared from
the Company's books and records and reflect all adjustments
consisting only of normal recurring items, except as discussed in
Note 2 and Note 3, that in the opinion of management, are
necessary for a fair presentation of information for the interim
periods presented. The condensed consolidated financial
statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and
therefore, do not include all information and footnote disclosures
included in the annual consolidated financial statements. These
financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in
the Molex Incorporated 2004 Annual Report on Form 10-K. The
results of operations for the interim periods should not be
considered indicative of results to be expected for the full year.

The preparation of the unaudited financial statements in
conformity with accounting principles generally accepted in the
United States 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.

2. Reclassification of Income Statement

Certain reclassifications have been made to the prior year's
income statement to conform to the Company's new classifications
effective June 30, 2004 as discussed in Note 2 of the Notes to
Consolidated Financial Statements of the Company's fiscal 2004
Annual Report on Form 10-K. For the quarter ended December 31,
2003, these reclassifications consist of (a) $2.1 million of
selling, general and administrative expenses being reclassified as
a separate line item "Equity income" under other (income) expense,
(b) a $1.2 million loss on the sale of property, plant and
equipment reclassified from selling, general and administrative
expenses to cost of sales and (c) a $0.4 million foreign currency
exchange loss being reclassified to cost of sales from other
(income) expense. For the six months ended December 31, 2003,
these reclassifications consist of (a) $4.3 million of selling,
general and administrative expenses being reclassified as a
separate line item "Equity income" under other (income) expense,
(b) a $1.9 million loss on the sale of property, plant and
equipment reclassified from selling, general and administrative
expenses to cost of sales and (c) a $1.0 million foreign currency
exchange loss being reclassified to cost of sales from other
(income) expense.
6
Following is a summary of the effect of these
reclassifications on previously reported amounts for the three and
six months ended December 31, 2003 (in thousands):

Three Months Ended Six Months Ended
December 31, 2003 December 31, 2003
-------------------------------- ---------------------------------
Previously Previously
Reported Reclass Reclassified Reported Reclass Reclassified
--------- ------- ------------ ---------- ------- ------------

Net revenue $ 548,982 $ - $ 548,982 $1,045,745 $ - $ 1,045,745
Cost of sales 368,129 1,556 369,685 695,511 2,913 698,424
--------- ------- ----------- ---------- ------- ------------
Gross profit 180,853 (1,556) 179,297 350,234 (2,913) 347,321

Selling, general & admin expenses 130,274 898 131,172 256,246 2,390 258,636
--------- ------- ----------- ---------- ------- ------------
Income from operations 50,579 2,454 48,125 93,988 5,303 88,685

Gain on sale of affiliate stock (10,363) - (10,363) (10,363) - (10,363)
Loss/Write-down on investments 4,986 2 4,988 4,986 2 4,988
Equity income - (2,104) (2,104) - (4,287) (4,287)
Interest, net (1,089) - (1,089) (2,324) - (2,324)
Other 352 (352) - 1,018 (1,018) -
--------- ------- ----------- ---------- ------- ------------
Total other (income) expense (6,114) (2,454) (8,568) (6,683) (5,303) (11,986)

Income before income taxes 56,693 - 56,693 100,671 - 100,671
Income taxes and minority interest 15,477 - 15,477 27,393 - 27,393
--------- ------- ----------- ---------- ------- ------------
Net income $ 41,216 $ - $ 41,216 $ 73,278 $ - $ 73,278
--------- ------- ----------- ---------- ------- ------------

The Company has concluded that the amounts reclassified are
not material, either individually or in the aggregate, to the
trends of the financial statements for the periods affected, or to
a fair presentation of the Company's results of operations and
financial statements.

3. Correction of Prior Years' Errors

In the first fiscal quarter of 2005 the Company recorded the
adjustments discussed below to correct errors in prior years'
financial statements.

Included in cost of sales for the three months ended
September 30, 2004 is a charge of $9.1 million ($6.6 million after-
tax or $0.03 per share) for the cumulative effect of an error in
prior years. This error related to the inadvertent omission of in-
transit intercompany inventory in the Company's calculation of
profit-in-inventory elimination. The Company recorded this profit-
in-inventory adjustment as a reduction to inventories and a charge
to cost of sales.

Also included in the results for the three months ended
September 30, 2004 is a charge of $4.8 million ($3.5 million after-
tax or $0.02 per share) for the cumulative effect of an error in
prior years related to the Company's vacation accrual calculation.
Of the charge for this error, $2.1 million was recorded in cost of
sales and $2.7 million was recorded in selling, general and
administrative expenses. Also included is a charge for the
correction of an error of the prior year bonus accrual of $0.5
million ($0.4 million after-tax) recorded in selling, general and
administrative expenses.

In addition, included in the results for the three months
ended September 30, 2004 are the correction of an error related to
a prior year inventory allowance of $1.1 million ($0.8 million
after-tax), the correction of an error of a prior year insurance
accrual of $2.7 million ($2.0 million after-tax or $0.01 per
share), and the cumulative effect of an error related to prior
years receivable allowance of $3.2 million ($2.3 million after-tax
or $0.01 per share). These three items had a positive impact on
income. The inventory allowance and insurance accrual were
recorded in cost of sales. The receivable allowance was recorded
in selling, general and administrative expenses.
7
The aggregate effect of these corrections of errors,
identified prior to filing the Form 10-Q/A for the first fiscal
quarter of 2005, was a reduction of pretax income of $7.4 million
($5.4 million after-tax or $0.03 per share). Of that cumulative
amount, the Company estimates that approximately $4.9 million
($3.6 million after-tax) was an expense that should have been
recorded in fiscal 2004, $1.3 million ($0.9 million after-tax) was
an expense that should have been recorded in fiscal 2003, $0.5
million ($0.3 million after-tax) was an expense that should have
been recorded in fiscal 2002, $2.7 million ($2.0 million after-
tax) was income that should have been recorded in fiscal 2001,
$1.9 million ($1.4 million after-tax) was an expense that should
have been recorded in fiscal 2000 and $1.5 million ($1.2 million
after-tax) was an expense that should have been recorded in fiscal
1999 and prior.

The table below summarizes the estimated pretax effect, by
fiscal year, of the errors identified and corrected in the first
fiscal quarter of 2005 (in thousands):

1999 &
2004 2003 2002 2001 2000 Earlier Total
Increase (Decrease) -------- -------- -------- -------- -------- -------- --------
- -------------------

Profit-in-inventory elimination $(3,200) $(1,200) $ (400) $ 2,200 $(1,100) $(5,400) $(9,100)
Inventory allowance - - - - - 1,142 1,142
Insurance accrual - 2,200 500 - - - 2,700
Receivable allowance (625) (710) (12) (48) (315) 4,879 3,169
Vacation accrual (604) (1,590) (556) 584 (473) (2,186) (4,825)
Bonus accrual (500) - - - - - (500)
-------- -------- -------- -------- -------- -------- --------
Total pretax effect of errors $(4,929) $(1,300) $ (468) $ 2,736 $(1,888) $(1,565) $(7,414)
-------- -------- -------- -------- -------- -------- --------

Income before income taxes $239,892 $110,042 $ 93,221 $291,416 $323,694
Error percentage of income
before income taxes (2.1)% (1.2)% ( 0.5)% 0.9% (0.6)%

The Company has concluded that the amounts related to fiscal
2004 and prior years are not material, either individually or in
the aggregate, to the trends of the financial statements for those
periods affected, or to a fair presentation of the Company's
results of operations and financial statements. Accordingly,
results for fiscal 2004 and prior years have not been restated.

4. Stock Option Plans

As permitted by Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation", the
Company has elected to account for its stock-based compensation
programs according to the provisions of Accounting Principles
Board Opinion (APB) No. 25, "Accounting for Stock Issued to
Employees." Had the Company elected to apply the provisions of
SFAS No. 123 regarding recognition of compensation expense to the
extent of the calculated fair value of stock options granted, the
effects on reported net income and earnings per share for the
three and six months ended December 31 would have been as follows
(in thousands, except per share data):
8

Three Months Ended Six Months Ended
December 31, December 31,
---------------- ------------------
2004 2003 2004 2003
------- ------- -------- --------

Net income as reported $52,246 $41,216 $104,730 $ 73,278
Add: Stock-based compensation included in
reported net income, net of related tax effects 2,765 2,338 5,530 4,534
Deduct: Stock-based compensation determined
under fair value method, net of related tax effects (5,895) (4,545) (11,776) (8,095)
------- ------- -------- --------
Pro forma net income $49,116 $39,009 $ 98,484 $ 69,717
------- ------- -------- --------

Earnings per share:
Basic $ 0.28 $ 0.22 $ 0.55 $ 0.38
Diluted $ 0.27 $ 0.21 $ 0.55 $ 0.38
Pro forma earnings per share:
Basic $ 0.26 $ 0.20 $ 0.52 $ 0.37
Diluted $ 0.26 $ 0.20 $ 0.52 $ 0.37

For purposes of computing pro forma net income and earnings
per share, the fair value of each option grant is estimated as of
the date of grant using the Black-Scholes option-pricing model.

5. Earnings Per Share

A reconciliation of the basic average common shares
outstanding to dilutive average common shares outstanding is as
follows (in thousands):

Three Months Ended Six Months Ended
December 31, December 31,
------------------ ------------------
2004 2003 2004 2003
-------- -------- -------- --------

Basic average common shares outstanding 188,589 190,459 188,713 190,599
Effect of dilutive stock options 1,917 1,991 1,903 1,863
-------- -------- -------- --------
Diluted average common shares outstanding 190,506 192,450 190,616 192,462
-------- -------- -------- --------

6. Comprehensive Income

Total comprehensive income is summarized as follows (in thousands):

Three Months Ended Six Months Ended
December 31, December 31,
------------------ ------------------
2004 2003 2004 2003
-------- -------- -------- --------
Net income $ 52,246 $ 41,216 $104,730 $ 73,278
Translation adjustments 75,091 45,234 62,419 66,932
Unrealized investment gain (loss) 22 69 9 311
-------- -------- -------- --------
Total comprehensive income $127,359 $ 86,519 $167,158 $140,521
-------- -------- -------- --------
9

7. Inventories

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

Dec. 31, June 30,
2004 2004
--------- ---------
Raw materials $ 48,936 $ 39,743
Work in process 91,065 91,168
Finished goods 148,157 134,433
--------- ---------
Total inventories $288,158 $265,344
--------- ---------

8. Pensions and Other Postretirement Benefits

The components of pension and retiree health care benefit
cost are as follows for the three and six months ended December
31, 2004 and 2003 (in thousands):

Three months ended December 31, Pension Retiree Health Care
-------------- -------------------
2004 2003 2004 2003
------ ------ -------- --------

Service cost $2,243 $1,988 $ 470 $ 489
Interest cost 1,577 490 471 473
Expected return on plan assets (1,592) (428) - -
Amortization of prior service cost 51 54 (66) (63)
Recognized actuarial losses 145 436 159 207
Amortization of transition obligation 17 6 - -
------ ------ -------- --------
Benefit cost $2,441 $2,546 $1,034 $1,106
------ ------ -------- --------

Six months ended December 31, Pension Retiree Health Care
-------------- -------------------
2004 2003 2004 2003
------ ------ -------- --------
Service cost $4,240 $3,742 $ 940 $ 974
Interest cost 2,529 1,715 942 972
Expected return on plan assets (2,639) (1,649) - -
Amortization of prior service cost 102 114 (132) (131)
Recognized actuarial losses 494 608 318 396
Amortization of transition obligation 321 23 - -
------ ------ -------- --------
Benefit cost $4,758 $4,553 $2,068 $2,211
------ ------ -------- --------
10

9. Segments and Related Information

The Company operates in one product segment: the manufacture
and sale of electronic components. Revenue is recognized based on
the location of the selling entity. Management operates the
business through four regions. Information by region is
summarized as follows (in thousands):

Inter-
Customer Company Total Net
Three months ended: Revenue Revenue Revenue Income
December 31, 2004 ----------- --------- ---------- --------
Americas $ 170,860 $ 43,598 $ 214,458 $ 8,364
Far East South 204,219 31,906 236,125 19,607
Far East North 133,777 86,390 220,167 28,652
Europe 128,753 11,325 140,078 (995)
Corporate and other 14,209 28,624 42,833 (3,382)
Eliminations - (201,843) (201,843) -
---------- --------- ---------- --------
Total $ 651,818 $ - $ 651,818 $ 52,246
---------- --------- ---------- --------

December 31, 2003
Americas $ 167,478 $ 41,791 $ 209,269 $ 11,346
Far East South 152,665 24,007 176,672 13,033
Far East North 131,283 57,688 188,971 21,597
Europe 85,395 10,172 95,567 (5,779)
Corporate and other 12,161 19,363 31,524 1,019
Eliminations - (153,021) (153,021) -
---------- --------- ---------- --------
Total $ 548,982 $ - $ 548,982 $ 41,216
---------- --------- ---------- --------

Inter-
Customer Company Total Net
Six months ended: Revenue Revenue Revenue Income
---------- --------- ---------- --------
December 31, 2004
Americas $ 347,483 $ 98,884 $ 446,367 $ 19,936
Far East South 394,558 68,250 462,808 44,715
Far East North 265,416 163,292 428,708 53,789
Europe 257,167 21,914 279,081 1,630
Corporate and other 27,424 55,823 83,247 (15,340)
Eliminations - (408,163) (408,163) -
---------- --------- ---------- --------
Total $1,292,048 $ - $1,292,048 $104,730
---------- --------- ---------- --------

December 31, 2003
Americas $ 318,969 $ 80,660 $ 399,629 $ 21,929
Far East South 295,537 41,535 337,072 30,515
Far East North 247,596 106,381 353,977 35,251
Europe 159,802 18,537 178,339 (7,382)
Corporate and other 23,841 6,034 29,875 (7,035)
Eliminations - (253,147) (253,147) -
---------- --------- ---------- --------
Total $1,045,745 $ - $1,045,745 $ 73,278
---------- --------- ---------- --------
11

10. Recent Accounting Pronouncements

The American Jobs Creation Act of 2004 (the Act), which was
signed into law on October 22, 2004, introduces a special one-time
dividends received deduction on the repatriation of certain
foreign earnings to a U.S. taxpayer (Repatriation Provision),
provided certain criteria are met. The Financial Accounting
Standards Board ("FASB") issued Staff Position No. FAS 109-2 in
December 2004 which requires the recording of tax expense if and
when an entity decides to repatriate foreign earnings subject to
the Act.

The Company is considering the implications of the Act on the
repatriation of certain foreign earnings, which reduces the
Federal income tax rate on dividends from non-U.S. subsidiaries.
The one-time repatriation provision is elective, and is applicable
to Molex Incorporated on certain foreign profit distributions
received during either fiscal 2005 or 2006. Management has not
decided whether, and to what extent, the Company would repatriate
foreign earnings under the Act, and accordingly, the financial
statements do not reflect any provision for tax on undistributed
foreign earnings which may be repatriated subject to the
provisions of the Act. The Company currently estimates it could
receive distributions in a range of $0 to $120 million under the
repatriation provision. The related income tax effect from such
repatriation is dependent upon a number of factors that are being
analyzed, including the issuance of additional guidance from the
U.S. Treasury Department. Accordingly, the income tax effect of
such distributions cannot be reasonably estimated at this time.
The Company will continue to analyze the effect of this provision
and expects to complete this analysis during Fiscal 2005.

In November 2004, the FASB issued SFAS No. 151, "Inventory
Costs, an amendment of ARB No. 43, Chapter 4" ("SFAS 151"). SFAS
151 clarifies that abnormal inventory costs such as costs of idle
facilities, excess freight and handling costs, and wasted
materials (spoilage) are required to be recognized as current
period charges. The provisions of SFAS 151 are effective for
fiscal years beginning after June 15, 2005. The adoption of SFAS
151 is not expected to have a significant impact on the Company's
consolidated financial position or results of operations.

In December 2004, the FASB issued Statement No. 123 (revised
2004), Share-Based Payment ("Statement 123(R)"), which is a
revision of FASB Statement No. 123, Accounting for Stock-Based
Compensation ("Statement 123"). Statement 123(R) supersedes
Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting
for Stock Issued to Employees, and amends FASB Statement No. 95,
Statement of Cash Flows. Generally, the approach in Statement
123(R) is similar to the approach described in Statement 123.
Statement 123(R) requires that all share-based payments to
employees, including grants of employee stock options, be
recognized in the income statement based on their fair values.
Pro forma disclosure is no longer an option. Statement 123(R) is
effective for public companies at the beginning of the first
interim or annual period beginning after June 15, 2005.

As permitted by Statement 123, the Company currently accounts
for share-based payments to employees using APB 25's intrinsic
value method. The Company expects to adopt Statement 123(R) on
July 1, 2005 using the modified prospective method. The impact of
adoption of Statement 123(R) cannot be predicted at this time
because it will depend on the level of share based payments
granted in the future. However, had the Company adopted Statement
123(R) in prior periods, the impact of that standard would have
approximated the impact of Statement 123 as described in Note 4.
12

11. Contingencies

Between March 2, 2005 and March 11, 2005 four separate
complaints were filed, each purporting to be on behalf of a class
of Molex shareholders, against Molex and certain employees in the
United States District Court for the Northern District of Illinois
Eastern Division. The complaints in the shareholder actions
generally allege, among other things, that during the period from
April 15, 2004 to February 14, 2005 the named defendants made or
caused to be made a series of materially false or misleading
statements about Molex's business, prospects, operations, and
financial statements and also alleges that certain of the named
defendants engaged in insider trading in violation of Section
10(b) and Rule 10b-5. Additional information regarding the
complaints is contained in Part II, Item 1 of this 10-Q. Molex
believes the allegations contained in the complaints are without
merit and intends to contest the shareholder actions vigorously.

13

Molex Incorporated

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

The following discussion and analysis should be read in
conjunction with the Company's condensed consolidated financial
statements and accompanying notes contained herein and the
Company's consolidated financial statements and accompanying notes
and management's discussion and analysis of results of operation
and financial condition contained in the Company's Form 10-K for
the fiscal year ended June 30, 2004. This discussion and analysis
contains forward-looking statements that involve risks,
uncertainties and assumptions. The Company's 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."

Overview

Molex Incorporated originated from an enterprise established
in 1938 and today is the world's second-largest manufacturer of
electronic connectors. As of June 30, 2004, Molex operated 55
manufacturing plants, located in 19 countries on six continents.
Molex's core business is the manufacture and sale of electronic
components. The Company designs, manufactures and distributes more
than 100,000 products including terminals, connectors, planar
cables, cable assemblies, interconnection systems, fiber optic
interconnection systems, backplanes, mechanical and electronic
switches and other products.

The Company's financial results are influenced by factors in
the markets in which it operates and by the Company's ability to
successfully execute its 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. The Company expects that the marketplace
environment will remain highly competitive. The Company's ability
to execute its business strategy successfully will require it meet
a number of challenges, including its 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 its operational,
financial and management information systems.

Results of Operations

Second Quarter Results

Revenue was $651.8 million for the three months ended
December 31, 2004, an increase of 19 percent over last year's
second quarter of $549.0 million. Revenue for the second quarter
included $17.7 million from the Cinch acquisition in Europe that
was completed on April 2, 2004. The strengthening of certain
foreign currencies, principally the euro and the yen, compared
with the U.S. dollar increased revenue by approximately $16.6
million over the prior year quarter. The Company estimates that
the impact of price erosion reduced revenue by approximately $20
million in the second quarter of fiscal 2005, compared to last
year's second quarter. Revenue derived from the sale of new
products released by the Company within the last 36 months was
$206 million in the second quarter ended December 31, 2004,
compared with $140 million in the second quarter of fiscal 2004.
14
Customer revenue in the Americas region was $170.9 million,
up slightly from last year's second quarter revenue of $167.5
million. In the Far East South region, customer revenue was
$204.2 million, an increase of $51.6 million, or 34 percent,
compared with the prior year second quarter. The revenue growth
in this region was primarily driven by higher demand in the
computer, telecommunications and consumer products markets.
Customer revenue in the Far East North region was $133.8 million
in the second quarter of fiscal 2005, compared with $131.3 million
in the prior year quarter. Foreign currency translation increased
revenue by approximately $4.3 million. Excluding the impact of
foreign currency translation, revenue was down slightly due to
lower demand in the consumer products markets. In Europe,
customer revenue was $128.8 million, up $43.4 million, or 51
percent, from last year's second quarter revenue of $85.4 million.
As noted above, the Company's Cinch acquisition during the fourth
quarter of fiscal 2004, added revenue of $17.7 million. Foreign
currency translation, led by the strong euro, also favorably
impacted customer revenue by approximately $9.6 million.

Gross profit was $221.5 million for the three months ended
December 31, 2004, up $42.2 million, or 24 percent over the
prior year quarter. Gross profit margin was 34.0 percent of net
revenue, up from 32.7 percent in last year's second quarter. The
improvement in gross profit margin was primarily due to leverage
from the higher sales volumes offset by the negative impact of the
price erosion mentioned above and higher copper, gold and plastic
resin material costs of $8.2 million. The Company's operating
results were also negatively impacted by the increased strength of
the Japanese yen relative to the U.S. dollar, as products
manufactured by Molex in Japan are sold in the Far East South at
selling prices primarily denominated in or closely linked to the
U.S. dollar. The Company estimates this effect to be
approximately $2.5 million , compared with the prior year second
quarter. Also included in the results for the three months ended
December 31, 2004 is a favorable adjustment of $1.5 million to
reflect the Company's change in estimate to its inventory
allowance.

Selling, general and administrative expenses were $153.8
million for the three months ended December 31, 2004, as compared
with $131.2 million in the prior year quarter. As a percent of net
revenue, selling, general and administrative expenses decreased
from 23.9 percent in the prior year quarter to 23.6 percent in
this year's second quarter. Research and development expenditures
for the second quarter of fiscal 2005 were approximately $34.5
million, an increase of 25.5 percent when compared with the same
period last year.

Total other income was $3.9 million in the second quarter
ended December 31, 2004, compared with $8.6 million in the prior
year quarter. The prior year quarter included a $10.4 million
pretax gain from the sale of stock of an affiliate and an equity
gain resulting from the IPO completed by this affiliate. The
effective tax rate was 27 percent for the second quarter of fiscal
2005, the same rate as last year's second quarter.

Net income for the three months ended December 31, 2004 was
$52.2 million, up 27 percent from $41.2 million in last year's
second quarter. Foreign currency translation increased net income
by $1.0 million when compared with last year's second quarter.
Earnings per share was $0.27 in the second quarter of fiscal 2005
compared with $0.21 in the prior year quarter.

Six-Month Results

Revenue was $1.292 billion for the six months ended December
31, 2004, an increase of 24 percent, compared with $1.046 billion
in the first six months of fiscal 2004. The Cinch acquisition
added revenue of $35.6 million in the first six months of fiscal
2005. The strengthening of certain foreign currencies,
principally the euro and the yen, compared with the U.S. dollar
increased revenue by approximately $35 million over the prior year
period. The Company estimates that the impact of price erosion
reduced revenue by approximately $40 million in the six months
ended December 31, 2004, compared to last year's first six months.
Revenue derived from the sale of new products released by the
Company within the last 36 months was $380.7 million in the six
months ended December 31, 2004, compared with $266.5 million in
the six months ended December 31, 2003.
15
Customer revenue in the Americas region for the six months
ended December 31, 2004 was $347.5 million, up 9 percent from last
year's revenue of $319.0 million, due to a stronger general demand
for electronic connector products which more than offset lower
demand in the automotive market. In the Far East South region,
customer revenue was $394.6 million in the first six months of
fiscal 2005, an increase of $99.0 million, or 34 percent, compared
with the prior year period. The revenue growth in this region was
primarily driven by demand from the consumer products,
telecommunications and computer markets. Customer revenue in the
Far East North region increased 7 percent to $265.4 million for
the six months ended December 31, 2004, compared with $247.6
million in the prior year period. Foreign currency translation
contributed $13.1 million to the revenue increase. In Europe,
customer revenue for the six months ended December 31, 2004 was
$257.2 million, an increase of $97.4 million from last year's
revenue of $159.8 million. As noted above, the Company's Cinch
acquisition during the fourth quarter of fiscal 2004, added
revenue of $35.6 million in the first six months of fiscal 2005.
Foreign currency translation, led by the strong euro, also
favorably impacted customer revenue in Europe by approximately
$17.0 million.

Gross profit was $446.8 million for the six months ended
December 31, 2004, up $99.5 million, or 29 percent over the
prior year period. Gross profit margin was 34.6 percent of net
revenue, up from 33.2 percent in last year's first half. The
improvement in gross profit margin was primarily due to leverage
from the higher sales volumes partially offset by the price
erosion mentioned earlier and material cost increases of $16.1
million. Included in the results for the six months ended
December 31, 2004 is a charge of $7.3 million ($5.4 million after-
tax) related to correction of prior years' errors. These errors
related to the inadvertent omission of in-transit intercompany
inventory in the Company's calculation of the profit-in-inventory
elimination, correction of a prior year insurance accrual,
correction of an inventory allowance, as well as a vacation
accrual. See Note 3 to the Notes to Condensed Consolidated
Financial Statements for further discussion. Also included in the
results for the six months ended December 31, 2004 is a favorable
adjustment of $1.5 million to reflect the Company's change in
estimate to its inventory allowance.

Selling, general and administrative expenses were $309.0
million for the first six months of fiscal 2005, as compared with
$258.6 million in the prior year period. As a percentage of net
revenue, selling, general and administrative expenses decreased
from 24.7 percent in the prior year period to 23.9 percent in this
year's first half. Included in the results for the six months
ended December 31, 2004 is a charge of $0.1 million related to
correction of errors in prior years. These errors related to the
correction of a prior year receivable allowance, a bonus accrual,
as well as a vacation accrual. See Note 3 to the Notes to
Condensed Consolidated Financial Statements for further
discussion.

Total other income was $6.1 million in the six-month period
ended December 31, 2004, compared with $12.0 million in the prior
year period. The effective tax rate was 27 percent for the first
half of fiscal 2005, the same rate as last year's first half.

Net income for the six months ended December 31, 2004 was
$104.7 million, up 43 percent from $73.3 million in last year's
first half. Foreign currency translation increased net income by
$3.0 million. Earnings per share was $0.55 in the first half of
fiscal 2005 compared with $0.38 in the prior year period.

Financial Condition and Liquidity

The Company's long-term financing strategy is to rely on
internal sources of funds for investing in plant, equipment and
acquisitions. Management remains confident that the Company's
liquidity and financial flexibility are adequate to support both
current, as well as future growth. Molex has historically used
external borrowings only when a clear financial advantage exists.
At December 31,2004, Molex had cash and marketable securities of
$412.0 million and long-term debt of $9.8 million.
16
Cash provided from operating activities for the six months
ended December 31, 2004 was $183.2 million, up from $94.0 million
in the prior year period. The increase in cash provided from
operations was primarily driven by higher net income in the first
six months of fiscal 2005 and a reduction in working capital
requirements as growth moderated in accounts receivable and
inventory. Working capital, defined as Current Assets minus
Current Liabilities, at December 31, 2004 was $873.6 million
compared with $740.2 million at June 30, 2004.

Cash used for investing activities was $100.9 million and
$83.9 million for the six months ended December 31, 2004 and 2003,
respectively. Capital expenditures were $105.3 million in the
current period, an increase of $21.4 million over the prior year's
capital spending of $83.9 million. During the first quarter of
fiscal 2005, the Company sold its investment in an affiliate and
generated cash from this transaction of $14.1 million.

Cash used for financing activities was $32.1 million in the
first half of fiscal 2005 compared with $34.6 million in the prior
year period. Cash was used primarily for the purchase of treasury
stock and the payment of dividends. The Company's Board of
Directors authorized the purchase of up to $100 million of Common
Stock and/or Class A Common Stock during fiscal 2005. During the
six months ended December 31, 2004, the Company purchased 940,000
shares of Class A Common Stock at an aggregate cost of $23.6
million.

Molex has a strong cash balance, cash flow and very little
debt. The Company believes at this time that share repurchases
are a good investment compared with investing cash in short-term
money instruments or marketable securities, particularly with the
current low interest rates. The Company also uses shares
repurchased to replenish stock used for exercises of employee
stock options, employee stock awards and the employee stock
purchase plan.

As part of its growth strategy, the Company may, in the
future, acquire other companies in the same or complementary lines
of business, and pursue other business ventures. The pace and
size of any new business ventures or acquisitions the Company
completes may impact its cash requirements.

Outlook

Based on current market conditions, the Company expects net
revenue in the third fiscal quarter ending March 31, 2005, to be
in a range of $610 million to $620 million, a midpoint decline of
approximately $37 million from net revenue for the second fiscal
quarter. This anticipated sales decline reflects weaker demand in
the following markets: the telecommunications market in Europe,
the consumer products market in Japan, as well as a post Christmas
pause in the telecommunications and consumer products markets in
the Far East South as customers change models. In addition, as a
significantly higher amount of the Company's business is now done
in the Far East South, the impact of the shut down for Chinese New
Year is expected to be greater during the third fiscal quarter.
Net revenue for last year's third fiscal quarter was $569.2
million.

The Company also expects further impact from higher
manufacturing costs on Japanese export products due to the
increase in the value of the yen as well as increased costs for
plastic resins. The Company will incur additional legal and
accounting costs, currently estimated at approximately $2.6
million pre-tax. As a result, the Company expects earnings per
share in the third fiscal quarter to be in a range of
approximately $0.20 to $0.23, compared with $0.24 in last year's
third quarter.

The Company is moving quickly to respond to this downturn.
Plans are being implemented to reduce expenses throughout our
global operations. The Company is also accelerating production
transfers from Japan to manufacturing facilities within China.
For example, the manufacturing output of Molex Japan's facility in
Dalian, China, will be increased 60 percent by the end of the
current fiscal year. The Company also plans to add 60 percent to
the square footage of our largest manufacturing facility in
Shanghai, also by the end of the current fiscal year. In
addition, construction will soon begin on a sixth manufacturing
facility in China, to be located in the country's southwest
region.
17
Sales and net income for the fourth fiscal quarter are
expected to increase over the high end of the third fiscal quarter
estimate. The Company will provide an update for the fourth fiscal
quarter in the third fiscal quarter earnings release.

Due to the uncertainty of the foreign currency exchange
markets, Molex cannot reasonably predict future trends related to
foreign currency fluctuations. Foreign currency fluctuations have
impacted the Company's results in the past and may impact results
in the future.

Backlog

The Company's order backlog on December 31, 2004 was
approximately $285.7 million, an increase of $59.1 million, or
26.1 percent compared with $226.6 million as of December 31, 2003.
The impact of changes in currency rates accounts for approximately
$9.6 million of the increase in order backlog. New orders for
the second quarter of fiscal 2005 were $607.8 million, an increase
of 7.7 percent compared with last year's second quarter.

Contractual Obligations and Commercial Commitments

The Company has contractual obligations and commercial
commitments as described in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Contractual Obligations and Commercial Commitments" of the
Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission on September 10, 2004. In addition, the
Company has obligations under open purchase orders and the long-
term liabilities reflected in its consolidated balance sheet,
which principally consist of pension and retiree health care
benefit obligations. There have been no material changes in the
Company's contractual obligations and commercial commitments since
June 30, 2004 arising outside of the ordinary course of the
Company's business.

Critical Accounting Policies

This discussion and analysis of financial condition and
results of operations is based on the Company's 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, management
has made its 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 the Company's critical
accounting policies included under Management's Discussion of
Financial Condition and Results of Operations in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 2004
filed with the Securities and Exchange Commission on September 10,
2004, which is incorporated in this Form 10-Q by reference.

The results for the second fiscal quarter reflect the results
of the Company's review of certain accounting matters and
practices in that quarter. This review resulted in changes in
estimates of the Company's reserves for inventory that resulted in
a reduction of the Company's reserves for inventory of
approximately $1.5 million ($1.1 million after tax), which changes
had a positive impact on pre-tax income for the quarter.
18

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to market risk associated with changes
in foreign currency exchange rates, interest rates and certain
commodity prices. The Company mitigates its foreign currency
exchange rate risk principally through the establishment of local
production facilities in the markets it serves and invoicing of
customers in the same currency as the source of the products.
Molex also monitors its foreign currency exposure in each country
and implements strategies to respond to changing economic and
political environments. Examples of these strategies include the
prompt payment of Intercompany balances utilizing a global netting
system, the establishment of contra-currency accounts in several
international subsidiaries, development of natural hedges and
occasional use of foreign exchange contracts to protect or
preserve the value of intercompany cash flows. No material foreign
exchange contracts were in use at December 31, 2004 and 2003.

The Company has implemented a formalized treasury risk
management policy that describes the procedures and controls over
derivative financial and commodity instruments. Under the policy,
the Company does not use derivative financial or commodity
instruments for speculative purposes, and the use of such
instruments is subject to strict approval levels by senior
management. Typically, the use of derivative instruments is
limited to hedging activities related to specific foreign currency
cash flows.

The Company's $114.4 million of marketable securities at
December 31, 2004 are principally debt instruments that generate
interest income for the Company on temporary excess cash balances.
These instruments contain embedded derivative features that
enhance the liquidity of the portfolio by enabling the Company to
liquidate the instrument prior to the stated maturity date. The
Company's exposure related to derivative instrument transactions
is, in the aggregate, not material to the Company's financial
position, results of operations or cash flows.

Interest rate exposure is limited to marketable securities
owned by the Company and long-term debt. The Company does not
actively manage the risk of interest rate fluctuations. However,
such risk is mitigated by the relatively short-term nature of its
investments, less than twelve months, and the fixed-rate nature of
its long-term debt.

Molex does not have exposure to any off-balance-sheet
arrangements with the exception of certain operating leases. Due
to the nature of its operations, Molex is not subject to
significant concentration risks relating to customers, products or
geographic locations.

The Company monitors the environmental laws and regulations
in the countries in which it operates. Molex has implemented an
environmental program to reduce the generation of potentially
hazardous materials during its manufacturing process and believes
it continues to meet or exceed local government regulations.

Item 4. Controls and Procedures

As of the end of the period covered by this report, Molex
conducted an evaluation, under the supervision and with the
participation of its principal executive officer and principal
financial officer, of Molex's disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the `Exchange Act')). Molex's disclosure
controls and procedures are designed to provide reasonable
assurance of achieving their objectives. Based on that
evaluation, the principal executive officer and principal
financial officer concluded that, Molex's disclosure controls and
procedures are effective at a reasonable assurance level to ensure
that information required to be disclosed by Molex in reports that
it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in
Securities and Exchange Commission's rules and forms.
19
Prior to filing this Form 10-Q, Molex reviewed certain
accounting matters and practices in connection with its Sarbanes-
Oxley compliance program. As a result of its review, Molex's
management identified errors in its reserve for accounts
receivable, accrual for vacation pay and in the recording of the
first quarter profit-in-inventory adjustment (as described in Note
3 of the Notes to Condensed Consolidated Financial Statements in
this Form 10-Q). Additionally, Molex determined that potential
earn-out payments related to the sale of an investment should not
have been classified as a contingent gain as previously recorded.
The correction in the Company's reserve for accounts receivable
resulted in a reduction of such reserve by approximately $4.1
million ($3.0 million after tax), which change had a positive
impact on pre-tax income for the 2005 first fiscal quarter. The
other corrections, which had a negative impact on pre-tax income
for the 2005 first fiscal quarter, resulted in an increase in the
Company's vacation accrual of approximately $5.5 million ($4.0
million after tax), the reversal of a contingent gain previously
recorded in the 2005 first fiscal quarter of $1.9 million ($1.4
million after tax), on the sale of an investment that provides for
potential earn-out payments, and an adjustment to the previously
disclosed profit-in-inventory charge of $1.1 million ($0.8 million
after tax). Subsequent to the discovery of these errors, Molex
modified the design and operation of its internal control process
to more frequently update factors considered in determining its
accounts receivable reserve, include formal reconciliation of
earned versus accrued vacation pay as part of the its regular SFAS
5 review and implement a policy of strict adherence to SFAS 5
criteria for loss recognition of gains and losses. Molex also
completed the modification to the software logic used to calculate
slow and excess inventory reserves, which it began in the first
fiscal quarter of 2005.

Molex's management analyzed the materiality of the effect of
these changes, made during the period covered by the report, on
Molex's internal control over financial reporting by considering
the effect in light of the materiality standards provided by the
relevant case law in accordance with guidance issued by the staff
of the SEC. Management took into consideration that even well
designed controls operating as designed cannot provide absolute
assurance and that internal control over financial reporting has
inherent limitations because the process is subject to human error
resulting from lapses in judgment and breakdowns resulting from
human failure. Management also considered Molex's response
subsequent to discovery of the deficiencies, including the
promptness with which the underlying deficiencies were brought to
the attention of the Audit Committee and the scrutiny under which
Molex's internal control environment was reviewed. Additionally,
management considered the fact that substantially all of these
deficiencies were identified by management and not by Molex's
independent public accountant and the materiality of the effect of
the recorded adjustments on Molex's earnings trends and its
projected results of operations for fiscal year 2005. As a result
of the foregoing considerations, management concluded that there
have been no changes in our internal control over financial
reporting during the fiscal quarter covered by this report that
have materially affected, or are reasonably likely to materially
affect, internal control over financial reporting. The matters
described above have been discussed with Molex's Audit Committee
and independent auditor.

PART II - Other Information

Items 3 and 4 of this Part II are either inapplicable or are
answered in the negative and are omitted pursuant to the
instructions to Part II.

Item 1. Legal Proceedings

Between March 2, 2005 and March 11, 2005 four separate
complaints were filed, each purporting to be on behalf of a class
of Molex shareholders, against Molex, and some or all of the
following Molex officers and employees: J. Joseph King, Diane S.
Bullock, John H. Krehbiel Jr., Frederick A. Krehbiel, Louis A.
Hecht, Ronald L. Schubel and Martin P. Slark in the United States
District Court for the Northern District of Illinois Eastern
Division entitled The Takara Trust v. Molex Incorporated, Et. Al.,
Case No. 05C 1245; BDM, LLC v. Molex Incorporated, Et. Al., Case
No. 05C 1372; James Baker v. Molex Incorporated, Et. Al., Case No.
05C 1467; and Drywall Acoustic Lathing and Insulation Local 675
Pension Fund v. Molex Incorporated, Et. Al., Case No. 05C 1461
(collectively, the "Shareholder Actions"). The complaints in the
Shareholder Actions generally allege, among other things, that
during the period from April 15, 2004 (or July 27, 2004 in the
20
case of the complaints filed by The Takara Trust and the Drywall
Acoustic Lathing and Insulation Local 675 Pension Fund) to
February 14, 2005 the named defendants made or caused to be made a
series of materially false or misleading statements about Molex's
business, prospects, operations, and financial statements which
constituted violations of Section 10(b) of the Exchange Act of
1934, as amended, and Rule 10b-5 promulgated thereunder and
Section 20(a) of the Exchange Act. The complaint filed by BDM,
LLC also alleges that certain of the named defendants engaged in
insider trading in violation of Section 10(b) and Rule 10b-5. As
relief, the complaints seek, among other things, declaration that
the action be certified as a proper class action, unspecified
compensatory damages (including interest) and payment of costs and
expenses (including fees for legal counsel and experts). The
complaint filed by BDM, LLC also seeks, as relief, an accounting
of the proceeds received by certain of the named defendants from
the sale of Molex stock during the period from April 15, 2004 to
February 14, 2005 and the imposition of a constructive trust on
such proceeds. Molex believes the allegations contained in the
complaints are without merit and intends to contest the
Shareholder Actions vigorously.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On October 22, 2004, the Company issued options to purchase
14,400 shares of Class A Common Stock to non-employee directors of
the Company with an aggregate exercise price of $362,592, pursuant
to the terms of the 2000 Incentive Stock Option Plan. The
issuance of these options to purchase shares of Class A Common
Stock was exempt from registration under the Securities Act of
1933, as a transaction not involving a public offering under
Section 4(2). Per the terms of the plan, the option price is the
fair market value of the stock on the date of grant and the option
term is five years from the date of grant.

The Company's Board of Directors authorized the purchase of
up to $100 million of Common Stock and/or Class A Common Stock
during fiscal 2005. Share purchases of Molex Class A Common Stock
for the quarter ended December 31, 2004 were as follows:

Period Total Average Total Dollar
Number of Price Paid Number of Value of
Shares Per Share Shares Shares that
Purchased Purchased May Yet Be
as Part of Purchased
Publicly Under the
Announced Plan
Plan
- -------------- --------- --------- ---------- ------------
Oct. 1-Oct. 31 65,000 $26.30 65,000 $ 76,385,357

Nov. 1-Nov. 30 - - - $ 76,385,357

Dec. 1-Dec. 31 - - - $ 76,385,357
--------- --------- ---------- ------------
Total 65,000 - 65,000 $ 76,385,357
--------- --------- ---------- ------------

Item 5. Other Information

Change in Molex's Certifying Accountant. On November 13,
2004, Deloitte & Touche LLP notified Molex that Deloitte was
resigning as Molex's independent public accounting firm. The
Audit Committee engaged Ernst & Young LLP ("E&Y") to serve as the
Company's new independent registered public accounting firm as of
December 9, 2004. A summary of the circumstances surrounding
these developments is described under the caption "Controls and
Procedures" in Item 4 of Part I of the Company's Form 10-Q/A for
the quarter ended September 30, 2004 filed on March 21, 2005 and
in the Company's Current Reports on Form 8-K.

Compliance with Nasdaq Continued Listing Requirements.
Nasdaq Marketplace Rule 4310(c)(14) requires Molex to file with
the Nasdaq Stock Market, Inc. ("Nasdaq") copies of all reports
filed or required to be filed with the SEC. As previously
disclosed, prior to the filing of this Form 10-Q and the
concurrent filing of an amendment to the first fiscal quarter Form
10-Q, Molex was not in compliance with Nasdaq Marketplace Rule
4310(c)(14) because Molex's unaudited financial statements for the
fiscal quarter ended September 30, 2004 included in Molex's
21
Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on November 15, 2004 had not been reviewed by
an independent public accountant under Statement of Auditing
Standards No. 100 "Interim Financial Information" as required by
SEC rules and Molex had not filed its Form 10-Q for the second
fiscal quarter ended December 31, 2004 by February 9, 2005. As a
result, Molex received letters from Nasdaq on November 15, 2004
and February 11, 2005 indicating its non-compliance with Rule
4310(c)(14) with respect to such filings. The November 15, 2004
letter also indicated that Molex's securities were subject to
delisting from The Nasdaq National Market.

As permitted by Nasdaq rules, Molex requested a hearing
before a Nasdaq Listing Qualifications Panel to review the
determination of the Nasdaq staff described above and a hearing
was held on December 15, 2004. The Nasdaq Panel granted Molex an
exception to the continued listing requirements of The Nasdaq
National Market that provided Molex with an opportunity to remedy
the filing deficiencies described above on or before February 15,
2005. Molex subsequently requested and was granted an extension
with respect to such exception to March 17, 2005. The Nasdaq
Panel's determination to provide this exception and extension is
subject to certain conditions, including that (1) Molex file an
amended Form 10-Q for its first fiscal quarter ended September 30,
2004 and a Form 10-Q for its second fiscal quarter ended December
31, 2004 on or before March 17, 2005; and (2) Molex timely file
all periodic reports with the SEC for all reporting periods ending
on or before December 31, 2006; provided that the filing of a Form
12b-25 will not automatically result in an extension of the filing
deadlines for the purposes of this condition. Molex subsequently
requested a further extension from the Nasdaq Panel. Nasdaq
advised Molex that the Company's common stock and Class A common
stock would continue to be listed on the Nasdaq National Market
pending receipt of the Panel's decision with respect to the
requested extension.

Molex believes that the filing of this Form 10-Q and the
concurrent filing of an amendment to the first fiscal quarter Form
10-Q will make Molex current in its SEC filing obligations and in
compliance with Nasdaq Marketplace Rule 4310(c)(14). The fifth
character "E" will remain appended to the trading symbols of
Molex's securities listed on the Nasdaq National Market pending a
determination by Nasdaq that Molex has fully complied with the
Nasdaq's filing requirement and has evidenced compliance with all
other continued listing requirements of The Nasdaq National
Market. Molex intends to request a final determination of
compliance from Nasdaq promptly following the filing of this Form
10-Q and the concurrent filing of an amendment to the first fiscal
quarter Form 10-Q.

Departure and Appointment of Principal Officers. On November
10, 2004, Molex's Board of Directors appointed Robert B. Mahoney,
a current Executive Vice President and former Chief Financial
Officer of Molex, as the Acting Chief Financial Officer and
reassigned the prior Chief Financial Officer, Diane S. Bullock, to
the position of Vice President and Treasurer.

Robert B. Mahoney, age 51, has been employed by Molex since
1995. In addition to his appointment as Acting Chief Financial
Officer, Mr. Mahoney will continue to serve as an Executive Vice
President of Molex (since 2002) and as President, Far East South
(beginning in 2004). Previously, he served as Molex's Treasurer
and Chief Financial Officer from 1996 to 2004 and as a Corporate
Vice President of Molex from 1996 to 2002. There is no family
relationship between Mr. Mahoney and any director, executive
officer, or person nominated or chosen by Molex to become a
director or executive officer. There is no written employment
agreement between Mr. Mahoney and Molex.

As disclosed in Molex's Form 8-K filed on December 9, 2004,
the Molex Board of Directors named Frederick A. Krehbiel, Co-
chairman of the Board of Directors, as Chief Executive Officer of
Molex effective December 9, 2004. The Board also reviewed Molex's
management succession plan and indicated that, while no definitive
action has yet been taken by the Board, the current expectation is
that Martin P. Slark, Molex's President and Chief Operating
Officer, would replace Mr. Krehbiel as Chief Executive Officer
during the first fiscal quarter following the end of Molex's
current fiscal year on June 30, 2005. In addition, the Board of
Directors accepted the resignation of J. Joseph King from his
positions as Molex's Vice Chairman, Chief Executive Officer and as
a member of the Board of Directors on December 9, 2004. Mr. King
will continue to serve Molex in a staff function with
responsibilities that include strategic planning and coordination
22
of certain Molex functional areas. The Board also accepted the
resignation of Diane Bullock from her positions as Vice President
and Treasurer. Ms. Bullock will continue to serve Molex in a
staff function with responsibilities that include the coordination
of Molex's global procurement and logistics strategy and
overseeing Molex's global lean manufacturing program. Neither Mr.
King nor Ms. Bullock will be elected an officer of Molex, nor will
their positions involve or significantly influence accounting,
financial reporting or internal controls. The Board of Directors'
actions were taken to facilitate the transition to a new
independent auditor and include the conditions requested by
Molex's previous independent auditor.

Additional Information. You should refer to filings under
the Exchange Act for additional information regarding the
foregoing matters, including the Current Reports on Form 8-K or
amendments thereto filed with the Commission on November 15, 2004,
November 18, 2004, November 22, 2004, December 1, 2004, December
9, 2004 and February 14, 2005. As previously disclosed, late in
calendar 2004 Molex received a comment letter from the Securities
and Exchange Commission's Division of Corporation Finance
regarding Molex's Exchange Act filings. Molex responded to that
letter and subsequent follow-up letters from the Division of
Corporation Finance and now believes that it has satisfactorily
addressed all comments received from the Staff of the Division of
Corporation Finance.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain
statements that are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements, in general, predict, forecast, indicate or imply
future results, performance or achievements and are typically
identified by words or phases such as "believe", "expect",
"estimate" and similar expressions. Such forward-looking
statements are subject to various risks and uncertainties that may
cause actual results or performance to vary materially from those
projected. Certain of these risks and uncertainties are set forth
in this and other documents filed with the Securities and Exchange
Commission and include, but are not limited to, Molex's ability to
timely comply with SEC and Nasdaq reporting obligations, continued
listing of Molex's common stock and Class A common stock on the
Nasdaq National Market, changes in key personnel, economic
conditions in various regions, product and price competition, raw
material prices, foreign currency exchange rates, interest rates,
changes in technology, patent issues, litigation results and legal
and regulatory developments. Molex undertakes no obligation to
update or revise these forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by law.

Item 6. Exhibits

Number Description
------ -----------

31 Rule 13a-14(a)/15d-14(a) Certifications

31.1 Section 302 certification by Chief Executive Officer
31.2 Section 302 certification by Acting Chief
Financial Officer

32 Section 1350 Certifications

32.1 Section 906 certification by Chief Executive Officer
32.2 Section 906 certification by Acting Chief
Financial Officer

23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

MOLEX INCORPORATED
_______________________
(Registrant)

Date: March 21, 2005 /S/ ROBERT B. MAHONEY
______________________
Robert B. Mahoney
Acting Chief Financial Officer,
Executive Vice President and
President, Far East South

Date: March 21, 2005 /S/ LOUIS A. HECHT
___________________
Louis A. Hecht
Corporate Secretary and
General Counsel

24