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Molex Inc. (MOLX)

F2Q10 (Qtr End 12/31/09) Earnings Call Transcript

January 26, 2010 5:00 pm ET

Executives

Steve Martens – VP, IR

Martin Slark – Vice Chairman and CEO

Dave Johnson – CFO, EVP and Treasurer

Liam McCarthy – President and COO

Analysts

Steven Fox – CLSA

Jim Suva – Citi

Matt Sheerin – Thomas Weisel Partners

Craig Hettenbach – Goldman Sachs

Amit Daryanani – RBC Capital Markets

Amitabh Passi – UBS

Shawn Harrison – Longbow Research

Brian White – Ticonderoga

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Q2 2010 Molex Incorporated earnings conference call. My name is Bobby and I will be your moderator for today. At this time all participants are in listen-only mode and later we will conduct a question-and-answer session. (Operator instructions)

I would now like to turn the conference over to your host for today Mr. Steve Martens, Vice President of Investor Relations. Please proceed.

Steve Martens

Thank you, Bobby. Good afternoon, everyone, and thank you for taking time for joining us today. I am joined on the call by Martin Slark, our Chief Executive Officer, Dave Johnson, our Chief Financial Officer and Liam McCarthy, our Chief Operating Officer. Please note that this call is being recorded and will be available for replay by accessing the Investor Relations section of our website. Presentation materials are also available on the website. As usual we would like to limit this call to one hour. When we get to Q&A, we ask for one question per participant and one follow-up question. Thanks.

Before we turn our attention to the quarterly results, let's review our Safe Harbor Statements on slide one and two of the presentation materials. During the course of this presentation, we will be providing forward-looking information and referring to non-GAAP measures. Please read carefully the forward-looking statements section of our press release and Form 10-K for an understanding of the risk and uncertainties associated with forward-looking information and the reconciliation of non-GAAP measures to GAAP. For your convenience, we have included these materials in our presentation. They are also available from our website, www.molex.com in the investors section.

And now, Martin will review order and revenue results for the quarter.

Martin Slark

Thank you, Steve, and welcome everyone to the second quarter of fiscal year '10 earnings release conference call. If you turn now to page three, this chart demonstrates our order trends over the past several quarters. Orders grew sequentially 7% in the December quarter to 778 million. This represents our third consecutive quarter of significant growth and we are now 38% about the order rate experienced in December 2008 quarter.

Looking back at our guidance provided in the last call, we stated the normal seasonal trend would generally have ordered slowing in late November or certainly early December. This is not the case this year and in fact, orders increased sequentially in November and then surprisingly they were up again sequentially in December. The strength of these bookings will give us momentum for the second half of our fiscal year. Needless to say, we are quite pleased with the pace and breadth of the recovery in our overall business which we think reflect stronger end-market demand, good new-product strength, continuing success with our focus (inaudible) program particularly in Asia.

It is worth noting that our bookings are still 13% below the peak that we achieved in Q3 of fiscal year '08 and channeling materials are in good shape. Looking at our bookings for the last quarter, we are therefore cautiously optimistic about the prospects of the calendar year 2010.

If you turn now to page four, we show our orders by industry. Hear you can see that the consumer electronics industry showed a lower than normal seasonality and was only down 3% from the September quarter. That reduction for that quarter is very low. This market however was still up 38% year-over-year. Consumer Electronics sold well during the Christmas season particularly in Asia. And having just spent a week in Japan, we don't see any evidence of excess inventory that needs to be burned off at this time.

Going forward, we are encouraged by the not large number of new products recently introduced to the Consumer Electronics show which was certainly not the case a year ago and as well as expectations that Chinese New Year and the World Cup will drive strong demands to TVs this year.

LCD TVs are expected to be up 16% in 2010 to 170 million units including 41 million LED backlit TVs and approximately 1 million 3D TVs. These new TV models have higher connector content which is a positive for Molex. The automotive markets continue to improve steadily from relatively low production levels a year ago. Orders were up 6% sequentially it up over 60% from what was a disastrous quarter the same quarter in 2008.

Automobile inventories remain low and selling rates have held up reasonably well even though government stimulus packages have been withdrawn. Third-party projections suggest that modest unit growth will continue in this sector through 2010. With improving production rates in Asia and the U.S. and decline in Western Europe.

In addition the continue to see strong demand for products similar to those sold in consumer electronics markets to support new functionality such as rear-view cameras, navigation systems, HD and satellite radios and (inaudible) network opportunities is providing the possibilities for Molex to sell not just the connector but value added assembly into this market.

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