Molex Inc.’s (MOLX) earnings per share for the fiscal first quarter beat the Zacks Consensus Estimate by 2 cents. Revenues beat the consensus by 2%.
 
Revenues
 
Revenues of $674.0 million was up 18.1% sequentially and down 19.7% year over year. This is the second quarter of double-digit sequential growth and fourth quarter of year-over-year decline. The recession has impacted the connector industry, which is expected to decline 25% in calendar year 2009. The company generates the bulk of its revenue from the connector market, so results have been strongly impacted by the recession. However, as the sequential increases indicate, it is past the bottom. The company saw particular strength in the data, consumer electronics and telecom markets.
 
The geographical distribution of revenues indicates that the company generates the largest chunk of its sales from Asia Pacific countries (around 54% of total fiscal 2009 revenues). The Americas contribute around 27% and Europe 19%.
 
Orders
 
Orders were up 25.8% in the September quarter, following a 21.3% increase in the June quarter. However, they were still quite a bit lower than a year ago. The company generated strong turns sales, which resulted in a 20.2% sequential increase in the backlog. However, the backlog was down 21.1% from the year-ago quarter, reflecting the impact of the recession.
 
Operating Results
 
The pro forma gross margin for the quarter was 28.4%, up 435 basis points (bps) from the previous quarter’s 24.1%. Higher volumes were primarily responsible for the increase.
 
Operating expenses of $155.9 million were higher than the previous quarter’s $129.6 million. The operating margin was 5.3%, up 393 bps from 1.3% recorded in the previous quarter. About two-thirds of the increase was on account of lower cost of sales, while the balance was due to the sequential decline in selling, general and administrative expenses (as a percentage of sales).
 
Excluding the impact of restructuring charges and stock compensation expenses on a tax adjusted basis, the pro forma net income was $29.2 million or 4.3% net margin, compared to $4.0 million or 0.7% in the previous quarter and $66.2 million or 7.9% in the year-ago quarter. Including the special items, the GAAP loss per share was $0.07 compared to $1.27 in the Jun quarter and an income of $0.25 in the Sep quarter of last year.
 
Balance Sheet
 
Inventories were down 1.2%, raising inventory turns from 4.9x to 5.5x. Collection improved, with the days sales outstanding (DSOs) decreasing from 98 to around 83. The company ended with a cash balance of $530.1 million, up $62.2 million during the quarter. Capital expenses were $45.6 million, or 6.8% of revenue in the quarter, down significantly from 8.8% in the June quarter.
 
Guidance
 
Management expects a sequential revenue increase of 1-7% in the fiscal second quarter and pro forma EPS of 11-15 cents, excluding restructuring charges of 7 cents. The tax rate is expected to be 30%. Consensus expectations at the time were for revenue increase of 1.4% (at the low end of the guided range) and EPS of 19 cents (higher than the guided range).
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