The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements relating to future events or the future financial performance of Molex, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. Please see the discussion regarding forward-looking statements included at the end of this discussion, under the caption "Forward-Looking Statements" and Item 1A, "Risk Factors" for a discussion of the uncertainties, risks and assumptions associated with these statements.

The following discussion should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. All references to fiscal years relate to the fiscal year ended June 30.

Overview

Our Business

Our core business is the manufacture and sale of electronic 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 different products including terminals, connectors, planar cables, cable assemblies, interconnection systems, backplanes, integrated products and mechanical and electronic switches. We also provide manufacturing services to integrate specific components into a customer's product.

Our connectors, interconnecting devices and assemblies are used principally in the telecommunications, data, consumer products, industrial and automotive markets. Our products are used in a wide range of applications including desktop and notebook computers, computer peripheral equipment, mobile phones, digital electronics such as cameras and flat panel display televisions, automobile engine control units and adaptive braking systems, factory robotics and diagnostic equipment.

We believe that our sales mix has growth prospects in each of our product markets. Net revenue by market can fluctuate based on various factors including new technologies within the industry, composition of customers and changes in their revenue levels and new products or model changes that we or our customers introduce. The following table sets forth, for fiscal years 2009, 2008 and 2007 the percentage relationship to net revenue of our sales by primary product markets.

                                          Percentage of Net Revenue
                                        2009           2008        2007

                  Telecommunication         26 %           25 %       25 %
                  Data                      21             20         20
                  Consumer                  21             20         20
                  Industrial                15             16         18
                  Automotive                14             17         16
                  Other                      3              2          1

                  Total                    100 %          100 %      100 %

In fiscal 2009, we reclassified our net revenue by market to reflect our current estimate of how revenue to distributors and contract manufacturers reach the end market. Previously reported net revenue by market for fiscal 2008 and 2007 was reclassified to reflect this change.

The following table sets forth, for fiscal years 2009, 2008 and 2007, the percentage relationship to net revenue of our sales by geographic region:

                                      2009        2008        2007

                      Americas          26.9 %      27.6 %      28.7 %
                      Asia-Pacific      54.4        52.0        51.1
                      Europe            18.7        20.4        20.2

                      Total            100.0 %     100.0 %     100.0 %

The following table sets forth, for fiscal years 2009, 2008 and 2007, the percentage relationship to net revenue of our sales by reporting segment:

                                         2009        2008        2007

                  Connector                69.3 %      71.4 %      72.2 %
                  Custom & Electrical      30.6        28.3        27.3
                  Corporate & Other         0.1         0.3         0.5

                  Total                   100.0 %     100.0 %     100.0 %

We sell our products directly to OEMs and to their contract manufacturers and suppliers and, to a lesser extent, through distributors worldwide. Many of our customers are multi-national corporations that manufacture their products in multiple operations in several countries.

As of June 30, 2009, we operated 43 manufacturing locations, located in 18 countries throughout the Americas, Europe and Asia-Pacific regions. In fiscal 2009, 54.4% of our revenue was derived from sales in the Asia-Pacific region. We expect greater economic growth in Asia, particularly in China, than in the Americas and Europe. We continue to move our manufacturing operations from the United States and Western Europe to lower cost regions. Approximately 52% of our manufacturing capacity is in lower cost areas such as China, Eastern Europe and Mexico. In addition, reduced trade barriers, lower freight cost and improved supply chain logistics have reduced our need to duplicate regional manufacturing capabilities. For these reasons, our strategy has been to consolidate multiple plants of modest size in favor of operating fewer, larger and more integrated facilities in strategic locations around the world. We believe that our business is positioned to benefit from this strategy.

Business Environment

The market in which we operate is highly fragmented with a limited number of large companies and a significant number of smaller companies making electronic connectors. We are one of the world's largest manufacturers of electronic connectors. We believe that our global presence and our ability to design and manufacture our products throughout the world and to service our customers globally is a key advantage for us. Our growth has come primarily from new products that we develop, often in collaboration with our customers.

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, manage rising raw material costs, develop, manufacture and successfully market new and enhanced products and product lines, control operating costs, and attract, motivate and retain key personnel to manage our operational, financial and management information systems.

Non-GAAP Financial Measures

Organic net revenue growth, which is included in Management's Discussion & Analysis, is a non-GAAP financial measure. The tables presented in Results of Operations above provide reconciliations of U.S. GAAP reported net revenue growth (the most directly comparable GAAP financial measure) to organic net revenue growth.

We believe organic net revenue growth provides useful information to investors because it reflects the underlying growth from the ongoing activities of our business and provides investors with a view of our operations from management's perspective. We use organic net revenue growth to monitor and evaluate performance, as it is an important measure of the underlying results of our operations. It excludes items that are not completely under management's control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition activity. Management uses organic net revenue growth together with GAAP measures such as net revenue growth and operating income in its decision making processes related to the operations of our reporting segments and our overall company. Because organic net revenue growth calculations may vary among other companies, organic net sales growth amounts presented below may not be comparable with similar measures of other companies.

Financial Highlights

Net revenue for fiscal 2009 of $2.6 billion decreased 22.4% from fiscal 2008. Organic net revenue declined 23.1% in fiscal 2009 compared with 2008. We recognized a net loss of $321.3 million in fiscal 2009 compared with net income of $215.4 million in fiscal 2008. Fiscal 2009 results include goodwill impairment charges of $264.1 million and restructuring costs of $131.3 million ($99.0 million after-tax), and intangible asset impairment costs of $16.3 million. Restructuring charges of $31.2 million ($21.0 million after-tax) were recorded in fiscal 2008. On June 25, 2009, we entered into a $195.0 million committed, unsecured, three-year revolving credit facility with an outstanding balance of $25.0 million as of June 30, 2009, which was used to pay down other unsecured debt balances.

Results of Operations

The following table sets forth, for fiscal years 2009, 2008 and 2007, certain consolidated statements of operations data as a percentage of net revenue (dollars in thousands):

                                                   Percentage of                          Percentage of                         Percentage of
                                    2009              Revenue              2008              Revenue             2007              Revenue

Net revenue                      $ 2,581,841                100.0 %     $ 3,328,347                100.0 %    $ 3,265,874                100.0 %
Cost of sales                      1,925,664                 74.6 %       2,314,112                 69.5 %      2,249,166                 68.9 %

Gross profit                         656,177                 25.4 %       1,014,235                 30.5 %      1,016,708                 31.1 %
Selling, general &
administrative                       586,702                 22.7 %         665,038                 20.0 %        658,289                 20.1 %
Restructuring costs and asset
impairments                          151,531                  5.9 %          31,247                  0.9 %         36,869                  1.1 %
Goodwill impairments                 264,140                 10.2 %               -                  0.0 %              -                  0.0 %

Income (loss) from operations       (346,196 )              (13.4 )%        317,950                  9.6 %        321,550                  9.9 %
Other income, net                     27,308                  1.0 %          20,698                  0.6 %         16,707                  0.5 %

Income (loss) before income
taxes                               (318,888 )              (12.4 )%        338,648                 10.2 %        338,257                 10.4 %
Income taxes                           2,399                 (0.0 )%        123,211                  3.7 %         97,489                  3.0 %

Net (loss) income                $  (321,287 )              (12.4 )%    $   215,437                  6.5 %    $   240,768                  7.4 %

Net Revenue

The following table provides an analysis of the change in net revenue compared
with the prior fiscal years (in thousands):


                                                                  2009              2008

Net revenue for prior year                                     $ 3,328,347       $ 3,265,874
Components of net revenue (decrease) increase:
Organic net revenue decline                                       (769,296 )        (106,863 )
Currency translation                                                 5,243           169,336
Acquisitions                                                        17,547                 -

Total change in net revenue from prior year                       (746,506 )          62,473

Net revenue for current year                                   $ 2,581,841       $ 3,328,347

Organic net revenue (decline) as a percentage of net revenue
for prior year                                                       (23.1 )%           (3.3 )%

Revenue declined significantly during fiscal 2009 across all of the primary markets due to deterioration in global economic conditions starting in November 2008 and subsequent inventory reductions in the supply chain, which decreased demand for components and our production levels.

The increase in net revenue attributed to currency translation in fiscal 2009 compared with 2008 was principally due to the strengthening Japanese yen. The increase in net revenue attributed to currency translation in fiscal 2008 was principally due to the general weakening of the U.S. dollar

against other currencies. The following tables show the effect on the change in geographic net revenue from foreign currency translations to the U.S. dollar (in thousands):

                                   June 30, 2009                                  June 30, 2008
                      Local          Currency           Net           Local          Currency           Net
                     Currency       Translation        Change        Currency       Translation       Change

Americas            $ (226,735 )   $      (2,627 )   $ (229,362 )   $  (23,304 )   $       3,637     $ (19,667 )
Asia-Pacific          (354,081 )          27,594       (326,487 )      (26,974 )          89,405        62,431
Europe                (177,647 )         (19,724 )     (197,371 )      (54,735 )          76,294        21,559
Corporate & Other        6,714                 -          6,714         (1,850 )               -        (1,850 )

Net change          $ (751,749 )   $       5,243     $ (746,506 )   $ (106,863 )   $     169,336     $  62,473

The change in revenue on a local currency basis as of June 30 was as follows:

                                         2009         2008

                         Americas         (24.7 )%     (2.5 )%
                         Asia-Pacific     (20.5 )      (1.6 )
                         Europe           (26.1 )      (8.3 )

                         Total            (22.6 )%     (3.3 )%

We sell our products in five primary markets. The decline in organic revenue due to poor global economic conditions has impacted all of our market areas. Of our five primary markets, the automotive market has experienced the sharpest decline in demand during fiscal 2009 as consumers are not purchasing as many new automobiles in the current economic environment. Concerns about the global economy have also impacted our industrial market and telecommunications market for mobile devices as demand continues to be lower than in fiscal 2008. The following table sets forth, for fiscal years 2009 and 2008, changes in net revenue from each of our five primary product markets from the prior fiscal year:

                                             2009       2008

                        Telecommunications     (18 )%       3 %
                        Consumer               (18 )        2
                        Data                   (18 )        4
                        Industrial             (27 )       (7 )
                        Automotive             (35 )        6

Telecommunications market revenue decreased in fiscal 2009 compared with 2008 due to lower demand for mobile products and supply chain inventory reductions. This decline is partially offset by higher demand for smartphones and our customers' introduction of new smartphone models, many of which include our connector and antenna products. Telecommunications market revenue increased in fiscal 2008 compared with 2007 due to higher demand for our networking products.

Consumer market revenue decreased in home entertainment and home appliance products in fiscal 2009. These declines were partially offset by increased demand for our products used in electronic gaming equipment. Demand increased in fiscal 2009 for our components in portable navigation devices and flat panel display televisions, although the increased demand in flat panel display televisions was offset by cost pressures and price erosion. Consumer market revenue increased in fiscal 2008 compared with 2007 due to higher demand for our connectors used in home entertainment products.

Data market revenue for fiscal 2009 decreased from 2008 due to lower customer demand for storage networking products and computer peripherals due to the global economic uncertainties. These declines were partially offset by increased demand due to our customers' release of lower end computers and notebook computers. Data market revenue increased in fiscal 2008 compared with

2007 due to our customers' releases of new high-end products and their expansion in new optical and high speed technologies, for which we offered a strong product line.

The industrial market revenue for fiscal 2009 decreased compared with 2008 due to declines in residential and commercial construction, lower demand in the industrial communications business worldwide, particularly in North America and Europe, and lower demand for factory automation due to worldwide excess manufacturing capacity. Declines in non-residential, commercial and industrial construction had a negative impact on temporary power and lighting products used on jobsites. The global decline in the manufacturing economy resulted in the delay or cancellation of many industrial automation projects. The industrial market declined in fiscal 2008 compared with 2007 due largely to our customer enhancing its product line for a cable assembly product.

Automotive market revenue declined in fiscal 2009 compared with 2008 due to a decrease in demand related to poor economic conditions during fiscal 2009. The number of automobiles manufactured by our customers decreased in fiscal 2009 as automotive manufacturing companies' reduced inventories in the automotive supply chain. There were a number of extended closings and bankruptcy filings by automotive manufacturers and automotive suppliers during fiscal 2009 that negatively impacted our revenue. The automobile market began to show signs of stabilization late in fiscal 2009 as new car sales increased in Western Europe due to government incentives. Revenue in the U.S. automotive market was higher in fiscal 2008 compared with 2007 as the automotive market benefited from new products reflecting higher electronic content in automobiles.

Gross Profit

We measure gross profit as net revenue less cost of sales. Cost of sales includes manufacturing costs, such as materials, direct and indirect labor, and factory overhead, as well as all of the costs of our customer service function such as labor, materials, travel and overhead. Our gross margins are primarily affected by the following drivers: product mix; volume; cost reduction efforts; competitive pricing pressure; commodity costs; and currency fluctuations.

The following table sets forth gross profit and gross margin for fiscal years 2009, 2008 and 2007 (dollars in thousands):

                                  2009           2008            2007

                 Gross profit   $ 656,177     $ 1,014,235     $ 1,016,708
                 Gross margin        25.4 %          30.5 %          31.1 %

The reduction in gross margin during fiscal 2009 was primarily due to lower absorption from the rapid drop in our production caused by the poor global economic conditions. While we were unable to reduce factory-related costs as quickly as production declined, the expansion of our restructuring program should improve our gross margins over time. The reduction in gross margin in fiscal 2008 compared with 2007 was primarily related to higher commodity cost and price erosion partially offset by general cost reductions, a portion of which is related to restructuring activities.

A significant portion of our material cost consists of copper and gold costs. We purchased approximately 16 million pounds of copper and approximately 87,000 troy ounces of gold in fiscal 2009 compared with approximately 25 million pounds of copper and approximately 135,000 troy ounces of gold in fiscal 2008 and 2007. The following table sets forth the average prices of copper and gold we purchased in fiscal 2009, 2008 and 2007:

                                                  2009         2008         2007

       Average Price Copper (price per pound)   $   2.69     $   3.49     $   3.20
       Gold (price per troy ounce)                872.00       825.00       636.00

Generally, we are able to pass through to our customers only a small a portion of the changes in the cost of copper and gold. However, we mitigated the impact of the change in copper and gold

prices by hedging with call options a portion of our projected net global purchases of copper and gold. The hedges did not materially affect operating results for fiscal 2009 and 2008.

In addition to commodity costs, the following table sets forth, for fiscal years 2009 and 2008, the effects of certain significant impacts on gross profit from the prior year (in thousands):

                                            2009           2008

                   Price erosion          $ (97,643 )   $ (132,758 )
                   Currency translation       4,590         48,842
                   Currency transaction     (14,382 )      (18,393 )

Price erosion is measured as the reduction in prices of our products year over year, which reduces our gross profit. A significant portion of the price erosion occurred in our mobile phone connector products, which are part of our telecommunications market.

The increase in gross profit due to currency translation gains in fiscal 2009 compared with 2008 was primarily due to a stronger Japanese yen against other currencies, partially offset by a general strengthening U.S. dollar against other currencies. The increase in gross profit due to currency translation gains in fiscal 2008 compared with fiscal 2007 was primarily due to a general weakening of the U.S. dollar against other currencies.

Certain products that we manufacture in Japan and Europe are sold in other regions of the world at selling prices primarily denominated in or closely linked to the U.S. dollar. As a result, changes in currency exchange rates may affect our cost of sales reported in U.S. dollars without a corresponding effect on net revenue. The decrease in gross profit due to currency transactions in fiscal 2009 was primarily due to a stronger Japanese yen, partially offset by a weaker euro against the U.S. dollar. The decrease in gross profit due to currency transaction losses in fiscal 2008 was primarily due to a general weakening of the U.S. dollar against other currencies.

Operating Expenses

The following table sets forth our operating expenses for fiscal years 2009,
2008 and 2007 (dollars in thousands):


                                                         2009           2008           2007

Selling, general & administrative                      $ 586,702      $ 665,038      $ 658,289
Selling, general & administrative as a percentage of
revenue                                                     22.7 %         20.0 %         20.1 %
Restructuring costs and asset impairments                151,531         31,247         36,869
Goodwill impairments                                     264,140              -              -

Selling, general & administrative expenses

Selling, general and administrative expense increased as a percentage of revenue in fiscal 2009 compared with prior year periods primarily due to the significant drop in revenue. Selling, general and administrative expenses declined by $78.3 million or 11.8% primarily due to our restructuring efforts and cost- cutting initiatives in response to the significant drop in revenue. These initiatives included salary reductions and a $9.1 million decrease in expense related to reductions in employee benefits. We also reduced selling, general and administrative expenses through a lower cost structure resulting from our restructuring initiative and specific cost containment activities. Selling, general and administrative expense as a percentage of revenue was relatively consistent in fiscal 2008 compared with 2007 while organic net revenue declined. The impact of currency translation decreased selling, general and administrative expenses by approximately $4.1 million for fiscal 2009 compared with 2008 and increased selling, general and administrative expenses by approximately $35.4 million for fiscal 2008 compared with 2007.

Research and development expenditures, which are classified as selling, general and administrative expense, was $159.2 million, or 6.2% of net revenue, for fiscal 2009 compared with $163.7 million, or 4.9% of net revenue, for fiscal 2008 and $159.1 million, or 4.9% of net revenue, for fiscal 2007. The increase in expense as a percent of revenue is primarily due to the drop in revenue in fiscal 2009. Total research and development expenditures in fiscal 2009 were consistent with fiscal 2008, but increased as a percent of net revenue.

Restructuring costs and asset impairments

Restructuring costs and asset impairments consist of the following (in thousands):

                                                      2009           2008          2007          Total

Severance costs                                     $ 110,155      $ 17,648      $ 26,702      $ 154,505
Asset impairments                                      21,128        13,599         8,667         43,394

Restructuring costs                                   131,283        31,247        35,369        197,899
Intangible asset impairments                           16,300             -             -         16,300
Other charges                                           3,948             -         1,500          5,448

Total restructuring charges and asset impairments   $ 151,531      $ 31,247      $ 36,869      $ 219,647

During fiscal 2007, we undertook a multi-year restructuring plan designed to reduce costs, increase efficiencies and to improve customer service and return on invested capital in connection with a new global organization that was effective July 1, 2007. A majority of the plan relates to facilities located in . . .