See accompanying notes to condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

     On January 10,During the third quarter of fiscal 2011, we completed an asset acquisition of an active optical cable business for $24.6 million and recorded goodwill of $14.3$14.6 million. The purchase price includes contingent consideration up to $5.8 million payable through fiscal 2013 upon the seller meeting certain criteria. The purchase price allocation for this acquisition is preliminary and subject to revision as more detailed analysis is completed and additional information about the fair value of assets and liabilities becomes available.complete.

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

     Excluded from the computations above were anti-dilutive shares of 3.35.6 million and 6.66.1 million for the three months ended September 30, 2011 and nine months ended March 31, 2011, respectively, compared with 6.0 million and 7.3 million for the same prior year periods.2010, respectively.

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

     The components of pension benefit cost are as follows (in thousands):

     In June 2009, we entered into a $195.0 million unsecured, three-year revolving credit facility in the United States, amended in January 2010, and September 2010 and March 2011, that was initially scheduled to mature in June 2012 (the “U.S.U.S. Credit Facility”)Facility). In connection with the September 2010 amendment, we increased the credit line on the U.S. Credit Facility to $270.0 million. In March 2011, we further amended the credit facility to increase the credit line to $350.0 million and extend the term to March 2016. Borrowings under the U.S. Credit Facility bear interest at a fluctuating interest rate (based on London InterBank Offered Rate) plus an applicable percentage based on our consolidated leverage. The applicable percentage was 150 basis points as of March 31,September 30, 2011. The instrument governing the U.S. Credit FacilityAgreement contains customary covenants regarding liens, debt, substantial asset sales and mergers, dividends and investments. The U.S. Credit FacilityAgreement also requires us to maintain financial covenants pertaining to, among other things, our consolidated leverage and fixed charge coverage. As of March 31,September 30, 2011, we were in compliance with these covenants and had outstanding borrowings of $165.0$20.0 million. We obtained waiver letters from the participating banks for any default of the U.S. Credit Facility arising from the unauthorized activities in Japan.

     In MarchSeptember 2011, Molex Japan renewed a ¥5.0 billion overdraft loan, with a six month term and an interest rate of approximately 2.48%. At March 31,September 30, 2011, the balance of the overdraft loan, which requires full repayment by the end of the term if not renewed, approximated $60.7$65.3 million.

     In March 2010, Molex Japan entered into a ¥3.0 billion syndicated term loan for three years, with interest rates equivalent to the six month Tokyo Interbank Offered Rate (TIBOR) plus 75 basis points and scheduled principal payments of ¥0.5 billion every six months. At March 31,September 30, 2011, the balance of the syndicated term loan approximated $24.5$19.5 million, of which $12.3$13.1 million was current.

     In September 2009, Molex Japan issued unsecured bonds totaling ¥10.0 billion with a term of three years, an interest rate of approximately 1.65% and scheduled principal payments of ¥1.6 billion every six months. At March 31,September 30, 2011, the outstanding balance of the unsecured bonds approximated $63.0$47.0 million of which $38.9 million wasis classified as current.

     We had available lines of credit totaling $282.3$406.4 million at March 31,September 30, 2011, expiringincluding a $350.0 million unsecured, five-year revolving credit facility with $330.0 million available as of September 30, 2011. The lines of credit expire between 2011 and 2016.2021.

     The effective tax rate was 30.4%32.6% for the three months ended March 31,September 30, 2011 and 32.8%32.2% for the three months ended March 31,September 30, 2010. The effective tax rate for the nine months ended March 31, 2011 was 31.0%.

     We are subject to tax in U.S. Federal, Statestate and foreign tax jurisdictions. We have substantially completed all U.S. federal income tax matters for tax years through 2007. The tax years 2008 through 20092010 remain open to examination by all major taxing jurisdictions to which we are subject.

     It is our practice to recognize interest and penalties related to income tax matters in tax expense. As of March 31,September 30, 2011, there were no material interest or penalty amounts to accrue.

     The following table summarizes our financial assets and liabilities as of March 31,September 30, 2011, which are measured at fair value on a recurring basis (in thousands):

     We determine the fair value of our marketable and available for sale securities based on quoted market prices (Level 1). We generally use derivatives for hedging purposes, which are valued based on Level 2 inputs in the fair value hierarchy. The fair value of our financial instruments is determined by a mark-to-market valuation based on forward curves using observable market prices.

     The carrying value of our long-term debt approximates fair value.

     We use derivative instruments to manage our foreign exchange and commodity cost exposures. All derivative instruments are recognized at fair value in other current assets or liabilities.

     We use one-month foreign currency forward contracts (forward contracts) to offset the impact of exchange rate volatility on certain assets and liabilities, including intercompany receivables and payables denominated in non-functionalnon-

     In January 2010,September 2011, the Financial Accounting Standards Board (the FASB) issued updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This new guidance to enhance disclosure requirements related to fair value measurements by requiring certain new disclosures and clarifying certain existing disclosures. The new guidance requires additional information related to activities in the reconciliation of Level 3 fair value measurements. The new guidance also expands the disclosures related to the disaggregation of assets and liabilities and information about inputs and valuation techniques. The new guidance related to Level 3 fair value measurements becameis effective for us on Januarybeginning July 1, 2011, but did2012, with early adoption permitted. This new guidance will not have a material impact on our consolidated financial statements.

     We are currently a party to various legal proceedings, claims and investigations including those disclosed in this note. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially adversely impact our financial position or overall trends in operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or other events could occur. If unfavorable final outcomes were to occur, then there exists the possibility of a material adverse impact.

     Information by segment is summarized as follows (in thousands):

     Corporate & Other includes expenses primarily related to corporate operations that are not allocated to segments such as executive management, human resources, legal, finance and information technology. We also include in Corporate & Other the investigative and legal costs related to the unauthorized activities in Japan and the assets of certain plants that are not specific to a particular division.

     Segment assets, which are comprised of accounts receivable, inventory and fixed assets, are summarized as follows (in thousands):

     The reconciliation of segment assets to consolidated total assets is as follows (in thousands):

     Telecommunications market net revenue increaseddecreased against the comparable quarter due to decreases in demand for certain mobile products partially offset by increased infrastructure spending on networking. Telecommunications market net revenue decreased against the sequential quarter primarily due to decreased infrastructure spending partially offset by improved demand for mobile products, including higher demand for smartphones and our customers’ introduction of smartphone models. Revenue declined against the sequential quarter due to seasonal decline in mobile phone business, partially offset by increased activity in networking infrastructure.

     Organic net revenue increaseddecreased during the three and nine months ended March 31,September 30, 2011 compared with the prior year periodsperiod as customer demand improveddecreased in all of ourcertain primary markets. We also completed an asset acquisition of an active optical cable business during the third quarter of fiscal 2011 and completed an asset purchase of a company in China during the second quarter of fiscal 2010.2011.

     Foreign currency translation increased net revenue approximately $21.9 million and $37.9$52.9 million for the three and nine months ended March 31,September 30, 2011 respectively, principally due to a stronger Japanese yen, partially offset by a weaker euro against the U.S. dollar. The following tables show the effect on the change in geographic net revenue from foreign currency translations to the U.S. dollar (in thousands):

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

     The increase in gross profit and gross margin for the three and nine months ended March 31,September 30, 2011 was primarily due to higher revenue. Gross margins havenet revenue and higher absorption from increased production. We also increased prices to partially offset rising input costs, which improved over time due to lower costs resulting from our restructuring program.gross profit and gross margin. The improvements in gross profit and gross margin were partially offset by the impact of price erosion and material price increases. The decrease in gross margin for the three months ended March 31, 2011 compared with the prior year period was primarily due to higher material costs and lower absorption from our operations in Japan.

     A significant portion of our material cost is comprised of copper and gold. We purchased approximately 15.66.0 million pounds of copper and approximately 97,00029,000 troy ounces of gold during the first three quartersquarter of fiscal 2011.2012. The following table shows the change in average prices related to our purchases of copper and gold for the three and nine months ended March 31September 30 (in thousands):

     Generally, we are able to pass through to our customers only a small portion of changes in the cost of copper and gold. However, we mitigate the impact of any significant increases in gold and copper prices by hedging with call options a portion of our projected net global purchases of gold and copper. The hedges reduced cost of sales by $2.2 million and $4.2$1.8 million for the three and nine months ended March 31,September 30, 2011 respectively, and reduced cost of sales by $2.5 million and $3.0$2.2 million for the three and nine months ended March 31, 2010, respectively.September 30, 2010.

     The effect of certain significant impacts on gross profit compared with the prior year periods was as follows for the three and nine months ended March 31September 30 (in thousands):

     Price erosion is measured as the reduction in prices of our products year over year, which reduces our gross profit, particularly in our Connector segment, where we have the largest impacts of price erosion. A significant portion of our price erosion occurred in our mobile phone connector products whichas our customers introduced new versions of mobile products. Mobile phones and smartphones are part of our telecommunications and consumer markets.market.

     The increase in gross profit due to currency translation was primarily due to a stronger Japanese yen against other currencies and a general weakening of the U.S. dollar against other currencies, during the three and nine months ended March 31,September 30, 2011.

     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

     Selling, general and administrative expenses decreased as a percent of net revenue forincreased $12.2 million compared to the three and nine months ended March 31, 2011 from the comparable prior year periods due to the increased revenue and our lower cost structure resulting from our restructuring efforts and specific cost containment activities.period. The impact of currency translation increased selling, general and administrative expenses approximately $5.9$8.1 million and $11.3$2.6 million for the three and nine months ended March 31,September 30, 2011 respectively, and increased selling, general, and administrative expenses approximately $4.6 million and $11.1 million for the comparable year periods.2010, respectively.

     Research and development expenditures, which are classified as selling, general and administrative expense, were approximately $43.6 million, or 5.0% of net revenue and $126.3$43.9 million, or 4.7% of net revenue for the three and nine months ended March 31,September 30, 2011, respectively, compared with $39.9$40.5 million, or 5.3% of net revenue and $113.1 million, or 5.2%4.5% of net revenue for the comparable prior year periods.period.

     Net restructuring costs decreased $9.1 million and $90.6 million during the three and nine months ended March 31, 2011, compared with the comparable prior year periods, as we concluded our restructuring program. Net restructuring costs duringUnauthorized activities in Molex Japan for the three months ended March 31, 2010 were $9.1 million, consisting of $0.1 million in asset impairments and $9.0 million for employee termination benefits. Net restructuring costs during the nine months ended March 31, 2010 were $90.6 million, consisting of $20.1 million in asset impairments and $70.5 million for employee termination benefits. The cumulative expense of our restructuring program was $314.8 million with estimated annual savings of approximately $205.0 million.