Methode Electronics, Inc. (NYSE: MEI), a
global developer of custom engineered and application specific
products and solutions, today announced financial results for the
Fiscal 2013 fourth quarter and year ended April 27, 2013.
Fourth-Quarter Fiscal 2013 Methode's
fourth-quarter Fiscal 2013 net sales increased $21.9 million, or
17.3 percent, to $148.3 million from $126.4 million in the same
quarter of Fiscal 2012.
Net income increased $4.3 million to $10.1 million, or $0.27 per
share, in the fourth quarter of Fiscal 2013 from $5.8 million, or
$0.15 per share, in the same period of Fiscal 2012. Year over year,
Fiscal 2013 fourth-quarter net income benefitted from:
- higher income tax benefit due to adjustment of the valuation
allowance related to Malta investment tax credits of $6.8
million;
- lower legal expense of $0.7 million;
- lower costs related to third-party inspection, premium freight
and over-time expenses of $0.4 million;
- higher Other segment income as a result of increased
torque-sensing product sales of $0.3 million; and
- higher sales.
Year over year, Fiscal 2013 fourth-quarter net income was
negatively impacted by:
- a goodwill impairment charge in the Power Products segment
related to Eetrex of $4.3 million;
- compensation expense related to the company's long-term
incentive program for performance-based tandem cash awards of $2.1
million;
- severance and building demolition costs in the Automotive
segment of $1.1 million;
- higher Other expense, related mainly to higher foreign currency
loss and the absence of a life insurance gain, of $1.1
million;
- higher costs related to the design, development, engineering
and launch of a large North American automotive program of $0.2
million; and
- costs related to the newly acquired Hetronic business in Italy
of $0.2 million.
Excluding the impact of the Malta valuation allowance, the
goodwill impairment charge and the compensation expense, Methode's
Fiscal 2013 fourth-quarter net income was $8.9 million, or $0.24
per share.
Consolidated gross margins as a percentage of sales were 18.7
percent in the Fiscal 2013 fourth quarter compared to 18.2 percent
in the same period of Fiscal 2012. The increase was due primarily
to higher sales, lower costs related to third-party inspection,
premium freight and over-time expenses, as well as higher sales and
lower material costs in the Other segment, partially offset by
increased design, development and engineering costs for a new
automotive program, increased sales of automotive product that has
a higher prime cost due to the current high percentage of purchased
content, severance and building demolition costs in the Automotive
segment and costs related to the newly acquired Hetronic business
in Italy in the Interconnect segment.
Selling and administrative expenses increased $1.8 million, or
10.0 percent, to $19.8 million in the Fiscal 2013 fourth quarter
compared to $18.0 million in the prior-year fourth quarter due
primarily to the compensation expense related to the tandem cash
awards, partially offset by lower headcount in Europe. As a
percentage of sales, selling and administrative expenses decreased
to 13.3 percent for the Fiscal 2013 fourth quarter compared to 14.2
percent in the same period last year.
In the Fiscal 2013 fourth quarter, income tax benefit was $7.0
million compared to a benefit of $0.2 million for the Fiscal 2012
period. For the Fiscal 2013 period, the net income tax expense of
$0.6 million related to income taxes on foreign profits was offset
by a $7.6 million Malta valuation allowance adjustment. For the
Fiscal 2012 period, the net income tax expense of $0.6 million
related to income taxes on foreign profits was offset by a $0.8
million Malta valuation allowance adjustment.
Fourth-Quarter Fiscal 2013 Segment
Comparisons Comparing the Automotive segment's fourth quarter
of Fiscal 2013 to the same period of Fiscal 2012,
- Net sales increased 12.1 percent attributable to
- an 18.6 percent sales increase in Europe primarily due to new
product launches; and
- a 26.9 percent sales increase in Asia due to increased demand
for transmission lead-frame assemblies, switches and sensors;
partially offset by
- a 6.2 percent sales decrease in North America due to lower
sales at AMD.
- Gross margins as a percentage of sales increased to 15.1
percent from 13.9 percent due to higher sales and lower costs
related to third-party inspection costs, premium freight and
over-time expenses, partially offset by increased design,
development and engineering costs for a North American automotive
program and the increased sales of automotive product that has
higher prime cost due to the current high percentage of purchased
content.
- Income from operations improved to $6.4 million from $3.3
million due to higher sales, lower costs related to third-party
inspection costs, premium freight and over-time expenses, as well
as lower legal and salary expense, partially offset by severance
and building demolition costs and higher design, development and
engineering costs.
Comparing the Interconnect segment's fourth quarter of Fiscal
2013 to the same period of Fiscal 2012,
- Net sales improved 26.4 percent attributable to
- a 42.1 percent sales improvement in North America due to higher
appliance and data solutions sales; partially offset by
- a 4.9 percent sales decrease in Europe and a 27.0 percent sales
decrease in Asia due primarily to lower radio remote control and
sensor sales.
- Gross margins as a percentage of sales decreased to 25.5
percent from 31.0 percent due primarily to increased sales of lower
margin products and decreased sales of higher margin products, as
well as costs related to the newly acquired business in Italy and
new sensor product development in North America.
- Income from operations improved to $6.3 million from $6.0
million due to improved sales, partially offset by costs related to
the newly acquired business in Italy and new product development in
North America.
Comparing the Power Products segment's fourth quarter of Fiscal
2013 to the same period of Fiscal 2012,
- Net sales increased 23.4 percent attributable to
- a 14.6 percent sales increase in North America driven by higher
cabling product sales;
- a 200.0 percent increase in sales in Europe due to new product
launches; and
- a 13.9 percent sales increase in Asia due to higher busbar
demand.
- Gross margins as a percentage of sales improved to 22.9 percent
from 12.9 percent due to favorable sales mix and higher sales.
- Income from operations decreased to a loss of $2.7 million from
a loss of $0.1 million due to a $4.3 million goodwill impairment
charge related to Eetrex. Without this impairment, income from
operations would have improved to $1.6 million.
Fiscal 2013 Methode's Fiscal 2013 net
sales increased $54.7 million, or 11.8 percent, to $519.8 million
from $465.1 million in Fiscal 2012.
In September 2012, the Company and various Delphi parties agreed
to settle all Delphi related litigation matters. In addition to
resolving all claims between the parties, the Company assigned
certain patents to Delphi and entered into a non-compete with
respect to the related technology. In exchange, the Company
received a payment of $20.0 million. The Company recorded the gain
in the income from settlement section of its consolidated statement
of operations for the fiscal year ended April 27, 2013.
Net income increased $32.3 million to $40.7 million, or $1.08
per share, in Fiscal 2013 compared to $8.4 million, or $0.22 per
share, in Fiscal 2012. Year over year, Fiscal 2013 net income
benefitted from:
- the gain recorded in connection with the legal settlement of
$20.0 million;
- higher income tax benefit due to adjustment of the valuation
allowance related to Malta investment tax credits of $6.8
million;
- higher Other segment income (primarily as a result of increased
torque-sensing product sales) of $3.7 million;
- lower legal expenses of $2.1 million;
- commodity pricing adjustments in the Automotive segment of $1.4
million;
- lower costs related to third-party inspection costs, premium
freight and over-time expenses of $1.3 million;
- the reversal of accruals related to a customer bankruptcy of
$1.1 million;
- lower stock-based compensation costs of $0.7 million; and
- higher sales.
Year over year, Fiscal 2013 net income was negatively affected
by:
- a goodwill impairment charge in the Power Products segment
related to Eetrex of $4.3 million;
- higher costs related to the design, development, engineering
and launch of a large North American automotive program of $2.5
million;
- compensation expense related to the company's long-term
incentive program for performance-based tandem cash awards of $2.1
million;
- severance and building demolition costs in the Automotive
segment of $1.1 million;
- higher Other expense, due to increased foreign currency loss,
the lack of a life insurance gain and the lack of a gain on the
acquisition of AMD, of $1.0 million;
- costs related to the delayed launch of a laundry program of
$0.6 million; and
- costs related to the newly acquired Hetronic business in Italy
of $0.5 million.
Excluding the impact of the pre-tax gain in connection with the
legal settlement, the Malta valuation allowance, the goodwill
impairment charge and the compensation expense, Methode's Fiscal
2013 net income was $19.5 million, or $0.52 per share, which is in
line with full-year Fiscal 2013 earnings per share guidance of
$0.45 to $0.60 per share.
Consolidated gross margins as a percentage of sales were 17.6
percent in Fiscal 2013 compared to 17.9 percent in the same period
of Fiscal 2012. The decrease was due primarily to higher design,
development and engineering costs for a new automotive program,
increased sales of automotive product that has higher prime cost
due to the current high percentage of purchased content, severance
and building demolition costs, as well as manufacturing
inefficiencies due to launch delays in the Interconnect segment,
partially offset by a favorable commodity pricing adjustment in the
Automotive segment, lower costs related to third-party inspection,
premium freight and over-time expenses, a favorable product mix in
the Power Products segment and higher sales and lower costs in the
Other segment.
Selling and administrative expenses decreased $3.6 million, or
5.2 percent, to $66.3 million in Fiscal 2013 compared to $69.9
million in the prior year due primarily to the reversal of customer
bankruptcy accruals, lower legal expenses, as well as lower salary
and stock-based compensation, partially offset by the compensation
expense. Selling and administrative expenses as a percentage of net
sales decreased to 12.8 percent in Fiscal 2013 from 15.0 percent in
Fiscal 2012.
In Fiscal 2013, income tax benefit/expense increased $5.7
million to a benefit of $2.5 million compared to an expense of $3.2
million for Fiscal 2012. For Fiscal 2013, the net income taxes on
foreign profits of $5.1 million were offset by a $7.6 million Malta
valuation allowance adjustment. For Fiscal 2012, the income tax
expense relates to net income taxes on foreign profits of $2.0
million and $2.0 million for taxes on a foreign dividend, partially
offset by a benefit of $0.8 million Malta valuation allowance
adjustment.
Fiscal 2013 Segment Comparison Comparing
the Automotive segment's Fiscal 2013 to Fiscal 2012,
- Net sales increased 14.2 percent attributable to
- a 37.5 percent sales improvement in North America due primarily
to higher sales for the Ford center console program and
transmission lead frame assembly; and
- a 12.8 percent sales increase in Europe primarily due to new
product launches; partially offset by
- a 4.1 percent sales decrease in Asia due to the planned partial
transfer of transmission lead frame assembly products to the
Company's Mexico facility.
- Gross margins as a percentage of sales decreased slightly to
14.0 percent in Fiscal 2013 from 14.1 percent in Fiscal 2012 and
were affected by increased design, development and engineering
costs for a North American automotive program, the increased sales
of automotive product that has higher prime cost due to the current
high percent of purchased content, as well as severance and
building demolition costs, partially offset by lower third-party
inspection costs, premium freight and over-time expenses as well as
commodity pricing adjustments.
- Income from operations improved to $38.8 million from $10.0
million due to the litigation settlement, increased sales,
favorable commodity pricing adjustments, lower third-party
inspection costs, premium freight and over-time expenses as well as
lower legal and other selling and administrative expenses,
partially offset by severance and building demolition costs, higher
design, development and engineering costs and higher prime
costs.
Comparing the Interconnect segment's Fiscal 2013 to Fiscal
2012,
- Net sales increased 9.8 percent attributable to
- higher North American sales of 20.7 percent due to improved
appliance and data solutions sales, partially offset by lower
safety radio remote control device sales; partially offset by
- lower European sales of 10.2 percent due to lower safety radio
remote control device and sensor sales; and
- lower Asian sales of 18.3 percent primarily due to lower legacy
product sales from the planned exit of a product line and lower
safety radio remote control device sales.
- Gross margins as a percentage of sales declined to 26.2 percent
from 28.3 percent due primarily to the increased sales of lower
margin products and decreased sales of higher margin products, as
well as costs related to the delayed launch of a laundry program
and North American sensor development costs.
- Income from operations increased to $19.0 million from $18.1
million primarily due to higher sales and lower selling and
administrative expenses, partially offset by costs related to the
delayed launch of a laundry program and higher development
costs.
Comparing the Power Products segment's Fiscal 2013 to Fiscal
2012,
- Net sales improved 1.3 percent driven by
- flat sales in North America impacted by lower busbar and heat
sink demand offset by higher demand for flexible cabling products;
and
- a 54.5 percent sales increase in Europe due to new product
launches; partially offset by
- a 3.2 percent sales decline in Asia due to lower busbar
demand.
- Gross margins as a percentage of sales increased to 17.3
percent from 16.5 percent due primarily to sales mix partially
offset by development costs.
- Income from operations decreased to a loss of $2.1 million from
income of $1.7 million due to a $4.3 million impairment of goodwill
related to Eetrex and increased development costs, partially offset
by higher sales. Without this impairment, income from operations
would have improved to $2.2 million.
Management Comments President and Chief
Executive Officer Donald W. Duda said, "We ended Fiscal 2013 on a
strong note, with fourth-quarter sales improving over 17 percent
and improved gross margins in our Automotive and Power Products
segments. Additionally, we are proud of our achievements in Fiscal
2013, including sales improvement of nearly 12 percent, the
successful launch of the first high volume laundry platform
utilizing touch technology, a significant number of automotive
launches in Europe, as well as the launch of the GM center console
program."
Guidance For Fiscal 2014, Methode
anticipates sales in the range of $630 to $660 million and earnings
per share in the range of $0.91 to $1.11. The Company currently
expects that the fourth quarter will be the strongest quarter of
Fiscal 2014. The guidance ranges for Fiscal 2014 are based upon
management's expectations regarding a variety of factors and
involve a number of risks and uncertainties, including the
following significant factors considered by management in preparing
this guidance:
- the launch of significant awards previously announced and the
corresponding sales volumes and timing thereof for certain makes
and models of automobiles and trucks for Fiscal 2014;
- the uncertainty of the European economy;
- foreign exchange translation rates;
- a mid-teen tax effective tax rate, assuming no changes in tax
valuation allowances;
- an increase in diluted shares outstanding;
- compensation expense related to tandem cash awards; and
- no unusual or one-time items.
Conference Call The Company will conduct a
conference call and Webcast to review financial and operational
highlights led by its President and Chief Executive Officer, Donald
W. Duda, and Chief Financial Officer, Douglas A. Koman, at 10:00
a.m. Central time today.
To participate in the conference call, please dial (877)
407-8031 (domestic) or (201) 689-8031 (international) at least five
minutes prior to the start of the event. A simultaneous Webcast can
be accessed through the Company's Web site, www.methode.com, by
selecting the Investor Relations page, and then clicking on the
"Webcast" icon.
A replay of the conference call, as well as an MP3 download,
will be available shortly after the call through July 4 by dialing
(877) 660-6853 (domestic) or (201) 612-7415 (international) and
providing Conference ID number 415939. On the Internet, a replay
will be available for 90 days through the Company's Web site,
www.methode.com, by selecting the Investor Relations page and then
clicking on the "Webcast" icon.
About Methode Electronics, Inc. Methode
Electronics, Inc. (NYSE: MEI) is a global developer of custom
engineered and application specific products and solutions with
manufacturing, design and testing facilities in China, Germany,
India, Italy, Lebanon, Malta, Mexico, the Philippines, Singapore,
Switzerland, the United Kingdom and the United States. We design,
manufacture and market devices employing electrical, electronic,
wireless, safety radio remote control, sensing and optical
technologies to control and convey signals through sensors,
interconnections and controls. Our business is managed on a segment
basis, with those segments being Automotive, Interconnect, Power
Products and Other. Our components are in the primary end markets
of the automobile, computer, information processing and networking
equipment, voice and data communication systems, consumer
electronics, appliances, aerospace vehicles and industrial
equipment industries. Further information can be found on Methode's
Web site www.methode.com.
Forward-Looking Statements This press
release contains certain forward-looking statements, which reflect
management's expectations regarding future events and operating
performance and speak only as of the date hereof. These
forward-looking statements are subject to the safe harbor
protection provided under the securities laws. Methode undertakes
no duty to update any forward-looking statement to conform the
statement to actual results or changes in Methode's expectations on
a quarterly basis or otherwise. The forward-looking statements in
this press release involve a number of risks and uncertainties. The
factors that could cause actual results to differ materially from
our expectations are detailed in Methode's filings with the
Securities and Exchange Commission, such as our annual and
quarterly reports. Such factors may include, without limitation,
the following: (1) dependence on a small number of large customers,
including two large automotive customers; (2) dependence on the
automotive, appliance, computer and communications industries; (3)
customary risks related to conducting global operations; (4) the
ability to successfully launch a significant number of programs;
(5) ability to avoid design or manufacturing defects (6) ability to
compete effectively; (7) dependence on the availability and price
of raw materials; (8) dependence on our supply chain; (9) further
downturns in the automotive industry or the bankruptcy of certain
automotive customers; (10) ability to keep pace with rapid
technological changes; (11) ability to protect our intellectual
property; (12) ability to withstand price pressure; (13) location
of a significant amount of cash outside of the U.S.; (14) currency
fluctuations; (15) ability to successfully benefit from
acquisitions and divestitures; (16) ability to withstand business
interruptions; (17) income tax rate fluctuations; and (18) the cost
and implementation of SEC disclosure and reporting requirements
regarding conflict minerals.
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
------------------------------------
Fiscal Quarter Ended
------------------------------------
April 27, 2013 April 28, 2012
----------------- -----------------
Net sales $ 148,358 $ 126,400
Cost of products sold 120,514 103,441
----------------- -----------------
Gross margins 27,844 22,959
Impairment of goodwill 4,326 -
Selling and administrative expenses 19,880 18,077
----------------- -----------------
Income from operations 3,638 4,882
Interest income, net (57) (129)
Other (income)/expense, net 649 (494)
----------------- -----------------
Income before income taxes 3,046 5,505
Income tax benefit (7,012) (187)
----------------- -----------------
Net Income 10,058 5,692
Less: Net loss attributable to
noncontrolling interest (104) (76)
NET INCOME ATTRIBUTABLE TO METHODE
ELECTRONICS, INC. $ 10,162 $ 5,768
================= =================
Net income per share:
Basic $ 0.27 $ 0.15
Diluted $ 0.27 $ 0.15
Basic shares 37,490,370 37,376,936
Diluted shares 38,210,800 37,634,313
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Fiscal Year Ended
-----------------------------
April 27, April 28,
2013 2012
------------- -------------
Net sales $ 519,836 $ 465,095
Cost of products sold 428,200 381,981
------------- -------------
Gross margins 91,636 83,114
Impairment of goodwill 4,326 -
Income from settlement (20,000) -
Selling and administrative expenses 66,338 69,946
Amortization of intangibles 1,794 1,811
------------- -------------
Income from operations 39,178 11,357
Interest (income)/expense, net (30) (288)
Other expense 1,257 272
------------- -------------
Income before income taxes 37,951 11,373
Income tax expense/(benefit) (2,493) 3,236
------------- -------------
Net income 40,444 8,137
------------- -------------
Less: Net loss attributable to noncontrolling
interest (294) (246)
------------- -------------
NET INCOME ATTRIBUTABLE TO METHODE
ELECTRONICS, INC. $ 40,738 $ 8,383
============= =============
Net income per share:
Basic $ 1.09 $ 0.22
Diluted $ 1.07 $ 0.22
Basic shares 37,466,221 37,366,505
Diluted shares 38,120,462 37,591,980
METHODE ELECTRONICS, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
April 27, April 28,
2013 2012
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 65,811 86,797
Accounts receivable, less allowance (2013 - $1,022;
2012 -$1,279) 119,816 98,359
Inventories:
Finished products 11,736 7,001
Work in process 10,220 14,235
Materials 37,973 22,325
----------- -----------
59,929 43,561
Deferred income taxes 3,313 3,529
Prepaid and refundable income taxes 326 1,015
Prepaid expenses and other current assets 9,459 7,172
----------- -----------
TOTAL CURRENT ASSETS 258,654 240,433
PROPERTY, PLANT AND EQUIPMENT
Land 3,135 3,135
Buildings and building improvements 43,159 44,051
Machinery and equipment 250,961 230,265
----------- -----------
297,255 277,451
Less allowances for depreciation 198,897 200,299
----------- -----------
98,358 77,152
OTHER ASSETS
Goodwill 12,907 16,422
Other intangibles, less accumulated amortization 16,466 16,620
Cash surrender value of life insurance 9,351 8,802
Deferred income taxes 14,767 15,072
Pre-production costs 11,511 16,215
Other 12,925 12,932
----------- -----------
77,927 86,063
----------- -----------
TOTAL ASSETS 434,939 403,648
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 61,541 54,775
Salaries, wages and payroll taxes 9,673 9,554
Other accrued expenses 14,827 14,964
Deferred income taxes 628 9,131
Income tax payable 3,802 3,453
----------- -----------
TOTAL CURRENT LIABILITIES 90,471 91,877
LONG-TERM DEBT 43,500 48,000
OTHER LIABILITIES 3,294 3,413
DEFERRED COMPENSATION 8,090 4,801
NON-CONTROLLING INTEREST - 333
SHAREHOLDERS' EQUITY
Common stock, $0.50 par value, 100,000,000 shares
authorized, 38,455,853 and 38,375,678 shares
issued as of April 27, 2013 and April 28, 2012,
respectively 19,228 19,188
Additional paid-in capital 81,472 77,652
Accumulated other comprehensive income 15,680 15,573
Treasury stock, 1,342,188 as of April 27, 2013
and April 28, 2012 (11,377) (11,377)
Retained earnings 184,368 154,008
----------- -----------
TOTAL METHODE ELECTRONICS, INC. SHAREHOLDERS'
EQUITY 289,371 255,044
Noncontrolling interest 213 180
----------- -----------
TOTAL EQUITY 289,584 255,224
----------- -----------
TOTAL LIABILITIES AND EQUITY 434,939 403,648
=========== ===========
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Year Ended
--------------------------------
April 27, 2013 April 28, 2012
--------------- ---------------
OPERATING ACTIVITIES
Net income $ 40,444 $ 8,137
Adjustments to reconcile net income to
net cash provided by/(used in)
operating activities:
Loss on sale of fixed assets - 118
Impairment of goodwill 4,326 -
Gain on bargain purchase - (255)
Provision for depreciation 17,012 14,348
Amortization of intangible assets 1,794 1,811
Stock-based compensation 3,252 3,976
Provision for bad debt 106 495
Deferred income taxes (7,206) (1,939)
Changes in operating assets and
liabilities:
Accounts receivable (21,198) (13,525)
Inventories (16,138) (3,278)
Prepaid expenses and other current
assets 9,175 (10,255)
Accounts payable and accrued
expenses 1,678 25,192
--------------- ---------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 33,245 24,825
INVESTING ACTIVITIES
Purchases of property, plant and
equipment (38,555) (25,744)
Acquisition of businesses (1,434) (6,353)
--------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (39,989) (32,097)
FINANCING ACTIVITIES
Proceeds from exercise of stock options 608 263
Cash dividends (10,378) (10,364)
Proceeds from borrowings 37,000 52,000
Repayment of borrowings (41,500) (4,000)
--------------- ---------------
NET CASH PROVIDED BY/ (USED IN)
FINANCING ACTIVITIES (14,270) 37,899
Effect of foreign currency exchange rate
changes on cash 28 (1,275)
--------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (20,986) 29,352
Cash and cash equivalents at beginning of
year 86,797 57,445
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 65,811 $ 86,797
=============== ===============
For Methode Electronics, Inc. - Investor Contacts:
Kristine Walczak Dresner Corporate Services 312-780-7205
kwalczak@dresnerco.com Philip Kranz Dresner Corporate Services
312-780-7240 pkranz@dresnerco.com
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