Methode Electronics, Inc. (NYSE: MEI), a global designer and
manufacturer of electro-mechanical devices, today announced
operating results for the fiscal-year 2009 fourth quarter and year
ended May 2, 2009. Due to the timing of the Company's fiscal
calendar, the 12 months ended May 2, 2009, represent 52 weeks of
results, while the 12 months ended May 3, 2008, represent 53 weeks
of results.
Fourth-Quarter Fiscal Year 2009
Methode's fourth-quarter fiscal year 2009 net sales decreased
$65.4 million, or 42.4 percent, to $89.0 million from $154.4
million in the fourth quarter of fiscal year 2008. Net income
decreased $105.5 million to a loss of $92.6 million, or $2.50 per
share, in the fourth quarter of fiscal year 2009 compared to income
of $12.9 million, or $0.34 per share, in the same period of fiscal
year 2008.
The decrease in net income in the fiscal-year 2009 fourth
quarter is due to an impairment of goodwill and intangible assets
charge of $61.7 million ($1.99 per share after tax), restructuring
charges of $10.3 million ($0.41 per share after tax), and lower
sales attributable to the continuing softness of the global
economic environment, especially the effect on the North American
automotive market, as compared to the fiscal-year 2008 fourth
quarter, which had restructuring charges of $4.7 million ($0.08 per
share after tax). Excluding the restructuring and impairment of
goodwill and intangible assets charges, Methode's net loss was $3.6
million, or $0.10 per share, in the fourth-quarter fiscal year 2009
compared to net income of $15.7 million, or $0.42 per share,
excluding restructuring charges, in the same period of fiscal year
2008.
Based on Methode's reduced market capitalization and general
business declines in the last half of fiscal year 2009, the Company
performed goodwill impairment tests in accordance with generally
accepted accounting principles as of May 2, 2009. As a result, it
was determined that the fair value of the net assets of certain
reporting units was less than the carrying value. Therefore, a
goodwill impairment charge was recorded for $45.1 million in the
fourth quarter of fiscal year 2009. Also, in accordance with
generally accepted accounting principles, the Company determined
that certain identifiable intangible assets were impaired based on
the Company's future estimates of the undiscounted cash flows,
which resulted in an impairment charge of $16.6 million in the
fourth quarter of fiscal year 2009.
In the fourth quarter of fiscal year 2009, Automotive segment
net sales were negatively impacted by the continuing softness of
the global economic environment, especially the effect on the North
American automotive industry, and by negligible Chrysler sales
volumes as compared to the prior period due to the Company's
decision to exit the Chrysler business. The transfer of the
Chrysler product was substantially completed during the second
quarter of fiscal year 2009. Additionally, as a result of the
Company's agreement with Ford Motor Company to transfer all
production at Methode's Reynosa, Mexico, facility to another
supplier, the Company's sales to Ford were further reduced in the
fourth quarter of fiscal 2009. Methode expects to complete the
transfer of this Ford business by August 2009.
In January 2008, Methode announced a restructuring of its
U.S.-based automotive operations and the decision to discontinue
producing certain legacy products in the Interconnect segment. In
March 2009, Methode announced several additional restructuring
actions to further reduce its exposure to the North American
automotive industry, and to reduce costs by consolidating
facilities and migrating manufacturing to lower cost regions. The
Company expects to complete these restructuring activities by the
end of the 2010 fiscal year and estimates that it will record
pre-tax charges in fiscal year 2010 of between $9.2 million and
$19.2 million.
Consolidated cost of products sold decreased $32.4 million, or
28.1 percent, to $82.7 million in the fiscal-year 2009 fourth
quarter, compared to $115.1 million in the same period of fiscal
year 2008. The decrease is due to lower sales volumes. Cost of
products sold as a percentage of sales was 92.9 percent and 74.6
percent in the fourth-quarter fiscal years 2009 and 2008,
respectively. The increase in cost of products sold as a percentage
of net sales in the current period is the result of manufacturing
inefficiencies caused by the significant drop in sales experienced
in the last half of fiscal year 2009.
Selling and administrative expenses decreased $3.0 million, or
18.8 percent, to $13.0 million for the fourth-quarter fiscal year
2009, compared to $16.0 million in the prior-year period. The
decrease relates to lower performance-based compensation expense
and commission expense as a result of lower sales and earnings. Due
to the significant drop in sales experienced in the last half of
fiscal year 2009, selling and administrative expenses as a
percentage of sales increased to 14.6 percent in the fourth-quarter
fiscal year 2009, compared to 10.4 percent in the same period of
fiscal year 2008.
Fiscal Year 2009 Results
For the year ended May 2, 2009, net sales decreased $125.5
million, or 22.8 percent, to $425.6 million from $551.1 million for
the year ended May 3, 2008. Net income decreased $152.3 million to
a loss of $112.5 million, or $3.05 per share, in fiscal year 2009
compared to income of $39.8 million, or $1.06 per share, in fiscal
year 2008.
The decrease in net income is due mainly to an impairment of
goodwill and intangible assets charge of $94.4 million ($2.54 per
share after tax), restructuring charges of $25.3 million ($0.68 per
share after tax), and lower sales attributable to the softening of
the global economic environment in fiscal year 2009. Fiscal year
2008 results included restructuring charges of $5.2 million ($0.08
per share after tax). Excluding the restructuring and impairment of
goodwill and intangible asset charges, Methode achieved net income
of $6.4 million, or $0.17 per share, in fiscal year 2009 compared
to $42.9 million, or $1.14 per share, excluding restructuring
charges, in fiscal year 2008.
In fiscal year 2009, net sales were negatively impacted by the
softening of the global economic environment, especially the effect
on the North American automotive industry, and by planned lower
Chrysler and Ford sales volumes in the Automotive segment.
Consolidated cost of products sold decreased $72.0 million, or
16.8 percent, to $356.4 million in fiscal year 2009, compared to
$428.4 million in fiscal year 2008. The decrease is due to lower
sales volumes. Cost of products sold as a percentage of sales was
83.7 percent and 77.7 percent in fiscal years 2009 and 2008,
respectively. The increase in cost of products sold as a percentage
of net sales in the current period is the result of manufacturing
inefficiencies caused by the significant drop in sales experienced
in the last half of fiscal year 2009.
Selling and administrative expenses decreased $4.0 million, or
6.5 percent, to $57.5 million for the fiscal year ended May 2,
2009, from $61.5 million for the fiscal year ended May 3, 2008.
Selling and administrative expense was favorably impacted by lower
performance-based compensation expense and commission expense in
fiscal year 2009 compared to fiscal year 2008. These were partially
offset by higher amortization expense from the Hetronic, VEP and
TouchSensor acquisitions. As a percentage of sales, selling and
administrative expenses increased to 13.5 percent in fiscal year
2009, compared to 11.2 percent in fiscal year 2008 as a result of
the significant drop in sales experienced in the last half of
fiscal year 2009.
For fiscal year 2009, the income tax provision was an expense of
$1.7 million compared with an expense of $9.7 million in fiscal
year 2008. In fiscal year 2009, the impairment of assets,
restructuring charges and slowing of business resulted in a loss
before income taxes generating a tax benefit. Offsetting this tax
benefit, in accordance with Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes," the Company
recorded a valuation allowance due to the uncertainty of the future
utilization of the tax benefit. The valuation allowance was
recorded in the fourth quarter of fiscal 2009, resulting in an
income tax expense of $14.0 million compared to $2.7 million in the
same period of fiscal year 2008.
Management Comments
President and Chief Executive Officer Donald W. Duda said,
"Accounting rules mandated that goodwill and certain identifiable
intangible assets of Methode were impaired. Notwithstanding these
charges, we believe Methode's businesses are viable and well
positioned to rebound when the economy improves. During fiscal year
2009, we aggressively restructured and strengthened Methode's
global manufacturing footprint to lower our breakeven point.
Through these actions, we have significantly reduced the Company's
cost structure and cash flow needs going forward. We also continued
the acceleration of our strategy to substantially exit the legacy
North American auto business and expect to reduce our overall
automotive sales to approximately 40 percent of total revenues by
the end of fiscal 2011. These actions, along with the additional
restructuring actions taken throughout fiscal years 2008 and 2009,
will see us through these difficult times and will allow us to come
out of this downturn a leaner and stronger company. Furthermore,
Methode's margin and profit potential should benefit considerably
from our restructuring initiatives when the economy returns to
normalized levels.
"In addition, Methode's balance sheet remains strong, and we
have good liquidity. We ended the year with $54.0 million in cash,
no debt and a $75 million revolving credit facility. Additionally,
we generated $43.2 million in cash from operating activities in
fiscal year 2009, allowing us to repurchase approximately 670,000
shares of our common stock, while paying an aggregate of 26 cents
per share in dividends for the fiscal year."
Mr. Duda concluded, "Our strategy remains unchanged, with our
focus on providing user interfaces, sensors and power solutions,
and accelerating the introduction of new products utilizing our
advanced manufacturing capabilities. In fiscal 2010, we expect to
solidify our existing market positions and increase our prominence
in new markets to advance future results."
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) and provide passcode 326370 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 9 by dialing (877) 660-6853 (domestic) or (201)
612-7415 and providing pass code 326370. On the Internet, a replay
will be available for seven 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 designer and
manufacturer of electro-mechanical devices with manufacturing,
design and testing facilities in the United States, Malta, Mexico,
the United Kingdom, Germany, the Czech Republic, China, Singapore,
the Philippines and India. We design, manufacture and market
devices employing electrical, electronic, wireless, 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
within the automotive industry; (2) dependence on the automotive,
appliance, computer and communications industries; (3) seasonal and
cyclical nature of some of our businesses; (4) ability to protect
our intellectual property; (5) customary risks related to
conducting global operations; (6) ability to successfully benefit
from acquisitions; (7) ability to keep pace with rapid
technological changes; (8) ability to avoid design or manufacturing
defects; (9) dependence on the availability and price of raw
materials; (10) oil prices could affect our automotive customers
future results; (11) incurrence of additional restructuring
charges, goodwill and other asset impairments.
Methode Electronics, Inc.
Financial Highlights
(In thousands, except per share data, unaudited)
Three Months Ended Fiscal Year Ended
May 2, May 3, May 2, May 3,
2009 2008 2009 2008
--------- --------- --------- ---------
Net sales $ 89,045 $ 154,360 $ 425,644 $ 551,073
Other income 759 893 3,202 1,879
Cost of products sold 82,739 115,088 356,496 428,355
Restructuring 10,281 4,709 25,278 5,159
Impairment of goodwill and
other assets 61,696 1,472 94,374 1,472
Selling and administrative
expenses 13,035 15,999 57,471 61,550
Amortization of intangibles 1,524 1,786 6,933 6,013
Income/(loss) from operations (79,471) 16,199 (111,706) 50,403
Interest, net 167 625 1,382 2,324
Other, net 746 (1,166) (479) (3,250)
Income/(loss) before income
taxes (78,558) 15,658 (110,803) 49,477
Income taxes 13,994 2,739 1,680 9,723
Net income/(loss) (92,552) 12,919 (112,483) 39,754
Basic earnings/(loss) per
common share ($ 2.50) $ 0.35 ($ 3.05) $ 1.07
Diluted earnings/(loss) per
common share ($ 2.50) $ 0.34 ($ 3.05) $ 1.06
Average Number of Common Shares
Outstanding:
Basic 36,598 37,108 36,879 37,069
Diluted 36,598 37,365 36,879 37,493
Methode Electronics, Inc.
Summary Balance Sheet
(In thousands)
May 2, May 3,
2009 2008
--------- ---------
Cash $ 54,030 $ 104,305
Accounts receivable - net 60,406 85,805
Inventories 40,426 55,949
Other current assets 26,384 14,758
--------- ---------
Total Current Assets 181,246 260,817
Property, plant and equipment - net 69,917 90,280
Goodwill - net 11,771 54,476
Intangible assets - net 20,501 41,282
Other assets 21,853 23,365
--------- ---------
Total Assets $ 305,288 $ 470,220
========= =========
Accounts payable $ 24,495 $ 42,810
Other current liabilities 29,023 33,902
--------- ---------
Total Current Liabilities 53,518 76,712
Other liabilities 19,994 20,723
Shareholders' equity 231,776 372,785
--------- ---------
Total Liabilities and Shareholders' Equity $ 305,288 $ 470,220
========= =========
Methode Electronics, Inc.
Summary Statement of Cash Flow
(In thousands)
Fiscal Year Ended
May 2, May 3,
2009 2008
---------- ----------
Operating Activities:
Net income $ (112,483) $ 39,754
Provision for depreciation 30,103 22,146
Impairment of tangible assets 10,313 1,472
Impairment of goodwill and intangible assets 94,374 -
Amortization of intangibles 6,933 6,013
Amortization of stock awards and stock options (553) 3,359
Changes in operating assets and liabilities 6,347 6,821
Other 8,134 (2,544)
---------- ----------
Net Cash Provided by Operating Activities 43,168 77,021
Investing Activities:
Purchases of property, plant and equipment (17,064) (20,018)
Proceeds from sale of building and equipment - 1,706
Acquisitions of businesses and technology (59,044) (9,647)
Joint venture dividend - (1,000)
Other (14) (27)
---------- ----------
Net Cash Used in Investing Activities (76,122) (28,986)
Financing Activities:
Repurchase of common stock (5,252) (1,249)
Proceeds from exercise of stock options 113 1,298
Tax benefit from stock options and awards (209) 383
Dividends (9,778) (7,575)
---------- ----------
Net Cash Used in Financing Activities (15,126) (7,143)
Effect of foreign exchange rate changes on cash (2,195) 3,322
---------- ----------
Increase/Decrease in Cash and Cash Equivalents (50,275) 44,214
Cash and Cash Equivalents at Beginning of Period 104,305 60,091
---------- ----------
Cash and Cash Equivalents at End of Period $ 54,030 $ 104,305
========== ==========
For Methode Electronics, Inc. - Investor Contacts: Philip Kranz
Dresner Corporate Services 312-780-7240 pkranz@dresnerco.com
Kristine Walczak Dresner Corporate Services 312-780-7205
kwalczak@dresnerco.com
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