Table
of Contents
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended May 2, 2009
Commission
File Number 0-2816
METHODE
ELECTRONICS, INC.
(Exact name of Registrant
as specified in its charter)
Delaware
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36-2090085
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(State or other
jurisdiction of
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(IRS Employer
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incorporation or organization)
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Identification No.)
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7401
West Wilson Avenue
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Chicago,
Illinois
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60706-4548
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(Address of Principal
Executive Offices)
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(Zip Code)
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Registrants
telephone number (including area code):
(708) 867-6777
Securities registered
pursuant to Section 12(b) of the Act:
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Title of
each Class
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Name of
each exchange
on which registered
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Common Stock, $0.50 Par
Value
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New York Stock Exchange
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Securities registered
pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the Registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
o
No
x
Indicate by check mark if the Registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of
the Act. Yes
o
No
x
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
x
No
o
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of Registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
o
Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
o
No
o
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See definitions of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer
o
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Accelerated
filer
x
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Non-accelerated filer
o
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Smaller reporting
company
o
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Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2
of the
Act). Yes
o
No
x
The aggregate market value of common stock, $0.50 par
value, held by non-affiliates of the Registrant on November 1, 2008, based
upon the average of the closing bid and asked prices on that date as reported
by the New York Stock Exchange was $278.5 million.
Registrant had 38,174,261 shares of common stock,
$0.50 par value, outstanding as of July 1, 2009.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual
shareholders meeting to be held September 17, 2009 are incorporated by
reference into Part III.
Table
of Contents
PART I
Item 1. Business
Methode Electronics, Inc. was incorporated in
1946 as an Illinois corporation and reincorporated in Delaware in 1966. As used herein, we, us, our, the Company
or Methode mean Methode Electronics, Inc. and its subsidiaries.
We are a global designer and manufacturer of
electro-mechanical devices. We design,
manufacture and market devices employing electrical, radio remote control,
electronic, wireless, sensing and optical technologies. Our components are found in the primary end
markets of the aerospace, appliance, automotive, consumer and industrial
equipment markets, communications (including information processing and
storage, networking equipment, wireless and terrestrial voice/data systems),
rail and other transportation industries.
On September 30, 2008, we acquired certain assets
of Hetronic LLC (Hetronic) for $53.6 million in cash. We also incurred $2.4 million in transaction
costs related to the purchase. Hetronic
is a global leader in industrial safety radio remote controls with locations in
the U.S., Malta, the Philippines and Germany.
Hetronic is represented in 45 countries by direct sales associates,
licensed partners, distributors and representatives. Hetronic provides application specific and
standard controls to many different industries, such as material handling,
transportation, mining, military, agriculture and construction. The accounts and transactions of Hetronic
have been included in the Interconnect segment in the Consolidated Financial
Statements from the effective date of the acquisition.
Our business has been and will likely continue to be materially adversely affected by the current economic environment, particularly as it impacts the automotive industry. The disruptions in global financial and credit markets have significantly impacted global economic activity and led to an economic recession. As a result of these disruptions, our customers and markets have been adversely affected. We have experienced a significant drop in sales in all our reporting segments. If demand for our products continues to decline, our business, results of operations and financial condition could be materially adversely affected. If we are unable to successfully anticipate changing economic and financial conditions, we may be unable to effectively plan for and respond to these changes and our business could be adversely affected.
We have recorded and may record additional impairment
charges which would adversely impact our results of operations. We review our goodwill and other intangible
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of these assets may not be recoverable, and we also review
our goodwill annually in accordance with Statement of Financial Accounting
Standards, (SFAS) No. 142, Goodwill and Other Intangibles. The values assigned to goodwill and
intangible assets are normally based on estimates and judgments regarding
expectations for the success and life cycle of products and technologies
acquired. A decline in expectations,
future cash flows, a change in strategic direction or our market capitalization
remaining below our net book value for a significant additional period of time
could result in further significant impairment charges, which could have a
material adverse effect on our financial condition and results of
operations. See Note 4 to our
Consolidated Financial Statements for additional information regarding our
goodwill and other intangible asset impairment charges.
On March 12, 2009, we
announced several additional restructuring actions to further reduce our
exposure to the North American automotive industry and to consolidate
manufacturing facilities in lower cost regions to reduce costs. After these actions, our principal
manufacturing operations will be in Mexico, Malta and China. In addition, we have decided to transfer
certain new General Motors (GM) business to other suppliers. This business was scheduled to be produced in
our Shanghai, China automotive facility.
All Ford Motor Company production at our Reynosa,
Mexico facility is being moved to another supplier. TouchSensor manufacturing currently in west
suburban Chicago, Illinois will be moved to Monterrey, Mexico. Additionally, our operations in Shanghai,
China will be consolidated to two facilities from three.
In total, this additional restructuring will affect
approximately 850 employees worldwide. We estimate that we will record a
pre-tax charge between $16.0 million and $25.0 million, during fiscal 2009 and
2010. The cash portion of this charge is estimated between $7.0 million and
$8.0 million. During the fiscal year
ended May 2, 2009, we recorded a restructuring charge of $7.3 million,
which consisted of $0.1 million for employee severance, $1.4 million for
impairment and accelerated depreciation for buildings and improvements and
machinery and equipment,
1
Table of Contents
Item 1. Business - Continued
$5.4 million for customer
funded tooling and $0.1 in forfeited security deposits related to the
cancellation of the new GM business and $0.3 million relating to professional
fees. We estimate that we will record
pre-tax restructuring charges in fiscal 2010 between $8.7 million and $17.7
million. See Note 2 to our Consolidated
Financial Statements for additional information regarding the March 2009
restructuring.
On January 24, 2008, we announced a restructuring
of our U.S.-based automotive operations and a decision to discontinue producing
certain legacy products in the Interconnect segment. The Automotive and Interconnect segment
restructuring is expected to be completed during fiscal 2010. On January 24, 2008, the total pre-tax
charges were estimated to be between $19.0 million and $25.0 million. Through May 2, 2009, we have recorded
$23.2 million of charges, of which $18.0 million was recorded during fiscal
2009. We estimate that we will record
pre-tax restructuring charges in fiscal 2010 between $0.5 million and $1.5
million, of which $0.5 million will relate to the termination of approximately
225 employees and the cost of one-time employee benefits, retention, COBRA and
outplacement services. See Note 2 to our
Consolidated Financial Statements for additional information regarding the January 2008
restructuring.
We maintain our financial
records on the basis of a fifty-two or fifty-three week fiscal year ending on
the Saturday closest to April 30.
Due to the timing of our fiscal calendar, the fiscal year ended May 2,
2009 represents 52 weeks of results, the fiscal year ended May 3, 2008
represents 53 weeks of results and the fiscal year ended April 28, 2007
represents 52 weeks of results.
Segments.
Our business is managed and our financial results are
reported on a segment basis, with those segments being Automotive,
Interconnect, Power Products and Other.
The Automotive segment supplies electronic and
electromechanical devices and related products to automobile OEMs, either
directly or through their tiered suppliers, including control switches for
electrical power and signals, connectors for electrical devices, integrated
control components, switches and sensors that monitor the operation or status
of a component or system, and packaging of electrical components.
The Interconnect segment provides a variety of copper
and fiber-optic interconnect and interface solutions for the aerospace,
appliance, commercial, computer, construction, consumer, material handling,
medical, military, mining, networking, storage, and telecommunications
markets. Solutions include connectors,
conductive polymer, thick film inks, custom cable assemblies, industrial safety
radio remote controls, solid-state field effect interface panels, optical and
copper transceivers, PC and express card packaging and terminators. Services include the design and installation
of fiber optic and copper infrastructure systems, and manufacturing active and
passive optical components.
The Power Products segment manufactures braided
flexible cables, current-carrying laminated bus devices, custom power-product
assemblies, high-current low voltage flexible power cabling systems and powder
coated bus bars that are used in various markets and applications, including
aerospace, computers, industrial and power conversion, insulated gate bipolar
transistor solutions, military, telecommunications, and transportation.
The Other segment includes a designer and manufacturer
of magnetic torque sensing products, and independent laboratories that provide
services for qualification testing and certification, and analysis of
electronic and optical components.
Financial results by segment are summarized in Note 13
to the Consolidated Financial Statements.
2
Table of Contents
Item 1. Business - Continued
Sales.
The following
table reflects the percentage of net sales of the segments of the Company for
the last three fiscal years.
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Year Ended
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May 2,
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May 3,
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April 28,
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2009
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2008
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2007
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Automotive
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57.2
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%
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65.7
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%
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70.4
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%
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Interconnect
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30.8
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%
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24.7
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%
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18.3
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%
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Power Products
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10.0
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%
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8.3
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%
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9.6
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%
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Other
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1.9
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%
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1.3
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%
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1.7
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%
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Our sales activities are directed by sales managers
who are supported by field application engineers and other engineering
personnel who work with customers to design our products into their
systems. Our field application engineers
also help us identify emerging markets and new products. Our products are sold through in-house sales
staff and through independent manufacturers representatives with offices
throughout the world. Information about
our sales and operations in different geographic regions is summarized in Note
13 to the Consolidated Financial Statements.
Sales are made primarily to OEMs, either directly or through their
tiered suppliers as well as selling partners and distributors.
Sources and Availability of Raw Materials
.
Principal raw materials that we purchase include coil and bar stock, die
castings, ferrous and copper alloy sheet, glass, plastic molding materials,
precious metals, semiconductor components, silicon and urethane. All of these items are available from several
suppliers and we generally rely on more than one supplier for each item. We have not experienced any significant
shortages of raw materials and normally do not carry inventories of raw materials
or finished products in excess of those reasonably required to meet production
and shipping schedules. We did
experience significant price increases in fiscal 2008 and 2007 for copper,
precious metals and petroleum-based raw materials.
Patents; Licensing Agreements
. We have numerous United States and foreign
patents and license agreements covering certain of our products and
manufacturing processes, several of which are considered significant to our
business. Our ability to compete
effectively with other companies depends, in part, on our ability to maintain
the proprietary nature of our technology. Although we have been awarded, have
filed applications for, or have been licensed under numerous patents in the
United States and other countries, there can be no assurance concerning the
degree of protection afforded by these patents or the likelihood that pending
patents will be issued.
Seasonality
. A significant
portion of our business is dependent on automotive sales and the vehicle
production schedules of our customers.
The automotive market is cyclical and depends on general economic
conditions, interest rates, fuel prices and consumer spending patterns. During fiscal 2009, we experienced
significantly lower automotive sales due to the global recession. Also i
n fiscal 2009, we
significantly reduced shipments to
Chrysler, LLC (Chrysler)
due to our decision to exit
unprofitable or marginally profitable legacy business and we are transferring
some
Ford business
from our Reynosa, Mexico facility to other suppliers. In addition, new GM business from our
Shanghai, China facility will be transferred to other suppliers during the
first quarter of fiscal 2010
. This
loss of business will affect our U.S. automotive results in future
periods. Traditionally, in prior fiscal
years, o
ur business
was moderately seasonal as our North American automotive customers historically
halt operations for approximately two weeks in July for model changeovers
and one to two weeks during the December holiday period. During
the second half of fiscal 2009, we experienced additional customer plant
shutdowns due to lower demand for their products. Accordingly, if we experience additional
shutdowns, future quarterly results may be affected.
Material Customers
. During the
fiscal year ended May 2, 2009, shipments to Ford and Delphi Corporation (Delphi),
each represented approximately 10% or greater of consolidated net sales and, in
the aggregate, amounted to approximately 28.5% of consolidated net sales. Such shipments included a wide variety of our
automotive component products.
3
Table of Contents
Item 1. Business - Continued
Backlog
. Our backlog of orders was approximately $66.7
million at May 2, 2009, and $120.6 million at May 3, 2008. It is expected that most of the total backlog
at May 2, 2009 will be shipped within fiscal 2010.
Competitive Conditions
.
The markets in which we operate are highly competitive and characterized
by rapid changes due to technological improvements and developments. We compete with a large number of other
manufacturers in each of our product areas; many of these competitors have
greater resources and sales. Price,
service and product performance are significant elements of competition in the
sale of our products.
Research and Development
.
We maintain a research and development program involving a number of
professional employees who devote a majority of their time to the development
of new products and processes and the advancement of existing products. Senior management of our Company participates
directly in the program. Expenditures
for such activities amounted to $22.0 million, $25.6 million and $21.3 million
for fiscal 2009, 2008 and 2007, respectively.
Environmental Quality
.
Compliance with foreign, federal, state and local provisions regulating
the discharge of materials into the environment has not materially affected our
capital expenditures, earnings or our competitive position. Currently, we do not have any environmental
related lawsuits or material administrative proceedings pending against
us. Further information as to
environmental matters affecting us is presented in Note 9 to the Consolidated
Financial Statements.
Employees.
At May 2, 2009 and May 3, 2008, we had 2,876 and 3,580
employees, respectively. We also from
time to time employ part-time employees and hire independent contractors. As of May 2, 2009 our employees from our
Malta and Mexico facilities, which account for about 45% of the total number of
employees, are represented by a collective bargaining agreement. We have never experienced a work stoppage and
we believe that our employee relations are good.
Segment Information and Foreign Sales
.
Information about our operations by segment and in different geographic
regions is summarized in Note 13 to the Consolidated Financial Statements.
Available
Information
. We are subject to the informational
requirements of the Securities Exchange Act of 1934 (Exchange Act) and file
periodic reports, proxy statements and other information with the Securities
and Exchange Commission (SEC). Such reports may be obtained by visiting the
Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C.
20549, or by calling the SEC at (800) SEC-0330. In addition, the SEC maintains
an internet site (www.sec.gov) that contains reports, proxy and information
statements and other information.
Financial
and other information can also be accessed on the investor section of our
website at www.methode.com. We make available, free of charge, copies of our
annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act as soon
as reasonably practicable after filing such material electronically or
otherwise furnishing it to the SEC.
Also posted on our website are the Companys Corporate Governance
Guidelines, Code of Conduct and the charters of the Audit Committee,
Compensation Committee, Nominating and Governance Committee and Technology
Committee. Copies of these documents are also available free of charge by
sending a request to Methode Electronics, Inc., 7401 West Wilson Avenue,
Chicago, Illinois 60706, Attention: Investor Relations Department. Information on our website is not
incorporated into this Form 10-K or our other securities filings and is
not a part of them.
Certifications.
As
required by the rules and regulations of the New York Stock Exchange (NYSE),
we delivered to the NYSE a certification signed by our Chief Executive Officer,
Donald W. Duda, certifying that Mr. Duda was not aware of any violation by
the Company of the NYSEs corporate governance listing standards as of October 20,
2008.
As
required by the rules and regulations of the SEC, the Sarbanes-Oxley Act Section 302
certifications regarding the quality of our public disclosures are filed as
exhibits to this Annual Report on Form 10-K.
4
Table of Contents
Item 1A. Risk Factors
Certain statements in this
report are forward-looking statements that are subject to certain risks and
uncertainties. We undertake no duty to
update any such forward-looking statements to conform to actual results or
changes in our expectations. Our
business is highly dependent upon two large automotive customers and specific
makes and models of automobiles. Our
results will be subject to many of the same risks that apply to the automotive,
appliance, computer and telecommunications industries, such as general economic
conditions, interest rates, consumer spending patterns and technological
changes. Other factors, which may
result in materially different results for future periods, include the
following risk factors. These risk
factors should be considered in connection with evaluating the forward-looking
statements contained in this report because these factors could cause our
actual results and condition to differ materially from those projected in
forward-looking statements. The
forward-looking statements in this report are subject to the safe harbor protection
provided under the securities laws and are made as of the date of this
report. We undertake no duty to update
any such forward-looking statements.
We depend on a small number of large customers. If we were to lose any of these customers or any of these customers decreased the number of orders it placed, or if any of the customers declare bankruptcy, our future results could be adversely affected.
During the year ended May 2, 2009, shipments to Ford and Delphi, each represented 10% or greater of consolidated net sales and, in the aggregate, amounted to approximately 28.5% of consolidated net sales. It is expected that in fiscal 2010, we will significantly reduce sales to Ford in North America due to our decision to transfer business from our Reynosa, Mexico facility to other suppliers. The exit of this business will affect our U.S. automotive segment results in future periods. The loss of all or a substantial portion of the sales to Delphi, which has been in bankruptcy since October 2005, could have a material adverse effect on our sales, margins, profitability and, as a result, our share price. The Company is involved in certain disputes with Delphi, which could have an adverse impact on the Companys future sales to Delphi. The contracts we have entered into with many of our customers provide for supplying the customers requirements for a particular model, rather than for manufacturing a specific quantity of products. Such contracts range from one year to the life of the model, which is generally three to seven years. Therefore, the loss of a contract for a major model or a significant decrease in demand for certain key models or group of related models sold by Ford or Delphi could have a material adverse impact on our results of operations and financial condition. We also compete to supply products for successor models and are subject to the risk that Ford or Delphi will not select us to produce products on any such model, which could have a material adverse impact on our results of operations and financial condition.
In addition, we have significant receivable balances related to these customers and other major customers that would be at risk in the event of their bankruptcy. Due to the financial stresses within the worldwide automotive industry, certain automakers and tiered customers have already declared bankruptcy or may be considering bankruptcy.
Because
we derive a substantial portion of our revenues from customers in the
automotive, appliance, computer and communications industries, we are
susceptible to trends and factors affecting those industries.
Our components are found in
the primary end markets of the automotive, communications (including
information processing and storage, networking equipment, wireless and
terrestrial voice/data systems), aerospace, rail and other transportation
industries, appliances and the consumer and industrial equipment markets. Factors negatively affecting these industries
and the demand for products also negatively affect our business, financial
condition and operating results. Recently, we have experienced slow-downs in
all segments due to the recession. Any
adverse occurrence, including additional industry slowdown, recession, rising
interest rates, political instability, costly or constraining regulations,
armed hostilities, terrorism, excessive inflation, prolonged disruptions in one
or more of our customers production schedules or labor disturbances, that
results in significant decline in the volume of sales in these industries, or
in an overall downturn in the business and operations of our customers in these
industries, could materially adversely affect our business, financial condition
and operating results.
Our business is cyclical and seasonal in nature and further downturns in the automotive industry could reduce the sales and profitability of our business.
A large portion of our business is dependent on automotive sales and
the vehicle production schedules of our customers. The automotive market is cyclical and depends
on general economic conditions, interest rates and consumer spending
patterns. Any significant reduction in
vehicle production by our customers would have a
5
Table
of Contents
Item 1A. Risk Factors - Continued
material
adverse effect on our business. During
fiscal 2009, we experienced significantly lower automotive sales due to the
global recession. Also in fiscal 2009,
we significantly reduced shipments to Chrysler due to our decision to exit
unprofitable or marginally profitable legacy business and we are transferring
some Ford business from our Reynosa, Mexico facility to other suppliers during
the first quarter of fiscal 2010. In
addition, we are in the process of transferring new GM business from our
Shanghai, China facility to other suppliers, which is expected to be completed
during the first quarter of fiscal 2010.
The loss of business will affect our U.S. automotive results in future
periods. Traditionally, in prior fiscal
years, our business was moderately seasonal as our North American automotive
customers historically halt operations for approximately two weeks in July for
model changeovers and one to two weeks during the December holiday
period. During the second half of fiscal
2009, we experienced additional customer plant shutdowns due to lower demand
for their products. Accordingly, if we
experience additional shutdowns, quarterly results may be affected.
If we are unable to protect our intellectual property or we infringe, or are alleged to infringe, on another persons intellectual property, our business, financial condition and operating results could be materially adversely affected.
We have numerous United States and foreign patents and license agreements covering certain of our products and manufacturing processes, several of which are considered material to our business. Our ability to compete effectively with other companies depends, in part, on our ability to maintain the proprietary nature of our technology. Although we have been awarded, have filed applications for, or have been licensed under numerous patents in the United States and other countries, there can be no assurance concerning the degree of protection afforded by these patents or the likelihood that pending patents will be issued. The loss of any significant patents and trade secrets could adversely affect our sales, margins, profitability and, as a result, share price.
We may become involved in
litigation in the future to protect our intellectual property or because others
may allege that we infringe on their intellectual property. These claims and
any resulting lawsuit could subject us to liability for damages and invalidate
our intellectual property rights. If an infringement claim is successfully
asserted by a holder of intellectual property rights, we may be required to
cease marketing or selling certain products, pay a penalty for past
infringement and spend significant time and money to develop a non-infringing
product or process or to obtain licenses for the technology, process or
information from the holder. We may not be successful in the development of a
non-infringing alternative, or licenses may not be available on commercially
acceptable terms, if at all, in which case we may lose sales and profits. In
addition, any litigation could be lengthy and costly and could materially
adversely affect us even if we are successful in the litigation.
We
face risks relating to our international operations.
Because we have significant international operations, our operating
results and financial condition could be adversely affected by economic,
political, health, regulatory and other factors existing in foreign countries
in which we operate. Our international operations are subject to inherent risks,
which may adversely affect us, including: fluctuations in exchange rates;
political and economic instability in countries in which our products are
manufactured; expropriation, or the imposition of government controls; changes
in government regulations; export license requirements; trade restrictions;
earnings expatriation restrictions; exposure to different legal standards; less
favorable intellectual property laws; health conditions and standards; currency
controls; increases in the duties and taxes we pay; high levels of inflation or
deflation; greater difficulty in collecting our accounts receivable and longer
payment cycles; changes in labor conditions and difficulties in staffing and
managing our international operations; limitations on insurance coverage
against geopolitical risks, natural disasters and business operations; and
communication among and management of international operations. In addition,
these same factors may also place us at a competitive disadvantage to some of
our foreign competitors.
We cannot assure you that the
newly acquired Hetronic business will be successful or that we can implement
and profit from any new applications of the acquired technology.
We acquired Hetronic on September 30,
2008. As a result of this acquisition, we
now design and manufacture industrial safety radio remote controls that are
used primarily in the material handling, transportation, mining, military,
agriculture and construction industries.
The current economic recession has had an adverse effect on the Hetronic
business and our operating results.
Also, the market for safety radio remote controls is competitive
6
Table
of Contents
Item 1A. Risk Factors - Continued
and rapidly changing. If we do not keep pace with technological
innovations in the industry, our products may not
be competitive and our revenue and operating results
may suffer. Furthermore, while we intend
to expand the Hetronic business by integrating the technology into additional
automotive and other applications, we can make no guarantee that such ventures
will be successful or profitable.
Our technology-based business and the markets in which we operate are highly competitive. If we are unable to compete effectively, our sales will decline.
The markets in which we
operate are highly competitive and characterized by rapid changes due to
technological improvements and developments.
We compete with a large number of other manufacturers in each of our
product areas; many of these competitors have greater resources and sales. Price, service and product performance are
significant elements of competition in the sale of our products. Competition may intensify further if more
companies enter the markets in which we operate. Our failure to compete
effectively could materially adversely affect our business, financial condition
and operating results.
We
may acquire businesses or divest business operations. These transactions may
pose significant risks and may materially adversely affect our business,
financial condition and operating results.
We intend to explore opportunities to acquire other businesses or
technologies that could complement, enhance or expand our current business or
product lines or that might otherwise offer growth opportunities. Any
transactions that we are able to identify and complete may involve a number of
risks, including: the diversion of our managements attention from our existing
business to integrate the operations and personnel of the acquired or combined
business or joint venture; possible adverse effects on our operating results
during the integration process; and our possible inability to achieve the
intended objectives of the transaction. In addition, we may not be able to
successfully or profitably integrate, operate, maintain and manage our newly
acquired operations or employees. We may not be able to maintain uniform
standards, controls, procedures and policies, and this may lead to operational
inefficiencies. In addition, future acquisitions may result in dilutive
issuances of equity securities, a reduction of cash or the incurrence of debt.
We have in the past, and may
in the future, consider divesting certain business operations. Divestitures may
involve a number of risks, including the diversion of managements attention,
significant costs and expenses, the loss of customer relationships and cash
flow, and the disruption of operations in the affected business. Failure to
timely complete a divestiture or to consummate a divestiture may negatively
affect valuation of the affected business or result in restructuring charges.
We
may be unable to keep pace with rapid technological changes, which would
adversely affect our business.
The technologies relating to
some of our products have undergone, and are continuing to undergo, rapid and
significant changes. Specifically, end markets for electronic components and
assemblies are characterized by technological change, frequent new product
introductions and enhancements, changes in customer requirements and emerging
industry standards. These changes could
render our existing products unmarketable before we can recover any or all of
our research, development and other expenses. Furthermore, the life cycles of
our products vary, may change and are difficult to estimate. If we are unable,
for technological or other reasons, to develop and market new products or
product enhancements in a timely and cost-effective manner, our business,
financial condition and operating results could be materially adversely
affected.
Products
we manufacture may contain design or manufacturing defects that could result in
reduced demand for our products or services and liability claims against us.
Despite our quality control
and quality assurance efforts, defects may occur in the products we manufacture
due to design or manufacturing errors or component failure. Product defects may
result in delayed shipments and reduced demand for our products. We may be
subject to increased costs due to warranty claims on defective products.
Product defects may result in product liability claims against us where defects
cause, or are alleged to cause, property damage, bodily injury or death. We may
be required to participate in a recall involving products that are, or are
alleged to be, defective. We carry insurance for certain legal matters
involving product liability, however, we do not have coverage for all costs
related to product defects and the costs of such claims, including costs of
7
Table
of Contents
Item 1A. Risk Factors - Continued
defense and settlement, may exceed our
available coverage.
We are dependent on the
availability and price of raw materials.
We require substantial
amounts of raw materials, including petroleum-based products, glass, copper and
precious metals, and all raw materials we require are purchased from outside
sources. The availability and prices of raw materials may be subject to
curtailment or change due to, among other things, new laws or regulations,
suppliers allocations to other purchasers, interruptions in production by
suppliers, changes in exchange rates and worldwide price levels. Any change in
the supply of, or price for, these raw materials could materially affect our
results of operations and financial condition.
We
did
experience price increases in fiscal 2008 and 2007 for copper, precious metals
and petroleum-based raw materials.
Because
we derive approximately 57% of our revenues from customers in the automotive
segment, rising oil prices could adversely affect future results.
A large portion of our revenue is derived from parts
and components that are provided in our customers less fuel-efficient
vehicles. Increasing oil and gasoline
prices have, and, are expected to continue to negatively affect the sales of
those vehicles in the future, which could negatively impact our future automotive
revenue.
We have and
may continue to incur additional significant restructuring charges that will
adversely affect our results of operations.
Due to the economic downturn, we have incurred $25.3 million in restructuring charges in fiscal 2009, and we expect to incur $9.2 million to $19.2 million of restructuring charges in fiscal 2010. This will have an adverse effect on our financial condition and results of operations. If economic conditions worsen, we could have additional restructuring efforts in addition to those mentioned above.
We may incur additional goodwill and other asset impairments.
Our business has been and may continue to be materially adversely affected by the current economic environment. The recent disruptions in global financial and credit markets have significantly impacted global economic activity and led to an economic recession. As a result of these disruptions, our customers and markets have been adversely affected. We have recently experienced a significant drop in sales in all our reporting segments. If we experience reduced demand because of these disruptions in the macroeconomic environment or other factors, our business, results of operation and financial condition could be materially adversely affected. If we are unable to successfully anticipate changing economic and financial conditions, we may be unable to effectively plan for and respond to these changes and our business could be adversely affected.
We have recorded and may record additional impairment charges that would adversely impact our results of operations. We review our goodwill and other assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable, and we also review our goodwill annually in accordance with SFAS No. 142, Goodwill and Other Intangibles as well as SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The values assigned to goodwill and intangible assets are normally based on estimates and judgments regarding expectations for the success and life cycle of products and technologies acquired. A decline in expectations, future cash flows, a change in strategic direction or our market capitalization remaining below our net book value for a significant period of time could result in significant impairment charges, which could have a material adverse effect on our financial condition and results of operations. See Note 4 to our Consolidated Financial Statements for additional information regarding our goodwill and other asset impairment charges.
8
Table
of Contents
Item
2. Properties
We operate the following
manufacturing and other facilities, all of which we believe to be in good
condition and adequate to meet our current and reasonably anticipated needs:
|
|
|
|
Owned/
|
|
Approximate
|
|
Location
|
|
Use
|
|
Leased
|
|
Square Footage
|
|
|
|
|
|
|
|
|
|
Chicago,
Illinois
|
|
Corporate Headquarters
|
|
Owned
|
|
15,000
|
|
|
|
|
|
|
|
|
|
Automotive Segment:
|
|
|
|
|
|
|
|
Carthage,
Illinois
|
|
Manufacturing
|
|
Owned
|
|
261,000
|
|
Mriehel,
Malta
|
|
Manufacturing
|
|
Leased
|
|
209,000
|
|
Reynosa,
Mexico
|
|
Manufacturing
|
|
Leased
|
|
102,000
|
|
Golden,
Illinois
|
|
Manufacturing
|
|
Owned
|
|
90,000
|
|
Shanghai,
China
|
|
Manufacturing
|
|
Leased
|
|
75,500
|
|
McAllen,
Texas
|
|
Warehousing
|
|
Leased
|
|
38,000
|
|
Monterrey,
Mexico
|
|
Manufacturing
|
|
Leased
|
|
36,000
|
|
Southfield,
Michigan
|
|
Sales and Engineering
Design Center
|
|
Owned
|
|
17,000
|
|
Gau-Algesheim,
Germany
|
|
Sales and Engineering
Design Center
|
|
Leased
|
|
6,800
|
|
Burnley,
England
|
|
Engineering Design
Center
|
|
Leased
|
|
5,900
|
|
|
|
|
|
|
|
|
|
Interconnect Segment:
|
|
|
|
|
|
|
|
Rolling
Meadows, Illinois
|
|
Manufacturing
|
|
Owned
|
|
75,000
|
|
Carol
Stream, Illinois
|
|
Manufacturing
|
|
Leased
|
|
50,000
|
|
Shanghai,
China
|
|
Manufacturing
|
|
Leased
|
|
49,000
|
|
Richardson,
Texas
|
|
Manufacturing
|
|
Leased
|
|
45,000
|
|
Chicago,
Illinois
|
|
Manufacturing
|
|
Owned
|
|
38,400
|
|
Jihlava,
Czech Republic
|
|
Manufacturing
|
|
Owned
|
|
36,000
|
|
Mosta,
Malta
|
|
Manufacturing
|
|
Leased
|
|
32,500
|
|
Laguna,
Philippines
|
|
Manufacturing
|
|
Leased
|
|
22,800
|
|
Wheaton,
Illinois
|
|
Manufacturing
|
|
Leased
|
|
22,500
|
|
Oklahoma
City, Oklahoma
|
|
Manufacturing/Design
Center
|
|
Leased
|
|
19,800
|
|
San
Jose, California
|
|
Sales and Design
|
|
Leased
|
|
7,250
|
|
Warsaw,
Poland
|
|
Sales and Distribution
|
|
Leased
|
|
5,700
|
|
Limerick,
Ireland
|
|
Sales and Distribution
|
|
Leased
|
|
4,700
|
|
Singapore
|
|
Sales and
Administrative
|
|
Leased
|
|
3,000
|
|
Kiev,
Ukraine
|
|
Sales and Distribution
|
|
Leased
|
|
900
|
|
Bucharest,
Romania
|
|
Sales and Distribution
|
|
Leased
|
|
400
|
|
Ljubljana,
Slovenia
|
|
Sales and Distribution
|
|
Leased
|
|
400
|
|
|
|
|
|
|
|
|
|
Power Products Segment:
|
|
|
|
|
|
|
|
Shaghai,
China
|
|
Manufacturing
|
|
Leased
|
|
60,000
|
|
Rolling
Meadows, Illinois
|
|
Manufacturing
|
|
Owned
|
|
52,000
|
|
Naperville,
Illinois
|
|
Manufacturing
|
|
Leased
|
|
30,000
|
|
Reynosa,
Mexico
|
|
Manufacturing
|
|
Leased
|
|
27,000
|
|
San
Jose, California
|
|
Prototype and Design
Center
|
|
Leased
|
|
7,250
|
|
|
|
|
|
|
|
|
|
Other Segment:
|
|
|
|
|
|
|
|
Palatine,
Illinois
|
|
Test Laboratory
|
|
Owned
|
|
27,000
|
|
Hunt
Valley, Maryland
|
|
Test Laboratory
|
|
Owned
|
|
16,000
|
|
Chicago,
Illinois
|
|
Manufacturing
|
|
Owned
|
|
10,000
|
|
9
Table
of Contents
Item 3. Legal Proceedings
As of July 2, 2009,
we were not involved in any material legal proceedings or any legal proceedings
or material administrative proceedings with governmental authorities pertaining
to the discharge of materials into the environment or otherwise.
Executive
Officers of the Registrant
Name
|
|
Age
|
|
Offices and Positions Held and Length of Service as Officer
|
Donald W. Duda
|
|
54
|
|
Chief Executive Officer
of the Company since May 1, 2004. President and Director of the Company
since February 2001. Prior thereto Mr. Duda was Vice
President-Interconnect Group since March 2000. Prior thereto
Mr. Duda was with Amphenol Corporation through November 1998 as
General Manager of its Fiber Optic Products Division since 1988.
|
|
|
|
|
|
Douglas A. Koman
|
|
59
|
|
Chief Financial Officer
of the Company since May 1, 2004. Vice President, Corporate Finance, of
the Company since April 2001. Prior thereto Mr. Koman was Assistant
Vice President-Financial Analysis since December 2000. Prior thereto
Mr. Koman was with Illinois Central Corporation through March 2000
as Controller since November 1997 and Treasurer since July 1991.
|
|
|
|
|
|
Thomas D. Reynolds
|
|
46
|
|
Senior Vice President,
Worldwide Automotive Operations, of the Company since September 14,
2006. Vice President and General Manager, North American Automotive
Operations, of the Company since October 2001. Prior thereto
Mr. Reynolds was with Donnelly Corporation through October 2001 as
Senior Manager of Operations since 1999, and as Director of Transnational
Business Unit from 1995 to 1999.
|
|
|
|
|
|
Timothy R. Glandon
|
|
45
|
|
Vice President and
General Manager, North American Automotive, of the Company since
September 14, 2006. Prior thereto Mr. Glandon was General Manager
of Automotive Safety Technologies since August 1, 2001. Prior thereto
Mr. Glandon was Vice President and General Manager with American Components,
Inc. from 1996 to 2001.
|
|
|
|
|
|
Theodore D. Kill
|
|
58
|
|
Vice President,
Worldwide Automotive Sales, of the Company since August 2006. Prior
thereto Mr. Kill was a principal with Kill and Associates from 2003 to
2006. Prior thereto Mr. Kill was a principal with Kill and Bolton
Associates from 1995 to 2003.
|
|
|
|
|
|
Ronald L.G. Tsoumas
|
|
48
|
|
Controller and
Treasurer of the Company since September 2007. Prior thereto
Mr. Tsoumas was Assistant Controller of the Company since
July 1998.
|
All executive officers are elected by the Board of Directors and serve
a term of one year or until their successors are duly elected and qualified.
10
Table of Contents
PART II
Item 5.
Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
The following is a tabulation of high and low sales prices for the
periods indicated as reported by the New York Stock Exchange.
|
|
|
|
|
|
Dividends
|
|
|
|
Sales Price Per Share
|
|
Paid
|
|
|
|
High
|
|
Low
|
|
Per Share
|
|
Fiscal
Year ended May 2, 2009
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
12.51
|
|
$
|
9.50
|
|
$
|
0.05
|
|
Second
Quarter
|
|
13.65
|
|
6.11
|
|
0.07
|
|
Third
Quarter
|
|
9.66
|
|
4.45
|
|
0.07
|
|
Fourth
Quarter
|
|
6.43
|
|
2.59
|
|
0.07
|
|
|
|
|
|
|
|
|
|
Fiscal
Year ended May 3, 2008
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
18.90
|
|
$
|
14.30
|
|
$
|
0.05
|
|
Second
Quarter
|
|
17.04
|
|
10.27
|
|
0.05
|
|
Third
Quarter
|
|
16.94
|
|
10.53
|
|
0.05
|
|
Fourth
Quarter
|
|
12.95
|
|
9.89
|
|
0.05
|
|
On June 23, 2009, the Board declared a dividend of $0.07 per share
of common stock, payable on July 31, 2009, to holders of record on July 17,
2009.
As of July 1, 2009,
the number of record holders of our common stock was 636.
Equity Compensation Plan Information
The following table provides information about shares of our common
stock that may be issued upon exercise of stock options or granting of stock
awards under all of the existing equity compensation plans as of May 2,
2009.
Plan category
|
|
Number
of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
Number
of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in the first
column)
|
|
Equity compensation
plans approved by security holders
|
|
910,633
|
|
$
|
7.97
|
|
394,718
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans not approved by security holders
|
|
|
|
|
|
|
|
Total
|
|
910,633
|
|
$
|
7.97
|
|
394,718
|
|
11
Table of Contents
Purchase
of Equity Securities by the Company and Affiliated Purchasers
|
|
|
|
|
|
Total
Number of
|
|
Maximum
Number of
|
|
|
|
Total
|
|
|
|
Shares
Purchased as
|
|
Shares
that
|
|
|
|
Number
of
|
|
Average
|
|
Part of
Publicly
|
|
May Yet
Be Purchased
|
|
|
|
Shares
|
|
Price
Paid
|
|
Announced
Plans
|
|
Under
the Plans or
|
|
Period
|
|
Purchased
(1)
|
|
Per
Share
|
|
or
Programs (2)
|
|
Programs
(2)
|
|
|
|
|
|
|
|
|
|
|
|
February 1,
2009 through February 28, 2009
|
|
297
|
|
$
|
4.62
|
|
|
|
2,360,120
|
|
|
|
|
|
|
|
|
|
|
|
March 1,
2009 through April 4, 2009
|
|
29,600
|
|
$
|
3.88
|
|
29,600
|
|
2,330,520
|
|
|
|
|
|
|
|
|
|
|
|
April 5,
2009 through May 2, 2009
|
|
14,252
|
|
$
|
6.20
|
|
|
|
2,330,520
|
|
|
|
44,149
|
|
$
|
4.63
|
|
29,600
|
|
2,330,520
|
|
(1) The amount includes the repurchase and
cancellation of shares of common stock redeemed by the Company for the payment
of minimum withholding taxes on the value of restricted stock awards vesting
during the period.
(2) On September 18, 2008, the Board
of Directors adopted a plan to repurchase up to 3 million shares of its
common
stock. The plan will expire on
May 1, 2010.
12
Table of Contents
Item
6. Selected Financial Data
The following selected financial data should be read
in conjunction with Managements Discussion and Analysis of Financial
Condition and Results of Operations and the Companys Consolidated Financial
Statements and related notes included elsewhere in this report. The consolidated statement of operations data
for fiscal 2009, 2008 and 2007, and the consolidated balance sheet data as of May 2,
2009 and May 3, 2008, are derived from, and are qualified by reference to,
the Companys audited Consolidated Financial Statements included elsewhere in
this report. The consolidated statement
of operations data for fiscal 2006 and 2005, and the consolidated balance sheet
data as of April 28, 2007, April 29, 2006 and April 30, 2005,
are derived from audited consolidated financial statements not included in this
report. Due to the timing of our fiscal
calendar, fiscal 2008 represents 53 weeks of results. Fiscal 2009, 2007, 2006 and 2005 represent 52
weeks of results.
|
|
Fiscal Year Ended
|
|
|
|
May 2,
|
|
May 3,
|
|
April 28,
|
|
April 29,
|
|
April 30,
|
|
|
|
2009
|
|
2008 (53 wks)
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
(In Millions, Except Percentages and Per Share
Amounts)
|
|
Income
Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
425.6
|
|
$
|
551.1
|
|
$
|
448.4
|
|
$
|
421.6
|
|
$
|
392.7
|
|
Income/(loss)
before income taxes and cumulative affect of accounting change
|
|
(110.8
|
)
(1)
|
49.5
|
(2)
|
35.8
|
(3)
|
32.4
|
(4)
|
38.4
|
(5)
|
Income
taxes
|
|
1.7
|
(1)
|
9.7
|
(2)
|
9.8
|
(3)
|
15.3
|
(4)
|
12.9
|
(5)
|
Cumulative
effect of accounting change
|
|
|
|
|
|
0.1
|
|
|
|
|
|
Net
income/(loss)
|
|
(112.5
|
)
(1)
|
39.8
|
(2)
|
26.1
|
(3)
|
17.0
|
(4)
|
25.5
|
(5)
|
Per
Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income/(loss)
|
|
(3.05
|
)
(1)
|
1.07
|
(2)
|
0.72
|
(3)
|
0.47
|
(4)
|
0.71
|
(5)
|
Diluted
net income/(loss)
|
|
(3.05
|
)
(1)
|
1.06
|
(2)
|
0.71
|
(3)
|
0.47
|
(4)
|
0.71
|
(5)
|
Dividends
|
|
0.26
|
|
0.20
|
|
0.20
|
|
0.20
|
|
0.20
|
|
Book
Value
|
|
6.28
|
|
9.93
|
|
8.69
|
|
7.82
|
|
7.62
|
|
Long-term
Debt
|
|
|
|
|
|
|
|
|
|
|
|
Retained
Earnings
|
|
143.6
|
|
265.8
|
|
233.7
|
|
215.1
|
|
205.5
|
|
Fixed
Assets (net)
|
|
69.9
|
|
90.3
|
|
86.9
|
|
90.5
|
|
92.6
|
|
Total
Assets
|
|
305.3
|
|
470.2
|
|
411.7
|
|
374.6
|
|
356.7
|
|
Return
on Average Equity
|
|
-37.2
|
%
(1)
|
11.4
|
%(2)
|
8.5
|
%(3)
|
5.9
|
%
(4)
|
9.6
|
%
(5)
|
Pre-tax
Income/(loss) as a Percentage of Sales
|
|
-26.0
|
%
(1)
|
9.0
|
%
(2)
|
8.0
|
%
(3)
|
7.7
|
%
(4)
|
9.8
|
%
(5)
|
Net
Income/(loss) as a Percentage of Sales
|
|
-26.4
|
%
(1)
|
7.2
|
%
(2)
|
5.8
|
%
(3)
|
4.0
|
%
(4)
|
6.5
|
%
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Fiscal 2009 results include a pre-tax
charge of $94.4 million relating to goodwill and other asset impairments. In addition, fiscal 2009 results include a
pre-tax charge of $25.3 million relating to restructuring activities. The income tax expense includes a $28.0
million valuation charge related to the uncertainty of the future realization
of our deferred tax assets.
(2)
Fiscal 2008 results include a pre-tax
charge of $5.2 million relating to a restructuring of our U.S.-based automotive
operations and the decision to discontinue producing certain legacy products in
the Interconnect segment.
(3)
Fiscal 2007 results include a pre-tax and
an after-tax restructuring charge of $2.0 million related to the closing of our
Scotland automotive parts manufacturing plant and transfer of production lines
from that facility to our automotive parts manufacturing facility in Malta.
(4)
Fiscal 2006 results include $4.5 million
of income tax expense related to the repatriation of $38.1 million of foreign
earnings for which income taxes were not previously provided, and an after-tax
charge of $1.5 million ($2.3 million pre-tax) related to receivables deemed to
be impaired due to the Chapter 11 bankruptcy filing by Delphi.
(5) Fiscal 2005
results include $1.0 million of tax-free income from life insurance proceeds.
13
Table
of Contents
Item 7.
Managements Discussion and Analysis of Financial Condition and Results
of Operations
Overview
We are a global manufacturer of component and
subsystem devices with manufacturing, design and testing facilities in China,
Czech Republic, Germany, Malta, Mexico, the Philippines, Singapore, the United
Kingdom and the United States. We are a
global designer and manufacturer of electro-mechanical devices. We design, manufacture and market devices
employing electrical, radio remote control, electronic, wireless, sensing and
optical technologies. Our business is
managed on a segment basis, with those segments being Automotive, Interconnect,
Power Products and Other. For more
information regarding the business and products of these segments, see Item 1.
Business.
Our components are
found in the primary end markets of the aerospace, appliance, automotive,
consumer and industrial equipment markets, communications (including
information processing and storage, networking equipment, wireless and
terrestrial voice/data systems), rail and other transportation industries. Recent trends in the industries that we serve
include:
·
Automotive
industry sales volume in the United States and European markets declined
suddenly and substantially in fiscal 2009 and continue at historically low
levels into fiscal 2010;
·
The
deteriorating condition of certain of our customers and the uncertainty as they
undergo restructuring initiatives, including in some cases, reorganization
under bankruptcy laws;
·
Decline in demand for new houses and the
over-supply of new and existing houses;
·
Demand for construction and material
handling equipment is cyclical and has been impacted by the weakness of the
economy, availability of credit and higher interest rates;
Our business has been and will likely continue to be
materially adversely affected by the current economic environment, particularly
as it impacts the automotive industry.
The recent disruptions in global financial and credit markets have
significantly impacted global economic activity and led to an economic
recession. As a result of these
disruptions, our customers and markets have been adversely affected. We have recently experienced a significant
drop in sales in all of our reporting segments.
If we experience reduced demand because of these disruptions in the
macroeconomic environment or other factors, our business, results of operation
and financial condition could be materially adversely affected. If we are unable to successfully anticipate
changing economic and financial conditions, we may be unable to effectively
plan for and respond to these changes and our business could be adversely
affected.
We review our goodwill
and other intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of these assets may not be
recoverable, and we also review our goodwill annually in accordance with SFAS No. 142,
Goodwill and Other Intangibles. The
values assigned to goodwill and intangible assets are normally based on
estimates and judgments regarding expectations for the success and life cycle
of products and technologies acquired. A
severe decline in expectations, future cash flows, a change in strategic
direction or our market capitalization remaining below our net book value for a
significant period of time could result in significant impairment charges,
which could have a material adverse effect on our financial condition and
results of operations. Based on events
and general business declines, we performed step one of the goodwill
impairment test in accordance with paragraph 19 of SFAS No. 142, on the
reporting units that have goodwill during fiscal 2009. Based on this test, we determined that the
fair value was less than the carrying value of the net assets for certain
reporting units. We completed step two of the goodwill test and concluded
that goodwill was impaired. Therefore,
during fiscal 2009, we recorded a goodwill impairment charge of $25.8 million
in our Automotive segment, $30.8 million in our Interconnect segment, $5.4
million in our Power Products segment and $1.2 million in our Other segment for
a total of $63.2 million related to these assets.
Also, in
accordance with FASB Statement No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, we record impairment losses on long-lived
assets used in operations when events and circumstances indicate that
long-lived assets might be impaired and the undiscounted cash flows estimated
to be generated by those assets are less than the carrying amounts of those
assets. During fiscal 2009, based on our future estimates of the
14
Table
of Contents
Overview - Continued
undiscounted cash flows,
it was determined that certain identifiable assets of our TouchSensor and
Hetronic businesses in the Interconnect segment, the Automotive Safety
Technologies business in our Automotive segment and Magna-Lastic Devices, Inc.
from our Other segment were impaired.
Therefore, we recorded an impairment charge of $26.2 million in the
Interconnect segment, $4.6 million in the Automotive segment and $0.4 million
in the Other segment for a total of $31.2 million for these assets.
On September 30,
2008, we acquired certain assets of Hetronic LLC (Hetronic) for $53.6 million
in cash. We also incurred $2.4 million
in transaction costs related to the purchase.
Hetronic is a global leader in industrial safety radio remote controls
with locations in the U.S., Malta, the Philippines and Germany. Hetronic is represented in 45 countries by
direct sales associates, licensed partners, distributors and representatives. Hetronic provides application specific and
standard controls to many different industries, such as material handling,
transportation, mining, military, agriculture and construction.
On January 24, 2008, we announced a
restructuring of our U.S.-based automotive operations and a decision to
discontinue producing certain legacy products in the Interconnect segment. The Automotive and Interconnect restructuring
is expected to be completed during fiscal 2010.
We record the expense in the restructuring section of our Consolidated
Statement of Operations. On January 24, 2008, the total pre-tax charges
were estimated between $19.0 million and $25.0 million. As of May 2, 2009, we have recorded
$23.2 million of the charges. We
estimate that we will record pre-tax restructuring charges in fiscal 2010
between $0.5 million and $1.5 million, of which $0.5 million will relate to the
termination of approximately 225 employees and the cost of one-time employee
benefits, retention, COBRA and outplacement services. We continue to perform periodic impairment
testing, if indicators exist, and will record any charges incurred as per SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, (SFAS No. 144)
in the period when impairment is incurred.
On March 12, 2009, we announced several
additional restructuring actions to further reduce our exposure to the North
American automotive industry and to consolidate manufacturing facilities in
lower cost regions to reduce costs.
After these actions our principal manufacturing operations will be in
Mexico, Malta and China. In addition, we
decided to transfer certain new GM business to other suppliers. This business was scheduled to be produced in
our Shanghai, China automotive facility.
All Ford Motor Company production at Methodes
Reynosa, Mexico, facility will be moved to another supplier. TouchSensor manufacturing currently in west
suburban Chicago, Illinois, will be moved to Monterrey, Mexico. Additionally, our operations in Shanghai,
China, will be consolidated to two facilities from three. The addition of a
plant in Morocco has been put on indefinite hold.
In total, this additional restructuring will affect
approximately 850 employees worldwide. We estimate that we will record a pre-tax
charge between $16.0 million and $25.0 million, during fiscal years 2009 and
2010. The cash portion of this charge is estimated between $7.0 million and
$8.0 million. We estimate that we will
record pre-tax restructuring charges in fiscal 2010 between $8.7 million and
$17.7 million.
Business Outlook
We are very cautious about fiscal 2010, expecting
that it will be another challenging year. The financial sector crisis and
stagnant global economic conditions have increased uncertainty in the markets in
every geographic region we serve. We expect the unprecedented current global
economic environment to continue to affect near-term results and to create
difficult conditions. Looking forward, visibility is low and forecasting is
very challenging. Sales of Automotive
segment products are expected to decline, as our forecasted sales from North
American and European automotive OEMs are lower. Additionally, we took actions
in fiscal 2008 and 2009 to exit certain unprofitable or marginally profitable
North American automotive business. Sales of sensor pads for passive
occupant-detection systems are expected to decline due to lower North American
automotive volumes, and as the current systems are replaced, with new
technology. We expect sales declines in
the Interconnect and Power Products segments as well as demand for information
processing and networking equipment, construction, voice and data
communications systems, consumer electronics, appliance, aerospace vehicles and
industrial equipment to be stagnant. In
our Interconnect segment, sales from our Hetronic acquisition will be offset by
sales lost due to our decision to exit certain unprofitable component products
in fiscal 2009. While we have taken
steps to restructure our businesses, operating margin improvement will not be
realized until economic conditions begin to improve.
Results may differ materially from what is expressed
or forecasted. See Item 1A Risk
Factors herein.
15
Table
of Contents
Results of Operations
Results of Operations for the Fiscal Year Ended May 2,
2009 (52 weeks) as Compared to the Fiscal Year Ended May 3, 2008 (53
weeks)
Consolidated Results
Below is a table summarizing results for the years ended:
(in millions)
|
|
May 2,
|
|
May 3,
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Net Change
|
|
Net Change
|
|
Net sales
|
|
$
|
425.6
|
|
$
|
551.1
|
|
$
|
(125.5
|
)
|
-22.8
|
%
|
Other income
|
|
3.2
|
|
1.9
|
|
1.3
|
|
68.5
|
%
|
|
|
428.8
|
|
553.0
|
|
(124.2
|
)
|
-22.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost of products
sold
|
|
356.4
|
|
428.4
|
|
(72.0
|
)
|
-16.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross margins
(including other income)
|
|
72.4
|
|
124.6
|
|
(52.2
|
)
|
-41.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
25.3
|
|
5.2
|
|
20.1
|
|
386.5
|
%
|
Impairment of
goodwill and other assets
|
|
94.4
|
|
1.5
|
|
92.9
|
|
6193.3
|
%
|
Selling and
administrative expenses
|
|
57.5
|
|
61.5
|
|
(4.0
|
)
|
-6.5
|
%
|
Amortization of
intangibles
|
|
6.9
|
|
6.0
|
|
0.9
|
|
15.0
|
%
|
Interest income,
net
|
|
1.4
|
|
2.3
|
|
(0.9
|
)
|
-39.9
|
%
|
Other, net -
expense
|
|
(0.5
|
)
|
(3.2
|
)
|
2.7
|
|
-85.0
|
%
|
Income taxes -
expense
|
|
1.7
|
|
9.7
|
|
(8.0
|
)
|
-82.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Net
income/(loss)
|
|
$
|
(112.5
|
)
|
$
|
39.8
|
|
$
|
(152.3
|
)
|
-382.6
|
%
|
|
|
May 2,
|
|
May 3,
|
|
|
|
|
|
Percent
of sales:
|
|
2009
|
|
2008
|
|
|
|
|
|
Net sales
|
|
100.0
|
%
|
100.0
|
%
|
|
|
|
|
Other income
|
|
0.8
|
%
|
0.3
|
%
|
|
|
|
|
Cost of products
sold
|
|
83.7
|
%
|
77.7
|
%
|
|
|
|
|
Gross margins
(including other income)
|
|
17.0
|
%
|
22.6
|
%
|
|
|
|
|
Restructuring
|
|
5.9
|
%
|
0.9
|
%
|
|
|
|
|
Impairment of
goodwill and other assets
|
|
22.2
|
%
|
0.3
|
%
|
|
|
|
|
Selling and
administrative expenses
|
|
13.5
|
%
|
11.2
|
%
|
|
|
|
|
Amortization of
intangibles
|
|
1.6
|
%
|
1.1
|
%
|
|
|
|
|
Interest income,
net
|
|
0.3
|
%
|
0.4
|
%
|
|
|
|
|
Other, net -
expense
|
|
-0.1
|
%
|
-0.6
|
%
|
|
|
|
|
Income taxes -
expense
|
|
0.4
|
%
|
1.8
|
%
|
|
|
|
|
Net
income/(loss)
|
|
-26.4
|
%
|
7.2
|
%
|
|
|
|
|
Net Sales
.
Consolidated net sales decreased $125.5 million, or 22.8%, to $425.6
million for the fiscal year ended May 2, 2009 from $551.1 million for the
fiscal year ended May 3, 2008. The Automotive
segment net sales declined $118.5 million or 32.7% to $243.6 million for fiscal
2009 from $362.1 million for fiscal 2008.
The decline is attributable to the softening of the global economic
environment, especially the effect on the automotive industry. The Automotive segment net sales were also
negatively impacted by planned lower Chrysler sales volumes of $14.8 million in
fiscal 2009, compared to $59.2 million in fiscal 2008. In July 2007, we decided to exit
production for certain Chrysler products at the expiration of our manufacturing
commitment
. The transfer of the Chrysler
product was completed during the second quarter of fiscal 2009.
Excluding Chrysler, the North American Automotive
segment net sales declined 18.5% in fiscal 2009, as compared to fiscal
2008. The Interconnect segment net sales
16
Table of Contents
Consolidated Results - Continued
decreased $5.3 million, or 3.9% to $131.0 million in
fiscal 2009 as compared to $136.3 million in fiscal 2008. The Interconnect segment net sales were
favorably impacted by the Hetronic acquisition, which was purchased on September 30,
2008, offset by lower sales in the other Interconnect businesses. The Power Products segment net sales
decreased $3.1 million to $42.7 million in fiscal 2009, compared to $45.8
million in fiscal 2008. Translation of
net sales from our foreign operations increased reported net sales by $1.6
million or 0.4% due to currency rate fluctuations.
Other Income
.
Other income increased $1.3 million to $3.2 million for the fiscal year
ended May 2, 2009 from $1.9 million for the fiscal year ended May 3,
2008. Other income consisted primarily
of earnings from engineering design fees and royalties.
Cost of Products Sold
.
Consolidated cost of products sold decreased $72.0 million, or 16.8%, to
$356.4 million for the fiscal year ended May 2, 2009 from $428.4 million
for the fiscal year ended May 3, 2008.
The decrease is due to the lower sales volumes. Consolidated cost of products sold as a
percentage of sales was 83.7% for fiscal 2009 and 77.7% for fiscal 2008. This increase relates to manufacturing
inefficiencies experienced in the third and fourth quarters of fiscal 2009 due
to a significant, unexpected drop in sales, in addition to the drop in the
planned sales to Chrysler. A large
portion of the drop in sales is due to the North American automotive
manufacturers extending plant shutdowns that occurred during the second half of
fiscal 2009.
Gross
Margins (including other income).
Consolidated gross margins (including
other income) decreased $52.2 million, or 41.9%, to $72.4 million for the
fiscal year ended May 2, 2009 as compared to $124.6 million for the fiscal
year ended May 3, 2008. Gross
margins as a percentage of net sales were 17.0% for fiscal 2009 and 22.6% for
fiscal 2008. Gross margins were impacted
negatively due to manufacturing inefficiencies during the third and fourth
quarters of fiscal 2009 related to significantly lower sales volumes. In addition, gross margins were impacted due
to unfavorable product mix and production costs for the Power Products segment.
Restructuring
.
On January 24, 2008, we announced a restructuring of our U.S.-based
automotive operations and the decision to discontinue producing certain legacy
products in the Interconnect segment.
During the fiscal year ended May 2, 2009, we recorded a
restructuring charge of $18.0 million, which consisted of $6.1 million for employee severance, $10.8
million for impairment and accelerated depreciation for buildings and
improvements and machinery and equipment, $0.2 million for inventory write-downs
and $0.9 million relating to professional fees.
During fiscal 2008, we recorded restructuring charges of $5.2 million,
which consisted of $3.4 million for employee severance, $1.3 million for asset
write-downs and $0.5 million for professional fees.
On March 12, 2009,
we announced several additional restructuring actions to further reduce our
exposure to the North American automotive industry and to
consolidate
manufacturing facilities in lower cost regions to reduce costs.
During the fiscal year ended May 2, 2009, we recorded a
restructuring charge of $7.3 million, which consisted of $0.1 million for
employee severance, $1.4 million for impairment and accelerated depreciation
for buildings and improvements and machinery and equipment, $5.4 million for
impairment of customer funded tooling and $0.1 million in forfeited security
deposits related to the cancellation of the new GM business and $0.3 million
relating to professional fees.
Impairment of Goodwill and Other
Assets
. We review our goodwill and other intangible
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of these assets may not be recoverable, and we also review
our goodwill annually in accordance with SFAS No. 142, Goodwill and Other
Intangibles. The values assigned to
goodwill and intangible assets are normally based on estimates and judgments
regarding expectations for the success and life cycle of products and
technologies acquired. A severe decline
in expectations, future cash flows, a change in strategic direction or our
market capitalization remaining below our net book value for a significant
period of time could result in significant impairment charges, which could have
a material adverse effect on our financial condition and results of
operations. Based on events and general
business declines, we performed step one of the goodwill impairment test in
accordance with paragraph 19 of SFAS No. 142, on the reporting units that
had goodwill during fiscal 2009. Based
on this test, we determined that the fair value was less than the carrying
value of the net assets for certain reporting units. We completed
step two of the goodwill test and concluded that goodwill was
impaired. During fiscal 2009, we
recorded a goodwill impairment charge of $25.8 million in our Automotive
segment, $30.8 million in our Interconnect segment, $5.4 million in our Power
Products segment and $1.2 million in our Other segment for a total of $63.2
million related to these assets.
17
Table of Contents
Consolidated Results - Continued
Also, in accordance with
Financial Accounting Standards Board, (FASB) Statement No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, we record impairment
losses on long-lived assets used in operations when events and circumstances
indicate that long-lived assets might be impaired and the undiscounted cash
flows estimated to be generated by those assets are less than the carrying
amounts of those assets. During fiscal 2009, based on our future estimates of
the undiscounted cash flows, it was determined that certain identifiable assets
of our TouchSensor and Hetronic businesses in the Interconnect segment, the Automotive
Safety Technologies business from our Automotive segment and Magna-Lastic
Devices, Inc. from our Other segment were impaired. Therefore, we recorded an impairment charge
of $26.2 million in the Interconnect segment, $4.6 million in the Automotive
segment and $0.4 million in the Other segment for a total of $31.2 million for
these assets.
In fiscal 2008, we
recorded a $1.5 million impairment of assets relating to a $0.7 million
write-down of machinery and equipment as a result of lower anticipated revenues
over the life of the related project and $0.8 million for the impairment of a
particular patent (classified as an intangible asset) where the underlying
technology was deemed to be commercially impractical.
Selling and Administrative
Expenses
. Selling and administrative expenses decreased
$4.0 million, or 6.5%, to $57.5 million for the fiscal year ended May 2,
2009 compared to $61.5 million for the fiscal year ended May 3, 2008. Selling and administrative expenses were
favorably impacted by an adjustment of pre-tax compensation expense associated
with
the performance-based restricted stock awards granted in fiscal 2007,
2008 and 2009. The adjustment was made
because we determined that these awards were unlikely to vest based on the
Companys performance under the revenue growth and return on invested capital
targets. The pre-tax compensation
expense for fiscal 2009 was a reversal of expense of $0.6 million, which
relates to compensation expense reversed from previous years. The pre-tax compensation expense for fiscal
2008 was $3.3 million. Partially
offsetting the reversal of pre-tax compensation expense,
selling and administrative expenses were
impacted by higher amortization expense relating to the Hetronic, Value
Engineered Products, Inc. and TouchSensor acquisitions. In addition, management positions were filled
for our testing facilities in fiscal 2009, which were vacant in fiscal
2008. Selling and administrative
expenses as a percentage of net sales increased to 13.5% in fiscal 2009 from
11.2% in fiscal 2008.
Amortization of Intangibles
.
Amortization of intangibles increased $0.9 million, or 15.0%, to $6.9
million for the fiscal year ended May 2, 2009 compared to $6.0 million for
the fiscal year ended May 3, 2008.
The increase is due to the amortization expenses for the Hetronic
acquisition.
Interest Income, Net
.
Net interest income was $1.4 million for the fiscal year ended May 2,
2009 and $2.3 million for the fiscal year ended May 3, 2008. The average cash balance was $81.4 million
during fiscal 2009 as compared to $83.0 million during fiscal 2008. The average interest rate earned in fiscal
2009 was 2.22% compared to 3.07% in fiscal 2008. The average interest rate earned includes
both taxable interest and tax-exempt municipal interest. Interest expense was $0.4 million for fiscal
2009 compared to $0.2 million for fiscal 2008.
Other, Net
.
Other, net was an expense of $0.5 million for the fiscal year ended May 2,
2009, compared to an expense of $3.2 million for the fiscal year ended May 3,
2008. The decrease is primarily due to
the strengthening of the U.S. dollar versus the Euro and Czech koruna during
fiscal 2009 as compared to fiscal 2008.
The functional currencies of our international operations are the
British pound, Chinese yuan, Czech koruna, Euro, Mexican peso and Singapore
dollar. Some foreign operations have
transactions denominated in currencies other than their functional currencies,
primarily sales in U.S. dollars and Euros, creating exchange rate
sensitivities.
At May 2, 2009, approximately $3.5 million
was invested in an enhanced cash fund sold as an alternative to traditional
money-market funds. We have historically invested a portion of our on hand cash
balances in this fund. These investments are subject to credit, liquidity,
market and interest rate risk. Based on the information available to us, we
have estimated the fair value of this fund at $0.72 per unit as of May 2,
2009. For fiscal 2009, we recorded a loss of $1.2 million, of which $0.6
million was realized on partial redemptions of
$8.8 million, and $0.6 million was unrealized
. See the Financial Condition, Liquidity and
Capital Resources section for more information.
Income
Taxes.
The effective income tax rate was a net
provision of 1.5% in fiscal 2009 compared with a provision of 19.7% in fiscal
2008. The income tax rate in fiscal 2009
was a benefit due to the impairment of goodwill and intangible assets,
restructuring charges and slowing of business in our U.S.-based businesses,
causing a loss before income taxes.
Offsetting the benefit recorded in fiscal 2009, a valuation allowance
against our deferred
18
Table
of Contents
Consolidated
Results - Continued
tax assets of $28.0 was
recorded in accordance with FASB No. 109 Accounting for Income Taxes. This was recorded due to the uncertainty of
the future utilization of our deferred tax assets. See Note 7 for additional information. The effective tax rates for both fiscal 2009
and 2008 reflect utilization of foreign investment tax credits and the effect
of lower tax rates on income of the Companys foreign earnings and a higher
percentage of earnings at those foreign operations.
Net
Income/(Loss).
Net income decreased $152.3 million to a loss
of $112.5 million for the fiscal year ended May 2, 2009 as compared to net
income of $39.8 million for the fiscal year ended May 3, 2008 due to the
impairment of goodwill and intangible assets, lower sales volumes, the income
tax valuation allowance recorded against our deferred tax assets, increased
restructuring expenses, offset by favorable other income and lower selling and
administrative expenses.
Operating
Segments
Automotive
Segment Results
Below is a table
summarizing results for the years ended:
(in millions)
|
|
May 2,
|
|
May 3,
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Net Change
|
|
Net Change
|
|
Net
sales
|
|
$
|
243.6
|
|
$
|
362.1
|
|
$
|
(118.5
|
)
|
-32.7
|
%
|
Other
income
|
|
2.5
|
|
0.9
|
|
1.6
|
|
177.8
|
%
|
|
|
246.1
|
|
363.0
|
|
(116.9
|
)
|
-32.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost
of products sold
|
|
206.0
|
|
282.1
|
|
(76.1
|
)
|
-27.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross
margins (including other income)
|
|
40.1
|
|
80.9
|
|
(40.8
|
)
|
-50.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
19.3
|
|
4.4
|
|
14.9
|
|
338.6
|
%
|
Impairment
of goodwill and other assets
|
|
30.5
|
|
1.5
|
|
29.0
|
|
1933.3
|
%
|
Selling
and administrative expenses
|
|
14.6
|
|
18.0
|
|
(3.4
|
)
|
-18.9
|
%
|
Other,
net - income/(expense)
|
|
0.3
|
|
(1.7
|
)
|
2.0
|
|
-117.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Income/(loss)
before income taxes
|
|
$
|
(24.0
|
)
|
$
|
55.3
|
|
$
|
(79.3
|
)
|
-143.4
|
%
|
|
|
May 2,
|
|
May 3,
|
|
|
|
|
|
Percent of sales:
|
|
2009
|
|
2008
|
|
|
|
|
|
Net
sales
|
|
100.0
|
%
|
100.0
|
%
|
|
|
|
|
Other
income
|
|
1.0
|
%
|
0.2
|
%
|
|
|
|
|
Cost
of products sold
|
|
84.6
|
%
|
77.9
|
%
|
|
|
|
|
Gross
margins (including other income)
|
|
16.5
|
%
|
22.3
|
%
|
|
|
|
|
Restructuring
|
|
7.9
|
%
|
1.2
|
%
|
|
|
|
|
Impairment
of goodwill and other assets
|
|
12.5
|
%
|
0.4
|
%
|
|
|
|
|
Selling
and administrative expenses
|
|
6.0
|
%
|
5.0
|
%
|
|
|
|
|
Other,
net
|
|
0.1
|
%
|
-0.5
|
%
|
|
|
|
|
Income/(loss)
before income taxes
|
|
-9.9
|
%
|
15.3
|
%
|
|
|
|
|
Net Sales
.
Automotive segment net sales decreased $118.5 million, or 32.7%, to
$243.6 million for the fiscal year ended May 2, 2009 from $362.1 million
for the fiscal year ended May 3, 2008.
The decline is attributable to the softening of the global economic
environment, especially the effect on the North American automotive
industry. Net sales have declined in
fiscal 2009 as compared to fiscal 2008 by 34.2% in North America, 30.6% in
Europe and 30.7% in Asia. A large
portion of the drop in sales is due to the North American automotive
19
Table of Contents
Automotive
Segment Results - Continued
manufacturers
extending plant shutdowns that occurred during the third and fourth quarters of
fiscal 2009. The Automotive segment net
sales were also negatively impacted by anticipated lower Chrysler sales volumes
of $14.8 million in fiscal 2009, compared to $59.2 million in fiscal 2008. Excluding Chrysler, the North American
Automotive segment net sales declined 18.5% in fiscal 2009, as compared to
fiscal 2008. Translation of net sales
from our foreign operations in the fiscal year ended May 2, 2009 increased
reported net sales by $1.3 million, or 0.5%, due to currency rate fluctuations.
Other
Income
. Other income increased $1.6 million, or
177.8%, to $2.5 million for the fiscal year ended May 2, 2009 from $0.9
million for the fiscal year ended May 3, 2008. Other income consisted primarily of earnings
from engineering design fees and royalties.
Cost of
Products Sold
. Automotive segment cost of products sold
decreased $76.1 million to $206.0 million for the fiscal year ended May 2,
2009 from $282.1 million for the fiscal year ended May 3, 2008. The decrease relates to lower sales
volumes. Automotive segment costs of
products sold as a percentage of sales increased to 84.6% for fiscal 2009 from
77.9% for fiscal 2008. This increase
relates to manufacturing inefficiencies experienced in the third and fourth
quarters of fiscal 2009 due to a significant, unexpected drop in sales, in
addition to lower planned sales to Chrysler.
A large portion of the drop in sales is due to the North American
automotive manufacturers extending plant shutdowns that occurred during the
second half of fiscal 2009.
Gross
Margins (including other income).
Automotive segment gross margins
(including other income) decreased $40.8 million, or 50.4%, to $40.1 million
for the fiscal year ended May 2, 2009 as compared to $80.9 million for the
fiscal year ended May 3, 2008.
Gross margins as a percentage of net sales decreased to 16.5% for fiscal
2009 from 22.3% for fiscal 2008. Gross
margins were impacted negatively due to manufacturing inefficiencies during the
second half of fiscal 2009 due to significantly lower sales volumes. In addition, gross margins were impacted by
the planned lower Chrysler sales volumes in fiscal 2009.
Restructuring
.
On January 24, 2008, we announced a restructuring of our U.S.-based
automotive operations. During fiscal
2009, we recorded a restructuring charge of $12.8 million, which consisted of
$4.7 million for employee severance, $7.4 million for impairment and
accelerated depreciation for buildings, building improvements and machinery and
equipment and $0.7 million for
professional fees. We expect the
restructuring to be complete during fiscal 2010.
In fiscal 2008, we
recorded a restructuring charge of $4.4 million, $2.7 million relating to
employee severance, $1.3 million relating to impairment and accelerated
depreciation for assets and $0.4 million for professional fees relating to the January 2008
restructuring.
On March 12,
2009, we announced several additional restructuring actions to further reduce
our exposure to the North American automotive industry and to
consolidate
manufacturing facilities in lower cost regions to reduce costs.
During the fiscal year ended May 2, 2009, we recorded a
restructuring charge of $6.5 million, which consisted of $1.0 million for impairment and accelerated
depreciation for buildings and improvements and machinery and equipment and
$5.4 million for customer funded tooling and $0.1 million in forfeited security
deposits related to the cancellation of the new GM business.
Impairment
of Goodwill and Other Assets
. Based on
events and general business declines, we performed step one and step two of
the goodwill impairment test in accordance with paragraph 19 of SFAS No. 142,
on the reporting units that had goodwill during fiscal 2009. Based on these tests, we concluded that
goodwill was impaired. We recorded a
goodwill impairment charge of $25.8 million in our Automotive segment related
to these assets. See Note 4 for more
information.
Also, in accordance with FASB Statement No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, during the fourth quarter
of fiscal 2009, based on our future estimates of the undiscounted cash flows,
it was determined that certain identifiable assets were impaired. We recorded an impairment charge of
$4.7million for these assets. See Note 4
for more information.
In fiscal 2008, we
recorded a $1.5 million impairment of assets relating to a $0.7 million
write-down of machinery and equipment as a result of lower anticipated revenues
over the life of the related project and $0.8
20
Table of Contents
Automotive
Segment Results - Continued
million for the impairment
of a particular patent (classified as an intangible asset) where the underlying
technology was deemed to be commercially impractical.
Selling
and Administrative Expenses
. Selling and
administrative expenses decreased $3.4 million, or 18.9%, to $14.6 million for
the fiscal year ended May 2, 2009 compared to $18.0 million for the fiscal
year ended May 3, 2008. The
decrease is due to lower commission expense as a result of lower sales during
fiscal 2009. Selling and administrative
expenses as a percentage of net sales increased to 6.0% in fiscal 2009 from
5.0% in fiscal 2008.
Other,
Net
. Other, net was income of $0.3 million for the
fiscal year ended May 2, 2009, compared to an expense of $1.7 million for
the fiscal year ended May 3, 2008.
The decrease is primarily due to the strengthening of the U.S. dollar
versus the Euro during fiscal 2009 as compared to fiscal 2008. The functional currencies of our
international operations are the British pound, Chinese yuan, Euro and Mexican
peso. Some foreign operations have
transactions denominated in currencies other than their functional currencies,
primarily sales in U.S. dollars and Euros, creating exchange rate
sensitivities.
Income/(Loss)
Before Income Taxes.
Automotive segment income/(loss) before
income taxes decreased $79.3 million, or 143.4%, to a loss of $24.0 million for
the fiscal year ended May 2, 2009 compared to income of $55.3 million for
the fiscal year ended May 3, 2008.
The decrease occurred due to goodwill and intangible asset write-offs,
manufacturing inefficiencies due to significantly lower sales volumes during
the third and fourth quarters of fiscal 2009, increased restructuring expenses,
partially offset by lower selling and administrative expenses.
21
Table of
Contents
Interconnect
Segment Results
Below is a table
summarizing results for the years ended:
(in millions)
|
|
May 2,
|
|
May 3,
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Net Change
|
|
Net Change
|
|
Net
sales
|
|
$
|
131.0
|
|
$
|
136.3
|
|
$
|
(5.3
|
)
|
-3.9
|
%
|
Other
income
|
|
0.2
|
|
0.3
|
|
(0.1
|
)
|
-33.3
|
%
|
|
|
131.2
|
|
136.6
|
|
(5.4
|
)
|
-4.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost
of products sold
|
|
99.7
|
|
104.7
|
|
(5.0
|
)
|
-4.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross
margins (including other income)
|
|
31.5
|
|
31.9
|
|
(0.4
|
)
|
-1.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
5.5
|
|
0.6
|
|
4.9
|
|
816.7
|
%
|
Impairment
of goodwill and other assets
|
|
56.9
|
|
|
|
56.9
|
|
|
|
Selling
and administrative expenses
|
|
31.0
|
|
25.9
|
|
5.1
|
|
19.7
|
%
|
Interest
income
|
|
0.5
|
|
0.4
|
|
0.1
|
|
25.0
|
%
|
Other,
net - income/(expense)
|
|
0.7
|
|
(1.2
|
)
|
1.9
|
|
-158.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Income/(loss)
before income taxes
|
|
$
|
(60.7
|
)
|
$
|
4.6
|
|
$
|
(65.3
|
)
|
-1419.6
|
%
|
|
|
May 2,
|
|
May 3,
|
|
|
|
|
|
Percent of sales:
|
|
2009
|
|
2008
|
|
|
|
|
|
Net
sales
|
|
100.0
|
%
|
100.0
|
%
|
|
|
|
|
Other
income
|
|
0.2
|
%
|
0.2
|
%
|
|
|
|
|
Cost
of products sold
|
|
76.1
|
%
|
76.8
|
%
|
|
|
|
|
Gross
margins (including other income)
|
|
24.0
|
%
|
23.4
|
%
|
|
|
|
|
Restructuring
|
|
4.2
|
%
|
0.4
|
%
|
|
|
|
|
Impairment
of goodwill and other assets
|
|
43.4
|
%
|
0.0
|
%
|
|
|
|
|
Selling
and administrative expenses
|
|
23.7
|
%
|
19.0
|
%
|
|
|
|
|
Interest
income
|
|
0.4
|
%
|
0.3
|
%
|
|
|
|
|
Other,
net
|
|
0.5
|
%
|
-0.9
|
%
|
|
|
|
|
Income/(loss)
before income taxes
|
|
-46.3
|
%
|
3.4
|
%
|
|
|
|
|
Net Sales
.
Interconnect segment net sales decreased $5.3 million, or 3.9%, to
$131.0 million for the fiscal year ended May 2, 2009 from $136.3 million for
the fiscal year ended May 3, 2008.
Net sales were favorably impacted by the Hetronic acquisition on September 30,
2008. Excluding Hetronic, North American
net sales decreased 14.7%, Europe decreased 22.8% and Asia decreased 7.8% in
fiscal 2009 as compared to fiscal 2008.
The net sales decline was primarily due to the general economic
slowdown. Translation of net sales from
our foreign operations in the fiscal year ended May 2, 2009 increased
reported net sales by $0.3 million, or 0.2%, due to currency rate fluctuations.
Other
Income
. Other income was $0.2 million for the fiscal
year ended May 2, 2009 and $0.3 million for the fiscal year ended May 3,
2008. Other income consisted primarily
of earnings from engineering design fees and royalties.
Cost of
Products Sold
. Interconnect segment cost of products sold
decreased $5.0 million to $99.7 million for the fiscal year ended May 2,
2009 compared to $104.7 million for the fiscal year ended May 3,
2008. The majority of the decrease is
due to lower net sales. Interconnect
segment cost of products sold as a percentage of net sales decreased to 76.1%
in fiscal 2009 compared to 76.8% in fiscal 2008. The decrease in cost of products sold as a
percentage of net sales relates primarily to product mix related to the
Hetronic acquisition and the impact of the Interconnect restructuring.
22
Table of Contents
Interconnect
Segment Results - Continued
Gross
Margins (including other income)
Interconnect segment gross margins
(including other income) decreased $0.4 million, or 1.3%, to $31.5 million for
the fiscal year ended May 2, 2009 as compared to $31.9 million for the
fiscal year ended May 3, 2008.
Gross margins as a percentage of net sales increased to 24.0% in fiscal
2009 from 23.4% in fiscal 2008. The
increase in gross margins as a percentage of net sales relates primarily to
product mix related to the Hetronic acquisition and the impact of the
Interconnect restructuring.
Restructuring
.
On January 24, 2008, we announced our decision to discontinue
producing certain legacy products in the Interconnect segment. During fiscal 2009, we recorded a
restructuring charge of $5.2 million, which consisted of $1.4 million for
employee severance, $3.4 million for impairment and accelerated depreciation
for buildings, building improvements and machinery and equipment, $0.2 million
for inventory write-downs and $0.2 million relating to professional fees. We expect the Interconnect restructuring to
be complete in fiscal 2010.
In fiscal 2008, we
recorded a restructuring charge of $0.7 million, $0.6 million for employee
severance and $0.1 million for professional fees relating to the January 2008
restructuring.
On March 12,
2009, we announced several additional restructuring actions to
consolidate
manufacturing facilities in lower cost regions to reduce costs.
During the fiscal year ended May 2, 2009, we recorded a
restructuring charge of $0.3 million, which consisted of $0.1 million for employee severance and $0.2
million relating to professional fees.
Impairment
of Goodwill and Intangible Assets
. Based on
events and general business declines, we performed step one and step two of
the goodwill impairment test in accordance with paragraph 19 of SFAS No. 142,
on the reporting units that had goodwill during fiscal 2009. Based on these tests, we concluded that
goodwill was impaired. We recorded a
goodwill impairment charge of $30.8 million in our Interconnect segment related
to these assets. See Note 4 for more
information.
Also, in
accordance with FASB Statement No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, during the fourth quarter of fiscal 2009, based
on our future estimates of the undiscounted cash flows, it was determined that
certain identifiable assets were impaired.
We recorded an impairment charge of $26.1 million for these assets. See Note 4 for more information.
Selling
and Administrative Expenses
. Selling and
administrative expenses increased $5.1 million, or 19.7%, to $31.0 million for
the fiscal year ended May 2, 2009 compared to $25.9 million for the fiscal
year ended May 3, 2008. Selling and
administrative expenses are higher due to the Hetronic acquisition, higher
amortization expense, slightly offset by lower commission expense due to lower
sales in fiscal 2009 as compared to fiscal 2008. Selling and administrative expenses as a
percentage of net sales increased to 23.7% in fiscal 2009 from 19.0% in fiscal
2008.
Interest
Income, Net
. Net interest income was $0.5 million for the
fiscal year ended May 2, 2009, compared to $0.4 million for the fiscal
year ended May 3, 2008.
Other,
Net
. Other, net was income of $0.7 million for the
fiscal year ended May 2, 2009, compared to an expense of $1.2 million for
the fiscal year ended May 3, 2008.
The increase is primarily due to the strengthening of the U.S. dollar
versus the Euro and Czech koruna during fiscal 2009 as compared to fiscal
2008. The functional currencies of these
operations are the Chinese yuan, Czech koruna, Euro and Singapore dollar. Some foreign operations have transactions
denominated in currencies other than their functional currencies, primarily
sales in U.S. dollars and Euros, creating exchange rate sensitivities.
Income/(Loss)
Before Income Taxes.
Interconnect segment income/(loss) before
income taxes decreased $65.3 million to a loss of $60.7 million for the fiscal
year ended May 2, 2009 compared to income of $4.6 million for the fiscal
year ended May 3, 2008 due to the goodwill and intangible asset write-off,
higher selling and administrative expenses, increased amortization expense and
increased restructuring expenses.
23
Table of
Contents
Power
Products Segment Results
Below is a table
summarizing results for the years ended:
(in millions)
|
|
May 2,
|
|
May 3,
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Net Change
|
|
Net Change
|
|
Net
sales
|
|
$
|
42.7
|
|
$
|
45.8
|
|
$
|
(3.1
|
)
|
-6.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost
of products sold
|
|
37.2
|
|
33.2
|
|
4.0
|
|
12.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross
margins
|
|
5.5
|
|
12.6
|
|
(7.1
|
)
|
-56.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
0.5
|
|
|
|
0.5
|
|
0.0
|
%
|
Impairment
of goodwill and other assets
|
|
5.4
|
|
|
|
5.4
|
|
|
|
Selling
and administrative expenses
|
|
5.1
|
|
4.1
|
|
1.0
|
|
25.4
|
%
|
Other
- expense
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Income/(loss)
before income taxes
|
|
$
|
(5.7
|
)
|
$
|
8.5
|
|
$
|
(14.2
|
)
|
-166.7
|
%
|
|
|
May 2,
|
|
May 3,
|
|
|
|
|
|
Percent of sales:
|
|
2009
|
|
2008
|
|
|
|
|
|
Net
sales
|
|
100.0
|
%
|
100.0
|
%
|
|
|
|
|
Cost
of products sold
|
|
87.1
|
%
|
72.5
|
%
|
|
|
|
|
Gross
margins (including other income)
|
|
13.0
|
%
|
27.5
|
%
|
|
|
|
|
Restructuring
|
|
1.2
|
%
|
0.0
|
%
|
|
|
|
|
Impairment
of goodwill and other assets
|
|
12.5
|
%
|
0.0
|
%
|
|
|
|
|
Selling
and administrative expenses
|
|
12.0
|
%
|
9.0
|
%
|
|
|
|
|
Other
- expense
|
|
-0.4
|
%
|
0.0
|
%
|
|
|
|
|
Income/(loss)
before income taxes
|
|
-13.3
|
%
|
18.6
|
%
|
|
|
|
|
Net Sales
.
Power Products segment net sales decreased $3.1 million, or 6.8%, to
$42.7 million for the fiscal year ended May 2, 2009 from $45.8 million for
the fiscal year ended May 3, 2008.
Net sales were favorably impacted by the VEP acquisition on August 31,
2007. Excluding VEP, Power Products net
sales decreased 10.9% in fiscal 2009 as compared to fiscal 2008.
Cost of
Products Sold
. Power Products segment cost of products sold
increased $4.0 million, or 12.0%, to $37.2 million for the fiscal year ended May 2,
2009 compared to $33.2 million for the fiscal year ended May 3, 2008. The Power Products segment cost of products
sold as a percentage of sales increased to 87.1% for fiscal 2009 from 72.5% for
fiscal 2008. The increase is partially
due to a product that reached end-of-life at the end of fiscal 2008 and had a
lower cost as a percentage of sales than the remaining sales during fiscal
2009. In addition, we experienced an
unfavorable product mix in our busbar businesses, as well as, increased
shipping and distribution costs.
Gross
Margins.
Power Products segment gross margins decreased
$7.1 million, or 56.0%, to $5.5 million for the fiscal year ended May 2,
2009 as compared to $12.6 million for the fiscal year ended May 3, 2008.
Gross margins as a percentage of net sales decreased to 13.0% in fiscal 2009
from 27.5% in fiscal 2008. The decrease
is due to a product that reached end-of-life at the end of fiscal 2008 and had
higher gross margins than the remaining sales and gross margins during fiscal
2009. We also experienced an unfavorable
product mix, and increases in labor costs, as well as, shipping and
distribution costs.
24
Table of
Contents
Power
Products Segment Results - Continued
Restructuring
.
On March 12, 2009, we announced several additional restructuring
actions to
consolidate manufacturing facilities in lower cost regions to reduce
costs.
During the fiscal year ended May 2,
2009, we recorded a restructuring charge of $0.5 million, which consisted
of $0.4 million for impairment and
accelerated depreciation for buildings and improvements and machinery and
equipment and $0.1 million relating to professional services.
Impairment
of Goodwill and Intangible Assets
. Based on
events and general business declines, we performed step one and step two of
the goodwill impairment test in accordance with paragraph 19 of SFAS No. 142,
on the reporting units that had goodwill during fiscal 2009. Based on these tests, we concluded that
goodwill was impaired. We recorded a
goodwill impairment charge of $5.4 million in our Power Products segment
related to these assets. See Note 4 for
more information.
Selling
and Administrative Expenses
. Selling and
administrative expenses increased $1.0 million, or 25.4%, to $5.1 million for
the fiscal year ended May 2, 2009 compared to $4.1 million for the fiscal
year ended May 3, 2008. Selling and
administrative expenses increased due to the Tribotek acquisition on March 30,
2008, partially offset by lower commission and bonus expenses in fiscal
2009. Selling and administrative
expenses as a percentage of net sales increased to 12.0% in the fiscal 2009
from 9.0% in fiscal 2008.
Other,
Net
. Other, net was an expense of $0.2 million for
the fiscal year ended May 2, 2009, compared to no other, net for the
fiscal year ended May 3, 2008.
Income/(Loss)
Before Income Taxes.
Power Products segment income/(loss)
before income taxes decreased by $14.2 million to a loss of $5.7 million for
the fiscal year ended May 2, 2009 from a profit of $8.5 million for the
fiscal year ended May 3, 2008 due to impairment of goodwill, decreased
sales of products which became end-of-life at the end of fiscal year 2008,
restructuring costs, higher material, labor and shipping costs, expenses
related to Tribotek, partially offset by lower commission and bonus expenses.
Other
Segment Results
Below is a table
summarizing results for the years ended:
(in millions)
|
|
May 2,
|
|
May 3,
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Net
Change
|
|
Net
Change
|
|
Net
sales
|
|
$
|
8.2
|
|
$
|
6.9
|
|
$
|
1.3
|
|
18.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost
of products sold
|
|
8.9
|
|
6.7
|
|
2.2
|
|
32.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross
margins
|
|
(0.7
|
)
|
0.2
|
|
(0.9
|
)
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Impairment
of goodwill and intangible assets
|
|
1.6
|
|
|
|
1.6
|
|
0.0
|
%
|
Selling
and administrative expenses
|
|
2.8
|
|
2.0
|
|
0.8
|
|
40.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
$
|
(5.1
|
)
|
$
|
(1.8
|
)
|
$
|
(3.3
|
)
|
183.3
|
%
|
|
|
May 2,
|
|
May 3,
|
|
|
|
|
|
Percent of sales:
|
|
2009
|
|
2008
|
|
|
|
|
|
Net
sales
|
|
100.0
|
%
|
100.0
|
%
|
|
|
|
|
Cost
of products sold
|
|
108.5
|
%
|
97.1
|
%
|
|
|
|
|
Gross
margins
|
|
-8.5
|
%
|
2.9
|
%
|
|
|
|
|
Impairment
of goodwill and intangible assets
|
|
19.5
|
%
|
0.0
|
%
|
|
|
|
|
Selling
and administrative expenses
|
|
34.1
|
%
|
29.0
|
%
|
|
|
|
|
Loss
before income taxes
|
|
-62.2
|
%
|
-26.1
|
%
|
|
|
|
|
25
Table of
Contents
Other
Segment Results - Continued
Net Sales
.
The Other segment net sales increased $1.3 million to $8.2 million for
the fiscal year ended May 2, 2009 as compared to $6.9 million for the
fiscal year ended May 3, 2008. Net
sales from our torque-sensing business increased 60.6% and net sales from our
testing facilities increased 11.2% in fiscal 2009 as compared to fiscal 2008.
Cost of
Products Sold
. Other segment cost of products sold increased
$2.2 million to $8.9 million for the fiscal year ended May 2, 2009
compared to $6.7 million for the fiscal year ended May 3, 2008. The increase is due to additional support
staff in our U.S. testing facilities and a new testing facility that was opened
in Shanghai, China during the second quarter of fiscal 2009.
Gross
Margins .
The Other segment gross margins was a
loss of $0.7 million for fiscal 2009, compared to income $0.2 million for
fiscal 2008. Gross margins declined in
fiscal 2009 due to the increase in additional support staff in our U.S. testing
facilities and the new testing facility in Shanghai, China.
Impairment
of Goodwill and Intangible Assets
. Based on
events and general business declines, we performed step one and step two of
the goodwill impairment test in accordance with paragraph 19 of SFAS No. 142,
on the reporting units that had goodwill during fiscal 2009. Based on these tests, we concluded that
goodwill was impaired. We recorded a
goodwill impairment charge of $1.2 million in our Other segment related to
these assets. See Note 4 for more
information.
Also, in
accordance with FASB Statement No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, during the fourth quarter of fiscal 2009, based
on our future estimates of the undiscounted cash flows, it was determined that
certain identifiable assets were impaired.
We recorded an impairment charge of $0.4 million for these assets. See Note 4 for more information.
Selling
and Administrative Expenses
. Selling and
administrative expenses increased $0.8 million to $2.8 million for the fiscal
year ended May 2, 2009 compared to $2.0 million for the fiscal year ended May 3,
2008. The increase is primarily due to
the new testing facility in Shanghai, China.
Selling and administrative expenses as a percentage of net sales
increased to 34.1% in fiscal 2009 from 29.0% in fiscal 2008.
Loss
Before Income Taxes.
The Other segment loss before income
taxes was $5.1 million for the fiscal year ended May 2, 2009 compared to
$1.8 million for the fiscal year ended May 3, 2008. The increase in the loss before income taxes
is due the impairment of goodwill and intangible assets, additional support
staff for our North American testing facilities as well as costs associated
with the new testing facility in Shanghai, China.
26
Table of Contents
Results
of Operations for the Fiscal Year Ended May 3, 2008 (53 weeks) as Compared
to the Fiscal Year Ended April 28, 2007 (52 weeks)
Consolidated
Results
Below is a table
summarizing results for the years ended:
(in millions)
|
|
May 3,
|
|
April 28,
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
Net Change
|
|
Net Change
|
|
Net
sales
|
|
$
|
551.1
|
|
$
|
448.4
|
|
$
|
102.7
|
|
22.9
|
%
|
Other
income
|
|
1.9
|
|
1.6
|
|
0.3
|
|
18.8
|
%
|
|
|
553.0
|
|
450.0
|
|
103.0
|
|
22.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost
of products sold
|
|
428.4
|
|
359.9
|
|
68.5
|
|
19.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross
margins (including other income)
|
|
124.6
|
|
90.1
|
|
34.5
|
|
38.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
5.2
|
|
2.0
|
|
3.2
|
|
160.0
|
%
|
Selling
and administrative expenses
|
|
61.5
|
|
50.2
|
|
11.3
|
|
22.5
|
%
|
Amortization
of intangibles
|
|
6.0
|
|
4.7
|
|
1.3
|
|
27.7
|
%
|
Impairment
of assets
|
|
1.5
|
|
0.4
|
|
1.1
|
|
290.5
|
%
|
Interest
income, net
|
|
2.3
|
|
3.4
|
|
(1.1
|
)
|
-32.4
|
%
|
Other,
net
|
|
(3.2
|
)
|
(0.4
|
)
|
(2.8
|
)
|
700.0
|
%
|
Income
taxes
|
|
9.7
|
|
9.8
|
|
(0.1
|
)
|
-1.0
|
%
|
Cumulative
effect of accounting change
|
|
|
|
0.1
|
|
(0.1
|
)
|
-100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
39.8
|
|
$
|
26.1
|
|
$
|
13.7
|
|
52.5
|
%
|
|
|
May 3,
|
|
April 28,
|
|
|
|
|
|
Percent of sales:
|
|
2008
|
|
2007
|
|
|
|
|
|
Net
sales
|
|
100.0
|
%
|
100.0
|
%
|
|
|
|
|
Other
income
|
|
0.3
|
%
|
0.4
|
%
|
|
|
|
|
Cost
of products sold
|
|
77.7
|
%
|
80.3
|
%
|
|
|
|
|
Gross
margins (including other income)
|
|
22.6
|
%
|
20.1
|
%
|
|
|
|
|
Restructuring
|
|
0.9
|
%
|
0.4
|
%
|
|
|
|
|
Selling
and administrative expenses
|
|
11.2
|
%
|
11.2
|
%
|
|
|
|
|
Amortization
of intangibles
|
|
1.1
|
%
|
1.0
|
%
|
|
|
|
|
Impairment
of assets
|
|
0.3
|
%
|
0.1
|
%
|
|
|
|
|
Interest
income, net
|
|
0.4
|
%
|
0.8
|
%
|
|
|
|
|
Other,
net
|
|
-0.6
|
%
|
-0.1
|
%
|
|
|
|
|
Income
taxes
|
|
1.8
|
%
|
2.2
|
%
|
|
|
|
|
Cumulative
effect of accounting change
|
|
0.0
|
%
|
0.0
|
%
|
|
|
|
|
Net
income
|
|
7.2
|
%
|
5.8
|
%
|
|
|
|
|
Net Sales
.
Consolidated net sales increased $102.7 million, or 22.9%, to $551.1
million for the fiscal year ended May 3, 2008 from $448.4 million for the
fiscal year ended April 28, 2007.
Of the increase, $51.3 million relates to our TouchSensor and VEP
acquisitions. The increase was also
driven by strong organic growth from our European and Asian operations. Sales from those operations increased 36.1%
during fiscal 2008 as compared to fiscal 2007.
Automotive segment sales were also favorably impacted by price increases
of $20.7 million on what were previously marginally profitable and unprofitable
products, which we had decided to exit at the expiration of our manufacturing
commitment,
but, at the request of the customer, have agreed to continue to
produce at higher prices.
Excluding TouchSensor, the
Interconnect segment sales increased 9.9% for fiscal 2008 due to strong sales
from our Asian connector and European optical businesses. Excluding VEP, the Power Products segment
sales decreased 3.6% for fiscal 2008 as compared to fiscal 2007. Translation of foreign operations net sales
in fiscal 2008
27
Table
of Contents
Consolidated
Results - Continued
increased reported net
sales by $10.5 million or 1.9% due to the weaker U.S. dollar versus foreign
currencies.
Other
Income
. Other income increased $0.3 million, or
18.8%, to $1.9 million for the fiscal year ended May 3, 2008 from $1.6
million for the fiscal year ended April 28, 2007. Other income consisted primarily of earnings
from our automotive joint venture, grants, engineering design fees and
royalties.
Cost of
Products Sold
. Consolidated cost of products sold increased
$68.5 million, or 19.0%, to $428.4 million for fiscal 2008 from $359.9 million
for fiscal 2007. The increase is due to
the higher sales volumes. Consolidated
cost of products sold, as a percentage of sales was 77.7% for the fiscal year
ended May 3, 2008 and 80.3% for the fiscal year ended April 28,
2007. Automotive segment cost of goods
sold as a percentage of sales were favorably impacted by price increases and
the transfer of certain operations from Scotland to Malta during the third
quarter of fiscal 2007. Additionally, in anticipation of the forecasted lower
automotive sales in the U.S. market, we had previously made our North American
operations more efficient and cost effective.
Gross
Margins (including other income).
Consolidated gross margins (including
other income) increased $34.5 million, or 38.3%, to $124.6 million for the
fiscal year ended May 3, 2008 as compared to $90.1 million for the fiscal
year ended April 28, 2007. Gross
margins as a percentage of net sales increased to 22.6% for fiscal 2008 from
20.1% for fiscal 2007. The increase in
gross margins as a percentage of sales is primarily due to the North American
automotive segment price increases and integration of the Scotland operation to
Malta.
Restructuring.
On January 24, 2008, we announced a restructuring of our U.S.-based
automotive operations and the decision to discontinue producing certain legacy
electronic Interconnect products. As a
result, we recorded a restructuring charge of $5.2 million for the fiscal year
ended May 3, 2008. We recorded $2.0
million of restructuring and impairment costs in the third quarter of fiscal
2007 relating to the closing of our Scotland automotive parts manufacturing
plant and transferred all production lines from that facility to our automotive
parts manufacturing operation in Malta.
Selling
and Administrative Expenses
. Selling and
administrative expenses increased $11.3 million, or 22.5%, to $61.5 million for
the fiscal year ended May 3, 2008 compared to $50.2 million for the fiscal
year ended April 28, 2007. Of the
increase, $3.3 million relates to the recently acquired TouchSensor and VEP businesses. The majority of the additional increase
relates to additional global support staff and increased long-term incentive
compensation due to improved performance and higher share price and higher
professional fees. Selling and
administrative expenses as a percentage of net sales were 11.2% in both fiscal
2008 and 2007.
Amortization
of Intangibles
. Amortization of intangibles increased $1.3
million, or 27.7%, to $6.0 million for the fiscal year ended May 3, 2008
compared to $4.7 million for the fiscal year ended April 28, 2007. The increase is due to the amortization
expenses for the TouchSensor and VEP acquisitions.
Impairment
of Assets
. Impairment of assets increased $1.1 million
to $1.5 million for the fiscal year ended May 3, 2008 compared to $0.4
million for the fiscal year ended April 28, 2007. The increase includes a $0.7 million
write-down of machinery and equipment as a result of lower anticipated revenues
over the life of the related project and $0.4 million for the impairment of a
particular patent (classified as an intangible asset) where the underlying
technology was deemed to be commercially impractical.
Interest
Income, Net
. Net interest income decreased 32.4% in the
fiscal year ended May 3, 2008 to $2.3 million as compared to $3.4 million
in the fiscal year ended April 28, 2007.
The average cash balance was $83.0 million during fiscal 2008 as
compared to $89.0 million during fiscal 2007.
The average interest rate earned in fiscal 2008 was 3.07% as compared to
4.23% in fiscal 2007. The average
interest rate earned includes both taxable interest and tax-exempt municipal
interest. The cash balance decreased
primarily due to the recent acquisitions of TouchSensor and VEP. Interest expense was $0.2 million and $0.3
million for fiscal 2008 and 2007, respectively.
Other,
Net
. Other, net was an expense of $3.2 million for
the fiscal year ended May 3, 2008 versus an expense of $0.4 million for
the fiscal year ended April 28, 2007.
Other, net consists primarily of currency exchange gains and losses at
the Companys foreign operations. The
functional currencies of these operations are the British pound, Chinese yuan,
Czech koruna, Euro, Maltese lira, Mexican peso and Singapore dollar. Some foreign operations have transactions
denominated in currencies other than their functional currencies, primarily
sales in U.S.
28
Table
of Contents
Consolidated
Results - Continued
dollars and Euros,
creating exchange rate sensitivities.
Effective January 1, 2008, the Euro replaced the Maltese lira as
the functional currency of Malta.
During fiscal
2008, we recorded a charge of $0.5 million relating to a reduction of the net asset
value (NAV) on a portion of our short-term investments which is an enhanced
cash fund sold as an alternative to traditional money market funds. We have
historically invested a portion of our cash in the fund. During the third
quarter, the fund was overwhelmed with withdrawal requests and a restriction
was placed on the redemption ability of the fund. Therefore, during the fiscal
year, we recorded a realized loss of $0.1 million on partial redemptions and an
unrealized loss of $0.4 million for the
reduction in the NAVs principal balance.
Income
Taxes.
The effective income tax rate was 19.7% for
fiscal 2008 compared with 27.4% for the fiscal 2007. During fiscal 2008, we recognized a benefit
of $0.3 million relating to the expiration of certain statute of limitations
for tax positions that were not challenged by the taxing authorities. In addition, we recognized $1.5 million
relating to tax return reconciliations compared to income tax provisions during
the fiscal year ended May 3, 2008.
The effective tax rates for both fiscal years 2008 and 2007 reflect
utilization of foreign investment tax credits and the effect of lower tax rates
on income of our foreign earnings and higher earnings at those operations.
Net
Income.
Net income increased $13.7 million, or 52.5%,
to $39.8 million for the fiscal year ended May 3, 2008 as compared to
$26.1 million for the fiscal year ended April 28, 2007 due to the
automotive segment price increases, strong sales and increased efficiencies
from our European and Asian operations, offset slightly by higher selling and
administrative expenses. In addition,
restructuring costs increased by $3.2 million and our effective tax rate was
19.7% during fiscal 2008. Net income as
a percentage of sales increased to 7.2% for the fiscal year ended May 3,
2008 as compared to 5.8% for fiscal 2007.
29
Operating
Segments
Automotive
Segment Results
Below is a table
summarizing results for the years ended:
(in millions)
|
|
May 3,
|
|
April 28,
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
Net Change
|
|
Net Change
|
|
Net
sales
|
|
$
|
362.1
|
|
$
|
315.7
|
|
$
|
46.4
|
|
14.7
|
%
|
Other
income
|
|
0.9
|
|
|
|
0.9
|
|
0.0
|
%
|
|
|
363.0
|
|
315.7
|
|
47.3
|
|
15.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost
of products sold
|
|
282.0
|
|
265.1
|
|
16.9
|
|
6.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross
margins (including other income)
|
|
81.0
|
|
50.6
|
|
30.4
|
|
60.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
4.5
|
|
2.0
|
|
2.5
|
|
125.0
|
%
|
Impairment
of assets
|
|
1.5
|
|
0.4
|
|
1.1
|
|
275.0
|
%
|
Selling
and administrative expenses
|
|
18.0
|
|
19.2
|
|
(1.2
|
)
|
-6.3
|
%
|
Interest,
net - income/(expense)
|
|
|
|
(0.3
|
)
|
0.3
|
|
0.0
|
%
|
Other,
net - income/(expense)
|
|
(1.7
|
)
|
(1.3
|
)
|
(0.4
|
)
|
30.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
$
|
55.3
|
|
$
|
27.4
|
|
$
|
27.9
|
|
101.8
|
%
|
|
|
May 3,
|
|
April 28,
|
|
|
|
|
|
Percent of sales:
|
|
2008
|
|
2007
|
|
|
|
|
|
Net
sales
|
|
100.0
|
%
|
100.0
|
%
|
|
|
|
|
Other
income
|
|
0.2
|
%
|
0.0
|
%
|
|
|
|
|
Cost
of products sold
|
|
77.9
|
%
|
84.0
|
%
|
|
|
|
|
Gross
margins (including other income)
|
|
22.4
|
%
|
16.0
|
%
|
|
|
|
|
Restructuring
|
|
1.2
|
%
|
0.6
|
%
|
|
|
|
|
Impairment
of assets
|
|
0.4
|
%
|
0.1
|
%
|
|
|
|
|
Selling
and administrative expenses
|
|
5.0
|
%
|
6.1
|
%
|
|
|
|
|
Interest
income, net
|
|
0.0
|
%
|
-0.1
|
%
|
|
|
|
|
Other,
net
|
|
-0.5
|
%
|
-0.4
|
%
|
|
|
|
|
Income
before income taxes
|
|
15.3
|
%
|
8.7
|
%
|
|
|
|
|
Net Sales
.
Automotive segment net sales increased $46.4 million, or 14.7%, to
$362.1 million for the fiscal year ended May 3, 2008 from $315.7 million
for the fiscal year ended April 28, 2007.
Sales were also favorably impacted by price increases of $20.7 million
on what was previously marginally profitable and unprofitable products, which
we had decided to exit at the expiration of our manufacturing commitment,
but, at the
request of the customer, have agreed to continue to produce at higher
prices. Additionally,
automotive segment net sales increased
from organic growth from our European and Asian operations. Net sales from these operations increased
32.7% for fiscal 2008.
We expect to discontinue producing these
products during fiscal 2009.
Excluding the price increases, North
American automotive segment sales decreased 5.5% in fiscal 2008. Translation of foreign operations net sales
in fiscal 2008 increased reported net sales by $9.2 million, or 2.5%, due to
the weaker U.S. dollar versus foreign currencies.
Other
Income
. Other income was $0.9 million for the fiscal year
ended May 3, 2008 from no other income for fiscal year ended April 28,
2007. Other income consisted primarily
of earnings from engineering design fees and royalties.
Cost of
Products Sold
. Automotive segment cost of products sold
increased $16.9 million to $282.0 million for the fiscal year ended May 3,
2008 from $265.1 for the fiscal year ended April 28, 2007. The increase
30
Table
of Contents
Automotive
Segment Results - Continued
relates to higher
sales volumes. Automotive segment costs
of products sold as a percentage of sales decreased to 77.9% for fiscal 2008
from 84.0% for fiscal 2007. Automotive
segment cost of goods sold as a percentage of sales was favorably impacted by
the price increases. The integration of
our Scotland operation to our Malta operation has increased efficiency in our
European manufacturing processes.
Additionally, in anticipation of the forecasted lower automotive sales
in the U.S. market, we had previously made our North American operations more
efficient and cost effective.
Gross
Margins (including other income).
Automotive segment gross margins
(including other income) increased $30.4 million, or 60.1%, to $81.0 million
for the fiscal year ended May 3, 2008 as compared to $50.6 million for the
fiscal year ended April 28, 2007.
The increase in gross profit as a percentage of sales is primarily due
to the price increases and integration of the Scotland operation to Malta. Gross margins (including other income) as a
percentage of net sales increased to 22.4% for fiscal 2008 from 16.0% for
fiscal 2007.
Restructuring
.
On January 24, 2008, we announced a restructuring of our U.S.-based
automotive operations. As a result, we
recorded a restructuring charge of $4.5 million, $2.7 million relating to
employee severance, $1.3 million relating to impairment and accelerated depreciation
for assets and $0.5 million for professional fees. We recorded $2.0 million of restructuring and
impairment costs in the third quarter of fiscal 2007 relating to the closing of
our Scotland automotive parts manufacturing plant and transferred all
production lines from that facility to our automotive parts manufacturing
operation in Malta.
Impairment
of Assets
. Impairment of assets increased $1.1 million
to $1.5 million for the fiscal year ended May 3, 2008 compared to $0.4
million for the fiscal year ended April 28, 2007. The increase includes a $0.7 million
write-down of machinery and equipment as a result of lower anticipated revenues
over the life of the related project and $0.4 million for the impairment of a
particular patent (classified as an intangible asset) where the underlying
technology was deemed to be commercially impractical.
Selling
and Administrative Expenses
. Selling and
administrative expenses decreased $1.2 million, or 6.3%, to $18.0 million for
the fiscal year ended May 3, 2008 compared to $19.2 million for the fiscal
year ended April 28, 2007. The
decrease is due the integration of the Scotland operation to Malta in the third
quarter of fiscal 2007. Selling and
administrative expenses as a percentage of net sales decreased to 5.0% in
fiscal 2008 from 6.1% in fiscal 2007.
Interest
Expense, Net
. Net interest expense was zero for the fiscal
year ended May 3, 2008, compared to an expense of $0.3 million for the
fiscal year ended April 28, 2007.
Other
Expense, Net
. Other expense, net was $1.7 million for the
fiscal year ended May 3, 2009, compared to $1.3 million for the fiscal
year ended April 28, 2007. The
increase is primarily due to the weakening of the U.S. dollar versus the Euro
and Czech koruna during fiscal 2008 as compared to fiscal 2007. The functional currencies of these operations
are the British pound, Chinese yuan, Czech koruna, Euro, Mexican peso and
Singapore dollar. Some foreign operations
have transactions denominated in currencies other than their functional
currencies, primarily sales in U.S. dollars and Euros, creating exchange rate
sensitivities.
Income
Before Income Taxes.
Automotive segment income before income
taxes increased $27.9 million, or 101.8%, to $55.3 million for the fiscal year
ended May 3, 2008 compared to $27.4 million for the fiscal year ended April 28,
2007 due to the price increases, strong sales in Europe and Asia and
integration of our Scotland operation to our Malta operation, offset by
restructuring costs.
31
Table of
Contents
Interconnect
Segment Results
Below is a table
summarizing results for the years ended:
(in millions)
|
|
May 3,
|
|
April 28,
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
Net Change
|
|
Net Change
|
|
Net
sales
|
|
$
|
136.3
|
|
$
|
82.1
|
|
$
|
54.2
|
|
66.0
|
%
|
Other
income
|
|
0.3
|
|
0.6
|
|
(0.3
|
)
|
-50.0
|
%
|
|
|
136.6
|
|
82.7
|
|
53.9
|
|
65.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost
of products sold
|
|
104.7
|
|
58.0
|
|
46.7
|
|
80.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross
margins (including other income)
|
|
31.9
|
|
24.7
|
|
7.2
|
|
29.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
0.7
|
|
|
|
0.7
|
|
0.0
|
%
|
Selling
and administrative expenses
|
|
25.8
|
|
16.3
|
|
9.5
|
|
58.3
|
%
|
Interest,
net - income/(expense)
|
|
0.4
|
|
0.4
|
|
|
|
0.0
|
%
|
Other,
net - income/(expense)
|
|
(1.2
|
)
|
0.5
|
|
(1.7
|
)
|
-340.0
|
%
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
$
|
4.6
|
|
$
|
9.3
|
|
$
|
(4.7
|
)
|
-50.5
|
%
|
|
|
May 3,
|
|
April 28,
|
|
|
|
|
|
Percent of sales:
|
|
2008
|
|
2007
|
|
|
|
|
|
Net
sales
|
|
100.0
|
%
|
100.0
|
%
|
|
|
|
|
Other
income
|
|
0.2
|
%
|
0.7
|
%
|
|
|
|
|
Cost
of products sold
|
|
76.8
|
%
|
70.6
|
%
|
|
|
|
|
Gross
margins (including other income)
|
|
23.4
|
%
|
30.1
|
%
|
|
|
|
|
Restructuring
|
|
0.5
|
%
|
0.0
|
%
|
|
|
|
|
Selling
and administrative expenses
|
|
18.9
|
%
|
19.9
|
%
|
|
|
|
|
Interest
income, net
|
|
0.3
|
%
|
0.5
|
%
|
|
|
|
|
Other,
net
|
|
-0.9
|
%
|
0.6
|
%
|
|
|
|
|
Income
before income taxes
|
|
3.4
|
%
|
11.3
|
%
|
|
|
|
|
Net Sales
. Interconnect
segment net sales increased $54.2 million, or 66.0%, to $136.3 million for the
fiscal year ended May 3, 2008 from $82.1 million for the fiscal year ended
April 28, 2007. A majority of the
sales increase is due to the TouchSensor acquisition. Sales from our Asian connector business
increased 73.3% for fiscal 2008.
Excluding TouchSensor, the Interconnect segment sales increased 9.9% for
fiscal 2008 due to the strong sales from our Asian connector business. In addition, sales increased from our
European optical business, offset by lower sales in our domestic data
installation business. Translation of
foreign operations net sales in fiscal 2008 increased reported net sales by
$1.3 million, or 0.9%, due to the weaker U.S. dollar versus foreign currencies.
Other
Income
. Other income was $0.3 million for the fiscal
year ended May 3, 2008 and $0.6 million for the fiscal year ended April 28,
2007. Other income consisted primarily
of earnings from engineering design fees and royalties.
Cost of
Products Sold
. Interconnect segment cost of products sold
increased $46.7 million to $104.7 million for the fiscal year ended May 3,
2008 compared to $58.0 million for the fiscal year ended April 28,
2007. The majority of the increase is
due to cost of products sold from our TouchSensor acquisition. Interconnect segment cost of products sold as
a percentage of net sales increased to 76.8% for fiscal 2008 compared to 70.6%
for fiscal 2007. The increase is
primarily due to the TouchSensor business, which has higher cost of products
sold as a percentage of sales as compared to the other businesses in the
Interconnect segment. We experienced
lower sales in our domestic data center installation business and higher costs
related to PC card adapters during fiscal 2008.
In addition, we experienced increased costs due to overall lower sales
volumes in our North American operations (excluding TouchSensor).
32
Table
of Contents
Interconnect
Segment Results - Continued
Gross
Margins (including other income).
Interconnect segment gross margins
(including other income) increased $7.2 million, or 29.1%, to $31.9 million for
the fiscal year ended May 3, 2008 as compared to $24.7 million for the
fiscal year ended April 28, 2007.
The majority of the increase is due to the TouchSensor acquisition. In addition, gross margins increased in our
Asian connector business and European optical business, partially offset by
increased cost of products sold in our PC card adapter and data installation
businesses. Gross margins (including
other income) as a percentage of net sales decreased to 23.4% for fiscal 2008
from 30.1% for fiscal 2007.
Restructuring
.
On January 24, 2008, we announced our decision to discontinue
producing certain legacy electronic Interconnect products. As a result, we recorded a restructuring
charge of $0.7 million, $0.6 million for employee severance and $0.1 million
for professional fees.
Selling
and Administrative Expenses
. Selling and
administrative expenses increased $9.5 million, or 58.3%, to $25.8 million for
the fiscal year ended May 3, 2008 compared to $16.3 million for the fiscal
year ended April 28, 2007. Selling
and administrative expenses are higher due to the TouchSensor acquisition and
higher amortization expense in fiscal 2008 as compared to fiscal 2007. Selling and administrative expenses as a
percentage of net sales decreased to 18.9% in fiscal 2008 from 19.9% in fiscal
2007.
Interest
Income, Net
. Net interest income was $0.4 million for both
the fiscal years ended May 3, 2008 and April 28, 2007.
Other,
Net
. Other, net was expense of $1.2 million for
the fiscal year ended May 3, 2008, compared to income of $0.5 million for
the fiscal year ended April 28, 2007.
The increase is primarily due to the weakening of the U.S. dollar versus
the Euro and Czech koruna during fiscal 2008 as compared to fiscal 2007. The functional currencies of these operations
are the British pound, Chinese yuan, Czech koruna, Euro, Mexican peso and
Singapore dollar. Some foreign
operations have transactions denominated in currencies other than their
functional currencies, primarily sales in U.S. dollars and Euros, creating
exchange rate sensitivities.
Income
Before Income Taxes.
Interconnect income before income taxes
decreased $4.7 million, or 50.5%, to $4.6 million for the fiscal year ended May 3,
2008 compared to $9.3 million for the fiscal year ended April 28, 2007 due
to the gross margin declines in our PC card adapter and data installation
businesses, partially offset with increases from the TouchSensor business.
33
Table of
Contents
Power
Products Segment Results
Below is a table
summarizing results for the years ended:
(in millions)
|
|
May 3,
|
|
April 28,
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
Net Change
|
|
Net Change
|
|
Net
sales
|
|
$
|
45.8
|
|
$
|
43.0
|
|
$
|
2.8
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost
of products sold
|
|
33.2
|
|
30.8
|
|
2.4
|
|
7.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross
margins
|
|
12.6
|
|
12.2
|
|
0.4
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Selling
and administrative expenses
|
|
4.1
|
|
3.4
|
|
0.7
|
|
20.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
$
|
8.5
|
|
$
|
8.8
|
|
$
|
(0.3
|
)
|
-3.4
|
%
|
|
|
May 3,
|
|
April 28,
|
|
|
|
|
|
Percent of sales:
|
|
2008
|
|
2007
|
|
|
|
|
|
Net
sales
|
|
100.0
|
%
|
100.0
|
%
|
|
|
|
|
Cost
of products sold
|
|
72.5
|
%
|
71.6
|
%
|
|
|
|
|
Gross
margins (including other income)
|
|
27.5
|
%
|
28.4
|
%
|
|
|
|
|
Selling
and administrative expenses
|
|
9.0
|
%
|
7.9
|
%
|
|
|
|
|
Income
before income taxes
|
|
18.6
|
%
|
20.5
|
%
|
|
|
|
|
Net Sales
.
Power Products segment net sales increased $2.8 million to $45.8 million
for the fiscal year ended May 3, 2008 from $43.0 million for the fiscal
year ended April 28, 2007. Net
sales increased due to the VEP acquisition and were more than offset by lower
sales from our bus bar business.
Excluding VEP, the Power Products segment sales decreased 3.6% in fiscal
2008. The majority of the decrease
relates to certain projects for a customer, which reached end of life at the
end of fiscal 2007. In addition,
effective at the beginning of fiscal 2008, we are no longer the sole supplier
for another customer.
Cost of
Products Sold
. Power Products segment cost of products sold
increased $2.4 million, or 7.8%, to $33.2 million for the fiscal year ended May 3,
2008 compared to $30.8 million for the fiscal year ended April 28,
2007. The Power Products segment cost of
products sold as a percentage of sales increased to 72.5% for fiscal 2008 from
71.6% for fiscal 2007. The increase is
primarily due to higher material costs and price erosion at our North American
operations, partially offset by margin improvement at our Shanghai, China
operation.
Gross
Margins.
Power Products segment gross margins increased
$0.4 million, or 3.3%, to $12.6 million for the fiscal year ended May 3,
2008 as compared to $12.2 million for the fiscal year ended April 28,
2007. Gross margins as a percentage of net sales decreased to 27.5% for fiscal
2008 from 28.4% for fiscal 2007. The
increase is primarily due to the VEP business, offset by higher material costs
from our bus bar business.
Selling
and Administrative Expenses
. Selling and
administrative expenses increased $0.7 million, or 20.6%, to $4.1 million for
the fiscal year ended May 3, 2008 compared to $3.4 million for the fiscal
year ended April 28, 2007. Selling
and administrative expenses increased due to the VEP and Tribotek acquisitions
during fiscal 2008. Selling and
administrative expenses as a percentage of net sales increased to 9.0% in
fiscal 2008 from 7.9% in fiscal 2007.
Income
Before Income Taxes.
Power Products segment income before
income taxes decreased $0.3 million to $8.5 million for the fiscal year ended May 3,
2008 compared to $8.8 million for the fiscal year ended April 28, 2007,
due to certain projects ending at the end of fiscal 2007, no longer being the
sole supplier for another customer and higher material costs and customer price
erosion at our North American operation.
34
Table of
Contents
Other
Segment Results
Below is a table
summarizing results for the years ended:
(in millions)
|
|
May 3,
|
|
April 28,
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
Net Change
|
|
Net Change
|
|
Net
sales
|
|
$
|
6.9
|
|
$
|
7.6
|
|
$
|
(0.7
|
)
|
-9.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Cost
of products sold
|
|
6.7
|
|
5.8
|
|
0.9
|
|
15.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Gross
margins
|
|
0.2
|
|
1.8
|
|
(1.6
|
)
|
-88.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Selling
and administrative expenses
|
|
2.0
|
|
2.1
|
|
(0.1
|
)
|
-4.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
$
|
(1.8
|
)
|
$
|
(0.3
|
)
|
$
|
(1.5
|
)
|
500.0
|
%
|
|
|
May 3,
|
|
April 28,
|
|
|
|
|
|
Percent
of sales:
|
|
2008
|
|
2007
|
|
|
|
|
|
Net
sales
|
|
100.0
|
%
|
100.0
|
%
|
|
|
|
|
Cost
of products sold
|
|
97.1
|
%
|
76.3
|
%
|
|
|
|
|
Gross
margins
|
|
2.9
|
%
|
23.7
|
%
|
|
|
|
|
Selling
and administrative expenses
|
|
29.0
|
%
|
27.6
|
%
|
|
|
|
|
Loss
before income taxes
|
|
-26.1
|
%
|
-3.9
|
%
|
|
|
|
|
Net Sales
.
The Other segment net sales decreased $0.7 million to $6.9 million for
the fiscal year ended May 3, 2008 as compared to $7.6 million for the
fiscal year ended April 28, 2007.
Sales from our testing facilities decreased 11.9% during the fiscal year
ended May 3, 2008 compared to the fiscal year ended April 28, 2007
primarily due to lower demand for vibration testing.
Cost of
Products Sold
. Other segment cost of products sold increased
$0.9 million to $6.7 million for the fiscal year ended May 3, 2008
compared to $5.8 million for the fiscal year ended April 28, 2007. The majority of the increase is due to
increased initiatives in our torque-sensing business.
Gross
Margins.
The Other segment gross margins decreased $1.6 million
to $0.2 million for the fiscal year ended May 3, 2008 as compared to $1.8
million for the fiscal year ended April 28, 2007. The majority of the decrease is due to
increased cost initiatives in our torque-sensing business and the decrease in
net sales in our test facilities.
Selling and Administrative Expenses
.
Selling and administrative expenses decreased $0.1 million to $2.0
million for the fiscal year ended May 3, 2009 compared to $2.1 million for
the fiscal year ended April 28, 2007.
Selling and administrative expenses as a percentage of net sales
increased to 29.0% in fiscal 2008 from 27.6% in fiscal 2007.
Loss Before Income Taxes.
The
Other segment loss before income taxes was $1.8 million for the fiscal year
ended May 3, 2008 compared to a loss of $0.3 million for the fiscal year
ended April 28, 2007 due to the increased initiatives in our
torque-sensing business and lower sales volumes in our test facilities.
Financial
Condition, Liquidity and Capital Resources
We have historically
financed our cash requirements through cash flows from operations. Our future capital requirements will depend
on a number of factors, including our future net sales and the timing and rate
of expansion of our business. We believe
our current cash balances together with the cash flow expected to be generated
from future domestic and foreign operations will be sufficient to support
current operations.
We have an agreement with our primary bank for a revolving credit
facility to
35
Table
of Contents
Financial
Condition, Liquidity and Capital Resources - Continued
provide up to
$75,000 ready financing for general corporate purposes, including acquisition
opportunities that may become available.
The bank credit agreement, which expires on January 31, 2011,
requires maintenance of certain financial ratios and a minimum net worth level.
At May 2, 2009, we were in compliance with these covenants and had no
borrowings against this credit facility.
At May 2, 2009,
approximately $3.5 million remains invested in an enhanced cash fund sold
as an alternative to traditional money-market funds. We had historically
invested a portion of our on hand cash balances in this fund. These investments
are subject to credit, liquidity, market and interest rate risk. In December 2007,
the
fund
was overwhelmed with withdrawal requests from investors and was closed with a
restriction placed upon the cash redemption ability of its holders. Based on
the information available to us, we have estimated the fair value of this fund
at $0.72 per unit as of May 2, 2009.
For fiscal 2009, we recorded a loss of $1.2 million, of which $0.6
million was realized on partial redemptions of $8.8 million, and $0.6 million was unrealized. Since December
2007, we recorded a loss of $1.7 million, of which, $0.7 million was realized
on partial redemptions of $17.4 million, and $1.0 million was unrealized.
To date, 83% of the fund
has been liquidated. The latest information from fund management states that
its goal is to have 92% of the portfolio liquidated by December 2009.
Information and the markets relating to these investments remain dynamic, and
there may be further declines in the value of these investments, the value of
the collateral held by these entities, and the liquidity of our investments. To
the extent we determine that there is a further decline in fair value, we may
recognize additional losses in future periods.
Net cash provided by operations was $43.2 million,
$77.0 million and $53.9 million in fiscal 2009, 2008 and 2007,
respectively. The primary factor in the
Companys ability to generate cash from operations is our net income. Net income/(loss) decreased $152.3 million,
or 382.6%, to a loss of $112.5 million for the fiscal year ended May 2,
2009 as compared to net income of $39.8 million for the fiscal year ended May 3,
2008. Additionally, cash flows from
operations exceed net income because non-cash charges (impairment charges,
depreciation, amortization of intangibles and restricted stock awards)
negatively impact net income but do not result in the use of cash. Similarly,
non-cash credits such as deferred income tax benefits increase net income but
do not provide cash.
Operating cash flow is summarized below (in millions):
|
|
Fiscal
Year Ended
|
|
|
|
May 2,
|
|
May 3,
|
|
April 28,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Net income/(loss)
|
|
$
|
(112.5
|
)
|
$
|
39.8
|
|
$
|
26.1
|
|
Depreciation and
amortization
|
|
37.0
|
|
28.2
|
|
23.6
|
|
Changes in operating
assets and liabilities
|
|
6.3
|
|
6.8
|
|
1.0
|
|
Other non-cash items
|
|
112.4
|
|
2.2
|
|
3.2
|
|
Cash flow from
operations
|
|
$
|
43.2
|
|
$
|
77.0
|
|
$
|
53.9
|
|
Net
cash used in investing activities was $76.1 million for fiscal 2009, $29.0
million for fiscal 2008 and $73.4 million for fiscal 2007. Purchases of property, plant and equipment
were $17.1 million, $20.0 million and $10.7 million for the fiscal years ended
May 2, 2009, May 3, 2008 and April 28, 2007, respectively. On September 30, 2008, we acquired certain
assets of Hetronic LLC for $53.6 million in cash. We also incurred $2.4 million in transaction
costs related to the purchase. In fiscal
2009, we made a contingent payment of $0.8 million related to the VEP
acquisition and a contingent payment of $0.6 million for Cableco
Technologies. In fiscal 2008, net cash
used in investing activities also included $9.6 million relating to the
TouchSensor, VEP and Tribotek acquisitions.
During fiscal 2008, we also paid a $1.0 million dividend for our
automotive joint venture. Cash used in
investing activities in fiscal 2007 included $60.3 million for the acquisition
of TouchSensor and $2.7 million final contingent payment related to the AST
acquisition.
Net
cash used in financing activities was $15.1 million in fiscal 2009, $7.1
million in fiscal 2008 and $2.7 million in fiscal 2007. We paid cash dividends of $9.8 million, $7.6
million and $7.5 million in fiscal 2009, 2008
36
Table
of Contents
Financial
Condition, Liquidity and Capital Resources - Continued
and
2007, respectively. We repurchased
53,012 shares, 95,420 shares and 134,807 shares in fiscal 2009, 2008 and 2007,
respectively, of our common stock from the former owners of Cableco in
accordance with the terms of the earn-out provision of the Cableco purchase
agreement.
Our board of directors approved a stock repurchase plan in September 2009,
which expires May 1, 2010. We
repurchased 669,480 shares of common stock at an average price of $7.85 in
fiscal 2009 on the open market.
Contractual
Obligations
The following table
summarizes contractual obligations and commitments, as of May 2, 2009 (in
thousands):
|
|
Payments Due By Period
|
|
|
|
|
|
Less than
|
|
|
|
|
|
More than
|
|
|
|
Total
|
|
1 year
|
|
1-3 years
|
|
4-5 years
|
|
5 years
|
|
Operating
leases
|
|
$
|
7,820
|
|
$
|
3,685
|
|
$
|
3,042
|
|
$
|
993
|
|
$
|
100
|
|
Purchase
obligations
|
|
34,550
|
|
34,550
|
|
|
|
|
|
|
|
Deferred
compensation
|
|
4,884
|
|
1,023
|
|
1,132
|
|
291
|
|
2,438
|
|
Other
obligations
|
|
1,250
|
|
1,250
|
|
|
|
|
|
|
|
Total
|
|
$
|
48,504
|
|
$
|
40,508
|
|
$
|
4,174
|
|
$
|
1,284
|
|
$
|
2,538
|
|
Off-Balance Sheet Arrangements
We do not have any off-balance sheet
arrangements, other than the operating leases and purchase obligations noted in
the preceding table.
Critical Accounting Policies and
Estimates
Managements discussion
and analysis of financial condition and results of operations is based upon our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and related
disclosure of contingent assets and liabilities. Actual results may differ from
these estimates under different assumptions or conditions; however, we do not
believe that it is reasonably likely that changes will occur. We believe the following critical accounting
policies affect our more significant judgments and estimates used in the
preparation of our consolidated financial statements.
Revenue Recognition.
We recognize revenue on product sales when i) persuasive evidence of an
agreement exists, ii) the price is fixed or determinable, iii) delivery has
occurred or services have been rendered, and iv) collection of the sales
proceeds is reasonably assured. Revenue
from our product sales not requiring installation, net of trade discounts and
estimated sales allowances, is recognized when title passes, which is generally
upon shipment. We do not have any
additional obligations or customer acceptance provisions after shipment of such
products. We handle returns by
replacing, repairing or issuing credit for defective products when
returned. Revenue from cabling
infrastructure systems installations is recognized when the installation is
completed, tested and accepted by the customer.
Allowance
for Doubtful Accounts.
We maintain an allowance for
doubtful accounts for estimated losses resulting from the inability of
customers to make required payments. The amount of the allowance is based on
the age of unpaid amounts, information about the creditworthiness of customers,
and other relevant information. Estimates of uncollectible amounts are revised
each period, and changes are recorded in the period they become known. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.
In
addition, our revenues and accounts receivable are concentrated in a relatively
small number of customers. A significant
change in the liquidity or financial position of any one of these customers or
a
37
Table
of Contents
Critical Accounting Policies and
Estimates - Continued
deterioration in the economic environment or automotive industry, in
general, could have a material adverse impact on the collectability of our
accounts receivable and our future operating results, including a reduction in
future revenues and additional allowances for doubtful accounts.
Allowance
for Excess and Obsolete Inventory.
Inventories
are valued at the lower-of-cost-or-market value and have been reduced by
allowances for excess and obsolete inventories. The estimated allowances are
based on our review of inventories on hand compared to estimated future usage
and sales, using assumptions about future product life cycles, product demand
and market conditions. If actual product
life cycles, product demand and market conditions are less favorable than those
projected by us, additional inventory write-downs may be required.
Intangible
Assets.
We have significant intangible assets related
to goodwill and other acquired intangibles.
The determination of related estimated useful lives and whether these
assets are impaired involves significant judgment. In assessing the recoverability of our
intangibles, we must make assumptions regarding estimated future cash flows and
other factors to determine the fair value of the respective assets. If these estimates or their related
assumptions change in the future, we may be required to record impairment
charges for these assets. In accordance
with SFAS No. 142,
Goodwill and Other
Intangible Assets,
on May 1, 2002, we ceased amortizing
goodwill. In lieu of amortization, we
are required to perform an annual impairment review
(see Note 4 to the Consolidated
Financial Statements).
Income
Taxes.
As part of the process of preparing our
Consolidated Financial Statements, we are required to estimate income taxes in
each of the jurisdictions in which we operate. The process involves estimating
actual current tax expense along with assessing temporary differences resulting
from differing treatment of items for book and tax purposes. These temporary
differences result in deferred tax assets and liabilities, which are included
in our consolidated balance sheet. We record a valuation allowance to reduce
our deferred tax assets to the amount that is more likely than not to be
realized. We have considered future taxable income and ongoing tax planning
strategies in assessing the need for the valuation allowance. The tax laws of Malta provide for investment
tax credits of 50% of certain qualified expenditures. Unused credits can be carried forward
indefinitely. We have accumulated
investment tax credits in excess of amounts more likely than not to be realized
based upon projections of taxable income to be generated within a reasonable
time period. Valuation allowances have
been provided for this excess.
Contingencies.
We are subject to various investigations, claims, legal and
administrative proceedings covering a wide range of matters that arise in the
ordinary course of business activities.
A significant amount of judgment and use of estimates is required to
quantify our ultimate exposure in these matters. For those matters that we can
estimate a range of loss, we have established reserves at levels within that
range to provide for the most likely scenario based upon available
information. The valuation of reserves
for contingencies is reviewed on a quarterly basis to assure that the Company
is properly reserved. Reserve balances are adjusted to account for changes in
circumstances for ongoing issues and the establishment of additional reserves
for emerging issues. While we believe that the current level of reserves is
adequate, changes in the future could impact these determinations.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
Certain of our foreign
operations enter into transactions in currencies other than their functional
currency, primarily the U.S. dollar and the Euro. A 10% change in foreign currency exchange
rates from balance sheet date levels could impact our income before income
taxes by $2.8 million and $1.1 million at May 2, 2009 and May 3,
2008, respectively. We also have foreign
currency exposure arising from the translation of our net equity investment in
our foreign operations to U.S. dollars.
We generally view our investments in foreign operations with functional
currencies other than the U.S. dollar as long-term. The currencies to which we are exposed are
the British pound, Chinese yuan, Czech koruna, Euro, Mexican peso and Singapore
dollar. A 10% change in foreign currency
exchange rates from balance sheet date levels could impact our net foreign
investments by $10.8 million at May 2, 2009 and $15.1 million at May 3,
2008.
Item
8. Financial Statements and
Supplementary Data
See Item 15 for an Index
to Financial Statements and Financial Statement Schedule. Such Financial Statements and Schedule are
incorporated herein by reference.
38
Table of Contents
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this annual
report on Form 10-K, we performed an evaluation under the supervision and
with the participation of our management, including our Chief Executive Officer
and our Chief Financial Officer, of our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934 (the Exchange Act). Our disclosure controls and
procedures are designed to ensure that the information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions applicable rules and forms. As
a result of this evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that, as of the end of the period covered by this
report, our disclosure controls and procedures were effective.
Managements Report on Internal Control over
Financial Reporting
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the
participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting as of May 2, 2009 based on the
guidelines established in
Internal Control
Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Our internal control over financial reporting
includes policies and procedures that provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external reporting purposes in accordance with U.S. generally
accepted accounting principles.
Managements assessment of and conclusion on the effectiveness of
internal control over financial reporting did not include the internal controls
of Hetronic LLC, acquired on September 30, 2008, which is included in our
fiscal 2009 consolidated financial statements and constituted $21.9 million and
$20.0 million of total and net assets, respectively, as of May 2, 2009 and
$14.4 million of revenue and a net loss of $36.1 million as of May 2,
2009.
Based on the results of our evaluation, with the exception of Hetronic
LLC mentioned above, our management concluded that our internal control over
financial reporting was effective as of May 2, 2009. Management reviewed
the results of its assessment with the Audit Committee. Our independent registered public accounting
firm, Ernst and Young, LLP, has issued an attestation report on our internal
control over financial reporting. This
report is included on page F-2 of this report on Form 10-K.
Changes in Internal Control over Financial
Reporting
There were no changes in our internal control over financial reporting
identified in connection with the evaluation required by paragraph (d) of
Exchange Act Rules 13a-15 or 15d-15 that was conducted during the last
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief
Financial Officer, do not expect that our disclosure controls or our internal
control over financial reporting will prevent all errors and all fraud. A
control system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of a simple error or
mistake. Additionally, controls can be circumvented by the individual acts of
some persons, by collusion of two or more people or by management override of
the controls. The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with policies or
procedures may
39
Table
of Contents
Inherent Limitations on Effectiveness of Controls -
Continued
deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.
PART III
Item
10. Directors, Executive Officers and
Corporate Governance
Information regarding our
directors will be included under the caption Proposal One: Election of Directors and Corporate
Governance in the definitive proxy statement for our 2009 annual meeting to be
held on September 17, 2009, and is incorporated herein by reference. Information regarding our executive officers
is included under a separate caption in Part I hereof, and is incorporated
herein by reference, in accordance with General Instruction G(3) to Form 10-K
and Instruction 3 to Item 401(b) of Regulation S-K. Information regarding compliance with Section 16(a) of
the Exchange Act is included under the caption Section 16(a) Beneficial
Ownership Reporting Compliance and Audit Committee Matters in the definitive
proxy statement for our 2009 annual meeting and is incorporated herein by
reference.
We have adopted a Code of Business Conduct (the Code)
that applies to our directors, our principal executive officer, principal
financial officer, principal accounting officer or controller and persons
performing similar functions, as well as other employees. The Code of Business Conduct is publicly
available on our website at www.methode.com.
If we make any substantive amendments to the Code or grant any waiver,
including any implicit waiver, from a provision of the Code to our principal
executive officer, principal financial officer, principal accounting officer or
controller or persons performing similar functions, we will disclose the nature
of such amendment or waiver on our website or in a report on Form 8-K in
accordance with applicable rules and regulations.
Item
11. Executive Compensation
Information regarding
the above will be included under the caption Compensation Discussion and
Analysis, Compensation Committee Report, Executive Compensation Tables and
Director Compensation in the definitive proxy statement for our 2009 annual
meeting to be held on September 17, 2009, and is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Information regarding
the above will be included under the caption Security Ownership and Executive
Compensation Discussion and Analysis and in subsequent compensation tables in
the definitive proxy statement for our 2009 annual meeting to be held on September 17,
2009, and is incorporated herein by reference.
Item
13. Certain Relationships and Related
Transactions, and Director Independence
Information regarding
the above will be included under the caption Corporate Governance in the
definitive proxy statement for our 2009 annual meeting to be held on September 17,
2009, and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
Information regarding
the above will be included under the caption Audit Committee Matters in the
definitive proxy statement for our 2009 annual meeting to be held on September 17,
2009, and is incorporated herein by reference.
40
Table
of Contents
PART IV
Item
15. Exhibits and Financial Statement
Schedule
(a)
The
documents included in the following indexes are filed as part of this annual
report on Form 10-K.
(1) (2)
|
The response to this portion of Item 15 is included in this report
under the caption Financial Statements and Financial Statement Schedule
below, which is incorporated herein by reference.
|
|
|
(3)
|
See Index to Exhibits immediately following the financial statement
schedule.
|
|
|
(a)
|
See Index to Exhibits immediately following the
financial statement schedule.
|
|
|
(b)
|
See Financial Statements and Financial Statement Schedule.
|
41
Table of Contents
SIGNATURES
Pursuant to the
requirements of Section 13 or 15 (d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
METHODE ELECTRONICS,
INC.
|
|
(Registrant)
|
|
|
|
By:
|
/s/ DOUGLAS A. KOMAN
|
|
Douglas A. Koman
|
|
Chief Financial Officer
|
|
(Principal Accounting
and Financial Officer)
|
Dated: July 2, 2009
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s / WARREN L. BATTS
|
|
Chairman of the Board
|
|
July 2, 2009
|
Warren L. Batts
|
|
|
|
|
|
|
|
|
|
/s/ DONALD W. DUDA
|
|
Chief Executive
Officer, President & Director
|
|
July 2, 2009
|
Donald W. Duda
|
|
(Principal Executive
Officer)
|
|
|
|
|
|
|
|
/s / DOUGLAS A. KOMAN
|
|
Chief Financial Officer
|
|
July 2, 2009
|
Douglas A. Koman
|
|
|
|
|
|
|
|
|
|
/s / WALTER J. ASPATORE
|
|
Director
|
|
July 2, 2009
|
Walter J. Aspatore
|
|
|
|
|
|
|
|
|
|
/s/ J. EDWARD COLGATE
|
|
Director
|
|
July 2, 2009
|
J. Edward Colgate
|
|
|
|
|
|
|
|
|
|
/s/ DARREN M. DAWSON
|
|
Director
|
|
July 2, 2009
|
Darren M. Dawson
|
|
|
|
|
|
|
|
|
|
/s / ISABELLE C.
GOOSSEN
|
|
Director
|
|
July 2, 2009
|
Isabelle C. Goossen
|
|
|
|
|
|
|
|
|
|
/s / CHRISTOPHER J.
HORNUNG
|
|
Director
|
|
July 2, 2009
|
Christopher J. Hornung
|
|
|
|
|
|
|
|
|
|
/s / LAWRENCE B.
SKATOFF
|
|
Director
|
|
July 2, 2009
|
Lawrence B. Skatoff
|
|
|
|
|
|
|
|
|
|
/s / PAUL G. SHELTON
|
|
Director
|
|
July 2, 2009
|
Paul G. Shelton
|
|
|
|
|
42
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
FORM 10-K
ITEM 15 (a) (1) and
(2)
(1)
Financial Statements
The following
consolidated financial statements of Methode Electronics, Inc. and
subsidiaries are included in Item 8:
Report
of Independent Registered Public Accounting Firm
|
F1
|
|
|
Report of Independent
Registered Public Accounting Firm on Internal Control over Financial
Reporting
|
F2
|
|
|
Consolidated
Balance Sheets May 2, 2009 and May 3, 2008
|
F3
|
|
|
Consolidated
Statements of Operations Years Ended May 2, 2009, May 3, 2008 and
April 28, 2007
|
F4
|
|
|
Consolidated Statements of Shareholders Equity
Years Ended May 2, 2009, May 3, 2008 and April 28, 2007
|
F5
|
|
|
Consolidated Statements of Cash Flows Years Ended
May 2, 2009, May 3, 2008 and April 28, 2007
|
F6
|
|
|
Notes to Consolidated Financial Statements
|
F7
|
(2)
Financial Statement Schedule
All other schedules for
which provision is made in the applicable accounting regulation of the
Securities and Exchange Commission are not required under the related
instructions or are immaterial and, therefore, have been omitted.
43
Table
of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Board of Directors and
Shareholders
Methode Electronics, Inc.
We have audited the
accompanying consolidated balance sheets of Methode Electronics, Inc. and
subsidiaries as of May 2, 2009 and May 3, 2008, and the related
consolidated statements of operations, shareholders equity and cash flows for
each of the three years in the period ended May 2, 2009. Our audits also included the financial statement
schedule listed in the Index at Item 15(a)(2).
These financial statements and schedule are the responsibility of the
Companys management. Our responsibility
is to express an opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Methode Electronics, Inc.
and subsidiaries at May 2, 2009 and May 3, 2008, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended May 2, 2009, in conformity with U.S. generally accepted
accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note 7 to
the consolidated financial statements, effective April 29, 2007, the
Company adopted Financial Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes.
We also have audited, in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the effectiveness of Methode Electronics, Inc.s internal
control over financial reporting as of May 2, 2009, based on criteria
established in
Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated July 1, 2009 expressed an unqualified opinion
thereon.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
July 1, 2009
F1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Board of Directors and Shareholders
Methode Electronics, Inc.
We have audited Methode Electronics, Inc.s internal control over
financial reporting as of May 2, 2009, based on criteria established in
Internal ControlIntegrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). Methode Electronics, Inc.s
management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Report on
Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Companys internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of
internal control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A companys internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A companys internal
control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
As indicated in
the accompanying Report on Internal Control over Financial Reporting,
managements assessment of and conclusion on the effectiveness of internal
control over financial reporting did not include the internal controls of
Hetronic LLC, which is included in the May 2, 2009 consolidated financial
statements of Methode Electronics, Inc. and constituted $21.9 million and
$20.0 million of total and net assets, respectively, as of May 2, 2009 and
$14.4 million and $36.1 million of revenues and net loss, respectively, for the
year then ended. Our audit of internal
control over financial reporting of Methode Electronics, Inc. also did not
include an evaluation of the internal control over financial reporting of
Hetronic LLC.
In our opinion, Methode Electronics, Inc. maintained effective
internal control over financial reporting as of May 2, 2009, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheets of Methode Electronics, Inc. as of May 2, 2009 and May 3,
2008, and the related consolidated statements of operations, shareholders
equity, and cash flows for each of the three years in the period ended May 2,
2009 and our report dated July 1, 2009 expressed an unqualified opinion
thereon.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
July 1, 2009
F2
Table of Contents
METHODE
ELECTRONICS, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in
thousands, except share data)
|
|
May 2, 2009
|
|
May 3, 2008
|
|
ASSETS
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
54,030
|
|
$
|
104,305
|
|
Accounts receivable, net, less allowance (2009
$1,444; 2008 $2,309)
|
|
60,406
|
|
85,805
|
|
Inventories:
|
|
|
|
|
|
Finished products
|
|
11,865
|
|
15,384
|
|
Work in process
|
|
10,765
|
|
20,715
|
|
Materials
|
|
17,796
|
|
19,850
|
|
|
|
40,426
|
|
55,949
|
|
Deferred income taxes
|
|
4,928
|
|
8,730
|
|
Refundable income taxes
|
|
14,764
|
|
|
|
Prepaid expenses and other current assets
|
|
6,692
|
|
6,028
|
|
TOTAL CURRENT ASSETS
|
|
181,246
|
|
260,817
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
Land
|
|
3,236
|
|
3,205
|
|
Buildings and building improvements
|
|
54,378
|
|
44,894
|
|
Machinery and equipment
|
|
231,470
|
|
260,165
|
|
|
|
289,084
|
|
308,264
|
|
Less allowances for depreciation
|
|
219,167
|
|
217,984
|
|
|
|
69,917
|
|
90,280
|
|
OTHER ASSETS
|
|
|
|
|
|
Goodwill
|
|
11,771
|
|
54,476
|
|
Other intangibles, less accumulated amortization
|
|
20,501
|
|
41,282
|
|
Cash surrender value of life insurance
|
|
11,177
|
|
10,345
|
|
Deferred income taxes
|
|
4,993
|
|
10,099
|
|
Other
|
|
5,683
|
|
2,921
|
|
|
|
54,125
|
|
119,123
|
|
|
|
$
|
305,288
|
|
$
|
470,220
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
Accounts payable
|
|
$
|
24,495
|
|
$
|
42,810
|
|
Salaries, wages and payroll taxes
|
|
7,918
|
|
13,317
|
|
Other accrued expenses
|
|
19,921
|
|
19,207
|
|
Income taxes
|
|
1,184
|
|
1,378
|
|
TOTAL CURRENT LIABILITIES
|
|
53,518
|
|
76,712
|
|
|
|
|
|
|
|
OTHER LIABILITIES
|
|
16,686
|
|
13,833
|
|
DEFERRED COMPENSATION
|
|
3,308
|
|
6,890
|
|
SHAREHOLDERS EQUITY
|
|
|
|
|
|
Common stock, $0.50 par value, 100,000,000 shares
authorized, 38,290,776 and 38,225,379 shares issued as of May 2, 2009
and May 3, 2008, respectively
|
|
19,145
|
|
19,113
|
|
Unearned common stock issuances
|
|
(3,632
|
)
|
(4,257
|
)
|
Additional paid-in capital
|
|
68,506
|
|
69,953
|
|
Retained earnings
|
|
143,577
|
|
265,838
|
|
Accumulated other comprehensive income
|
|
15,675
|
|
28,381
|
|
Treasury stock, 1,372,188 and 702,708 shares as of
May 2, 2009 and May 3, 2008, respectively
|
|
(11,495
|
)
|
(6,243
|
)
|
|
|
231,776
|
|
372,785
|
|
|
|
$
|
305,288
|
|
$
|
470,220
|
|
See
notes to consolidated financial statements.
F3
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in
thousands, except per share data)
|
|
Fiscal Year Ended
|
|
|
|
May 2,
|
|
May 3,
|
|
April 28,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
INCOME
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
425,644
|
|
$
|
551,073
|
|
$
|
448,427
|
|
Other
|
|
3,202
|
|
1,879
|
|
1,596
|
|
|
|
428,846
|
|
552,952
|
|
450,023
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES
|
|
|
|
|
|
|
|
Cost
of products sold
|
|
356,496
|
|
428,355
|
|
359,914
|
|
Restructuring
|
|
25,278
|
|
5,159
|
|
2,027
|
|
Impairment
of goodwill and other assets
|
|
94,374
|
|
1,472
|
|
377
|
|
Selling
and administrative expenses
|
|
57,471
|
|
61,550
|
|
50,182
|
|
Amortization
of intangibles
|
|
6,933
|
|
6,013
|
|
4,708
|
|
|
|
540,552
|
|
502,549
|
|
417,208
|
|
|
|
|
|
|
|
|
|
Income/(loss)
from operations
|
|
(111,706
|
)
|
50,403
|
|
32,815
|
|
|
|
|
|
|
|
|
|
Interest
income, net
|
|
1,382
|
|
2,324
|
|
3,428
|
|
Other,
net
|
|
(479
|
)
|
(3,250
|
)
|
(468
|
)
|
Income/(loss)
before income taxes and cumulative effect of accounting change
|
|
(110,803
|
)
|
49,477
|
|
35,775
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
1,680
|
|
9,723
|
|
9,792
|
|
Income/(loss)
before cumulative effect of accounting change
|
|
(112,483
|
)
|
39,754
|
|
25,983
|
|
|
|
|
|
|
|
|
|
Cumulative
effect of accounting change, net of taxes of $28
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
NET INCOME/(LOSS)
|
|
$
|
(112,483
|
)
|
$
|
39,754
|
|
$
|
26,084
|
|
|
|
|
|
|
|
|
|
Amounts
per common share:
|
|
|
|
|
|
|
|
Basic
net income/(loss)
|
|
$
|
(3.05
|
)
|
$
|
1.07
|
|
$
|
0.72
|
|
Diluted
net income/(loss)
|
|
$
|
(3.05
|
)
|
$
|
1.06
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
Cash
dividends:
|
|
|
|
|
|
|
|
Common
stock
|
|
$
|
0.26
|
|
$
|
0.20
|
|
$
|
0.20
|
|
See notes to
consolidated financial statements.
F4
Table of Contents
METHODE
ELECTRONICS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS EQUITY
Years
Ended May 2, 2009, May 3, 2008 and April 28, 2007
(Dollar amounts in
thousands, except share data)
|
|
|
|
|
|
Unearned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Common
|
|
Common
|
|
Additional
|
|
|
|
Currency
|
|
|
|
Total
|
|
|
|
|
|
Stock
|
|
Stock
|
|
Stock
|
|
Paid-in
|
|
Retained
|
|
Translation
|
|
Treasury
|
|
Shareholders
|
|
Comprehensive
|
|
|
|
Shares
|
|
$
|
|
Issuances
|
|
Capital
|
|
Earnings
|
|
Adjustments
|
|
Stock
|
|
Equity
|
|
Income/(loss)
|
|
Balance at April 29, 2006
|
|
37,700,484
|
|
$
|
18,850
|
|
$
|
(9,132
|
)
|
$
|
59,411
|
|
$
|
215,072
|
|
$
|
11,039
|
|
$
|
(3,531
|
)
|
$
|
291,709
|
|
|
|
Release
of restriction pursuant to acquisition earn-out
|
|
|
|
|
|
1,233
|
|
|
|
|
|
|
|
|
|
1,233
|
|
|
|
Purchase
and cancellation of shares related to acquisition earn-out
|
|
(95,420
|
)
|
(48
|
)
|
|
|
(1,077
|
)
|
|
|
|
|
|
|
(1,125
|
)
|
|
|
Reversal
of unvested stock awards for adoption of SFAS 123R
|
|
(463,957
|
)
|
(232
|
)
|
3,382
|
|
(3,150
|
)
|
|
|
|
|
|
|
|
|
|
|
Cumulative
effect of accounting change
|
|
|
|
|
|
|
|
(129
|
)
|
|
|
|
|
|
|
(129
|
)
|
|
|
Earned
portion of restricted stock awards
|
|
145,765
|
|
73
|
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
Stock
award and stock option amortization expense
|
|
|
|
|
|
|
|
3,026
|
|
|
|
|
|
|
|
3,026
|
|
|
|
Vested
stock awards withheld for payroll taxes
|
|
(35,060
|
)
|
(18
|
)
|
|
|
(529
|
)
|
|
|
|
|
|
|
(547
|
)
|
|
|
Exercise
of options
|
|
699,017
|
|
350
|
|
|
|
6,858
|
|
|
|
|
|
|
|
7,208
|
|
|
|
Common
stock repurchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,924
|
)
|
(1,924
|
)
|
|
|
Tax
benefit from stock options
|
|
|
|
|
|
|
|
1,175
|
|
|
|
|
|
|
|
1,175
|
|
|
|
Foreign
currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
4,971
|
|
|
|
4,971
|
|
$
|
4,971
|
|
Net
income for year
|
|
|
|
|
|
|
|
|
|
26,084
|
|
|
|
|
|
26,084
|
|
26,084
|
|
Cash
dividends on common stock
|
|
|
|
|
|
|
|
|
|
(7,472
|
)
|
|
|
|
|
(7,472
|
)
|
$
|
31,055
|
|
Balance at April 28, 2007
|
|
37,950,829
|
|
$
|
18,975
|
|
$
|
(4,517
|
)
|
$
|
65,512
|
|
$
|
233,684
|
|
$
|
16,010
|
|
$
|
(5,455
|
)
|
$
|
324,209
|
|
|
|
Cumulative
impact of change in accounting for uncertainties in income taxes (FIN 48
adoption)
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
(25
|
)
|
|
|
Release
of restriction pursuant to acquisition earn-out
|
|
|
|
|
|
260
|
|
|
|
|
|
|
|
|
|
260
|
|
|
|
Earned
portion of restricted stock awards
|
|
188,982
|
|
94
|
|
|
|
(94
|
)
|
|
|
|
|
|
|
|
|
|
|
Stock
award and stock option amortization expense
|
|
|
|
|
|
|
|
3,359
|
|
|
|
|
|
|
|
3,359
|
|
|
|
Vested
stock awards withheld for payroll taxes
|
|
(40,140
|
)
|
(20
|
)
|
|
|
(441
|
)
|
|
|
|
|
|
|
(461
|
)
|
|
|
Exercise
of options
|
|
125,708
|
|
64
|
|
|
|
1,234
|
|
|
|
|
|
|
|
1,298
|
|
|
|
Common
stock repurchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(788
|
)
|
(788
|
)
|
|
|
Tax
benefit from stock options
|
|
|
|
|
|
|
|
383
|
|
|
|
|
|
|
|
383
|
|
|
|
Foreign
currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
12,371
|
|
|
|
12,371
|
|
$
|
12,371
|
|
Net
income for year
|
|
|
|
|
|
|
|
|
|
39,754
|
|
|
|
|
|
39,754
|
|
39,754
|
|
Cash
dividends on common stock
|
|
|
|
|
|
|
|
|
|
(7,575
|
)
|
|
|
|
|
(7,575
|
)
|
$
|
52,125
|
|
Balance at May 3, 2008
|
|
38,225,379
|
|
$
|
19,113
|
|
$
|
(4,257
|
)
|
$
|
69,953
|
|
$
|
265,838
|
|
$
|
28,381
|
|
$
|
(6,243
|
)
|
$
|
372,785
|
|
|
|
Release
of restriction pursuant to acquisition earn-out
|
|
(53,012
|
)
|
(27
|
)
|
625
|
|
(598
|
)
|
|
|
|
|
|
|
|
|
|
|
Earned
portion of restricted stock awards
|
|
120,041
|
|
60
|
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
Stock
award and stock option amortization expense
|
|
|
|
|
|
|
|
(553
|
)
|
|
|
|
|
|
|
(553
|
)
|
|
|
Vested
stock awards withheld for payroll taxes
|
|
(20,721
|
)
|
(11
|
)
|
|
|
(130
|
)
|
|
|
|
|
|
|
(141
|
)
|
|
|
Exercise
of options
|
|
19,089
|
|
10
|
|
|
|
103
|
|
|
|
|
|
|
|
113
|
|
|
|
Common
stock repurchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,252
|
)
|
(5,252
|
)
|
|
|
Tax
expense from stock options
|
|
|
|
|
|
|
|
(209
|
)
|
|
|
|
|
|
|
(209
|
)
|
|
|
Foreign
currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
(12,706
|
)
|
|
|
(12,706
|
)
|
$
|
(12,706
|
)
|
Net
income/(loss) for year
|
|
|
|
|
|
|
|
|
|
(112,483
|
)
|
|
|
|
|
(112,483
|
)
|
(112,483
|
)
|
Cash
dividends on common stock
|
|
|
|
|
|
|
|
|
|
(9,778
|
)
|
|
|
|
|
(9,778
|
)
|
$
|
(125,189
|
)
|
Balance at May 2, 2009
|
|
38,290,776
|
|
$
|
19,145
|
|
$
|
(3,632
|
)
|
$
|
68,506
|
|
$
|
143,577
|
|
$
|
15,675
|
|
$
|
(11,495
|
)
|
$
|
231,776
|
|
|
|
See notes to consolidated financial statements
F5
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
|
|
Fiscal Year Ended
|
|
|
|
May 2,
|
|
May 3,
|
|
April 28,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
(112,483
|
)
|
$
|
39,754
|
|
$
|
26,084
|
|
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
Provision for minority interest
|
|
343
|
|
329
|
|
241
|
|
(Gain)/loss of sale of fixed assets
|
|
(407
|
)
|
(120
|
)
|
268
|
|
Provision for depreciation
|
|
30,103
|
|
22,146
|
|
18,915
|
|
Amortization of intangible assets
|
|
6,933
|
|
6,013
|
|
4,708
|
|
Impairment of tangible assets
|
|
10,313
|
|
1,472
|
|
377
|
|
Impairment of goodwill and other assets
|
|
94,374
|
|
|
|
|
|
Stock-based compensation
|
|
(553
|
)
|
3,359
|
|
2,897
|
|
Provision for bad debt
|
|
120
|
|
195
|
|
372
|
|
Deferred income taxes
|
|
8,078
|
|
(2,948
|
)
|
(1,012
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
33,347
|
|
(793
|
)
|
4,942
|
|
Inventories
|
|
19,918
|
|
(482
|
)
|
1,875
|
|
Prepaid expenses and other current assets
|
|
(16,086
|
)
|
7,989
|
|
2,478
|
|
Accounts payable and accrued expenses
|
|
(30,832
|
)
|
107
|
|
(8,230
|
)
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
43,168
|
|
77,021
|
|
53,915
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(17,064
|
)
|
(20,018
|
)
|
(10,667
|
)
|
Acquisition of businesses
|
|
(57,469
|
)
|
(9,647
|
)
|
(63,168
|
)
|
Acquisition of technology licenses
|
|
(1,575
|
)
|
|
|
(113
|
)
|
Proceeds from the sale of property and equipment
|
|
|
|
1,706
|
|
800
|
|
Joint venture dividend
|
|
|
|
(1,000
|
)
|
|
|
Other
|
|
(14
|
)
|
(27
|
)
|
(218
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
(76,122
|
)
|
(28,986
|
)
|
(73,366
|
)
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Purchase of common stock
|
|
(5,252
|
)
|
(1,249
|
)
|
(3,596
|
)
|
Proceeds from exercise of stock options
|
|
113
|
|
1,298
|
|
7,208
|
|
Tax (expense)/benefit from stock options and awards
|
|
(209
|
)
|
383
|
|
1,175
|
|
Cash dividends
|
|
(9,778
|
)
|
(7,575
|
)
|
(7,472
|
)
|
NET CASH USED IN FINANCING ACTIVITIES
|
|
(15,126
|
)
|
(7,143
|
)
|
(2,685
|
)
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate changes on
cash
|
|
(2,195
|
)
|
3,322
|
|
581
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
(50,275
|
)
|
44,214
|
|
(21,555
|
)
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
104,305
|
|
60,091
|
|
81,646
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR
|
|
$
|
54,030
|
|
$
|
104,305
|
|
$
|
60,091
|
|
See notes to condensed consolidated financial statements.
F6
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
1.
Significant Accounting Policies
Principles
of Consolidation.
The consolidated financial statements include
the accounts and operations of Methode Electronics, Inc. (the Company)
and its subsidiaries. As used herein, we,
us, our, the Company or Methode means Methode Electronics, Inc.
and its subsidiaries.
Financial
Reporting Periods.
We maintain our financial records on the
basis of a fifty-two or fifty-three week fiscal year ending on the Saturday
closest to April 30. Due to the
timing of our fiscal calendar, the fiscal year ended May 2, 2009 and the
fiscal year ended April 28, 2007 represent 52 weeks of results and the
fiscal year ended May 3, 2008 represents 53 weeks of results.
Cash
Equivalents.
Generally, all highly liquid investments with
a maturity of three months or less when purchased are carried at their
approximate fair value and classified in the consolidated balance sheets as
cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts.
We carry accounts receivable at their face amounts less an allowance for doubtful accounts. On a regular basis, we record an allowance for uncollectible receivables based upon past transaction history with customers, customer payment practices and economic conditions. Actual collection experience may differ from the current estimate of net receivables. A change to the allowance for uncollectible amounts may be required if a future event or other change in circumstances results in a change in the estimate of the ultimate collectability of a specific account. We do not require collateral for our accounts receivable balances. Accounts are written off against the allowance account when they are determined to be no longer collectible.
Inventories.
Inventories are stated at the lower-of-cost (first-in, first-out
method)-or-market.
Property,
Plant and Equipment.
Properties are stated on the basis of
cost. We amortize such costs by annual
charges to income, computed on the straight-line method using estimated useful
lives of 5 to 40 years for buildings and improvements and 3 to 15 years for
machinery and equipment for financial reporting purposes. Accelerated methods are generally used for
income tax purposes.
Income
Taxes.
Deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
Revenue
Recognition.
We recognize revenue on product sales when i)
persuasive evidence of an agreement exists, ii) the price is fixed or
determinable, iii) delivery has occurred or services have been rendered, and
iv) collection of the sales proceeds is reasonably assured. Revenue from our product sales not requiring
installation, net of trade discounts and estimated sales allowances, is
recognized when title passes, which is generally upon shipment. We do not have any additional obligations or
customer acceptance provisions after shipment of such products. We handle returns by replacing, repairing or
issuing credit for defective products when returned. Return costs were not significant in fiscal
2009, 2008 and 2007. Revenue from
cabling infrastructure systems installations is recognized when the installation
is completed, tested and accepted by the customer.
Shipping
and Handling Fees and Costs
. Shipping and
handling fees billed to customers are included in net sales, and the related
costs are included in cost of products sold.
Foreign
Currency Translation.
The functional currencies of
the majority of our foreign subsidiaries are in their local currencies. Accordingly, the results of operations of
these foreign subsidiaries are translated into U.S. dollars using average
exchange rates during the year, while the assets and liabilities are translated
using period end exchange rates.
Adjustments from the translation process are classified as a component
of shareholders equity. Exchange gains
and losses arising from transactions denominated in a currency other than the
functional currency of the foreign subsidiary are included in the Consolidated
Statements of Operations in other, net.
In fiscal 2009, 2008 and 2007, we had foreign exchange losses of $479,
$3,250 and $468, respectively.
F7
Table
of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
1. Significant Accounting Policies - Continued
Long-Lived
Assets.
In accordance with Statement of Financial Accounting
Standards (SFAS) No. 144,
Accounting
for the Impairment or Disposal of Long-Lived Assets
, we continually
evaluate whether events and circumstances have occurred which indicate that the
remaining estimated useful lives of our intangible assets, excluding goodwill,
and other long-lived assets, may warrant revision or that the remaining balance
of such assets may not be recoverable. In the event that the undiscounted cash
flows resulting from the use of the asset group is less than the carrying
amount, an impairment loss equal to the excess of the assets carrying amount
over its fair value is recorded.
In accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, we record
impairment losses on long-lived assets used in operations when events and
circumstances indicate that long-lived assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. During fiscal 2009, based on our future
estimates of the undiscounted cash flows, it was determined that certain
identifiable intangible assets of our TouchSensor and Hetronic businesses in
the Interconnect segment, the Automotive Safety Technologies business in our
Automotive segment and Magna-Lastic Devices, Inc from our Other segment were
impaired. Therefore, we recorded an
impairment charge of $26.2 million in the Interconnect segment, $4.6 million in
the Automotive segment and $0.4 million in the Other segment for a total of
$31.2 million for these assets.
Goodwill
and Intangibles.
Costs assigned to the fair value of
intangible assets acquired with finite lives are being amortized over periods
ranging from 3 to 20 years, generally on a straight-line basis or accelerated
basis, depending on the nature of the intangible asset. The fair value of certain intangible assets
is being amortized over projected revenues used to initially value such intangible
assets. Goodwill represents the excess
of purchase price over the estimated fair value of net assets of acquired
companies, which has not been allocated to other intangible assets.
The Company
evaluates goodwill for impairment at the reporting unit level, which is one
level below the operating segment level (herein referred to as the reporting
unit). The impairment test for goodwill
is a two-step process. The first step is
to identify when goodwill impairment has occurred by comparing the fair value
of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds
its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of the reporting unit
exceeds its fair value, the second step of the goodwill test is performed to
measure the amount of the impairment loss, if any. In this second step, the implied fair value
of the reporting units goodwill is compared with the carrying amount of the
goodwill. If the carrying amount of the
reporting units goodwill exceeds the implied fair value of that goodwill, an
impairment loss is recognized in an amount equal to that excess, not to exceed
the carrying amount of the goodwill.
Based on events and general business declines, we performed step one
of the goodwill impairment test in accordance with paragraph 19 of SFAS No. 142,
Goodwill and Other Intangible Assets, on the reporting units that have
goodwill during fiscal 2009. Based on
this test, we determined that the fair value was less than the carrying value
of the net assets for certain reporting units.
We completed step two of the
goodwill test and concluded that goodwill was impaired. During fiscal 2009, we recorded a goodwill
impairment charge of $25,840 in our Automotive segment, $30,750 in our
Interconnect segment, $5,358 in our Power Products segment and $1,203 in our
Other segment for a total of $63,151 related to these assets.
Research
and Development Costs.
Costs associated with the
development of new products are charged to expense when incurred. Research and development costs for the fiscal
years ended May 2, 2009, May 3, 2008 and April 28, 2007 amounted
to $21,995, $25,595 and $21,336, respectively.
Stock-Based
Compensation.
See Note 5, Shareholders Equity for a
description of our stock-based compensation plans. In the first quarter of fiscal 2007, we
adopted SFAS No. 123(R), Share Based Payments, which revises SFAS No. 123,
Accounting for Stock Based Compensation.
SFAS No. 123(R) requires us to record compensation expense for
all share-based payments, including employee stock options, at fair value.
Use of Estimates.
The preparation of financial statements in
conformity with accounting principles
F8
Table
of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
1.
Significant Accounting Policies - Continued
generally
accepted in the United States requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could
differ from those estimates.
Fair Value of Other Financial
Instruments.
The carrying values of our short-term financial instruments, including
cash and cash equivalents, accounts receivable and accounts payable approximate
their fair values because of the short maturity of these instruments.
Comprehensive
Income.
SFAS No. 130, Reporting Comprehensive
Income, requires companies to report all changes in equity during a period,
except those resulting from investment by owners and distribution to owners, in
a financial statement for the period in which they were recognized. We chose to disclose comprehensive income,
which encompasses net income and foreign currency translation adjustments, in the
Consolidated Statement of Shareholders Equity.
Recent Accounting Pronouncements
We
adopted Financial Accounting Standards Board (FASB) SFAS No. 157, Fair
Value Measurements (SFAS No. 157) as of May 4, 2008 for
financial assets and liabilities, and non-financial assets and liabilities that
are recognized or disclosed at fair value in the financial statements on a
recurring basis. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value as required by other accounting
pronouncements and expands fair value measurement disclosures. The provisions
of SFAS No. 157 are applied prospectively upon adoption and did not
have a material impact on our Consolidated Financial Statements. The
disclosures required by SFAS No. 157 are included in Note 15, Fair
Value Measurements, to our Consolidated Financial Statements.
In February 2008,
the FASB issued FASB Staff Position No. 157-2, which delays the effective
date of SFAS No. 157 for non-financial assets and liabilities, which
are not measured at fair value on a recurring basis (at least annually) until
fiscal years beginning after November 15, 2008, which is our fiscal year
2010 that began May 3, 2009. We are
currently assessing the impact of adopting SFAS No. 157 for
non-financial assets and liabilities on our Consolidated Financial Statements.
We adopted
SFAS No. 159, The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an Amendment of FASB Statement No. 115 (SFAS No. 159)
as of May 4, 2008. SFAS No. 159 permits entities to elect to
measure many financial instruments and certain other items at fair value. We
did not elect the fair value option for any assets or liabilities that were not
previously carried at fair value. Accordingly, the adoption of SFAS No. 159
had no impact on our Consolidated Financial Statements.
We adopted
Emerging Issues Task Force (EITF) No. 06-4, Accounting for Deferred
Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar
Life Insurance Arrangements (EITF No. 06-4) as of May 4,
2008. EITF No. 06-4 requires that endorsement split-dollar life
insurance arrangements, which provide a benefit to an employee beyond the
postretirement period be recorded in accordance with SFAS No. 106, Employers
Accounting for Postretirement Benefits Other Than Pensions or Accounting
Principle Board (APB) Opinion No. 12, Omnibus Opinion1967 based on
the substance of the agreement with the employee. The adoption of EITF No. 06-4 had no
impact on our Consolidated Financial Statements.
In December 2007,
the FASB issued SFAS No. 141 (revised 2007) (SFAS No. 141R),
a revision of SFAS No. 141, Business Combinations. SFAS No. 141R
establishes requirements for the recognition and measurement of acquired
assets, liabilities, goodwill and non-controlling interests. SFAS No. 141R also provides
disclosure requirements related to business combinations. SFAS No. 141R
is effective for fiscal years beginning after December 15, 2008, which is
our fiscal year 2010 that began May 3, 2009. SFAS No. 141R will be applied prospectively
to business combinations with an acquisition date on or after the effective
date. This statement will generally
affect acquisitions occurring after the adoption date.
F9
Table
of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
1.
Significant Accounting Policies - Continued
In December 2007,
the FASB issued SFAS No. 160, Non-Controlling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS No. 160).
SFAS No. 160 establishes new standards for the accounting for and
reporting of non-controlling interests (formerly minority interests) and for
the loss of control of partially owned and consolidated subsidiaries.
SFAS No. 160 does not change the criteria for consolidating a
partially owned entity. SFAS No. 160 is effective for fiscal years
beginning after December 15, 2008, which is our fiscal year 2010 that
began May 3, 2009. The provisions of SFAS No. 160 will be
applied prospectively upon adoption except for the presentation and disclosure
requirements, which will be applied retrospectively. We do not expect the
adoption of SFAS No. 160 to have a material impact on our
Consolidated Financial Statements.
In March 2008,
the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of SFAS No. 133 (SFAS No. 161).
SFAS No. 161 requires enhanced disclosures about an entitys
derivative and hedging activities and is effective for fiscal years and interim
periods beginning after November 15, 2008, which is our fiscal year 2010
that began May 3, 2009. We do not believe the adoption of SFAS No. 161
will have a material impact on our Consolidated Financial Statements.
In April 2008,
the FASB issued FASB Staff Position No. FAS 142-3, Determination of the
Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142,
Goodwill and Other Intangible Assets.
The provision of FSP 142-3 will be effective for financial statements
issued for fiscal years beginning after December 15, 2008, which is our
fiscal year 2010 that began May 3, 2009.
Since this guidance will be applied prospectively, upon adoption, there
will be no impact to our financial position, results of operations or cash
flows.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles (SFAS No 162). SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements.
SFAS No. 162 is effective 60 days following the SECs approval of
the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411,
The Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles . We do not
believe the adoption of this standard will have a material impact on our
Consolidated Financial Statements.
In April 2009, the Financial Accounting Standards Board (FASB)
issued three FSPs related to fair value measurements. The first, FSP FAS 157-4,
Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are
Not Orderly, provides guidance on determining whether a market is inactive and
whether transactions in that market are distressed. The second FSP issued, FSP FAS 115-2, FAS
124-2, and EITF 99-20-2, Recognition and Presentation of Other-Than-Temporary
Impairments, provides guidance on how to assess whether an asset has
experienced an other-than-temporary impairment and, if so, where the impairment
should be recorded in the financial statements.
The third FSP issued, FSP FAS 107-1 and APB 28-1, Interim Disclosures
About Fair Value of Financial Instruments, requires that disclosures currently
required under SFAS No. 107, Disclosures about Fair Value of Financial
Instruments, be presented for interim periods as well as annual periods. These FSPs are first effective for interim
periods ending after June 15, 2009 and are not expected to have a material
impact on our Consolidated Financial Statements.
In June 2008, the FASB issued EITF Issue No. 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities; (EITF 03-6-1). EITF 03-6-1 addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, need to be included in the earnings
allocation in computing earnings per share (EPS) under the two-class method
described in paragraphs 60 and 61 of FASB No. 128, Earnings per Share. EITF 03-6-1 is
effective for fiscal years beginning after December 15, 2008 and is to be
applied retrospectively. The adoption of EITF 03-6-1 is not expected to have a
material impact on the Companys consolidated financial position and results of
operations.
F10
Table
of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
2. Restructurings
March 2009 Restructuring
On March 12, 2009, we announced several additional restructuring
actions to further reduce our exposure to the North American automotive
industry and to consolidate manufacturing facilities in lower cost regions to
reduce costs. After these actions our
principal manufacturing operations will be in Mexico, Malta and China. In addition, we have decided to transfer
certain new GM business to other suppliers.
This business was scheduled to be produced in our Shanghai, China
automotive facility.
All Ford Motor Company production at Methodes Reynosa, Mexico,
facility will be moved to another supplier.
TouchSensor manufacturing currently in west suburban Chicago, Illinois,
will be moved to Monterrey, Mexico.
Additionally, our operations in Shanghai, China, will be consolidated to
two facilities from three.
In total, this additional restructuring will affect approximately 850
employees worldwide. We estimate that we will record a pre-tax charge between
$16,000 and $25,000, during fiscal years 2009 and 2010. The cash portion of
this charge is estimated between $7,000 and $8,000.
During the fiscal year
ended May 2, 2009, we recorded a restructuring charge of $7,263, which
consisted of $100 for employee severance, $1,373 in impairment for buildings
and improvements and machinery and equipment, $5,418 for impairment of customer
funded tooling and $133 in forfeited security deposits related to the transfer
of the new GM business and $239 relating to professional fees. We estimate that we will record pre-tax
restructuring charges in fiscal 2010 of between $8,700 and $17,700.
As of May 2, 2009,
we had an accrued restructuring liability of $141 reflected in the current
liabilities section of our consolidated balance sheet. We expect this liability to be paid out
during fiscal 2010.
The table below reflects
the activity related to the March 2009 restructuring as of May 2,
2009:
|
|
One-Time
|
|
|
|
|
|
|
|
|
|
Employee
|
|
Asset
|
|
Other
|
|
|
|
|
|
Severance
|
|
Write-Downs
|
|
Costs
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
balance at May 3, 2008
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
FY
2009 restructuring charges
|
|
100
|
|
6,924
|
|
239
|
|
7,263
|
|
Payments
and asset write-downs
|
|
|
|
(6,924
|
)
|
(198
|
)
|
(7,122
|
)
|
Accrued
balance at May 2, 2009
|
|
$
|
100
|
|
$
|
|
|
$
|
41
|
|
$
|
141
|
|
January 2008 Restructuring
On January 24, 2008, we announced a restructuring of our
U.S.-based automotive operations and a decision to discontinue producing
certain legacy products in the Interconnect segment. The Automotive and Interconnect restructuring
is expected to be completed during fiscal 2010.
We record the expense in the restructuring section of our Consolidated
Statement of Operations. On January 24, 2008, the total pre-tax charges
were estimated between $19,000 and $25,000.
As of May 2, 2009, we have recorded $23,174 of the charges. We estimate that we will record pre-tax
restructuring charges in fiscal 2010 of between $500 and $1,500, of which $500
will relate to the termination of approximately 225 employees and the cost of
one-time employee benefits, retention, COBRA and outplacement services. We continue to perform periodic impairment
testing, if indicators exist, and will record any charges incurred as per SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, (SFAS No. 144)
in the period when impairment is incurred.
During the fiscal year
ended May 3, 2008, we recorded a restructuring charge of $5,159, which
consisted of
F11
Table
of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
January 2008 Restructuring - Continued
$3,355 for employee severance,
$1,346 in impairments and accelerated depreciation for buildings and
improvements and machinery and equipment and $458 relating to professional
fees. As of May 3, 2008, we had an
accrued restructuring liability of $3,176 reflected in the current liabilities
section of our consolidated balance sheet.
During the fiscal year
ended May 2, 2009, we recorded a restructuring charge of $18,015, which
consisted of $6,099 for employee severance, $3,522 and $7,276 in impairments
and accelerated depreciation, respectively, for buildings and improvements and
machinery and equipment, $153 in inventory write-downs and $965 relating to
professional fees. As of May 2,
2009, we had an accrued restructuring liability of $1,849 reflected in the
current liabilities section of our consolidated balance sheet. We expect this liability to be paid out
during fiscal 2010.
The table below reflects
the January 2008 restructuring activity for fiscal years ended May 3,
2008 and May 2, 2009.
|
|
One-Time
|
|
|
|
|
|
|
|
|
|
Employee
|
|
Asset
|
|
Other
|
|
|
|
|
|
Severance
|
|
Write-Downs
|
|
Costs
|
|
Total
|
|
Accrued
balance at April 28, 2007
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Fiscal
2008 restructuring charges
|
|
3,355
|
|
1,346
|
|
458
|
|
5,159
|
|
Fiscal
2008 payments and asset write-downs
|
|
(203
|
)
|
(1,346
|
)
|
(434
|
)
|
(1,983
|
)
|
Accrued
balance at May 3, 2008
|
|
3,152
|
|
|
|
24
|
|
3,176
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2009 restructuring charges
|
|
6,099
|
|
10,951
|
|
965
|
|
18,015
|
|
Fiscal
2009 payments and asset write-downs
|
|
(7,402
|
)
|
(10,951
|
)
|
(989
|
)
|
(19,342
|
)
|
Accrued
balance at May 2, 2009
|
|
$
|
1,849
|
|
$
|
|
|
$
|
|
|
$
|
1,849
|
|
Fiscal
2007 Restructuring
In the third quarter of
fiscal 2007, we closed our Scotland automotive parts manufacturing plant and
transferred all production lines from that facility to our automotive parts
manufacturing operation in Malta. We recorded charges of $2,518 related
to the closing and transfer of operations, consisting of involuntary severance
of $1,525 for termination of 140 employees, equipment moving and installation
costs of $667, provision for the permanent impairment of assets of $174, and
professional fees and lease and other obligations of $152, reduced by a
cumulative currency translation credit of $491. All restructuring costs relating to the
Scotland restructuring have been paid out as of May 3, 2008.
F12
Table
of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
3
.
Acquisitions
Fiscal 2009 Acquisitions
On September 30, 2008, we acquired certain assets of Hetronic LLC
(Hetronic) for $53,639 in cash. We also
incurred $2,447 in transaction costs related to the purchase. Hetronic is a global leader in industrial
safety radio remote controls with locations in the U.S., Malta, the Philippines
and Germany. Hetronic is represented in
45 countries by direct sales associates, licensed partners, distributors and
representatives. Hetronic provides
application specific and standard controls to many different industries, such
as material handling, transportation, mining, military, agriculture and
construction.
Based on a third-party valuation report, the tangible net assets
acquired had a fair value of $20,533.
The fair values assigned to intangible assets acquired were $12,170 for
customer relationships, $2,700 for the trade name and trademarks, $1,450 for
technology valuation, and $170 for non-competes, resulting in $19,063 of goodwill. The customer relationships, technology
valuation and non-competes are being amortized over 5 to approximately 12
years. The trade name and trademarks are
not subject to amortization but are subject to periodic impairment
testing. The accounts and transactions
of Hetronic have been included in the Interconnect segment in the consolidated
financial statements from the effective date of the acquisition.
Fiscal 2008 Acquisitions
On August 31, 2007,
we acquired 100% of the assets of Value Engineered Products, Inc. (VEP)
for $5,750 in cash. We also incurred $79
in transaction costs related to the purchase.
VEP is a thermal management solutions provider, manufacturing heat sinks
and related products for high-powered applications. These components complement our Power Product
offerings and, in some instances, are joined with bus bars to aid thermal
management of power systems. The terms
of the acquisition provide for an additional payment of up to a maximum of $1,000
if sales reach specified targets during the twelve-month period following the
closing. The final payout was $758 and
was recorded in the second quarter of fiscal 2009.
Based on a third-party
valuation report, the tangible net assets acquired in the VEP transaction had a
fair value of $915. The fair values
assigned to intangible assets acquired were $2,900 for customer relationships
and $600 for trademarks, resulting in $2,172 of goodwill. The customer relationships acquired are being
amortized over a period of approximately 16 years, which began in September 2007. The trademark intangible assets are not
subject to amortization but are subject to periodic impairment testing. The accounts and transactions of the acquired
business have been included in the Power Products segment in the consolidated
financial statements from the effective date of the acquisition.
On March 30, 2008,
we acquired 100% of the assets of Tribotek, Inc for $1,750 in cash. We also incurred $61 in transaction costs
related to the purchase. Tribotek
designs, develops and manufactures high current power connectors and power
product systems for products such as power supplies, servers, rectifiers,
inverters, robotics and automated test equipment, in addition to various
military and telecommunication applications.
The tangible net assets
acquired in the Tribotek transaction had a fair value of $1,445. The fair values assigned to intangible assets
acquired were $366 for patents that are being amortized over a period of
approximately 18 years beginning March 2008. There was no goodwill recorded for this
acquisition. The accounts and
transactions of the acquired business have been included in the Power Products
segment in the consolidated financial statements from the effective date of the
acquisition.
Fiscal 2007 Acquisition
As of March 1, 2007,
we acquired 100% of the member interest of TouchSensor Technologies, LLC from
Gemtron Corporation for $58,474 in cash and assumed liabilities of $7,061. We also incurred $2,239 in transaction costs
related to the purchase. TouchSensor is
a North American market leader in solid-state, field-effect switching. Using its patented technology, TouchSensor
designs and manufactures touch-sensitive user interface panels found
F13
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
3
.
Acquisitions - Continued
on products such
as home appliances, exercise equipment, electronic bath/shower controls,
commercial beverage dispensers and automobiles.
The tangible net assets
acquired had a fair value of $6,886. The
fair values assigned to intangible assets acquired were $9,800 for patents,
$250 for covenants not to compete, $18,200 for customer relationships, and
$2,900 for trade name, resulting in $22,677 of goodwill. The intangible assets acquired are being
amortized over periods of 15 to 20 years.
The accounts and transactions of the acquired business have been
included in the Interconnect segment in the consolidated financial statements
from the effective date of the acquisition.
The pro forma results of operations, assuming the purchase occurred at May 2,
2005, would not differ materially from the reported amounts. Included in our results for fiscal 2007 are
approximately 8 weeks of TouchSensor sales of $7,100 and operating income of
$400.
4
.
Intangible Assets and Goodwill
Goodwill and Intangible Asset Write-Offs
We review our
goodwill and other intangible assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of these assets may not be
recoverable, and we also review our goodwill annually in accordance with SFAS No. 142,
Goodwill and Other Intangibles. The
values assigned to goodwill and intangible assets are normally based on
estimates and judgments regarding expectations for the success and life cycle
of products and technologies acquired. A
severe decline in expectations, future cash flows, a change in strategic
direction or our market capitalization remaining below our net book value for a
significant period of time could result in significant impairment charges,
which could have a material adverse effect on our financial condition and
results of operations. Based on events
and general business declines, we performed step one of the goodwill
impairment test in accordance with paragraph 19 of SFAS No. 142, on the
reporting units that have goodwill during fiscal 2009. Based on this test, we determined that the
fair value was less than the carrying value of the net assets for certain
reporting units. We completed step two of the goodwill test and concluded
that goodwill was impaired. Therefore,
during fiscal 2009, we recorded a goodwill impairment charge of $25,840 in our
Automotive segment, $30,750 in our Interconnect segment, $5,358 in our Power
Products segment and $1,203 in our Other segment for a total of $63,151 related
to these assets.
Also, in accordance with
FASB Statement No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, we record impairment losses on long-lived assets used in
operations when events and circumstances indicate that long-lived assets might
be impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. During fiscal 2009,
based on our future estimates of the undiscounted cash flows, it was determined
that certain identifiable intangible assets of our TouchSensor and Hetronic
businesses in the Interconnect segment, the Automotive Safety Technologies
business in our Automotive segment and Magna-Lastic Devices, Inc. from our
Other segment were impaired. Therefore,
we recorded an impairment charge of $26,176 in the Interconnect segment, $4,626
in the Automotive segment and $421 in the Other segment for a total of $31,063
for these assets.
F14
Table
of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
4
.
Intangible Assets and Goodwill - Continued
The following table presents details of
the goodwill and other asset impairments during fiscal 2009:
|
|
|
|
|
|
Intangible
|
|
|
|
Segment
|
|
Reporting Unit
|
|
Goodwill
|
|
Assets
|
|
Total
|
|
Automotive
|
|
Methode Electronics
Malta Ltd.
|
|
$
|
16,987
|
|
$
|
160
|
|
$
|
17,147
|
|
|
|
Automotive Safety
Technologies, Inc.
|
|
8,853
|
|
4,466
|
|
13,319
|
|
|
|
Subtotal Automotive
|
|
25,840
|
|
4,626
|
|
30,466
|
|
|
|
|
|
|
|
|
|
|
|
Interconnect
|
|
Hetronic
|
|
19,063
|
|
11,587
|
|
30,650
|
|
|
|
TouchSensor
Technologies
|
|
11,528
|
|
14,589
|
|
26,117
|
|
|
|
Methode Development
Company
|
|
159
|
|
|
|
159
|
|
|
|
Subtotal Interconnect
|
|
30,750
|
|
26,176
|
|
56,926
|
|
|
|
|
|
|
|
|
|
|
|
Power
Products
|
|
Cableco
Technologies, Inc.
|
|
3,186
|
|
|
|
3,186
|
|
|
|
Value Engineered
Products, Inc.
|
|
2,172
|
|
|
|
2,172
|
|
|
|
Subtotal Power Products
|
|
5,358
|
|
|
|
5,358
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Magna-Lastic
Devices, Inc.
|
|
933
|
|
421
|
|
1,354
|
|
|
|
Trace Laboratories
|
|
270
|
|
|
|
270
|
|
|
|
Subtotal Other
|
|
1,203
|
|
421
|
|
1,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
63,151
|
|
$
|
31,223
|
|
$
|
94,374
|
|
F15
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
4
.
Intangible Assets and Goodwill - Continued
Intangible Assets
The
following tables present details of our remaining identifiable intangible
assets:
|
|
May 2, 2009
|
|
|
|
|
|
|
|
|
|
Wtd. Avg.
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
Accumulated
|
|
|
|
Amortization
|
|
|
|
Gross
|
|
Amortization
|
|
Net
|
|
Periods (Years)
|
|
Customer
relationships and agreements
|
|
$
|
14,995
|
|
$
|
12,718
|
|
$
|
2,277
|
|
14.7
|
|
Patents
and technology licenses
|
|
23,244
|
|
5,169
|
|
18,075
|
|
13.4
|
|
Covenants
not to compete
|
|
480
|
|
331
|
|
149
|
|
2.8
|
|
Total
|
|
$
|
38,719
|
|
$
|
18,218
|
|
$
|
20,501
|
|
|
|
|
|
|
|
|
|
May 3,
2008
|
|
|
|
|
|
|
|
|
|
Wtd.
Avg.
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
Accumulated
|
|
|
|
Amortization
|
|
|
|
Gross
|
|
Amortization
|
|
Net
|
|
Periods
(Years)
|
|
Customer
relationships and agreements
|
|
$
|
41,324
|
|
$
|
19,168
|
|
$
|
22,156
|
|
16.2
|
|
Patents
and technology licenses
|
|
24,692
|
|
5,795
|
|
18,897
|
|
15.5
|
|
Covenants
not to compete
|
|
2,480
|
|
2,251
|
|
229
|
|
12.1
|
|
Total
|
|
$
|
68,496
|
|
$
|
27,214
|
|
$
|
41,282
|
|
|
|
The estimated aggregate
amortization expense for each of the five succeeding fiscal years is as
follows:
2010
|
|
$
|
2,248
|
|
2011
|
|
2,187
|
|
2012
|
|
1,675
|
|
2013
|
|
1,298
|
|
2014
|
|
1,185
|
|
As of May 2, 2009, the patents and
technology licenses include $2,400 of trade names that are not subject to
amortization.
5. Shareholders Equity
Preferred
Stock.
We have 50,000 authorized shares of Series A
Junior Participating Preferred Stock, par value $100 per share, of which none
were outstanding during any of the periods presented.
Common
Stock.
Common stock, par value
$0.50 per share, authorized, issued and in treasury, was as follows:
|
|
May 2, 2009
|
|
May 3, 2008
|
|
Authorized
|
|
100,000,000
|
|
100,000,000
|
|
Issued
|
|
38,290,776
|
|
38,225,379
|
|
In
treasury
|
|
1,372,188
|
|
702,708
|
|
F16
Table of
Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
5. Shareholders Equity - Continued
At May 2, 2009, 394,718 shares of common stock are reserved for
future issuance in connection with our stock plans.
Shareholders Rights Agreement.
On January 8, 2004, our Board of Directors
declared a dividend of one preferred share purchase right (a Right) for each
share of common stock (Common Shares) outstanding on January 18, 2004 to
the stockholders of record on that date.
Each Right entitles the registered holder to purchase from us one
ten-thousandth of a share of our Series A Junior Participating Preferred
Stock at an exercise price of $65.00 per one ten-thousandth of a preferred
share, subject to adjustment.
The Rights, which are not detachable, will trade automatically with the
Common Shares and will not be exercisable until it is announced that a person
or group has become an acquiring person by acquiring 15% or more of the
Common Shares, or a person or group commences a tender offer that will result
in such person or group owning 15% or more of the Common Shares. Thereafter, separate right certificates will
be distributed, and each right will entitle its holder to purchase for the
exercise price, a fraction of a share of our Series A Junior Participating
Preferred Stock having economic and voting terms similar to one share of common
stock.
Upon
announcement that any person or group has become an acquiring person, each
Right will entitle all right-holders (other than the acquiring person) to
purchase, for the exercise price, a number of shares of Common Shares having a
market value of twice the exercise price.
Right-holders would also be entitled to purchase the common stock of
another entity having a value of twice the exercise price if, after a person
has become an acquiring person, the Company were to enter into certain mergers
or other transactions with such other entity.
If any person becomes an acquiring person, the Companys Board of
Directors may, at its option and subject to certain limitations, exchange one
share of common stock for each Right.
The Rights may be redeemed by our Board of Directors for $0.01 per
Right at any time prior to a person or group having become an acquiring
person. The Rights will expire on January 8,
2014.
Dividends
We paid quarterly
dividends totaling $9,778 during fiscal
2009. We intend to retain the remainder
of our earnings not used for dividend payments to provide funds for the
operation and expansion of our business.
Our board of directors approved a stock repurchase plan in September 2008,
which expires at the end of fiscal 2010.
There were 669,480 shares purchased at an average price of $7.85 under
the plan in fiscal 2009.
2007
Stock Plan
On June 21, 2007,
our Board of Directors, on the recommendation of our Compensation Committee,
adopted the Methode Electronics, Inc. 2007 Stock Plan (the Stock Plan). The Stock Plan was voted on and approved by
the shareholders at our annual meeting on September 13, 2007. Upon adoption of the Stock Plan, our board of
directors elected to terminate the 2004 Plan and the 2000 Plan with respect to
the shares reserved under these plans that are not subject to outstanding
awards.
The Stock Plan permits a
total of 1,250,000 shares of our common stock to be awarded to
participants. Shares issued under the
Stock Plan may be either authorized but unissued shares, or treasury
shares. If any award terminates,
expires, is cancelled or forfeited as to any number of shares of common stock,
new awards may be granted with respect to such shares. The total number of shares with respect to
which awards may be granted to any participant in any calendar year shall not
exceed 200,000 shares. As of May 2,
2009 there were 394,718 shares still available for award under the Stock Plan.
F17
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
5. Shareholders Equity - Continued
Stock
Options Granted Under the 2000 and 2004 Stock Plans
There are 625,633 stock
options that were granted in previous years under the 2000 and 2004 stock plans
that are outstanding and exercisable as of May 2, 2009. No options were granted under the Plans since
the first quarter of fiscal 2005. Stock
options granted under the Plans vest over a period of six months to forty-eight
months after the date of the grant and have a term of ten years. There was no remaining compensation expense relating
to these options in fiscal 2009.
|
|
Options Outstanding
|
|
Exercisable Options
|
|
|
|
|
|
Wtd. Avg.
|
|
|
|
Wtd. Avg.
|
|
|
|
|
|
Exercise
|
|
|
|
Exercise
|
|
|
|
Shares
|
|
Price
|
|
Shares
|
|
Price
|
|
April 29, 2006
|
|
1,657,699
|
|
$
|
10.38
|
|
1,463,623
|
|
$
|
10.28
|
|
Granted
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
(699,017
|
)
|
10.31
|
|
|
|
|
|
Cancelled
|
|
(139,764
|
)
|
11.45
|
|
|
|
|
|
April 28, 2007
|
|
818,918
|
|
10.26
|
|
777,668
|
|
10.20
|
|
Granted
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
(125,708
|
)
|
10.32
|
|
|
|
|
|
Cancelled
|
|
(3,521
|
)
|
8.03
|
|
|
|
|
|
May 3, 2008
|
|
689,689
|
|
10.26
|
|
689,689
|
|
10.26
|
|
Granted
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
(19,089
|
)
|
5.90
|
|
|
|
|
|
Cancelled
|
|
(44,967
|
)
|
10.65
|
|
|
|
|
|
May 2, 2009
|
|
625,633
|
|
10.36
|
|
625,633
|
|
10.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding and
|
|
|
|
Exercisable at May 2, 2009
|
|
|
|
|
|
|
|
Wtd.
Avg.
|
|
Avg.
|
|
|
|
Range of
|
|
|
|
Exercise
|
|
Remaining
|
|
|
|
Exercise Prices
|
|
Shares
|
|
Price
|
|
Life
(Years)
|
|
|
|
$5.12
- $7.69
|
|
154,125
|
|
$
|
6.68
|
|
2.0
|
|
|
|
$8.08
- $11.64
|
|
336,748
|
|
10.60
|
|
1.9
|
|
|
|
$12.11
- $17.66
|
|
134,760
|
|
13.98
|
|
1.0
|
|
|
|
|
|
625,633
|
|
10.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F18
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
5. Shareholders Equity - Continued
Stock
Options Granted Under the 2007 Stock Plan
On March 16, 2009, the Compensation Committee approved 285,000
stock option grants to our executive officers under the Companys 2007 Stock
Plan. These options vest in full on March 16,
2012, and have a ten-year term.
|
|
Options Outstanding
|
|
|
|
|
|
Exercise
|
|
|
|
Shares
|
|
Price
|
|
May 3, 2008
|
|
|
|
$
|
|
|
Granted
|
|
285,000
|
|
2.72
|
|
Exercised
|
|
|
|
|
|
Cancelled
|
|
|
|
|
|
May 2, 2009
|
|
285,000
|
|
$
|
2.72
|
|
Options Outstanding
|
|
at May 2, 2009
|
|
|
|
|
|
Avg.
|
|
|
|
|
|
Remaining
|
|
Exercise Price
|
|
Shares
|
|
Life (Years)
|
|
$
|
2.72
|
|
285,000
|
|
9.9
|
|
|
|
|
|
|
|
|
We estimated the fair value of our employee
stock options on the date of grant using the Black-Scholes option-pricing model
with the following assumptions:
Expected
volatility
|
|
69.58
|
%
|
Risk-Free
interest rate
|
|
1.39
|
%
|
Dividend
yield
|
|
2.26
|
%
|
Expected
life of options
|
|
6.87 years
|
|
Weighted-average
grant-date fair value
|
|
$
|
1.46
|
|
|
|
|
|
|
Expected volatility was based on the monthly
changes in our historical common stock prices over the expected life of the
award. The risk-free rate is based on
the U.S. Treasury yield curve in effect at the time of the grant corresponding
to the expected life of the options. Our
dividend yield is based on the average dividend yield for the previous two
years from the date of grant. The
expected life of options is based on historical stock option exercise patterns
and the terms of the options.
Restricted
Stock Awards and Restricted Stock Units
In April 2007, 225,000 shares of common stock
subject to performance-based Restricted Stock Awards (RSAs) granted to our CEO
in fiscal 2006 and 2007 were converted to Restricted Stock Units (RSUs). The RSUs are subject to the same vesting
schedule and other major provisions of the RSAs they replaced, except the RSUs
are not payable until the earlier of: (1) thirty days after the CEOs date
of termination of employment with the Company and all of its subsidiaries and
affiliates; or (2) the last day of our fiscal year in which the payment of
common stock in satisfaction of the RSUs becomes deductible to the Company
under Section 162(m) of the Internal Revenue Code. All further discussion of RSAs in this report
includes the RSUs described above.
At the
beginning of fiscal 2009, there were 525,589 performance-based and time-based
RSAs outstanding. The time-based RSAs
vest in three equal annual installments from the grant date. All RSAs awarded to senior
F19
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
5. Shareholders Equity - Continued
management are performance-based and vest after three years if the
recipient remains employed by the Company until that date and we have met
certain revenue growth and return on invested capital targets. All of the unvested RSAs are entitled to
voting rights and to payment of dividends.
During fiscal 2009, we awarded 356,665 restricted stock awards. Of the shares granted, 24,000 shares vested
immediately upon grant, 255,065 are performance-based RSAs and 77,600 are
time-based RSAs.
During
fiscal 2009, it was determined that based on the current economic environment,
the performance shares granted in fiscal years 2007, 2008 and 2009 are not
meeting the revenue growth and return on invested capital targets. Due to the performance shares not meeting
financial targets, all of the 220,750, performance-based stock awards granted
in fiscal 2007, were cancelled. In
addition, we have recorded an adjustment to the pre-tax compensation expense to
reflect the performance shares not meeting current and future anticipated
revenue growth and return on invested capital targets. We recognized pre-tax compensation expense
reversal for RSAs in the fiscal year ended May 2, 2009 of $570, a pre-tax
compensation expense of $3,348 for the fiscal year ended May 3, 2008 and
$2,922 for the fiscal year ended April 28, 2007. We record the expense in the selling and
administrative section of our Consolidated Statement of Operations.
The following
table summarizes the RSA activity:
|
|
|
|
|
|
Fiscal Year
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
Unvested
at beginning of fiscal year
|
|
582,298
|
|
525,589
|
|
471,957
|
|
|
|
Awarded
|
|
|
|
356,665
|
|
246,123
|
|
316,390
|
|
|
|
Vested
|
|
|
|
(105,522
|
)
|
(188,982
|
)
|
(245,765
|
)
|
|
|
Cancelled
|
|
|
|
(220,750
|
)
|
|
|
|
|
|
|
Forfeited
|
|
|
|
(34,404
|
)
|
(432
|
)
|
(16,993
|
)
|
|
|
Unvested
at end of period
|
|
|
|
578,287
|
|
582,298
|
|
525,589
|
|
The table below
shows the Companys unvested RSAs at May 2, 2009:
|
|
|
|
|
|
|
|
Probable
|
|
Target
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
Unearned
|
|
Grant
|
|
|
|
|
|
Weighted
|
|
Compensation
|
|
Compensation
|
|
Fiscal
|
|
|
|
|
|
Average
|
|
Expense at
|
|
Expense at
|
|
Year
|
|
RSAs
|
|
Vesting Period
|
|
Value
|
|
May 2, 2009
|
|
May 2, 2009
|
|
2006
|
|
125,000
|
|
3-year cliff
performanced-based
|
|
$
|
12.42
|
|
$
|
|
|
$
|
|
|
2007
|
|
834
|
|
3-year equal annual
installments
|
|
11.07
|
|
|
|
|
|
2007
|
|
|
|
3-year cliff performanced-based
|
|
|
|
|
|
|
|
2008
|
|
18,460
|
|
3-year equal annual
installments
|
|
14.77
|
|
91,228
|
|
91,228
|
|
2008
|
|
149,730
|
|
3-year cliff
performanced-based
|
|
15.14
|
|
|
|
933,944
|
|
2009
|
|
49,724
|
|
3-year equal annual
installments
|
|
10.64
|
|
322,004
|
|
322,004
|
|
2009
|
|
234,539
|
|
3-year cliff
performanced-based
|
|
11.35
|
|
|
|
2,031,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At May 2, 2009, the
aggregate unvested RSAs had a weighted average fair value of $12.61 and a
weighted average vesting period of approximately 15 months.
In connection with the
performance-based RSAs, we agreed to pay each recipient a cash bonus if the
Company meets certain additional financial targets, which shall be measured as
of the vesting date. The amount of the cash bonuses, if any, will be calculated
by multiplying the number representing up to 50% of each recipients RSAs
described in the paragraphs above by the closing price of our common stock as
of the vesting date. This
F20
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
5. Shareholders Equity - Continued
additional cash
bonus is recorded as compensation expense ratably over the vesting period,
based upon the market value of our common stock as of the latest balance sheet
date, if such targets are being met as of the latest balance sheet date. As of May 2, 2009, we were not meeting
certain of these additional financial targets, no compensation expense has been
accrued as a liability.
6. Employee 401(k) Savings Plan
We have an Employee 401(k) Savings
Plan covering substantially all U.S. employees to which we make contributions
equal to 3% of eligible compensation.
Our contributions to the Employee 401(k) Savings Plan were $1,950,
$2,075 and $1,806 in fiscal 2009, 2008 and 2007, respectively.
7. Income Taxes
Significant components of
our deferred tax assets and liabilities were as follows:
|
|
May 2,
|
|
May 3,
|
|
|
|
2009
|
|
2008
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
Accelerated
tax depreciation
|
|
$
|
2,104
|
|
$
|
2,101
|
|
|
|
|
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
Deferred
compensation and stock award amortization
|
|
3,576
|
|
3,083
|
|
Inventory
valuation differences
|
|
2,855
|
|
3,015
|
|
Property
valuation differences
|
|
1,031
|
|
1,001
|
|
Accelerated
book amortization
|
|
22,025
|
|
2,656
|
|
Environmental
reserves
|
|
1,191
|
|
994
|
|
Bad
debt reserves
|
|
639
|
|
562
|
|
Vacation
accruals
|
|
966
|
|
1,383
|
|
Restructuring
accruals
|
|
866
|
|
1,261
|
|
Foreign
investment tax credit
|
|
26,518
|
|
28,986
|
|
Foreign
net operating loss carryover
|
|
3,032
|
|
252
|
|
State
net operating loss carryover
|
|
443
|
|
|
|
Other
accruals
|
|
260
|
|
1,699
|
|
|
|
63,402
|
|
44,892
|
|
Less
valuation allowance
|
|
51,377
|
|
23,962
|
|
Total
deferred tax assets
|
|
12,025
|
|
20,930
|
|
Net
deferred tax assets
|
|
$
|
9,921
|
|
$
|
18,829
|
|
|
|
|
|
|
|
Balance
sheet classification:
|
|
|
|
|
|
Current
asset
|
|
$
|
4,928
|
|
$
|
8,730
|
|
Non-current
asset
|
|
4,993
|
|
10,099
|
|
|
|
$
|
9,921
|
|
$
|
18,829
|
|
F21
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
7. Income Taxes - Continued
At May 2, 2009, we had valuation allowances against our deferred
tax assets of $51,377. In accordance
with FASB No. 109, Accounting for Income Taxes, a valuation allowance is
required to be recorded when it is more likely than not that deferred tax
assets will not be realized. Future
realization depends on the existence of sufficient taxable income within the
carry forward period available under the tax law. Sources of future taxable income include
future reversals of taxable temporary differences, future taxable income
exclusive of reversing taxable differences, taxable income in carry back years
and tax planning strategies. These
sources of positive evidence of realizability must be weighed against negative
evidence, such as cumulative losses in recent years.
In forming a judgment about the future realization of our deferred tax
assets, we considered both the positive and negative evidence of realizability
and gave significant weight to the negative evidence from our recent cumulative
loss. We will continue to assess this
situation and make appropriate adjustments to the valuation allowance based on
our evaluation of the positive and negative evidence existing at the time. We are currently unable to forecast when
there will be sufficient positive evidence for us to reverse the remainder of
the valuation allowances that we have recorded.
The valuation allowance is associated with the deferred tax assets for
the differences between book and tax that result from net operating losses
(NOL), foreign investment tax credits with unlimited carryovers generated in
the current and prior years and temporary differences which become deductible
when the related asset is recovered or related liability is settled.
The foreign and state NOL carry forwards relate to the current years
NOLs, which may be used to reduce tax liabilities in future years. If not realized, the state tax benefits of
$443 expire over a twelve to twenty year period.
Income taxes consisted
of the following:
|
|
Fiscal Year Ended
|
|
|
|
May 2,
|
|
May 3,
|
|
April 28,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Current
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(6,956
|
)
|
$
|
10,580
|
|
$
|
8,414
|
|
Foreign
|
|
867
|
|
1,502
|
|
(4
|
)
|
State
|
|
(309
|
)
|
589
|
|
2,422
|
|
|
|
(6,398
|
)
|
12,671
|
|
10,832
|
|
Deferred
|
|
8,078
|
|
(2,948
|
)
|
(1,012
|
)
|
|
|
$
|
1,680
|
|
$
|
9,723
|
|
$
|
9,820
|
|
F22
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
7. Income Taxes - Continued
A reconciliation of the
consolidated provisions for income taxes to amounts determined by applying the
prevailing statutory federal income tax rate to pre-tax earnings/(loss) is as
follows:
|
|
Fiscal Year Ended
|
|
|
|
May 2,
|
|
|
|
May 3,
|
|
|
|
April 28,
|
|
|
|
|
|
2009
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
Income
tax at statutory rate
|
|
$
|
(38,779
|
)
|
35.0
|
%
|
$
|
17,317
|
|
35.0
|
%
|
$
|
12,566
|
|
35.0
|
%
|
Effect
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State
income taxes, net of federal benefit
|
|
(2,559
|
)
|
2.3
|
|
244
|
|
0.5
|
|
1,609
|
|
4.5
|
|
Foreign
operations with lower statutory rates
|
|
(2,578
|
)
|
2.3
|
|
(5,718
|
)
|
(11.6
|
)
|
(4,179
|
)
|
(11.6
|
)
|
Foreign
losses with no tax benefit
|
|
13,498
|
|
(12.2
|
)
|
12
|
|
0.0
|
|
1,802
|
|
5.0
|
|
Foreign
investment tax credit (FTC)
|
|
(2,027
|
)
|
1.8
|
|
(6,360
|
)
|
(12.8
|
)
|
(4,059
|
)
|
(11.3
|
)
|
Change
in tax contingency reserve
|
|
37
|
|
|
|
1,910
|
|
3.9
|
|
(213
|
)
|
(0.6
|
)
|
Manufacturing
deduction
|
|
|
|
|
|
(318
|
)
|
(0.6
|
)
|
(53
|
)
|
(0.1
|
)
|
Research
and development credit
|
|
(255
|
)
|
0.2
|
|
(470
|
)
|
(1.0
|
)
|
|
|
|
|
Foreign
plant closing benefit
|
|
|
|
|
|
(1,846
|
)
|
(3.7
|
)
|
|
|
|
|
Goodwill
|
|
6,422
|
|
(5.8
|
)
|
|
|
|
|
|
|
|
|
Other
- net
|
|
(32
|
)
|
|
|
213
|
|
0.4
|
|
(485
|
)
|
(1.4
|
)
|
Valuation
allowance
|
|
27,953
|
|
(25.1
|
)
|
4,739
|
|
9.6
|
|
2,832
|
|
7.9
|
|
Income
tax provision
|
|
$
|
1,680
|
|
-1.5
|
%
|
$
|
9,723
|
|
19.7
|
%
|
$
|
9,820
|
|
27.4
|
%
|
We paid income taxes of
$8,280 in 2009, $10,628 in 2008 and $13,963 in 2007. No provision has been made for income taxes
on undistributed net income of foreign operations, as we expect them to be indefinitely
reinvested in our foreign operations. If
the undistributed net income of $49,860 were distributed as dividends, we would
be subject to foreign tax withholdings and incur additional income tax expense
of approximately $19,944, before available foreign tax credits. It is not practical to estimate the amount of
foreign tax withholdings or foreign tax credits that may be available.
We adopted FIN 48 on April 29,
2007. As a result of the implementation
of FIN 48, we recognized a $1,039 increase in the liability for unrecognized
tax benefits which was accounted for as an increase of $1,014 to the April 29,
2007 balance of deferred tax assets and a decrease of $25 to the April 29,
2007 balance of retained earnings.
As of May 2, 2009,
our FIN 48 gross unrecognized tax benefits totaled $6,126. After considering the federal impact on the
state issues, $5,905 of this total would favorably affect the effective tax
rate if resolved in our favor.
The following table
presents a reconciliation of the beginning and ending amounts of unrecognized
tax benefits:
Balance
at May 3, 2008
|
|
$
|
5,770
|
|
Increases
for positions related to the current year
|
|
|
|
Increases
for positions related to the prior years
|
|
570
|
|
Decreases
for positions related to prior years
|
|
(135
|
)
|
Lapsing
of statutes of limitations
|
|
(79
|
)
|
Balance
at May 2, 2009
|
|
$
|
6,126
|
|
We
believe that it is reasonably possible that the total amount of unrecognized
tax benefits will change within the next twelve months. We have certain tax return years subject to
statutes of limitation, which will close within twelve months from the end of
the fiscal 2009. Unless challenged by
tax authorities, the closure of those
F23
Table of Contents
METHODE
ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
7. Income Taxes - Continued
statutes
of limitation is expected to result in the recognition of uncertain tax
positions in the range between $100 and $2,500.
We
are generally no longer subject to U.S. federal, state or non-U.S. income tax
examinations by tax authorities for years prior to fiscal year ended April 30,
2006.
The
continuing practice of the Company is to recognize interest and penalties
related to income tax matters in the provision for income taxes. We had $935 accrued for interest and no
accrual for penalties at May 2, 2009.
We recorded interest expense related to unrecognized tax provision of
$155 in fiscal 2009 and no expense for penalties.
8. Earnings Per Share
A basic earnings per
share (EPS) is calculated by dividing net earnings by the weighted average
number of common shares outstanding for the applicable period. Diluted EPS is calculated after adjusting the
numerator and the denominator of the basic EPS calculation for the effect of
all potential dilutive common shares outstanding during the period.
The following table sets
forth the computation of basic and diluted earnings/(loss) per share:
|
|
Fiscal Year Ended
|
|
|
|
May 2,
|
|
May 3,
|
|
April 28,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Numerator
- net income/(loss)
|
|
$
|
(112,483
|
)
|
$
|
39,754
|
|
$
|
26,084
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
Denominator
for basic earnings per share-weighted average shares (in thousands)
|
|
36,879
|
|
37,069
|
|
36,328
|
|
Dilutive
potential common shares-employee and director stock options (in thousands)
|
|
|
|
424
|
|
315
|
|
Denominator
for diluted earnings per share adjusted weighted average shares and assumed
conversions (in thousands)
|
|
36,879
|
|
37,493
|
|
36,643
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net income/(loss) per share:
|
|
|
|
|
|
|
|
Basic
income/(loss) per share
|
|
$
|
(3.05
|
)
|
$
|
1.07
|
|
$
|
0.72
|
|
Diluted
net income/(loss) per share
|
|
$
|
(3.05
|
)
|
$
|
1.06
|
|
$
|
0.71
|
|
Options to
purchase 625,633, 35,296 and 370,506
shares of common stock were outstanding at May 2, 2009, May 3,
2008 and April 28, 2007, respectively, but were not included in the
computation of diluted earnings/(loss) per share because the exercise price was
greater than the average market price of the common shares; therefore, the
effect would have been anti-dilutive.
Potential common shares have not been included in the calculation of
diluted net loss per share, as the effect would be anti-dilutive. As such, the numerator and the demoninator
used in computing both basic and diluted net loss per share for the fiscal year
ended May 2, 2009 are the same.
9. Environmental Matters
We apply the guidance of
SOP 96-1
Environmental Remediation Liabilities
in
accounting for known environmental obligations.
We are not aware of any potential unasserted environmental claims that
may be brought
F24
Table
of Contents
METHODE ELECTRONICS, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
9. Environmental Matters - Continued
against us.
We are involved in
environmental investigation and/or remediation at two of our former plant
sites. We use environmental consultants
to assist us in evaluating our environmental liabilities in order to establish
appropriate accruals in our financial statements. Accruals are recorded when environmental
remediation is probable and the costs can be reasonably estimated. A number of factors affect the cost of
environmental remediation, including the determination of the extent of
contamination, the length of time remediation may require, the complexity of
environmental regulations and the advancement of remediation technology. Considering these factors, we have estimated
(without discounting) the costs of remediation, which will be incurred over a
period of several years. Recovery from
insurance or other third parties is not anticipated. We are not yet able to determine when such
remediation activity will be complete, but estimates for certain remediation
efforts are projected through 2015.
At May 2, 2009 and May 3,
2008, we had accruals, primarily based upon independent engineering studies,
for environmental matters of $4,271 and $2,580, respectively, of which $600 was
classified in other accrued expenses and the remainder was included in other
liabilities. We believe the provisions
made for environmental matters are adequate to satisfy liabilities relating to
such matters, however it is reasonably possible that costs could exceed accrued
amounts if the selected methods of remediation do not reduce the contaminates
at the sites to levels acceptable to federal and state regulatory agencies.
In fiscal 2009, we spent
$685 on remediation cleanups and related studies compared with $387 in fiscal 2008
and $591 in fiscal 2007. The costs
associated with environmental matters as they relate to day-to-day activities
were not material.
10. Pending Litigation
Certain litigation
arising in the normal course of business is pending against us. We, from time to time, are subject to various
legal actions and claims incidental to our business, including those arising
out of alleged defects, breach of contracts, employment-related matters and
environmental matters. We consider
insurance coverage and third party indemnification when determining required
accruals for pending litigation and claims.
Although the outcome of potential legal actions and claims cannot be
determined, it is the opinion of our management, based on the information
available, that we have adequate reserves for these liabilities and that the
ultimate resolution of these matters will not have a significant effect on our
consolidated financial statements.
11. Material Customers
Sales to two customers in
the Automotive segment, either directly or through their tiered suppliers,
represented a significant portion of our business. Net sales to these two customers approximated
18.8% and 9.7% of consolidated net sales in fiscal 2009; three customers accounted
for 25.1%, 13.8% and 9.4% of consolidated net sales, respectively in fiscal
2008 and three customers accounted for 27.3%, 16.5% and 13.6% of consolidated
net sales in fiscal 2007. Sales of PODS
sensor pads to one of these customers were 9.7%, 9.4% and 13.6% of consolidated
net sales in fiscal 2009, 2008 and 2007, respectively.
At May 2, 2009 and May 3, 2008, accounts receivable from
customers in the automotive industry were approximately $26,834 and $49,774,
respectively, which included $14,386 and $22,888, respectively, at our Maltese
subsidiary. Accounts receivable are
generally due within 30 to 60 days.
Credit losses relating to all customers generally have been within
managements expectation.
12. Line of Credit
We have an agreement with our primary
bank for a revolving credit facility to provide up to $75,000 ready financing
for general corporate purposes, including acquisition opportunities that may
become available. This facility, which expires January 31, 2011,
bears interest at (a) LIBOR plus 2.75% or (b) the banks prime rate
(or, if
F25
Table
of Contents
METHODE ELECTRONICS, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
12. Line of Credit - Continued
higher,
the Federal Funds Rate plus 0.5%) plus 1.50%. The facility also includes
a fee of 0.50% of the unused balance. The facility requires that we
maintain a minimum consolidated net worth
equal
to 85% of consolidated net worth ($197,010 at May 2, 2009) plus 50% of
consolidated net income earned in each fiscal quarter, with no deduction for a
net loss in any quarter, and maintain consolidated interest coverage, as
defined, of not less than 3.50:1.00, and maintain on a monthly basis a
consolidated debt to EBITDA ratio, as defined, of not more than 2.50:1.00
.
We
were in compliance at May 2, 2009. We borrowed $10,000 under this
facility to finance a portion of the Hetronic acquisition on September 30,
2009. The amount was repaid in full the
following month.
13. Segment Information and Geographic Area
Information
We are a global
manufacturer of component and subsystem devices. We design, manufacture and market devices
employing electrical, electronic, wireless, sensing and optical
technologies. Our components are found
in the primary end markets of the automotive, appliance, communications
(including information processing and storage, networking equipment, wireless
and terrestrial voice/data systems), aerospace, rail and other transportation
industries; and the consumer and industrial equipment markets.
SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information
(SFAS No. 131), establishes annual and interim reporting standards for an
enterprises operating segments and related disclosures about its products,
services, geographic areas and major customers. An operating segment is defined
as a component of an enterprise that engages in business activities from which
it may earn revenues and incur expenses, and about which separate financial
information is regularly evaluated by the Chief Operating Decision Maker (CODM)
in deciding how to allocate resources.
The CODM, as defined by SFAS No. 131, is the Companys President and
Chief Executive Officer (CEO).
The Automotive segment supplies
electronic and electromechanical devices and related products to automobile
OEMs, either directly or through their tiered suppliers, including control
switches for electrical power and signals, connectors for electrical devices,
integrated control components, switches and sensors that monitor the operation
or status of a component or system, and packaging of electrical components.
The Interconnect segment provides a
variety of copper and fiber-optic interconnect and interface solutions for the
appliance, computer, networking, telecommunications, storage, medical,
military, aerospace, commercial and consumer markets. Solutions include solid-state field effect
interface panels, PC and express card packaging, optical and copper
transceivers, terminators, connectors, custom cable assemblies and conductive
polymer and thick film inks. Services
include the design and installation of fiber optic and copper infrastructure
systems, and manufacture of active and passive optical components.
The Power Products
segment manufactures current-carrying laminated bus devices, custom
power-product assemblies; powder coated bus bars, braided flexible cables and
high-current low voltage flexible power cabling systems that are used in
various markets and applications, including telecommunications, computers,
transportation, industrial and power conversion, insulated gate bipolar
transistor solutions, aerospace and military.
The Other segment
includes a designer and manufacturer of magnetic torque sensing products, and
independent laboratories that provide services for qualification testing and
certification, and analysis of electronic and optical components.
The accounting policies of the segments
are the same as those described in the summary of significant accounting
policies. We allocate resources to and
evaluate performance of segments based on operating income. Transfers between
segments are recorded using internal transfer prices set by us.
F26
Table
of Contents
METHODE ELECTRONICS, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
13. Segment
Information and Geographic Area Information - Continued
The table below presents information
about our reportable segments:
|
|
Fiscal Year Ended May 2, 2009
|
|
|
|
|
|
Inter-
|
|
Power
|
|
|
|
|
|
|
|
|
|
Automotive
|
|
Connect
|
|
Products
|
|
Other
|
|
Eliminations
|
|
Consolidated
|
|
Net sales
|
|
$
|
243,650
|
|
$
|
131,998
|
|
$
|
43,097
|
|
$
|
8,353
|
|
$
|
1,454
|
|
$
|
425,644
|
|
Transfers between segments
|
|
|
|
(952
|
)
|
(399
|
)
|
(103
|
)
|
(1,454
|
)
|
|
|
Net sales to unaffiliated customers
|
|
$
|
243,650
|
|
$
|
131,046
|
|
$
|
42,698
|
|
$
|
8,250
|
|
$
|
|
|
$
|
425,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment income (loss) before restructuring charge, impairment
of goodwill and intangible assets
|
|
$
|
25,782
|
|
$
|
1,681
|
|
$
|
137
|
|
$
|
(3,506
|
)
|
$
|
|
|
$
|
24,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
(19,283
|
)
|
(5,468
|
)
|
(527
|
)
|
|
|
|
|
(25,278
|
)
|
Impairment of goodwill and intangible assets
|
|
(30,466
|
)
|
(56,926
|
)
|
(5,358
|
)
|
(1,624
|
)
|
|
|
(94,374
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment income (loss) including restructuring
charge, impairment of goodwill and intangible assets
|
|
$
|
(23,967
|
)
|
$
|
(60,713
|
)
|
$
|
(5,748
|
)
|
$
|
(5,130
|
)
|
$
|
|
|
$
|
(95,558
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses, net
|
|
|
|
|
|
|
|
|
|
|
|
(15,245
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(110,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
17,408
|
|
$
|
15,262
|
|
$
|
2,153
|
|
$
|
1,019
|
|
$
|
|
|
$
|
35,842
|
|
Corporate depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
1,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets
|
|
$
|
121,572
|
|
$
|
115,085
|
|
$
|
23,925
|
|
$
|
6,613
|
|
$
|
|
|
$
|
267,195
|
|
General corporate assets
|
|
|
|
|
|
|
|
|
|
|
|
38,093
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
$
|
305,288
|
|
F27
Table
of Contents
METHODE ELECTRONICS, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
13. Segment
Information and Geographic Area Information - Continued
|
|
Fiscal
Year Ended May 3, 2008
|
|
|
|
|
|
Inter-
|
|
Power
|
|
|
|
|
|
|
|
|
|
Automotive
|
|
Connect
|
|
Products
|
|
Other
|
|
Eliminations
|
|
Consolidated
|
|
Net sales
|
|
$
|
362,165
|
|
$
|
137,239
|
|
$
|
46,839
|
|
$
|
6,982
|
|
$
|
2,152
|
|
$
|
551,073
|
|
Transfers between segments
|
|
(69
|
)
|
(979
|
)
|
(1,023
|
)
|
(81
|
)
|
(2,152
|
)
|
|
|
Net sales to unaffiliated customers
|
|
$
|
362,096
|
|
$
|
136,260
|
|
$
|
45,816
|
|
$
|
6,901
|
|
$
|
|
|
$
|
551,073
|
|
Segment income (loss) before restructuring charge
|
|
$
|
59,783
|
|
$
|
5,268
|
|
$
|
8,546
|
|
$
|
(1,798
|
)
|
|
|
$
|
71,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
(4,487
|
)
|
(672
|
)
|
|
|
|
|
|
|
(5,159
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment income (loss) including restructuring
charge
|
|
$
|
55,296
|
|
$
|
4,596
|
|
$
|
8,546
|
|
$
|
(1,798
|
)
|
|
|
$
|
66,640
|
|
Corporate expenses, net
|
|
|
|
|
|
|
|
|
|
|
|
(17,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and cumulative effect of
accounting change
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
19,007
|
|
$
|
6,257
|
|
$
|
1,409
|
|
$
|
602
|
|
|
|
$
|
27,275
|
|
Corporate depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indentifiable assets
|
|
$
|
185,905
|
|
$
|
134,412
|
|
$
|
37,063
|
|
$
|
7,332
|
|
|
|
$
|
364,712
|
|
General corporate assets
|
|
|
|
|
|
|
|
|
|
|
|
105,508
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
$
|
470,220
|
|
F28
Table
of Contents
METHODE ELECTRONICS, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
13. Segment
Information and Geographic Area Information - Continued
The
table below presents information about our reportable segments:
|
|
Fiscal Year Ended April 28, 2007
|
|
|
|
|
|
Inter-
|
|
Power
|
|
|
|
|
|
|
|
|
|
Automotive
|
|
Connect
|
|
Products
|
|
Other
|
|
Eliminations
|
|
Consolidated
|
|
Net sales
|
|
$
|
315,691
|
|
$
|
83,221
|
|
$
|
43,398
|
|
$
|
7,715
|
|
$
|
1,598
|
|
$
|
448,427
|
|
Transfers between segments
|
|
|
|
(1,082
|
)
|
(402
|
)
|
(114
|
)
|
(1,598
|
)
|
|
|
Net sales to unaffiliated customers
|
|
$
|
315,691
|
|
$
|
82,139
|
|
$
|
42,996
|
|
$
|
7,601
|
|
$
|
|
|
$
|
448,427
|
|
Segment income (loss) before restructuring charge
|
|
$
|
29,328
|
|
$
|
9,264
|
|
$
|
8,845
|
|
$
|
(321
|
)
|
$
|
|
|
$
|
47,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
(2,027
|
)
|
|
|
|
|
|
|
|
|
(2,027
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment income (loss) including restructuring
charge
|
|
$
|
27,301
|
|
$
|
9,264
|
|
$
|
8,845
|
|
$
|
(321
|
)
|
|
|
$
|
45,089
|
|
Corporate expenses, net
|
|
|
|
|
|
|
|
|
|
|
|
(9,314
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and cumulative effect of
accounting change
|
|
|
|
|
|
|
|
|
|
|
|
$
|
35,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
18,927
|
|
$
|
3,122
|
|
$
|
585
|
|
$
|
475
|
|
|
|
$
|
23,109
|
|
Corporate depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indentifiable assets
|
|
$
|
197,107
|
|
$
|
119,979
|
|
$
|
22,979
|
|
$
|
7,799
|
|
|
|
$
|
347,864
|
|
General corporate assets
|
|
|
|
|
|
|
|
|
|
|
|
63,876
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
$
|
411,740
|
|
F29
Table
of Contents
METHODE ELECTRONICS, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
13. Segment Information and Geographic Area
Information - Continued
The following table sets
forth certain geographic financial information for fiscal years ended May 2,
2009, May 3, 2008 and April 28, 2007.
Geographic net sales and income are determined based our sales and
income from our various operational locations.
|
|
Fiscal Year Ended
|
|
|
|
May 2,
|
|
May 3,
|
|
April 28,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Net
Sales:
|
|
|
|
|
|
|
|
North
American
|
|
$
|
259,539
|
|
$
|
356,240
|
|
$
|
305,232
|
|
Asia
Pacific
|
|
53,378
|
|
51,915
|
|
30,141
|
|
Malta
|
|
100,594
|
|
127,880
|
|
75,425
|
|
Europe,
excluding Malta
|
|
12,133
|
|
15,038
|
|
37,629
|
|
|
|
$
|
425,644
|
|
$
|
551,073
|
|
$
|
448,427
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes and cumulative effect of accounting change:
|
|
|
|
|
|
|
|
North
American
|
|
$
|
(82,328
|
)
|
$
|
26,922
|
|
$
|
22,873
|
|
Asia
Pacific
|
|
(30,610
|
)
|
4,598
|
|
1,346
|
|
Europe
|
|
753
|
|
15,633
|
|
8,128
|
|
Income
and expenses not allocated
|
|
1,382
|
|
2,324
|
|
3,428
|
|
|
|
$
|
(110,803
|
)
|
$
|
49,477
|
|
$
|
35,775
|
|
|
|
|
|
|
|
|
|
Property,
Plant and Equipment:
|
|
|
|
|
|
|
|
United
States
|
|
$
|
30,200
|
|
$
|
35,921
|
|
$
|
48,097
|
|
Mexico
|
|
2,389
|
|
7,149
|
|
564
|
|
Asia
Pacific
|
|
7,523
|
|
11,847
|
|
8,893
|
|
Malta
|
|
24,561
|
|
29,255
|
|
23,434
|
|
Europe,
excluding Malta
|
|
5,244
|
|
6,108
|
|
5,869
|
|
|
|
$
|
69,917
|
|
$
|
90,280
|
|
$
|
86,857
|
|
F30
Table
of Contents
METHODE ELECTRONICS, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
14. Lease Commitments
We
lease certain office and manufacturing properties under non-cancelable
operating leases expiring at various dates through fiscal 2014. Rental expense under non-cancelable operating
leases amounted to $4,841, $4,032 and $3,123 in fiscal years 2009, 2008 and
2007, respectively.
Our
aggregate minimum rental commitments under all non-cancelable operating leases
are summarized in the table below for the next succeeding five fiscal years:
2010
|
|
$
|
3,685
|
|
2011
|
|
1,887
|
|
2012
|
|
1,155
|
|
2013
|
|
621
|
|
2014
|
|
371
|
|
15. Pre-Production Costs Related to Long-Term
Supply Arrangements
We
incur pre-production tooling costs related to the products produced for our
customers under long-term supply agreements.
We had $3,182 and $8,211 as of fiscal year ended May 2, 2009 and May 3,
2008, respectively, of pre-production tooling costs related to customer-owned
tools for which reimbursement is contractually guaranteed by the customer or
for which the customer has provided a non-cancelable right to use the
tooling. These amounts are included in
our work-in-process inventory in the consolidated balance sheets. Net revenues and costs on projects are
deferred and recognized over the life of the related long-term supply
agreement.
16. Fair Value Measurements
We adopted SFAS No. 157,
Fair Value Measurements (SFAS No. 157) as of May 4, 2008. SFAS No. 157 defines fair value as the
exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants.
In February 2008,
the FASB issued FASB Staff Position No. 157-2, which delays the effective
date of SFAS No. 157 for non-financial assets and liabilities, which
are not measured at fair value on a recurring basis (at least annually) until
fiscal years beginning after November 15, 2008, which is our fiscal year
2010 that began May 3, 2009. We are
currently assessing the impact of adopting SFAS No. 157 for
non-financial assets and liabilities on our consolidated financial statements.
SFAS No. 157
also specifies a fair value hierarchy based upon the observation of inputs in
valuation techniques. Observable inputs
(highest level) reflect market data obtained from independent sources, while
unobservable inputs (lowest level) reflect internally developed market
assumptions. In accordance with SFAS No. 157,
fair value measurements are classified under the following hierarchy:
·
Level 1 Quoted prices in active markets for identical assets and
liabilities.
·
Level 2 Quoted prices in active markets for similar assets and
liabilities, or other inputs that are observable for the asset or liability,
either directly or indirectly, for substantially the full term of the financial
instrument.
·
Level 3 Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets and
liabilities. This includes certain
pricing models, discounted cash flow methodologies and similar techniques that
use significant unobservable inputs.
The adoption of
SFAS No. 157 had no effect on our consolidated financial position or
results of operations. Assets and
liabilities recorded at fair value are valued using quoted market prices or
under a market approach using
F31
Table
of Contents
METHODE ELECTRONICS, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
16. Fair Value Measurements - Continued
other relevant information generated by market
transactions involving identical or comparable instruments and included:
Below
is a table that summarizes the fair value of assets and liabilities as of May 2,
2009:
|
|
Fair Value Measurement Used
|
|
|
|
|
|
Quoted prices
|
|
Quoted prices
|
|
|
|
|
|
|
|
in active
|
|
in active
|
|
|
|
|
|
|
|
markets for
|
|
markets for
|
|
Other
|
|
|
|
|
|
identical
|
|
similar
|
|
unobservable
|
|
|
|
Recorded
|
|
instruments
|
|
instruments
|
|
inputs
|
|
|
|
Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (1)
|
|
$
|
54,030
|
|
$
|
51,520
|
|
$
|
2,510
|
|
$
|
|
|
Assets related to deferred compensation plan
|
|
$
|
2,443
|
|
$
|
|
|
$
|
2,443
|
|
$
|
|
|
Total assets at fair value
|
|
$
|
56,473
|
|
$
|
51,520
|
|
$
|
4,953
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan
|
|
$
|
2,252
|
|
$
|
2,252
|
|
$
|
|
|
$
|
|
|
Total liabilities at fair value
|
|
$
|
2,252
|
|
$
|
2,252
|
|
$
|
|
|
$
|
|
|
(1) Includes
cash, money-market investments and certificates of deposit.
17. Summary of Quarterly Results of Operations
(Unaudited)
The following is a
summary of unaudited quarterly results of operations for the two years ended May 2,
2009 and May 3, 2008:
|
|
Fiscal Year 2009
|
|
|
|
Quarter Ended
|
|
|
|
|
|
Restated
|
|
|
|
|
|
|
|
August 2
|
|
November 1
|
|
January 31
|
|
May 2
|
|
Net
sales
|
|
$
|
134,514
|
|
$
|
121,304
|
|
$
|
80,781
|
|
$
|
89,045
|
|
Gross
profit
|
|
29,084
|
|
23,489
|
|
10,269
|
|
6,306
|
|
Net
income/(loss)
|
|
6,816
|
|
238
|
|
(26,985
|
)
|
(92,552
|
)
|
Net
income/(loss) per basic common share
|
|
0.18
|
|
0.01
|
|
(0.74
|
)
|
$
|
(2.50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2008
|
|
|
|
Quarter Ended
|
|
|
|
July 28
|
|
October 27
|
|
February 2
|
|
May 3
|
|
Net
sales
|
|
$
|
125,009
|
|
$
|
133,239
|
|
$
|
138,465
|
|
$
|
154,360
|
|
Gross
profit
|
|
26,674
|
|
27,339
|
|
29,433
|
|
39,272
|
|
Net
income
|
|
8,272
|
|
8,806
|
|
9,757
|
|
12,919
|
|
Net
income per basic common share
|
|
0.22
|
|
0.24
|
|
0.26
|
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended November 1, 2009 Restatement:
We
have restated our balance sheet as of November 1, 2008 and the related
statement of income and cash flows. We discovered an error related to unrealized
currency exchange losses arising from an intercompany loan between our
corporate headquarters and one of our foreign subsidiaries in conjunction with
a recent acquisition of
F32
Table
of Contents
METHODE ELECTRONICS, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in
thousands, except number of shares and per share data)
17. Summary of Quarterly Results of Operations
(Unaudited) - Continued
Hetronic,
LLC, purchased on September 30, 2008.
The loan amount was $20,858. Due
to the U.S. Dollar increasing versus the Euro, from 0.69230 on September 30,
2008 to 0.78500 on November 1, 2008, an unrealized currency loss of $2,463
should have been recorded during the second quarter.
The
effects of the restatement are as follows:
·
Adjustment to the November 1, 2008 Condensed Consolidated Balance
Sheet decreases retained earnings by $2,463 from $270,826 as previously
reported, to $268,363 and increases the accumulated other comprehensive income
by $2,463 from $11,472 as previously reported, to $13,935.
·
Adjustment to the three months ended November 1, 2008 Condensed
Consolidated Statement of Income decreases other income by $2,463 from $1,853
as previously reported to an expense of $610.
Net income for the three months ended November 1, 2008 decreased
$2,463 from $2,701 as previously reported to $238. Basic and diluted earnings per share both
decreased $0.06, from $0.07 as previously reported to $0.01.
·
Adjustment to the six months ended November 1, 2008 Condensed
Consolidated Statement of Income decreases other income by $2,463 from $1,584
as previously reported to an expense of $879.
Net income for the six months ended November 1, 2008 decreased
$2,463 from $9,517 as previously reported to $7,054. Basic earnings per share decreased $0.06,
from $0.26 as previously reported to $0.19.
Diluted earnings per share decreased $0.05, from $0.25 as previously
reported to $0.19.
·
Adjustment
to the six months ended November 1, 2008 condensed consolidated statement
of cash flows decreases net income by $2,463, from $9,517 as previously
reported to $7,054. In addition, a
non-cash add-back of translation loss of $2,463 has been added in the operating
activities section.
·
The
loan has been fully paid to corporate and all transactions have been properly
recorded as of May 2, 2009.
Other
Significant Items for Fiscal 2009
The first, second, third
and fourth quarter of fiscal 2009 includes a pre-tax restructuring charge of
$4,917, $6,284, $3,796 and $10,281, respectively. In addition, the third and fourth quarter of
fiscal 2009 include impairment charges for goodwill and intangible assets
write-down of $32,678 and $61,696, respectively.
Significant
Items for Fiscal 2008
The third and fourth
quarter of fiscal 2008 include a pre-tax restructuring charges of $450 and
$4,709, respectively, relating to a restructuring of our U.S.-based automotive
operations and a decision to discontinue producing certain legacy electronic
connector products.
Quarter ended February 2, 2008 includes 14 weeks of activity due
to the timing of our fiscal calendar.
Significant
Items for Fiscal 2007
Third quarter fiscal 2007
results include a restructuring charge of $2,027 for the closing of our Scotland
facility.
F33
Table
of Contents
SCHEDULE
IIVALUATION AND QUALIFYING ACCOUNTS
METHODE ELECTRONICS, INC.
AND SUBSIDIARIES
(in thousands)
COL. A
|
|
COL. B
|
|
COL. C
|
|
COL. D.
|
|
COL. E
|
|
|
|
|
|
Additions
|
|
|
|
|
|
Description
|
|
Balance at
Beginning of
Period
|
|
Charged to Costs
and Expenses
|
|
Charged to Other
Accounts
Describe
|
|
Deductions
Describe
|
|
Balance at End of
Period
|
|
YEAR
ENDED MAY 2, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
Reserves
and allowances deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for uncollectible accounts
|
|
$
|
2,309
|
|
$
|
120
|
|
$
|
625
|
(1)
|
$
|
360
|
(2)
|
$
|
1,444
|
|
Deferred
tax valuation allowance
|
|
31,164
|
|
27,506
|
|
(7,293
|
)(1)
|
|
|
51,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR
ENDED MAY 3, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
Reserves
and allowances deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for uncollectible accounts
|
|
$
|
2,231
|
|
$
|
195
|
|
$
|
45
|
(1)
|
$
|
162
|
(2)
|
$
|
2,309
|
|
Deferred
tax valuation allowance
|
|
25,762
|
|
3,892
|
|
1,510
|
(1)
|
|
|
31,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR
ENDED APRIL 28, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
Reserves
and allowances deducted from asset accounts:
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for uncollectible accounts
|
|
$
|
3,752
|
|
$
|
372
|
|
$
|
140
|
(1)
|
$
|
2,032
|
(2)
|
$
|
2,231
|
|
Deferred
tax valuation allowance
|
|
25,187
|
|
298
|
|
277
|
(1)
|
|
|
25,762
|
|
(1) Impact of
foreign currency translation and other reclassifications.
(2) Uncollectible
accounts written off, net of recoveries.
F34
Table
of Contents
INDEX TO
EXHIBITS
Exhibit
Number
|
|
Description
|
3.1
|
|
Certificate of
Incorporation of Registrant, as amended and currently in effect (1)
|
3.2
|
|
Bylaws of Registrant,
as amended and currently in effect (17)
|
4.1
|
|
Article Fourth of
Certificate of Incorporation of Registrant, as amended and currently in
effect (included in Exhibit 3.1) (1)
|
4.2
|
|
Rights Agreement dated
as of January 8, 2004 between Methode Electronics, Inc. and Mellon
Investor Services LLC, which includes as Exhibit A thereto, the
Certificate of Designation of Series A Junior Participating Preferred
Stock of Methode Electronics, Inc.; as Exhibit B thereto, the
Form of Right Certificate; as Exhibit C thereto, the Summary of
Rights to Purchase Preferred Shares. (2)
|
10.1*
|
|
Methode
Electronics, Inc. Managerial Bonus and Matching Bonus Plan (also
referred to as the Longevity Contingent Bonus Program) (3)
|
10.2*
|
|
Methode
Electronics, Inc. 2000 Stock Plan (4)
|
10.3*
|
|
Methode
Electronics, Inc. 2004 Stock Plan (5)
|
10.4*
|
|
Form of Methode
Electronics, Inc. Restricted Stock Award Agreement (Executive
Award/Cliff Vesting) under the 2000 Stock Plan (6)
|
10.5
|
|
Credit Agreement dated
as of December 19, 2002 among Methode Electronics, Inc. as the
Borrower, Bank of America, N.A., as Administrative Agent and L/C Issuer, and
The Other Lenders Party Thereto (7)
|
10.6
|
|
Amendment to Credit
Agreement dated as of November 2005 among Methode Electronics, Inc.
as the Borrower, Bank of America, N.A., as Administrative Agent and L/C
Issuer, and The Other Lenders Party Thereto (6)
|
10.7*
|
|
Form of Methode
Electronics, Inc. Restricted Stock Award Agreement (Outside Director)
under the 2004 Stock Plan (8)
|
10.8*
|
|
Form of Methode
Electronics, Inc. Restricted Stock Award Agreement (Executive
Award/Performance Based) under the 2004 Stock Plan (8)
|
10.9
|
|
Amendment to Credit
Agreement dated as of January 31, 2006, among Methode
Electronics, Inc., the Borrower, Bank of America, N.A., as Administrative
Agent, and L/C Issuer, and The Other Lenders Party Thereto (9)
|
10.10*
|
|
Change in Control
Agreement dated September 1, 2006 between Methode Electronics, Inc.
and Donald W. Duda (10)
|
10.11*
|
|
Change in Control
Agreement dated September 1, 2006 between Methode Electronics, Inc.
and Douglas A. Koman (10)
|
10.12*
|
|
Change in Control
Agreement dated September 1, 2006 between Methode Electronics, Inc.
and Thomas D. Reynolds (10)
|
10.13*
|
|
Change in Control
Agreement dated September 1, 2006 between Methode Electronics, Inc.
and Paul E. Whybrow (10)
|
10.14*
|
|
Change in Control
Agreement dated September 14, 2006 between Methode
Electronics, Inc. and Theodore P. Kill (11)
|
10.15*
|
|
Change in Control
Agreement dated September 14, 2006 between Methode Electronics, Inc.
and Timothy R. Glandon (11)
|
10.16*
|
|
First Amendment to
Methode Electronics, Inc. 2000 Stock Plan effective as of
December 14, 2006 (12)
|
10.17*
|
|
Amended and Restated
Restricted Stock Unit Award Agreement (Executive Award/Performance Based)
effective as of June 18, 2004 between Methode Electronics, Inc. and
Donald W. Duda (12)
|
10.18*
|
|
Amended and Restated
Restricted Stock Unit Award Agreement (Executive Award/Cliff Vesting)
effective as of June 18, 2004 between Methode Electronics, Inc. and
Donald W. Duda (12)
|
10.19
|
|
Waiver and Amendment
dated as of February 28, 2007 among Methode Electronics, Inc., the
Borrower, Bank of America, N.A., as Administrative Agent, and L/C Issuer, and
The Other Lenders Party Thereto (13)
|
10.20*
|
|
Amended Cash Bonus
Agreement effective as of April 6, 2007 between Methode Electronics, Inc.
and Donald W. Duda (14)
|
10.21*
|
|
Amended and Restated
Restricted Stock Unit Award Agreement (Executive Award/Performance Based)
effective as of June 15, 2005 between Methode Electronics, Inc. and
Donald W. Duda (14)
|
|
|
|
|
|
Table
of Contents
10.22*
|
|
Amended and Restated
Restricted Stock Unit Award Agreement (Executive Award/Performance Based)
effective as of August 7, 2006 between Methode Electronics, Inc.
and Donald W. Duda (14)
|
10.23*
|
|
Methode
Electronics, Inc. 2007 Stock Plan (15)
|
10.24*
|
|
Methode
Electronics, Inc. 2007 Cash Incentive Plan (15)
|
10.25*
|
|
Form Performance
Based RSA Award Agreement (15)
|
10.26*
|
|
Form Annual Cash
Bonus Award Agreement (15)
|
10.27*
|
|
Form RSA Tandem
Cash Award Agreement (15)
|
10.28*
|
|
Form Director RSA
Award Agreement (15)
|
10.29*
|
|
Change in Control
Agreement dated July 15, 2008 between Methode Electronics, Inc. and
Ronald L. G. Tsoumas (17)
|
10.30
|
|
Asset and Share
Purchase Agreement for Hetronic (18)
|
21
|
|
Subsidiaries of Methode
Electronics, Inc.
|
23
|
|
Consent of
Ernst & Young LLP
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification
of Principal Executive Officer
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification
of Principal Financial Officer
|
32
|
|
Certification of
Periodic Financial Report Pursuant to 18 U.S.C. Section 1350
|
(1)
|
|
Previously filed with
Registrants Form 8-K filed January 9, 2004, and incorporated
herein by reference.
|
(2)
|
|
Previously filed with
Registrants Form 8-A filed January 8, 2004, and incorporated
herein by reference.
|
(3)
|
|
Previously filed with
Registrants Form 10-K for the year ended April 30, 2005, and
incorporated herein by reference.
|
(4)
|
|
Previously filed with
Registrants Form 10-Q for the three months ended October 31, 2000,
and incorporated herein by reference.
|
(5)
|
|
Previously filed with
Registrants Form 8-K filed December 7, 2004, and incorporated
herein by reference.
|
(6)
|
|
Previously filed with
Registrants Form 10-Q for the three months ended October 31, 2004,
and incorporated herein by reference.
|
(7)
|
|
Previously filed with
Registrants Form 10-Q for the three months ended January 31, 2003,
and incorporated herein by reference.
|
(8)
|
|
Previously filed with
Registrants Form 8-K filed August 11, 2006, and incorporated
herein by reference.
|
(9)
|
|
Previously filed with
Registrants Form 8-K filed February 3, 2006, and incorporated
herein by reference.
|
(10)
|
|
Previously filed with
Registrants Form 8-K filed September 6, 2006, and incorporated
herein by reference.
|
(11)
|
|
Previously filed with
Registrants Form 8-K filed September 18, 2006, and incorporated
herein by reference.
|
(12)
|
|
Previously filed with
Registrants Form 10-Q for the three months ended January 27, 2007,
and incorporated herein by reference.
|
(13)
|
|
Previously filed with
Registrants Form 8-K filed March 12, 2007, and incorporated herein
by reference.
|
(14)
|
|
Previously filed with
Registrants Form 8-K filed April 6, 2007, and incorporated herein
by reference.
|
(15)
|
|
Previously filed with
Registrants Form 8-K filed September 19, 2007, and incorporated
herein by reference.
|
(16)
|
|
Previously filed with
Registrants Form 8-K filed November 2, 2007, and incorporated
herein by reference.
|
(17)
|
|
Previously filed with
Registrants Form 10-K filed July 17, 2008, and incorporated herein
by reference.
|
(18)
|
|
Previously filed with
Registrants Form 10-K filed July 2, 2009, and incorporated herein
by reference.
|
*
Management Compensatory Plan
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