Methode Electronics, Inc. (NYSE: MEI), a global designer and
manufacturer of electro-mechanical devices, today announced
operating results for the fiscal 2010 first quarter ended August 1,
2009.
First-Quarter Fiscal 2010
Methode's first-quarter fiscal 2010 net sales decreased $44.7
million, or 33.2 percent, to $89.8 million from $134.5 million in
the first quarter of fiscal 2009. Net income decreased $6.8 million
to breakeven, or $0.00 per share, in the first quarter of fiscal
2010 compared to income of $6.8 million, or $0.18 per share, in the
same period of fiscal 2009.
In January 2008, Methode announced a restructuring of its
U.S.-based automotive operations and the decision to discontinue
producing certain legacy products in the Interconnect segment. In
March 2009, Methode announced several additional restructuring
actions to further reduce its exposure to the North American
automotive industry, and to reduce costs by consolidating
facilities and migrating manufacturing to lower cost regions.
Methode recorded restructuring charges during the fiscal 2010 first
quarter of $3.6 million, before and after-tax, or $0.10 per share,
and during the fiscal 2009 first quarter of $4.9 million ($3.3
million after-tax), or $0.09 per share. The Company expects to
complete these restructuring activities during the second half of
fiscal 2010 and estimates that it will record additional pre-tax
charges in fiscal 2010 of between $2.8 million and $4.9
million.
The decrease in net income in the fiscal 2010 first quarter is
due to lower sales attributable to the continuing softness of the
global economic environment, especially the effect on the North
American automotive market, as well as the planned exit of Chrysler
and Ford North American business, partially offset by lower cost of
products sold, restructuring charges, and selling and
administrative expenses. Excluding restructuring charges, Methode's
net income was $3.5 million, or $0.10 per share, in the first
quarter of fiscal 2010 compared to net income of $10.1 million, or
$0.27 per share, in the same period of fiscal 2009.
Consolidated cost of products sold decreased $34.5 million, or
32.7 percent, to $70.9 million in the fiscal 2010 first quarter,
compared to $105.4 million in the same period of fiscal 2009. The
decrease is due to lower sales volumes and the benefit of the
Company's restructuring efforts to reduce costs. Cost of products
sold as a percentage of sales was 79.0 percent and 78.4 percent in
the first quarters of fiscal 2010 and 2009, respectively, as the
result of lower sales volumes and segment sales mix in the first
quarter of fiscal 2010 compared to the same quarter of fiscal
2009.
Consolidated gross margins as a percentage of sales increased to
22.6 percent in the fiscal 2010 first quarter from 22.2 percent in
the comparable period of fiscal 2009 despite a 33.2 percent drop in
sales, largely due to the restructuring actions previously taken to
reduce the cost structure to an appropriate level as a result of
the sustained change in the global economic environment.
In the Automotive segment, gross margins as a percentage of
sales increased to 22.5 percent in the fiscal 2010 first quarter
from 20.9 percent in the comparable period of fiscal 2009 despite a
39.6 percent drop in sales from period to period. Additionally, the
Power Products segment gross margins improved to 21.0 percent in
the first quarter of fiscal 2010 from 19.2 percent in the first
quarter of fiscal 2009 notwithstanding a 6.7 percent decrease in
sales. Gross margins as a percentage of sales in the Interconnect
segment decreased to 25.1 percent from 25.6 percent in the first
quarter of fiscal 2010 from the same period of fiscal 2009, as net
sales fell 30.6 percent.
Selling and administrative expenses decreased $0.5 million, or
3.0 percent, to $15.9 million in the fiscal 2010 first quarter, as
compared to $16.4 million in the prior-year period. The decrease
relates to lower intangible asset amortization expense and lower
stock award amortization expense during the first quarter of fiscal
2010, partially offset by selling and administrative expenses from
Hetronic, which was acquired in September 2008. Due to the
significant drop in sales experienced during the quarter, selling
and administrative expenses as a percentage of sales increased to
17.7 percent in the first quarter of fiscal 2010, compared to 12.2
percent in the same period of fiscal 2009.
The effective income tax rate was an expense of 109.6 percent in
the first quarter of fiscal 2010 compared to 21.6 percent in the
same period of fiscal 2009. The higher effective tax rate in the
fiscal 2010 first quarter was due to the restructuring charges and
the slowing of business, causing a loss before income tax for the
Company's U.S.-based businesses. Normally, a tax benefit is
recorded relating to the net loss before income taxes, but due to
the uncertainty of the future utilization of the tax benefit by the
Company's U.S.-based businesses, a valuation allowance was recorded
offsetting the tax benefit. Additionally, the tax rates for the
first quarters of fiscal 2010 and fiscal 2009 reflect utilization
of foreign investment tax credits and the effect of lower tax rates
on income of the Company's foreign earnings and a higher percentage
of earnings at those foreign operations.
Delphi Litigation
Delphi Automotive Systems ("Delphi") recently notified the
Company that it is terminating its supply arrangement with the
Company effective September 10, 2009. The Company is contesting
Delphi's right to prematurely terminate this long-term supply
arrangement, and the parties are engaged in litigation regarding
this supply arrangement and the Company's intellectual
property.
Management Comments
President and Chief Executive Officer Donald W. Duda said,
"Methode achieved improved results in the first quarter of fiscal
2010 compared to the third and fourth quarters of fiscal 2009.
Although we experienced a decline in first-quarter sales of 33
percent, consolidated gross margins as a percentage of sales were
consistent with the first quarter of fiscal 2009. Disciplined cost
control through the restructuring programs announced in January
2008 and March 2009 combined with diversification in our sales mix
drove break-even net income in spite of the sales decline.
"Prudent expense management and repositioning of our global cost
structure has lowered our break-even point, and therefore, reduced
the impact of sharply lower sales on our bottom-line, driving each
of our primary segments to profitability in the first quarter of
fiscal 2010."
Mr. Duda continued, "Despite continued soft markets, which we
foresee throughout Fiscal 2010, we are continuing our efforts to
stimulate near-term sales and position Methode for improved profits
through persistent research and development investment and
leveraging of our core technologies."
Mr. Duda concluded, "Our balance sheet remains strong, and we
have excellent liquidity. We generated $7.7 million of operating
cash flow during the quarter and ended the quarter with $57 million
in cash, a $3 million increase since the end of fiscal 2009. This
underscores our focus on effective working capital management and
has allowed us to continue to strengthen our balance sheet and
expand our financial flexibility for future growth
initiatives."
Conference Call
The Company will conduct a conference call and Webcast to review
financial and operational highlights led by its President and Chief
Executive Officer, Donald W. Duda, and Chief Financial Officer,
Douglas A. Koman, at 10:00 a.m. Central time today. To participate
in the conference call, please dial (877) 407-8031 (domestic) or
(201) 689-8031 (international) at least five minutes prior to the
start of the event. A simultaneous Webcast can be accessed through
the Company's Web site, www.methode.com, by selecting the Investor
Relations page and then clicking on the "Webcast" icon. A replay of
the conference call, as well as an MP3 download, will be available
shortly after the call through September 10 by dialing (877)
660-6853 (domestic) or (201) 612-7415 and providing pass code
331560. On the Internet, a replay will be available for seven days
through the Company's Web site, www.methode.com, by selecting the
Investor Relations page and then clicking on the "Webcast"
icon.
About Methode Electronics, Inc.
Methode Electronics, Inc. (NYSE: MEI) is a global designer and
manufacturer of electro-mechanical devices with manufacturing,
design and testing facilities in the United States, Malta, Mexico,
the United Kingdom, Germany, the Czech Republic, China, Singapore,
the Philippines and India. We design, manufacture and market
devices employing electrical, electronic, wireless, radio remote
control, sensing and optical technologies to control and convey
signals through sensors, interconnections and controls. Our
business is managed on a segment basis, with those segments being
Automotive, Interconnect, Power Products and Other. Our components
are in the primary end markets of the automobile, computer,
information processing and networking equipment, voice and data
communication systems, consumer electronics, appliances, aerospace
vehicles and industrial equipment industries. Further information
can be found on Methode's Web site www.methode.com.
Forward-Looking Statements
This press release contains certain forward-looking statements,
which reflect management's expectations regarding future events and
operating performance and speak only as of the date hereof. These
forward-looking statements are subject to the safe harbor
protection provided under the securities laws. Methode undertakes
no duty to update any forward-looking statement to conform the
statement to actual results or changes in Methode's expectations on
a quarterly basis or otherwise. The forward-looking statements in
this press release involve a number of risks and uncertainties. The
factors that could cause actual results to differ materially from
our expectations are detailed in Methode's filings with the
Securities and Exchange Commission, such as our annual and
quarterly reports. Such factors may include, without limitation,
the following: (1) dependence on a small number of large customers,
including two large automotive customers; (2) dependence on the
automotive, appliance, computer and communications industries; (3)
seasonal and cyclical nature of some of our businesses; (4) ability
to protect our intellectual property; (5) customary risks related
to conducting global operations; (6) ability to successfully
benefit from acquisitions; (7) ability to keep pace with rapid
technological changes; (8) ability to avoid design or manufacturing
defects; (9) dependence on the availability and price of raw
materials; (10) oil prices could affect our automotive customers
future results; (11) incurrence of additional restructuring
charges, goodwill and other asset impairments.
Methode Electronics, Inc.
Financial Highlights
(In thousands, except per share data, unaudited)
Three Months Ended
August 1, August 2,
2009 2008
--------- ---------
Net sales $ 89,776 $ 134,514
Other income 1,387 733
Cost of products sold 70,909 105,430
Restructuring 3,611 4,917
Selling and administrative expenses 15,874 16,398
Income from operations 769 8,502
Interest income/(expense), net (102) 534
Other expense, net (394) (269)
Income before income taxes 273 8,767
Income tax expense 286 1,897
Net income/(loss) (13) 6,870
Less: Net income attributable to non-controlling
interest (6) (54)
Net income/(loss) attributable to Methode
Electronics, Inc. (19) 6,816
Basic earnings per common share $ - $ 0.18
Diluted earnings per common share $ - $ 0.18
Average Number of Common Shares Outstanding:
Basic 36,638 37,198
Diluted 36,638 37,644
Methode Electronics, Inc.
Summary Balance Sheet
(In thousands)
August 1, May 2,
2009 2009
----------- -----------
(unaudited)
Cash $ 57,052 $ 54,030
Accounts receivable - net 54,840 60,406
Inventories 42,223 40,426
Other current assets 27,220 26,384
----------- -----------
Total Current Assets 181,335 181,246
Property, plant and equipment - net 69,691 69,917
Goodwill 11,771 11,771
Intangible assets - net 20,024 20,501
Other assets 22,544 21,853
----------- -----------
Total Assets $ 305,365 $ 305,288
=========== ===========
Accounts payable $ 25,099 $ 24,495
Other current liabilities 26,054 29,023
----------- -----------
Total Current Liabilities 51,153 53,518
Other liabilities 16,298 16,869
Total Methode Electronics, Inc. shareholders'
equity 234,450 231,776
----------- -----------
Non-controlling interest 3,464 3,125
Total shareholders' equity 237,914 234,901
----------- -----------
Total Liabilities and Shareholders' Equity $ 305,365 $ 305,288
=========== ===========
Methode Electronics, Inc.
Summary Statement of Cash Flow (Unaudited)
(In thousands)
Three Months Ended
August 1, August 2,
2009 2008
--------- ---------
Operating Activities:
Net income/(loss) $ (13) $ 6,870
Provision for depreciation 5,038 5,942
Impairment of tangible assets 710 -
Amortization of intangible assets 565 1,372
Amortization of stock awards and stock options 299 792
Changes in operating assets and liabilities 1,070 (3,722)
Other 19 88
--------- ---------
Net Cash Provided by Operating Activities 7,688 11,342
Investing Activities:
Purchases of property, plant and equipment (3,266) (3,340)
Acquisitions of businesses and technology (87) (156)
Other - 63
--------- ---------
Net Cash Used in Investing Activities (3,353) (3,433)
Financing Activities:
Proceeds from exercise of stock options - 103
Tax benefit from stock options and awards - 46
Dividends (2,616) (1,895)
--------- ---------
Net Cash Used in Financing Activities (2,616) (1,746)
Effect of foreign exchange rate changes on cash 1,303 609
--------- ---------
Increase in Cash and Cash Equivalents 3,022 6,772
Cash and Cash Equivalents at Beginning of Period 54,030 104,716
--------- ---------
Cash and Cash Equivalents at End of Period $ 57,052 $ 111,488
========= =========
For Methode Electronics, Inc. - Investor Contacts: Philip Kranz
Dresner Corporate Services 312-780-7240 pkranz@dresnerco.com
Kristine Walczak Dresner Corporate Services 312-780-7205
kwalczak@dresnerco.com
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