Methode Electronics, Inc. (NYSE: MEI), a global developer of custom
engineered and application specific products and solutions, today
announced operating results for the Fiscal 2010 fourth quarter and
year ended May 1, 2010.
Fourth-Quarter Fiscal 2010
Methode's fourth-quarter Fiscal 2010 net sales increased $6.7
million, or 7.5 percent, to $95.7 million from $89.0 million in the
fourth quarter of Fiscal 2009. Net income increased $108.7 million
to $16.1 million, or $0.44 per share, in the fourth quarter of
Fiscal 2010 compared to a loss of $92.6 million, or $2.50 per
share, in the same period of Fiscal 2009. Improved sales and lower
overall manufacturing costs due to the Company's restructuring
efforts in prior periods contributed to higher net income in the
Fiscal 2010 fourth quarter compared to the same period last
year.
Fiscal 2010 fourth-quarter net income also benefitted from:
- No goodwill and other asset write-off expenses in the Fiscal
2010 period compared with $61.7 million in write-offs in the Fiscal
2009 period.
- Lower restructuring expenses of $0.5 million in the Fiscal 2010
period compared with $10.3 million in the Fiscal 2009 period.
- A favorable tax benefit of $8.8 million in the Fiscal 2010
period compared to income tax expense of $14.0 million in the
Fiscal 2009 period.
- Favorable changes in reserve estimates of approximately $3.0
million, the majority affecting cost of products sold, which have
been calculated in a consistent manner each reporting period, and
were reduced due to business growth, effective inventory
management, favorable fringe benefit and product assurance
experience.
As mentioned above, Methode recorded restructuring charges
during the Fiscal 2010 fourth quarter of $0.5 million, or $0.01 per
share, and during the Fiscal 2009 fourth quarter of $10.3 million,
or $0.41 per share. The Company completed its restructuring
activities during the Fiscal 2010 fourth quarter.
Excluding restructuring charges in both periods and the goodwill
and other assets charge in the fourth quarter of Fiscal 2009,
Methode's net income was $16.4 million, or $0.45 per share, in the
fourth quarter of Fiscal 2010 compared to a net loss of $4.7
million, or $0.10 per share, in the same period of Fiscal 2009.
Consolidated gross margins (including other income) as a
percentage of sales increased to 23.5 percent in the Fiscal 2010
fourth quarter from 8.1 percent in the comparable period of Fiscal
2009 due to increased sales and the restructuring actions
previously taken to reduce the Company's cost structure, as well as
a change in the estimate of reserves.
Selling and administrative expenses increased $1.6 million, or
12.2 percent, to $14.7 million in the Fiscal 2010 fourth quarter
compared to $13.1 million in the prior-year period. The increase is
due to $1.5 million in legal fees related to the Delphi supply
agreement and patent dispute and to $0.1 million attributable to
stock-based compensation in the fourth quarter of Fiscal 2010
compared with a net reversal of expense of $1.2 million in the
fourth quarter of Fiscal 2009. Higher selling and administrative
expense in the Fiscal 2010 fourth quarter was partially offset by
reductions attributable to the Company's restructuring and
consolidation efforts in prior periods. Selling and administrative
expenses as a percentage of sales increased to 15.4 percent in the
fourth quarter of Fiscal 2010, compared to 14.7 percent in the same
period of Fiscal 2009.
In the fourth quarter of Fiscal 2010, income taxes -
expense/(benefit) decreased $22.8 million to a benefit of $8.8
million compared to an expense of $14.0 million in the fourth
quarter of Fiscal 2009. The $8.8 million benefit for Fiscal 2010
primarily relates to the ability to carry back current year
U.S.-based losses and deductions. In the fourth quarter of Fiscal
2009, the Company recorded a $28.0 million valuation allowance due
to the uncertainty of the future utilization of the tax benefits
primarily generated by the impairment of intangible assets and
restructuring charges. The effective tax rates for Fiscal 2010 and
2009 reflect utilization of foreign investment tax credits and the
effect of lower tax rates on income of the Company's foreign
operations and a higher percentage of earnings at those foreign
operations.
Comparing the fourth quarter of Fiscal 2010 to the same period
of Fiscal 2009, Automotive segment
- Net sales improved 1.3 percent attributable to stronger sales
in the Company's European and Asian markets, partially offset by
lower sales attributable to the planned exit of legacy automotive
products, and no sales to Delphi compared to $7.9 million of sales
to Delphi.
- Gross margins (including other income) as a percentage of sales
increased to 18.9 percent from 10.0 percent.
- Fourth-quarter Fiscal 2010 income/(loss) before income taxes
increased to $4.7 million from a loss of $37.8 million.
Comparing the fourth quarter of Fiscal 2010 to the same period
of Fiscal 2009, Interconnect segment
- Net sales increased 17.9 percent attributable to solid growth
at TouchSensor and Hetronic.
- Gross margins (including other income) as a percentage of sales
increased to 35.4 percent from 21.5 percent.
- Fourth-quarter Fiscal 2010 income/(loss) before income taxes
increased to $5.1 million from a loss of $32.1 million.
Comparing the fourth quarter of Fiscal 2010 to the same period
of Fiscal 2009, Power Products segment
- Net sales improved 3.0 percent.
- Gross margins (including other income) as a percentage of sales
increased to 33.0 percent from 1.0 percent.
- Fourth-quarter Fiscal 2010 income/(loss) before income taxes
increased to $1.1 million from a loss of $1.6 million.
Fiscal Year 2010 Results
For the Fiscal year ended May 1, 2010, net sales decreased $52.5
million, or 12.3 percent, to $373.1 million from $425.6 million for
the year ended May 2, 2009. Net income/(loss) improved $126.2
million to income of $13.7 million, or $0.37 per share, in the
Fiscal 2010 period compared to a loss of $112.5 million, or $3.05
per share, in the Fiscal 2009 period.
Net income in Fiscal 2010 improved compared to Fiscal 2009 due
in part to no goodwill and other asset write-off expenses in Fiscal
2010 compared with $94.4 million in write-offs for Fiscal 2009 and
a favorable tax benefit of $6.0 million in Fiscal 2010 compared to
income tax expense of $1.7 million in Fiscal 2009. Fiscal 2010 net
income was also favorably impacted by lower restructuring charges,
amortization expense and other expense in Fiscal 2010 compared to
Fiscal 2009, as well as lower overall manufacturing costs due to
the Company's restructuring efforts in prior periods, partially
offset by higher selling and administrative expense in Fiscal 2010
compared to Fiscal 2009 due to legal expenses associated with the
Delphi supply agreement and patent dispute.
The Company recorded a restructuring charge during Fiscal 2010
of $7.8 million, or $0.14 per share, compared to $25.3 million, or
$0.68 per share, in Fiscal 2009. All previously announced
restructuring initiatives are now complete. Excluding restructuring
charges in both periods, a $1.7 million reversal of one-time
pricing contingencies included in net sales in the Fiscal 2010
second quarter and impairment of goodwill and other assets charge
of $94.4 million in Fiscal 2009, Methode's net income was $17.8
million, or $0.48 per share, in Fiscal 2010 compared to net income
of $6.3 million, or $0.17 per share, in Fiscal 2009.
Consolidated gross margins (including other income) as a
percentage of sales improved to 21.4 percent in Fiscal 2010 from
17.0 percent in Fiscal 2009 despite the 12.3 percent decline in
sales, largely due to higher other income in Fiscal 2010, as well
as restructuring and consolidation efforts that were undertaken in
prior periods to reduce the Company's cost structure.
Selling and administrative expenses increased $5.2 million, or
9.1 percent, to $62.4 million in Fiscal 2010 from $57.2 million in
Fiscal 2009. The increase is due to $5.8 million in legal fees
related to the Delphi supply agreement and patent dispute, and to
$0.9 million attributable to stock-based compensation in Fiscal
2010 compared with a net reversal of expense of $0.6 million in
Fiscal 2009. The increase in selling and administrative expense in
Fiscal 2010 was partially offset by a reduction of $2.0 million
attributable to the Company's restructuring and consolidation
efforts in prior periods. Selling and administrative expenses as a
percentage of net sales increased to 16.7 percent in Fiscal 2010
from 13.4 percent in Fiscal 2009.
Amortization of intangibles decreased $4.6 million, or 66.7
percent, to $2.3 million for Fiscal 2010, compared to $6.9 million
for Fiscal 2009 due to the impairment of certain intangible assets
in Fiscal 2009.
Income taxes - expense/(benefit) decreased $7.7 million to a
benefit of $6.0 million in Fiscal 2010 compared to an expense of
$1.7 million in Fiscal 2009. The $6.0 million benefit for Fiscal
2010 includes taxes booked on foreign profits of $0.5 million, book
to income tax return adjustments of $2.9 million and other
adjustments of $1.7 million. In addition, a benefit of $3.2 million
was recorded due to the settlement of uncertain tax positions and
related interest from prior periods. For Fiscal 2010, there is a
loss before income taxes in the Company's U.S.-based businesses.
Therefore, a tax carry-back benefit of $7.9 million was recorded in
Fiscal 2010. The effective tax rates for Fiscal 2010 and 2009
reflect utilization of foreign investment tax credits and the
effect of lower tax rates on income of the Company's foreign
operations and a higher percentage of earnings at those foreign
operations.
Comparing Fiscal 2010 to Fiscal 2009, Automotive segment
- Net sales decreased 18.2 percent, negatively impacted by lower
sales to Delphi of 65.8 percent, planned lower legacy automotive
products sales of $13.8 million, or 93.2 percent, and the softening
of the global economic environment.
- Gross margins (including other income) as a percentage of sales
improved to 18.3 percent from 16.5 percent largely attributable to
restructuring and consolidation efforts in previous periods
partially offset by inefficiencies caused by extended automotive
customer plant shut downs. Gross margins (including other income)
as a percentage of sales also benefitted from $1.7 million relating
to a one-time reversal of pricing contingencies.
- Fiscal 2010 income/(loss) before income taxes increased to
$11.2 million from a loss of $24.0 million.
Comparing Fiscal 2010 to Fiscal 2009, Interconnect segment
- Net sales decreased 5.3 percent due to sales declines in North
America and Asia primarily due to the restructuring of the
Interconnect segment's legacy businesses during the first quarter
of Fiscal 2010, but favorably impacted by the Hetronic acquisition
in September 2008.
- Gross margins (including other income) as a percentage of sales
increased to 28.7 percent from 24.0 percent also due mainly to
restructuring and consolidation efforts in previous periods.
- Fiscal 2010 income/(loss) before income taxes increased to
$10.3 million from a loss of $60.7 million.
Comparing Fiscal 2010 to Fiscal 2009, Power Products segment
- Net sales decreased 5.4 percent, driven mainly by lower demand
for flexible cabling and heat sink products in the U.S.
- Gross margins (including other income) as a percentage of sales
increased to 26.0 percent from 12.9 percent also attributable
mainly to restructuring and consolidation efforts in previous
periods.
- Fiscal 2010 income/(loss) before income taxes increased to $3.4
million from a loss of $5.7 million.
Management Comments
President and Chief Executive Officer Donald W. Duda said, "In
Fiscal 2010, Methode returned to profitability. We finished the
year with a strong fourth quarter, in which consolidated sales
improved about 7 percent both year over year and sequentially,
notwithstanding lower sales attributable to the planned exit of
legacy automotive products and the loss of sales to Delphi.
Additionally, consolidated gross margin as a percentage of sales
increased during the fourth quarter on both a year over year and
sequential basis over third quarter, even when excluding the
favorable changes in reserve estimates of $3.0 million in the
fourth quarter.
"While we are encouraged by our fourth-quarter results and
pleased that our restructuring efforts have produced improved
results, we remain cautious about our business outlook for the next
few quarters for three reasons. First, the Fiscal fourth quarter is
historically a strong quarter. Second, July, which will be included
in our first-quarter Fiscal 2011 results, is typically our slowest
month in the Automotive segment. And third, the global economic
recovery remains tenuous, especially in light of the current debt
crisis in Europe, its effect on the Euro and possible impact on
global economic growth."
Mr. Duda concluded, "During Fiscal 2010 we continued to
strategically position the Company by strengthening our technology
toolbox through investments and licenses with Lumidigm for
biometric sensing, and in the alternative energy market through
Eetrex. With a solid balance sheet and cash position, global
engineering, manufacturing and sales infrastructure, as well as
value-added solutions that help our customers win in their markets,
I believe Methode is well positioned for increased shareholder
value through long-term growth in revenue and margins."
Conference Call
The Company will conduct a conference call and Webcast to review
financial and operational highlights led by its President and Chief
Executive Officer, Donald W. Duda, and Chief Financial Officer,
Douglas A. Koman, at 10:00 a.m. Central time today. To participate
in the conference call, please dial (877) 407-8031 (domestic) or
(201) 689-8031 (international) at least five minutes prior to the
start of the event. A simultaneous Webcast can be accessed through
the Company's Web site, www.methode.com, by selecting the Investor
Relations page, and then clicking on the "Webcast" icon. A replay
of the conference call, as well as an MP3 download, will be
available shortly after the call through July 14 by dialing (877)
660-6853 (domestic) or (201) 612-7415 (international) and providing
Account number 286 and Conference ID number 352430. On the
Internet, a replay will be available for 30 days through the
Company's Web site, www.methode.com, by selecting the Investor
Relations page and then clicking on the "Webcast" icon.
About Methode Electronics, Inc.
Methode Electronics, Inc. (NYSE: MEI) is a global developer of
custom engineered and application specific products and solutions
with manufacturing, design and testing facilities in China, the
Czech Republic, Germany, India, Lebanon, Malta, Mexico, the
Philippines, Singapore, the United Kingdom and the United States.
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;
(2) dependence on the automotive, appliance, computer and
communications industries and the consumer and industrial equipment
markets; (3) seasonal and cyclical nature of some of our
businesses, including further downturns in the automotive industry;
(4) ability to compete effectively in our technology-based
businesses and the markets in which we operate; (5) customary risks
related to conducting international operations; (6) ability to keep
pace with rapid technological changes; (7) ability to avoid design
or manufacturing defects; (8) ability to protect our intellectual
property or if we infringe, or are alleged to infringe, on another
person's intellectual property; (9) dependence on the availability
and price of raw materials; (10) affect of acquisition or
divestiture of various business operations on our business,
financial condition and operating results; (11) significant
fluctuation between the U.S. dollar and other currencies; (12)
unfavorable tax legislation; (13) the future trading price of our
common stock could be subject to wide price fluctuations; and (14)
risks of owning real property.
Methode Electronics, Inc.
Financial Highlights
(In thousands, except per share data, unaudited)
Three Months Ended
May 1, May 2,
2010 2009
--------- ---------
Net sales $ 95,738 $ 89,045
Other income 935 759
Cost of products sold 74,094 82,739
Restructuring 443 10,281
Impairment of goodwill and intangible assets - 61,696
Selling and administrative expenses 14,758 12,913
Amortization of intangibles 608 1,524
Income/(loss) from operations 6,770 (79,349)
Interest income, net 30 167
Other income, net 503 746
Income/(loss) before income taxes 7,303 (78,436)
Income tax expense/(benefit) (8,724) 13,994
Net income/(loss) 16,027 (92,430)
Less: Net income/(loss) attributable to
noncontrolling interest (69) 122
Net income/(loss) attributable to Methode
Electronics, Inc. 16,096 (92,552)
Basic and diluted income/(loss) per common share $ 0.44 ($ 2.50)
Basic and diluted 37,003 36,598
Fiscal Year Ended
May 1, May 2,
2010 2009
--------- ---------
Net sales $ 373,136 $ 425,644
Other income 4,510 3,202
Cost of products sold 297,711 356,496
Restructuring 7,770 25,278
Impairment of goodwill and intangible assets - 94,374
Selling and administrative expenses 62,427 57,128
Amortization of intangibles 2,297 6,933
Income/(loss) from operations 7,441 (111,363)
Interest income/(expense), net (139) 1,382
Other income/(expense), net 515 (479)
Income/(loss) before income taxes 7,817 (110,460)
Income tax expense/(benefit) (5,964) 1,680
Net income/(loss) 13,781 (112,140)
Less: Net income attributable to noncontrolling
interest 126 343
Net income/(loss) attributable to Methode
Electronics, Inc. 13,655 (112,483)
Basic and diluted loss per common share $ 0.37 ($ 3.05)
Basic and diluted 36,932 36,879
Methode Electronics, Inc.
Summary Balance Sheet
(In thousands)
May 1, May 2,
2010 2009
----------- -----------
(unaudited)
Cash $ 63,821 $ 54,030
Accounts receivable - net 68,649 60,406
Inventories 29,760 37,244
Other current assets 22,366 26,384
----------- -----------
Total Current Assets 184,596 178,064
Property, plant and equipment - net 61,876 69,917
Goodwill 12,096 11,771
Intangible assets - net 18,811 20,501
Other assets 33,444 25,035
----------- -----------
Total Assets $ 310,823 $ 305,288
=========== ===========
Accounts payable $ 29,743 $ 24,495
Other current liabilities 29,002 29,023
----------- -----------
Total Current Liabilities 58,745 53,518
Other liabilities 12,136 16,869
----------- -----------
Total Methode Electronics, Inc. shareholders'
equity 236,754 231,776
Noncontrolling interest 3,188 3,125
----------- -----------
Total shareholders' equity 239,942 234,901
----------- -----------
Total Liabilities and Shareholders' Equity $ 310,823 $ 305,288
=========== ===========
Methode Electronics, Inc.
Summary Statement of Cash Flows
(In thousands)
Fiscal Year Ended
May 1, May 2,
2010 2009
---------- ----------
Operating Activities:
Net income/(loss) $ 13,781 $ (112,140)
Provision for depreciation 17,112 30,103
Impairment of tangible assets 710 10,313
Impairment of goodwill and intangible assets - 94,374
Amortization of intangible assets 2,297 6,933
Amortization of stock awards and stock options 871 (553)
Changes in operating assets and liabilities (11,539) 6,347
Other 4,134 7,791
---------- ----------
Net Cash Provided by Operating Activities 27,366 43,168
Investing Activities:
Purchases of property, plant and equipment (9,379) (17,064)
Acquisitions of businesses (325) (57,469)
Acquisitions of businesses and technology (530) (1,575)
Proceeds from life insurance policies 2,464 -
Other - (14)
---------- ----------
Net Cash Used in Investing Activities (7,770) (76,122)
Financing Activities:
Repurchase of common stock - (5,252)
Proceeds from exercise of stock options 185 113
Tax benefit from stock options and awards (31) (209)
Dividends (10,414) (9,778)
---------- ----------
Net Cash Used in Financing Activities (10,260) (15,126)
Effect of foreign exchange rate changes on cash 455 (2,195)
---------- ----------
Increase/(Decrease) in Cash and Cash Equivalents 9,791 (50,275)
Cash and Cash Equivalents at Beginning of Period 54,030 104,305
---------- ----------
Cash and Cash Equivalents at End of Period $ 63,821 $ 54,030
========== ==========
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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