Methode Electronics, Inc. (NYSE: MEI), a global
developer of custom engineered and application specific products
and solutions, today announced financial results for the fourth
quarter and full year of Fiscal 2020 ended May 2, 2020.
The COVID-19 PandemicThe COVID-19 global
pandemic negatively impacted our automotive and commercial vehicle
businesses as many of our customers suspended their manufacturing
operations. As a result, our net sales and production levels
declined significantly in the fiscal fourth quarter. The extent of
the impact of the COVID-19 pandemic on our business, financial
results and liquidity will depend largely on future developments,
including the impact on our automotive and commercial vehicle
customers. We currently expect the COVID-19 pandemic to adversely
impact our results for the first quarter of fiscal 2021 and the
full fiscal year. In response to the COVID-19 pandemic and
related business disruptions, we implemented measures to manage
costs, preserve liquidity and enhance employee safety. These
measures include temporary salary reductions, the reduction of
capital expenditures, the draw-down of $100.0 million under our
revolving credit facility as a precautionary measure, enhanced
cleaning and disinfection procedures at our facilities and the
promotion of social distancing and working from home.
Fourth Quarter Fiscal 2020Methode's net sales
decreased $55.4 million, or 20.8 percent, to $210.6 million from
$266.0 million in the same quarter of Fiscal 2019. The decrease in
net sales was largely due to lower volume in the Automotive and
Industrial segments as a result of the COVID-19 pandemic reducing
demand and shutting down automotive and commercial vehicle
production. These production shutdowns, most of which continued
through the end of the fiscal fourth quarter, had a negative impact
of approximately $85 million on net sales. Year over year, currency
rate fluctuations decreased net sales $3.5 million.
GAAP net income increased $7.5 million to $30.1 million, or
$0.79 per diluted share, from $22.6 million, or $0.60 per diluted
share, in the same quarter of Fiscal 2019. Other income increased
$5.5 million to $5.9 million, from $0.4 million in the same quarter
of Fiscal 2019, primarily due to higher international government
grants (inclusive of international COVID-19 assistance). Adjusted
net income, a non-GAAP financial measure, was $25.4 million, or
$0.67 per diluted share, compared to $23.5 million, or $0.62 per
diluted share, in the same quarter of Fiscal 2019. Adjusted net
income excluded expenses for initiatives to reduce overall costs
and improve operational profitability, acquisition-related costs,
and long-term incentive plan accrual adjustments in the applicable
periods.
GAAP income from operations in the fourth quarter of Fiscal 2020
was $36.3 million, an increase of $3.3 million from $33.0 million
in the same quarter of Fiscal 2019. The increase was mainly due to
lower S&A expense partially offset by lower gross profit on
lower sales. Non-GAAP income from operations in the fourth quarter
of Fiscal 2020 was $30.1 million, a decrease of $4.0 million from
$34.1 million in the same quarter of Fiscal 2019. Non-GAAP income
from operations excluded expenses for initiatives to reduce overall
costs and improve operational profitability, acquisition-related
costs, and long-term incentive plan accrual adjustments in the
applicable periods.
Year over year, GAAP income from operations benefitted from:
- an $11.7 million benefit from initiatives taken in Fiscal 2019
and Fiscal 2020 to reduce overall costs and improve operational
profitability;
- lower stock award amortization expense of $7.6 million due to a
$6.5 million reversal;
- lower performance-based cash compensation of $2.3 million;
and
- lower expenses of $0.7 million for initiatives to reduce
overall costs and improve operational profitability.
Year over year, GAAP income from operations was negatively
affected by:
- lower Automotive and Industrial segment sales due to the
COVID-19 pandemic reducing demand for and shutting down production
of automotive and commercial vehicles, partially offset by
increased sales from new product launches and other organic growth
for a net impact of $17.9 million; and
- the impact of foreign currency translation of $1.1
million.
Consolidated gross margin as a percentage of sales increased to
28.1 percent compared to 26.5 percent in the Fiscal 2019 fourth
quarter, favorably impacted by sales mix in the Automotive and
Industrial segments, increased sales in the Interface segment and
the weakening Mexican peso compared to the U.S. dollar, partially
offset by lower sales volumes in the Automotive and Industrial
segments.
Selling and administrative expenses as a percentage of sales
decreased to 8.6 percent compared to 12.3 percent in the Fiscal
2019 fourth quarter attributable to long-term incentive accrual
adjustments, lower performance-based cash compensation expenses,
and lower salaries resulting from COVID-19 cost saving actions.
Adjusted selling and administrative expenses as a percentage of
sales, a non-GAAP financial measure, decreased slightly to 11.6
percent from 12.0 percent in the Fiscal 2019 fourth quarter and
excluded acquisition-related costs, expenses for initiatives to
reduce overall costs and improve operational profitability, and
long-term incentive plan accrual adjustments in the applicable
periods.
Year over year, intangible asset amortization expense decreased
$0.3 million, or 6.0 percent, to $4.7 million, due to lower
amortization expense in the Interface segment.
Income tax expense increased $2.5 million to $10.0 million
compared to $7.5 million in the Fiscal 2019 fourth quarter
primarily due to an increase in pre-tax income, partially offset by
a net increase in investment tax credits. The Company’s effective
tax rate of 24.9 percent was unchanged from the same quarter of
Fiscal 2019.
EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization of Intangibles), a non-GAAP financial measure, was
$54.5 million compared to $46.1 million in the Fiscal 2019 fourth
quarter. Adjusted EBITDA, a non-GAAP financial measure, excludes
expenses for initiatives to reduce overall costs and improve
operational profitability, acquisition-related costs, and long-term
incentive plan accrual adjustments from EBITDA, improved to $48.3
million from $47.2 million in the Fiscal 2019 fourth quarter.
Free cash flow, a non-GAAP financial measure, includes GAAP net
income, amortization of intangibles, and depreciation less
purchases of property, plant, and equipment. The resulting free
cash flow was $32.2 million, a 43.1 percent increase over the same
quarter of Fiscal 2019.
Segment Comparisons (GAAP)Comparing the
Automotive segment's Fiscal 2020 fourth quarter to the same period
of Fiscal 2019,
- Net sales decreased 26.8 percent, or $49.4 million,
attributable to:
- a 36.3 percent sales decline in North America due to customer
shutdowns as a result of the COVID-19 pandemic; and
- a 11.7 percent sales decrease in Europe mainly as a result of
customer shutdowns due to the COVID-19 pandemic and an unfavorable
currency impact.
- Gross profit margins as a percentage of sales decreased to 23.3
percent from 24.1 percent mainly due to lower sales volume as the
result of the COVID-19 pandemic, partially offset by favorable
sales mix and lower expenses for initiatives to reduce overall
costs and improve operational profitability.
- Income from operations decreased $6.4 million, or 21.6 percent,
resulting from lower gross profit partially offset by lower stock
award amortization expense.
Comparing the Industrial segment's Fiscal 2020 fourth quarter to
the same period of Fiscal 2019,
- Net sales decreased 17.0 percent, or $11.4 million, as a result
of lower Grakon sales of $15.3 million, partially offset by higher
sales of busbar products. Grakon sales were impacted by customer
shutdowns due to the COVID-19 pandemic.
- Gross profit margins as a percentage of sales increased to 39.7
percent from 36.0 percent due to favorable product mix.
- Income from operations decreased $1.7 million, or 10.4 percent,
resulting from lower income from Grakon, partially offset by higher
sales from busbar products.
Comparing the Interface segment's Fiscal 2020 fourth quarter to
the same period of Fiscal 2019,
- Net sales increased 39.4 percent, or $5.4 million, attributable
to the launch of a major appliance program and higher legacy data
solution product volume.
- Gross margins as a percentage of sales improved to 28.8 percent
from 8.8 percent due to the higher sales volume.
- Income from operations increased $5.4 million from a prior
period loss of $0.5 million due to higher sales volume and lower
intangible asset amortization expense.
Comparing the Medical segment's Fiscal 2020 fourth quarter to
the same period of Fiscal 2019,
- Net sales were $0.4 million, unchanged from the prior
period.
- Loss from operations decreased $1.2 million to $1.1 million due
to higher gross profit and lower selling and administrative
expenses.
Fiscal 2020For full year Fiscal 2020 ended May
2, 2020, the company's accounting period included 53 weeks compared
to 52 weeks for Fiscal 2019 ended April 27, 2019. The following
discussions of comparative results should be reviewed in this
context.
Methode's net sales increased $23.6 million, or 2.4 percent, to
$1,023.9 million from $1,000.3 million in Fiscal 2019. Year over
year, foreign currency translation decreased net sales by $13.9
million. Fiscal 2020 net sales were a record for the company.
GAAP net income increased $31.8 million to $123.4 million, or
$3.26 per diluted share, from $91.6 million, or $2.43 per diluted
share, in Fiscal 2019. Fiscal 2020 diluted income per share was a
record for the company. Other income increased $6.6 million to
$11.7 million, from $5.1 million in Fiscal 2019, primarily due to
higher international government grants (inclusive of COVID-19
assistance). Adjusted net income, a non-GAAP financial measure,
increased to $117.8 million, or $3.12 per diluted share, compared
to $111.5 million, or $2.96 per diluted share, in Fiscal 2019.
Adjusted net income excludes expenses for initiatives to reduce
overall costs and improve operational profitability,
acquisition-related costs (including purchase accounting
adjustments), long-term incentive plan accrual adjustments and the
transition tax benefits from U.S. Tax Reform.
GAAP income from operations in Fiscal 2020 was $147.1 million,
an increase of $40.3 million from $106.8 million in Fiscal 2019.
The increase was mainly due to lower S&A expense and higher
gross profit on higher sales. Non-GAAP income from operations in
Fiscal 2020 was $143.7 million, an increase of $7.2 million from
$136.5 million in Fiscal 2019. Non-GAAP income from operations
excluded expenses for initiatives to reduce overall costs and
improve operational profitability, acquisition-related costs
(including purchase accounting adjustments) and long-term incentive
plan accrual adjustments in the applicable periods.
Year over year, Fiscal 2020 GAAP income from operations
benefitted from:
- a full year of Grakon sales, which accounted for $23.6 million
of the increase;
- lower acquisition-related costs of $15.4 million;
- lower stock award amortization expense of $13.7 million due to
a $6.5 million reversal in the fourth quarter of Fiscal 2020;
- a $10.8 million and $4.2 million benefit from initiatives taken
in Fiscal 2019 and Fiscal 2020, respectively, to reduce overall
costs and improve operational profitability; and
- lower expenses of $5.1 million for initiatives to reduce
overall costs and improve operational profitability.
Year over year, Fiscal 2020 GAAP income from operations was
negatively affected by:
- lower Automotive segment sales in the fourth quarter of Fiscal
2020 from the COVID-19 pandemic-related production shutdowns and
the adverse impact from the UAW labor strike at GM for a total
impact of $25.7 million;
- impact of foreign currency translation of $3.8 million, due in
part to the unfavorable impact of the weaker euro and Chinese
renminbi; and
- increased intangible asset amortization expense of $2.9 million
related to the Grakon acquisition, partially offset by lower
amortization in the Interface segment.
Consolidated gross margins as a percentage of sales increased to
27.6 percent from 26.6 percent in Fiscal 2019, favorably impacted
by the acquisition of Grakon and the benefits of initiatives to
reduce overall costs and improve operational profitability,
partially offset by currency translation expense, and lower sales
volume in the Automotive segment due to the UAW labor strike at GM
and the impact from the COVID-19 pandemic.
Adjusted gross margins as a percentage of sales, a non-GAAP
financial measure, increased slightly to 27.7 percent from 27.5
percent in Fiscal 2019 and excluded expenses for initiatives to
reduce overall costs and improve operational profitability and
acquisition-related purchase accounting adjustments in the
applicable periods.
Selling and administrative expenses as a percentage of sales
decreased to 11.4 percent compared to 14.3 percent in Fiscal 2019
due primarily to lower stock award amortization expense, lower
professional fees, and lower salaries resulting from cost saving
actions. The decrease was also driven by benefits from Fiscal 2019
initiatives taken to reduce overall costs and improve operational
profitability.
Adjusted selling and administrative expenses as a percentage of
sales, a non-GAAP financial measure, decreased to 11.8 percent
compared to 12.3 percent in Fiscal 2019 and excluded
acquisition-related costs, expenses for initiatives to reduce
overall costs and improve operational profitability, and long-term
incentive plan accrual adjustments in the applicable periods.
Year over year, intangible asset amortization expense increased
$2.9 million, or 18.0 percent, to $19.0 million, due to the Grakon
acquisition, partially offset by lower amortization in the
Interface segment.
Income tax expense increased $13.3 million to $25.3 million
compared to $12.0 million in Fiscal 2019 primarily due to higher
pre-tax income from the Grakon businesses and an increase in tax
reserves. The Company’s effective tax rate increased to 17.0
percent from 11.6 percent in Fiscal 2019. Fiscal 2019 included tax
benefits related to the finalization of the transition tax from
U.S. Tax Reform and investment tax credits generated from a
non-U.S. location.
EBITDA, a non-GAAP financial measure, was $207.1 million
compared to $155.2 million in Fiscal 2019. Adjusted EBITDA, a
non-GAAP financial measure, excludes expenses for initiatives to
reduce overall costs and improve operational profitability,
acquisition-related costs (including purchase accounting
adjustments) and long-term incentive plan accrual adjustments from
EBITDA, improved to $203.7 million from $184.9 million in Fiscal
2019.
Free cash flow, a non-GAAP financial measure, includes GAAP net
income, amortization of intangibles, and depreciation less
purchases of property, plant, and equipment. The resulting free
cash flow was $126.6 million, a 48.8 percent increase over Fiscal
2019.
Segment Comparisons (GAAP)Comparing the
Automotive segment's Fiscal 2020 to Fiscal 2019,
- Net sales decreased 3.1 percent, or $22.6 million, attributable
to:
- a 5.5 percent sales decrease in North America primarily due to
the UAW labor strike at GM and the COVID-19 pandemic-related
production shutdowns, partially offset by higher sales from an
additional four and a half months of volume at Grakon;
- a 4.9 percent sales decrease in Asia mainly due to lower sensor
and transmission lead-frame assembly sales, an unfavorable currency
impact, and the adverse impact of the COVID-19 pandemic; and
partially offset by
- a 3.3 percent sales increase in Europe mainly as a result of
higher sensor and switch products volume, partially offset by an
unfavorable currency impact and the adverse impact of the COVID-19
pandemic.
- Gross margins as a percentage of sales decreased slightly to
25.0 percent from 25.6 percent primarily due to the adverse effect
of the UAW labor strike at GM, the COVID-19 pandemic-related
production shutdowns, and an unfavorable product mix. This was
partially offset by the savings from Fiscal 2019 initiatives to
reduce overall costs and improve operational profitability and
increased sensor and switch sales.
- Income from operations decreased $1.9 million, or 1.5 percent,
resulting from lower gross profit, partially offset by lower
selling and administrative costs.
Comparing the Industrial segment's Fiscal 2020 to Fiscal
2019,
- Net sales increased 21.6 percent, or $44.6 million,
attributable to:
- a $44.3 million increase from the full year of Grakon
sales;
- higher sales volume of busbar products; partially offset
by
- the adverse impact on demand from the COVID-19 pandemic;
- unfavorable foreign currency translation of $3.7 million;
and
- lower radio remote control product volume.
- Gross margins as a percentage of sales increased to 37.8
percent from 33.2 percent due to lower purchase accounting
adjustments and favorable product mix relating to Grakon and busbar
product sales volume, partially offset by reduced radio remote
control product sales.
- Income from operations improved to $59.4 million from $37.4
million, with the Grakon acquisition accounting for $21.0 million
of the increase.
Comparing the Interface segment's Fiscal 2020 to Fiscal
2019,
- Net sales increased 1.9 percent, or $1.1 million, attributable
to modestly higher sales volume in appliance products and legacy
data solution products.
- Gross margins as a percentage of sales increased to 17.0
percent from 13.5 percent due to the higher sales volume in
appliance products and legacy data solution products.
- Income from operations increased $5.9 million from a prior
period loss of $0.3 million resulting from lower selling and
administrative expenses and amortization of intangibles.
Comparing the Medical segment's Fiscal 2020 to Fiscal 2019,
- Net sales increased $0.5 million to $1.6 million due primarily
to increased product acceptance.
- Loss from operations decreased $2.6 million to $6.0 million due
to higher gross profit and lower selling and administrative
expenses.
Fiscal 2021 GuidanceAt this time, the company
is not providing annual guidance due to the ongoing market
uncertainty and the resulting lack of demand visibility due to the
COVID-19 pandemic. The company does intend to provide partial year
guidance at a future date as soon as demand schedules firm and
forecasts stabilize.
Management CommentsPresident and Chief
Executive Officer Donald W. Duda said, “Our foremost focus
continues to be on the health and safety of our employees, who have
shown incredible dedication to the company and our customers in
light of extraordinary circumstances across the globe. In Fiscal
2020, we reported a record year in sales and pre-tax income despite
headwinds from a prolonged automotive industry labor strike and the
early stages of a global pandemic. In the process, we still managed
to diversify our product, customer, and geographic bases, while
reaping the benefits of actions we took in Fiscal 2019 to improve
operational efficiency, drive margin expansion, and generate record
free cash flow."
Mr. Duda added, "In Fiscal 2021, we will continue to see
significant headwinds, particularly in the first quarter, from the
COVID-19 pandemic and will continue to take multiple proactive
measures to control costs and manage liquidity. The strides we have
made in solidifying our Industrial segment and in leveraging our
technologies across an expanded customer base and into new markets
will help us navigate the current environment. That, as well as our
strong balance sheet, will positively position Methode for the
eventual recovery phase of this global macroeconomic downturn."
Non-GAAP Financial MeasuresTo supplement the
company's financial statements presented in accordance with
generally accepted accounting principles in the United States
(“GAAP”), Methode uses Adjusted Net Income, Adjusted Earnings Per
Share, Adjusted Income from Operations, Adjusted Gross Profit,
Adjusted Gross Margins as a Percentage of Sales, Adjusted Selling
and Administrative Expenses, Adjusted Selling and Administrative
Expenses as a Percentage of Sales, EBITDA, Adjusted EBITDA, and
Free Cash Flow as non-GAAP measures. Reconciliation to the nearest
GAAP measures of all non-GAAP measures included in this press
release can be found at the end of this release. Methode's
definitions of these non-GAAP measures may differ from similarly
titled measures used by others. These non-GAAP measures should be
considered supplemental to, and not a substitute for, financial
information prepared in accordance with GAAP. The company believes
that these non-GAAP measures are useful because they (i) provide
both management and investors meaningful supplemental information
regarding financial performance by excluding certain expenses that
may not be indicative of recurring core business operating results,
(ii) permit investors to view Methode's performance using the same
tools that management uses to evaluate its past performance,
reportable business segments and prospects for future performance
and (iii) otherwise provide supplemental information that may be
useful to investors in evaluating Methode.
Conference CallThe 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, Ron Tsoumas, today at 10:00
a.m. CDT.
To participate in the conference call, please dial (844)
369-8770 (domestic) or (862) 298-0840 (international) at least five
minutes prior to the start of the event. A simultaneous webcast can
be accessed through the company’s website, www.methode.com, by
selecting the Investors page.
A replay of the teleconference will be available shortly after
the call through July 9, 2020, by dialing (877) 481-4010 and
providing Conference ID number 35406. A replay will also be
available through the company’s website, www.methode.com, by
selecting the Investors page.
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 Belgium, Canada,
China, Egypt, Germany, India, Italy, Lebanon, Malta, Mexico, the
Netherlands, Singapore, Switzerland, the United Kingdom and the
United States. We design, manufacture and market devices employing
electrical, radio remote control, electronic, LED lighting,
wireless and sensing technologies. Our business is managed on a
segment basis, with those segments being Automotive, Industrial,
Interface and Medical. Our components are found in the primary
end-markets of the aerospace, appliance, automotive, commercial
vehicle, construction, consumer and industrial equipment,
communications (including information processing and storage,
networking equipment, wireless and terrestrial voice/data systems),
medical, rail and other transportation industries. Further
information can be found on Methode's website www.methode.com.
Forward-Looking StatementsThis 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) impact from pandemics, such as the COVID-19
pandemic; (2) dependence on the automotive, appliance, commercial
vehicle, computer and communications industries; (3) dependence on
a small number of large customers, including two large automotive
customers; (4) international trade disputes resulting in tariffs
and our ability to mitigate tariffs; (5) timing, quality and cost
of new program launches; (6) ability to withstand price pressure,
including pricing reductions; (7) failure to attract and retain
qualified personnel; (8) ability to successfully market and sell
Dabir Surfaces products; (9) currency fluctuations; (10) customary
risks related to conducting global operations; (11) costs
associated with environmental, health and safety regulations; (12)
ability to withstand business interruptions; (13) recognition of
goodwill and long-lived asset impairment charges; (14) ability to
successfully benefit from acquisitions and divestitures; (15)
investment in programs prior to the recognition of revenue; (16)
dependence on the availability and price of materials; (17)
dependence on our supply chain; (18) judgments related to
accounting for tax positions; (19) income tax rate fluctuations;
(20) ability to keep pace with rapid technological changes; (21)
impacts to our information technology systems; (22) ability to
avoid design or manufacturing defects; (23) costs associated with
reorganization activities; (24) ability to compete effectively;
(25) ability to protect our intellectual property; (26) success of
Grakon and/or our ability to implement and profit from new
applications of the acquired technology; (27) significant
adjustments to expense related to our performance-based stock
awards in our long-term incentive plan; (28) ability to manage our
debt levels and any restrictions thereunder; and (29) impact to
interest expense from the replacement or modification of LIBOR.
For Methode Electronics, Inc.Robert K.
CherryVice President Investor
Relationsrcherry@methode.com708-457-4030
METHODE ELECTRONICS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME (Unaudited)(in millions, except share and
per-share data)
|
|
Three Months Ended |
|
|
Fiscal Year Ended |
|
|
|
May 22020 |
|
|
April 272019 |
|
|
May 2,2020 |
|
|
April 27,2019 |
|
|
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(53 Weeks) |
|
|
(52 Weeks) |
|
Net Sales |
|
$ |
210.6 |
|
|
$ |
266.0 |
|
|
$ |
1,023.9 |
|
|
$ |
1,000.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Products Sold |
|
|
151.4 |
|
|
|
195.4 |
|
|
|
741.0 |
|
|
|
734.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
59.2 |
|
|
|
70.6 |
|
|
|
282.9 |
|
|
|
265.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and Administrative
Expenses |
|
|
18.2 |
|
|
|
32.6 |
|
|
|
116.8 |
|
|
|
142.9 |
|
Amortization of
Intangibles |
|
|
4.7 |
|
|
|
5.0 |
|
|
|
19.0 |
|
|
|
16.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Operations |
|
|
36.3 |
|
|
|
33.0 |
|
|
|
147.1 |
|
|
|
106.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net |
|
|
2.1 |
|
|
|
3.3 |
|
|
|
10.1 |
|
|
|
8.3 |
|
Other Income, Net |
|
|
(5.9 |
) |
|
|
(0.4 |
) |
|
|
(11.7 |
) |
|
|
(5.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before Income
Taxes |
|
|
40.1 |
|
|
|
30.1 |
|
|
|
148.7 |
|
|
|
103.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense |
|
|
10.0 |
|
|
|
7.5 |
|
|
|
25.3 |
|
|
|
12.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income |
|
$ |
30.1 |
|
|
$ |
22.6 |
|
|
$ |
123.4 |
|
|
$ |
91.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Income per
Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.80 |
|
|
$ |
0.61 |
|
|
$ |
3.28 |
|
|
$ |
2.45 |
|
Diluted |
|
$ |
0.79 |
|
|
$ |
0.60 |
|
|
$ |
3.26 |
|
|
$ |
2.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends per Share |
|
$ |
0.11 |
|
|
$ |
0.11 |
|
|
$ |
0.44 |
|
|
$ |
0.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of
Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
37,587,742 |
|
|
|
37,422,607 |
|
|
|
37,574,671 |
|
|
|
37,405,298 |
|
Diluted |
|
|
38,216,658 |
|
|
|
37,675,723 |
|
|
|
37,844,470 |
|
|
|
37,669,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
METHODE ELECTRONICS, INC. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(in millions, except share and per-share
data)
|
|
May 2,2020 |
|
|
April 27,2019 |
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
$ |
217.3 |
|
|
$ |
83.2 |
|
Accounts Receivable, Less Allowance (2020 - $0.7 and 2019 -
$0.9) |
|
|
188.5 |
|
|
|
219.3 |
|
Inventories |
|
|
131.0 |
|
|
|
116.7 |
|
Income Taxes Receivable |
|
|
12.9 |
|
|
|
14.3 |
|
Prepaid Expenses and Other Current Assets |
|
|
15.9 |
|
|
|
20.0 |
|
TOTAL CURRENT
ASSETS |
|
|
565.6 |
|
|
|
453.5 |
|
LONG-TERM
ASSETS |
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Net |
|
|
201.9 |
|
|
|
191.9 |
|
Goodwill |
|
|
231.6 |
|
|
|
233.3 |
|
Other Intangible Assets, Net |
|
|
244.8 |
|
|
|
264.9 |
|
Operating Lease Assets, Net |
|
|
23.5 |
|
|
|
— |
|
Deferred Tax Assets |
|
|
31.4 |
|
|
|
34.3 |
|
Pre-production Costs |
|
|
37.1 |
|
|
|
32.8 |
|
Other Long-term Assets |
|
|
34.7 |
|
|
|
21.0 |
|
TOTAL LONG-TERM
ASSETS |
|
|
805.0 |
|
|
|
778.2 |
|
TOTAL
ASSETS |
|
$ |
1,370.6 |
|
|
$ |
1,231.7 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts Payable |
|
$ |
73.8 |
|
|
$ |
91.9 |
|
Accrued Employee Liabilities |
|
|
19.1 |
|
|
|
20.1 |
|
Other Accrued Expenses |
|
|
18.5 |
|
|
|
33.9 |
|
Short-term Operating Lease Liability |
|
|
5.5 |
|
|
|
— |
|
Short-term Debt |
|
|
15.3 |
|
|
|
15.7 |
|
Income Tax Payable |
|
|
11.6 |
|
|
|
19.3 |
|
TOTAL CURRENT
LIABILITIES |
|
|
143.8 |
|
|
|
180.9 |
|
LONG-TERM
LIABILITIES |
|
|
|
|
|
|
|
|
Long-term Debt |
|
|
336.8 |
|
|
|
276.9 |
|
Long-term Operating Lease Liability |
|
|
20.4 |
|
|
|
— |
|
Long-term Income Taxes Payable |
|
|
29.3 |
|
|
|
33.0 |
|
Other Long-term Liabilities |
|
|
15.3 |
|
|
|
14.8 |
|
Deferred Tax Liabilities |
|
|
41.6 |
|
|
|
36.4 |
|
TOTAL LONG-TERM
LIABILITIES |
|
|
443.4 |
|
|
|
361.1 |
|
TOTAL
LIABILITIES |
|
|
587.2 |
|
|
|
542.0 |
|
SHAREHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
Common Stock, $0.50 par value, 100,000,000 shares authorized,
38,438,111 shares and 38,333,576 shares issued as of May 2, 2020
and April 27, 2019, respectively |
|
|
19.2 |
|
|
|
19.2 |
|
Additional Paid-in Capital |
|
|
150.7 |
|
|
|
150.4 |
|
Accumulated Other Comprehensive Loss |
|
|
(26.9 |
) |
|
|
(13.6 |
) |
Treasury Stock, 1,346,624 shares as of May 2, 2020 and April 27,
2019 |
|
|
(11.5 |
) |
|
|
(11.5 |
) |
Retained Earnings |
|
|
651.9 |
|
|
|
545.2 |
|
TOTAL SHAREHOLDERS'
EQUITY |
|
|
783.4 |
|
|
|
689.7 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
$ |
1,370.6 |
|
|
$ |
1,231.7 |
|
|
|
|
|
|
|
|
|
|
METHODE ELECTRONICS, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)(in millions)
|
|
Fiscal Year Ended |
|
|
|
May 2,2020 |
|
|
April 27,2019 |
|
|
|
(53 Weeks) |
|
|
(52 Weeks) |
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
123.4 |
|
|
$ |
91.6 |
|
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities: |
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
48.3 |
|
|
|
43.3 |
|
Stock-based Compensation Expense |
|
|
0.3 |
|
|
|
14.0 |
|
Change in Cash Surrender Value of Life Insurance |
|
|
— |
|
|
|
(0.6 |
) |
Amortization of Debt Issuance Costs |
|
|
0.7 |
|
|
|
0.5 |
|
Gain on Sale of Business/Investment/Property |
|
|
(0.4 |
) |
|
|
(0.4 |
) |
Change in Deferred Taxes |
|
|
8.0 |
|
|
|
(4.4 |
) |
Other |
|
|
(0.2 |
) |
|
|
0.2 |
|
Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
Accounts Receivable |
|
|
27.4 |
|
|
|
1.5 |
|
Inventories |
|
|
(15.8 |
) |
|
|
(3.9 |
) |
Prepaid Expenses and Other Assets |
|
|
(3.6 |
) |
|
|
(16.7 |
) |
Accounts Payable and Other Liabilities |
|
|
(47.5 |
) |
|
|
(23.1 |
) |
NET CASH PROVIDED BY
OPERATING ACTIVITIES |
|
|
140.6 |
|
|
|
102.0 |
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of Property, Plant and Equipment |
|
|
(45.1 |
) |
|
|
(49.8 |
) |
Acquisition of Businesses, Net of Cash Acquired |
|
|
— |
|
|
|
(422.1 |
) |
Sale of Business/Investment/Property |
|
|
0.6 |
|
|
|
1.1 |
|
NET CASH USED IN
INVESTING ACTIVITIES |
|
|
(44.5 |
) |
|
|
(470.8 |
) |
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Taxes Paid Related to Net Share Settlement of Equity Awards |
|
|
(0.4 |
) |
|
|
(1.7 |
) |
Repayments of Finance Leases |
|
|
(0.7 |
) |
|
|
— |
|
Debt Issuance Costs |
|
|
— |
|
|
|
(3.1 |
) |
Cash Dividends |
|
|
(16.3 |
) |
|
|
(16.3 |
) |
Proceeds from Borrowings |
|
|
157.5 |
|
|
|
359.0 |
|
Repayment of Borrowings |
|
|
(98.4 |
) |
|
|
(120.5 |
) |
NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES |
|
|
41.7 |
|
|
|
217.4 |
|
Effect of Foreign Currency
Exchange Rate Changes on Cash and Cash Equivalents |
|
|
(3.7 |
) |
|
|
(11.5 |
) |
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS |
|
|
134.1 |
|
|
|
(162.9 |
) |
Cash and Cash Equivalents at
Beginning of Year |
|
|
83.2 |
|
|
|
246.1 |
|
CASH AND CASH
EQUIVALENTS AT END OF YEAR |
|
$ |
217.3 |
|
|
$ |
83.2 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW
INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
9.9 |
|
|
$ |
8.8 |
|
Income Taxes, Net of Refunds |
|
$ |
21.1 |
|
|
$ |
27.8 |
|
|
|
|
|
|
|
|
|
|
METHODE ELECTRONICS, INC. AND
SUBSIDIARIES(Unaudited)(in
millions, except per share data)
Reconciliation of Non-GAAP Financial
Measures for the Three Months Ended May 2, 2020 (13
Weeks)
|
|
|
|
|
|
|
|
|
|
Acquisition-Related Costs |
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP(As Reported) |
|
Expense forInitiatives
toReduceOverallCosts
andImproveOperationalProfitability |
|
PurchaseAccountingAdjustmentsRelated
toInventory |
|
Severance |
|
Other |
|
Long-termIncentivePlanAccrualAdjustment |
|
Non-U.S.GAAPFinancialMeasures |
Gross Profit |
|
$ |
59.2 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
59.2 |
|
Gross Margin (% of sales) |
|
|
28.1 |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
28.1 |
% |
Selling and Administrative
Expenses |
|
$ |
18.2 |
|
|
$ |
(0.3 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6.5 |
|
|
$ |
24.4 |
|
Selling and Administrative Expenses (% of sales) |
|
|
8.6 |
% |
|
|
(0.1 |
)% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
3.1 |
% |
|
|
11.6 |
% |
Income from Operations |
|
$ |
36.3 |
|
|
$ |
0.3 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(6.5 |
) |
|
$ |
30.1 |
|
Net Income |
|
$ |
30.1 |
|
|
$ |
0.2 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(4.9 |
) |
|
$ |
25.4 |
|
Diluted Earnings per
Share |
|
$ |
0.79 |
|
|
$ |
0.01 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(0.13 |
) |
|
$ |
0.67 |
|
Reconciliation of Non-GAAP Financial
Measures for the Three Months Ended April 27, 2019 (13
Weeks)
|
|
|
|
|
|
|
|
|
|
Acquisition-Related Costs |
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP(As Reported) |
|
Expense forInitiatives
toReduceOverallCosts
andImproveOperationalProfitability |
|
PurchaseAccountingAdjustmentsRelated
toInventory |
|
Severance |
|
Other |
|
Long-termIncentivePlanAccrualAdjustment |
|
Non-U.S.GAAPFinancialMeasures |
Gross Profit |
|
$ |
70.6 |
|
|
$ |
0.1 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
70.7 |
|
Gross Margin (% of sales) |
|
|
26.5 |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
26.5 |
% |
Selling and Administrative
Expenses |
|
$ |
32.6 |
|
|
$ |
(0.9 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(0.1 |
) |
|
$ |
— |
|
|
$ |
31.6 |
|
Selling and Administrative Expenses (% of sales) |
|
|
12.3 |
% |
|
|
(0.3 |
)% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
|
|
|
12.0 |
% |
Income from Operations |
|
$ |
33.0 |
|
|
$ |
1.0 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.1 |
|
|
$ |
— |
|
|
$ |
34.1 |
|
Net Income |
|
$ |
22.6 |
|
|
$ |
0.8 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.1 |
|
|
$ |
— |
|
|
$ |
23.5 |
|
Diluted Earnings per
Share |
|
$ |
0.60 |
|
|
$ |
0.02 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.62 |
|
Reconciliation of Non-GAAP Financial
Measures for the Fiscal Year Ended May 2, 2020 (53
Weeks)
|
|
|
|
|
|
|
|
|
|
Acquisition-Related Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP(As Reported) |
|
Expense forInitiatives
toReduceOverallCosts
andImproveOperationalProfitability |
|
PurchaseAccountingAdjustmentsRelated
toInventory |
|
Severance |
|
Other |
|
Long-termIncentivePlanAccrualAdjustment |
|
Transition tax and the
impact of revaluing deferred
taxes due to the change in
the federal tax rate from
U.S. Tax Reform |
|
Non-U.S.GAAPFinancialMeasures |
Gross Profit |
|
$ |
282.9 |
|
|
$ |
0.6 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
283.5 |
|
Gross Margin (% of sales) |
|
|
27.6 |
% |
|
|
0.1 |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
27.7 |
% |
Selling and Administrative
Expenses |
|
$ |
116.8 |
|
|
$ |
(1.2 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
5.2 |
|
|
$ |
— |
|
|
$ |
120.8 |
|
Selling and Administrative Expenses (% of sales) |
|
|
11.4 |
% |
|
|
(0.1 |
)% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
0.5 |
% |
|
|
— |
% |
|
|
11.8 |
% |
Income from Operations |
|
$ |
147.1 |
|
|
$ |
1.8 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(5.2 |
) |
|
$ |
— |
|
|
$ |
143.7 |
|
Net Income |
|
$ |
123.4 |
|
|
$ |
1.5 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(4.3 |
) |
|
$ |
(2.8 |
) |
|
$ |
117.8 |
|
Diluted Earnings per
Share |
|
$ |
3.26 |
|
|
$ |
0.04 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(0.11 |
) |
|
$ |
(0.07 |
) |
|
$ |
3.12 |
|
Reconciliation of Non-GAAP Financial
Measures for the Fiscal Year Ended April 27, 2019 (52
Weeks)
|
|
|
|
|
|
|
|
|
|
Acquisition-Related Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP(As Reported) |
|
Expense forInitiatives
toReduceOverallCosts
andImproveOperationalProfitability |
|
PurchaseAccountingAdjustmentsRelated
toInventory |
|
Severance |
|
Other |
|
Long-termIncentivePlanAccrualAdjustment |
|
Transition tax and the
impact of revaluing deferred
taxes due to the change in
the federal tax rate from
U.S. Tax Reform |
|
Non-U.S.GAAPFinancialMeasures |
Gross Profit |
|
$ |
265.8 |
|
|
$ |
2.8 |
|
|
$ |
5.6 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
274.2 |
|
Gross Margin (% of sales) |
|
|
26.6 |
% |
|
|
0.3 |
% |
|
|
0.6 |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
27.5 |
% |
Selling and Administrative
Expenses |
|
$ |
142.9 |
|
|
$ |
(4.1 |
) |
|
$ |
— |
|
|
$ |
(1.5 |
) |
|
$ |
(8.3 |
) |
|
$ |
(7.4 |
) |
|
$ |
— |
|
|
$ |
121.6 |
|
Selling and Administrative Expenses (% of sales) |
|
|
14.3 |
% |
|
|
(0.4 |
)% |
|
|
— |
% |
|
|
(0.1 |
)% |
|
|
(0.8 |
)% |
|
|
(0.7 |
)% |
|
|
— |
% |
|
|
12.3 |
% |
Income from Operations |
|
$ |
106.8 |
|
|
$ |
6.9 |
|
|
$ |
5.6 |
|
|
$ |
1.5 |
|
|
$ |
8.3 |
|
|
$ |
7.4 |
|
|
$ |
— |
|
|
$ |
136.5 |
|
Net Income |
|
$ |
91.6 |
|
|
$ |
5.7 |
|
|
$ |
4.7 |
|
|
$ |
1.2 |
|
|
$ |
6.9 |
|
|
$ |
6.2 |
|
|
$ |
(4.8 |
) |
|
$ |
111.5 |
|
Diluted Earnings per
Share |
|
$ |
2.43 |
|
|
$ |
0.15 |
|
|
$ |
0.13 |
|
|
$ |
0.03 |
|
|
$ |
0.18 |
|
|
$ |
0.17 |
|
|
$ |
(0.13 |
) |
|
$ |
2.96 |
|
Reconciliation of EBITDA and Adjusted
EBITDA to Net Income(in millions)
|
|
Three Months Ended |
|
|
Fiscal Year Ended |
|
|
|
May 2,2020 |
|
|
April 27,2019 |
|
|
May 2,2020 |
|
|
April 27,2019 |
|
|
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(53 Weeks) |
|
|
(52 Weeks) |
|
Net Income |
|
$ |
30.1 |
|
|
$ |
22.6 |
|
|
$ |
123.4 |
|
|
$ |
91.6 |
|
Income Tax Expense (Benefit) |
|
|
10.0 |
|
|
|
7.5 |
|
|
|
25.3 |
|
|
|
12.0 |
|
Interest Expense, Net |
|
|
2.1 |
|
|
|
3.3 |
|
|
|
10.1 |
|
|
|
8.3 |
|
Amortization of Intangibles |
|
|
4.7 |
|
|
|
5.0 |
|
|
|
19.0 |
|
|
|
16.1 |
|
Depreciation |
|
|
7.6 |
|
|
|
7.7 |
|
|
|
29.3 |
|
|
|
27.2 |
|
EBITDA |
|
|
54.5 |
|
|
|
46.1 |
|
|
|
207.1 |
|
|
|
155.2 |
|
Expense for Initiatives to Reduce Overall Costs and Improve
Operational Profitability |
|
|
0.3 |
|
|
|
1.0 |
|
|
|
1.8 |
|
|
|
6.9 |
|
Acquisition-related Costs - Purchase Accounting Adjustments Related
to Inventory |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5.6 |
|
Acquisition-related Costs - Severance |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.5 |
|
Acquisition-related Costs - Other |
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
8.3 |
|
Long-term Incentive Plan Accrual Adjustment |
|
|
(6.5 |
) |
|
|
— |
|
|
|
(5.2 |
) |
|
|
7.4 |
|
Adjusted EBITDA |
|
$ |
48.3 |
|
|
$ |
47.2 |
|
|
$ |
203.7 |
|
|
$ |
184.9 |
|
Reconciliation of Free Cash Flow to Net
Income(in millions)
|
|
Three Months Ended |
|
|
Fiscal Year Ended |
|
|
|
May 2,2020 |
|
|
April 27,2019 |
|
|
May 2,2020 |
|
|
April 27,2019 |
|
|
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(53 Weeks) |
|
|
(52 Weeks) |
|
Net Income |
|
$ |
30.1 |
|
|
$ |
22.6 |
|
|
$ |
123.4 |
|
|
$ |
91.6 |
|
Amortization of Intangibles |
|
|
4.7 |
|
|
|
5.0 |
|
|
|
19.0 |
|
|
|
16.1 |
|
Depreciation |
|
|
7.6 |
|
|
|
7.7 |
|
|
|
29.3 |
|
|
|
27.2 |
|
Purchases of Property, Plant and Equipment |
|
|
(10.2 |
) |
|
|
(12.8 |
) |
|
|
(45.1 |
) |
|
|
(49.8 |
) |
Free Cash Flow |
|
$ |
32.2 |
|
|
$ |
22.5 |
|
|
$ |
126.6 |
|
|
$ |
85.1 |
|
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