Methode Electronics, Inc. (NYSE: MEI), a global
developer of custom engineered and application specific products
and solutions, today announced financial results for the fiscal
first quarter of 2021 ended August 1, 2020.
Fiscal First Quarter 2021 Highlights
- Net sales were $190.9 million
- Selling and administrative expense decreased $5.8 million from
fiscal first quarter 2020
- Net income was $20.7 million, or $0.54 per diluted share, and
included $2.8 million of restructuring costs, or $0.07 per diluted
share, and discrete tax benefits of $7.8 million, or $0.20 per
diluted share
Consolidated Fiscal First Quarter 2021 Financial
ResultsMethode's net sales were $190.9 million, compared
to $270.2 million in the same quarter of fiscal 2020. The decrease
in net sales was largely due to lower sales volume in the
Automotive and Industrial segments as a result of the COVID-19
pandemic which caused the sharp reduction of automotive and
commercial vehicle production in the first half of the quarter.
Gross margin as a percentage of sales was 23.6 percent, compared
to 28.1 percent in the same quarter of fiscal 2020. The decrease
was primarily due to the lower net sales in the Automotive and
Industrial segments in the quarter, which resulted in reduced
overhead coverage. In addition, the company recognized $1.9 million
of restructuring costs in cost of products sold related to actions
taken to reduce overall costs and improve operational
profitability.
Selling and administrative expense as a percentage of sales was
13.9 percent, compared to 12.0 percent in the same quarter of
fiscal 2020. Selling and administrative expense decreased $5.8
million from the same quarter of fiscal 2020 primarily due to lower
compensation expense and lower travel expense from cost saving
actions taken to mitigate the impact from the pandemic, as well as
lower stock-based compensation expense. Partially offsetting these
savings, the company recognized $1.5 million of restructuring costs
in selling and administrative expense related to actions taken to
reduce overall costs and improve operational profitability and also
recorded an increase in professional services fees.
Income from operations was $13.8 million, compared with $38.6
million in the same quarter of fiscal 2020. The decrease was mainly
due to the lower gross profit on lower sales driven by the
pandemic, partially offset by the lower selling and administrative
expense from cost saving actions.
Other income was $3.4 million, compared to other expense of $0.1
million in the same quarter of fiscal 2020. Included in other
income in the quarter was $2.9 million of government assistance
received by certain foreign locations with respect to the
pandemic.
Income tax was a benefit of $5.1 million, compared to an income
tax expense of $7.3 million in the same quarter of fiscal 2020. The
income tax benefit was primarily due to discrete tax benefits of
$7.8 million, compared to discrete tax expenses of $1.4 million in
the same quarter of fiscal 2020. The discrete benefits in the first
quarter of fiscal 2021 included tax credits earned and research
deductions claimed in foreign jurisdictions. Excluding these
discrete tax benefits and expenses, the effective tax rate would
have been 17.2%, compared to an effective tax rate of 16.6% in the
same quarter of fiscal 2020.
Net income was $20.7 million, or $0.54 per diluted share,
compared to $28.3 million, or $0.75 per diluted share, in the same
quarter of fiscal 2020.
EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization of Intangibles), a non-GAAP financial measure, was
$29.3 million, compared to $50.3 million in the same quarter of
fiscal 2020.
Debt was $349.8 million at the end of the quarter, down slightly
compared to $352.1 million at the end of fiscal 2020. Net debt, a
non-GAAP financial measure and includes debt less cash and cash
equivalents, was $138.8 million, compared to $134.8 million at the
end of fiscal 2020.
Free cash flow, a non-GAAP financial measure and includes cash
provided by operating activities less purchases of property, plant,
and equipment, was $4.8 million, compared to $5.9 million in the
same quarter of fiscal 2020.
Segment Fiscal First Quarter 2021 Financial
ResultsComparing the Automotive segment's quarter to the
same quarter of fiscal 2020,
- Net sales were $125.1 million, down from $186.2 million
attributable to a 37.3 percent sales decline in North America and a
41.2 percent sales decrease in Europe due mainly to a sharp
reduction in customer demand in the first half of the quarter due
to the pandemic. Partially offsetting this decline was a 28.2
percent sales increase in Asia primarily due to higher touchscreen
volume.
- Gross profit margin as a percentage of sales was 20.9 percent,
down from 25.5 percent mainly due to lower sales volume resulting
from the pandemic and $1.9 million in restructuring actions taken
in the quarter.
- Income from operations was $15.3 million, down from $33.1
million resulting from the lower gross profit and the restructuring
actions taken in the quarter.
Comparing the Industrial segment's quarter to the same quarter
of fiscal 2020,
- Net sales were $52.0 million, down from $70.8 million as a
result of lower sales of commercial vehicle lighting products and
radio remote control devices, which were adversely impacted by the
pandemic. This decrease was partially offset by higher sales of
busbar products.
- Gross profit margin as a percentage of sales was 31.5 percent,
down from 37.4 percent due to the lower sales in the quarter.
- Income from operations was $7.0 million, a decrease from $16.5
million resulting from lower gross profit and $0.6 million in
restructuring actions taken in the quarter, partially offset by
higher income from operations from busbar products.
Comparing the Interface segment's quarter to the same quarter of
fiscal 2020,
- Net sales were $13.4 million, up from $12.9 million
attributable to higher volume of appliance products and legacy data
solution products.
- Gross profit margin as a percentage of sales was 18.7 percent,
up from 11.6 percent due to the higher sales volume and product
mix.
- Income from operations was $1.1 million, up from $0.2 million
due to higher gross profit, partially offset by $0.7 million in
restructuring actions taken in the quarter.
Comparing the Medical segment's quarter to the same quarter of
fiscal 2020,
- Net sales were $0.4 million, up from $0.3 million.
- Loss from operations was $1.6 million, compared to a loss of
$1.5 million.
Fiscal Second Quarter 2021 GuidanceThe company
expects net sales in the fiscal second quarter of 2021 to improve
sequentially and be in the range of $230 to $250 million based on
the near-term outlook, which is subject to disruption at any time
due to a variety of factors including the pandemic situation.
However, the company is not providing annual guidance due to the
mid-term market uncertainty as a result of the ongoing
pandemic.
Management CommentsPresident and Chief
Executive Officer Donald W. Duda said, “I continue to express my
gratitude to our employees, who have shown incredible commitment to
the company in the midst of an ongoing pandemic. Our team
successfully executed multiple proactive measures to control costs
and manage liquidity."
Mr. Duda added, "For our fiscal second quarter, we will continue
to face market uncertainty and will continue to be vigilant on cost
saving actions. However, the demand we experienced in the latter
half of the first quarter and are seeing early in the second
quarter has given us the confidence to provide sales guidance for
the second quarter. Longer term, we are enthusiastic about an
increase in awards that we are winning for EV and hybrid programs
from busbars and lead frames to interior and exterior lighting
systems."
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 certain non-GAAP financial measures, such as
EBITDA, Free Cash Flow and Net Debt. 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. Management
believes EBITDA is useful to investors as it is a measure that is
commonly used by other companies in our industry and provides a
comparison for investors to the company’s performance versus its
competitors. Management believes Free Cash Flow is a meaningful
measure to investors because management reviews cash flows
generated from operations after taking into consideration capital
expenditures, which are both necessary to maintain the company’s
asset base and which are expected to generate future cash flows
from operations. Prior to Fiscal 2021 the definition of Free Cash
Flow was net income plus depreciation and amortization less capital
expenditures. Management believes Net Debt is a meaningful measure
to investors because management assesses the company’s leverage
position after considering available cash that could be used to
repay outstanding debt. 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.
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, Ronald 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 September 17, 2020, by dialing (877) 481-4010 and
providing passcode 36525. 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 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, construction, consumer and industrial
equipment, communications (including information processing and
storage, networking equipment, wireless and terrestrial voice/data
systems), medical, rail, consumer automotive, commercial vehicle,
and other transportation industries.
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) recognition of goodwill and long-lived asset
impairment charges; (5) costs associated with restructuring
activities; (6) international trade disputes resulting in tariffs
and our ability to mitigate tariffs; (7) timing, quality and cost
of new program launches; (8) ability to withstand price pressure,
including pricing reductions; (9) failure to attract and retain
qualified personnel; (10) ability to successfully market and sell
Dabir Surfaces products; (11) currency fluctuations; (12) customary
risks related to conducting global operations; (13) costs
associated with environmental, health and safety regulations; (14)
ability to withstand business interruptions; (15) ability to
successfully benefit from acquisitions and divestitures; (16)
investment in programs prior to the recognition of revenue; (17)
dependence on the availability and price of materials; (18)
dependence on our supply chain; (19) judgments related to
accounting for tax positions; (20) income tax rate fluctuations;
(21) ability to keep pace with rapid technological changes; (22)
breaches to our information technology systems; (23) ability to
avoid design or manufacturing defects; (24) ability to compete
effectively; (25) ability to protect our intellectual property;
(26) success of recent acquisitions and/or our ability to implement
and profit from new applications of the acquired technology; (27)
ability to manage our debt levels and any restrictions thereunder;
and (28) 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 |
|
|
|
August 1,2020 |
|
|
July 27,2019 |
|
Net Sales |
|
$ |
190.9 |
|
|
$ |
270.2 |
|
|
|
|
|
|
|
|
|
|
Cost of Products Sold |
|
|
145.8 |
|
|
|
194.4 |
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
45.1 |
|
|
|
75.8 |
|
|
|
|
|
|
|
|
|
|
Selling and Administrative
Expenses |
|
|
26.6 |
|
|
|
32.4 |
|
Amortization of Intangibles |
|
|
4.7 |
|
|
|
4.8 |
|
|
|
|
|
|
|
|
|
|
Income from Operations |
|
|
13.8 |
|
|
|
38.6 |
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net |
|
|
1.6 |
|
|
|
2.9 |
|
Other (Income) Expense, Net |
|
|
(3.4 |
) |
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
Income before Income Taxes |
|
|
15.6 |
|
|
|
35.6 |
|
|
|
|
|
|
|
|
|
|
Income Tax (Benefit) Expense |
|
|
(5.1 |
) |
|
|
7.3 |
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
20.7 |
|
|
$ |
28.3 |
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Income per
Share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.55 |
|
|
$ |
0.75 |
|
Diluted |
|
$ |
0.54 |
|
|
$ |
0.75 |
|
|
|
|
|
|
|
|
|
|
Cash Dividends per Share |
|
$ |
0.11 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Shares
Outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
37,836,543 |
|
|
|
37,534,451 |
|
Diluted |
|
|
38,158,418 |
|
|
|
37,667,054 |
|
METHODE ELECTRONICS, INC. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(in millions, except share and per-share
data)
|
|
August 1,2020 |
|
|
May 2,2020 |
|
|
|
(Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
$ |
211.0 |
|
|
$ |
217.3 |
|
Accounts Receivable, Net |
|
|
233.0 |
|
|
|
188.5 |
|
Inventories |
|
|
124.0 |
|
|
|
131.0 |
|
Income Tax Receivable |
|
|
13.6 |
|
|
|
12.9 |
|
Prepaid Expenses and Other Current Assets |
|
|
16.4 |
|
|
|
15.9 |
|
TOTAL CURRENT
ASSETS |
|
|
598.0 |
|
|
|
565.6 |
|
LONG-TERM
ASSETS |
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Net |
|
|
208.6 |
|
|
|
201.9 |
|
Goodwill |
|
|
233.3 |
|
|
|
231.6 |
|
Other Intangible Assets, Net |
|
|
242.1 |
|
|
|
244.8 |
|
Operating Lease Assets, Net |
|
|
22.1 |
|
|
|
23.5 |
|
Deferred Tax Assets |
|
|
41.0 |
|
|
|
31.4 |
|
Pre-production Costs |
|
|
36.0 |
|
|
|
37.1 |
|
Other Long-term Assets |
|
|
37.1 |
|
|
|
34.7 |
|
TOTAL LONG-TERM
ASSETS |
|
|
820.2 |
|
|
|
805.0 |
|
TOTAL
ASSETS |
|
$ |
1,418.2 |
|
|
$ |
1,370.6 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES &
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts Payable |
|
$ |
83.2 |
|
|
$ |
73.8 |
|
Accrued Employee Liabilities |
|
|
20.0 |
|
|
|
19.1 |
|
Other Accrued Expenses |
|
|
28.3 |
|
|
|
18.5 |
|
Short-term Operating Lease Liability |
|
|
5.5 |
|
|
|
5.5 |
|
Short-term Debt |
|
|
15.4 |
|
|
|
15.3 |
|
Income Tax Payable |
|
|
7.6 |
|
|
|
11.6 |
|
TOTAL CURRENT
LIABILITIES |
|
|
160.0 |
|
|
|
143.8 |
|
LONG-TERM
LIABILITIES |
|
|
|
|
|
|
|
|
Long-term Debt |
|
|
334.4 |
|
|
|
336.8 |
|
Long-term Operating Lease Liability |
|
|
18.4 |
|
|
|
20.4 |
|
Long-term Income Tax Payable |
|
|
29.3 |
|
|
|
29.3 |
|
Other Long-term Liabilities |
|
|
20.0 |
|
|
|
15.3 |
|
Deferred Tax Liabilities |
|
|
42.3 |
|
|
|
41.6 |
|
TOTAL LONG-TERM
LIABILITIES |
|
|
444.4 |
|
|
|
443.4 |
|
TOTAL
LIABILITIES |
|
|
604.4 |
|
|
|
587.2 |
|
SHAREHOLDERS'
EQUITY |
|
|
|
|
|
|
|
|
Common Stock, $0.50 par value, 100,000,000 shares authorized,
38,876,362 shares and 38,438,111 shares issued as of August 1, 2020
and May 2, 2020, respectively |
|
|
19.4 |
|
|
|
19.2 |
|
Additional Paid-in Capital |
|
|
151.5 |
|
|
|
150.7 |
|
Accumulated Other Comprehensive Loss |
|
|
(10.2 |
) |
|
|
(26.9 |
) |
Treasury Stock, 1,346,624 shares as of August 1, 2020 and May 2,
2020 |
|
|
(11.5 |
) |
|
|
(11.5 |
) |
Retained Earnings |
|
|
664.6 |
|
|
|
651.9 |
|
TOTAL SHAREHOLDERS'
EQUITY |
|
|
813.8 |
|
|
|
783.4 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
$ |
1,418.2 |
|
|
$ |
1,370.6 |
|
METHODE ELECTRONICS, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)(in millions)
|
|
Three Months Ended |
|
|
|
August 1,2020 |
|
|
July 27,2019 |
|
OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
20.7 |
|
|
$ |
28.3 |
|
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities: |
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
12.1 |
|
|
|
11.8 |
|
Stock-based Compensation Expense |
|
|
0.9 |
|
|
|
2.5 |
|
Change in Cash Surrender Value of Life Insurance |
|
|
(0.6 |
) |
|
|
(0.3 |
) |
Amortization of Debt Issuance Costs |
|
|
0.2 |
|
|
|
0.2 |
|
Change in Deferred Income Taxes |
|
|
(6.2 |
) |
|
|
— |
|
Other |
|
|
1.0 |
|
|
|
— |
|
Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
Accounts Receivable |
|
|
(37.3 |
) |
|
|
(12.8 |
) |
Inventories |
|
|
9.1 |
|
|
|
(5.7 |
) |
Prepaid Expenses and Other Assets |
|
|
1.5 |
|
|
|
0.7 |
|
Accounts Payable and Other Liabilities |
|
|
15.0 |
|
|
|
(5.6 |
) |
NET CASH PROVIDED BY
OPERATING ACTIVITIES |
|
|
16.4 |
|
|
|
19.1 |
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
Purchases of Property, Plant and Equipment |
|
|
(11.6 |
) |
|
|
(13.2 |
) |
NET CASH USED IN
INVESTING ACTIVITIES |
|
|
(11.6 |
) |
|
|
(13.2 |
) |
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
Taxes Paid Related to Net Share Settlement of Equity Awards |
|
|
(3.9 |
) |
|
|
(0.4 |
) |
Proceeds from Exercise of Stock Options |
|
|
0.1 |
|
|
|
— |
|
Repayments of Finance Leases |
|
|
(0.1 |
) |
|
|
(0.2 |
) |
Cash Dividends |
|
|
(5.0 |
) |
|
|
(4.1 |
) |
Proceeds from Borrowings |
|
|
— |
|
|
|
1.0 |
|
Repayments of Borrowings |
|
|
(4.1 |
) |
|
|
(10.7 |
) |
NET CASH USED IN
FINANCING ACTIVITIES |
|
|
(13.0 |
) |
|
|
(14.4 |
) |
Effect of Foreign Currency
Exchange Rate Changes on Cash and Cash Equivalents |
|
|
1.9 |
|
|
|
(0.9 |
) |
DECREASE IN CASH AND CASH
EQUIVALENTS |
|
|
(6.3 |
) |
|
|
(9.4 |
) |
Cash and Cash Equivalents at
Beginning of the Year |
|
|
217.3 |
|
|
|
83.2 |
|
CASH AND CASH EQUIVALENTS
AT END OF THE PERIOD |
|
$ |
211.0 |
|
|
$ |
73.8 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW
INFORMATION |
|
|
|
|
|
|
|
|
Cash Paid During the Period For: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
1.5 |
|
|
$ |
2.9 |
|
Income Taxes, Net of Refunds |
|
$ |
4.8 |
|
|
$ |
7.8 |
|
Operating Lease Obligations |
|
$ |
2.1 |
|
|
$ |
2.1 |
|
METHODE ELECTRONICS, INC. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP MEASURES
(Unaudited)(in millions)
|
|
Three Months Ended |
|
|
|
August 1,2020 |
|
|
July 27,2019 |
|
EBITDA: |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
20.7 |
|
|
$ |
28.3 |
|
Income Tax (Benefit) Expense |
|
|
(5.1 |
) |
|
|
7.3 |
|
Interest Expense, Net |
|
|
1.6 |
|
|
|
2.9 |
|
Amortization of Intangibles |
|
|
4.7 |
|
|
|
4.8 |
|
Depreciation |
|
|
7.4 |
|
|
|
7.0 |
|
EBITDA |
|
$ |
29.3 |
|
|
$ |
50.3 |
|
|
|
Three Months Ended |
|
|
|
August 1,2020 |
|
|
July 27,2019 |
|
Free Cash Flow: |
|
|
|
|
|
|
|
|
Net Cash Provided by Operating
Activities |
|
$ |
16.4 |
|
|
$ |
19.1 |
|
Purchases of Property, Plant and
Equipment |
|
|
(11.6 |
) |
|
|
(13.2 |
) |
Free Cash Flow |
|
$ |
4.8 |
|
|
$ |
5.9 |
|
|
|
August 1,2020 |
|
|
May 2,2020 |
|
Net Debt: |
|
|
|
|
|
|
|
|
Short-Term Debt |
|
$ |
15.4 |
|
|
$ |
15.3 |
|
Long-Term Debt |
|
|
334.4 |
|
|
|
336.8 |
|
Total Debt |
|
|
349.8 |
|
|
|
352.1 |
|
Less: Cash and Cash
Equivalents |
|
|
(211.0 |
) |
|
|
(217.3 |
) |
Net Debt |
|
$ |
138.8 |
|
|
$ |
134.8 |
|
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