CHICAGO, IL--(Marketwire - September 3, 2009) - 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
========= =========
Contact Information: 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