CHICAGO, IL--(Marketwire - December 10, 2009) - Methode Electronics, Inc. (
NYSE:
MEI), a global
designer and manufacturer of electro-mechanical devices, today announced
operating results for the fiscal 2010 second quarter ended October 31,
2009.
Second-Quarter Fiscal 2010
Methode's second-quarter fiscal 2010 net sales decreased $22.8 million, or
18.8 percent, to $98.5 million from $121.3 million in the second quarter of
fiscal 2009. Net income increased $1.9 million to $2.1 million, or $0.06
per share, in the second quarter of fiscal 2010 compared to income of $0.2
million, or $0.01 per share, in the same period of fiscal 2009.
In January 2008, Methode announced a restructuring of its U.S.-based
Automotive segment 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 second
quarter of $3.2 million ($2.6 million after-tax), or $0.07 per share, and
during the fiscal 2009 second quarter of $6.3 million ($4.0 million
after-tax), or $0.10 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 $1.0 million and $2.2 million.
Net income in the fiscal 2010 second quarter benefitted by $1.7 million
relating to a one-time reversal of pricing contingencies which were accrued
over several years and are no longer required, as well as lower cost of
products sold, restructuring costs and selling, general and administrative
expenses. These benefits were offset by lower sales attributable to the
planned exit of Chrysler and Ford North American business, reduced sales to
Delphi Automotive Systems ("Delphi") due to the cancellation of a supply
arrangement by Delphi, and the continuing softness of the global economic
environment, especially the effect on the North American automotive market.
Excluding restructuring charges in both periods and the $1.7 million
reversal of one-time pricing contingencies included in net sales in the
Fiscal 2010 period, Methode's net income was $3.5 million, or $0.10 per
share, in the second quarter of fiscal 2010 compared to net income of $4.2
million, or $0.11 per share, in the same period of fiscal 2009.
Consolidated cost of products sold decreased $20.0 million, or 20.4
percent, to $77.8 million in the fiscal 2010 second quarter, compared to
$97.8 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. Included in the cost of products sold in the Fiscal 2010
second quarter is $0.7 million of asset write-downs relating to the
termination of the Delphi supply arrangement. Consolidated cost of products
sold as a percentage of sales was 79.0 percent and 80.6 percent in the
second quarters of fiscal 2010 and 2009, respectively. Excluding the $0.7
million Delphi asset write-down and the $1.7 million reversal of one-time
pricing contingencies included in net sales, consolidated cost of products
sold as a percentage of sales was 79.6 percent for the second quarter of
fiscal 2010.
Consolidated gross margins as a percentage of sales increased to 22.1
percent in the fiscal 2010 second quarter from 20.2 percent in the
comparable period of fiscal 2009 despite an 18.8 percent drop in sales,
largely due to the restructuring actions previously taken to reduce the
cost structure, in part as a result of the sustained change in the global
economic environment. Excluding the $0.7 million Delphi asset write-down
and the $1.7 million reversal of one-time pricing contingencies included in
net sales, consolidated gross margins as a percentage of sales was 21.5
percent for the second quarter of fiscal 2010.
In the Automotive segment, gross margins as a percentage of sales increased
to 23.1 percent in the fiscal 2010 second quarter from 21.0 percent in the
comparable period of fiscal 2009 despite a 25.3 percent drop in sales from
period to period. Excluding the $0.7 million Delphi asset write-down and
the $1.7 million reversal of one-time pricing contingencies included in net
sales, Automotive segment gross margins as a percentage of sales was 22.0
percent for the second quarter of fiscal 2010. Additionally, the
Interconnect segment gross margins as a percentage of sales improved to
23.3 percent in the second quarter of fiscal 2010 from 22.8 percent in the
same quarter of fiscal 2009, notwithstanding a 4.7 percent decrease in
sales. Gross margins as a percentage of sales in the Power Products segment
increased to 22.3 percent in the second quarter of fiscal 2010 from 18.1
percent from the same period of fiscal 2009, notwithstanding a 19.0 percent
decrease in sales period over period.
Selling and administrative expenses decreased $2.1 million, or 11.4
percent, to $16.4 million in the fiscal 2010 second quarter, as compared to
$18.5 million in the prior-year period. The decrease relates to lower
intangible asset amortization expense and lower stock award amortization
expense during the second quarter of fiscal 2010, partially offset by
higher selling and administrative expenses from Hetronic, which was
acquired in September 2008. Additionally, the selling and administrative
expenses for the second quarter of fiscal 2010 included $1.5 million in
legal fees relating to the Delphi supply arrangement dispute. Due to the
significant drop in sales and increased legal fees experienced during the
quarter, selling and administrative expenses as a percentage of sales
increased to 16.6 percent in the second quarter of fiscal 2010, compared to
15.3 percent in the same period of fiscal 2009.
The effective income tax rate was an expense of 9.7 percent in the second
quarter of fiscal 2010 compared to a benefit of 168.3 percent in the same
period of fiscal 2009. The higher effective tax rate in the fiscal 2010
second 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 second 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.
Six-Month Period Fiscal 2010
For the six-month period ended October 31, 2009, net sales decreased $67.5
million, or 26.4 percent, to $188.3 million from $255.8 million for the
six-month period ended November 1, 2008. Net income decreased $4.9 million,
or 70.0 percent, to $2.1 million, or $0.06 per share, in the fiscal 2010
six-month period compared to $7.0 million, or $0.19 per share, in the
fiscal 2009 six-month period.
The decrease in net income is due mainly to lower sales, lower interest
income and increased income taxes partially offset by lower restructuring
expenses, lower other expense and lower costs due to restructuring and
consolidation efforts.
In the six-month period of fiscal 2010, Automotive segment net sales were
negatively impacted by lower sales to Delphi Corporation due to the
cancellation of the supply arrangement by Delphi, planned lower Chrysler
sales, and the softening of the global economic environment, especially the
effect on the North American automotive industry, but were also favorably
impacted by $1.7 million relating to a one-time reversal of pricing
contingencies which were accrued over several years and are no longer
required.
The Company recorded a restructuring charge during the six-month period of
fiscal year 2010 of $6.8 million ($6.2 million after-tax), or $0.17 per
share, compared to $11.2 million ($7.3 million after-tax), or $0.19 per
share, in the fiscal 2009 six-month period. Excluding restructuring charges
in both periods and the $1.7 million reversal of one-time pricing
contingencies included in net sales in the Fiscal 2010 period, Methode's
net income was $7.1 million, or $0.19 per share, in the first six months of
fiscal 2010 compared to net income of $14.4 million, or $0.38 per share, in
the same period of fiscal 2009.
Consolidated cost of products sold decreased $54.5 million, or 26.8
percent, to $148.7 million in the fiscal 2010 six-month period, compared to
$203.2 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 79.4 percent in the first six months of fiscal years 2010 and
2009, respectively.
Consolidated gross margins as a percentage of sales increased to 22.4
percent in the fiscal 2010 six-month period from 21.2 percent in the
comparable period of fiscal 2009 despite a 26.4 percent drop in sales,
largely due to the restructuring actions previously taken to reduce the
cost structure as a result of the sustained change in the global economic
environment. Excluding the $0.7 million Delphi asset write-down and the
$1.7 million reversal of one-time pricing contingencies included in net
sales, consolidated gross margins as a percentage of sales was 22.0 percent
for the first six months of fiscal 2010.
Selling and administrative expenses decreased $2.7 million, or 7.7 percent,
to $32.3 million for the six months ended October 31, 2009, from $35.0
million for the six months ended November 1, 2008. The decrease is due to
lower intangible asset amortization expense and lower stock award
amortization expense during the first half of fiscal 2010, partially offset
by selling and administrative expenses from Hetronic, acquired in September
2008. In addition, the selling and administrative expenses for the first
half of fiscal 2010 included $1.9 million in legal fees relating to the
Delphi supply arrangement dispute. Selling and administrative expenses as a
percentage of net sales increased to 17.2 percent in the six months ended
October 31, 2009, from 13.7 percent for the six months ended November 1,
2008.
Income tax expense was 19.8 percent in the first six months of fiscal 2010
compared with 12.5 percent in the same period of fiscal 2009. The higher
effective tax rate in the fiscal 2010 six-month period 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. The effective tax rates for the first half of 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 earnings and a higher
percentage of earnings at those foreign operations.
Delphi Litigation
Delphi terminated its supply arrangement with the Company effective
September 10, 2009. The Company is contesting Delphi's right to terminate
this long-term supply arrangement, and the parties are engaged in
litigation regarding this supply arrangement and the Company's intellectual
property. The Company ceased supplying product to Delphi subsequent to
September 10, 2009.
Management Comments
President and Chief Executive Officer Donald W. Duda said, "Methode's
performance in the second quarter of fiscal 2010 was strong on a sequential
basis for both our Automotive and Interconnect segments, with sales up over
the first quarter of Fiscal 2010 in both segments. However, Automotive
segment results in the second quarter of fiscal 2010 were impacted
positively by pricing contingencies that are no longer needed, offset by a
decrease in sales to Delphi.
"Our third and fourth quarter Fiscal 2010 results for the Automotive
segment will continue to be impacted by the cancellation of the Delphi
supply agreement and associated litigation expense, as well as expected
continued volatility in all our business segments."
Mr. Duda concluded, "Even though Methode's consolidated sales were down
quarter over quarter, our ability to improve profitability remains strong
through our exit of legacy automotive business and our significant
restructuring efforts. Throughout this and the last fiscal year, we have
taken actions to align our expense levels with the expectation of a long
challenging economic environment, with our key objective to improve margins
while operating at significantly lower sales levels. Our results thus far
in Fiscal 2010 validate our strategy."
Conference Call
Today, 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. 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 December 24 by dialing (877)
660-6853 (domestic) or (201) 612-7415 and providing Account number 286 and
Conference ID number 338766. 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; (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
October 31, November 1,
2009 2008
----------- -----------
Net sales $ 98,496 $ 121,304
Other income 1,072 959
Cost of products sold 77,784 97,815
Restructuring 3,156 6,284
Selling and administrative expenses 16,413 18,537
Income from operations 2,215 (373)
Interest income/(expense), net (45) 469
Other income/(expense), net 143 (610)
Income/(loss) before income taxes 2,313 (514)
Income tax expense/(benefit) 225 (865)
Net income 2,088 351
Less: Net income attributable to noncontrolling
interest (36) (113)
Net income attributable to Methode Electronics, Inc. 2,052 238
Basic earnings per common share $ 0.06 $ 0.01
Diluted earnings per common share $ 0.06 $ 0.01
Average Number of Common Shares Outstanding:
Basic 36,644 37,068
Diluted 36,868 37,551
Six Months Ended
October 31, November 1,
2009 2008
----------- -----------
Net sales $ 188,272 $ 255,818
Other income 2,459 1,692
Cost of products sold 148,693 203,245
Restructuring 6,767 11,201
Selling and administrative expenses 32,286 34,934
Income from operations 2,985 8,130
Interest income/(expense), net (147) 1,003
Other expense, net (252) (879)
Income before income taxes 2,586 8,254
Income tax expense 511 1,032
Net income 2,075 7,222
Less: Net income attributable to noncontrolling
interest (42) (168)
Net income attributable to Methode Electronics, Inc. 2,033 7,054
Basic earnings per common share $ 0.06 $ 0.19
Diluted earnings per common share $ 0.06 $ 0.19
Average Number of Common Shares Outstanding:
Basic 36,641 37,120
Diluted 36,823 37,584
Methode Electronics, Inc.
Summary Balance Sheets
(In thousands)
October 31,
2009 May 2, 2009
------------ ------------
(unaudited)
Cash $ 60,274 $ 54,030
Accounts receivable - net 71,837 60,406
Inventories 41,254 40,426
Other current assets 20,420 26,384
------------ ------------
Total Current Assets 193,785 181,246
Property, plant and equipment - net 68,350 69,917
Goodwill 11,771 11,771
Intangible assets - net 19,583 20,501
Other assets 22,722 21,853
------------ ------------
Total Assets $ 316,211 $ 305,288
============ ============
Accounts payable $ 31,075 $ 24,495
Other current liabilities 27,860 29,023
------------ ------------
Total Current Liabilities 58,935 53,518
Other liabilities 16,459 16,869
------------ ------------
Total Methode Electronics, Inc. shareholders'
equity 237,301 231,776
Noncontrolling interest 3,516 3,125
------------ ------------
Total shareholders' equity 240,817 234,901
------------ ------------
Total Liabilities and Shareholders' Equity $ 316,211 $ 305,288
============ ============
Methode Electronics, Inc.
Summary Statements of Cash Flow (unaudited)
(In thousands)
Six Months Ended
October 31, November 1,
2009 2008
----------- -----------
Operating Activities:
Net income $ 2,075 $ 7,222
Non-cash translation loss - 2,463
Provision for depreciation 10,118 12,489
Impairment of tangible assets 710 3,177
Amortization of intangible assets 1,123 3,052
Amortization of stock awards and stock options 507 1,605
Changes in operating assets and liabilities 1,044 (1,160)
Other 48 567
----------- -----------
Net Cash Provided by Operating Activities 15,625 29,415
Investing Activities:
Purchases of property, plant and equipment (5,821) (9,557)
Acquisitions of businesses - (56,785)
Acquisitions of businesses and technology (181) (225)
Other - (209)
----------- -----------
Net Cash Used in Investing Activities (6,002) (66,776)
Financing Activities:
Repurchase of common stock - (5,137)
Proceeds from exercise of stock options - 110
Tax benefit from stock options and awards - 46
Dividends (5,233) (4,528)
----------- -----------
Net Cash Used in Financing Activities (5,233) (9,509)
Effect of foreign exchange rate changes on cash 1,854 (4,629)
----------- -----------
Increase/(Decrease) in Cash and Cash Equivalents 6,244 (51,499)
Cash and Cash Equivalents at Beginning of Period 54,030 104,305
----------- -----------
Cash and Cash Equivalents at End of Period $ 60,274 $ 52,806
=========== ===========
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