CHICAGO, IL--(Marketwire - March 4, 2010) - Methode Electronics, Inc. (
NYSE:
MEI), a global
developer of custom engineered and application specific products and
solutions, today announced operating results for the Fiscal 2010 third
quarter ended January 30, 2010.
Third-Quarter Fiscal 2010
Methode's third-quarter Fiscal 2010 net sales increased $8.3 million, or
10.3 percent, to $89.1 million from $80.8 million in the third quarter of
Fiscal 2009. Quarter over quarter, Automotive segment net sales increased
$7.0 million, or 19.1 percent, Interconnect segment net sales improved $0.6
million, or 1.8 percent, and Power Products segment net sales increased
$0.4 million, or 4.3 percent.
Net loss decreased $22.5 million to a loss of $4.5 million, or $0.12 per
share, in the third quarter of Fiscal 2010 compared to a loss of $27.0
million, or $0.74 per share, in the same period of Fiscal 2009. The
decrease in net loss in the third quarter of Fiscal 2010 compared to the
third quarter of Fiscal 2009 was due to no goodwill and intangible assets
write-off charges in the Fiscal 2010 period compared to $32.7 million of
write-offs in the Fiscal 2009 period, along with higher Fiscal 2010
third-quarter sales and gross margins and lower Fiscal 2010 restructuring
costs, partially offset by higher Fiscal 2010 selling and administrative
costs related to the Delphi Automotive Systems ("Delphi") litigation.
Excluding restructuring charges in both periods and the impairment of
goodwill and intangible assets charge in the third quarter of Fiscal 2009,
Methode's net loss was $3.9 million, or $0.11 per share, in the third
quarter of Fiscal 2010 compared to a net loss of $4.4 million, or $0.13 per
share, in the same period of Fiscal 2009.
Methode recorded restructuring charges during the Fiscal 2010 third quarter
of $0.6 million ($0.6 million after-tax), or $0.02 per share, and during
the Fiscal 2009 third quarter of $3.8 million ($2.5 million after-tax), or
$0.07 per share. The Company expects to complete its restructuring
activities during the fourth quarter of Fiscal 2010 and estimates that it
will record additional pre-tax charges in Fiscal 2010 of between $0.5
million and $1.3 million.
Excluding the restructuring charges in both periods, and the impairment of
goodwill and intangible assets charge in the third quarter of Fiscal 2009,
the loss before income taxes was $1.5 million in the third quarter of
Fiscal 2010 compared to a loss of $3.8 million in the same period of Fiscal
2009, for an improvement of $2.3 million on increased net sales of $8.3
million.
Consolidated cost of products sold increased $4.4 million, or 6.2 percent,
to $74.9 million in the Fiscal 2010 third quarter, compared to $70.5
million in the same period of Fiscal 2009. Consolidated cost of products
sold as a percentage of sales was 84.1 percent and 87.3 percent in the
third quarters of Fiscal 2010 and 2009, respectively. This improvement was
driven by higher sales volumes and the benefit of the Company's
restructuring efforts to reduce costs and consolidate facilities.
Consolidated gross margins as a percentage of sales increased to 17.2
percent in the Fiscal 2010 third quarter from 13.7 percent in the
comparable period of Fiscal 2009, largely due to the restructuring actions
previously taken to reduce the Company's cost structure.
Consolidated selling and administrative expenses increased $2.4 million, or
16.3 percent, to $17.1 million in the Fiscal 2010 third quarter, as
compared to $14.7 million in the prior-year period. Selling and
administrative expenses for the third quarter of Fiscal 2010 were
unfavorable by $0.8 million in bonuses and professional fees and $0.3
million in sales and marketing expenses, offset by net favorable stock
award and intangible assets amortization expense of $1.1 million as
compared to the third quarter of Fiscal 2009. Additionally, third-quarter
Fiscal 2010 selling and administrative expenses included $2.4 million in
legal fees relating to the Delphi supply agreement and intellectual
property litigation. Consequently, selling and administrative expenses as
a percentage of sales increased to 19.2 percent in the third quarter of
Fiscal 2010, compared to 18.2 percent in the same period of Fiscal 2009.
Income taxes - expense/(benefit) increased $15.6 million to an expense of
$2.3 million for the third quarter of Fiscal 2010, compared to a tax
benefit of $13.3 million for the same period of Fiscal 2009. The expense
in the Fiscal 2010 third quarter includes taxes on foreign profits of $0.6
million, book to income tax return adjustments of $2.8 million and other
adjustments of $1.6 million. In addition, a benefit of $2.7 million was
recorded due to the settlement of uncertain tax positions and related
interest from prior periods. For the third quarter of Fiscal 2010, the
Company has a loss before income taxes. 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 third quarters 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 operations and
a higher percentage of earnings at those foreign operations.
In the Automotive segment, net sales improved 19.1 percent to $43.6 million
in the third quarter of Fiscal 2010 from $36.6 million in the third quarter
of Fiscal 2009, attributable to stronger sales in the Company's European
and Asian markets, partially offset by lower sales attributable to the
planned exit of legacy automotive products, no sales to Delphi due to the
cancellation of a supply agreement by Delphi, and the continuing
instability of the global automotive market. Gross margins as a percentage
of sales increased to 8.0 percent in the Fiscal 2010 third quarter from 5.2
percent in the comparable period of Fiscal 2009. In the Fiscal 2010 third
quarter, selling and administrative expenses increased $2.5 million to $4.5
million from $2.0 million in the same period of Fiscal 2009 primarily due
to $2.4 million in legal fees associated with the Delphi supply agreement
and intellectual property litigation.
In the Interconnect segment, net sales increased 1.8 percent to $33.8
million in the Fiscal 2010 third quarter compared to the Fiscal 2009 third
quarter. Due primarily to the Company's restructuring efforts in prior
periods, cost of products sold decreased 6.9 percent in the Fiscal 2010
third quarter compared to the same period of Fiscal 2009, gross margins as
a percentage of sales improved to 28.1 percent in the third quarter of
Fiscal 2010 from 21.4 percent in the same quarter of Fiscal 2009, and
selling and administrative expenses as a percent of sales decreased to 16.9
percent in the Fiscal 2010 third quarter compared to 20.5 percent in the
Fiscal 2009 third quarter.
In the Power Products segment, net sales in the third quarter of Fiscal
2010 improved 4.3 percent over the same quarter of Fiscal 2009. Cost of
products sold as a percent of sales decreased 12.5 percent, and gross
margins increased 116.7 percent in the third quarter of Fiscal 2010 over
the third quarter of Fiscal 2009 due mainly to the Company's restructuring
efforts in prior periods.
Nine-Month Period Fiscal 2010
For the nine-month period ended January 30, 2010, net sales decreased $59.2
million, or 17.6 percent, to $277.4 million from $336.6 million for the
nine-month period ended January 31, 2009. Net loss decreased $17.5
million, or 87.9 percent, to $2.4 million, or $0.07 per share, in the
Fiscal 2010 nine-month period compared to a loss of $19.9 million, or $0.54
per share, in the Fiscal 2009 nine-month period.
Net loss in the Fiscal 2010 nine months improved compared to the Fiscal
2009 nine months due to no goodwill and intangible assets write-off
expenses in the Fiscal 2010 period compared with $32.7 million of
write-offs in the 2009 period, and lower restructuring charges,
amortization expense and other expense in the Fiscal 2010 period, partially
offset by lower sales and gross margins.
The Company recorded a restructuring charge during the nine-month period of
Fiscal 2010 of $7.3 million ($6.8 million after-tax), or $0.18 per share,
compared to $15.0 million ($9.8 million after-tax), or $0.27 per share, in
the Fiscal 2009 nine-month period. Excluding restructuring charges in both
periods, a $1.7 million reversal of one-time pricing contingencies included
in net sales in the Fiscal 2010 second quarter and impairment of goodwill
and intangible assets charge in the Fiscal 2009 nine-month period,
Methode's net income was $3.2 million, or $0.09 per share, in the first
nine months of Fiscal 2010 compared to net income of $12.5 million, or
$0.34 per share, in the same period of Fiscal 2009.
Consolidated cost of products sold decreased $50.2 million, or 18.3
percent, to $223.6 million in the Fiscal 2010 nine-month period, compared
to $273.8 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. Cost of products sold as a percentage of sales
was 80.6 percent and 81.3 percent in the first nine months of Fiscal 2010
and 2009, respectively.
Consolidated gross margins as a percentage of sales improved to 20.7
percent in the Fiscal 2010 nine-month period from 19.4 percent in the
comparable period of Fiscal 2009 despite the 17.6 percent decline in sales,
largely due to higher other income in the nine-month period of Fiscal 2010
as well as restructuring and consolidation efforts that were undertaken in
prior periods to reduce the Company's cost structure.
Selling and administrative expenses decreased $0.1 million, or 0.2 percent,
to $49.4 million for the nine months ended January 30, 2010, from $49.5
million for the nine months ended January 31, 2009. The decrease is due to
lower intangible assets amortization expense and lower stock award
amortization expense during the first nine months of Fiscal 2010, partially
offset by $4.3 million in legal fees relating to the Delphi supply
agreement and intellectual property litigation. Selling and administrative
expenses as a percentage of net sales increased to 17.8 percent in the nine
months of Fiscal 2010 from 14.7 percent for the nine months of Fiscal 2009.
Income taxes - expense/(benefit) increased by $15.1 million to an expense
of $2.8 million for the nine months of Fiscal 2010, compared to a tax
benefit of $12.3 million for the same period of Fiscal 2009. The $2.8
million expense for the Fiscal 2010 period includes taxes on foreign
profits of $1.1 million, book to income tax return adjustments of $2.8
million and other adjustments of $1.6 million. In addition, a benefit of
$2.7 million was recorded due to the settlement of uncertain tax positions
and related interest from prior periods. For the first nine months of
Fiscal 2010, the Company has a loss before income taxes. 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 nine-month
periods 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 operations and a higher percentage of earnings at those foreign
operations.
In the nine-month period of Fiscal 2010, the Automotive segment net sales,
which decreased 22.8 percent to $151.6 million from $196.5 million in the
nine-month period of Fiscal 2009, were negatively impacted by lower sales
to Delphi due to the cancellation of the supply agreement by Delphi,
planned lower legacy automotive products sales, and the softening of the
global economic environment, 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. Interconnect segment
net sales decreased $12.3 million, or 12.2 percent, to $88.5 million for
the nine months of Fiscal 2010 from $100.8 million for the nine months of
Fiscal 2009. Net sales were favorably impacted by the Hetronic acquisition
in September 2008, but offset by sales declines in North America and Asia.
Power Products segment net sales decreased $2.6 million, or 8.0 percent, to
$30.1 million for the Fiscal 2010 nine-month period compared to $32.7
million for the same period of Fiscal 2009 driven mainly by lower demand
for busbar, flexible cabling and heat sink products.
Delphi Litigation
Delphi terminated its supply agreement with the Company effective September
10, 2009. The Company is contesting Delphi's right to terminate this
long-term supply agreement, and the parties are engaged in litigation
regarding this supply agreement 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, "Although the
general economic climate continues to be extremely challenging, we executed
relatively well in the third quarter in what are still difficult end
markets. Year over year, third-quarter Fiscal 2010 consolidated sales
increased just over 10 percent, with improvement in each of our segments.
More importantly, third-quarter gross margins also improved in each of our
segments year over year due primarily to the impact of the significant
restructuring activities we undertook.
"Additionally, the Interconnect and Power Products segments were profitable
in this third quarter, as compared to losses in the same period last year.
While the Automotive segment incurred a loss in the current third quarter,
our strategy to exit legacy automotive sales improved the results for this
segment over last year's third quarter."
Mr. Duda continued, "On a sequential basis, comparing the Fiscal 2010 third
quarter and the second quarter, we saw solid improvement in sales and
strong improvement in gross margins in the Interconnect and Power Products
segments. However, as anticipated, third quarter Automotive segment sales
declined from the second quarter. This decrease was largely driven by
lower sales to Delphi of $6.6 million, $3.4 million in reduced sales to
Ford Motor Company as a result of the transfer of all production at
Methode's Reynosa, Mexico, facility to another Ford designated supplier,
and approximately $2.6 million primarily related to programs going end of
life as anticipated. Third-quarter gross margins in the Automotive segment
were likewise affected by the significantly reduced volumes and associated
overhead coverage, as well as expenses associated with the sales and
engineering efforts to book and launch new programs to return Methode's
North American automotive business to profitability.
"The end markets related to some of our business units are undergoing some
recovery, which can be seen in the improved sequential results in our
Interconnect and Power Products segments from the second to the third
quarter of Fiscal 2010. However, while I feel confident about our
long-term ability to capitalize on our plans, the near-term is less
certain, and we remain guarded in our business outlook."
Mr. Duda concluded, "During the nine months of Fiscal 2010, we've seen the
beginning of the rebuilding of each of our business segments' sales
streams, as well as improving margins due to our extensive restructuring
efforts. We believe the benefit of these actions will build over time as
we continue to win new business and gain market share. With our strong
cash position of over $57 million and positive operating cash flow of $15.9
million for the first nine months of Fiscal 2010, we remain in a strong
financial position to execute 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) 407-9210
(domestic) or (201) 689-8049 (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 March 18 by dialing (877) 660-6853
(domestic) or (201) 612-7415 (international) and providing Account number:
286 and Conference ID number: 344842. On the Internet, a replay will be
available for 30 days through the Company's Web site,
www.methode.com, by
selecting the Investor Relations page and then clicking on the "Webcast"
icon.
About Methode Electronics, Inc.
Methode Electronics, Inc. (
NYSE:
MEI) is a global developer of custom
engineered and application specific products and solutions with
manufacturing, design and testing facilities in 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 and
construction, industrial safety radio remote control markets; (3) seasonal
and cyclical nature of some of our businesses; (4) ability to protect our
intellectual property or if we infringe, or are alleged to infringe, on
another person's intellectual property; (5) customary risks related to
conducting global operations; (6) ability to avoid design or manufacturing
defects; (7) ability to successfully benefit from acquisitions and acquired
technology; (8)ability to compete effectively in our technology-based
businesses and the markets in which we operate ; (9) affect of acquisition
or divestiture of various business operations on our business, financial
condition and operating results; (10) ability to keep pace with rapid
technological changes; (11) dependence on the availability and price of raw
materials; (12) oil prices could affect our automotive customers future
results; (13) incurrence of additional restructuring charges, goodwill and
other asset impairments; and (14) incurrence of additional goodwill and
other asset impairments.
Methode Electronics, Inc.
Financial Highlights
(In thousands, except per share data, unaudited)
Three Months Ended
January 30, January 31,
2010 2009
------------ ------------
Net sales $ 89,127 $ 80,781
Other income 1,116 751
Cost of products sold 74,924 70,512
Restructuring 559 3,796
Impairment of goodwill and intangible assets - 32,678
Selling and administrative expenses 17,075 14,688
Loss from operations (2,315) (40,142)
Interest income/(expense), net (22) 212
Other income/(expense), net 264 (346)
Loss before income taxes (2,073) (40,276)
Income tax expense/(benefit) 2,249 (13,346)
Net loss (4,322) (26,930)
Less: Net income attributable to
noncontrolling interest (153) (55)
Net loss attributable to Methode Electronics,
Inc. (4,475) (26,985)
Basic and diluted loss per common share $ (0.12) $ (0.74)
Average Number of Common Shares Outstanding:
Basic and diluted 36,644 36,597
Nine Months Ended
January 30, January 31,
2010 2009
------------ ------------
Net sales $ 277,398 $ 336,599
Other income 3,575 2,443
Cost of products sold 223,617 273,757
Restructuring 7,327 14,997
Impairment of goodwill and intangible assets - 32,678
Selling and administrative expenses 49,358 49,624
Income/(loss) from operations 671 (32,014)
Interest income/(expense), net (169) 1,215
Other income/(expense), net 12 (1,225)
Income/(loss) before income taxes 514 (32,024)
Income tax expense/(benefit) 2,760 (12,314)
Net loss (2,246) (19,710)
Less: Net income attributable to
noncontrolling interest (195) (222)
Net loss attributable to Methode Electronics,
Inc. (2,441) (19,932)
Basic and diluted loss per common share $ (0.07) $ (0.54)
Average Number of Common Shares Outstanding:
Basic and diluted 36,642 36,964
Methode Electronics, Inc.
Financial Highlights
Summary Balance Sheets
(In thousands)
January 30, May 2,
2010 2009
------------- -------------
(unaudited)
Cash $ 57,245 $ 54,030
Accounts receivable - net 67,595 60,406
Inventories 30,479 37,244
Other current assets 17,276 26,384
------------- -------------
Total Current Assets 172,595 178,064
Property, plant and equipment - net 64,990 69,917
Goodwill 11,771 11,771
Intangible assets - net 19,276 20,501
Other assets 29,616 25,035
------------- -------------
Total Assets $ 298,248 $ 305,288
============= =============
Accounts payable $ 27,989 $ 24,495
Other current liabilities 28,128 29,023
------------- -------------
Total Current Liabilities 56,117 53,518
Other liabilities 12,823 16,869
------------- -------------
Total Methode Electronics, Inc. shareholders'
equity 225,840 231,776
Noncontrolling interest 3,468 3,125
------------- -------------
Total shareholders' equity 229,308 234,901
------------- -------------
Total Liabilities and Shareholders' Equity $ 298,248 $ 305,288
============= =============
Methode Electronics, Inc.
Financial Highlights
Summary Statements of Cash Flows
(In thousands)
Nine Months Ended
January 30, January 31,
2010 2009
------------ ------------
Operating Activities:
Net loss $ (2,246) $ (19,710)
Non-cash translation loss - 2,463
Provision for depreciation 13,691 19,937
Impairment of tangible assets 710 3,177
Impairment of goodwill and intangible assets - 32,678
Amortization of intangible assets 1,689 5,408
Amortization of stock awards and stock
options 724 696
Changes in operating assets and liabilities 1,319 (6,844)
Other - 576
------------ ------------
Net Cash Provided by Operating Activities 15,887 38,381
Investing Activities:
Purchases of property, plant and equipment (7,816) (12,242)
Acquisitions of businesses - (57,457)
Acquisitions of businesses and technology (440) (903)
Proceeds from life insurance policies 2,407 -
Other - (425)
------------ ------------
Net Cash Used in Investing Activities (5,849) (71,027)
Financing Activities:
Repurchase of common stock - (5,137)
Proceeds from exercise of stock options - 110
Tax benefit from stock options and awards - 46
Dividends (7,823) (7,154)
------------ ------------
Net Cash Used in Financing Activities (7,823) (12,135)
Effect of foreign exchange rate changes on cash 1,000 (5,097)
------------ ------------
Increase/(Decrease) in Cash and Cash
Equivalents 3,215 (49,878)
Cash and Cash Equivalents at Beginning of
Period 54,030 104,305
------------ ------------
Cash and Cash Equivalents at End of Period $ 57,245 $ 54,427
============ ============
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