CHICAGO, IL--(Marketwire - March 12, 2009) - Methode Electronics, Inc. (
NYSE:
MEI), a global
designer and manufacturer of electro-mechanical devices, today announced
operating results for the fiscal year 2009 third-quarter and nine-month
periods ended January 31, 2009. Due to the timing of the Company's fiscal
calendar, the three months ended January 31, 2009, represent 13 weeks of
results, while the three months ended February 2, 2008, represent 14 weeks
of results. In addition, the nine months ended January 31, 2009, represent
39 weeks of results, while the nine months ended February 2, 2008,
represent 40 weeks of results.
Third-Quarter Fiscal Year 2009
Methode's third-quarter fiscal year 2009 net sales decreased $57.7 million,
or 41.7 percent, to $80.8 million from $138.5 million in the third-quarter
fiscal year 2008. Net income decreased $36.8 million to a loss of $27.0
million, or $0.74 per share, in the third-quarter fiscal year 2009 compared
to income of $9.8 million, or $0.26 per share, in the third-quarter fiscal
year 2008.
The decrease in net income in the fiscal year 2009 third quarter is due to
an impairment of goodwill and intangible assets charge of $32.7 million
($20.1 million after-tax, or $0.54 per share), restructuring charges of
$3.8 million ($2.5 million after tax, or $0.07 per share), lower sales
attributable to the softening of the global economic environment,
especially the effect on the North American auto market, and higher selling
and administrative expenses related to the Hetronic acquisition compared to
the fiscal year 2008 third quarter, which had no impairment charge and
restructuring charges of $0.5 million ($0.3 million after-tax, or $0.01 per
share).
Based on Methode's reduced market capitalization and general business
declines in the third quarter, the Company performed goodwill impairment
tests in accordance with SFAS No. 142 on the reporting units that had
goodwill as of November 1, 2008. Because of these tests, it was determined
that the fair value of the net assets of these reporting units was less
than the carrying value. As a result, a goodwill impairment charge was
recorded for $18.1 million in the third quarter of fiscal year 2009.
Also, in accordance with SFAS No. 144, the Company determined that certain
identifiable intangible assets of its TouchSensor business were impaired
based on the Company's future estimates of the undiscounted cash flows,
which resulted in an impairment charge of $14.6 million during the third
quarter of fiscal year 2009.
In the third quarter of fiscal year 2009, Automotive segment net sales were
negatively impacted by the continued softening of the global economic
environment, especially the effect on the North American auto industry, and
by negligible Chrysler sales volumes due to the Company's decision to exit
this business, compared to $13.2 million of Chrysler revenues in the same
period of fiscal year 2008. The transfer of the Chrysler product was
substantially completed during the second quarter of fiscal year 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. Excluding the restructuring
and impairment of goodwill and intangible assets charges, Methode's net
loss was $4.4 million, or $0.13 per share, in the third-quarter fiscal year
2009 compared to net income of $10.0 million, or $0.27 per share, in the
same period of fiscal year 2008, excluding $0.5 million, in restructuring
charges. The Company expects to complete this restructuring during fiscal
year 2010.
Consolidated cost of products sold decreased $38.5 million, or 35.3
percent, to $70.5 million in the fiscal year 2009 third quarter, compared
to $109.0 million in the same period of fiscal year 2008. The decrease is
due to lower sales volumes. Cost of products sold as a percentage of sales
was 87.3 percent and 78.7 percent in the third-quarter fiscal years 2009
and 2008, respectively. The increase in cost of products sold as a
percentage of net sales in the current period is due to manufacturing
inefficiencies caused by the inability to adjust overhead costs in line
with the significant, sudden drop in sales experienced in the third quarter
of fiscal year 2009.
Selling and administrative expenses decreased $3.0 million, or 16.9
percent, to $14.8 million for the third-quarter fiscal year 2009, compared
to $17.8 million in the prior-year period. The decrease relates to lower
bonus and commission expenses relating to lower sales and earnings.
Because of the significant, sudden drop in sales, selling and
administrative expenses as a percentage of sales increased to 18.3 percent
in the third-quarter fiscal year 2009, compared to 12.9 percent in the same
period of fiscal year 2008.
Income tax rate was a benefit of 33.1 percent in the third quarter of
fiscal year 2009 compared with an income tax expense of 14.0 percent in the
same period of fiscal year 2008 due to impairment and restructuring charges
and the slowing of business, which caused a loss before income taxes in
fiscal year 2009. The effective tax rates for the third quarters of fiscal
years 2009 and 2008 reflect utilization of foreign investment tax credits
and the effect of lower tax rates on earnings of the Company's foreign
operations and a higher percentage of earnings at those foreign operations.
Nine-Month Period Ended January 31, 2009
For the nine-month period ended January 31, 2009, net sales decreased $60.1
million, or 15.1 percent, to $336.6 million from $396.7 million for the
nine-month period ended February 2, 2008. Net income decreased $44.3
million to a loss of $17.5 million, or $0.47 per share, in the fiscal year
2009 nine-month period compared to income of $26.8 million, or $0.72 per
share, in the fiscal year 2008 nine-month period.
The decrease in net income is due mainly to an impairment of goodwill and
intangible assets charge of $32.7 million ($20.1 million after-tax, or
$0.54 per share), restructuring charges of $15.0 million ($9.8 million
after-tax, or $0.27 per share), and lower sales attributable to the
softening of the global economic environment in the fiscal year 2009
nine-month period, partially offset by favorable other income. In the
fiscal year 2008 nine-month period, there was no impairment charge and
restructuring charges were $0.5 million ($0.3 million after-tax, or $0.01
per share).
In the nine-month period of fiscal year 2009, Automotive segment net sales
were negatively impacted by the softening of the global economic
environment, especially the effect on the North American automotive
industry, and by planned lower Chrysler sales volume ($14.3 million in
fiscal year 2009 compared to $40.3 million in fiscal year 2008) due to the
Company's decision to exit this business.
Excluding the restructuring and impairment of goodwill and intangible
assets charges, Methode achieved net income of $12.5 million, or $0.34 per
share, in the first nine months of fiscal year 2009 compared to $27.1
million, or $0.72 per share, in the same period of fiscal year 2008,
excluding $0.5 million in restructuring charges.
Consolidated cost of products sold decreased $39.5 million, or 12.6
percent, to $273.8 million in the fiscal year 2009 nine-month period,
compared to $313.3 million in the same period of fiscal year 2008. The
decrease is due to lower sales volumes. Cost of products sold as a
percentage of sales was 81.3 percent and 79.0 percent in the first nine
months of fiscal years 2009 and 2008, respectively.
Selling and administrative expenses decreased $0.1 million, or 0.2 percent,
to $49.7 million for the nine months ended January 31, 2009, from $49.8
million for the nine months ended February 2, 2008. Higher selling and
administrative expenses related to higher amortization expense from the
Hetronic, VEP and Touchsensor acquisitions were offset by lower commission
and bonus expense in the first nine months of fiscal year 2009 compared to
the same period in 2008. As a percentage of sales, selling and
administrative expenses increased to 14.8 percent in the first nine months
fiscal year 2009, compared to 12.6 percent in the same period of fiscal
year 2008.
Income tax rate was a benefit of 41.3 percent in the first nine months of
fiscal year 2009 compared with an income tax expense of 20.7 percent in the
same period of fiscal year 2008, as restructuring charges and decreased
earnings at the Company's U.S.-based businesses caused a loss before income
taxes in fiscal year 2009. The effective tax rates for the first nine
months of fiscal years 2009 and 2008 reflect utilization of foreign
investment tax credits and the effect of lower tax rates on earnings of the
Company's foreign operations and a higher percentage of earnings at those
foreign operations.
Additional Restructuring
The Company announced today several additional restructuring actions to
further reduce its exposure to the North American automotive industry and
to migrate manufacturing to lower cost regions to consolidate facilities
and reduce costs. After these actions Methode's principal manufacturing
operations will be in Mexico, Malta and China.
All Ford Motor Company production at Methode's Reynosa, Mexico, facility
will be moved to another supplier. This business contributed a substantial
portion of the third quarter operating losses. TouchSensor manufacturing
currently in west suburban Chicago, Illinois, will be moved to Monterrey,
Mexico. Additionally, the Company's operations in Shanghai, China, will be
consolidated to two facilities from three. The addition of a plant in
Morocco has been put on indefinite hold. Power Product manufacturing for
European customers will now take place in Methode's Malta facility. The
Company was awarded grant monies by the Maltese government to assist with
this expansion.
In total, this additional restructuring will affect approximately 850
employees worldwide. The Company estimates that it will record a pre-tax
charge between $9.0 million and $18.0 million ($7.9 million and $15.1
million net of tax), or between $0.21 and $0.40 per share, during fiscal
years 2009 and 2010. The cash portion of this charge will be between $7.0
million and $8.0 million.
Management Comments
President and Chief Executive Officer Donald W. Duda said, "The
increasingly challenging economic environment and the severe downturn in
the worldwide automotive industry have negatively impacted our results in
the third quarter of this fiscal year. In response we have accelerated our
strategy to reduce our exposure to legacy automotive business, particularly
with the Detroit automakers. These actions, once completed, are expected to
reduce Methode's revenues derived from the automotive industry to less than
40 percent of our overall revenue base by fiscal year 2011. This is in
stark contrast to automotive revenues of 75 percent in fiscal year 2005."
Duda continued, "We will be exiting production for Ford at the expiration
of our manufacturing commitment at our facility in Reynosa, Mexico, which
should be completed by the end of July 2009. Although these actions will
reduce revenues in the short term, they should improve our cash flow
position and allow our management team to concentrate on the strategic
direction for Methode in fiscal year 2010 and beyond."
Duda added, "Although the global recession will continue to unfavorably
impact the markets Methode serves in the near term, we are taking the
necessary steps to reduce our cost structure and improve cash flow. Our
long-term growth strategy continues to emphasize developing and acquiring
innovative and patented technology, thereby providing our customers leading
edge solutions while improving Methode's overall margins. We remain
optimistic about the future of Methode, which has remained financially
strong, generating $9.0 million in operating cash flow in the third
quarter, and ending the third quarter with $54.4 million in cash and no
debt."
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) 741-4244 (domestic) or (719) 325-4767 (international) and
provide passcode 4536039 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
19 by dialing (888) 203-1112 (domestic) or (719) 457-0820 and providing
pass code 4536039. 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 within the automotive
industry; (2) rising oil prices could affect our automotive customers
future results; (3) the seasonal and cyclical nature of some of our
businesses; (4) dependence on the automotive industry; (5) dependence on
the appliance, computer and communications industries; (6) intense pricing
pressures in the automotive industry; (7) increases in raw materials
prices; and (8) customary risks related to conducting global operations.
Methode Electronics, Inc.
Financial Highlights
(In thousands, except per share data, unaudited)
Three Months Ended
January 31, February 2,
2009 2008
------------ ------------
Net sales $ 80,781 $ 138,465
Other income 751 313
Cost of products sold 70,512 109,032
Restructuring 3,796 450
Impairment of goodwill and intangible assets 32,678 -
Selling and administrative expenses 14,743 17,707
Income/(loss) from operations (40,197) 11,589
Interest, net 212 652
Other, net (346) (923)
Income/(loss) before income taxes (40,331) 11,318
Income taxes/(benefit) (13,346) 1,561
Net income/(loss) (26,985) 9,757
Basic and diluted earnings/(loss) per common
share $ (0.74) $ 0.26
Average Number of Common Shares Outstanding:
Basic 36,597 37,138
Diluted 36,597 37,492
Nine Months Ended
January 31, February 2,
2009 2008
------------ ------------
Net sales $ 336,599 $ 396,713
Other income 2,443 986
Cost of products sold 273,757 313,267
Restructuring 14,997 450
Impairment of goodwill and intangible assets 32,678 -
Selling and administrative expenses 49,846 49,778
Income/(loss) from operations (32,236) 34,204
Interest, net 1,215 1,699
Other, net 1,238 (2,084)
Income/(loss) before income taxes (29,783) 33,819
Income taxes/(benefit) (12,314) 6,984
Net income/(loss) (17,469) 26,835
Basic earnings/(loss) per common share $ (0.47) $ 0.72
Diluted earnings/(loss) per common share $ (0.47) $ 0.72
Average Number of Common Shares Outstanding:
Basic 36,964 37,066
Diluted 36,964 37,479
Methode Electronics, Inc.
Summary Balance Sheet
(In thousands)
January 31, May 3,
2009 2008
------------ ------------
Cash $ 54,427 $ 104,305
Accounts receivable - net 51,325 85,805
Inventories 62,957 55,949
Other current assets 14,359 14,758
------------ ------------
Total Current Assets 183,068 260,817
Property, plant and equipment - net 75,090 90,280
Goodwill - net 50,620 54,476
Intangible assets - net 37,920 41,282
Other assets 39,168 23,365
------------ ------------
Total Assets $ 385,866 $ 470,220
============ ============
Accounts payable $ 19,864 $ 42,810
Other current liabilities 21,604 33,902
------------ ------------
Total Current Liabilities 41,468 76,712
Other liabilities 17,988 20,723
Shareholders' equity 326,410 372,785
----------- -------------
Total Liabilities and Shareholders' Equity $ 385,866 $ 470,220
============ ============
Methode Electronics, Inc.
Summary Statement of Cash Flow
(In thousands)
Nine Months Ended
January 31, February 2,
2009 2008
------------ ------------
Operating Activities:
Net income/(loss) $ (17,469) $ 26,835
Provision for depreciation 19,937 16,332
Impairment of tangible assets 3,177 -
Impairment of goodwill and intangible
assets 32,678 -
Amortization of intangibles 5,408 4,227
Amortization of stock awards and stock
options 696 2,479
Changes in operating assets and
liabilities (6,844) 7,615
Other 798 77
------------ ------------
Net Cash Provided by Operating Activities 38,381 57,565
Investing Activities:
Purchases of property, plant and equipment (12,242) (16,702)
Proceeds from sale of building - 960
Acquisitions of businesses (58,360) (7,090)
Joint venture dividend - (1,000)
Other (425) (407)
------------ ------------
Net Cash Used in Investing Activities (71,027) (24,239)
Financing Activities:
Repurchase of common stock (5,137) -
Proceeds from exercise of stock options 110 1,268
Tax benefit from stock options and awards 46 291
Dividends (7,154) (5,680)
------------ ------------
Net Cash Used in Financing Activities (12,135) (4,121)
Effect of foreign exchange rate changes on
cash (5,097) 1,230
------------ ------------
Increase/Decrease in Cash and Cash
Equivalents (49,878) 30,435
Cash and Cash Equivalents at Beginning
of Period 104,305 60,091
------------ ------------
Cash and Cash Equivalents at End of Period $ 54,427 $ 90,526
============ ============
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