Repurchased 1.2 Million Shares Under Share Repurchase Program During Third Quarter
CHICAGO, IL--(Marketwired - Mar 3, 2016) - Methode Electronics, Inc. (
Third Quarter Fiscal 2016
Methode's third-quarter Fiscal 2016 net sales decreased $21.4 million, or 10.4 percent, to $184.6 million from $206.0 million in the same quarter of Fiscal 2015. Year over year, currency rate fluctuations decreased net sales $2.9 million.
Net income decreased $9.9 million to $17.2 million, or $0.45 per share, in the third quarter of Fiscal 2016 from $27.1 million, or $0.68 per share, in the same period of Fiscal 2015.
Year over year, Fiscal 2016 third-quarter net income was negatively affected by:
Year over year, Fiscal 2016 third-quarter net income benefitted from:
Consolidated gross margins as a percentage of sales declined to 25.8 percent in the Fiscal 2016 third quarter from 27.3 percent in the Fiscal 2015 period primarily as a result of manufacturing inefficiencies related to decreased sales, particularly in the Power Products segment, and pricing concessions in the Automotive segment, partially offset by a favorable currency impact on raw materials and labor costs, as well as favorable commodity pricing of raw materials.
Selling and administrative expenses as a percentage of sales increased to 14.1 percent for the Fiscal 2016 third quarter compared to 10.4 percent in the same period last year. Selling and administrative expenses increased $4.6 million, or 21.4 percent, to $26.1 million in the Fiscal 2016 third quarter compared to $21.5 million in the prior-year third quarter due primarily to higher legal, professional services, wages, benefits, stock award compensation and intangible asset amortization expenses.
In the Fiscal 2016 third quarter, income tax expense decreased $2.6 million to $5.5 million compared to $8.1 million in the Fiscal 2015 third quarter. The Company's effective tax rate increased to 24.1 percent in the Fiscal 2016 third quarter from 23.0 percent in the previous third quarter.
Segment Comparisons
Comparing the Automotive segment's Fiscal 2016 third quarter to the same period of Fiscal 2015,
Comparing the Interface segment's Fiscal 2016 third quarter to the same period of Fiscal 2015,
Comparing the Power Products segment's Fiscal 2016 third quarter to the same period of Fiscal 2015,
Nine Months Fiscal 2016
Methode's nine-month Fiscal 2016 net sales decreased $57.5 million, or 8.8 percent, to $596.3 million from $653.8 million in the same period of Fiscal 2015. Year over year, currency rate fluctuations decreased net sales $13.2 million.
Net income decreased $12.5 million to $62.0 million, or $1.60 per share, in the nine months of Fiscal 2016 from $74.5 million, or $1.90 per share, in the same period of Fiscal 2015.
Year over year, Fiscal 2016 nine-month net income was negatively affected by:
Year over year, Fiscal 2016 nine-month net income benefitted from:
Consolidated gross margins as a percentage of sales remained constant at 25.5 percent in the Fiscal 2016 nine months compared to the Fiscal 2015 period. However, gross profit decreased year over year primarily as a result of manufacturing inefficiencies related to decreased sales in the Interface and Power Products segments and costs and inefficiencies due to the transfer of manufacturing from the Philippines to Egypt in the Interface segment, partially offset by a favorable currency impact on raw materials and labor costs, favorable commodity pricing of raw materials and manufacturing efficiencies due to increased production at the Company's lower-cost manufacturing facility in the Automotive segment.
Selling and administrative expenses as a percentage of sales increased to 12.4 percent in the Fiscal 2016 nine months from 10.6 percent in the same period of Fiscal 2015 due primarily to higher legal, professional services, wages, benefits, stock award compensation, travel, advertising and intangible asset amortization expenses, partially offset by lower bonus expense.
In the Fiscal 2016 nine months, income tax expense decreased $5.2 million to $18.6 million from $23.8 million in the Fiscal 2015 nine months. The Company's effective tax rate decreased to 23.1 percent in the Fiscal 2016 nine months compared to 24.2 percent in the prior-year period.
Segment Comparisons
Comparing the Automotive segment's Fiscal 2016 nine months to the same period of Fiscal 2015,
Comparing the Interface segment's Fiscal 2016 nine months to the same period of Fiscal 2015,
Comparing the Power Products segment's Fiscal 2016 nine months to the same period of Fiscal 2015,
Share Repurchase
During the third quarter of Fiscal 2016, the Company purchased $37.0 million, or 1,207,621 shares, of its outstanding common stock at an average purchase price of $30.63 under its board of directors-authorized $100 million repurchase plan, which terminates September 1, 2017. Approximately $40.3 million remains under the repurchase plan. The program may be suspended or terminated at any time.
Guidance
Methode reaffirmed guidance for income from operations in the range of $104 to $110 million and earnings per share in the range of $2.06 to $2.18, but revised its Fiscal 2016 sales guidance from the range of $805 million to $825 million to the range of $790 million to $800 million. The guidance ranges for Fiscal 2016 are based upon management's expectations regarding a variety of factors and involve a number of risks and uncertainties, including the following significant factors considered by management in preparing this guidance:
Management Comments
President and Chief Executive Officer Donald W. Duda said, "Third-quarter profitability met our expectations. However, sales were lower than previously expected due to prolonged weakness in our non-automotive businesses, particularly for our products and solutions that serve the industrial, telecom and energy markets. We expect this will continue into the fourth quarter. Despite our reduced expectations for sales in Fiscal 2016, we remain confident that our operating income and earnings per share will approximate the midpoint of our guidance ranges."
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, today at 10:00 a.m. Central time.
To participate in the conference call, please dial (877) 407-8033 (domestic) or (201) 689-8033 (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 April 3, 2016, by dialing (877) 660-6853 (domestic) or (201) 612-7415 (international) and providing Conference ID number 13631249. 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. (
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) investment in programs prior to the recognition of revenue; (4) ability to withstand price pressure, including price concessions; (5) currency fluctuations; (6) timing, quality and cost of new program launches; (7) dependence on our supply chain; (8) dependence on the availability and price of raw materials; (9) customary risks related to conducting global operations; (10) income tax rate fluctuations; (11) fluctuations in our gross margins; (12) the recognition of goodwill impairment charges; (13) ability to keep pace with rapid technological changes; (14) a breach of our information technology systems; (15) ability to compete effectively; (16) ability to successfully benefit from acquisitions and divestitures; (17) ability to avoid design or manufacturing defects; (18) ability to protect our intellectual property; (19) location of a significant amount of cash outside of the U.S.; (20) ability to withstand business interruptions; and (21) costs and expenses due to regulations regarding conflict minerals.
METHODE ELECTRONICS, INC. AND SUBSIDIARIES | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | |||||||||||||||||
($ in millions, except per share data) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
January 30, 2016 |
January 31, 2015 |
January 30, 2016 |
January 31, 2015 |
||||||||||||||
Net sales | $ | 184.6 | $ | 206.0 | $ | 596.3 | $ | 653.8 | |||||||||
Cost of products sold | 137.0 | 149.8 | 444.2 | 487.0 | |||||||||||||
Gross profit | 47.6 | 56.2 | 152.1 | 166.8 | |||||||||||||
Selling and administrative expenses | 26.1 | 21.5 | 73.7 | 69.1 | |||||||||||||
Income from operations | 21.5 | 34.7 | 78.4 | 97.7 | |||||||||||||
Interest income, net | (0.2 | ) | (0.2 | ) | (0.7 | ) | (0.4 | ) | |||||||||
Other (income) / expense | (1.0 | ) | (0.3 | ) | (1.5 | ) | (0.2 | ) | |||||||||
Income before income taxes | 22.7 | 35.2 | 80.6 | 98.3 | |||||||||||||
Income tax expense | 5.5 | 8.1 | 18.6 | 23.8 | |||||||||||||
Net income | 17.2 | 27.1 | 62.0 | 74.5 | |||||||||||||
Less: Net income attributable to noncontrolling interest | -- | -- | -- | -- | |||||||||||||
NET INCOME ATTRIBUTABLE TO METHODE ELECTRONICS, INC. | $ | 17.2 | $ | 27.1 | $ | 62.0 | $ | 74.5 | |||||||||
Amounts per common share attributable to Methode Electronics, Inc.: | |||||||||||||||||
Basic | $ | 0.45 | $ | 0.69 | $ | 1.60 | $ | 1.93 | |||||||||
Diluted | $ | 0.45 | $ | 0.68 | $ | 1.60 | $ | 1.90 | |||||||||
Cash dividends: | |||||||||||||||||
Common stock | $ | 0.09 | $ | 0.09 | $ | 0.27 | $ | 0.27 | |||||||||
Weighted average number of Common Shares outstanding: | |||||||||||||||||
Basic | 38,159,789 | 38,791,210 | 38,662,487 | 38,644,413 | |||||||||||||
Diluted | 38,278,231 | 39,615,541 | 38,790,624 | 39,289,513 | |||||||||||||
METHODE ELECTRONICS, INC. AND SUBSIDIARIES | ||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
($ in millions) | ||||||||||
As of | As of | |||||||||
January 30, 2016 |
May 2, 2015 |
|||||||||
(Unaudited) | ||||||||||
ASSETS | ||||||||||
CURRENT ASSETS | ||||||||||
Cash and cash equivalents | $ | 202.3 | $ | 168.1 | ||||||
Accounts receivable, net | 146.6 | 170.4 | ||||||||
Inventories: | ||||||||||
Finished products | 13.3 | 16.0 | ||||||||
Work in process | 10.2 | 12.2 | ||||||||
Materials | 48.9 | 42.7 | ||||||||
72.4 | 70.9 | |||||||||
Deferred income taxes | 15.5 | 15.0 | ||||||||
Prepaid expenses and other current assets | 16.9 | 13.9 | ||||||||
TOTAL CURRENT ASSETS | 453.7 | 438.3 | ||||||||
PROPERTY, PLANT AND EQUIPMENT | 316.9 | 309.2 | ||||||||
Less allowances for depreciation | 225.0 | 215.9 | ||||||||
91.9 | 93.3 | |||||||||
GOODWILL | 1.6 | 1.7 | ||||||||
INTANGIBLE ASSETS, net | 9.5 | 11.3 | ||||||||
PRE-PRODUCTION COSTS | 10.4 | 10.5 | ||||||||
DEFERRED INCOME TAXES | 27.1 | 32.1 | ||||||||
OTHER ASSETS | 18.4 | 18.6 | ||||||||
67.0 | 74.2 | |||||||||
TOTAL ASSETS | $ | 612.6 | $ | 605.8 | ||||||
LIABILITIES AND EQUITY | ||||||||||
CURRENT LIABILITIES | ||||||||||
Accounts payable | $ | 64.3 | $ | 70.1 | ||||||
Other current liabilities | 45.0 | 60.5 | ||||||||
TOTAL CURRENT LIABILITIES | 109.3 | 130.6 | ||||||||
LONG-TERM DEBT | 55.0 | 5.0 | ||||||||
OTHER LIABILITIES | 3.4 | 4.0 | ||||||||
DEFERRED COMPENSATION | 7.8 | 7.2 | ||||||||
SHAREHOLDERS' EQUITY | ||||||||||
Common stock, $0.50 par value, 100,000,000 shares authorized, 38,259,493 and 39,702,036 shares issued as of January 30, 2016 and May 2, 2015, respectively | 19.1 | 19.9 | ||||||||
Additional paid-in capital | 111.5 | 102.2 | ||||||||
Accumulated other comprehensive income | (23.6 | ) | (8.3 | ) | ||||||
Treasury stock, 1,346,624 shares as of January 30, 2016 and May 2, 2015 | (11.5 | ) | (11.5 | ) | ||||||
Retained earnings | 341.6 | 356.5 | ||||||||
TOTAL METHODE ELECTRONICS, INC. SHAREHOLDERS' EQUITY | 437.1 | 458.8 | ||||||||
Noncontrolling interest | -- | 0.2 | ||||||||
TOTAL EQUITY | 437.1 | 459.0 | ||||||||
TOTAL LIABILITIES AND EQUITY | $ | 612.6 | $ | 605.8 | ||||||
METHODE ELECTRONICS, INC. AND SUBSIDIARIES | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | ||||||||||
($ in millions) | ||||||||||
Nine Months Ended | ||||||||||
January 30, 2016 |
January 31, 2015 |
|||||||||
OPERATING ACTIVITIES | ||||||||||
Net income | $ | 62.0 | $ | 74.5 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Provision for depreciation | 16.0 | 16.4 | ||||||||
Amortization of intangibles | 1.8 | 1.1 | ||||||||
Amortization of stock awards and stock options | 4.8 | 3.5 | ||||||||
Changes in operating assets and liabilities | (0.8 | ) | 13.1 | |||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 83.8 | 108.6 | ||||||||
INVESTING ACTIVITIES | ||||||||||
Purchases of property, plant and equipment | (17.2 | ) | (12.8 | ) | ||||||
NET CASH USED IN INVESTING ACTIVITIES | (17.2 | ) | (12.8 | ) | ||||||
FINANCING ACTIVITIES | ||||||||||
Taxes paid related to net share settlement of equity awards | (7.6 | ) | -- | |||||||
Purchase of common stock | (59.8 | ) | -- | |||||||
Proceeds from exercise of stock options | 0.5 | 6.3 | ||||||||
Excess tax benefit from equity-based compensation | 4.0 | -- | ||||||||
Cash dividends | (10.2 | ) | (10.3 | ) | ||||||
Proceeds from borrowings | 63.0 | -- | ||||||||
Repayment of borrowings | (13.0 | ) | (28.0 | ) | ||||||
NET CASH USED IN FINANCING ACTIVITIES | (23.1 | ) | (32.0 | ) | ||||||
Effect of foreign currency exchange rate changes on cash | (9.3 | ) | (12.4 | ) | ||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 34.2 | 51.4 | ||||||||
Cash and cash equivalents at beginning of period | 168.1 | 116.4 | ||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 202.3 | $ | 167.8 | ||||||
Contact Information:
For Methode Electronics, Inc. - Investor Contacts:
Kristine Walczak
Dresner Corporate Services
312-780-7205
kwalczak@dresnerco.com
Philip Kranz
Dresner Corporate Services
312-780-7240
pkranz@dresnerco.com