Methode Electronics (NASDAQ:METH)
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Methode Electronics, Inc. (Nasdaq:METH), a global manufacturer of
electronic component and subsystem devices, today announced operating
results for the quarter ended January 27, 2007, which is the third
quarter of the 2007 fiscal year.
Methode reported third quarter fiscal 2007 net sales of $105.4 million,
and net income of $4.7 million, or $0.13 per share. This compares with
net sales of $95.1 million and net income of $2.8 million, or $0.08 per
share in the third quarter of the 2006 fiscal year. In the first nine
months of fiscal 2007, net sales were $317.5 million, compared to $305.3
million from the same period in the last fiscal year. Net income was
$14.0 million in the first nine months of fiscal year 2007, or $0.38 per
share, compared to $12.8 million, or $0.35 per share in the 2006 fiscal
year.
Included in the third quarter and first nine-months of fiscal 2007 is a
$1.9 million charge both before and after taxes, or $0.05 per share,
related to the cost of closing Methode’s
Scotland plant and transferring automotive manufacturing to its Malta
facility.
The increase in net sales in the third quarter and first nine months of
fiscal 2007 is primarily due to improved sales of power distribution
products, fiber optic installations and automotive products in Europe
and Asia.
For the third quarter of fiscal 2007, cost of products sold, as a
percent of sales, decreased to 81.0 percent from 82.1 percent in the
prior-year period. This primarily reflects improvement at Methode’s
Shanghai operation, which operated profitably, in the third quarter.
Cost of products sold, as a percent of sales, in the nine-month period
of fiscal 2007 was 81.4 percent compared to 80.8 percent in the
nine-month period of fiscal 2006. The increase is predominately due to
automotive volume erosion due to production cutbacks and the
unprofitable status in our Shanghai operations during the first half of
the year.
For the third quarter of fiscal 2007, selling and administrative
expense, as a percent of sales, was 12.2 percent, compared to 13.4
percent in last year’s third quarter.
Stock-based compensation costs for the third quarter of fiscal 2006 were
higher as more stock-based compensation was subject to variable
accounting prior to adoption of FAS123R, and Methode’s
stock price increased during the quarter.
For the first nine months of fiscal 2007, selling and administrative
expense, as a percent of sales was 12.6 percent compared to 13.6 percent
last year. In the first nine months of fiscal 2007, stock based
compensation costs were higher because an additional tranche of
restricted stock awards was granted as Methode entered the third year of
its restricted stock award program. In the first nine months of fiscal
2006, Methode reported a higher than normal selling and administrative
expense, due to the bad debt provision of $3.2 million, $2.1 million net
of tax, for receivables deemed impaired due to the bankruptcy of the
U.S. subsidiaries of Delphi Corporation.
Donald W. Duda, President and Chief Executive Officer for Methode
Electronics said, “Solid business growth in
our power distribution and fiber-optics products and automotive products
in Europe and Asia helped offset continued erosion from our traditional
Detroit automotive OEM customers.” Mr. Duda
continued, “Last year we set a goal to reach
profitability at our China operations and to resolve inefficiencies
associated at our Scotland automotive plant. Today, I am pleased to say
that each of Methode’s businesses operating
out of China was profitable in the third quarter. In addition, we
transferred manufacturing from Scotland integrating production into our
Malta facility, to realize improved operational efficiencies going
forward.”
On March 1, 2007, Methode announced the acquisition of TouchSensor
Technologies for $65 million in cash and assumed liabilities. Methode
will include TouchSensor’s operations for the
months of March and April in its 2007 fiscal year. Including
TouchSensor, Methode expects to achieve fiscal year 2007 sales results
between $430.0 million and $440.0 million. Fiscal year 2007 earnings per
share are expected to be in the range of $0.52 to $0.55, which reflects
an expected full-year $0.06 per share restructuring charge for the
closure of Methode’s Scotland facility and
modest dilution from the TouchSensor acquisition.
Conference Call
As previously announced, the Company will conduct a conference call led
by its President and Chief Executive Officer, Donald W. Duda, and Chief
Financial Officer, Douglas A. Koman, on March 2, 2007 at 10:00 a.m.
Central Time. Methode invites you to listen to the webcast of this call
by visiting the Company’s website at www.methode.com
and entering the “Investor Relations”
page and then clicking on the “Webcast”
icon. You may participate on the conference call by dialing 877-407-8031
for domestic callers and 201-689-8031 for international callers. For
those who cannot listen to the live broadcast, a replay, as well as an
MP3 download will be available shortly after the call. The replay and
download of the call will be available for seven days, by dialing
877-660-6853 for domestic callers and 201-612-7415 for international,
both using the playback account number 286 and conference ID number
232236.
About Methode Electronics
Methode Electronics, Inc. is a global manufacturer of electronic
component and subsystem devices. Methode designs, manufactures and
markets devices employing electrical, electronic, wireless, sensing and
optical technologies. Methode's components are found in the primary end
markets of the automotive, communications (including information
processing and storage, networking equipment, wireless and terrestrial
voice/data systems), aerospace, rail and other transportation
industries, and the consumer and industrial equipment markets. Further
information can be found at Methode's website www.methode.com.
Forward-Looking Statements
Certain statements in this press release dated March 2, 2007 containing
information on Methode's third quarter reporting period for fiscal 2007
and offering guidance for its full year reporting period for fiscal
2007, are forward-looking statements that are subject to certain risks
and uncertainties. Our business is highly dependent upon three large
automotive customers and specific makes and models of automobiles. The
Company's results will be subject to many of the same risks that apply
to the automotive, computer, telecommunication and appliance industries,
such as general economic conditions, interest rates, consumer spending
patterns and technological changes. Other factors, which may result in
materially different results for future periods, include significant
customer bankruptcy filings; restructuring, operational improvement and
cost reduction programs currently under review by Methode; the current
macroeconomic environment, including higher petroleum and copper prices
affecting material and components used by Methode; potential
manufacturing plant closures by automotive customers; potential strikes
at automotive customers; and significant fluctuations in the demand for
certain automobile models. In addition, market growth, operating costs,
currency exchange rates and devaluations, delays in development,
production and marketing of new products and other factors set forth
from time to time in our reports filed with the Securities and Exchange
Commission, impact our business. Any of these factors could cause our
actual results to differ materially from those described in the
forward-looking statements. The forward-looking statements in this press
release are subject to the safe harbor protection provided under the
securities laws. All information in this press release is as of March 2,
2007. Methode undertakes no duty to update any forward-looking statement
to conform the statement to actual results or changes in the Company’s
expectations.
Methode Electronics, Inc.
Financial Highlights
(In thousands, except per share data, unaudited)
Three Months Ended
January 27,
January 28,
2007
2006
Net sales
$
105,412
$
95,050
Other income
686
103
Cost of products sold
85,334
78,065
Restructuring charge
1,861
-
Selling and administrative expenses
12,910
12,746
Income from operations
5,993
4,342
Interest, net
1,056
647
Other, net
(335)
(719)
Income before income taxes
6,714
4,270
Income taxes
2,010
1,460
Net income
4,704
2,810
Basic and diluted earnings per common share
$
0.13
$
0.08
Average Number of Common Shares outstanding:
Basic
36,193
36,264
Diluted
36,562
36,413
Nine Months Ended
January 27,
January 28,
2007
2006
Net sales
$
317,499
$
305,318
Other income
1,020
661
Cost of products sold
258,537
246,737
Restructuring charge
1,861
-
Selling and administrative expenses
39,939
41,368
Income from operations
18,182
17,874
Interest, net
2,778
1,655
Other, net
(9)
(625)
Income before income taxes and cumulative effect of accounting
change
20,951
18,904
Income taxes
7,100
6,145
Income before cumulative effect of accounting change
13,851
12,759
Cumulative effect of accounting change
101
-
Net income
13,952
12,759
Basic and Diluted Earnings per Common Share:
Income before cumulative effect of accounting change
$
0.38
$
0.35
Net income
$
0.38
$
0.35
Average Number of Common Shares outstanding:
Basic
36,260
36,250
Diluted
36,528
36,451
Note - Certain amounts in fiscal 2006 have been reclassified to
conform to the classification in fiscal 2007.
Methode Electronics, Inc.
Summary Balance Sheets
(In thousands)
January 27,
April 29,
2007
2006
(Unaudited)
Cash
$
107,979
$
81,646
Accounts receivable - net
61,620
74,223
Inventories
46,204
45,681
Other current assets
14,270
19,722
Total Current Assets
230,073
221,272
Property, plant and equipment - net
83,231
90,497
Goodwill - net
30,125
28,893
Intangible assets - net
14,175
17,540
Other assets
19,757
16,381
Total Assets
$
377,361
$
374,583
Accounts payable
$
34,217
$
41,581
Other current liabilities
32,234
32,622
Total current liabilities
66,451
74,203
Other liabilities
8,650
8,671
Shareholders' equity
302,260
291,709
Total Liabilities and Shareholders' Equity
$
377,361
$
374,583
Methode Electronics, Inc.
Summary Statements of Cash Flows (Unaudited)
(In thousands)
Nine Months Ended
January 27,
January 28,
2007
2006
Operating Activities:
Net income
$
13,952
$
12,759
Provision for depreciation
14,103
13,277
Amortization of intangibles
3,576
4,184
Amortization of restricted stock awards
2,138
1,777
Provision for losses on accounts receivable
93
3,150
Deferred income taxes
(325)
(3,404)
Non-cash impact of currency translation adjustment
(491)
-
Changes in operating assets and liabilities
11,188
(10,313)
Other
371
318
Net Cash Provided by Operating Activities
44,605
21,748
Investing Activities:
Purchases of property, plant and equipment
(6,365)
(14,689)
Proceeds from sale of building
800
1,712
Acquisitions of businesses
(2,678)
(5,127)
Acquisitions of technology licenses
-
(2,402)
Other
(2,016)
(452)
Net Cash Used in Investing Activities:
(10,259)
(20,958)
Financing Activities
Options exercised
263
598
Dividends
(5,592)
(5,600)
Purchase of common stock
(3,059)
(1,664)
Net Cash Used in Financing Activities
(8,388)
(6,666)
Effect of foreign exchange rate changes on cash
375
(1,887)
Increase (Decrease) in Cash and Cash Equivalents
26,333
(7,763)
Cash and cash equivalents at beginning of period
81,646
87,142
Cash and Cash Equivalents at End of Period
$
107,979
$
79,379