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Methode Electronics, Inc. Reports Fiscal 2015 Third-Quarter Income From Operations Growth of 112 Percent

March 5, 2015 6:30 AM

CHICAGO, IL -- (Marketwired) -- 03/05/15 -- Methode Electronics, Inc. (NYSE: MEI), a global developer of custom engineered and application specific products and solutions, today announced financial results for the Fiscal 2015 third quarter and nine months ended January 31, 2015.

Third-Quarter Fiscal 2015 Methode's third-quarter Fiscal 2015 net sales grew $16.2 million, or 8.5 percent, to $206.0 million from $189.8 million in the same quarter of Fiscal 2014.

Net income increased $12.5 million to $27.1 million, or $0.68 per share, in the third quarter of Fiscal 2015 from $14.6 million, or $0.38 per share, in the same period of Fiscal 2014.

Year over year, Fiscal 2015 third-quarter net income benefitted from:

Year over year, Fiscal 2015 third-quarter net income was negatively affected by:

Consolidated gross margins as a percentage of net sales improved to 27.3 percent in the Fiscal 2015 third quarter compared to 20.3 percent in the Fiscal 2014 period as a result of increased manufacturing efficiencies related to higher Automotive and Power Products segment sales primarily in North America and Asia, increased Automotive segment production at the Company's Egyptian manufacturing facility, increased manufacturing efficiencies at AMD and favorable raw material commodity pricing in the Power Products segment, partially offset by lower sales and increased development costs in the Interface segment.

Selling and administrative expenses as a percentage of net sales decreased to 10.4 percent for the Fiscal 2015 third quarter compared to 11.6 percent in the same period last year. Selling and administrative expenses decreased $0.6 million, or 2.7 percent, to $21.5 million in the Fiscal 2015 third quarter compared to $22.1 million in the prior-year third quarter due primarily to lower long-term incentive plan compensation expense and lower legal fees, partially offset by higher total salary and bonus expense and higher professional fees.

Income from operations increased $18.3 million, or 111.6 percent, to $34.7 million for the Fiscal 2015 third quarter, compared to $16.4 million in the prior-year period, due primarily to increased sales and manufacturing efficiencies as well as decreased selling and administrative expenses.

In the Fiscal 2015 third quarter, income tax expense increased $6.7 million to $8.1 million from $1.4 million in the Fiscal 2014 third quarter. In the Fiscal 2014 fourth quarter, the Company recorded a reversal of a valuation allowance against the deferred tax assets in the U.S. Due to the reversal, the Company recorded income tax expense in the U.S. during the Fiscal 2015 third quarter compared to no income tax expense recorded in the same period of Fiscal 2014. Due to the reversal, the Company's effective tax rate increased to 23.0 percent in the Fiscal 2015 third quarter compared to 8.8 percent in the prior-year third quarter.

Segment Comparisons Comparing the Automotive segment's Fiscal 2015 third quarter to the same period of Fiscal 2014,

Comparing the Interface segment's Fiscal 2015 third quarter to the same period of Fiscal 2014,

Comparing the Power Products segment's Fiscal 2015 third quarter to the same period of Fiscal 2014,

Nine-Month Fiscal 2015 Methode's nine-month Fiscal 2015 net sales grew $105.9 million, or 19.3 percent, to $653.8 million from $547.9 million in the same period of Fiscal 2014.

Net income increased $26.5 million to $74.5 million, or $1.90 per share, in the first nine months of Fiscal 2015 from $48.0 million, or $1.26 per share, in the same period of Fiscal 2014.

Year over year, Fiscal 2015 nine-month net income benefitted from:

Year over year, Fiscal 2015 nine-month net income was negatively affected by:

Consolidated gross margins as a percentage of sales improved to 25.5 percent in the Fiscal 2015 first nine months compared to 20.8 percent in the Fiscal 2014 period as a result of increased manufacturing efficiencies related to higher Automotive and Power Products segment sales primarily in North America and Asia, increased Automotive segment production at the Company's Egyptian manufacturing facility, and increased manufacturing efficiencies at AMD, partially offset by lower sales and increased development costs in the Interface segment.

Selling and administrative expenses as a percentage of net sales decreased to 10.6 percent for the Fiscal 2015 nine months compared to 11.1 percent in the same period last year. Selling and administrative expenses increased $8.5 million, or 14.0 percent, to $69.1 million in the Fiscal 2015 first nine months compared to $60.6 million in the prior-year period due primarily to higher total compensation, legal, travel and other general and stock-based compensation expenses.

Income from operations increased $44.4 million, or 83.3 percent, to $97.7 million for the Fiscal 2015 nine months, compared to $53.3 million in the prior-year period due primarily to increased sales volumes and manufacturing efficiencies, partially offset by increased selling and administrative expenses.

In the Fiscal 2015 nine months, income tax expense increased $19.6 million to $23.8 million from $4.2 million in the same period of Fiscal 2014. In the Fiscal 2014 fourth quarter, the Company recorded a reversal of a valuation allowance against the deferred tax assets in the U.S. Due to the reversal, the Company recorded income tax expense in the U.S. during the first nine months of Fiscal 2015, compared to no income tax expense recorded in the same period of Fiscal 2014. Due to the reversal, the Company's effective tax rate increased to 24.2 percent in the Fiscal 2015 nine months compared to 8.0 percent in the same period of last year.

Segment Comparisons Comparing the Automotive segment's Fiscal 2015 first nine months to the same period of Fiscal 2014,

Comparing the Interface segment's Fiscal 2015 first nine months to the same period of Fiscal 2014,

Comparing the Power Products segment's Fiscal 2015 first nine months to the same period of Fiscal 2014,

Sale of Trace Laboratories On February 3, 2015, Methode sold the assets of its Trace Laboratories businesses. The Company expects to record a pre-tax gain between $7.3 million and $7.6 million in its Fiscal 2015 fourth quarter. Trailing twelve-month revenues and pretax income at the end of the third quarter were $7.3 million and $1.3 million, respectively.

Guidance Methode reaffirms Fiscal 2015 sales guidance in the range of $870 to $885 million, but increases its guidance for Fiscal 2015 income from operations to a range of $130 to $135 million and earnings per share to a range of $2.50 to $2.60, not including the gain on the sale of Trace Laboratories. The guidance ranges for Fiscal 2015 are based upon management's current 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 sales in our Automotive and Interface segments were in line with our expectations. However, our Power Products segment saw stronger than anticipated sales, which, coupled with favorable raw material pricing and lower than expected consolidated SG&A, drove consolidated income from operations growth of 112 percent over last year. Given these results, we have increased our overall profit outlook for this fiscal year."

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.

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 5, 2015, by dialing (877) 660-6853 (domestic) or (201) 612-7415 (international) and providing Conference ID number 13601992. 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 China, Egypt, Germany, India, Italy, Lebanon, Malta, Mexico, the Philippines, Singapore, Switzerland, the United Kingdom and the United States. We design, manufacture and market devices employing electrical, electronic, wireless, safety 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, Interface, 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, 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; (5) timing, volume, quality and cost of new program launches; (6) dependence on our supply chain; (7) currency fluctuations; (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) location of a significant amount of cash outside of the U.S.; (15) ability to successfully benefit from acquisitions and divestitures; (16) ability to avoid design or manufacturing defects; (17) ability to protect our intellectual property; (18) ability to compete effectively; (19) ability to withstand business interruptions; (20) a breach of our information technology systems; 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 31,   February 1,    January 31,   February 1,
                        2015           2014          2015           2014
                   -------------- ------------- -------------- -------------

Net sales          $       206.0  $       189.8 $       653.8  $       547.9

  Cost of products
   sold                    149.8          151.3         487.0          434.0
                   -------------  ------------- -------------  -------------

  Gross profit              56.2           38.5         166.8          113.9

  Selling and
   administrative
   expenses                 21.5           22.1          69.1           60.6
                   -------------  ------------- -------------  -------------

Income from
 operations                 34.7           16.4          97.7           53.3

  Interest
   (income)/expens
   e, net                   (0.2)           0.1          (0.4)           0.3
  Other
   (income)/expens
   e, net                   (0.3)           0.3          (0.2)           0.8
                   -------------  ------------- -------------  -------------

Income before
 income taxes               35.2           16.0          98.3           52.2

Income tax expense           8.1            1.4          23.8            4.2
                   -------------  ------------- -------------  -------------

Net income                  27.1           14.6          74.5           48.0
                   =============  ============= =============  =============

Less: Net income
 attributable to
 noncontrolling
 interest                      -              -             -              -
                   -------------  ------------- -------------  -------------
NET INCOME
 ATTRIBUTABLE TO
 METHODE
 ELECTRONICS, INC. $        27.1  $        14.6 $        74.5  $        48.0
                   =============  ============= =============  =============

Amounts per common
 share
 attributable to
 Methode
 Electronics,
 Inc.:
  Basic            $        0.69  $        0.38 $        1.93  $        1.27
  Diluted          $        0.68  $        0.38 $        1.90  $        1.26
Cash dividends:
  Common stock     $        0.09  $        0.07 $        0.27  $        0.21
Weighted average
 number of Common
 Shares
 outstanding:
  Basic               38,791,210     38,051,772    38,644,413     37,780,506
  Diluted             39,615,541     38,474,129    39,289,513     38,123,192



METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)


                                                     As of         As of
                                                  January 31,     May 3,
                                                     2015          2014
                                                 ------------  ------------
                                                  (Unaudited)
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                      $      167.8  $      116.4
  Accounts receivable, net                              145.2         173.0
  Inventories:
    Finished products                                    20.2          14.2
    Work in process                                      14.3          12.0
    Materials                                            49.4          45.4
                                                 ------------  ------------
                                                         83.9          71.6
  Deferred income taxes                                   5.8           8.7
  Prepaid expenses and other current assets              12.4          12.0
                                                 ------------  ------------
    TOTAL CURRENT ASSETS                                415.1         381.7
PROPERTY, PLANT AND EQUIPMENT                           310.8         323.6
  Less allowances for depreciation                      218.1         222.4
                                                 ------------  ------------
                                                         92.7         101.2
GOODWILL                                                 12.8          13.0
INTANGIBLE ASSETS, net                                   11.7          13.0
PRE-PRODUCTION COSTS                                      9.5          10.5
DEFERRED INCOME TAXES                                    25.4          40.0
OTHER ASSETS                                             20.4          16.1
                                                 ------------  ------------
                                                         79.8          92.6
                                                 ------------  ------------
    TOTAL ASSETS                                 $      587.6  $      575.5
                                                 ============  ============
LIABILITIES AND EQUITY
CURRENT LIABILITIES
  Accounts payable                               $       74.3  $       82.0
  Other current liabilities                              50.9          37.1
                                                 ------------  ------------
    TOTAL CURRENT LIABILITIES                           125.2         119.1
LONG-TERM DEBT                                           20.0          48.0
OTHER LIABILITIES                                         4.6           3.4
DEFERRED COMPENSATION                                     6.9          12.8
SHAREHOLDERS' EQUITY
  Common stock, $0.50 par value, 100,000,000
   shares authorized, 39,694,536 and 39,262,168
   shares issued as of January 31, 2015 and May
   3, 2014, respectively                                 19.8          19.6
  Additional paid-in capital                             96.9          89.8
  Accumulated other comprehensive income                 (7.9)         24.7
  Treasury stock, 1,346,624 shares and 1,342,188
   as of January 31, 2015 and May 3, 2014,
   respectively                                         (11.5)        (11.4)
  Retained earnings                                     333.3         269.2
                                                 ------------  ------------
    TOTAL METHODE ELECTRONICS, INC.
     SHAREHOLDERS' EQUITY                               430.6         391.9
  Noncontrolling interest                                 0.3           0.3
                                                 ------------  ------------
    TOTAL EQUITY                                        430.9         392.2
    TOTAL LIABILITIES AND EQUITY                 $      587.6  $      575.5
                                                 ============  ============



METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($ in millions)


                                                      Nine Months Ended
                                                 --------------------------
                                                  January 31,   February 1,
                                                     2015          2014
                                                 ------------  ------------
OPERATING ACTIVITIES
  Net income                                     $       74.5  $       48.0
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Provision for depreciation                           16.4          16.0
    Amortization of intangibles                           1.1           1.3
    Amortization of stock awards and stock
     options                                              3.5           2.6
    Changes in operating assets and liabilities          13.1         (18.8)
    Other                                                   -           0.3
                                                 ------------  ------------
      NET CASH PROVIDED BY OPERATING ACTIVITIES         108.6          49.4

INVESTING ACTIVITIES
  Purchases of property, plant and equipment            (12.8)        (23.5)
                                                 ------------  ------------
    NET CASH USED IN INVESTING ACTIVITIES               (12.8)        (23.5)

FINANCING ACTIVITIES
  Proceeds from exercise of stock options                 6.3           5.0
  Cash dividends                                        (10.3)         (7.9)
  Proceeds from borrowings                                  -          28.5
  Repayment of borrowings                               (28.0)        (22.0)
                                                 ------------  ------------
    NET CASH PROVIDED BY/(USED IN) FINANCING
     ACTIVITIES                                         (32.0)          3.6

Effect of foreign currency exchange rate changes
 on cash                                                (12.4)          1.5
                                                 ------------  ------------

    INCREASE IN CASH AND CASH EQUIVALENTS                51.4          31.0
Cash and cash equivalents at beginning of period        116.4          65.8
                                                 ------------  ------------
    CASH AND CASH EQUIVALENTS AT END OF PERIOD   $      167.8  $       96.8
                                                 ============  ============

For Methode Electronics, Inc. - Investor Contacts:

Kristine Walczak
Dresner Corporate Services
312-780-7205
[email protected]

Philip Kranz
Dresner Corporate Services
312-780-7240
[email protected]

Source: Methode Electronics, Inc.

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