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Methode Electronics, Inc. Reports Record Sales and Earnings for Fiscal 2015

June 25, 2015 6:30 AM

CHICAGO, IL -- (Marketwired) -- 06/25/15 -- 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 fourth quarter and year ended May 2, 2015.

Fourth-Quarter Fiscal 2015 Methode's fourth-quarter Fiscal 2015 net sales grew $2.4 million, or 1.1 percent, to $227.3 million from $224.9 million in the same quarter of Fiscal 2014. Year over year, in the fourth quarter of Fiscal 2015, the strengthening of the US dollar compared to the Euro had the effect of reducing net sales by $7.5 million, or 3.2 percent.

Net income decreased $21.5 million to $26.6 million, or $0.68 per share, in the fourth quarter of Fiscal 2015 from $48.1 million, or $1.25 per share, in the same period of Fiscal 2014.

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

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

Excluding the fourth-quarter impacts of goodwill and intangible asset impairments, sales of businesses/investments, and tax credits/valuation allowances, Methode's Fiscal 2015 fourth-quarter net income was $20.1 million, or $0.51 per share, and Fiscal 2014 fourth-quarter net income was $14.6 million, or $0.38 per share. The details regarding the excluded items follow:

Consolidated gross margins as a percentage of sales improved to 22.9 percent in the Fiscal 2015 fourth quarter compared to 19.0 percent in the Fiscal 2014 period as a result of increased efficiencies related to manufacturing improvements at AMD, the Company's captive molding business, and increased production at the Company's lower cost Egyptian facility, partially offset by pricing concessions in the Automotive segment and lower gross margins in the Interface and Other segments due to higher development costs.

Selling and administrative expenses as a percentage of net sales increased to 11.6 percent for the Fiscal 2015 fourth quarter compared to 9.2 percent in the same period in Fiscal 2014. Selling and administrative expenses increased $5.6 million, or 26.9 percent, to $26.4 million in the Fiscal 2015 period compared to $20.8 million in the prior-year period due primarily to higher long-term incentive plan compensation, bonus, wage, travel, legal and general expenses.

In the Fiscal 2015 fourth quarter, income tax benefit decreased $20.5 million to a benefit of $4.0 million from a benefit of $24.5 million for the Fiscal 2014 period. The Fiscal 2015 fourth-quarter net tax benefit included a tax benefit of $8.6 million due to the release of a valuation allowance against deferred tax assets. The Fiscal 2014 fourth-quarter net tax benefit included a $32.6 million release of deferred tax asset valuation allowance partially offset by income tax expense for other discrete adjustments.

Fourth-Quarter Fiscal 2015 Segment Comparisons Comparing the Automotive segment's Fiscal 2015 fourth quarter to the same period of Fiscal 2014,

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

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

Fiscal 2015 Methode's Fiscal 2015 net sales grew $108.3 million, or 14.0 percent, to $881.1 million from $772.8 million in Fiscal 2014. Year over year, in Fiscal 2015, the strengthening of the US dollar compared to the Euro had the effect of reducing net sales by $10.9 million, or 1.7 percent.

Net income increased $5.0 million to $101.1 million, or $2.57 per share, in Fiscal 2015 compared to $96.1 million, or $2.51 per share, in Fiscal 2014.

Year over year, Fiscal 2015 net income benefitted from:

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

Excluding the full-year impacts of goodwill and intangible asset impairments, sales of businesses/investments, and tax credits/valuation allowances, Methode's Fiscal 2015 net income was $94.6 million, or $2.41 per share, and Fiscal 2014 net income was $62.6 million, or $1.64 per share. The details regarding the excluded items follow:

Consolidated gross margins as a percentage of sales improved to 24.8 percent in Fiscal 2015 compared to 20.3 percent in Fiscal 2014 as a result of increased efficiencies related to higher sales, manufacturing improvements at AMD and increased production at the Egyptian facility, partially offset by pricing concessions in the Automotive segment, lower gross margins in the Interface segment due to lower sales and higher development costs and lower gross margins in the Other segment due to higher development costs.

Selling and administrative expenses as a percentage of net sales increased to 10.7 percent for Fiscal 2015 compared to 10.3 percent in Fiscal 2014. Selling and administrative expenses increased $14.4 million, or 18.1 percent, to $94.0 million in Fiscal 2015 compared to $79.6 million in the prior year due primarily to higher long-term incentive plan compensation, bonus, wage, travel, legal and general expenses.

In Fiscal 2015, income tax expense increased $40.1 million to an expense of $19.8 million from a benefit of $20.3 million for Fiscal 2014. The Fiscal 2015 net tax expense included a tax benefit of $8.6 million due to the release of a valuation allowance against deferred tax assets. The Fiscal 2014 net tax benefit included a $32.6 million release of deferred tax asset valuation allowance partially offset by income tax expense for other discrete adjustments.

Fiscal 2015 Segment Comparisons Comparing the Automotive segment's Fiscal 2015 to Fiscal 2014,

Comparing the Interface segment's Fiscal 2015 to Fiscal 2014,

Comparing the Power Products segment's Fiscal 2015 to Fiscal 2014,

Guidance For Fiscal 2016, Methode anticipates sales in the range of $830 million to $865 million, income from operations in the range of $108 to $119 million and earnings per share in the range of $2.07 to $2.22. 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, "Methode's Fiscal 2015 was a year of continued growth, as sales, income from operations and earnings per share were the highest in our Company's history, while we generated nearly $95 million in cash. The execution by our teams to achieve these results is very impressive. Our Automotive segment increased operating income 80 percent, while the Power Products segment exceeded our expectations as a major customer accelerated its demand."

Mr. Duda concluded, "In Fiscal 2016, we are focused on continuing to invest in our businesses to grow, defend and improve our long-term competitive position, concentrating on Dabir Therapeutic Surfaces, 10 gig copper transceiver modules, as well as our lithium-ion power solutions. While Fiscal 2016 guidance calls for lower revenue and earnings over Fiscal 2015, we are targeting a five-year compounded annual growth rate for EBITDA in the range of 9 to 10 percent."

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 Corporate Controller and Treasurer, Ronald L. Tsoumas, 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 July 25, 2015, by dialing (877) 660-6853 (domestic) or (201) 612-7415 (international) and providing Conference ID number 13611988. 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, 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) timing, quality and cost of new program launches; (5) ability to withstand price pressure, including price concessions; (6) dependence on our supply chain; (7) dependence on the availability and price of raw materials; (8) customary risks related to conducting global operations; (9) currency fluctuations; (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 thousands, except per share data)

                            Three Months Ended         Fiscal Year Ended
                         ------------------------  ------------------------
                            May 2,       May 3,       May 2,       May 3,
                             2015         2014         2015         2014
                         -----------  -----------  -----------  -----------

Net sales                $     227.3  $     224.9  $     881.1  $     772.8

  Cost of products sold        175.3        182.0        662.3        616.1
                         -----------  -----------  -----------  -----------

  Gross profit                  52.0         42.9        218.8        156.7

  Impairment of goodwill
   and intangible assets        11.1          1.7         11.1          1.7
  Selling and
   administrative
   expenses                     26.4         20.8         95.5         81.4
                         -----------  -----------  -----------  -----------

Income from operations          14.5         20.4        112.2         73.6

  Gain from sale of
   business                     (7.7)          --         (7.7)          --
  Interest
   (income)/expense, net        (0.3)          --         (0.7)         0.3
  Other income, net               --         (3.4)        (0.2)        (2.6)
                         -----------  -----------  -----------  -----------

Income before income
 taxes                          22.5         23.8        120.8         75.9

Income tax
 (benefit)/expense              (4.0)       (24.5)        19.8        (20.3)
                         -----------  -----------  -----------  -----------

Net income                      26.5         48.3        101.0         96.2

Less: Net income/(loss)
 attributable to
 noncontrolling interest        (0.1)         0.1         (0.1)         0.1
                         -----------  -----------  -----------  -----------
NET INCOME ATTRIBUTABLE
 TO METHODE ELECTRONICS,
 INC.                    $      26.6  $      48.2  $     101.1  $      96.1
                         ===========  ===========  ===========  ===========

Amounts per common share
 attributable to Methode
 Electronics, Inc.:
  Basic                  $      0.69  $      1.26  $      2.61  $      2.53
  Diluted                $      0.68  $      1.25  $      2.57  $      2.51
Cash dividends:
  Common stock           $      0.09  $      0.09  $      0.36  $      0.30
Weighted average number
 of Common Shares
 outstanding:
  Basic                   38,812,413   38,384,980   38,686,550   37,973,697
  Diluted                 39,410,371   38,667,231   39,266,701   38,216,259



                 METHODE ELECTRONICS, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                    (in millions, except per share data)

                                                May 2, 2015    May 3, 2014
                                               -------------  -------------
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                    $       168.1  $       116.4
  Accounts receivable, less allowance (2015 --
   $0.5; 2014 --$0.7)                                  170.4          173.0
  Inventories:
    Finished products                                   16.0           14.2
    Work in process                                     12.2           12.0
    Materials                                           42.7           45.4
                                               -------------  -------------
                                                        70.9           71.6
  Deferred income taxes                                 15.0            8.7
  Prepaid and refundable income taxes                    1.8            0.4
  Prepaid expenses and other current assets             12.1           11.6
                                               -------------  -------------
      TOTAL CURRENT ASSETS                             438.3          381.7
PROPERTY, PLANT AND EQUIPMENT
  Land                                                   0.8            3.1
  Buildings and building improvements                   44.4           45.9
  Machinery and equipment                              264.0          274.6
                                               -------------  -------------
                                                       309.2          323.6
  Less allowances for depreciation                     215.9          222.4
                                               -------------  -------------
                                                        93.3          101.2
OTHER ASSETS
  Goodwill                                               1.7           13.0
  Other intangibles, less accumulated
   amortization                                         11.3           13.0
  Cash surrender value of life insurance                 7.0            8.2
  Deferred income taxes                                 32.1           40.0
  Pre-production costs                                  10.5           10.5
  Other                                                 11.6            7.9
                                               -------------  -------------
                                                        74.2           92.6
                                               -------------  -------------
TOTAL ASSETS                                   $       605.8  $       575.5
                                               =============  =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                             $        70.1  $        82.0
  Salaries, wages and payroll taxes                     30.6           15.3
  Other accrued expenses                                17.2           15.9
  Deferred income taxes                                  1.7            1.3
  Income tax payable                                    11.0            4.6
                                               -------------  -------------
      TOTAL CURRENT LIABILITIES                        130.6          119.1
LONG-TERM DEBT                                           5.0           48.0
OTHER LIABILITIES                                        4.0            3.4
DEFERRED COMPENSATION                                    7.2           12.8
SHAREHOLDERS' EQUITY
  Common stock, $0.50 par value, 100,000,000
   shares authorized, 39,702,036 and
   39,262,168 shares issued as of May 2, 2015
   and May 3, 2014, respectively                        19.9           19.6
  Additional paid-in capital                           102.2           89.8
  Accumulated other comprehensive
   income/(loss)                                        (8.3)          24.7
  Treasury stock, 1,346,624 and 1,342,188
   shares as of May 2, 2015 and May 3, 2014,
   respectively                                        (11.5)         (11.4)
  Retained earnings                                    356.5          269.2
                                               -------------  -------------
TOTAL METHODE ELECTRONICS, INC. SHAREHOLDERS'
 EQUITY                                                458.8          391.9
  Noncontrolling interest                                0.2            0.3
                                               -------------  -------------
TOTAL EQUITY                                           459.0          392.2
                                               -------------  -------------
TOTAL LIABILITIES AND EQUITY                   $       605.8  $       575.5
                                               =============  =============



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

                                                  Fiscal Year Ended
                                         ----------------------------------
                                           May 2,      May 3,     April 27,
                                            2015        2014        2013
                                         ----------  ----------  ----------
OPERATING ACTIVITIES
  Net income                             $    101.0  $     96.2  $     40.4
  Adjustments to reconcile net income to
   net cash provided by operating
   activities:
    Loss on sale of fixed assets                 --         0.2          --
    Impairment of goodwill and
     intangible assets                         11.1         1.7         4.3
    Gain on sale of business                   (7.7)         --          --
    Provision for depreciation                 21.9        22.1        17.0
    Amortization of intangible assets           1.5         1.8         1.8
    Stock-based compensation                    4.3         3.3         3.3
    Provision for bad debt                       --          --         0.1
    Deferred income taxes                      (0.3)      (29.2)       (7.2)
    Changes in operating assets and
     liabilities:
      Accounts receivable                      (8.6)      (49.7)      (21.2)
      Inventories                              (1.6)      (11.0)      (16.1)
      Prepaid expenses and other assets        (1.6)        0.2         9.1
      Accounts payable and other
       expenses                                 2.9        36.8         1.7
                                         ----------  ----------  ----------
  NET CASH PROVIDED BY OPERATING
   ACTIVITIES                                 122.9        72.4        33.2

INVESTING ACTIVITIES
  Purchases of property, plant and
   equipment                                  (22.5)      (29.0)      (38.6)
  Acquisition of businesses                      --          --        (1.4)
  Sale of business/investment                  11.2         6.1          --
                                         ----------  ----------  ----------
  NET CASH USED IN INVESTING ACTIVITIES       (11.3)      (22.9)      (40.0)

FINANCING ACTIVITIES
  Proceeds from exercise of stock
   options                                      4.0         5.0         0.6
  Tax benefit from stock option
   exercises                                    4.3         0.4          --
  Cash dividends                              (13.8)      (11.3)      (10.3)
  Proceeds from borrowings                       --        38.0        37.0
  Repayment of borrowings                     (43.0)      (33.5)      (41.5)
                                         ----------  ----------  ----------
  NET CASH USED IN FINANCING ACTIVITIES       (48.5)       (1.4)      (14.2)
Effect of foreign currency exchange rate
 changes on cash                              (11.4)        2.5          --
                                         ----------  ----------  ----------
INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS                                   51.7        50.6       (21.0)
Cash and cash equivalents at beginning
 of year                                      116.4        65.8        86.8
                                         ----------  ----------  ----------
  CASH AND CASH EQUIVALENTS AT END OF
   YEAR                                  $    168.1  $    116.4  $     65.8
                                         ==========  ==========  ==========

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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