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Methode Electronics, Inc. Reports Fiscal 2017 Sales and Earnings

June 22, 2017 6:30 AM

CHICAGO, IL -- (Marketwired) -- 06/22/17 -- Methode Electronics, Inc. (NYSE: MEI), a global developer of custom engineered and application-specific products and solutions, announced financial results for the fourth quarter and Fiscal 2017 ended April 29, 2017.

Fourth Quarter Fiscal 2017 Methode's fourth-quarter Fiscal 2017 net sales increased $6.9 million, or 3.2 percent, to $219.7 million from $212.8 million in the same quarter of Fiscal 2016. Year over year, currency rate fluctuations decreased net sales $2.2 million.

Net income increased $0.4 million to $23.1 million, or $0.62 per share, in the fourth quarter of Fiscal 2017 from $22.7 million, or $0.61 per share, in the same period of Fiscal 2016. During the fourth quarter of Fiscal 2017, the Company incurred $2.3 million of expense related to the exit of two reporting units ("exit costs") and $1.5 million of expense related to activity from a potential acquisition the Company elected not to undertake ("M&A").

Year over year, Fiscal 2017 fourth-quarter net income benefitted from:

Year over year, Fiscal 2017 fourth-quarter net income was negatively affected by:

Consolidated gross margins as a percentage of net sales decreased to 25.1 percent in the Fiscal 2017 fourth quarter from 28.6 percent in the Fiscal 2016 period, primarily as a result of the exit costs for Connectivity and AES, a provision for a customer warranty, unfavorable copper costs, unfavorable sales mix of data solutions products in the Interface segment and unfavorable sales mix in the Automotive segment, partially offset by higher sales volumes and a favorable currency impact on material and labor expense.

Selling and administrative expense as a percentage of net sales decreased to 13.3 percent for the Fiscal 2017 fourth quarter compared to 13.8 percent in the same period last year. Selling and administrative expense decreased $0.1 million, or 0.3 percent, to $29.3 million in the Fiscal 2017 fourth quarter, compared to $29.4 million in the prior-year fourth quarter, due primarily to lower compensation, legal and other professional fees and selling expenses, partially offset by M&A expense.

In the Fiscal 2017 fourth quarter, income tax expense decreased $3.0 million to $4.7 million compared to $7.7 million in the Fiscal 2016 fourth quarter. The Company's effective tax rate decreased to 16.9 percent in the Fiscal 2017 period from 25.3 percent in the previous fourth quarter. The results for fourth-quarter Fiscal 2017 include a tax benefit of $4.0 million for foreign investment tax credits, partially offset by a tax expense of $1.7 million on a dividend between foreign entities.

Segment Comparisons Comparing the Automotive segment's Fiscal 2017 fourth quarter to the same period of Fiscal 2016:

Comparing the Interface segment's Fiscal 2017 fourth quarter to the same period of Fiscal 2016:

Comparing the Power Products segment's Fiscal 2017 fourth quarter to the same period of Fiscal 2016:

Fiscal 2017 Methode's Fiscal 2017 net sales increased $7.4 million, or 0.9 percent, to $816.5 million from $809.1 million in Fiscal 2016. Year over year, currency rate fluctuations decreased net sales $5.5 million.

Net income increased $8.3 million to $92.9 million, or $2.48 per share, in Fiscal 2017 from $84.6 million, or $2.20 per share, in Fiscal 2016.

Year over year, Fiscal 2017 net income benefitted from:

Year over year, Fiscal 2017 net income was negatively affected by:

Consolidated gross margins as a percentage of net sales increased to 26.7 percent in Fiscal 2017 from 26.3 percent in Fiscal 2016. Gross margins improved as a result of commodity pricing adjustments and the one-time reversal of accruals related to customer commercial issues in the Automotive segment. In addition, the Company also experienced a favorable currency impact on material and labor expense, the absence of costs associated with the move of manufacturing from the Philippines to Egypt and overhead cost reductions in the Power Products segment, partially offset by the exit costs.

Selling and administrative expense as a percentage of sales increased to 12.9 percent for Fiscal 2017 compared to 12.5 percent in Fiscal 2016. Selling and administrative expense increased $4.4 million, or 4.4 percent, to $105.2 million in Fiscal 2017, compared to $100.8 million in the prior year, due primarily to higher stock award amortization expense, increased legal and professional fees and M&A expense, partially offset by lower sales support and travel expense.

In Fiscal 2017, income tax expense decreased $3.3 million to $23.0 million compared to $26.3 million in Fiscal 2016. The Company's effective tax rate decreased to 19.9 percent in Fiscal 2017 from 23.8 percent in the previous fiscal year. The results for Fiscal 2017 include a tax benefit of $4.0 million for foreign investment tax credits, partially offset by a tax expense of $1.7 million on a dividend between foreign entities.

Segment Comparisons Comparing the Automotive segment's Fiscal 2017 to Fiscal 2016:

Comparing the Interface segment's Fiscal 2017 to Fiscal 2016:

Comparing the Power Products segment's Fiscal 2017 to Fiscal 2016:

Subsequent Event On June 19, 2017, Methode entered into an agreement for the acquisition of 100 percent of the stock of Procoplast, an independent manufacturer of automotive assemblies located close to the Belgian-German border, which is in close proximity to several key automotive customers. Its brand new facility includes automated assembly equipment, injection molding and testing equipment. Procoplast produces high volume products for Bosch, Kiekert, ZF-TRW and others, which will augment Methode's transmission lead-frame business. The closing of the transaction is subject to customary conditions, including, but not limited to, regulatory approvals, and is expected in the second quarter of Fiscal 2018.

Guidance For Fiscal 2018, Methode anticipates sales in the range of $807 million to $827 million, pre-tax income in the range of $114 to $127 million and earnings per share in the range of $2.43 to $2.63.

Fiscal 2018 guidance considers:

The guidance ranges for Fiscal 2018 are based upon management's expectations regarding a variety of factors and involve a number of risks and uncertainties, including, but not limited to, the following:

Management Comments President and Chief Executive Officer Donald W. Duda said, "The proposed acquisition of Procoplast is expected to complement our European automotive business with high volume, highly automated injection production lines for automotive transmission and brake products. Through this acquisition, Methode would gain new customers, including Bosch, Kiekert and ZF-TRW, as well as additional opportunities in sensors."

Mr. Duda concluded, "Fiscal 2017 sales and net income grew year over year with earnings per share increasing 13 percent. We are pleased that in the fourth quarter we were awarded approximately $40 million in new Automotive revenue that will contribute to our Fiscal 2020. In Fiscal 2018, we will continue to make significant progress on our objectives across each aspect of our company strategy, including bringing to market enabling technologies for our customers, strengthening our competitive advantages, and driving contributions from our acquisition program."

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, John Hrudicka, today at 10:00 a.m. Central time.

To participate in the conference call, please dial (877) 407-9210 (domestic) or (201) 689-8049 (international) at least five minutes prior to the start of the event. A simultaneous Webcast can be accessed through the Company's website, 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 22 by dialing (877) 481-4010 (domestic) or (919) 882-2331 (international) and providing Conference ID number 10241. On the Internet, a replay will be available for 30 days through the Company's website, 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 website 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 pricing concessions; (6) currency fluctuations; (7) customary risks related to conducting global operations; (8) ability to successfully market and sell Dabir surfaces; (9) dependence on our supply chain; (10) income tax rate fluctuations; (11) dependence on the availability and price of raw materials; (12) fluctuations in our gross margins; (13) location of a significant amount of cash outside of the U.S.; (14) the effect of a catastrophic event or significant business interruption at one of our facilities; (15) ability to keep pace with rapid technological changes; (16) a breach of our information technology systems; (17) ability to avoid design or manufacturing defects; (18) ability to compete effectively; (19) ability to protect our intellectual property; (20) ability to successfully benefit from acquisitions and divestitures; (21) the recognition of impairment charges; and (22) costs and expense 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
                         ------------------------- -------------------------
                           April 29,    April 30,    April 29,    April 30,
                              2017         2016         2017         2016
                         ------------ ------------ ------------ ------------
Net sales                $     219.7  $      212.8 $     816.5  $     809.1

 Cost of products sold         164.5         152.0       598.2        596.2
                         ------------ ------------ ------------ ------------

 Gross profit                   55.2          60.8       218.3        212.9

 Impairment of goodwill
  and intangible assets           --            --          --           --
 Selling and
  administrative
  expenses                      29.3          29.4       107.5        103.2
                         ------------ ------------ ------------ ------------

Income from operations          25.9          31.4       110.8        109.7

 Gain from sale of
  business                        --            --          --           --
 Interest
  (income)/expense, net         (0.1)           --        (0.4)        (0.7)
 Other income, net              (1.8)          1.0        (4.7)        (0.5)
                         ------------ ------------ ------------ ------------

Income before income
 taxes                          27.8          30.4       115.9        110.9

Income tax
 (benefit)/expense               4.7           7.7        23.0         26.3
                         ------------ ------------ ------------ ------------

Net income                      23.1          22.7        92.9         84.6

Less: Net income/(loss)
 attributable to
 noncontrolling interest          --            --          --           --
NET INCOME ATTRIBUTABLE
 TO METHODE ELECTRONICS,
 INC.                    $      23.1  $       22.7 $      92.9  $      84.6
                         ============ ============ ============ ============

Amounts per common share
 attributable to Methode
 Electronics, Inc.:
  Basic                  $      0.62  $       0.61 $      2.49  $      2.21
  Diluted                $      0.62  $       0.61 $      2.48  $      2.20
Cash dividends:
  Common stock           $      0.09  $       0.09 $      0.36  $      0.36
Weighted average number
 of Common Shares
 outstanding:
  Basic                   37,239,113    37,346,476  37,283,096   38,333,484
  Diluted                 37,523,246    37,471,873  37,485,701   38,471,613

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


                                               April 29, 2017 April 30, 2016
                                               -------------- --------------
ASSETS
CURRENT ASSETS
 Cash and cash equivalents                     $       294.0  $       227.8
 Accounts receivable, less allowance (2017 --
  $0.6 and 2016 --$0.5)                                165.3          175.5
 Inventories:
  Finished products                                     10.9           11.9
  Work in process                                        8.7            9.6
  Materials                                             38.3           44.7
                                               -------------- --------------
 Total Inventories                                      57.9           66.2
 Deferred income taxes                                    --           11.8
 Prepaid and refundable income taxes                     0.6            1.3
 Prepaid expenses and other current assets              12.5           13.6
                                               -------------- --------------
TOTAL CURRENT ASSETS                                   530.3          496.2
PROPERTY, PLANT AND EQUIPMENT
 Land                                                    0.6            0.6
 Buildings and building improvements                    48.2           46.9
 Machinery and equipment                               287.9          278.4
                                               -------------- --------------
 Property, Plant and Equipment, Gross                  336.7          325.9
 Less allowances for depreciation                      246.1          232.9
                                               -------------- --------------
PROPERTY, PLANT AND EQUIPMENT, NET                      90.6           93.0
OTHER ASSETS
 Goodwill                                                1.6            1.7
 Other intangibles, less accumulated
  amortization                                           6.6            8.9
 Cash surrender value of life insurance                  7.8            7.4
 Deferred income taxes                                  40.4           27.7
 Pre-production costs                                   15.5            9.5
 Other                                                  11.2           11.5
                                               -------------- --------------
TOTAL OTHER ASSETS                                      83.1           66.7
                                               -------------- --------------
TOTAL ASSETS                                   $       704.0  $       655.9
                                               ============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
 Accounts payable                              $        75.3  $        68.2
 Salaries, wages and payroll taxes                      18.7           17.3
 Other accrued expenses                                 17.7           17.3
 Deferred income taxes                                    --            2.1
 Income tax payable                                     12.7           13.0
                                               -------------- --------------
TOTAL CURRENT LIABILITIES                              124.4          117.9
LONG-TERM DEBT                                          27.0           57.0
OTHER LIABILITIES                                        2.6            2.9
DEFERRED COMPENSATION                                    8.9            8.0
SHAREHOLDERS' EQUITY
 Common stock, $0.50 par value, 100,000,000
  shares authorized, 38,133,925 and 38,181,985
  shares issued as of April 29, 2017 and April
  30, 2016, respectively                                19.1           19.1
 Additional paid-in capital                            132.2          112.3
 Accumulated other comprehensive loss                  (25.7)          (8.4)
 Treasury stock, 1,346,624 as of April 29,
  2017 and April 30, 2016                              (11.5)         (11.5)
 Retained earnings                                     427.0          358.6
                                               -------------- --------------
TOTAL METHODE ELECTRONICS, INC. SHAREHOLDERS'
 EQUITY                                                541.1          470.1
 Noncontrolling interest                                  --             --
                                               -------------- --------------
TOTAL EQUITY                                           541.1          470.1
                                               -------------- --------------
TOTAL LIABILITIES AND EQUITY                   $       704.0  $       655.9
                                               ============== ==============

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


                                               Fiscal Year Ended
                                   -----------------------------------------
                                   April 29, 2017 April 30, 2016 May 2, 2015
                                   -------------- -------------- -----------
OPERATING ACTIVITIES
 Net income                        $        92.9  $        84.6  $    101.0
 Adjustments to reconcile net
  income to net cash provided by
  operating activities:
  Gain on sale of fixed assets                --           (0.7)         --
  Impairment of goodwill and
   intangible assets                          --             --        11.1
  Gain on sale of business                    --             --        (7.7)
  Provision for depreciation                22.0           21.5        21.9
  Amortization of intangible
   assets                                    2.3            2.4         1.5
  Stock-based compensation                  12.4            7.4         4.3
  Provision for bad debt                     0.2             --          --
  Deferred income taxes                       --            8.2        (0.3)
  Changes in operating assets and
   liabilities:
   Accounts receivable                       5.6           (6.0)       (8.6)
   Inventories                               7.4            4.5        (1.6)
   Prepaid expenses and other
    assets                                  (8.7)           0.1        (1.6)
   Accounts payable and other
    expenses                                11.1          (11.3)        2.9
                                   -------------- -------------- -----------
 NET CASH PROVIDED BY OPERATING
  ACTIVITIES                               145.2          110.7       122.9

INVESTING ACTIVITIES
 Purchases of property, plant and
  equipment                                (22.4)         (23.2)      (22.5)
 Sale of
  business/investment/property               0.7            1.6        11.2
                                   -------------- -------------- -----------
 NET CASH USED IN INVESTING
  ACTIVITIES                               (21.7)         (21.6)      (11.3)

FINANCING ACTIVITIES
 Taxes paid related to net share
  settlement of equity awards               (1.1)          (7.7)         --
 Purchase of common stock                   (9.8)         (62.3)         --
 Proceeds from exercise of stock
  options                                    2.7            0.6         4.0
 Tax benefit from stock option
  exercises                                  4.9            2.2         4.3
 Cash dividends                            (13.7)         (13.5)      (13.8)
 Proceeds from borrowings                     --           71.0          --
 Repayment of borrowings                   (30.0)         (19.0)      (43.0)
                                   -------------- -------------- -----------
 NET CASH USED IN FINANCING
  ACTIVITIES                               (47.0)         (28.7)      (48.5)
Effect of foreign currency
 exchange rate changes on cash             (10.3)          (0.7)      (11.4)
                                   -------------- -------------- -----------
INCREASE IN CASH AND CASH
 EQUIVALENTS                                66.2           59.7        51.7
Cash and cash equivalents at
 beginning of year                         227.8          168.1       116.4
                                   -------------- -------------- -----------
CASH AND CASH EQUIVALENTS AT END
 OF YEAR                           $       294.0  $       227.8  $    168.1
                                   ============== ============== ===========

For Methode Electronics, Inc. - Investor Contacts:
Kristine Walczak
Dresner Corporate Services
312-780-7205
[email protected]

Source: Methode Electronics, Inc.

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