Methode Electronics, Inc. Reports Second Quarter Fiscal Year 2006 Results
CHICAGO--Dec. 7, 2005--Methode Electronics, Inc. , a global manufacturer of electronic component and subsystem devices, today announced operating results for the fiscal 2006 second quarter ended October 31, 2005.Methode reported second quarter fiscal year 2006 net sales of $116.3 million and net income of $5.2 million, or $0.14 per share. This compares with net sales of $99.7 million and net income of $6.5 million, or $0.18 per share, in the second quarter of fiscal year 2005. Customer paid tooling sales this quarter were $5.2 million compared to $1.6 million in the prior year period.
Included in the results for the 2006 quarter was a $3.2 million bad debt provision, $2.1 million after tax, for receivables deemed impaired due to the bankruptcy of the U. S. subsidiaries of Delphi Corporation. Excluding this charge, net income would have been $7.3 million, or $0.20 per share. Included in the results for the fiscal 2005 second quarter was a charge of $0.8 million, for the impairment of certain assets and other expenses related to the closure of our manufacturing facility in Singapore, and $0.5 million for the cost of relocating automotive molding tools from an insolvent supplier, totaling $0.02 per share.
In the first six months of fiscal 2006, net sales were $210.3 million, compared to $184.8 million from the same period last year. Net income was $9.9 million in the first half of this fiscal year, or $0.27 per share, compared to $11.1 million, or $0.31 per share, in the first half of fiscal 2005. Excluding the second quarter bad debt provision, net income for the first six months of fiscal 2006 would have been $12.0 million, or $0.33 per share. The first six months of fiscal 2005 included the charges from the second quarter, as mentioned above. For the first six months of fiscal 2006, tooling sales were $5.9 million, compared to $1.9 million in the first six-month period of fiscal 2005.
Commenting on the results, Donald W. Duda, President and Chief Executive Officer for Methode Electronics stated, "Methode continues to perform in line with our expectations notwithstanding the challenging operating environment of the domestic automotive industry."
Mr. Duda continued, "In other business, our power distribution unit opened its Shanghai, China operation and is currently developing prototypes in support of several business inquiries from local OEMs. We are very encouraged with the level of interest shown and look forward to this new market contributing toward Methode's growth in the future."
Cost of products sold increased to 79.9 percent of net sales from last year's second quarter mark of 78.0 percent that included the cost of transferring manufacturing from Singapore to China, and automotive tooling from an insolvent molder. The current quarter increase is primarily attributable to production issues at our Shanghai manufacturing facility, higher material costs across several business lines, and price reductions on our legacy automotive products.
Selling and administrative expense was 14.3 percent and 14.0 percent for the quarter and six-month period of fiscal 2006 compared to 12.8 percent and 13.1 percent in the second quarter and first six-months of last year. Excluding the bad debt provision of $3.2 million, selling and administrative expense in the fiscal 2006 second quarter would have been 11.6 percent. This declined as a result of lower stock-based compensation costs, lower legal expense and a higher sales base.
Subject to the uncertainty of a variety of factors listed in the Forward-Looking Statement section below, Methode expects to achieve third quarter fiscal 2006 sales of between $86.0 million and $91.0 million and earnings per share in the range of $0.07 to $0.09, and fiscal year 2006 sales of between $385.0 million and $400.0 million and earnings per share between $0.50 and $0.57, that reflects the second quarter $0.06 Delphi bad-debt provision.
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 December 8, 2005 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 877-407-9210. A telephone replay of the call will be available for seven days, by dialing 877-660-6853 and using the playback account number 286 and conference ID number 179847.
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.
Methode Electronics, Inc.
Financial Highlights
(In thousands, except per share data, unaudited)
Three Months Ended October 31,
2005 2004
---- ----
Net sales $116,285 $99,743
Other income 333 190
Cost of products sold 92,926 77,835
Selling and administrative expenses 16,577 12,729
Income from operations 7,115 9,369
Interest, net 507 249
Other, net 189 (174)
Income before income taxes 7,811 9,444
Income taxes 2,570 2,935
Net income 5,241 6,509
Basic and Diluted Earnings per Common
Share $0.14 $0.18
Average Number of Common Shares
outstanding:
Basic 36,262 35,699
Diluted 36,489 36,041
Six Months Ended October 31,
2005 2004
---- ----
Net sales $210,268 $184,764
Other income 557 845
Cost of products sold 167,822 145,617
Selling and administrative expenses 29,471 24,117
Income from operations 13,532 15,875
Interest, net 1,007 362
Other, net 94 (137)
Income before income taxes 14,633 16,100
Income taxes 4,685 5,000
Net income 9,948 11,100
Basic and Diluted Earnings per Common
Share $0.27 $0.31
Average Number of Common Shares
outstanding:
Basic 36,244 35,612
Diluted 36,471 35,922
Summary Balance Sheets
(In thousands)
October 31, April 30,
2005 2005
---- ----
(Unaudited)
Cash $84,642 $87,142
Accounts receivable - net 65,079 65,699
Inventories 47,032 41,583
Other current assets 10,672 10,908
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Total Current Assets 207,425 205,332
Property, plant and equipment - net 91,712 92,640
Goodwill - net 27,868 24,738
Intangible assets - net 20,008 20,367
Other assets 13,822 13,604
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Total Assets $360,835 $356,681
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Accounts and notes payable $33,903 $32,406
Other current liabilities 33,640 32,819
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Total current liabilities 67,543 65,225
Other liabilities 9,032 8,934
Shareholders' equity 284,260 282,522
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Total Liabilities and Shareholders'
Equity $360,835 $356,681
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Summary Statements of Cash Flows (Unaudited)
(In thousands)
Six Months Ended October 31,
2005 2004
---- ----
Operating Activities:
Net income $9,948 $11,100
Provision for depreciation 8,820 8,596
Amortization of intangibles 2,753 2,086
Amortization of restricted stock
awards 1,004 598
Provision for losses on accounts
receivable 3,150 24
Changes in operating assets and
liabilities (4,322) (5,490)
Other 84 16
-------------- --------------
Net Cash Provided by Operating
Activities 21,437 16,930
Investing Activities:
Purchases of property, plant and
equipment (11,621) (10,312)
Proceeds from sale of building 1,712 -
Acquisitions of businesses (5,127) (2,671)
Acquisitions of technology licenses (2,402) -
Other (199) (95)
-------------- --------------
Net Cash Used in Investing Activities: (17,637) (13,078)
Financing Activities
Options exercised 598 4,456
Dividends (3,736) (3,581)
Repurchase of common stock (664) -
-------------- --------------
Net Cash Used in Financing Activities (3,802) 875
Effect of foreign exchange rate changes
on cash (2,498) 1,445
-------------- --------------
Increase (Decrease) in Cash and Cash
Equivalents (2,500) 6,172
Cash and cash equivalents at beginning
of period 87,142 61,757
-------------- --------------
Cash and Cash Equivalents at End of
Period $84,642 $67,929
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