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Methode Electronics Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: December 9, 2010 07:14AM

Methode Electronics Inc. (MEI) filed Quarterly Report for the period ended 2010-10-30. Methode Electronics Inc. has a market cap of $433.9 million; its shares were traded at around $11.79 with a P/E ratio of 20.3 and P/S ratio of 1.1. The dividend yield of Methode Electronics Inc. stocks is 2.3%.

MEI is in the portfolios of Chuck Royce of Royce& Associates, Mario Gabelli of GAMCO Investors, James Barrow of Barrow, Hanley, Mewhinney & Strauss, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Net Sales. Consolidated net sales increased $8.1 million, or 8.2%, to $106.6 million for the three months ended October 30, 2010, from $98.5 million for the three months ended October 31, 2009. Net sales for the three months ended October 31, 2009 benefitted by $1.7 million, related to a one-time reversal of pricing contingencies which were accrued over several years that were no longer required. The Automotive segment net sales decreased $1.4 million, or 2.5%, to $54.8 million for the second quarter of fiscal 2011, from $56.2 million for the second quarter of fiscal 2010. The Interconnect segment net sales increased $6.0 million, or 19.7%, to $36.5 million for the second quarter of fiscal 2011, compared to $30.5 million for the second quarter of fiscal 2010. The Power Products segment net sales increased $2.6 million, or 27.7%, to $12.0 million for the second quarter of fiscal 2011, as compared to $9.4 million for the second quarter of fiscal 2010. The Other segment net sales increased $0.9 million, or 37.5%, to $3.3 million for the second quarter of fiscal 2011, as compared to $2.4 million for the second quarter of fiscal 2010. Translation of foreign operations net sales for the three months ended October 30, 2010 decreased reported net sales by $1.8 million or 1.7% due to average currency rates in the second quarter of fiscal 2011, compared to the average currency rates in the second quarter of fiscal 2010.

Cost of Products Sold. Consolidated cost of products sold increased $6.3 million, or 8.1%, to $84.1 million for the three months ended October 30, 2010, compared to $77.8 million for the three months ended October 31, 2009. Consolidated cost of products sold as a percentage of sales were 78.9% in the second quarter of fiscal 2011, compared to 79.0% in the second quarter of fiscal 2010. Included in the cost of products sold for the three months ended October 31, 2009 is $0.7 million of asset write-downs relating to the termination of the Delphi supply agreement. Included in cost of products sold are additional provisions for environmental matters for three sites that are no longer used in operations. We recorded $0.5 million and $0.2 million for environmental matters for the three months ended October 30, 2010 and October 31, 2009, respectively. Also during the second quarter of fiscal 2011, we recorded a negotiated program termination charge of $1.3 million for certain products manufactured in our Malta facility and $0.4 million for customer cancellation of certain products manufactured in our U.S. facility. In addition, we incurred $0.6 million in additional costs due to vendor supply issues for new products that began ramping up production during the second quarter of fiscal 2011. The increases were substantially offset by cost efficiencies achieved in our Asian businesses, higher sales volumes as well as a change in sales mix within the Interconnect segment in the second quarter of fiscal 2011, as compared to the second quarter of fiscal 2010.

Selling and Administrative Expenses. Selling and administrative expenses increased $4.8 million, or 29.3%, to $21.2 million for the three months ended October 30, 2010, compared to $16.4 million for the three months ended October 31, 2009. During the second quarter of fiscal 2011, we recorded an expense of $3.8 million for litigation regarding unsecured claims sold to Blue Angel LLC in June 2006, related to the Delphi bankruptcy. See the Overview section for more information regarding this matter. In addition, selling and marketing expenses increased in our North American and Asian automotive businesses, partially offset by lower legal expenses related to the Delphi patent and supply agreement litigation as well as lower commissions and professional fees in the second quarter of fiscal 2011, compared to the second quarter of fiscal 2010. The second quarter of fiscal 2011 included income of $0.5 million and the second quarter of fiscal 2010 included income of $0.4 million for grants

Interest Expense, Net. Interest expense, net was $0.1 million for the three months ended October 30, 2010, compared to zero for the three months ended October 31, 2009. Interest income was $0.2 million for the three months ended October 30, 2010, compared to $0.1 million for the three months ended October 31, 2009. The average cash balance was $63.2 million during the three months ended October 30, 2010, as compared to $63.7 million during the three months ended October 31, 2009. The average interest rate earned for the three months ended October 30, 2010 was 1.17%, compared to 0.48% for the three months ended October 31, 2009. Interest expense was $0.2 million for the three months ended October 30, 2010, compared to $0.1 million for the three months ended October 31, 2009.

Other (Income)/Expense, Net. Other (income)/expense, net decreased $2.1 million to an expense of $2.0 million for the three months ended October 30, 2010, as compared to income of $0.1 million for the three months ended October 31, 2009. The second quarter of fiscal 2010 included income of $0.3 million related to an enhanced cash fund. All other amounts for both the second quarter of fiscal 2011 and the second quarter of fiscal 2010 relate to currency rate fluctuations. The functional currencies of these operations are the British pound, Chinese yuan, Czech koruna, Euro, Indian Rupee, Mexican peso, Singapore dollar and Swiss Franc. Some foreign operations have transactions denominated in currencies other than their functional currencies, primarily sales in U.S. dollars and Euros, creating exchange rate sensitivities.

Income Tax Expense. Income tax expense increased by $0.6 million to $0.8 million for the three months ended October 30, 2010, compared to $0.2 million for the three months ended October 31, 2009. The three months ended October 30, 2010 relates to taxes on foreign profits. The three months ended October 31, 2009 includes taxes on foreign profits of $0.1 million and $0.1 million related to non-Federal U.S. taxes.

Read the The complete Report



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