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Methode Electronics Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: September 3, 2009 08:01AM

Methode Electronics Inc. (MEI) filed Quarterly Report for the period ended 2009-08-01. Methode Electronics Inc. manufactures component devices world-wide for Original Equipment Manufacturers of information processing and networking equipment voice and data communications systems consumer electronics automobiles aerospace vehicles and industrial equipment. Products employ electrical electronic and optical technologies as sensors interconnections and controls. The company manufactures bus systems and provides independent laboratory services for qualification testing and certification of electronic and optical components. Methode Electronics Inc. has a market cap of $317.2 million; its shares were traded at around $8.31 with a P/E ratio of 41.6 and P/S ratio of 0.8. The dividend yield of Methode Electronics Inc. stocks is 3.3%.

Highlight of Business Operations:

In March 2009, the total pre-tax charges were estimated between $16.0 million and $25.0 million. As of August 1, 2009, we have recorded a total of $9.2 million of the charges. We estimate that we will record additional pre-tax restructuring charges in fiscal 2010 between $2.3 million and $3.9 million, of which $0.5 million will relate to the termination of approximately 75 employees and the cost of one-time employee benefits, retention, COBRA and outplacement services.

Net Sales. Consolidated net sales decreased $44.7 million, or 33.2%, to $89.8 million for the three months ended August 1, 2009 from $134.5 million for three months ended August 2, 2008. The Automotive segment net sales declined $33.5 million or 39.6% to $51.2 million for first quarter of fiscal 2010 from $84.7 million for the first quarter of fiscal 2009. The decline is attributable to the continued softening of the global economic environment, especially the direct effect on the North American automotive industry. The Interconnect segment net sales decreased $10.9 million, or 30.6% to $24.7 million for the first quarter of fiscal 2010 as compared to $35.6 million for the first quarter of fiscal 2009. The Power Products segment net sales decreased $0.8 million, or 6.7% to $11.2 million for the first quarter of fiscal 2010 as compared to $12.0 million for the first quarter of fiscal 2009. The Other segment net sales increased $0.5 million to $2.7 million for the first quarter of fiscal 2010, as compared to $2.2 million in the first quarter of fiscal 2009. Translation of foreign operations net sales in the three months ended August 1, 2009 decreased reported net sales by $1.9 million or 2.0% due to currency rate fluctuations.

Cost of Products Sold. Consolidated cost of products sold decreased $34.5 million, or 32.7%, to $70.9 million for the three months ended August 1, 2009 compared to $105.4 million for the three months ended August 2, 2008. The decrease is due to the lower net sales volumes. Consolidated cost of products sold as a percentage of sales was 79.0% in the first quarter of fiscal 2010, compared to 78.4% in the first quarter of fiscal 2009. The increase relates to lower sales volumes and segment sales mix in the first quarter of fiscal 2010 as compared to the first quarter of fiscal 2009.

In January 2008, we announced a restructuring of our U.S.-based automotive operations and the decision to discontinue producing certain legacy products in the Interconnect segment. During the fiscal quarter ended August 1, 2009, we recorded a restructuring charge of $1.7 million related to this restructuring, which consisted of $0.2 million for employee severance, $1.4 million for the impairment and accelerated depreciation and $0.1 million relating to other costs. During the fiscal quarter ended August 2, 2008, we recorded a restructuring charge of $4.9 million, which consisted of $2.8 million for employee severance, $1.6 million for accelerated depreciation , $0.1 million for inventory write-down and $0.4 million relating to other costs.

Interest Income/(Expense), Net. Net interest income/(expense) decreased $0.6 million, or 120.0%, in the three months ended August 1, 2009 to an expense of $0.1 million as compared to income of $0.5 million in the three months ended August 2, 2008. The average cash balance was $61.1 million during the three months ended August 1, 2009 as compared to $116.0 million during the three months ended August 2, 2008. The decrease in cash relates primarily to the Hetronic acquisition in the second quarter of fiscal 2009. The average interest rate earned in the three months ended August 1, 2009 was 0.39% compared to 1.98% in the three months ended August 2, 2008. Interest expense was $0.2 million and $0.1 million for the three months ended August 1, 2009 and August 1, 2008, respectively. The interest expense in the first quarter fiscal 2010 included $0.1 million of fees related to the amendment of our bank agreement during the quarter.

At August 1, 2009, approximately $2.4 million was invested in an enhanced cash fund sold as an alternative to traditional money-market funds. We have historically invested a portion of our on hand cash balances in this fund. These investments are subject to credit, liquidity, market and interest rate risk. Based on the information available to us, we have estimated the fair value of the fund at $0.763 per unit as of August 1, 2009. During the quarter ended August 1, 2009, we recorded a gain of $0.3 million, of which $0.1 million was from a realized loss on partial redemptions of $1.1 million, offset by an unrealized gain of $0.4 million.

Read the The complete Report



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