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Methode Electronics Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: December 10, 2009 02:11PM
Methode Electronics Inc. (MEI) filed Quarterly Report for the period ended 2009-10-31. 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 $298.2 million; its shares were traded at around $7.95 with a P/E ratio of 265 and P/S ratio of 0.7. The dividend yield of Methode Electronics Inc. stocks is 3.5%.
Highlight of Business Operations:
In March 2009, the total pre-tax charges were estimated to be between $16.0 million and $25.0 million. As of October 31, 2009, we have recorded a total of $12.2 million of the charges. We estimate that we will record additional pre-tax restructuring charges in fiscal 2010 of between $0.5 million and $1.2 million.
Net Sales. Consolidated net sales decreased $22.8 million, or 18.8%, to $98.5 million for the three months ended October 31, 2009 from $121.3 million for the three months ended November 1, 2008. The Automotive segment net sales declined $19.0 million, or 25.3%, to $56.2 million for second quarter of fiscal 2010 from $75.2 million for the second quarter of fiscal 2009. The decline is primarily attributable to lower sales to Delphi and Chrysler in the Automotive segment and the continued softening of the global economic environment. Net sales benefited by $1.7 million for the three months ended October 31, 2009 relating to a one-time reversal of pricing contingencies which were accrued over several years and are no longer required. The Interconnect segment net sales decreased $1.5 million, or 4.7%, to $30.5 million for the second quarter of fiscal 2010 as compared to $32.0 million for the second quarter of fiscal 2009. The Power Products segment net sales decreased $2.2 million, or 19.0%, to $9.4 million for the second quarter of fiscal 2010 as compared to $11.6 million for the second quarter of fiscal 2009. The Other segment net sales decreased $0.1 million, or 4.0%, to $2.4 million for the second quarter of fiscal 2010, as compared to $2.5 million in the second quarter of fiscal 2009. Translation of foreign operations net sales in the
Cost of Products Sold. Consolidated cost of products sold decreased $20.0 million, or 20.4%, to $77.8 million for the three months ended October 31, 2009 compared to $97.8 million for the three months ended November 1, 2008. The decrease is due to the lower sales volumes. 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 arrangement. Consolidated cost of products sold as a percentage of sales were 79.0% in the second quarter of fiscal 2010, compared to 80.6% in the second quarter of fiscal 2009. Excluding the Delphi asset write-down and the $1.7 million reversal of pricing contingencies included in net sales, consolidated cost of products sold as a percentage of sales were 79.6% for the second quarter of fiscal 2010. The decrease relates to restructuring and consolidation efforts that occurred in prior periods.
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 October 31, 2009, we recorded a restructuring charge of $0.2 million related to this restructuring initiative, which consisted of $0.1 million for accelerated depreciation and $0.1 million relating to other costs. During the fiscal quarter ended November 1, 2008, we recorded a restructuring charge of $6.3 million, which consisted of $1.6 million for employee severance, $4.4 million for impairment and accelerated depreciation, and $0.3 million relating to other costs. We expect the January 2008 restructuring to be completed in the second half of fiscal 2010.
Other Income/(Expense), Net. Other income/(expense), net increased $0.7 million, or 116.7% to income of $0.1 million for the three months ended October 31, 2009 as compared to an expense of $0.9 million for the three months ended November 1, 2008. The three months ended October 31, 2009 included a $0.4 million gain recorded from life insurance policies owned by the Company in connection with an employee deferred compensation plan. In addition, we recorded a gain of $0.3 million related to an enhanced cash fund (described below), in the second quarter of fiscal 2010, compared to a loss of $0.5 million in the second quarter of fiscal 2009. During the second quarter of fiscal 2009, we recorded $2.5 million of unrealized currency exchange losses arising from an intercompany loan between our corporate headquarters and one of our foreign subsidiaries in conjunction with the acquisition of Hetronic. The functional currencies of these operations are the British pound, Chinese yuan, Czech koruna, Euro, Indian Rupee, Mexican peso and Singapore dollar. 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.
During the second quarter of fiscal 2010, we recorded a gain of $0.3 million, of which $0.3 million was from a realized loss on redemptions of $2.4 million, offset by a realized gain of $0.6 million.Chuck Royce of ROYCE & ASSOCIATES, Bruce Kovner of Caxton Associates.
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