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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One) (X) Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
for the quarterly period ended July 31, 1997
or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
______________________________
Commission file number 0-2816
METHODE ELECTRONICS, INC.
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(Exact name of registrant as specified in its charter.)
Delaware 36-2090085
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7444 West Wilson Avenue, Harwood Heights, Illinois 60656
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (708) 867-9600
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None
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(Former name, former address, former fiscal year, if changed since last report)
At September 5, 1997, Registrant had 34,273,132 shares of Class A Common
Stock and 1,199,754 shares of Class B Common Stock outstanding.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report(s)), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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INDEX
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets July 31, 1997 and April 30, 1997
Condensed consolidated statements of income -- Three months ended
July 31,1997 and 1996
Condensed consolidated statements of cash flows -- Three months ended
July 1, 1997 and 1996
Notes to condensed consolidated financial statements - - July 31, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
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Item 6. Exhibits and reports on Form 8-K
SIGNATURES
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2
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
July 31, April 30,
1997 1997
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ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 23,996,971 $ 23,115,320
Accounts receivable - net 56,667,569 54,054,695
Inventories:
Finished products 9,839,562 7,347,088
Work in process 25,580,649 21,323,077
Materials 9,697,378 11,185,199
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45,117,589 39,855,364
Current deferred income taxes 2,971,000 2,831,000
Prepaid expenses 2,955,592 2,944,056
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TOTAL CURRENT ASSETS 131,708,721 122,800,435
PROPERTY, PLANT AND EQUIPMENT 183,099,544 179,050,393
Less allowance for depreciation 102,193,560 98,954,082
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80,905,984 80,096,311
GOODWILL - net 38,269,773 35,190,298
INTANGIBLE BENEFIT PLAN ASSET 2,767,128 2,934,061
OTHER ASSETS 13,097,067 12,469,978
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$266,748,673 $253,491,083
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts and notes payable $ 27,380,418 $ 25,559,239
Other current liabilities 22,769,575 18,979,585
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TOTAL CURRENT LIABILITIES 50,149,993 44,538,824
OTHER LIABILITIES 2,383,900 2,464,519
DEFERRED COMPENSATION 6,838,057 6,964,135
ACCUMULATED BENEFIT PLAN OBLIGATION 2,398,904 2,326,248
SHAREHOLDERS' EQUITY
Common Stock 17,829,719 17,744,672
Paid in capital 20,598,807 18,040,963
Retained earnings 168,608,470 161,225,847
Other shareholders' equity (2,059,177) 185,875
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204,977,819 197,197,357
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$266,748,673 $253,491,083
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</TABLE>
See notes to condensed consolidated financial statements.
3
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended July 31,
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1997 1996
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<S> <C> <C>
INCOME:
Net sales $91,898,318 $78,965,710
Other 1,132,188 1,378,883
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Total 93,030,506 80,344,593
COSTS AND EXPENSES:
Cost of products sold 66,774,651 57,640,514
Selling and administrative expenses 12,164,600 10,089,491
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Total 78,939,251 67,730,005
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Income before income taxes 14,091,255 12,614,588
Provision for income taxes 4,935,000 4,605,000
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NET INCOME $9,156,255 $8,009,588
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Weighted average number of Common
Shares outstanding 35,298,000 35,171,000
Earnings per Common Share $0.26 $0.23
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Cash dividends per Common Share $0.05 $0.05
</TABLE>
See notes to condensed consolidated financial statements.
4
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended July 31,
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1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $9,156,255 $8,009,588
Provision for depreciation
and amortization 4,468,898 3,354,197
Changes in operating assets
and liabilities (4,030,498) 5,460,181
Other 801,193 272,808
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 10,395,848 17,096,774
INVESTING ACTIVITIES
Purchases of property, plant and
equipment (4,851,455) (4,710,883)
Acquisitions (3,649,195)
Other (1,506,440) 1,451,075
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NET CASH USED IN
INVESTING ACTIVITIES (10,007,090) (3,259,808)
FINANCING ACTIVITIES
Dividends (1,773,632) (1,766,671)
Other 2,266,525 (1,720,451)
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NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES 492,893 (3,487,122)
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INCREASE IN CASH AND
CASH EQUIVALENTS 881,651 10,349,844
Cash and cash equivalents at
beginning of period 23,115,320 50,185,934
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $23,996,971 $60,535,778
============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
July 31, 1997
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended July 31, 1997
are not necessarily indicative of the results that may be expected for the year
ending April 30, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended April 30, 1997.
NOTE 2. ACQUISITION
Effective May 5, 1997, the Company, using available cash balances,
purchased all of the outstanding shares of Adam Technologies, a designer and
marketer of electronic connectors. The acquisition, which may require
additional contingent consideration if certain performance targets are attained,
was accounted for using the purchase method of accounting and the results of
operations of Adam Technologies have been included in the Company's consolidated
financial statements from the date of acquisition.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
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Net sales for the first quarter of fiscal 1998 increased 16% to
$91,898,000, compared with $78,966,000 for the first quarter last year. Merit-
Malta Methode, a European automotive component supplier acquired in February
1997, helped Methode achieve automotive interconnect devices and controls sales
gains of just under 10% for the current quarter compared with the first quarter
last year. Domestic sales of automotive controls declined about 4% from the
first quarter of fiscal 1997. Automotive interconnect devices and controls
represented about half of Methode's business during both periods. Our dataMate
"smart interconnect" sales grew by approximately 40%, and with the help of Adam
Technologies, a broad line electronics connector supplier acquired in May 1997,
other connectors and assemblies had sales gains in excess of 30% over last
year's first quarter. Sales of Network Buss products to the mainframe computer
industry continued the decline begun in the first quarter of fiscal 1997, and
sales in the current year first quarter were less than half of last year's first
quarter.
Other income consisted primarily of earnings from an automotive joint
venture, royalty and license fees, and interest income on short-term
investments.
Cost of products sold as a percentage of sales for the quarter remained
relatively constant at 72.7% compared with the year-ago period of 73.0%.
Selling and administrative expenses as a percentage of sales were 13.2% in
the first quarter of fiscal 1998, up from 12.8% for the year-ago period.
The effective income tax rate was 35.0% in the current quarter compared
with 36.5% for the quarter ended July 31, 1996. The effective income tax rate
in the first quarter of fiscal 1998 equaled the statutory federal rate of 35%
with lower statutory rates on foreign operations offsetting the effect of state
income taxes. In the first quarter of fiscal 1997, the foreign operations were
not a large enough component of total income to completely offset the effect of
state income taxes.
Financial Conditions, Liquidity and Capital Resources
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Net cash provided by operating activities was $10,396,000 in the first
quarter of fiscal 1998, down from the $17,097,000 provided during the year-ago
period. The decrease was primarily the result of increased working capital
requirements.
To accelerate market penetration and extend product offerings, the Company
purchased the Common Stock of Adam Technologies in May 1997. Available cash
balances were used to fund this acquisition.
Depreciation and amortization expense was $4,469,000 in the first quarter
of fiscal 1998 compared with $3,354,000 in fiscal 1997, with capital
expenditures of $4,851,000 and $4,711,000, respectively. It is presently
expected that fixed asset additions for fiscal 1998 will approach $25,000,000
and will be financed with internally generated funds.
7
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PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description Number
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<C> <S> <C>
3.1 Certificate of Incorporation of Registrant, as amended and currently in effect(1)
3.2 By-Laws of Registrant, as amended and currently in effect(1)
4.1 Article Fourth of Certificate of Incorporation of Registrant, as amended and currently in
effect (included in Exhibit 3.1)
10.1 Methode Electronics, Inc. Employee Stock Ownership Plan dated
February 24, 1977(2)*
10.2 Methode Electronics, Inc. Employee Stock Ownership Plan and Trust
Amendment No. 1(2)*
10.3 Methode Electronics, Inc. Employee Stock Ownership Trust(2)*
10.4 Methode Electronics, Inc. Employee Stock Ownership Trust-
Amendment No. 1(2)*
10.5 Methode Electronics, Inc. Incentive Stock Award Plan(3)*
10.6 Methode Electronics, Inc. Supplemental Executive Benefit Plan(4)*
10.7 Methode Electronics, Inc. Managerial Bonus and Matching Bonus Plan (also
referred to as the Longevity Contingent Bonus Program) (4)*
10.8 Methode Electronics, Inc. Capital Accumulation Plan(4)*
10.9 Incentive Stock Award Plan for Non-Employee Directors(5)*
10.10 Methode Electronics, Inc. 401(k) Savings Plan(5)*
10.11 Methode Electronics, Inc. 401(k) Savings Trust(5)*
10.12 Methode Electronics, Inc. Electronic Controls Division Cash and Class A
Common Stock Bonus Plan(6)* 10
27 Financial Data Schedules
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(1) Previously filed with Registrant's Form S-3 Registration Statement No. 33-61940
filed April 30, 1993 and incorporated herein by reference.
</TABLE>
8
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<TABLE>
<S> <C>
(2) Previously filed with Registrant's S-8 Registration Statement No. 2-60613 and incorporated herein
by reference.
(3) Previously filed with Registrant's Registration Statement No. 2-92902 filed August 23, 1984, and
incorporated herein by reference.
(4) Previously filed with Registrant's Form 10-Q for three months ended January 31, 1994, and
incorporated herein by reference.
(5) Previously filed with Registrant's Form 10-K for the year ended April 30, 1994, and incorporated
herein by reference.
(6) Previously filed with Registrant's S-8 Registration Statement No. 33-88036 and incorporated herein
by reference.
*Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Report on
Form 10-Q pursuant to Item 6 of Form 10-Q.
b) Reports on Form 8-K
The Company did not file a report on Form 8-K during the three months ended July 31, 1997.
</TABLE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Methode Electronics, Inc.
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By:
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Kevin J. Hayes
Chief Financial Officer
Dated: September 9, 1997
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9
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 23,996,971
<SECURITIES> 0
<RECEIVABLES> 57,914,569
<ALLOWANCES> 1,247,000
<INVENTORY> 45,117,589
<CURRENT-ASSETS> 131,708,721
<PP&E> 183,099,544
<DEPRECIATION> 102,193,560
<TOTAL-ASSETS> 266,748,673
<CURRENT-LIABILITIES> 50,149,993
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0
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<COMMON> 17,829,719
<OTHER-SE> 187,148,100
<TOTAL-LIABILITY-AND-EQUITY> 266,748,673
<SALES> 91,898,318
<TOTAL-REVENUES> 93,030,506
<CGS> 66,774,651
<TOTAL-COSTS> 66,774,651
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93,863
<INCOME-PRETAX> 14,091,255
<INCOME-TAX> 4,935,000
<INCOME-CONTINUING> 9,156,255
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<NET-INCOME> 9,156,255
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
