<PAGE>
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, 1998
or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
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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 8, 1998, Registrant had 34,360,093 shares of Class A Common
Stock and 1,191,673 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, 1998 and April 30, 1998
Condensed consolidated statements of income -- Three months ended July
31, 1998 and 1997
Condensed consolidated statements of cash flows -- Three months ended July
31, 1998 and 1997
Note to condensed consolidated financial statements -- July 31, 1998
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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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
July 31, April 30,
1998 1998
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<S> <C> <C>
ASSETS (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 27,586,202 $ 24,178,868
Accounts receivable - net 67,158,243 64,468,407
Inventories:
Finished products 10,702,881 9,754,109
Work in process 29,782,174 27,669,081
Materials 13,199,987 11,541,822
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53,685,042 48,965,012
Current deferred income taxes 4,023,000 4,023,000
Prepaid expenses 2,331,991 3,055,417
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TOTAL CURRENT ASSETS 154,784,478 144,690,704
PROPERTY, PLANT AND EQUIPMENT 200,327,402 199,786,527
Less allowance for depreciation 116,102,585 112,742,879
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84,224,817 87,043,648
GOODWILL - net 38,908,164 38,749,031
INTANGIBLE BENEFIT PLAN ASSET 2,099,396 2,266,329
OTHER ASSETS 10,644,825 14,780,143
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$290,661,680 $287,529,855
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts and notes payable $ 25,939,811 $ 27,727,636
Other current liabilities 23,314,595 22,710,265
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TOTAL CURRENT LIABILITIES 49,254,406 50,437,901
OTHER LIABILITIES 2,709,003 2,585,704
DEFERRED COMPENSATION 7,169,779 7,259,549
ACCUMULATED BENEFIT PLAN OBLIGATION 1,207,010 1,206,819
SHAREHOLDERS' EQUITY
Common Stock 17,901,842 17,836,506
Paid in capital 22,924,550 21,021,669
Retained earnings 195,297,225 189,397,396
Other shareholders' equity (5,802,135) (2,215,689)
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230,321,482 226,039,882
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$290,661,680 $287,529,855
============ ============
</TABLE>
See note 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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1998 1997
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<S> <C> <C>
INCOME:
Net sales $87,961,397 $91,898,318
Other 1,133,451 1,132,188
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Total 89,094,848 93,030,506
COSTS AND EXPENSES:
Cost of products sold 65,441,410 66,774,651
Selling and administrative expenses 11,876,048 12,164,600
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Total 77,317,458 78,939,251
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Income before income taxes 11,777,390 14,091,255
Provision for income taxes 4,100,000 4,935,000
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NET INCOME $ 7,677,390 $ 9,156,255
=========== ===========
Basic and diluted earnings
per Common Share $ 0.22 $ 0.26
=========== ===========
Cash dividends per Common Share $ 0.05 $ 0.05
Weighted average number of Common Shares outstanding:
Basic 35,350,000 35,255,000
Diluted 35,404,000 35,313,000
</TABLE>
See note 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,
-----------------------------
<S> <C> <C>
1998 1997
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OPERATING ACTIVITIES
Net Income $ 7,677,390 $ 9,156,255
Provision for depreciation
and amortization 4,664,562 4,468,898
Changes in operating assets
and liabilities (2,249,970) (4,030,498)
Other 793,054 801,193
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NET CASH PROVIDED BY OPERATING ACTIVITIES 10,885,036 10,395,848
INVESTING ACTIVITIES
Purchases of property, plant and
equipment (4,072,490) (4,851,455)
Acquisitions (1,444,442) (3,649,195)
Other (305,532) (1,506,440)
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NET CASH USED IN INVESTING ACTIVITIES (5,822,464) (10,007,090)
FINANCING ACTIVITIES
Dividends (1,777,561) (1,773,632)
Other 122,323 2,266,525
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,655,238) 492,893
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INCREASE IN CASH AND CASH EQUIVALENTS 3,407,334 881,651
Cash and cash equivalents at
beginning of period 24,178,868 23,115,320
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $27,586,202 $23,996,971
=========== ===========
</TABLE>
See note to condensed consolidated financial statements.
5
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
July 31, 1998
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, 1998
are not necessarily indicative of the results that may be expected for the year
ending April 30, 1999. 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, 1998.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Net sales for the first quarter of fiscal 1999 decreased 4% to $87,961,000
from $91,898,000 a year ago. Our domestic automotive sales declined 3% and
worldwide, our automotive sales were 2% below sales for the year-ago period.
Automotive interconnect devices represented about half of Methode's business
during both periods. Sales of non-automotive interconnect devices were down 9%
from the first quarter of fiscal 1998. Strong sales of our high frequency
gigabit optical transceiver products significantly helped to mitigate the sales
slowdown by the majority of our other non-automotive interconnect devices.
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 increased to
74.4% compared with the year-ago period of 72.7%. Margins were unfavorably
impacted by our automotive margins which suffered a three percentage point drop
from the first quarter of fiscal 1998 primarily due to our aggressive investment
in new product launches and development.
Selling and administrative expenses as a percentage of sales remained
relatively constant at 13.5% in the first quarter of fiscal 1999, compared with
13.2% for the year-ago period.
The effective income tax rate was 35% in both the current and prior year
first quarter. The effective income tax rate for both periods equaled the
statutory federal rate of 35% with lower statutory rates on foreign operations
offsetting the effect of state income taxes.
Financial Conditions, Liquidity and Capital Resources
Net cash provided by operating activities was $10,885,000 in the first
quarter of fiscal 1999, on a par with the $10,396,000 provided during the year-
ago period. The decrease in cash provided by net income in the current quarter
was offset by a smaller increase in working capital requirements.
Depreciation and amortization expense was $4,665,000 in the first quarter
of fiscal 1999 compared with $4,469,000 in fiscal 1998, with capital additions
of $4,072,000 and $4,851,000, respectively. It is presently expected that fixed
asset additions for fiscal 1999 will approach $25,000,000 and will be financed
with internally generated funds.
Year 2000 Conversion
The Company's plan to become Year 2000 ready has not significantly changed
from that described in its annual report on Form 10-K for the year ended April
30, 1998.
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
- ------ ----------- ------
<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)*
10.13 Methode Electronics, Inc. 1997 Stock Plan (7)*
27 Financial Data Schedules................................................................. 10
</TABLE>
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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.
8
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(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. 333-49559
and incorporated herein by reference.
(7) Previously filed with Registrant's Registration Statement No. 333-49671 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, 1998.
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 10, 1998
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9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 27,586,202
<SECURITIES> 0
<RECEIVABLES> 68,450,243
<ALLOWANCES> 1,292,000
<INVENTORY> 53,685,042
<CURRENT-ASSETS> 154,784,478
<PP&E> 200,327,402
<DEPRECIATION> 116,102,585
<TOTAL-ASSETS> 290,661,680
<CURRENT-LIABILITIES> 49,254,406
<BONDS> 0
0
0
<COMMON> 17,901,842
<OTHER-SE> 212,419,640
<TOTAL-LIABILITY-AND-EQUITY> 290,661,680
<SALES> 87,961,397
<TOTAL-REVENUES> 89,094,848
<CGS> 65,441,410
<TOTAL-COSTS> 65,441,410
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105,324
<INCOME-PRETAX> 11,777,390
<INCOME-TAX> 4,100,000
<INCOME-CONTINUING> 7,677,390
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,677,390
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
