Source: Methode Electronics Inc
CHICAGO, Dec. 07, 2017 (GLOBE NEWSWIRE) -- Methode Electronics, Inc. (NYSE:MEI), a global developer of custom engineered and application specific products and solutions, announced financial results for the second quarter and first half of Fiscal 2018 ended October 28, 2017.
Second Quarter Fiscal 2018
Methode's second-quarter Fiscal 2018 net sales increased $20.8 million, or 9.9 percent, to $230.1 million from $209.3 million in the same quarter of Fiscal 2017. Year over year, currency rate fluctuations increased net sales $2.4 million. The second quarter of Fiscal 2018 includes net sales from new acquisitions in the Automotive segment of $7.0 million from Pacific Insight and $9.1 million from Procoplast.
Net income decreased $0.7 million to $24.2 million, or $0.64 per share, in the second quarter of Fiscal 2018 from $24.9 million, or $0.66 per share, in the same period of Fiscal 2017.
Year over year, Fiscal 2018 second-quarter net income was negatively affected by:
Year over year, Fiscal 2018 second-quarter net income benefitted from:
Consolidated gross margins as a percentage of sales increased to 26.9 percent in the Fiscal 2018 second quarter from 26.6 percent in the Fiscal 2017 period. Gross margins improved primarily as a result of higher sales, partially offset by pricing reductions, unfavorable currency impact on labor and other factory expenses in the Automotive and Interface segments, purchase accounting adjustments, unfavorable commodity pricing of raw materials and increased investment in Dabir.
Selling and administrative expenses as a percentage of sales increased to 13.6 percent for the Fiscal 2018 second quarter compared to 12.4 percent in the same period last year. Selling and administrative expenses increased $5.3 million, or 20.5 percent, to $31.2 million in the Fiscal 2018 second quarter compared to $25.9 million in the prior-year second quarter due primarily to acquisition-related expense and additional selling and administrative expenses from acquisitions. Expenses also increased for travel and increased investment in Dabir, partially mitigated by lower legal fees and the absence of expense related to operating units exited at the end of Fiscal 2017.
Intangible asset amortization expense increased $0.5 million, or 83.3 percent, to $1.1 million, primarily due to new acquisitions.
In the Fiscal 2018 second quarter, income tax expense decreased $1.3 million to $4.9 million compared to $6.2 million in the Fiscal 2017 second quarter. The Company’s effective tax rate decreased to 16.8 percent in the Fiscal 2018 period from 19.9 percent in the previous second quarter. The decrease primarily relates to the composition of pre-tax income in jurisdictions with lower effective tax rates and additional foreign investment tax credits.
Comparing the Automotive segment's Fiscal 2018 second quarter to the same period of Fiscal 2017,
Comparing the Interface segment's Fiscal 2018 second quarter to the same period of Fiscal 2017,
Comparing the Power Products segment's Fiscal 2018 second quarter to the same period of Fiscal 2017,
First Half Fiscal 2018
Methode's first-half Fiscal 2018 net sales increased $30.2 million, or 7.5 percent, to $431.3 million from $401.1 million in the same period of Fiscal 2017. Year over year, currency rate fluctuations increased net sales $2.1 million. The first half of Fiscal 2018 includes net sales from new acquisitions in the Automotive segment of $7.0 million from Pacific Insight and $9.1 million from Procoplast.
Net income decreased $1.2 million to $44.7 million, or $1.19 per share, in the first half of Fiscal 2018 from $45.9 million, or $1.23 per share, in the same period of Fiscal 2017.
Year over year, Fiscal 2018 first-half net income was negatively affected by:
Year over year, Fiscal 2018 first-half net income benefitted from:
Consolidated gross margins as a percentage of sales were consistent at 27.3 percent in both the Fiscal 2018 and Fiscal 2017 first-half periods. Fiscal 2018 first-half gross margins were positively impacted by higher sales, partially offset by purchase accounting adjustments, unfavorable commodity pricing of raw materials in the Power Products segment and increased investment in Dabir. Gross margins were favorably impacted in the Fiscal 2017 period by the commodity pricing adjustments and reversal of customer commercial accruals.
Selling and administrative expenses as a percentage of sales increased to 14.1 percent for the Fiscal 2018 first half compared to 13.2 percent in the same period last year. Selling and administrative expenses increased $8.0 million, or 15.2 percent, to $60.8 million in the Fiscal 2018 first half compared to $52.8 million in the prior-year period due primarily to acquisition-related expense, additional selling and administrative expenses from acquisitions, higher bonus, travel, advertising and professional fees and increased investment in Dabir, partially mitigated by lower legal fees and the absence of expense related to operating units exited at the end of Fiscal 2017.
Intangible asset amortization expense increased $0.5 million, or 41.7 percent, to $1.7 million, primarily due to new acquisitions.
In the first half of Fiscal 2018, income tax expense decreased $2.5 million to $9.2 million compared to $11.7 million in the Fiscal 2017 first half. The Company’s effective tax rate decreased to 17.1 percent in the Fiscal 2018 period from 20.2 percent in the previous period. The decrease is primarily due to favorable discrete tax adjustments in the first half of Fiscal 2018, favorable earnings in lower tax jurisdictions and additional foreign investment tax credits.
Comparing the Automotive segment's Fiscal 2018 first half to the same period of Fiscal 2017,
Comparing the Interface segment's Fiscal 2018 first half to the same period of Fiscal 2017,
Comparing the Power Products segment's Fiscal 2018 first half to the same period of Fiscal 2017,
Methode updated Fiscal 2018 guidance to sales in the range of $880 million to $900 million from $807 million to $827 million, primarily due to incremental sales from acquisitions, but maintained pre-tax income from operations in the range of $114 to $127 million and earnings per share in the range of $2.43 to $2.63.
The guidance ranges for Fiscal 2018 are based upon management's expectations regarding a variety of factors and involve a number of risks and uncertainties, including, but not limited to, the following:
President and Chief Executive Officer Donald W. Duda said, “The integration of our recent acquisitions of Procoplast and Pacific Insight is going well. These acquisitions extend our Automotive capabilities and enhance our value-added solutions to our clients.”
Mr. Duda concluded, “With over 11,000 surgeries performed utilizing our Dabir surface with no reported pressure injuries, three new major health systems began initial adoption of Dabir during November, and we anticipate expansion into additional care settings as we continue to prove its efficacy and economic value. These new customers, coupled with the ongoing research work, are important progress in Dabir’s market adoption and its establishment as the standard of care to address the significant need for the prevention of pressure injuries.”
The Company will conduct a conference call and Webcast to review financial and operational highlights led by its President and Chief Executive Officer, Donald W. Duda, and Chief Financial Officer, John Hrudicka, today at 10:00 a.m. Central time.
To participate in the conference call, please dial (877) 407-9210 (domestic) or (201) 689-8049 (international) at least five minutes prior to the start of the event. A simultaneous Webcast can be accessed through the Company’s Web site, www.methode.com, by selecting the Investor Relations page, and then clicking on the “Webcast” icon.
A replay of the conference call will be available shortly after the call through January 7, 2018, by dialing (877) 481-4010 and providing Conference ID number 22900. On the Internet, a replay will be available for 30 days through the Company’s Web site, www.methode.com, by selecting the Investor Relations page and then clicking on the “Webcast” icon.
About Methode Electronics, Inc.
Methode Electronics, Inc. (NYSE:MEI) is a global developer of custom engineered and application specific products and solutions with manufacturing, design and testing facilities in Belgium, Canada, China, Egypt, Germany, India, Italy, Lebanon, Malta, Mexico, Singapore, Switzerland, the United Kingdom and the United States. We design, manufacture and market devices employing electrical, electronic, wireless, safety radio remote control, sensing and optical technologies to control and convey signals through sensors, interconnections and controls. Our business is managed on a segment basis, with those segments being Automotive, Interface, Power Products and Other. Our components are in the primary end markets of the automobile, computer, information processing and networking equipment, voice and data communication systems, consumer electronics, appliances, aerospace vehicles and industrial equipment industries. Further information can be found on Methode's Web site www.methode.com.
This press release contains certain forward-looking statements, which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are subject to the safe harbor protection provided under the securities laws. Methode undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Methode's expectations on a quarterly basis or otherwise. The forward-looking statements in this press release involve a number of risks and uncertainties. The factors that could cause actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission, such as our annual and quarterly reports. Such factors may include, without limitation, the following: (1) dependence on a small number of large customers, including two large automotive customers; (2) dependence on the automotive, appliance, computer and communications industries; (3) investment in programs prior to the recognition of revenue; (4) timing, quality and cost of new program launches; (5) ability to withstand price pressure, including pricing reductions; (6) customary risks related to conducting global operations; (7) currency fluctuations; (8) the effect of any material modifications to NAFTA and other international trade agreements; (9) continued economic challenges in Europe including the exit of the United Kingdom from the European Union; (10) location of a significant amount of cash outside of the U.S.; (11) ability to successfully market and sell Dabir Surfaces; (12) the success of Pacific Insight and Procoplast and/or our ability to implement and profit from new applications of the acquired technology; (13) dependence on our supply chain; (14) income tax rate fluctuations; (15) ability to withstand business interruptions; (16) dependence on the availability and price of raw materials; (17) fluctuations in our gross margins; (18) ability to keep pace with rapid technological changes; (19) a breach of our information technology systems; (20) ability to protect our intellectual property; (21) ability to avoid design or manufacturing defects; (22) ability to compete effectively; (23) ability to successfully benefit from acquisitions and divestitures; (24) the recognition of goodwill impairment charges; (25) costs and expenses due to regulations regarding conflict minerals; and (24) the effect of changes to U.S. tax policies.
For Methode Electronics, Inc. - Investor Contacts:
Kristine Walczak, Dresner Corporate Services, 312-780-7205, firstname.lastname@example.org
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
($ in millions, except per share data)
|Three Months Ended||Six Months Ended|
|Cost of Products Sold||168.1||153.7||313.7||291.5|
|Selling and Administrative Expenses||31.2||25.9||60.8||52.8|
|Amortization of Intangibles||1.1||0.6||1.7||1.2|
|Income from Operations||29.7||29.1||55.1||55.6|
|Interest Income, Net||0.2||(0.1||)||—||(0.1||)|
|Other Expense, Net||0.4||(1.9||)||1.2||(1.9||)|
|Income before Income Taxes||29.1||31.1||53.9||57.6|
|Income Tax Expense||4.9||6.2||9.2||11.7|
|Basic and Diluted Income per Share:|
|Weighted Average Number of Common Shares Outstanding:|
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
|Cash and Cash Equivalents||$||258.6||$||294.0|
|Accounts Receivable, Net||215.4||165.3|
|Work in Process||10.5||8.7|
|Prepaid and Refundable Income Taxes||0.6||0.6|
|Prepaid Expenses and Other Current Assets||15.9||12.5|
|Total Current Assets||568.9||530.3|
|Property Plan and Equipment:|
|Buildings and Building Improvements||58.3||48.2|
|Machinery and Equipment||331.1||287.9|
|Property, Plant and Equipment, Gross||390.0||336.7|
|Less Allowances for Depreciation||263.1||246.1|
|Property, Plant and Equipment, Net||126.9||90.6|
|Other Intangible Assets, Net||56.6||6.6|
|Cash Surrender Value of Life Insurance||8.1||7.8|
|Deferred Income Taxes||44.5||40.4|
|Total Other Assets||202.5||83.1|
|Liabilities and Shareholders' Equity:|
|Salaries, Wages and Payroll Taxes||17.5||18.7|
|Other Accrued Expenses||23.1||17.7|
|Income Tax Payable||10.1||12.7|
|Total Current Liabilities||152.3||124.4|
|Deferred Income Taxes||15.8||—|
|Common Stock, $0.50 par value, 100,000,000 shares authorized, 38,181,477 and 38,133,925 shares|
issued as of October 28, 2017 and April 29, 2017, respectively
|Additional Paid-in Capital||139.4||132.2|
|Accumulated Other Comprehensive Loss||(7.6||)||(25.7||)|
|Treasury Stock, 1,346,624 shares as of October 28, 2017 and April 29, 2017||(11.5||)||(11.5||)|
|Total Shareholders' Equity||606.8||541.1|
|Total Liabilities and Shareholders' Equity||$||898.3||$||704.0|
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|Six Months Ended|
|Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:|
|Provision for Depreciation||11.2||10.5|
|Amortization of Intangible Assets||1.7||1.2|
|Provision for Bad Debt||0.1||0.1|
|Changes in Operating Assets and Liabilities:|
|Prepaid Expenses and Other Assets||(3.5||)||(6.5||)|
|Accounts Payable and Other Expenses||1.9||0.9|
|Net Cash Provided by Operating Activities||45.2||63.7|
|Purchases of Property, Plant and Equipment||(16.4||)||(9.5||)|
|Acquisition of Business, Net of Cash Received||(129.9||)||—|
|Sale of Business/Investment/Property||0.3||—|
|Net Cash Used in Investing Activities||(146.0||)||(9.5||)|
|Taxes Paid Related to Net Share Settlement of Equity Awards||(0.3||)||(1.1||)|
|Purchase of Common Stock||—||(9.8||)|
|Proceeds from Exercise of Stock Options||—||1.5|
|Tax Benefit from Stock Option Exercises||—||0.5|
|Proceeds from Borrowings||61.1||—|
|Repayment of Borrowings||(2.8||)||(8.0||)|
|Net Cash Provided (Used) in Financing Activities||51.2||(23.5||)|
|Effect of Foreign Currency Exchange Rate Changes on Cash||14.2||(8.9||)|
|Increase (Decrease) in Cash and Cash Equivalents||(35.4||)||21.8|
|Cash and Cash Equivalents at Beginning of Year||294.0||227.8|
|Cash and Cash Equivalents at End of Period||$||258.6||$||249.6|