Methode Electronics, Inc. (NASDAQ:METH), a global manufacturer of
electronic component and subsystem devices, today announced
operating results for the quarter ended October 31, 2006, which is
the second quarter of the 2007 fiscal year. Methode reported net
sales of $108.5 million and net income of $4.9 million, or $0.13
per share, in the second quarter of the 2007 fiscal year. This
compares with net sales of $116.3 million and net income of $5.2
million, or $0.14 per share, in the second quarter of the 2006
fiscal year. Customer paid tooling sales in the second quarter of
the 2007 fiscal year were $0.4 million compared to $5.2 million in
the second quarter of the 2006 fiscal year. Included in net income
in the 2006 fiscal year was a $3.2 million bad debt provision, $2.1
million net of tax, for receivables deemed impaired due to the
bankruptcy of the U.S. subsidiaries of Delphi Corporation. In the
first six months of the 2007 fiscal year, net sales were $212.1
million, compared to $210.3 million in the same period in the last
fiscal year. Net income was $9.2 million in the first half of this
fiscal year, or $0.25 per share, compared to $9.9 million, or $0.27
per share, in the first half of the 2006 fiscal year. Customer paid
tooling sales in the first six months of the 2007 fiscal year were
$0.4 million compared to $5.9 million in the 2006 fiscal year.
Commenting on the results, Donald W. Duda, President and Chief
Executive Officer for Methode stated, �As anticipated, we
experienced a solid increase in our European automotive sales. This
was offset by a steep decline in North American automobile output
during Methode�s second quarter resulting in a 9.8 percent decline
in sales in our automotive segment, excluding customer paid tooling
sales, compared to last year�s second quarter.� Mr. Duda continued,
�Methode�s power distribution segment reported increased sales
during the second quarter both domestically and in Asia. We are
especially pleased with the significant growth in this segment�s
China business, which achieved profitability within its first year
of operation.� Cost of products sold increased to 82.2 percent of
net sales in the second quarter of the 2007 fiscal year from last
fiscal year�s second quarter mark of 80.3 percent. This increase in
cost of products sold is primarily in the automotive segment and is
a result of production volume declines, contractual price
reductions, inefficiencies in our Scotland facility and higher
material costs. Selling and administrative expense was 12.2 percent
and 12.7 percent in the second quarter and six-month period of the
2007 fiscal year, respectively, compared to 13.8 percent and 13.6
percent in the second quarter and first six months of the 2006
fiscal year. In the second quarter of the 2006 fiscal year, Methode
reported a higher than normal selling and administrative expense
due to the bad debt provision of $3.2 million, $2.1 million net of
tax, for receivables deemed impaired due to the bankruptcy of the
U.S. subsidiaries of Delphi Corporation, which represented 2.7
percent and 1.5 percent of net sales for the quarter and six-month
period ended October 31, 2005, respectively. Excluding this charge,
selling and administrative expenses as a percentage of net sales
for the second quarter and six months ended October 31, 2006
increased, primarily as a result of higher stock-based compensation
expense. On December 8, 2006, Methode intends to begin transferring
all production lines in its Scotland facility to Malta. These lines
produce automotive electronic components. Production in Malta is
anticipated to commence after the New Year holiday. Total cost of
the transfer is anticipated to be $2.2 million to $2.9 million,
resulting in a reduction of $0.06 to $0.08 in earnings per share,
to be incurred during the second half of the 2007 fiscal year. This
is the business restructuring charge that was included in previous
guidance. After the 2007 fiscal year, Methode anticipates that the
annual savings of closing the Scotland facility and transferring
production to Malta will be approximately $2.5 million. Methode
expects to achieve sales between $102.0 million and $107.0 million,
and earnings per share in the range of $0.06 to $0.09 in the
quarter ending January 31, 2007, which is the third quarter of the
2007 fiscal year. Methode reiterates its previously announced
guidance for sales between $420.0 million and $435.0 million, and
earnings per share between $0.40 and $0.48, for the full fiscal
year ending April 30, 2007. This estimated earnings per share range
for the 2007 full fiscal year includes the announced business
reorganization charge of $0.06 to $0.08 earnings per share. It is
anticipated that a majority of this expense will be incurred in the
third quarter with final costs to be reported in the fourth quarter
of the 2007 fiscal year. Conference Call As previously announced,
Methode will conduct a conference call led by its President and
Chief Executive Officer, Donald W. Duda, and Chief Financial
Officer, Douglas A. Koman, on Thursday, December 7, 2006 at 10:00
a.m. Central Time. Methode invites you to listen to the webcast of
this call by visiting Methode�s website at www.methode.com and
entering the �Investor Relations� page and then clicking on the
�Webcast� icon. You may participate on the conference call by
dialing 877-407-8031 for domestic callers and 201-689-8031 for
international. A telephone replay of the call will be available for
seven days, by dialing 877-660-6853 for domestic callers and
201-612-7415 for international, both using the playback account
number 286 and conference ID number 221527. About Methode
Electronics Methode Electronics, Inc. is a global manufacturer of
electronic component and subsystem devices. Methode designs,
manufactures and markets devices employing electrical, electronic,
wireless, sensing and optical technologies. Methode�s components
are found in the primary end markets of the automotive,
communications (including information processing and storage,
networking equipment, wireless and terrestrial voice/data systems),
aerospace, rail and other transportation industries; and the
consumer and industrial equipment markets. Further information can
be found at Methode�s website www.methode.com. Forward-Looking
Statements Certain statements in this press release dated December
7, 2006, containing information for Methode�s second quarter
reporting period for the 2007 fiscal year and offering guidance for
Methode�s third quarter and full year reporting periods for the
2007 fiscal year, are forward-looking statements that are subject
to certain risks and uncertainties. Methode�s results will be
subject to many of the same risks that apply to the automotive,
computer and telecommunications industries, such as general
economic conditions, interest rates, consumer spending patterns and
technological change. Other factors which may result in materially
different results include Delphi Corporation�s bankruptcy petition;
other significant customer bankruptcy filings; restructuring,
operational improvement and cost reduction programs currently under
review by Methode; the current macroeconomic environment, including
higher petroleum and copper prices affecting material and
components used by Methode; potential manufacturing plant
shut-downs by automotive customers and significant fluctuations in
the demand for certain automobile models. In addition, market
growth; operating costs; currency exchange rates and devaluations;
delays in development, production and marketing of new products;
and other factors set forth from time to time in Methode�s Form
10-K and other reports filed with the Securities and Exchange
Commission may also effect Methode�s results. The forward-looking
statements in this press release are subject to the safe harbor
protection provided under the securities law. All information in
this press release is as of December 7, 2006. Methode undertakes no
duty to update any forward-looking statement to conform the
statement to actual results or changes in Methode�s expectations.
Methode Electronics, Inc. Financial Highlights (In thousands,
except per share data, unaudited) � Three Months EndedOctober 31,
2006� 2005� � Net sales $108,516� $116,285� Other income 151� 333�
Cost of products sold 89,244� 93,419� Selling and administrative
expenses 13,277� 16,084� Income from operations 6,146� 7,115�
Interest, net 904� 507� Other, net 393� 189� Income before income
taxes 7,443� 7,811� Income taxes 2,555� 2,570� Net income 4,888�
5,241� Basic and Diluted Earnings per Common Share $0.13� $0.14�
Average Number of Common Shares outstanding: Basic 36,275� 36,262�
Diluted 36,495� 36,489� � � Six Months EndedOctober 31, 2006� 2005�
� Net sales $212,087� $210,268� Other income 335� 557� Cost of
products sold 173,203� 168,672� Selling and administrative expenses
27,030� 28,621� Income from operations 12,189� 13,532� Interest,
net 1,723� 1,007� Other, net 325� 94� Income before income taxes
and cumulative effect of accounting change 14,237� 14,633� Income
taxes 5,090� 4,685� Income before cumulative effect of accounting
change 9,147� 9,948� Cumulative effect of accounting change 101� -�
Net income 9,248� 9,948� Basic and Diluted Earnings per Common
Share: Income before cumulative effect of accounting change $0.25�
$0.27� Net income 0.25� 0.27� Average Number of Common Shares
outstanding: Basic 36,298� 36,244� Diluted 36,516� 36,471� � Note -
Certain amounts in fiscal 2006 have been reclassified toconform to
the classification in fiscal 2007. � Methode Electronics, Inc.
Summary Balance Sheets (In thousands) � October 31, April 30, 2006�
2006� (Unaudited) Cash $ 95,406� $ 81,646� Accounts receivable -
net 66,393� 74,223� Inventories 47,937� 45,681� Other current
assets 13,581� 19,722� Total Current Assets 223,317� 221,272� �
Property, plant and equipment - net 86,127� 90,497� Goodwill - net
30,125� 28,893� Intangible assets - net 15,324� 17,540� Other
assets 16,663� 16,381� Total Assets $ 371,556� $ 374,583� �
Accounts and notes payable $ 32,319� $ 41,581� Other current
liabilities 31,369� 32,622� Total current liabilities 63,688�
74,203� � Other liabilities 8,651� 8,671� Shareholders' equity
299,217� 291,709� Total Liabilities and Shareholders' Equity $
371,556� $ 374,583� Methode Electronics, Inc. Summary Statements of
Cash Flows (Unaudited) (In thousands) � Six Months Ended October
31, 2006� 2005� Operating Activities: Net income $ 9,248� $ 9,948�
Provision for depreciation 9,294� 8,820� Amortization of
intangibles 2,426� 2,753� Amortization of restricted stock awards
1,466� 1,004� Provision for losses on accounts receivable 84�
3,150� Changes in operating assets and liabilities 2,940� (4,322)
Other 1,129� 84� � Net Cash Provided by Operating Activities
26,587� 21,437� Investing Activities: Purchases of property, plant
and equipment (5,022) (11,621) Proceeds from sale of building 800�
1,712� Acquisitions of businesses (2,678) (5,127) Acquisitions of
technology licenses -� (2,402) Other (631) (199) � Net Cash Used in
Investing Activities: (7,531) (17,637) Financing Activities Options
exercised 187� 598� Dividends (3,732) (3,736) Purchase of common
stock (1,926) (664) � Net Cash Used in Financing Activities (5,471)
(3,802) � Effect of foreign exchange rate changes on cash 175�
(2,498) � Increase (Decrease) in Cash and Cash Equivalents 13,760�
(2,500) � Cash and cash equivalents at beginning of period 81,646�
87,142� � Cash and Cash Equivalents at End of Period $ 95,406� $
84,642�
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