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METHODE ELECTRONICS INC — Interim / Quarterly Report 2003
Sep 13, 2002
33443_10-q_2002-09-13_995bdd91-f2db-4fd5-85d7-54fbe8b081e6.zip
Interim / Quarterly Report
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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| ý | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 |
|---|---|
| for the quarterly period ended July 31, 2002 | |
| or | |
| o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
end of user-specified TAGGED TABLE
Commission file number 0-2816
METHODE ELECTRONICS, INC. (Exact name of registrant as specified in its charter.)
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| Delaware (State or other jurisdiction of incorporation or organization) | 36-2090085 (I.R.S. Employer Identification No.) |
|---|---|
| 7401 West Wilson Avenue, Harwood Heights, Illinois (Address of principal executive offices) | 60706-4548 (Zip Code) |
| (Registrant's telephone number, including area code) (708) 867-6777 |
end of user-specified TAGGED TABLE
None (Former name, former address, former fiscal year, if changed since last report)
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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
At September 6, 2002, Registrant had 35,084,416 shares of Class A Common Stock and 1,087,317 shares of Class B Common Stock outstanding.
ZEQ.=1,SEQ=1,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=192186,FOLIO='blank',FILE='DISK022:[02CHI6.02CHI4256]BA4256A.;2',USER='DINGRAM',CD='12-SEP-2002;18:46' THIS IS THE END OF A COMPOSITION COMPONENT
INDEX
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
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| PART I. FINANCIAL INFORMATION | |
|---|---|
| Item 1. | Financial Statements (unaudited) |
| Condensed consolidated balance sheets July 31, 2002 and April 30, 2002 | |
| Condensed consolidated statements of incomeThree months ended July 31, 2002 and 2001 | |
| Condensed consolidated statements of cash flowsThree months ended July 31, 2002 and 2001 | |
| Notes to condensed consolidated financial statementsJuly 31, 2002 | |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
| Item 3. | Quantitative and Qualitative Disclosure About Market Risk |
| PART II. OTHER INFORMATION | |
| Item 6. | Exhibits and reports on Form 8-K |
| SIGNATURES | |
| CERTIFICATIONS |
end of user-specified TAGGED TABLE
2
ZEQ.=1,SEQ=2,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=957738,FOLIO='2',FILE='DISK022:[02CHI6.02CHI4256]FA4256A.;2',USER='DINGRAM',CD='12-SEP-2002;18:46' THIS IS THE END OF A COMPOSITION COMPONENT
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
METHODE ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
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| July 31, 2002 | ||||
|---|---|---|---|---|
| (Unaudited) | ||||
| ASSETS | ||||
| CURRENT ASSETS | ||||
| Cash and cash equivalents | $ 64,553 | $ | 49,902 | |
| Accounts receivable, net | 52,714 | 64,061 | ||
| Inventories: | ||||
| Finished products | 9,546 | 6,870 | ||
| Work in process | 20,911 | 19,902 | ||
| Materials | 8,186 | 10,188 | ||
| 38,643 | 36,960 | |||
| Current deferred income taxes | 7,530 | 7,590 | ||
| Prepaid expenses | 7,189 | 6,904 | ||
| TOTAL CURRENT ASSETS | 170,629 | 165,417 | ||
| PROPERTY, PLANT AND EQUIPMENT | 210,408 | 201,938 | ||
| Less allowance for depreciation | 137,873 | 131,950 | ||
| 72,535 | 69,988 | |||
| GOODWILL, net | 18,200 | 18,200 | ||
| INTANGIBLE ASSETS, net | 14,748 | 15,013 | ||
| OTHER ASSETS | 23,885 | 23,308 | ||
| $ 299,997 | $ | 291,926 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| CURRENT LIABILITIES | ||||
| Accounts and notes payable | $ 24,666 | $ | 27,344 | |
| Other current liabilities | 26,616 | 22,852 | ||
| TOTAL CURRENT LIABILITIES | 51,282 | 50,196 | ||
| OTHER LIABILITIES | 6,645 | 6,743 | ||
| DEFERRED COMPENSATION | 4,426 | 5,148 | ||
| SHAREHOLDERS' EQUITY | ||||
| Common Stock | 18,298 | 18,277 | ||
| Paid in capital | 36,357 | 36,102 | ||
| Retained earnings | 189,984 | 187,210 | ||
| Other shareholders' equity | (6,995 | ) | (11,750 | ) |
| 237,644 | 229,839 | |||
| $ 299,997 | $ | 291,926 |
end of user-specified TAGGED TABLE
See note to condensed consolidated financial statements.
3
ZEQ.=1,SEQ=3,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=510001,FOLIO='3',FILE='DISK022:[02CHI6.02CHI4256]FC4256A.;3',USER='FLANGST',CD='13-SEP-2002;00:28' THIS IS THE END OF A COMPOSITION COMPONENT
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except per share data)
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| Three Months Ended July 31, — 2002 | 2001 | ||
|---|---|---|---|
| INCOME: | |||
| Net sales | $ 80,041 | $ | 79,596 |
| Other | 408 | 521 | |
| Total | 80,449 | 80,117 | |
| COSTS AND EXPENSES: | |||
| Cost of products sold | 62,350 | 64,604 | |
| Selling and administrative expenses | 10,211 | 9,775 | |
| Total | 72,561 | 74,379 | |
| Income from operations | 7,888 | 5,738 | |
| Interest, net | 283 | 367 | |
| Other, net | (1,438 | ) | 284 |
| Income before income taxes | 6,733 | 6,389 | |
| Income taxes | 2,150 | 2,135 | |
| NET INCOME | $ 4,583 | $ | 4,254 |
| Basic and diluted earnings per common share | $ 0.13 | $ | 0.12 |
| Cash dividends per common share | $ 0.05 | $ | 0.05 |
| Weighted average number of common shares outstanding: | |||
| Basic | 36,142 | 35,775 | |
| Diluted | 36,442 | 35,946 |
end of user-specified TAGGED TABLE
See notes to condensed consolidated financial statements.
4
ZEQ.=1,SEQ=4,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=986436,FOLIO='4',FILE='DISK022:[02CHI6.02CHI4256]FE4256A.;3',USER='FLANGST',CD='13-SEP-2002;00:29' THIS IS THE END OF A COMPOSITION COMPONENT
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
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| Three Months Ended July 31, — 2002 | 2001 | |||
|---|---|---|---|---|
| OPERATING ACTIVITIES | ||||
| Income from continuing operations | $ 4,583 | $ | 4,254 | |
| Provision for depreciation and amortization | 3,919 | 3,804 | ||
| Changes in operating assets and liabilities | 11,003 | 2,793 | ||
| Other | 6 | 192 | ||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 19,511 | 11,043 | ||
| INVESTING ACTIVITIES | ||||
| Purchases of property, plant and equipment | (4,463 | ) | (2,260 | ) |
| Other | (699 | ) | (2,218 | ) |
| NET CASH USED IN INVESTING ACTIVITIES | (5,162 | ) | (4,478 | ) |
| FINANCING ACTIVITIES | ||||
| Options exercised | 275 | 473 | ||
| Dividends | (1,809 | ) | (1,789 | ) |
| Other | | 1,076 | ||
| NET CASH USED IN FINANCING ACTIVITIES | (1,534 | ) | (240 | ) |
| Effect of foreign exchange rate changes on cash | 1,836 | (74 | ) | |
| INCREASE IN CASH AND CASH EQUIVALENTS | 14,651 | 6,251 | ||
| Cash and cash equivalents at beginning of period | 49,902 | 42,788 | ||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 64,553 | $ | 49,039 |
end of user-specified TAGGED TABLE
See note to condensed consolidated financial statements.
5
ZEQ.=1,SEQ=5,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=795940,FOLIO='5',FILE='DISK022:[02CHI6.02CHI4256]FG4256A.;2',USER='DINGRAM',CD='12-SEP-2002;18:46' THIS IS THE END OF A COMPOSITION COMPONENT
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) July 31, 2002
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, 2002 are not necessarily indicative of the results that may be expected for the year ending April 30, 2003. 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, 2002.
Comprehensive income consists of income from continuing operations and foreign currency translation adjustments and totaled $9.3 million and $3.5 million for the first quarters of fiscal 2003 and 2002.
2. ACQUISITION AND INTANGIBLE ASSETS
On August 1, 2001 the Company purchased for $12.6 million in cash, including costs of acquisition, the automotive safety business of American Components, Inc. and formed a new business unit, Automotive Safety Technologies (AST). Additional contingent consideration will be due beginning in fiscal 2004 based on the attainment of certain sales targets, up to a maximum additional consideration of $11.5 million. Included in this asset purchase are the manufacturing operations and patented intellectual property for a sensor pad currently used by a tier-one automotive supplier in its passenger occupant detection system. Also included in this purchase was patented intellectual property for a rollover airbag curtain that the Company intends to further develop. The fair values assigned to intangible assets acquired were $6.9 million for a customer supply agreement, $5.5 million for patents and $2.0 million for covenants not to compete and are being amortized over 10 years, 18 years and 5 years, respectively. In accordance with SFAS No. 141, the excess of fair value of assets acquired over the cash purchase price was recorded as a liability at the date of acquisition. The pro forma results of operations for the three months ended July 31, 2001 assuming the purchase occurred at the beginning of the period would not differ materially from reported amounts.
6
ZEQ.=1,SEQ=6,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=937571,FOLIO='6',FILE='DISK022:[02CHI6.02CHI4256]FI4256A.;9',USER='FLANGST',CD='13-SEP-2002;05:50'
The following tables present details of the Company's total intangible assets (in thousands):
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| July 31, 2002 — Gross | Accumulated Amortization | Net | |
|---|---|---|---|
| Customer supply agreement | $ 6,930 | $ 153 | $ 6,777 |
| Patents | 7,215 | 811 | 6,404 |
| Covenants not to compete | 2,000 | 433 | 1,567 |
| Total | $ 16,145 | $ 1,397 | $ 14,748 |
end of user-specified TAGGED TABLE User-specified TAGGED TABLE
| April 30, 2002 — Gross | Accumulated Amortization | Net | |
|---|---|---|---|
| Customer supply agreement | $ 6,930 | $ 79 | $ 6,851 |
| Patents | 7,215 | 720 | 6,495 |
| Covenants not to compete | 2,000 | 333 | 1,667 |
| Total | $ 16,145 | $ 1,132 | $ 15,013 |
end of user-specified TAGGED TABLE
The estimated aggregate amortization expense for each of the five succeeding fiscal years is as follows (in thousands):
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| 2003 | 1,131 |
|---|---|
| 2004 | 1,433 |
| 2005 | 1,707 |
| 2006 | 1,739 |
| 2007 | 1,504 |
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3. Recent Accounting Pronouncements
In October 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 144, Accounting for the Impairment and Disposal of Long Lived Assets. The Company adopted these standards beginning in the first quarter of fiscal 2003. The adoption of this statement did not have a material effect on the Company's financial statements.
In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets. This statement changes the accounting for intangible assets and goodwill, which are no longer amortized unless, in the case of intangible assets, the asset has a finite life. Goodwill and intangible assets with indefinite lives are now subject to an annual impairment test. The Company began applying the new rules on accounting for goodwill and other intangibles beginning in the first quarter of 2003. The Company will complete the first of the required impairment tests of goodwill and indefinite lived intangible assets during the second quarter of fiscal 2003. The Company does not expect that the results of the impairment tests will have a material effect on the Company's financial statements.
7
ZEQ.=2,SEQ=7,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=705473,FOLIO='7',FILE='DISK022:[02CHI6.02CHI4256]FI4256A.;9',USER='FLANGST',CD='13-SEP-2002;05:50'
Comparative information for the prior period as if goodwill had not been amortized in that period is as follows:
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| Three Months Ended July 31, — 2002 | 2001 | |
|---|---|---|
| (in thousands, except per share amounts) | ||
| Reported net income | $ 4,583 | $ 4,254 |
| Add back goodwill amortization | | 232 |
| Adjusted net income | $ 4,583 | $ 4,486 |
| Basic and diluted earnings per share: | ||
| Reported net income | $ 0.13 | $ 0.12 |
| Goodwill amortization | | 0.01 |
| Adjusted net income | $ 0.13 | $ 0.13 |
end of user-specified TAGGED TABLE
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
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| Three Months Ended July 31, — 2002 | 2001 | |
|---|---|---|
| (in thousands, except per share amounts) | ||
| Numerator net income | $ 4,583 | $ 4,254 |
| Denominator: | ||
| Denominator for basic earnings per Share weighted-average shares | 36,142 | 35,775 |
| Dilutive potential common shares employee stock awards/options | 300 | 171 |
| Denominator for diluted earnings per Share adjusted weighted-average shares and assumed conversions | 36,442 | 35,946 |
| Basic and diluted earnings per share | $ 0.13 | $ 0.12 |
end of user-specified TAGGED TABLE
Options to purchase 724,912 shares of Class A common stock at a weighted average option price of $13.08 per share were outstanding at July 31, 2002, but were not included in the computation of diluted earnings per share because the exercise prices were greater than the average market price of the Class A common stock and, therefore, the effect would be antidilutive.
8
ZEQ.=3,SEQ=8,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=788574,FOLIO='8',FILE='DISK022:[02CHI6.02CHI4256]FI4256A.;9',USER='FLANGST',CD='13-SEP-2002;05:50'
5. SEGMENT INFORMATION
Methode Electronics, Inc. is a global manufacturer of component and subsystem devices. The Company 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.
The Company reports three business segments: Electronic, Optical and Other. The business units whose results are identified in the Electronic segment principally employ electronic processes to control and convey signals. The business units whose results are identified in the Optical segment principally employ light to control and convey signals. The Company's business that manufactures bus systems as well as its independent laboratories, which provide services for qualification testing and certification of electronic and optical components are included in the Other segment.
The Company allocates resources to and evaluates performance of its technology segments based on operating income. Transfers between technology segments are recorded using internal transfer prices set by the Company.
The table below presents information about the Company's reportable segments (in thousands):
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| Electronic | Three Months Ended July 31, 2002 — Optical | Other | Eliminations | Consolidated | ||||
|---|---|---|---|---|---|---|---|---|
| Net sales to unaffiliated customers | $ 72,156 | $ 5,036 | $ 2,849 | $ 80,041 | ||||
| Transfers between technology segments | | | 27 | $ (27 | ) | | ||
| Total net sales | $ 72,156 | $ 5,036 | $ 2,876 | $ (27 | ) | $ 80,041 | ||
| Income (loss) before income taxes | $ 9,335 | $ (91 | ) | $ (43 | ) | $ 9,201 | ||
| Corporate expenses, net | (2,468 | ) | ||||||
| Total income before income taxes | $ 6,733 |
end of user-specified TAGGED TABLE User-specified TAGGED TABLE
| Electronic | Three Months Ended July 31, 2001 — Optical | Other | Eliminations | Consolidated | |||
|---|---|---|---|---|---|---|---|
| Net sales to unaffiliated customers | $ 66,475 | $ 9,151 | $ 3,970 | $ 79,596 | |||
| Transfers between technology segments | | | 25 | $ (25 | ) | | |
| Total net sales | $ 66,475 | $ 9,151 | $ 3,995 | $ (25 | ) | $ 79,576 | |
| Income before income taxes | $ 6,857 | $ 1,232 | $ 478 | $ 8,567 | |||
| Corporate expenses, net | (2,178 | ) | |||||
| Total income before income taxes | $ 6,389 |
end of user-specified TAGGED TABLE
9
ZEQ.=4,SEQ=9,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=679419,FOLIO='9',FILE='DISK022:[02CHI6.02CHI4256]FI4256A.;9',USER='FLANGST',CD='13-SEP-2002;05:50'
6. COMMITMENTS AND CONTINGENCIES
The Company is from time to time subject to various legal actions and claims incidental to its business, including those arising out of alleged defects, breach of contracts, product warranties, employment-related matters and environmental matters. Although the outcome of potential legal actions and claims cannot be determined, it is the opinion of the Company's management, based on the information available at the time, that it has adequate reserves for these liabilities and that the ultimate resolution of these matters will not have a significant effect on the consolidated financial position of the Company.
7. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year presentation.
10
ZEQ.=5,SEQ=10,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=401038,FOLIO='10',FILE='DISK022:[02CHI6.02CHI4256]FI4256A.;9',USER='FLANGST',CD='13-SEP-2002;05:50' THIS IS THE END OF A COMPOSITION COMPONENT
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's business is managed on a technology product basis, with those technology segments being Electronic, Optical and Other. The business units whose results are identified in the Electronic segment principally employ electronic processes to control and convey signals. The business units whose results are identified in the Optical segment principally employ light to control and convey signals. The Other segment includes a manufacturer of bus systems and independent laboratories that provide services for qualification testing and certification of electronic and optical components.
Results of Operations
The following table sets forth certain income statement data as a percentage of net sales for the periods indicated:
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| Three Months Ended July 31, — 2002 | 2001 | ||
|---|---|---|---|
| Income: | |||
| Net sales | 100.0 | % | 100.0 % |
| Other | 0.5 | 0.7 | |
| 100.5 | 100.7 | ||
| Costs and expenses: | |||
| Cost of products sold | 77.9 | 81.2 | |
| Selling and administrative expenses | 12.8 | 12.3 | |
| Income From Operations | 9.8 | 7.2 | |
| Interest, net | 0.4 | 0.5 | |
| Other, net | (1.8 | ) | 0.3 |
| Income Before Income Taxes | 8.4 | 8.0 | |
| Income taxes | 2.7 | 2.7 | |
| Net Income | 5.7 | % | 5.3 % |
end of user-specified TAGGED TABLE
Net sales. First quarter consolidated net sales increased 1% to $80.0 million in fiscal 2003 from $79.6 million in fiscal 2002. Net sales of the Electronic segment, which represented 90% and 84% of consolidated net sales in fiscal 2003 and fiscal 2002, increased to $72.2 million in fiscal 2003 from $66.5 million in fiscal 2002. Product sales to the automotive industry, which represented 81% and 78% of Electronic segment net sales in 2003 and 2002 increased by 12% in fiscal 2003. While the acquisition of Automotive Safety Technologies (AST) was a factor, the increase was primarily the result of stable vehicle production schedules supported by the continued consumer demand and incentive programs offered by the OEMs. Net sales for the balance of the Electronic segment decreased 6% reflecting the continued weakness in the computer and telecommunication markets.
First quarter net sales of the Optical segment represented 6% of consolidated net sales in fiscal 2003 and 11% of consolidated net sales in fiscal 2002. Optical segment net sales decreased 45% to $5.0 million in the first quarter of fiscal 2003 from $9.2 million in the first quarter of fiscal 2002. All of the Company's Optical businesses experienced sharp sales declines as a result of the continued weakness in the computer and telecommunication markets.
First quarter net sales of the Other segment declined 28% to $2.8 million in fiscal 2003 from $3.9 million in fiscal 2002, due to the weakness in the computer and telecommunication markets.
11
ZEQ.=1,SEQ=11,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=434845,FOLIO='11',FILE='DISK022:[02CHI6.02CHI4256]FM4256A.;4',USER='FLANGST',CD='13-SEP-2002;00:37'
Other income. Other income consisted primarily of earnings from the Company's automotive joint venture, license fees and royalties. The decrease in the first quarter of fiscal 2003 from the first quarter of 2002 was due to a reduction in earnings from the automotive joint venture.
Cost of products sold. Cost of products sold as a percentage of net sales was 78% in the first quarter of fiscal 2003 compared with 81% in the first quarter of fiscal 2002.
Gross margins of the Electronic segment increased to 23% in the first quarter of fiscal 2003 from 19% in the first quarter of fiscal 2002. Gross margins on sales to the automotive industry improved from the prior year first quarter, as a result of productivity gains and aggressive cost control programs. Gross margins for the balance of the Electronic segment also improved primarily as a result of the restructuring and consolidation undertaken in the fourth quarter of fiscal 2002.
Gross margins of the Optical segment decreased to 19% in the fiscal 2003 first quarter from 22% in the fiscal 2002 first quarter. Slow sales due to the weakness in the computer and telecommunication industries was the primary reason that margins declined at all of the Company's Optical businesses.
Gross margins of the Other segment declined to 16% in the first quarter of fiscal 2003 from 24% in the first quarter of fiscal 2002. The margin decline was the result of the previously described sales decline.
Selling and administrative expenses. Selling and administrative expenses as a percentage of net sales were 13% in the first quarter of fiscal 2003 and 12% in fiscal 2002.
Interest, net. Interest income, net of interest expense declined 23% in the first quarter of fiscal 2003 compared with the first quarter of fiscal 2002, primarily due to lower interest rates on short-term cash investments.
Other, net. Other, net was primarily currency exchange gains and losses at the Company's foreign locations in the first quarter of both fiscal 2003 and 2002. Currency exchange losses experienced in fiscal 2003 were the result of a weak U.S. dollar.
Income taxes. The effective income tax rate in the first quarter was 32% in fiscal 2003 and 33% in fiscal 2002. The effective rates for both fiscal 2003 and fiscal 2002 reflect the effect of lower tax rates on income from foreign operations.
Financial Condition, Liquidity and Capital Resources
Net cash provided by operations was $19.5 million and $11.0 million in the first quarter of fiscal 2003 and 2002, respectively. The increase in cash provided by operations was primarily due to collections on accounts receivables during the first quarter of fiscal 2003.
Net cash used in investing activities during the first quarter was $5.2 million for fiscal 2003 and $4.5 million for fiscal 2002. Purchases of plant and equipment increased by $2.2 million in fiscal 2003 over the first quarter of fiscal 2002 due to the production ramp-up at AST, and expansion at the Company's Malta manufacturing operation. Net cash used in investing activities in fiscal 2002 included a $2.0 million advance deposit on the acquisition of AST. An additional $10.5 million of cash consideration for this acquisition was paid upon closing and additional contingent consideration will be due beginning in fiscal 2004 based on the attainment of certain sales targets.
Net cash used in financing activities during the first quarter was $1.5 million in fiscal 2003 and $0.2 million in fiscal 2002. The Company paid cash dividends of $1.8 million in the first quarter of both fiscal 2003 and 2002 and received proceeds from the exercise of stock options of $0.3 million in fiscal 2003 and $0.5 million in fiscal 2002. In the first quarter of fiscal 2002, $1.1 million of cash was provided by a short-term borrowing arrangement at a foreign subsidiary.
12
ZEQ.=2,SEQ=12,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=130685,FOLIO='12',FILE='DISK022:[02CHI6.02CHI4256]FM4256A.;4',USER='FLANGST',CD='13-SEP-2002;00:37'
Cautionary Statement
Certain statements in this report are forward-looking statements that are subject to certain risks and uncertainties. The Company's business is highly dependent upon two large automotive customers and specific makes and models of automobiles. Therefore, the Company's financial results will be subject to many of the same risks that apply to the automotive industry, such as general economic conditions, interest rates and consumer spending patterns. A significant portion of the balance of the Company's business relates to the computer and telecommunication industries which are subject to many of the same risks facing the automotive industry as well as fast-moving technological change. These industries are currently experiencing a severe economic downturn. Other factors which may result in materially different results for future periods include actual growth in the Company's various markets; 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 the Company's reports filed with the Securities and Exchange Commission. Any of these factors could cause the Company's actual results to differ materially from those described in the forward-looking statements. The forward-looking statements in this report are intended to be subject to the safe harbor protection provided under the securities law.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Although certain of the Company's subsidiaries enter into transactions in currencies other than their functional currency, foreign currency exposures arising from these transactions generally are not material to the Company. The primary foreign currency exposure arises from the translation of the Company's net equity investment in its foreign subsidiaries to U.S. dollars. The Company generally views as long-term its investments in foreign subsidiaries with functional currencies other than the U.S. dollar. The primary currencies to which the Company is exposed are the British pound, Czech koruna, Euro, Maltese lira, and Singapore dollar. A 10% change in foreign currency exchange rates from balance sheet dates levels could impact the Company's net foreign investments by $7.7 million and $7.2 million at July 31, 2002 and April 30, 2002, respectively.
13
ZEQ.=3,SEQ=13,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=235909,FOLIO='13',FILE='DISK022:[02CHI6.02CHI4256]FM4256A.;4',USER='FLANGST',CD='13-SEP-2002;00:37'
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file a report on Form 8-K during the three months ended July 31, 2002.
14
ZEQ.=4,SEQ=14,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=237303,FOLIO='14',FILE='DISK022:[02CHI6.02CHI4256]FM4256B.;3',USER='FLANGST',CD='13-SEP-2002;00:37' THIS IS THE END OF A COMPOSITION COMPONENT
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SIGNATURES
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.
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| METHODE ELECTRONICS, INC. | |
|---|---|
| By: | /s/ DOUGLAS A. KOMAN Douglas A. Koman Vice President, Corporate Finance (principal financial officer) |
end of user-specified TAGGED TABLE
Dated: September 12, 2002
15
ZEQ.=1,SEQ=15,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=775788,FOLIO='15',FILE='DISK022:[02CHI6.02CHI4256]JA4256A.;6',USER='FLANGST',CD='13-SEP-2002;05:05' THIS IS THE END OF A COMPOSITION COMPONENT
CERTIFICATIONS
I, William T. Jensen, certify that:
-
I have reviewed this quarterly report on Form 10-Q of Methode Electronics, Inc.;
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Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and
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Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
Dated: September 12, 2002.
User-specified TAGGED TABLE
/s/ WILLIAM T. JENSEN Chairman (principal executive officer)
end of user-specified TAGGED TABLE
16
ZEQ.=1,SEQ=16,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=686196,FOLIO='16',FILE='DISK022:[02CHI6.02CHI4256]JE4256A.;6',USER='FLANGST',CD='13-SEP-2002;05:06' THIS IS THE END OF A COMPOSITION COMPONENT
CERTIFICATIONS
I, Donald W. Duda, certify that:
-
I have reviewed this quarterly report on Form 10-Q of Methode Electronics, Inc.;
-
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and
-
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
Dated: September 12, 2002.
User-specified TAGGED TABLE
/s/ DONALD W. DUDA President (principal operating officer)
end of user-specified TAGGED TABLE
17
ZEQ.=1,SEQ=17,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=70702,FOLIO='17',FILE='DISK022:[02CHI6.02CHI4256]JG4256A.;7',USER='FLANGST',CD='13-SEP-2002;05:07' THIS IS THE END OF A COMPOSITION COMPONENT
CERTIFICATIONS
I, Douglas A. Koman, certify that:
-
I have reviewed this quarterly report on Form 10-Q of Methode Electronics, Inc.;
-
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and
-
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
Dated: September 12, 2002.
User-specified TAGGED TABLE
/s/ DOUGLAS A. KOMAN Vice President, Corporate Finance (principal financial officer)
end of user-specified TAGGED TABLE
18
ZEQ.=1,SEQ=18,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=801341,FOLIO='18',FILE='DISK022:[02CHI6.02CHI4256]JI4256A.;6',USER='FLANGST',CD='13-SEP-2002;05:07' THIS IS THE END OF A COMPOSITION COMPONENT TOC_END
INDEX TO EXHIBITS
User-specified TAGGED TABLE
| Exhibit Number | Description |
|---|---|
| 3.1 | Certificate of Incorporation of Registrant, as amended and currently in effect (1) |
| 3.2 | Bylaws 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) |
| 4.2 | Form of Rights Agreement between ChaseMellon Shareholder Services LLC and Registrant (7) |
| 10.1 | Methode Electronics, Inc. Incentive Stock Award Plan (2)* |
| 10.2 | Methode Electronics, Inc. Managerial Bonus and Matching Bonus Plan (also referred to as the Longevity Contingent Bonus Program) (3)* |
| 10.3 | Methode Electronics, Inc. Capital Accumulation Plan (3)* |
| 10.4 | Incentive Stock Award Plan for Non-Employee Directors (4)* |
| 10.5 | Methode Electronics, Inc. 401(k) Savings Plan (4)* |
| 10.6 | Methode Electronics, Inc. 401(k) Saving Trust (4)* |
| 10.7 | Methode Electronics, Inc. 1997 Stock Plan (5)* |
| 10.8 | Form of Master Separation Agreement between Stratos Lightwave, Inc. and Registrant (6) |
| 10.9 | Form of Initial Public Offering and Distribution Agreement between Stratos Lightwave, Inc. and Registrant (6) |
| 10.10 | Form of Tax Sharing Agreement between Stratos Lightwave, Inc. and Registrant (6) |
| 10.11 | Methode Electronics, Inc. 2000 Stock Plan (8)* |
| 10.12 | Form of Agreement between Kevin J. Hayes and Registrant (9)* |
| 10.13 | Form of Agreement between Horizon Farms, Inc. and Registrant (9) |
| 10.14 | Form of Agreement between William T. Jensen and Registrant (9)* |
| 10.15 | Form of Agreement between Donald W. Duda and Registrant (10)* |
| 10.16 | Form of Agreement between John R. Cannon and Registrant (10)* |
| 10.17 | Form of Agreement between Robert J. Kuehnau and Registrant (10)* |
| 10.18 | Form of Agreement between James F. McQuillen and Registrant (10)* |
| 10.19 | Form of Agreement between Douglas A. Koman and Registrant* |
| 10.20 | Agreement dated August 19, 2002 by and among Methode Electronics, Inc.; Marital Trust No. 1 and Marital Trust No. 2 each created under the William J. McGinley Trust; Jane R. McGinley; Margaret J. McGinley; James W. McGinley; and Robert R. McGinley |
| (11) | |
| 99.1 | Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350 |
end of user-specified TAGGED TABLE (1) Previously filed with Registrant's Form S-3 Registration Statement No. 33-61940 filed April 30, 1993, and incorporated herein by reference. (2) Previously filed with Registrant's Registration Statement No. 2-92902 filed August 23, 1984, and incorporated herein by reference. ZEQ.=1,SEQ=19,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=718299,FOLIO='blank',FILE='DISK022:[02CHI6.02CHI4256]KA4256A.;2',USER='DINGRAM',CD='12-SEP-2002;18:47' (3) Previously filed with Registrant's Form 10-Q for the three months ended January 31, 1994, and incorporated herein by reference. (4) Previously filed with Registrant's Form 10-K for the year ended April 30, 1994, and incorporated herein by reference. (5) Previously filed with Registrant's Statement No. 333-49671 and incorporated herein by reference. (6) Previously filed with Registrant's Form 10-K for the year ended April 30, 2000, and incorporated herein by reference. (7) Previously filed with Registrant's Form 8-K filed July 7, 2000, and incorporated herein by reference. (8) Previously filed with Registrant's Form 10-Q for the three months ended October 31, 2000, and incorporated herein by reference. (9) Previously filed with Registrant's Form 10-K for the year ended April 30, 2001, and incorporated herein by reference. (10) Previously filed with Registrant's Form 10-Q for the three months ended January 31, 2002, and incorporated herein by reference. (11) Previously filed with Registrant's Form 8-K filed August 20, 2002, and incorporated herein by reference. * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c) of Form 10-K. ZEQ.=2,SEQ=20,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1",CHK=155867,FOLIO='blank',FILE='DISK022:[02CHI6.02CHI4256]KA4256A.;2',USER='DINGRAM',CD='12-SEP-2002;18:47' THIS IS THE END OF A COMPOSITION COMPONENT
QuickLinks
TOC_BEGIN
METHODE ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) TOC_BEGIN METHODE ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except per share data) TOC_BEGIN METHODE ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) TOC_BEGIN METHODE ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) July 31, 2002 TOC_BEGIN
TOC_BEGIN SIGNATURES TOC_BEGIN INDEX TO EXHIBITS SEQ=,FILE='QUICKLINK',USER=MWEINST,SEQ=,EFW="2089234",CP="METHODE ELECTRONICS, INC.",DN="1" TOCEXISTFLAG