METHODE ELECTRONICS INC — Interim / Quarterly Report 2004

Mar 15, 2004

10-Q 1 a04-3454_110q.htm 10-Q

*UNITED STATES SECURITIES AND EXCHANGE COMMISSION*

*WASHINGTON, D.C. 20549*

*FORM 10-Q*

(Mark One)
for the quarterly period ended
January 31, 2004
or
o Transition Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.

*Commission file number 0-2816*

*METHODE ELECTRONICS, INC.*

(Exact name of registrant as specified in its charter.)

Delaware	36-2090085
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7401 West Wilson Avenue, Harwood Heights,
Illinois	60706-4548
(Address of principal executive offices)	(Zip Code)
(Registrant’s telephone number, including
area code) (708) 867-6777
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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý No o

At March 5, 2004, Registrant had 35,481,759 shares of common stock outstanding.

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*INDEX*

METHODE ELECTRONICS, INC. AND SUBSIDIARIES

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
Condensed consolidated balance sheets as of January 31, 2004 and April 30, 2003
Condensed consolidated statements of income
— Three months and nine months ended January 31, 2004 and 2003
Condensed consolidated statements of cash
flows — Nine months ended January 31, 2004 and 2003
Notes to condensed consolidated financial
statements — January 31, 2004
Item 2.	Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosure
About Market Risk
Item 4.	Controls and Procedures
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security
Holders
Item 6.	Exhibits and Reports on Form 8-K
SIGNATURES
INDEX TO EXHIBITS

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS METHODE ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)

	January 31, 2004	April 30, 2003
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$ 60,543	$ 64,261
Accounts receivable, net	58,768	58,246
Inventories:
Finished products	7,711	6,895
Work in process	18,469	17,845
Materials	7,109	7,196
	33,289	31,936
Deferred income taxes	7,985	7,887
Prepaid expenses	4,259	4,965
Other
current assets	—	7,868
TOTAL
CURRENT ASSETS	164,844	175,163
PROPERTY, PLANT AND EQUIPMENT	249,917	229,586
Less allowance for depreciation	163,326	146,684
	86,591	82,902
GOODWILL, net	18,657	18,077
INTANGIBLE ASSETS, net	23,486	25,458
OTHER ASSETS	13,647	13,874
	$ 307,225	$ 315,474
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts and notes payable	$ 23,271	$ 24,515
Other current liabilities	30,278	24,801
TOTAL
CURRENT LIABILITIES	53,549	49,316
OTHER LIABILITIES	3,887	6,345
DEFERRED COMPENSATION	4,310	4,808
SHAREHOLDERS’ EQUITY
Common stock	17,948	18,316
Paid in capital	39,042	36,584
Retained earnings	181,419	201,845
Other shareholders’ equity	7,070	(1,740	)
	245,479	255,005
	$ 307,225	$ 315,474

See notes to condensed consolidated financial statements.

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INC OME (Unaudited) (in thousands, except per share data)

| | Three
Months Ended January 31, — 2004 | | 2003 | | Nine
Months Ended January 31, — 2004 | | 2003 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| INCOME | | | | | | | | |
| Net sales | $ 86,698 | | $ 92,061 | | $ 259,158 | | $ 268,925 | |
| Other | 636 | | 359 | | 1,986 | | 790 | |
| | 87,334 | | 92,420 | | 261,144 | | 269,715 | |
| COSTS AND EXPENSES | | | | | | | | |
| Cost of products sold | 69,594 | | 75,079 | | 205,979 | | 213,976 | |
| Selling and administrative expenses | 14,721 | | 10,025 | | 36,153 | | 31,870 | |
| | 84,315 | | 85,104 | | 242,132 | | 245,846 | |
| Income from operations | 3,019 | | 7,316 | | 19,012 | | 23,869 | |
| Interest, net | 144 | | 290 | | 383 | | 864 | |
| Other, net | (554 | ) | (998 | ) | (1,094 | ) | (2,216 | ) |
| Income before income taxes | 2,609 | | 6,608 | | 18,301 | | 22,517 | |
| Income taxes | 1,235 | | 2,150 | | 6,180 | | 7,300 | |
| NET INCOME | $ 1,374 | | $ 4,458 | | $ 12,121 | | $ 15,217 | |
| Basic and diluted earnings per common share | $ 0.04 | | $ 0.12 | | $ 0.34 | | $ 0.42 | |
| Cash dividends per common share: | | | | | | | | |
| Regular quarterly | $ 0.05 | | $ 0.05 | | $ 0.15 | | $ 0.15 | |
| Special (Note 7) | 0.04 | | — | | 0.04 | | — | |
| Weighted average number of common shares
outstanding: | | | | | | | | |
| Basic | 35,700 | | 36,178 | | 35,865 | | 36,162 | |
| Diluted | 36,045 | | 36,421 | | 36,163 | | 36,407 | |

See notes to condensed consolidated financial statements.

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CAS H FLOWS (Unaudited) (in thousands)

| | Nine
Months Ended January 31, — 2004 | | 2003 | |
| --- | --- | --- | --- | --- |
| OPERATING ACTIVITIES | | | | |
| Net income | $ 12,121 | | $ 15,217 | |
| Provision for depreciation and amortization | 15,608 | | 11,805 | |
| Changes in operating assets and liabilities | 4,068 | | 12,459 | |
| Other | 159 | | 17 | |
| NET CASH
PROVIDED BY OPERATING ACTIVITIES | 31,956 | | 39,498 | |
| INVESTING ACTIVITIES | | | | |
| Purchases of property, plant and equipment | (13,337 | ) | (14,880 | ) |
| Payments for acquired businesses | (2,072 | ) | (12,257 | ) |
| Collection
of note receivable from a related party | 6,000 | | — | |
| Other | (128 | ) | (626 | ) |
| NET CASH
USED IN INVESTING ACTIVITIES | (9,537 | ) | (27,763 | ) |
| FINANCING ACTIVITIES | | | | |
| Purchase
and retirement of Class B shares | (25,788 | ) | — | |
| Options exercised | 2,639 | | 407 | |
| Dividends | (5,382 | ) | (5,427 | ) |
| Other | — | | 932 | |
| NET CASH
USED IN FINANCING ACTIVITIES | (28,531 | ) | (4,088 | ) |
| Effect of foreign exchange rate changes on
cash | 2,394 | | 3,590 | |
| INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS | (3,718 | ) | 11,237 | |
| Cash and cash equivalents at beginning of period | 64,261 | | 49,902 | |
| CASH AND
CASH EQUIVALENTS AT END OF PERIOD | $ 60,543 | | $ 61,139 | |

See notes to condensed consolidated financial statements.

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIA L STATEMENTS (Unaudited)

January 31, 2004

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 and nine-month periods ended January 31, 2004 are not necessarily indicative of the results that may be expected for the year ending April 30, 2004. 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, 2003.

Certain prior year amounts have been reclassified to conform to the current year presentation.

The following table presents details of the Company’s comprehensive income (in thousands):

| | Three
Months Ended January 31, — 2004 | 2003 | Nine
Months Ended January 31, — 2004 | 2003 |
| --- | --- | --- | --- | --- |
| Net income | $ 1,374 | $ 4,458 | $ 12,121 | $ 15,217 |
| Translation adjustment | 5,890 | 4,201 | 8,807 | 9,267 |
| | $ 7,264 | $ 8,659 | $ 20,928 | $ 24,484 |

1. RELATED PARTY TRANSACTIONS

James W. McGinley and Robert R. McGinley were both members of the Company’s Board of Directors until their resignation in October 2003. James McGinley and Robert McGinley, together with their sister, Margaret J. McGinley, are special fiduciaries, co-trustees and beneficiaries of Marital Trust No. 1 and Marital Trust No. 2, each created under the William J. McGinley Trust (Marital Trusts). The Company entered into an agreement dated August 19, 2002, and amended December 26, 2002, with the Marital Trusts, Jane R. McGinley, Margaret J. McGinley, James W. McGinley, and Robert R. McGinley to commence a tender offer to purchase all of the outstanding Class B common stock at a price of $20 per share in cash by the terms and conditions provided for in the agreement.

Under the agreement, the Marital Trusts, the Jane R. McGinley Trust, James McGinley, Margaret J. McGinley and Robert McGinley were obligated to tender all of their Class B common stock in the offer. This represented an aggregate of 931,759 shares of Class B common stock, or 85.7% of the then outstanding Class B common stock. The agreement provided that either the Company or the Marital Trusts could terminate the agreement if the tender offer was not completed on or prior to May 31, 2003 provided that the party purporting to terminate was not the cause of the failure to be completed by such time.

On July 3, 2003, Dura Automotive Systems, Inc. (Dura) announced that it planned to commence a tender offer for all of the outstanding Class B common stock of the Company at a price of $23.00 per share in cash. The tender offer, which commenced on July 8, 2003, was subject to certain conditions, including a majority of the Company’s Class B common stock being tendered and not withdrawn and the holders of Class B common stock continuing to have the right to elect directors representing up to approximately 75 percent of the Company’s Board of Directors.

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On July 14, 2003, the Marital Trusts gave notice of termination of the Agreement dated August 19, 2002, as amended December 26, 2002.

As of July 18, 2003, the Company entered into an agreement with the Marital Trusts, the Jane R. McGinley Trust, Margaret J. McGinley, James W. McGinley, and Robert R. McGinley (collectively the “McGinley Family”), pursuant to which the McGinley Family sold 750,000 shares of its Class B common stock to the Company for $22.75 per share and agreed to vote their remaining shares of Class B common stock in favor of a merger in which all then outstanding Class B common stock (including those held by the McGinley Family not previously sold to the Company) would receive $23.55 per share and the Class A common stock would be converted into new Methode common stock (the “Merger). The Merger was approved by the affirmative vote of a majority of the Company’s outstanding shares at a special shareholders meeting held on January 8, 2004, and the Condensed Consolidated Balance Sheet at January 31, 2004 reflects the new capital structure of the Company. The Company recorded a charge of $2.6 million ($1.8 million after tax) in the third quarter of 2004, primarily for legal, investment banking and other professional fees incurred in connection with the elimination of its dual class common stock structure and the unsolicited tender offer for its Class B common stock.

1. RESTRUCTURING

In the third quarter of fiscal 2004, due in part to price erosion and lost sales to lower cost Eastern European and Asian suppliers, the Company adopted a restructuring plan to discontinue copper cable assembly operations at its Ireland facility in the third quarter and dispose of or close its United Kingdom optical cable assembly operation in the fourth quarter. The Company recorded charges of $1.3 million related to the closing of the Ireland operation, consisting of involuntary severance of $0.7 million for termination of 34 employees, equipment write-offs of $0.3 million, inventory write-offs of $0.1 million, and lease and other obligations of $0.2 million. The restructuring charges are classified in the fiscal 2004 Condensed Consolidated Statement of Income as cost of products sold ($1.2 million), and selling and administrative expenses ($0.1 million).

In the fourth quarter of fiscal 2002, in response to the weak economic conditions in the telecommunications and computer sectors, the Company implemented a restructuring plan in an effort to better align the Company’s operations with industry conditions. The restructuring included integrating the operations of Duel Systems, Inc. and Adam Technologies, Inc. into the Company’s domestic and foreign interconnect products units and closing the California and New Jersey manufacturing and distribution operations.

Accrued expenses, primarily severance pay and lease obligations that run through July 31, 2004 related to restructurings, included in other current liabilities in the Condensed Consolidated Balance Sheets were (in thousands):

	Involuntary Severance		Lease and Other		Total
	(in
thousands)
Balance April 30, 2003	$ —		$ 267		$ 267
Payments made	—		(121	)	(121	)
Balance October 31, 2003	—		146		146
Provision	733		174		907
Payments made	(591	)	(149	)	(740	)
Balance January 31, 2004	$ 142		$ 171		$ 313

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1. INTANGIBLE ASSETS

The following tables present details of the Company’s intangible assets other than goodwill (in thousands):

| | January 31,
2004 — Gross | Accumulated Amortization | Net |
| --- | --- | --- | --- |
| Customer relationships and agreements | $ 19,025 | $ 3,176 | $ 15,849 |
| Patents | 8,074 | 1,484 | 6,590 |
| Covenants not to compete | 2,100 | 1,053 | 1,047 |
| Total | $ 29,199 | $ 5,713 | $ 23,486 |

| | April 30,
2003 — Gross | Accumulated Amortization | Net |
| --- | --- | --- | --- |
| Customer relationships and agreements | $ 18,993 | $ 996 | $ 17,997 |
| Patents | 7,255 | 1,156 | 6,099 |
| Covenants not to compete | 2,100 | 738 | 1,362 |
| Total | $ 28,348 | $ 2,890 | $ 25,458 |

The estimated aggregate amortization expense for each of the five fiscal years subsequent to 2003 is as follows (in thousands):

2004	$
2005	4,232
2006	4,264
2007	4,029
2008	3,262

1. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

| | Three
Months Ended January 31, — 2004 | 2003 | Nine
Months Ended January 31, — 2004 | 2003 |
| --- | --- | --- | --- | --- |
| | (in
thousands, except per share amounts) | | | |
| Numerator - net income | $1,374 | $4,458 | $12,121 | $15,217 |
| Denominator: | | | | |
| Denominator for basic earnings per
share-weighted-average shares | 35,700 | 36,178 | 35,865 | 36,162 |
| Dilutive potential common shares- employee
stock options | 345 | 243 | 298 | 245 |
| Denominator for diluted earnings per
share-adjusted weighted-average shares and assumed conversions | 36,045 | 36,421 | 36,163 | 36,407 |
| Basic and diluted earnings per share | $.04 | $.12 | $.34 | $.42 |

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Options to purchase 594,501 shares of common stock at a weighted average option price of $13.14 per share were outstanding at January 31, 2004, 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 common stock and, therefore, the effect would be antidilutive.

Effective April 30, 2003, the Company adopted the disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure.” As it relates to stock options, the Company continues to apply the provisions of Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to Employees.” Under APB No. 25, no compensation cost related to stock options granted has been recognized in the Company’s Consolidated Statements of Income because the option terms are fixed and the exercise price equals the market price of the underlying stock on the grant date. In accordance with SFAS No. 123, “Accounting for Stock-Based Compensation,” the fair value of option grants is estimated on the date of grant using the Black-Scholes option pricing model for pro forma footnote purposes.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to all its stock options outstanding during the periods presented:

| | Three
Months Ended January 31, — 2004 | | 2003 | | Nine
Months Ended January 31, — 2004 | | 2003 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | (in
thousands, except per share amounts) | | | | | | | |
| Net income: | | | | | | | | |
| As reported | $ 1,374 | | $ 4,458 | | $ 12,121 | | $ 15,217 | |
| Less total stock based compensation expense
determined under fair value based method for all awards, net of tax | (443 | ) | (378 | ) | (1,257 | ) | (1,137 | ) |
| Pro forma | $ 931 | | $ 4,080 | | $ 10,864 | | $ 14,080 | |
| Basic and
diluted earnings per share: | | | | | | | | |
| As reported | $ 0.04 | | $ 0.12 | | $ 0.34 | | $ 0.42 | |
| Pro forma | 0.03 | | 0.11 | | 0.30 | | 0.39 | |

1. 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 unit 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.

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The table below presents information about the Company’s reportable segments (in thousands):

| | Three
Months Ended January 31, 2004 — Electronic | | Optical | Other | | Eliminations | | Consolidated | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Total net
sales | $ 75,963 | | $ 5,636 | $ 5,193 | | $ (94 | ) | $ 86,698 | |
| Transfers
between technology segments | (13 | ) | — | (81 | ) | 94 | | — | |
| Net sales to unaffiliated customers | $ 75,950 | | $ 5,636 | $ 5,112 | | $ — | | $ 86,698 | |
| Segment
income before income taxes | $ 7,731 | | $ 429 | $ 720 | | | | $ 8,880 | |
| Corporate
expenses, net | | | | | | | | (6,271 | ) |
| Income before income taxes | | | | | | | | $ 2,609 | |

| | Three
Months Ended January 31, 2003 — Electronic | Optical | | Other | | Eliminations | | Consolidated | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Total net
sales | $ 83,405 | $ 3,967 | | $ 4,751 | | $ (62 | ) | $ 92,061 | |
| Transfers
between technology segments | — | — | | (62 | ) | 62 | | — | |
| Net sales to unaffiliated customers | $ 83,405 | $ 3,967 | | $ 4,689 | | $ — | | $ 92,061 | |
| Segment
income (loss) before income taxes | $ 9,143 | $ (649 | ) | $ 169 | | | | $ 8,663 | |
| Corporate
expenses, net | | | | | | | | (2,055 | ) |
| Income before income taxes | | | | | | | | $ 6,608 | |

| | Nine
Months Ended January 31, 2004 — Electronic | | Optical | Other | | Eliminations | | Consolidated | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Total net
sales | $ 229,184 | | $ 14,441 | $ 15,851 | | $ (318 | ) | $ 259,158 | |
| Transfers between technology segments | (14 | ) | — | (304 | ) | 318 | | — | |
| Net sales to unaffiliated customers | $ 229,170 | | $ 14,441 | $ 15,547 | | $ — | | $ 259,158 | |
| Segment income before income taxes | $ 28,309 | | $ 685 | $ 1,935 | | | | $ 30,929 | |
| Corporate expenses, net | | | | | | | | (12,628 | ) |
| Income
before income taxes | | | | | | | | $ 18,301 | |

| | Nine
Months Ended January 31, 2003 — Electronic | Optical | | Other | | Eliminations | | Consolidated | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Total net
sales | $ 243,382 | $ 14,195 | | $ 11,533 | | $ (185 | ) | $ 268,925 | |
| Transfers between technology segments | — | — | | (185 | ) | 185 | | — | |
| Net sales to unaffiliated customers | $ 243,382 | $ 14,195 | | $ 11,348 | | $ — | | $ 268,925 | |
| Segment
income (loss) before income taxes | $ 30,010 | $ (666 | ) | $ 210 | | | | $ 29,554 | |
| Corporate expenses, net | | | | | | | | (7,037 | ) |
| Income
before income taxes | | | | | | | | $ 22,517 | |

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1. LITIGATION

Certain litigation arising in the normal course of business is pending against the Company. 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 issues, 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, 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 statements of the Company.

On September 13, 2002, a holder of 100 shares of Class A common stock filed a class action against Methode and certain of Methode’s directors on behalf of all holders of the Company’s Class A common stock and derivatively on behalf of Methode in the Court of Chancery of the State of Delaware. Plaintiff alleged in the Complaint that Methode’s directors breached their fiduciary duties of disclosure, care and loyalty by approving the August 19, 2002 agreement between Methode and the Trusts and the McGinley family members pursuant to which Methode agreed, among other things, to make a tender offer for the repurchase of all of the Company’s Class B common stock at a price of $20 per share. Plaintiff further alleged in the Complaint that Methode’s board approved the tender offer for the repurchase of its Class B common stock, caused Methode to enter into certain employment agreements with Methode’s Chairman of the Board and certain of its officers and failed to disclose and misrepresented certain information in connection with Methode’s 2002 proxy statement, as part of a scheme to entrench the incumbent Board and management. Additionally, Plaintiff alleged in the Complaint that Methode’s directors, by approving the repurchase of the Class B common stock, diverted a corporate opportunity to receive a control premium away from Methode and the Class A stockholders. Plaintiff sought, among other things, to enjoin the repurchase of the Class B common stock, as well as other equitable relief.

On March 17, 2003, following the December 26, 2002 amendment of the original agreement between Methode and the Trusts and the McGinley family members to require a vote of the Class A common stockholders, the parties in this litigation entered into a memorandum of understanding providing for the settlement of this litigation. Pursuant to the terms of the memorandum of understanding, Methode agreed, among other things, that: (i) it would only proceed with the planned Methode tender offer if it is approved by the affirmative vote of the holders of shares having a majority of the shares of Class A common stock present or represented by proxy at the special meeting (excluding shares held by the Trusts and the McGinley family members); (ii) it would make certain revisions to the disclosures in the proxy statement in connection with the special meeting to approve the making of the planned Methode tender offer as requested by Plaintiff; and (iii) it would declare a special dividend of $0.04 per share of Class A common stock within 60 days following consummation of the planned Methode tender offer.

On July 1, 2003, a Stipulation and Agreement of Compromise Settlement and Release (the “Original Settlement Agreement”) was executed by the parties. Counsel for the parties conferred on certain revisions to be made to the disclosures in the Company’s preliminary proxy statement filed with the Securities and Exchange Commission in connection with the special meeting for Class A common stockholders to approve the making of the planned Methode tender offer, and agreed to certain additional information, which was disclosed in the definitive proxy statement filed with the Securities and Exchange Commission on June 10, 2003 and mailed to stockholders on June 12, 2003.

On July 29, 2003, following the termination of the original agreement between Methode, the Trusts and the McGinley family members dated August 19, 2002, and amended December 26, 2002, and the execution of the agreement dated as of July 18, 2003 among Methode, the Trusts and the McGinley family members (the “McGinley Agreement”), the parties to the litigation entered into a stipulation and agreement of compromise, settlement and release (the “Settlement Agreement”) providing for the settlement of this litigation. Pursuant to the terms of the Settlement Agreement, Defendants agreed, among other things, that: (i) the amended agreement with the Trusts and the McGinley family members requiring the approval of the Class A common stockholders prior to making the planned tender offer by Methode was the result of this litigation and was a benefit to the Class A common stockholders and to Methode and its directors in responding to Dura’s offer and with respect to the decision to enter into the

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McGinley Agreement, and (ii) Methode, acting through its Board of Directors, would declare and pay a special dividend of $0.04 per share of Class A common stock within 60 days following the acquisition of the balance of the shares of Class B common stock by merger or purchase. The Settlement Agreement also provides for the dismissal of this litigation with prejudice and release of all related claims against Methode and the director defendants.

The Court approved the settlement of this litigation in accordance with the terms of the Settlement Agreement on December 3, 2003.

On September 9, 2003, the Company was served with a purported class action complaint on behalf of certain holders of Methode’s Class B common stock in the Court of Chancery of the State of Delaware naming Methode, its directors and certain officers as defendants and alleging that the defendants breached their fiduciary duties with respect to the McGinley Agreement. The Complaint sought, among other things, the entry of an order terminating and/or declaring void the McGinley Agreement and awarding unspecified damages and attorneys’ fees and costs.

On October 1, 2003, plaintiff filed an amended class action complaint, which, among other things, added a request for injunctive relief to preliminarily and permanently enjoin Methode from consummating the proposed merger or soliciting proxies related to the proposed merger. On October 20, 2003, the court denied plaintiff’s motion for expedited proceedings and refused to schedule a hearing on plaintiff’s motion for a preliminary injunction.

The Company believes the allegations in the litigation are without merit, and all defendants have filed a motion to dismiss the action.

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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:

| | Three
Months Ended January 31, — 2004 | | 2003 | | Nine
Months Ended January 31, — 2004 | | 2003 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Income: | | | | | | | | |
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
| Other | 0.7 | | 0.4 | | 0.8 | | 0.3 | |
| | 100.7 | | 100.4 | | 100.8 | | 100.3 | |
| Costs and expenses: | | | | | | | | |
| Cost of products sold | 80.3 | | 81.6 | | 79.5 | | 79.6 | |
| Selling and administrative expenses | 17.0 | | 10.9 | | 14.0 | | 11.9 | |
| Income From
Operations | 3.4 | | 7.9 | | 7.3 | | 8.8 | |
| Interest, net | 0.2 | | 0.3 | | 0.1 | | 0.3 | |
| Other, net | (0.6 | ) | (1.1 | ) | (0.4 | ) | (0.8 | ) |
| Income
Before Income Taxes | 3.0 | | 7.1 | | 7.0 | | 8.3 | |
| Income taxes | 1.4 | | 2.3 | | 2.4 | | 2.7 | |
| Net Income | 1.6 | % | 4.8 | % | 4.6 | % | 5.6 | % |

Net sales . Third quarter consolidated net sales decreased 5.8% to $86.7 million in fiscal 2004 from $92.1 million in fiscal 2003. Consolidated net sales for the nine-month period ended January 31, 2004 decreased 3.6% to $259.2 million from $268.9 million for the comparable period last year. Translation of foreign subsidiary net sales using a weaker dollar increased reported sales by $0.9 million in the quarter and $2.3 million in the nine-month period ended January 31, 2004. Customer tooling sales, which are primarily zero margin, were $3.8 million and $7.7 million for the three-month and nine-month periods ended January 31, 2004 compared with $7.9 million and $15.8 million in the three-month and nine-month periods of fiscal 2003.

Electronic segment net sales represented 87.6% and 88.4% of consolidated net sales for the quarter and nine months ended January 31, 2004 compared with 90.6% and 90.5% for the comparable periods last year. Net sales of the Electronic segment decreased 8.9% to $75.9 million in the third quarter of fiscal 2004 from $83.4 million in fiscal 2003. Electronic segment net sales for the nine months ended January 31, 2004 decreased 5.8% to $229.2 million from $243.4 million for the same period last year. Net product sales to the automotive industry, which excludes customer tooling, represented 83.8% of the Electronic segment net product sales in the third quarter and 84.3% for the nine months ended January 31, 2004, up from 82.7% for both of the comparable periods last year, and decreased 2.9% for the quarter and 0.6% for the nine months ended January 31, 2004 compared with the comparable periods last year. Strong sales growth at the Company’s Automotive Safety Technology (AST) business and European Automotive Electronics Controls group were somewhat offset by the decline in unit sales experienced by the Company’s traditional North American automotive customers in both the three-month and nine-month periods of fiscal 2004. The net decline in sales to North American automotive customers in fiscal 2004 reflects both price concessions and reduced unit sales due to lost market share by these

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customers. Many of the Company’s domestic automotive customers extended their plant shutdowns for model year changeovers in July this year in order to adjust inventory levels, which further reduced the Company’s sales for the nine-month period. Sales for the balance of the Electronic segment for the third quarter and the nine-month period ended January 31, 2004 were down 10.4% and 11.8%, respectively, compared to last year reflecting the continued weakness in the telecommunication market and increased competition from low cost Eastern European and Asian manufacturers. Price erosion and lost sales to lower cost Eastern European and Asian suppliers led to the Company’s decision to close its Ireland copper cable assembly business in the third quarter of fiscal 2004 resulting in a $1.3 million charge. See Note 3 to the Condensed Consolidated Financial Statements for additional details.

Optical segment net sales represented 6.5% and 5.6% of consolidated net sales for the quarter and nine months ended January 31, 2004 compared with 4.3% and 5.3% for the comparable periods last year. Net sales of the Optical segment for the third quarter of fiscal 2004 increased 42.1% to $5.6 million from $4.0 million a year ago. Net sales for the nine-month period ended January 31, 2004 increased 1.7% over the same period a year ago to $14.4 million from $14.2 million. Net sales at the Company’s domestic subsidiary that provides custom installation of fiber optic cable assemblies primarily to data centers more than doubled to $4.1 million in the quarter and increased 32.4% for the nine-month period to $9.7 million. The sales increase at this business unit was attributable to general market improvement and the addition of a substantial new customer. Net sales for the Company’s United Kingdom optical cable assembly operation fell more than 50% in both the quarter and nine-month period of fiscal 2004 due to the continued weakness in the telecommunication market, price erosion and lost sales to lower cost Eastern European and Asian suppliers. Management has determined that the United Kingdom unit can not compete in this environment and, in January 2004, announced that it will take a charge of up to $1.2 million over its remaining 2004 fiscal year for the closing of this business unit.

Net sales of the Other segment, principally current-carrying bus devices and test laboratories increased 9.0% to $5.1 million in the third quarter of fiscal 2004 from $4.7 million in fiscal 2003. Other segment net sales for the nine-month period increased 37.0% to $15.5 million from $11.3 million last year. The sales increase in this segment is primarily due to new bus device product offerings and an expanded customer base for its products.

Other income . Other income consisted primarily of earnings from the Company’s automotive joint venture, license fees, royalties and, in fiscal 2004, engineering design fees. Other income increased to $0.6 million in the third quarter of fiscal 2004 from $0.4 million in the fiscal 2003 period. Other income for the nine-month period ended January 31, 2004 increased to $2.0 million from $0.8 million in the comparable period last year. The increase in other income was primarily due to the design fees earned in fiscal 2004. Other income in fiscal 2003 was reduced because the automotive joint venture experienced an operating loss in the second quarter due to quality issues, which the Company believes have been resolved.

Cost of products sold . Cost of products sold, as a percentage of net sales, was 80.3% in the third quarter and 79.5% in the nine-month period of fiscal 2004 compared with 81.6% and 79.6% for the third quarter and the nine-month period ended January 31, 2003.

Gross margins on product sales of the Electronic segment decreased to 20.4% and 21.3% in the third quarter and nine-month period of fiscal 2004 from 20.7% and 22.5% for the comparable periods last year. The $1.1 million of costs charged to cost of sales in the third quarter of 2004 for the closing of the Ireland cable assembly operation, reduced the gross margins for the quarter and nine-month period by 1.7 and 0.5 percentage points, respectively. The margin improvement for the quarter, after excluding the Ireland closing costs, was primarily the result of a change of mix, with the Company’s higher margin AST and Malta operations representing a larger component of the quarter’s net sales. The decline in gross margins for the nine-month period was primarily due to the decline in unit sales experienced by the Company’s traditional North American automotive customers, price concessions given to automotive customers that were not completely recovered by cost cutting programs, and increased costs for the employee medical program in fiscal 2004.

Gross margins of the Optical segment increased to 24.4% in the third quarter and 22.4% in the nine-month period ended January 31, 2004 from 9.1% in the third quarter and 16.3% in the nine-month

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period in fiscal 2003. The margin improvement was primarily due to the sales volume increase at the Company’s fiber optic cable custom installation operation.

Gross margins of the Other segment improved to 25.4% in the third quarter and 23.6% in the nine-month period of fiscal 2004 from 14.9% in the prior year third quarter and 15.1% in the nine-month period of fiscal 2003. The margin improvement was primarily the result of the increased sales volume of bus device products with lower incremental fixed costs.

Selling and administrative expenses . Selling and administrative expenses as a percentage of net sales were 17.0% and 14.0% for the quarter and nine-month period in fiscal 2004 compared to 10.9% and 11.9% for the comparable periods of fiscal 2003. The third quarter of fiscal 2004 included $2.6 million related to the elimination of the Company’s dual class common stock structure and the unsolicited tender offer for its Class B shares. In addition, fiscal 2004 included additional expenses incurred to support increased activity at AST and the European Automotive Electronics Controls group, and expenses associated with the start-up of operations in Shanghai, China.

Interest, net . Interest income, net of interest expense, declined 50.3% in the third quarter and 55.7% in the nine-month period of fiscal 2004 compared with fiscal 2003. Interest income declined due to significantly lower short-term interest rates during fiscal 2004 and the June 30, 2003 maturity of the $6 million note receivable from a related party that accrued interest at 5.25% during fiscal 2003 and the first two months of fiscal 2004. Interest expense in fiscal 2004 included the commitment fee on the Company’s $30 million credit facility, which was put in place in the middle of the third quarter of fiscal 2003.

Other, net . Other, net consists primarily of currency exchange gains and losses at the Company’s foreign subsidiaries. The functional currencies of these subsidiaries are the Maltese lira, Euro, Singapore dollar, British pound and Czech koruna. The foreign subsidiaries have transactions denominated in currencies other than their functional currencies, primarily sales in US dollars and Euros, creating exchange rate sensitivities. Currency exchange losses were experienced by the Company’s foreign subsidiaries as a result of a weak U.S. dollar.

Income taxes . The effective income tax rate was 47.3% in the third quarter and 33.8% in the nine-month period of fiscal 2004 compared with 32.5% in the third quarter and 32.4% in the nine-month period of fiscal 2003. The effective income tax rate in fiscal 2004 was unusually high because tax benefits were not available for the charge for closing the Ireland operation and certain of the expenses related to the elimination of the Company’s dual class common stock structure. Excluding these items, the effective income tax rate for both the quarter and nine-month period ended January 31, 2004 was 31.5%. The effective rates for both fiscal 2004 and fiscal 2003 reflect the effect of lower tax rates on income from foreign operations.

Financial Condition, Liquidity and Capital Resources

Net cash provided by operations was $32.0 million and $39.5 million in the first nine months of fiscal 2004 and 2003, respectively. The decrease in cash provided by operations was primarily the result of increased working capital requirements to support increased volumes at the Company’s AST business and European Automotive Electronics Controls group.

Net cash used in investing activities during the first nine months of fiscal 2004 was $9.5 million compared with $27.8 million for the fiscal 2003 period, which included the $11.8 million acquisition of Kill & Bolton Associates International, Inc. Net cash used in investing activities in fiscal 2004 was reduced by the collection of a $6.0 million note receivable from a related party. Cash used in investing activities in fiscal 2004 included a $1.2 million contingent payment related to the acquisition of AST. Up to an additional $10.0 million of contingent cash consideration for this acquisition will be due in annual installments based on a percentage of AST’s annual sales.

Net cash used in financing activities during the first nine months was $28.5 million in fiscal 2004 and $4.1 million in fiscal 2003. The Company paid $25.8 million for the purchase of its Class B shares as

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described below. The Company paid cash dividends of $5.4 million in the nine-month period of both fiscal 2004 and 2003 and received proceeds from the exercise of stock options of $2.6 million in fiscal 2004 and $0.4 million in fiscal 2003.

In July 2003, the Company entered into an agreement with the William J. McGinley Marital Trust No. 1, the William J. McGinley Marital Trust No. 2, the Jane R. McGinley Trust, Margaret J. McGinley, James W. McGinley, and Robert R. McGinley (collectively the “McGinley Family”), pursuant to which the McGinley Family sold 750,000 of its Class B Common Shares to the Company for $22.75 per share and agreed to vote their remaining Class B Common Shares in favor of a merger in which all then outstanding Class B Common Shares (including those held by the McGinley Family not previously sold to the Company) would receive $23.55 per share and the Class A Common Shares will remain outstanding (the “Merger”). The Merger was approved by the affirmative vote of a majority of the Company’s outstanding shares on January 8, 2004, and the remaining Class B shares were redeemed and retired. Pursuant to the settlement of litigation relating to the purchase of the Class B shares, a dividend totaling $1.4 million was paid on March 1, 2004 to the Company’s shareholders of record on January 18, 2004.

Other future capital requirements will depend on a number of factors, including the Company’s future net sales and the timing and rate of expansion of its business. The Company believes its current cash balances together with the cash flow expected to be generated from its future operations and available credit facility will be sufficient to meet its cash needs for the next twelve months.

*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 continuing to experience weak market conditions. 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

Certain of the Company’s foreign subsidiaries enter into transactions in currencies other than their functional currency, primarily the U.S. dollar and the Euro. A 10% change in foreign currency exchange rates from balance sheet date levels could impact the Company’s income before income taxes by $1.9 million and $1.7 million at January 31, 2004 and April 30, 2003, respectively. The Company also has foreign currency exposure arising 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 date levels could impact the Company’s net foreign investments by $9.3 million and $7.7 million at January 31, 2004 and April 30, 2003, respectively.

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ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this quarterly report on Form 10-Q, the Company performed an evaluation under the supervision and with the participation of the Company’s management, including its Chairman (principal executive officer), its President (principal operating officer) and its Vice President, Corporate Finance (principal financial officer), of its “disclosure controls and procedures” (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)). The Company’s disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s applicable rules and forms. As a result of this evaluation, the Company’s principal executive officer, principal operating officer and principal financial officer have concluded that, as of the date of such evaluation, the Company’s disclosure controls and procedures were effective for their intended purposes.

There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. There have been no corrective actions with regard to significant deficiencies and material weaknesses during the fiscal quarter covered by this report.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

*Litigation relating to the Class A common stock*

On September 13, 2002, a holder of 100 shares of Class A common stock filed a class action against Methode and certain of Methode’s directors on behalf of all holders of our Class A common stock and derivatively on behalf of Methode in the Court of Chancery of the State of Delaware. Plaintiff alleged in the Complaint that Methode’s directors breached their fiduciary duties of disclosure, care and loyalty by approving the August 19, 2002 agreement between Methode and the Trusts and the McGinley family members pursuant to which Methode agreed, among other things, to make a tender offer for the repurchase of all of our Class B common stock at a price of $20 per share. Plaintiff further alleged in the Complaint that Methode’s board approved the tender offer for the repurchase of our Class B common stock, caused Methode to enter into certain employment agreements with Methode’s chairman of the board and certain of its officers and failed to disclose and misrepresented certain information in connection with Methode’s 2002 proxy statement, as part of a scheme to entrench the incumbent board and management. Additionally, Plaintiff alleged in the Complaint that Methode’s directors, by approving the repurchase of the Class B common stock, diverted a corporate opportunity to receive a control premium away from Methode and the Class A stockholders. Plaintiff sought, among other things, to enjoin the repurchase of the Class B common stock, as well as other equitable relief.

On March 17, 2003, following the December 26, 2002 amendment of the original agreement between Methode and the Trusts and the McGinley family members to require a vote of the Class A common stockholders, the parties in this litigation entered into a memorandum of understanding providing for the settlement of this litigation. Pursuant to the terms of the memorandum of understanding, Methode agreed, among other things, that: (i) it would only proceed with the planned Methode tender offer if it is approved by the affirmative vote of the holders of shares having a majority of the shares of Class A common stock present or represented by proxy at the special meeting (excluding shares held by the Trusts and the McGinley family members); (ii) it would make certain revisions to the disclosures in the proxy statement in connection with the special meeting to approve the making of the planned Methode tender offer as requested by Plaintiff; and (iii) it would declare a special dividend of $0.04 per share of Class A common stock within 60 days following consummation of the planned Methode tender offer.

On July 1, 2003, a Stipulation and Agreement of Compromise Settlement and Release (the “Original Settlement Agreement”) was executed by the parties. Counsel for the parties conferred on certain revisions to be made to the disclosures in our preliminary proxy statement filed with the Securities and Exchange Commission in connection with the special meeting for our Class A common stockholders to approve the making of the planned Methode tender offer, and agreed to certain additional information, which was disclosed in the definitive proxy statement filed with the Securities and Exchange Commission on June 10, 2003 and mailed to our stockholders on June 12, 2003.

On July 29, 2003, following the termination of the original agreement between Methode, the Trusts and the McGinley family members dated August 19, 2002, and amended December 26, 2002, and the execution of the agreement dated as of July 18, 2003 among Methode, the Trusts and the McGinley family members (the “McGinley Agreement”), the parties to the litigation entered into a stipulation and agreement of compromise, settlement and release (the “Settlement Agreement”) providing for the settlement of this litigation (for a description of the McGinley Agreement, see Financial Condition , Liquidity and Capital Resources in Methode’s Form 10-K filed with the Securities and Exchange Commission on July 29, 2003). Pursuant to the terms of the Settlement Agreement, Defendants agreed, among other things, that: (i) the amended agreement with the Trusts and the McGinley family members requiring the approval of the Class A common stockholders prior to making the planned tender offer by Methode was the result of this litigation and was a benefit to the Class A common stockholders and to Methode and its directors in responding to Dura’s offer and with respect to the decision to enter into the McGinley Agreement, and (ii) Methode, acting through its board of directors, would declare and pay a special dividend of $0.04 per share of Class A common stock within 60 days following the acquisition of the balance of the shares of Class B common stock by merger or purchase. The Settlement Agreement

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also provides for the dismissal of this litigation with prejudice and release of all related claims against Methode and the director defendants.

The Court approved the settlement of this litigation in accordance with the terms of the Settlement Agreement on December 3, 2003.

*Litigation relating to the Class B common stock*

On September 9, 2003, the Company was served with a purported class action complaint on behalf of certain holders of Methode’s Class B common stock in the Court of Chancery of the State of Delaware naming Methode, its directors and certain officers as defendants and alleging that the defendants breached their fiduciary duties with respect to the McGinley Agreement. The Complaint sought, among other things, the entry of an order terminating and/or declaring void the McGinley Agreement and awarding unspecified damages and attorneys’ fees and costs.

On October 1, 2003, plaintiff filed an amended class action complaint, which, among other things, added a request for injunctive relief to preliminarily and permanently enjoin Methode from consummating the proposed merger or soliciting proxies related to the proposed merger. On October 20, 2003, the court denied plaintiff’s motion for expedited proceedings and refused to schedule a hearing on plaintiff’s motion for a preliminary injunction.

The Company believes the allegations in the litigation are without merit, and all defendants have filed a motion to dismiss the action.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) A Special Stockholders Meeting of the Company was held on January 8, 2004.

(c) At the Special Stockholders Meeting, the Class A and Class B Stockholders (collectively referred to herein as the “Stockholders”) voted on the following uncontested matter.

Adoption of the Merger Agreement and approval of the merger pursuant to which each share of outstanding Class B common stock will be converted into the right to receive $23.55 in cash, without interest, and each share of outstanding Class A common stock will be converted into one share of new Methode common stock, as contemplated by the Merger Agreement.

The following was required (and received) for the adoption of the Merger Agreement and approval of the merger: the affirmative vote of a majority of the outstanding shares of Class A common stock and Class B common stock voting together as a single class with each share of Class A common stock having one-tenth of a vote per share and each share of Class B common stock having one vote per share.

Class A and B Stockholders representing 77% of the total shares outstanding as of the record date voted together as follows:

| Votes For | Votes
Against | Abstain |
| --- | --- | --- |
| 2,979,886 | 16,474 | 5,330 |

No other items were voted on at the Special Stockholders Meeting or otherwise during the quarter.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibits— See Index to Exhibits immediately following the signature page.

b) Reports on Form 8-K

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• On December 9, 2003, the Company filed a report on Form 8-K reporting that it had issued a press release to announce operating results for the first quarter of its fiscal year ending April 30, 2004.

• On December 9, 2003, the Company filed a report on Form 8-K reporting that it had issued a press release to announce operating results for the second quarter of its fiscal year ending April 30, 2004.

• On January 8, 2004, the Company filed a report on Form 8-K to report that the Company’s stockholders approved and the Company completed a merger pursuant to which each outstanding share of Class B common stock was converted into the right to receive $23.55 in cash, without interest, and each outstanding share of Class A common stock was converted into one share of new Methode common stock having one vote per share. The Company also announced that the Board elected three new board members, declared dividends, adopted a new Stockholders Rights Plan, approved amendments to the company’s by-laws and set the record date for its 2003 fiscal year annual meeting.

• On January 9, 2004, the Company filed a report on Form 8-K to file a copy of its restated certificate of incorporation and a copy of its amended and restated by-laws.

• On January 23, 2004, the Company filed a report on Form 8-K to report that it will take an after tax charge over its remaining 2004 fiscal year of up to $0.12 per share. This charge will include approximately $1.8 million for costs associated with the recently completed merger to eliminate its Class B stock and the unsolicited tender offer for Methode’s Class B stock, and up to $2.5 million for the closing of two European manufacturing facilities.

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.

By:	/s/ Douglas A. Koman
	Douglas A. Koman
	Vice President, Corporate Finance
	(principal financial officer)
Dated:	March 12, 2004

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*INDEX TO EXHIBITS*

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) (1)
4.2	Rights Agreement dated as of
January 8, 2004 between Methode Electronics, Inc. and Mellon Investor
Services LLC, which includes as Exhibit A thereto, the Certificate of
Designation of Series A Junior Participating Preferred Stock of Methode
Electronics, Inc.; as Exhibit B thereto, the Form of Right Certificate; as
Exhibit C thereto, the Summary of Rights to Purchase Preferred Shares. (2)
10.1	Methode Electronics, Inc.
Incentive Stock Award Plan (3)
10.2	Methode Electronics, Inc.
Managerial Bonus and Matching Bonus Plan (also referred to as the Longevity
Contingent Bonus Program) (4)
10.3	Methode Electronics, Inc.
Capital Accumulation Plan (4)
10.4	Incentive Stock Award Plan for
Non-Employee Directors (5)
10.5	Methode Electronics, Inc.
401(k) Savings Plan (5)
10.6	Methode Electronics, Inc.
401(k) Saving Trust (5)
10.7	Methode Electronics, Inc. 1997
Stock Plan (6)
10.8	Methode Electronics, Inc. 2000
Stock Plan (7)
10.9	Form of Agreement between
Horizon Farms, Inc. and Registrant (8)
10.10	Form of Agreement between
William T. Jensen and Registrant (8)
10.11	Form of
Agreement between Donald W. Duda and Registrant (9)
10.12	Form of Agreement between John
R. Cannon and Registrant (9)
10.13	Form of Agreement between
Robert J. Kuehnau and Registrant (9)
10.14	Form of Agreement between
James F. McQuillen and Registrant (9)
10.15	Form of
Agreement between Douglas A. Koman and Registrant (10)
10.16	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)
10.17	Credit
Agreement dated as of December 19, 2002 among Methode Electronics, Inc.
as the Borrower, Bank of America, N.A., as Administrative Agent and L/C
Issuer, and The Other Lenders Party Hereto (12)
10.18	Amendment to 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 (13)
10.19	Agreement dated as of
July 18, 2003 by and among Methode Electronics, Inc. and Marital
Trust No. 1 and Marital Trust No. 2, each created under the William J.
McGinley Trust, Jane R. McGinley Trust, Margaret J. McGinley, James W.
McGinley and Robert R. McGinley (14)
10.20	Form of
Agreement between Donald W. Duda and Registrant (15)
10.21	Stipulation and Agreement of
Compromise, Settlement and Release In re Methode Electronics, Inc.
Shareholders Litigation, Civil Action No. 19899, dated July 30, 2003
(16)
31.1	Rule
13a-14(a)/15d-14(a) Certification of Principal Executive Officer
31.2	Rule
13a-14(a)/15d-14(a) Certification of Principal Operating Officer
31.3	Rule
13a-14(a)/15d-14(a) Certification of Principal Financial Officer
32	Certification
of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350

| (1) | Previously filed with
Registrant’s Form 8-K filed January 9, 2004, and incorporated herein by
reference. |
| --- | --- |
| (2) | Previously filed with
Registrant’s Form 8-A filed January 8, 2004, 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. |

19

SEQ.=1,FOLIO='19',FILE='C:\jms\dglaeser\04-3454-1\task93856\3454-1-ba.htm',USER='jbaird',CD='Mar 15 12:37 2004'

| (4) | Previously filed with
Registrant’s Form 10-Q for the 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 Statement No. 333-49671 and incorporated herein by reference. |
| (7) | Previously filed with
Registrant’s Form 10-Q for the three months ended October 31, 2000, and
incorporated herein by reference. |
| (8) | Previously filed with
Registrant’s Form 10-K for the year ended April 30, 2001, and
incorporated herein by reference. |
| (9) | Previously filed with
Registrant’s Form 10-Q for the three months ended January 31, 2002, and
incorporated herein by reference. |
| (10) | Previously filed with
Registrant’s Form 10-Q for the three months ended July 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. |
| (12) | Previously filed with
Registrant’s Form 10-Q for the three months ended January 31, 2003, and
incorporated herein by reference. |
| (13) | Previously filed with
Registrant’s Form 8-K filed January 2, 2003, and incorporated herein by
reference. |
| (14) | Previously filed with
Registrant’s Schedule 14D-9 filed on July 21, 2003, and
incorporated herein by reference. |
| (15) | Previously filed with
Registrant’s Form 10-K/A for the year ended April 30, 2003, and
incorporated herein by reference. |
| (16) | Previously filed with
Registrant’s Amendment No. 5 to Schedule 13E-3 filed on
September 8, 2003,and incorporated herein by reference. |

20

SEQ.=1,FOLIO='20',FILE='C:\jms\dglaeser\04-3454-1\task93856\3454-1-ba.htm',USER='jbaird',CD='Mar 15 12:37 2004'