SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________________ FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 for the quarterly period ended January 31, 1996 or [ ] 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 (I.R.S. Employer incorporation or organization) Identification No.) 7444 West Wilson Avenue, Harwood Heights, Illinois 60656 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (708) 867-9600 -------------------------- None - ------------------------------------------------------------------------------- (Former name, former address, former fiscal year, if changed since last report) At March 1, 1996, Registrant had 33,931,145 shares of Class A Common Stock and 1,237,886 shares of Class B Common Stock outstanding. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such report(s)), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ----- ----- Page 1
INDEX METHODE ELECTRONICS, INC. AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - --------------------------------- Item 1. Financial Statements (unaudited) Condensed consolidated balance January 31, 1996 and April 30, 1995. Condensed consolidated statements of income - - - Three months and nine months ended January 31, 1996 and 1995. Condensed statements of cash flows - - - Nine months ended January 31, 1996 and 1995. Notes to condensed consolidated financial statements - - - January 31, 1996. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION - ----------------------------- Item 6. Exhibits and reports on Form 8-K. SIGNATURES - ---------- Page 2
<TABLE> <CAPTION> PART I. FINANCIAL INFORMATION - ------------------------------ ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS METHODE ELECTRONICS, INC. AND SUBSIDIARIES <S> <C> <C> January 31, April 30, 1996 1995 (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 51,735,696 $ 40,763,656 Accounts receivable, less allowance (1/31/96--$1,260,000; 4/30/95--$1,295,000) 40,544,396 39,467,500 Inventories: Finished products 5,792,895 5,213,948 Work in process 14,849,833 16,863,248 Materials 12,201,660 10,845,224 ------------ ------------ 32,844,388 32,922,420 Current deferred income taxes 3,601,000 3,601,000 Prepaid expenses 1,972,795 2,939,338 ------------ ------------ TOTAL CURRENT ASSETS 130,698,275 119,693,914 PROPERTY, PLANT AND EQUIPMENT 146,481,728 132,740,901 Less allowance for depreciation 83,942,973 76,574,297 ------------ ------------ 62,538,755 56,166,604 INTANGIBLE BENEFIT PLAN ASSET 3,768,726 4,269,525 OTHER ASSETS 13,730,704 11,365,852 ------------ ------------ $210,736,460 $191,495,895 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts and notes payable $ 24,968,021 $ 25,064,915 Other current liabilities 17,783,613 18,607,699 ------------ ------------ TOTAL CURRENT LIABILITIES 42,751,634 43,672,614 OTHER LIABILITIES 2,606,815 2,616,815 DEFERRED COMPENSATION 6,997,288 6,654,879 ACCUMULATED BENEFIT PLAN OBLIGATION 2,982,476 3,629,330 SHAREHOLDERS' EQUITY Common Stock 17,657,996 11,665,489 Paid in capital 15,114,319 17,106,383 Retained earnings 121,951,039 104,322,709 Other shareholders' equity 674,893 1,827,676 ------------ ------------ 155,398,247 134,922,257 ------------ ------------ $210,736,460 $191,495,895 ============ ============ See notes to condensed consolidated financial statements. </TABLE> Page 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) METHODE ELECTRONICS, INC. AND SUBSIDIARIES <TABLE> <CAPTION> Three Months Ended Nine Months Ended January 31, January 31, ------------------------------- ---------------------------- 1996 1995 1996 1995 --------------- ----------- ------------ ------------ <S> <C> <C> <C> <C> INCOME: Net sales $75,731,809 $67,386,826 $222,585,884 $191,933,901 Other 1,193,104 947,242 3,599,444 2,568,663 ----------- ----------- ------------ ------------ Total 76,924,913 68,334,068 226,185,328 194,502,564 COSTS AND EXPENSES: Cost of products sold 55,043,915 49,509,074 161,920,062 139,485,597 Selling and administrative expenses 9,986,372 9,505,182 29,869,007 26,722,848 ----------- ----------- ------------ ------------ Total 65,030,287 59,014,256 191,789,069 166,208,445 ----------- ----------- ------------ ------------ Income before income taxes 11,894,626 9,319,812 34,396,259 28,294,119 Provision for income taxes 4,340,000 3,355,000 12,553,000 10,510,000 ----------- ----------- ------------ ------------ NET INCOME $ 7,554,626 $ 5,964,812 $ 21,843,259 $ 17,784,119 =========== =========== ============ ============ Weighted average number of Common Shares outstanding 35,029,000 34,689,000 34,921,000 34,650,000 Earnings per Common Share $ .22 $ .17 $ .63 $ .51 =========== =========== ============ ============ Cash dividends per Common Share: Class A $ .040 $ .020 $ .120 $ .060 Class B $ .040 $ .017 $ .120 $ .050 </TABLE> See notes to condensed consolidated financial statements Page 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) METHODE ELECTRONICS, INC. AND SUBSIDIARIES <TABLE> <CAPTION> Nine Months Ended January 31 -------------------------- 1996 1995 ----------- ------------ <S> <C> <C> OPERATING ACTIVITIES Net Income $ 21,843,259 $ 17,784,119 Provision for depreciation and amortization 9,282,378 7,772,921 Changes in operating assets and liabilities 758,666 (3,735,956) Other 1,407,513 1,221,837 ----------- ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 33,291,816 23,042,921 INVESTING ACTIVITIES Purchases of property, plant and equipment (15,042,131) (12,463,056) Other (1,019,707) (2,024,517) ----------- ------------ NET CASH USED IN INVESTING ACTIVITIES (16,061,838) (14,487,573) FINANCING ACTIVITIES Dividends (4,214,929) (2,071,147) Other (2,043,009) (969,238) ----------- ------------ NET CASH USED IN FINANCING ACTIVITIES (6,257,938) (3,040,385) ----------- ------------ INCREASE IN CASH AND CASH EQUIVALENTS 10,972,040 5,514,963 Cash and cash equivalents at beginning of period 40,763,656 26,785,962 ----------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 51,735,696 $ 32,300,925 ============ ============ </TABLE> See notes to condensed consolidated financial statements. Page 5
METHODE ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) January 31, 1996 NOTE 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 and nine month periods ended January 31, 1996 are not necessarily indicative of the results that may be expected for the year ending April 30, 1996. 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, 1995. NOTE 2 -- COMMON STOCK SPLIT In October, 1995, the Company's Board of Directors declared a three for two stock split, paid on October 31, 1995, whereby one additional share of Class A Common Stock was issued for each two shares of Class A and Class B Common Stock outstanding. All per share amounts give retroactive effect to this stock split. Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations - --------------------- Net sales for the third quarter of fiscal 1996 and the nine months ended January 31, 1996 increased 12% to $75,732,000 and 16% to $222,586,000 compared with $67,387,000 and $191,934,000 for the comparable periods last year. The connector operations had significant gains over the prior year led by a strong sales increases of fiber optic devices, dataMate "intelligent" circuitized connectors and related adaptor products. Sales for the current quarter and nine month period also were boosted by the inclusion of the former ETOS Fujikara International operations purchased by Methode in the second quarter of fiscal 1995 and Duel Systems, Inc. purchased July 31, 1995. Domestic automotive connectors and controls products which represent approximately half of Methode's business enjoyed a sales increase of nearly 20% for the quarter. Automotive products sales for the nine month period increased approximately 10% over the prior year period. Sales of Network Buss products for the quarter dropped nearly 45% but were slightly ahead of prior year sales for the nine month period. Other income consisted primarily of earnings from our automotive joint venture, royalties and interest income from short-term investments. Cost of products sold as a percentage of sales for the third quarter decreased to 72.7% from 73.5% for the year-ago period. For the nine month period ended January 31, 1996 this percentage was unchanged at 72.7 compared with the same period last year. Volume gains were primarily responsible for the margin improvement in the third quarter of fiscal 1996. Selling and administrative expenses as a percentage of sales were 13.2% and 13.4% in the current quarter and nine month period compared with 14.1% and 13.9% for the year-ago periods. The improvement experienced in fiscal 1996 was primarily the result of sales volume gains. The effective income tax rate was 36.5% for the three and nine month periods of the current year compared with 36% and 37% last year. The effective income tax rate exceeds the statutory federal rate of 35% because of the effect of state income taxes partially offset by lower statutory rates on foreign operations. Financial Conditions, Liquidity and Capital Resources - ----------------------------------------------------- Net cash provided by operating activities was $33,292,000 in the first nine months of fiscal 1996, up from the $23,043,000 provided during the year-ago period. The increase was primarily the result of increased net income and a leveling off of working capital requirements which had risen sharply in fiscal 1995 to support volume gains. Capital expenditures and depreciation expense were $15,042,000 and $9,282,000 in fiscal 1996 and $12,463,000 and $7,773,000 in fiscal 1995. It is presently expected that fixed asset additions for fiscal 1996 will approximate $20,000,000 and will be financed with internally generated funds. Page 7
PART II. OTHER INFORMATION - ----------------------------- Item 6. Exhibits and Reports on Form 8-K -------------------------------- a) Exhibits -------- <TABLE> INDEX TO EXHIBITS Sequential Exhibit Page Number Description Number - ------- ----------- ------ <S> <C> 3.1 Certificate of Incorporation of Registrant, as amended and currently in effect(1) 3.2 By-Laws of Registrant, as amended and currently in effect(1) 4.1 Article Fourth of Certificate of Incorporation of Registrant, as amended and currently in effect (Included in Exhibit 3.1) 10.1 Methode Electronics, Inc. Employee Stock Ownership Plan dated February 24, 1977(3)* 10.2 Methode Electronics, Inc. Employee Stock Ownership Plan and Trust Amendment No. 1(3)* 10.3 Methode Electronics, Inc. Employee Stock Ownership Trust(3)* 10.4 Methode Electronics, Inc. Employee Stock Ownership Trust- Amendment No. 1(3)* 10.5 Letter Agreement dated December 27, 1978, between the Registrant and Kevin Hayes regarding management bonus(2)* 10.6 Letter Agreement dated December 27, 1978, between the Registrant and William T. Jensen regarding management bonus(2)* 10.7 Letter Agreement dated December 27, 1978, between the Registrant and William J. McGinley regarding management bonus(2)* 10.8 Lease Agreement between the City of Carthage, Illinois and Carthage Precision Electric Co.(4) dated as of June 1, 1975(2) 10.9 Supplemental Lease Agreement between the City of Carthage, Illinois and Carthage Precision Electric Co.(4) dated as of June 1, 1977(2) 10.10 Supplemental Lease Agreement between the City of Carthage, Illinois and Carthage Precision Electric Co.(4) dated as of April 1, 1983(5) 10.11 Methode Electronics, Inc. Incentive Stock Award Plan(5)* 10.12 Methode Electronics, Inc. Supplemental Executive Benefit Plan(6)* 10.13 Methode Electronics, Inc. Managerial Bonus and Matching Bonus Plan (also referred to as the Longevity Contingent Bonus Program)(6)* 10.14 Methode Electronics, Inc. Capital Accumulation Plan(6)* 10.15 Incentive Stock Award Plan for Non-Employee Directors(7)* 10.16 Methode Electronics, Inc. 401(k) Savings Plan(7)* 10.17 Methode Electronics, Inc. 401(k) Savings Trust(7)* 10.18 Methode Electronics, Inc. Electronic Controls Division Cash and Class A Common Stock Bonus Plan(8)* 27 Financial Data Schedules 10 __________ (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.2-80666 filed December 1, 1982 and incorporated herein by reference. </TABLE> Page 8
(3) Previously filed with Registrant's S-8 Registration Statement No.2-60613 and incorporated herein by reference. (4) Carthage Precision Electric Co., a former subsidiary of the Registrant, was merged into the Registrant on July 30, 1984. (5) Previously filed with Registrant's Registration Statement No.2-92902 filed August 23, 1984 and incorporated herein by reference. (6) Previously filed with Registrant's Form 10-Q for three months ended January 31, 1994 and incorporated herein by reference. (7) Previously filed with Registrant's Form 10-K for the year ended April 30, 1994 and incorporated herein by reference. (8) Previously filed with Registrant's S-8 Registration Statement No.33-88036 and incorporated herein by reference. *Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Report on Form 10-Q pursuant to Item 6 of Form 10-Q. b) Reports on Form 8-K ------------------- The Company did not file a report on Form 8-K during the three months ended January 31, 1996. 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. Methode Electronics, Inc. ------------------------------------- By: ____________________________________ Kevin Hayes, Vice President (Principal Financial and Accounting Officer) Dated: March 5, 1996 -------------- Page 9