SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________________ FORM 1 0 - 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 October 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 December 3, 1996, Registrant had 34,107,785 shares of Class A Common Stock and 1,232,770 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 sheets October 31, 1996 and April 30, 1996. Condensed consolidated statements of income---Three months and six months ended October 31, 1996 and 1995. Condensed statements of cash flows --- Six months ended October 31, 1996 and 1995. Note to condensed consolidated financial statements --- October 31, 1996. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of matters to a vote of security holders. 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 October 31, April 30, 1996 1996 (Unaudited) <S> <C> <C> ASSETS CURRENT ASSETS Cash and cash equivalents $ 56,184,137 $ 50,185,934 Accounts receivable, less allowance (October 31, 1996--$1,233,000; April 30, 1996 - $1,285,000) 52,385,652 48,326,214 Inventories: Finished products 5,289,162 5,199,125 Work in process 13,898,735 15,330,639 Materials 10,185,884 11,557,591 ------------ ------------ 29,373,781 32,087,355 Current deferred income taxes 3,029,000 3,029,000 Prepaid expenses 1,900,912 3,382,073 ------------ ------------ TOTAL CURRENT ASSETS 142,873,482 137,010,576 PROPERTY, PLANT AND EQUIPMENT 163,936,648 152,507,769 Less allowance for depreciation 92,166,373 85,721,950 ------------ ------------ 71,770,275 66,785,819 INTANGIBLE BENEFIT PLAN ASSET 3,267,927 3,601,793 OTHER ASSETS 15,734,680 15,881,185 ------------ ------------ $233,646,364 $223,279,373 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts and notes payable $ 22,910,647 $ 26,388,255 Other current liabilities 17,632,197 19,567,826 ------------ ------------ TOTAL CURRENT LIABILITIES 40,542,844 45,956,081 OTHER LIABILITIES 1,918,391 1,918,391 DEFERRED COMPENSATION 7,264,419 7,301,175 ACCUMULATED BENEFIT PLAN OBLIGATION 3,144,492 2,999,422 SHAREHOLDERS' EQUITY Common Stock 17,744,408 17,661,116 Paid in capital 17,831,111 15,249,444 Retained earnings 144,648,343 131,073,343 Other shareholders' equity 552,356 1,120,401 ------------ ------------ 180,776,218 165,104,304 ------------ ------------ $233,646,364 $223,279,373 ============ ============ </TABLE> See note to condensed consolidated financial statements. Page 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) METHODE ELECTRONICS, INC. AND SUBSIDIARIES <TABLE> <CAPTION> Three Months Ended Six Months Ended October 31, October 31, ---------------------------- ------------------------------ 1996 1995 1996 1995 ----------- ----------- ------------ ------------ <S> <C> <C> <C> <C> INCOME: Net sales $85,188,636 $78,638,261 $164,154,346 $146,854,075 Other 1,350,577 1,240,497 2,729,460 2,406,340 ----------- ----------- ------------ ------------ Total 86,539,213 79,878,758 166,883,806 149,260,415 COSTS AND EXPENSES: Cost of products sold 61,319,492 57,285,373 118,960,006 106,876,147 Selling and administrative expenses 10,890,695 10,648,198 20,980,186 19,882,635 ----------- ----------- ------------ ------------ Total 72,210,187 67,933,571 139,940,192 126,758,782 ----------- ----------- ------------ ------------ Income before income taxes 14,329,026 11,945,187 26,943,614 22,501,633 Provision for income taxes 5,230,000 4,360,000 9,835,000 8,213,000 ----------- ----------- ------------ ------------ NET INCOME $ 9,099,026 $ 7,585,187 $ 17,108,614 $ 14,288,633 =========== =========== ============ ============ Weighted average number of Common Shares outstanding 35,218,000 34,950,000 35,194,000 34,873,000 Earnings per Common Share $0.26 $0.22 $0.49 $0.41 ===== ===== ===== ===== Cash dividends per Common Share $0.05 $0.04 $0.10 $0.08 </TABLE> See note to condensed consolidated financial statements. Page 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) METHODE ELECTRONICS, INC. AND SUBSIDIARIES <TABLE> <CAPTION> Six Months Ended October 31, --------------------------- 1996 1995 ---- ---- <S> <C> <C> OPERATING ACTIVITIES Net Income $ 17,108,614 $ 14,288,633 Provision for depreciation and amortization 6,812,400 6,177,532 Changes in operating assets and liabilities (4,465,649) (4,931,231) Other 721,538 847,810 ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 20,176,903 16,382,744 INVESTING ACTIVITIES Purchases of property, plant and equipment (11,796,856) (11,155,598) Other 1,485,125 (241,857) ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (10,311,731) (11,397,455) FINANCING ACTIVITIES Dividends (3,533,614) (2,808,106) Other (333,355) (3,699,188) ------------ ------------ NET CASH USED IN FINANCING ACTIVITIES (3,866,969) (6,507,294) ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,998,203 (1,522,005) Cash and cash equivalents at beginning of period 50,185,934 40,763,656 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 56,184,137 $ 39,241,651 ============ ============ </TABLE> See note to condensed consolidated financial statements. Page 5
METHODE ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) October 31, 1996 NOTE -- 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 six month periods ended October 31, 1996 are not necessarily indicative of the results that may be expected for the year ending April 30, 1997. 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, 1996. Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations Net sales for the second quarter of fiscal 1997 increased 8% to $85,189,000 from $78,638,000 for the second quarter last year. Sales for the six months ended October 31, 1996 increased 12% to $164,154,000 compared with $146,854,000 for the comparable period last year. Sales of fiber optic connectors and assemblies increased more than 50% during the current year periods. Sales of automotive controls, which represent approximately half of Methode's business also posted strong increases during the current quarter and six-month period compared to the prior year. Network Buss products declined over 20% due to a slowing mainframe computer marketplace. 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 second quarter decreased to 72.0% from 72.8% for the year-ago period. For the six month period ended October 31, 1996 this percentage decreased to 72.5% from 72.8% for the same period last year. Volume gains were primarily responsible for the margin improvement in the current year periods. Selling and administrative expenses as a percentage of sales were 12.8% in both the current quarter and six month period compared with 13.5% for the year- ago periods. Sales volume gains were primarily responsible for the improvement experienced in the current year periods. The effective income tax rate was 36.5% for the three and six month periods of the current and prior years. 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 $20,177,000 in the first six months of fiscal 1997, up from the $16,383,000 provided during the year-ago period. The increase was primarily the result of increased net income. Capital expenditures and depreciation expense were $11,797,000 and $6,812,000 in fiscal 1997 and $11,156,000 and $6,178,000 in fiscal 1996. It is presently expected that fixed asset additions for fiscal 1997 will approximate $25,000,000 and will be financed with internally generated funds. Page 7
PART. II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Stockholders Meeting of the Company was held on September 10, 1996. (b) At the Annual Stockholders Meeting, the Class A and Class B Stockholders (collectively referred to herein as the "Stockholders") voted on the following uncontested matters. Each Class A nominee for director was elected by a vote of the Class A Stockholders; each Class B nominee for director was elected by a vote of the Class B Stockholders. 1. Election of the below named Class A Nominees of the Board of Directors of the Company by the holders of Class A Common Stock: <TABLE> <CAPTION> <S> <C> <C> For Withheld Michael G. Andre 29,591,593 639,227 James W. Ashley, Jr. 29,587,520 643,300 William C. Croft 29,696,714 534,106 2. Election of the below named Class B Nominees of the Board of Directors of the Company by the holders of Class B Common Stock: For Withheld Kevin J. Hayes 1,189,893 2,917 William T. Jensen 1,189,884 2,926 James W. McGinley 1,189,893 2,917 William J. McGinley 1,189,435 3,375 Raymond J. Roberts 1,189,893 2,917 George C. Wright 1,189,893 2,917 </TABLE> No other items were voted on at the Annual Stockholders Meeting or otherwise during the quarter. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a) Exhibits INDEX TO EXHIBITS Sequential Page Number ------ Exhibit Number Description 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) Page 8
PART II. OTHER INFORMATION (CONTINUED) Item 6. Exhibits and Reports on Form 8-K a) Exhibits (Continued) 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(2)* 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 Methode Electronics, Inc. Incentive Stock Award Plan(3)* 10.6 Methode Electronics, Inc. Supplemental Executive Benefit Plan(4)* 10.7 Methode Electronics, Inc. Managerial Bonus and Matching Bonus Plan (also referred to as the Longevity Contingent Bonus Program)(4)* 10.8 Methode Electronics, Inc. Capital Accumulation Plan(4)* 10.9 Incentive Stock Award Plan for Non-Employee Directors(5)* 10.10 Methode Electronics, Inc. 401(k) Savings Plan(5)* 10.11 Methode Electronics, Inc. 401(k) Savings Trust(5)* 10.12 Methode Electronics, Inc. Electronic Controls Division Cash and Class A Common Stock Bonus Plan (6)* 27 Financial Data Schedules 11 - -------------- (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 S-8 Registration Statement No.2-60613 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. (4) Previously filed with Registrant's Form 10-Q for 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 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 October 31, 1996. Page 9
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, Chief Financial Officer (Principal Financial and Accounting Officer) Dated: December 10, 1996 Page 10