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 July 31, 1997 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 September 5, 1997, Registrant had 34,273,132 shares of Class A Common Stock and 1,199,754 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 --- ---
INDEX METHODE ELECTRONICS, INC. AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - ----------------------------------- Item 1. Financial Statements (unaudited) Condensed consolidated balance sheets July 31, 1997 and April 30, 1997 Condensed consolidated statements of income -- Three months ended July 31,1997 and 1996 Condensed consolidated statements of cash flows -- Three months ended July 1, 1997 and 1996 Notes to condensed consolidated financial statements - - July 31, 1997 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 - ---------- 2
<TABLE> <CAPTION> PART I. FINANCIAL INFORMATION - ------------------------------ ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS METHODE ELECTRONICS, INC. AND SUBSIDIARIES July 31, April 30, 1997 1997 ---- ---- ASSETS (Unaudited) <S> <C> <C> CURRENT ASSETS Cash and cash equivalents $ 23,996,971 $ 23,115,320 Accounts receivable - net 56,667,569 54,054,695 Inventories: Finished products 9,839,562 7,347,088 Work in process 25,580,649 21,323,077 Materials 9,697,378 11,185,199 ------------ ------------ 45,117,589 39,855,364 Current deferred income taxes 2,971,000 2,831,000 Prepaid expenses 2,955,592 2,944,056 ------------ ------------ TOTAL CURRENT ASSETS 131,708,721 122,800,435 PROPERTY, PLANT AND EQUIPMENT 183,099,544 179,050,393 Less allowance for depreciation 102,193,560 98,954,082 ------------ ------------ 80,905,984 80,096,311 GOODWILL - net 38,269,773 35,190,298 INTANGIBLE BENEFIT PLAN ASSET 2,767,128 2,934,061 OTHER ASSETS 13,097,067 12,469,978 ------------ ------------ $266,748,673 $253,491,083 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts and notes payable $ 27,380,418 $ 25,559,239 Other current liabilities 22,769,575 18,979,585 ------------ ------------ TOTAL CURRENT LIABILITIES 50,149,993 44,538,824 OTHER LIABILITIES 2,383,900 2,464,519 DEFERRED COMPENSATION 6,838,057 6,964,135 ACCUMULATED BENEFIT PLAN OBLIGATION 2,398,904 2,326,248 SHAREHOLDERS' EQUITY Common Stock 17,829,719 17,744,672 Paid in capital 20,598,807 18,040,963 Retained earnings 168,608,470 161,225,847 Other shareholders' equity (2,059,177) 185,875 ------------ ------------ 204,977,819 197,197,357 ------------ ------------ $266,748,673 $253,491,083 ============ ============ </TABLE> See notes to condensed consolidated financial statements. 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) METHODE ELECTRONICS, INC. AND SUBSIDIARIES <TABLE> <CAPTION> Three Months Ended July 31, --------------------------- 1997 1996 ---- ---- <S> <C> <C> INCOME: Net sales $91,898,318 $78,965,710 Other 1,132,188 1,378,883 ----------- ----------- Total 93,030,506 80,344,593 COSTS AND EXPENSES: Cost of products sold 66,774,651 57,640,514 Selling and administrative expenses 12,164,600 10,089,491 ----------- ----------- Total 78,939,251 67,730,005 ----------- ----------- Income before income taxes 14,091,255 12,614,588 Provision for income taxes 4,935,000 4,605,000 ----------- ----------- NET INCOME $9,156,255 $8,009,588 =========== =========== Weighted average number of Common Shares outstanding 35,298,000 35,171,000 Earnings per Common Share $0.26 $0.23 =========== =========== Cash dividends per Common Share $0.05 $0.05 </TABLE> See notes to condensed consolidated financial statements. 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) METHODE ELECTRONICS, INC. AND SUBSIDIARIES <TABLE> <CAPTION> Three Months Ended July 31, --------------------------- 1997 1996 ---- ---- <S> <C> <C> OPERATING ACTIVITIES Net income $9,156,255 $8,009,588 Provision for depreciation and amortization 4,468,898 3,354,197 Changes in operating assets and liabilities (4,030,498) 5,460,181 Other 801,193 272,808 ------------ ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 10,395,848 17,096,774 INVESTING ACTIVITIES Purchases of property, plant and equipment (4,851,455) (4,710,883) Acquisitions (3,649,195) Other (1,506,440) 1,451,075 ------------ ----------- NET CASH USED IN INVESTING ACTIVITIES (10,007,090) (3,259,808) FINANCING ACTIVITIES Dividends (1,773,632) (1,766,671) Other 2,266,525 (1,720,451) ------------ ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 492,893 (3,487,122) ------------ ----------- INCREASE IN CASH AND CASH EQUIVALENTS 881,651 10,349,844 Cash and cash equivalents at beginning of period 23,115,320 50,185,934 ------------ ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $23,996,971 $60,535,778 ============ =========== </TABLE> See notes to condensed consolidated financial statements. 5
METHODE ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) July 31, 1997 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 period ended July 31, 1997 are not necessarily indicative of the results that may be expected for the year ending April 30, 1998. 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, 1997. NOTE 2. ACQUISITION Effective May 5, 1997, the Company, using available cash balances, purchased all of the outstanding shares of Adam Technologies, a designer and marketer of electronic connectors. The acquisition, which may require additional contingent consideration if certain performance targets are attained, was accounted for using the purchase method of accounting and the results of operations of Adam Technologies have been included in the Company's consolidated financial statements from the date of acquisition. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations - --------------------- Net sales for the first quarter of fiscal 1998 increased 16% to $91,898,000, compared with $78,966,000 for the first quarter last year. Merit- Malta Methode, a European automotive component supplier acquired in February 1997, helped Methode achieve automotive interconnect devices and controls sales gains of just under 10% for the current quarter compared with the first quarter last year. Domestic sales of automotive controls declined about 4% from the first quarter of fiscal 1997. Automotive interconnect devices and controls represented about half of Methode's business during both periods. Our dataMate "smart interconnect" sales grew by approximately 40%, and with the help of Adam Technologies, a broad line electronics connector supplier acquired in May 1997, other connectors and assemblies had sales gains in excess of 30% over last year's first quarter. Sales of Network Buss products to the mainframe computer industry continued the decline begun in the first quarter of fiscal 1997, and sales in the current year first quarter were less than half of last year's first quarter. Other income consisted primarily of earnings from an automotive joint venture, royalty and license fees, and interest income on short-term investments. Cost of products sold as a percentage of sales for the quarter remained relatively constant at 72.7% compared with the year-ago period of 73.0%. Selling and administrative expenses as a percentage of sales were 13.2% in the first quarter of fiscal 1998, up from 12.8% for the year-ago period. The effective income tax rate was 35.0% in the current quarter compared with 36.5% for the quarter ended July 31, 1996. The effective income tax rate in the first quarter of fiscal 1998 equaled the statutory federal rate of 35% with lower statutory rates on foreign operations offsetting the effect of state income taxes. In the first quarter of fiscal 1997, the foreign operations were not a large enough component of total income to completely offset the effect of state income taxes. Financial Conditions, Liquidity and Capital Resources - ----------------------------------------------------- Net cash provided by operating activities was $10,396,000 in the first quarter of fiscal 1998, down from the $17,097,000 provided during the year-ago period. The decrease was primarily the result of increased working capital requirements. To accelerate market penetration and extend product offerings, the Company purchased the Common Stock of Adam Technologies in May 1997. Available cash balances were used to fund this acquisition. Depreciation and amortization expense was $4,469,000 in the first quarter of fiscal 1998 compared with $3,354,000 in fiscal 1997, with capital expenditures of $4,851,000 and $4,711,000, respectively. It is presently expected that fixed asset additions for fiscal 1998 will approach $25,000,000 and will be financed with internally generated funds. 7
PART II. OTHER INFORMATION - -------- ----------------- Item 6. Exhibits and Reports on Form 8-K a) Exhibits INDEX TO EXHIBITS <TABLE> <CAPTION> Sequential Exhibit Page Number Description Number - ------- ----------- ------ <C> <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(2)* 10.2 Methode Electronics, Inc. Employee Stock Ownership Plan and Trust Amendment No. 1(2)* 10.3 Methode Electronics, Inc. Employee Stock Ownership Trust(2)* 10.4 Methode Electronics, Inc. Employee Stock Ownership Trust- Amendment No. 1(2)* 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)* 10 27 Financial Data Schedules - -------- (1) Previously filed with Registrant's Form S-3 Registration Statement No. 33-61940 filed April 30, 1993 and incorporated herein by reference. </TABLE> 8
<TABLE> <S> <C> (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 July 31, 1997. </TABLE> 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 J. Hayes Chief Financial Officer Dated: September 9, 1997 ----------------- 9