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, 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 February 21, 1997, Registrant had 34,143,889 shares of Class A Common Stock and 1,202,251 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 January 31, 1997 and April 30, 1996. Condensed consolidated statements of income -- Three months and nine months ended January 31,1997 and 1996. Condensed statements of cash flows -- Nine months ended January 31, 1997 and 1996. Note to condensed consolidated financial statements -- January 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 - ---------- Page 2
- ------------------------------- PART I. FINANCIAL INFORMATION - ------------------------------- ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS METHODE ELECTRONICS, INC. AND SUBSIDIARIES <TABLE> <CAPTION> January 31, April 30, 1997 1996 ---- ---- <S> <C> <C> ASSETS (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 62,539,836 $ 50,185,934 Accounts receivable, less allowance (January 31, 1997--$1,229,000; April 30, 1996--$1,285,000) 43,836,100 48,326,214 Inventories: Finished products 5,848,530 5,199,125 Work in process 17,016,208 15,330,639 Materials 9,137,993 11,557,591 ------------ ------------ 32,002,731 32,087,355 Current deferred income taxes 3,029,000 3,029,000 Prepaid expenses 1,300,988 3,382,073 ------------ ------------ TOTAL CURRENT ASSETS 142,708,655 137,010,576 PROPERTY, PLANT AND EQUIPMENT 169,225,299 152,507,769 Less allowance for depreciation 95,700,225 85,721,950 ------------ ------------ 73,525,074 66,785,819 INTANGIBLE BENEFIT PLAN ASSET 3,100,994 3,601,793 OTHER ASSETS 16,189,502 15,881,185 ------------ ------------ $235,524,225 $223,279,373 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts and notes payable $ 18,027,914 $ 26,388,255 Other current liabilities 17,030,446 19,567,826 ------------ ------------ TOTAL CURRENT LIABILITIES 35,058,360 45,956,081 OTHER LIABILITIES 1,918,391 1,918,391 DEFERRED COMPENSATION 7,201,314 7,301,175 ACCUMULATED BENEFIT PLAN OBLIGATION 2,757,568 2,999,422 SHAREHOLDERS' EQUITY Common Stock 17,747,330 17,661,116 Paid in capital 17,939,244 15,249,444 Retained earnings 152,015,593 131,073,343 Other shareholders' equity 886,425 1,120,401 ------------ ------------ 188,588,592 165,104,304 ------------ ------------ $235,524,225 $223,279,373 ============ ============ </TABLE> See notes to condensed consolidated financial statements. Page 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) METHODE ELECTRONICS, INC. AND SUBSIDIARIES <TABLE> <CAPTION> Three Months Ended January 31, Nine Months Ended January 31, ----------------------------- ---------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> INCOME: Net sales $85,943,283 $75,731,809 $250,097,629 $222,585,884 Other 1,984,063 1,193,104 4,713,523 3,599,444 -------------- -------------- -------------- ------------- Total 87,927,346 76,924,913 254,811,152 226,185,328 COSTS AND EXPENSES: Cost of products sold 62,126,072 55,043,915 181,086,078 161,920,062 Selling and administrative expenses 11,417,133 9,986,372 32,397,319 29,869,007 -------------- -------------- -------------- ------------- Total 73,543,205 65,030,287 213,483,397 191,789,069 -------------- -------------- -------------- ------------- Income before income taxes 14,384,141 11,894,626 41,327,755 34,396,259 Provision for income taxes 5,250,000 4,340,000 15,085,000 12,553,000 -------------- -------------- -------------- ------------- NET INCOME $9,134,141 $7,554,626 $26,242,755 $21,843,259 ============== ============== ============== ============= Weighted average number of Common Shares outstanding 35,261,000 35,029,000 35,217,000 34,921,000 Earnings per Common Share $0.26 $0.22 $0.75 $0.63 ============== ============== ============== ============= Cash dividends per Common Share $0.05 $0.04 $0.15 $0.12 </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, ---------------------------- 1997 1996 ---- ---- <S> <C> <C> OPERATING ACTIVITIES Net income $26,242,755 $21,843,259 Provision for depreciation and amortization 10,392,031 9,282,378 Changes in operating assets and liabilities (3,766,593) 758,666 Other 1,041,221 1,407,513 ------------- ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 33,909,414 33,291,816 INVESTING ACTIVITIES Purchases of property, plant and equipment (17,131,286) (15,042,131) Other 1,092,640 (1,019,707) ------------- ------------ NET CASH USED IN INVESTING ACTIVITIES (16,038,646) (16,061,838) FINANCING ACTIVITIES Dividends (5,300,505) (4,214,929) Other (216,361) (2,043,009) ------------- ------------ NET CASH USED IN FINANCING ACTIVITIES (5,516,866) (6,257,938) ------------- ------------ DECREASE IN CASH AND CASH EQUIVALENTS 12,353,902 10,972,040 Cash and cash equivalents at beginning of period 50,185,934 40,763,656 ------------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $62,539,836 $51,735,696 ============= ============ </TABLE> See notes to condensed consolidated financial statements. Page 5
METHODE ELECTRONICS, INC. AND SUBSIDIARIES NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) January 31, 1997 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 nine-month periods ended January 31, 1997 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 third quarter of fiscal 1997 increased 13% to $85,943,000 from $75,732,000 for the third quarter last year. Sales for the nine months ended January 31, 1997, increased 12% to $250,098,000, compared with $222,586,000 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 nine-month period compared to the prior year. Network Buss products declined over 10% in the current quarter and over 20% year-to-date due to a slowing mainframe computer marketplace. The 1997 third quarter contained an additional week of operations as compared to the 1996 quarter. Other income consisted primarily of interest income from short-term investments, earnings from our automotive joint venture, royalties, and in the current quarter a $244,000 gain from the sale of marketable securities. Cost of products sold as a percentage of sales for the third quarter decreased to 72.3% from 72.7% for the year-ago period. For the nine-month period ended January 31, 1997, this percentage decreased to 72.4% from 72.7% for the same period last year. Volume gains were primarily responsible for the marginal improvement in the margins for the current year periods. Selling and administrative expenses as a percentage of sales were 13.3% and 13.0% in the current quarter and nine-month periods compared with 13.2% and 13.4% for the year-ago periods. The effective income tax rate was 36.5% for the three- and nine-month periods of the current and prior 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 $33,909,000 in the first nine months of fiscal 1997, compared with $33,292,000 provided during the year- ago period. The increase in cash provided as a result of increased net income was substantially offset by a reduction of accounts payable in the current quarter. Capital expenditures and depreciation expense were $17,131,000 and $10,392,000 in fiscal 1997 and $15,042,000 and $9,282,000 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. Subsequent to the end of the current quarter, the Company purchased for cash a 75% interest in Sentorque, Inc., a company controlling a portfolio of patents in the field of non-contact torque sensors. This technology is expected to be especially useful for automotive applications requiring economical techniques to directly measure power transmitted by a rotary shaft. There are also applications outside the automotive field for which the Company intends to license this new capability. Page 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 - ------ ----------- ------ <S> <C> <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)* 10.1 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 </TABLE> _______ (1) Previously filed with Registrant's Form S-3 Registration Statement No. 33-61940 filed April 30, 1993 and incorporated herein by reference. Page 8
(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 January 31, 1997. 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: February 25, 1997 ----------------- Page 9