Fiscal Third Quarter 2024 Highlights
- Net sales were
$259.5 million - Electric and hybrid vehicle applications were 19 percent of net sales
- Net loss was
$11.6 million , or$0.33 per diluted share - Free cash flow was
$12.2 million - Company purchased 130,592 shares of its common stock for
$3.0 million - Forward-looking guidance suspended
Management Comments
President and Chief Executive Officer
Consolidated Fiscal Third Quarter 2024 Financial Results
Methode's net sales were
Selling and administrative expense as a percentage of sales was 13.1 percent, compared to 11.7 percent in the same quarter of fiscal 2023. Selling and administrative expense increased
Loss from operations was
Net loss was
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization of Intangibles), a non-GAAP financial measure, was
Debt was
Net cash provided by operating activities was
The company purchased and retired 130,592 shares of stock for
Segment Fiscal Third Quarter 2024 Financial Results
Comparing the Automotive segment’s quarter to the same quarter of fiscal 2023,
- Net sales were
$139.7 million , down from$176.5 million . Net sales decreased by$36.8 million or 20.8% mainly due to lower volume inNorth America andAsia primarily related to program roll-offs and EV demand weakness and inEurope related to lower sensor sales resulting from an overstocked e-bike market. Partially offsetting the decline was a favorable foreign currency translation of$1.1 million . - Loss from operations was
$11.0 million , down from income from operations of$18.7 million . Loss from operations was a negative 7.9% of net sales, down from a positive 10.6% primarily due to lower sales volume and costs resulting from the operational inefficiencies, mainly inNorth America , that occurred in the first and second fiscal quarters and continued in the third fiscal quarter. These inefficiencies resulted in inventory adjustments, scrap expenses, and higher labor and freight costs.
Comparing the Industrial segment’s quarter to the same quarter of fiscal 2023,
- Net sales were
$107.1 million , up from$91.0 million . The acquisition of the Nordic Lights business contributed$21.2 million and favorable foreign currency translation contributed$0.4 million to the sales increase. Net of the acquisition and foreign currency translation, net sales decreased by$5.5 million or 6.0% driven primarily by lower demand for power distribution products in the EV and data center markets. - Income from operations was
$18.9 million , down from$22.3 million . The acquisition of the Nordic Lights business contributed$1.6 million . Income from operations was 17.6% of net sales, down from 24.5% mainly due to product sales mix.
Comparing the Interface segment’s quarter to the same quarter of fiscal 2023,
- Net sales were
$12.7 million , up from$12.0 million . The increase was mainly due to higher volume of appliance products. - Income from operations was
$1.5 million , up from$1.0 million . Income from operations was 11.8% of net sales, up from 8.3%. Both increases were mainly due to the higher sales volume.
Guidance
Due to the recent transition at the CEO position and the various market and operational challenges the business is facing, the company has suspended forward-looking guidance. Any and all previous guidance provided by the company should no longer be relied upon.
Conference Call
The company will conduct a conference call and webcast to review financial and operational highlights led by its President and Chief Executive Officer,
To participate in the conference call, please dial 888-506-0062 (domestic) or 973-528-0011 (international) at least five minutes prior to the start of the event. A simultaneous webcast can be accessed through the company’s website, www.methode.com, on the Investors page.
A replay of the teleconference will be available shortly after the call through
About
Our solutions are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus, and rail), cloud computing infrastructure, construction equipment, and consumer appliance. Our business is managed on a segment basis, with those segments being Automotive, Industrial, and Interface.
Non-GAAP Financial Measures
To supplement the company's financial statements presented in accordance with generally accepted accounting principles in
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect, when made, our current views with respect to current events and financial performance. Such forward-looking statements are subject to many risks, uncertainties and factors relating to our operations and business environment, which may cause our actual results to be materially different from any future results, expressed or implied, by such forward-looking statements. All statements that address future operating, financial or business performance or our strategies or expectations are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “outlook,” “upcoming” or “continue,” and other comparable terminology. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following:
- Dependence on our supply chain, including semiconductor suppliers;
- Impact from pandemics, such as the COVID-19 pandemic;
- Dependence on the automotive and commercial vehicle industries;
- Impact from inflation;
- Dependence on a small number of large customers, including one large automotive customer;
- Risks relating to our use of requirements contracts;
- Failure to attract and retain qualified personnel;
- Risks related to conducting global operations;
- Potential work stoppages;
- Dependence on the availability and price of materials;
- Timing, quality and cost of new program launches;
- Ability to compete effectively;
- Ability to withstand pricing pressures, including price reductions;
- Our lengthy sales cycle;
- Ability to successfully benefit from acquisitions and divestitures;
- Impact from production delays or cancelled orders;
- Investment in programs prior to the recognition of revenue;
- Electric vehicle ("EV") adoption rates;
- Ability to withstand business interruptions;
- Breaches to our information technology systems or service interruptions;
- Ability to keep pace with rapid technological changes;
- Ability to protect our intellectual property;
- Costs associated with environmental, health and safety regulations;
- International trade disputes resulting in tariffs and our ability to mitigate tariffs;
- Impact from climate change and related regulations;
- Ability to avoid design or manufacturing defects;
- Ability to remediate a material weakness in our internal control over financial reporting;
- Recognition of goodwill and other intangible asset impairment charges;
- Ability to manage our debt levels and comply with restrictions and covenants under our credit agreement;
- Interest rate changes and variable rate instruments;
- Currency fluctuations;
- Adjustments to compensation expense for performance-based awards;
- Timing and magnitude of costs associated with restructuring activities;
- Income tax rate fluctuations; and
- Judgments related to accounting for tax positions.
Additional details and factors are discussed under the caption “Risk Factors” in our Annual Report. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Any forward-looking statements made by us speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.
For
Vice President, Investor Relations
rcherry@methode.com
+1-708-457-4030
CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in millions, except per-share data) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
Net sales | $ | 259.5 | $ | 280.1 | $ | 837.2 | $ | 878.4 | ||||||||
Cost of products sold | 222.5 | 215.2 | 693.9 | 677.6 | ||||||||||||
Gross profit | 37.0 | 64.9 | 143.3 | 200.8 | ||||||||||||
Selling and administrative expenses | 33.9 | 32.9 | 119.3 | 104.8 | ||||||||||||
— | — | 56.5 | — | |||||||||||||
Amortization of intangibles | 6.1 | 4.7 | 18.0 | 14.1 | ||||||||||||
(Loss) income from operations | (3.0 | ) | 27.3 | (50.5 | ) | 81.9 | ||||||||||
Interest expense, net | 5.0 | 0.8 | 12.2 | 1.3 | ||||||||||||
Other expense (income), net | 2.5 | 3.5 | 2.3 | (1.7 | ) | |||||||||||
Pre-tax (loss) income | (10.5 | ) | 23.0 | (65.0 | ) | 82.3 | ||||||||||
Income tax expense | 1.1 | 3.1 | 1.0 | 13.3 | ||||||||||||
Net (loss) income | (11.6 | ) | 19.9 | (66.0 | ) | 69.0 | ||||||||||
Net income attributable to redeemable noncontrolling interest | — | — | — | — | ||||||||||||
Net (loss) income attributable to Methode | $ | (11.6 | ) | $ | 19.9 | $ | (66.0 | ) | $ | 69.0 | ||||||
(Loss) income per share attributable to Methode: | ||||||||||||||||
Basic | $ | (0.33 | ) | $ | 0.56 | $ | (1.86 | ) | $ | 1.91 | ||||||
Diluted | $ | (0.33 | ) | $ | 0.54 | $ | (1.86 | ) | $ | 1.87 | ||||||
Cash dividends per share | $ | 0.14 | $ | 0.14 | $ | 0.42 | $ | 0.42 |
CONSOLIDATED BALANCE SHEETS (unaudited) (in millions, except share and per-share data) | ||||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 122.9 | $ | 157.0 | ||||
Accounts receivable, net | 265.3 | 314.3 | ||||||
Inventories | 204.0 | 159.7 | ||||||
Income tax receivable | 18.6 | 12.9 | ||||||
Prepaid expenses and other current assets | 19.0 | 20.5 | ||||||
Total current assets | 629.8 | 664.4 | ||||||
Long-term assets: | ||||||||
Property, plant and equipment, net | 232.5 | 220.3 | ||||||
220.4 | 301.9 | |||||||
Other intangible assets, net | 264.3 | 256.7 | ||||||
Operating lease right-of-use assets, net | 25.9 | 28.4 | ||||||
Deferred tax assets | 36.1 | 33.6 | ||||||
Pre-production costs | 47.8 | 36.1 | ||||||
Other long-term assets | 34.7 | 37.7 | ||||||
Total long-term assets | 861.7 | 914.7 | ||||||
Total assets | $ | 1,491.5 | $ | 1,579.1 | ||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 146.0 | $ | 138.7 | ||||
Accrued employee liabilities | 31.6 | 36.7 | ||||||
Other accrued liabilities | 38.2 | 34.5 | ||||||
Short-term operating lease liabilities | 6.3 | 6.8 | ||||||
Short-term debt | 0.2 | 3.2 | ||||||
Income tax payable | 7.6 | 8.1 | ||||||
Total current liabilities | 229.9 | 228.0 | ||||||
Long-term liabilities: | ||||||||
Long-term debt | 331.1 | 303.6 | ||||||
Long-term operating lease liabilities | 19.9 | 21.8 | ||||||
Long-term income tax payable | 9.3 | 16.7 | ||||||
Other long-term liabilities | 19.9 | 14.3 | ||||||
Deferred tax liabilities | 46.4 | 41.8 | ||||||
Total long-term liabilities | 426.6 | 398.2 | ||||||
Total liabilities | 656.5 | 626.2 | ||||||
Redeemable noncontrolling interest | — | 11.1 | ||||||
Shareholders' equity: | ||||||||
Common stock, | 18.4 | 18.6 | ||||||
Additional paid-in capital | 181.7 | 181.0 | ||||||
Accumulated other comprehensive loss | (31.2 | ) | (19.0 | ) | ||||
(11.5 | ) | (11.5 | ) | |||||
Retained earnings | 677.6 | 772.7 | ||||||
Total shareholders' equity | 835.0 | 941.8 | ||||||
Total liabilities, redeemable noncontrolling interest and shareholders' equity | $ | 1,491.5 | $ | 1,579.1 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in millions) | ||||||||
Nine Months Ended | ||||||||
Operating activities: | ||||||||
Net (loss) income | $ | (66.0 | ) | $ | 69.0 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 43.3 | 36.8 | ||||||
Stock-based compensation expense | 1.8 | 9.4 | ||||||
Change in cash surrender value of life insurance | (1.0 | ) | 0.2 | |||||
Amortization of debt issuance costs | 0.5 | 0.6 | ||||||
Loss on sale of assets | 0.6 | 0.1 | ||||||
Impairment of long-lived assets | 0.7 | 0.4 | ||||||
56.5 | — | |||||||
Change in deferred income taxes | (4.0 | ) | 0.7 | |||||
Other | 0.8 | 0.2 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 47.7 | (19.7 | ) | |||||
Inventories | (47.1 | ) | (16.2 | ) | ||||
Prepaid expenses and other assets | (8.8 | ) | (17.3 | ) | ||||
Accounts payable | 11.0 | 7.0 | ||||||
Other liabilities | (13.4 | ) | 12.6 | |||||
Net cash provided by operating activities | 22.6 | 83.8 | ||||||
Investing activities: | ||||||||
Purchases of property, plant and equipment | (41.1 | ) | (30.8 | ) | ||||
Proceeds from settlement of net investment hedge | 0.6 | — | ||||||
Proceeds from disposition of assets | 1.5 | 3.5 | ||||||
Net cash used in investing activities | (39.0 | ) | (27.3 | ) | ||||
Financing activities: | ||||||||
Taxes paid related to net share settlement of equity awards | (3.8 | ) | (0.5 | ) | ||||
Repayments of finance leases | (0.2 | ) | (0.3 | ) | ||||
Proceeds from exercise of stock options | — | 1.5 | ||||||
Purchases of common stock | (10.8 | ) | (39.6 | ) | ||||
Cash dividends | (15.0 | ) | (14.9 | ) | ||||
Debt issuance costs | — | (3.2 | ) | |||||
Purchase of redeemable noncontrolling interest | (10.9 | ) | — | |||||
Proceeds from borrowings | 232.9 | 200.0 | ||||||
Repayments of borrowings | (207.2 | ) | (206.6 | ) | ||||
Net cash used in financing activities | (15.0 | ) | (63.6 | ) | ||||
Effect of foreign currency exchange rate changes on cash and cash equivalents | (2.7 | ) | (0.2 | ) | ||||
Decrease in cash and cash equivalents | (34.1 | ) | (7.3 | ) | ||||
Cash and cash equivalents at beginning of the period | 157.0 | 172.0 | ||||||
Cash and cash equivalents at end of the period | $ | 122.9 | $ | 164.7 | ||||
Supplemental cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 12.7 | $ | 3.0 | ||||
Income taxes, net of refunds | $ | 17.0 | $ | 15.4 | ||||
Operating lease obligations | $ | 6.9 | $ | 6.5 |
RECONCILIATION OF NON-GAAP MEASURES (Unaudited) (in millions) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
EBITDA: | ||||||||||||||||
Net (loss) income | $ | (11.6 | ) | $ | 19.9 | $ | (66.0 | ) | $ | 69.0 | ||||||
Income tax expense | 1.1 | 3.1 | 1.0 | 13.3 | ||||||||||||
Interest expense, net | 5.0 | 0.8 | 12.2 | 1.3 | ||||||||||||
Amortization of intangibles | 6.1 | 4.7 | 18.0 | 14.1 | ||||||||||||
Depreciation | 8.8 | 7.6 | 25.3 | 22.7 | ||||||||||||
EBITDA | 9.4 | 36.1 | (9.5 | ) | 120.4 | |||||||||||
— | — | 56.5 | — | |||||||||||||
Acquisition costs | — | — | 0.5 | — | ||||||||||||
Acquisition-related costs - purchase accounting adjustments related to inventory | — | — | 0.5 | — | ||||||||||||
Restructuring costs | 0.1 | — | 1.4 | 0.6 | ||||||||||||
Loss on sale of Dabir assets | — | — | 0.6 | — | ||||||||||||
Adjusted EBITDA | $ | 9.5 | $ | 36.1 | $ | 50.0 | $ | 121.0 |
Three Months Ended | Nine Months Ended | |||||||||||||||
Free Cash Flow: | ||||||||||||||||
Net cash provided by operating activities | $ | 28.8 | $ | 55.7 | $ | 22.6 | $ | 83.8 | ||||||||
Purchases of property, plant and equipment | (16.6 | ) | (12.8 | ) | (41.1 | ) | (30.8 | ) | ||||||||
Free cash flow | $ | 12.2 | $ | 42.9 | $ | (18.5 | ) | $ | 53.0 |
Net Debt: | ||||||||
Short-term debt | $ | 0.2 | $ | 3.2 | ||||
Long-term debt | 331.1 | 303.6 | ||||||
Total debt | 331.3 | 306.8 | ||||||
Less: cash and cash equivalents | (122.9 | ) | (157.0 | ) | ||||
Net debt | $ | 208.4 | $ | 149.8 |
RECONCILIATION OF NON-GAAP MEASURES (Unaudited) (in millions, except per share data) | ||||||||||||||||||||||||||||
Reconciliation of Non-GAAP Financial Measures for the Three Months Ended | ||||||||||||||||||||||||||||
(as reported) | impairment | Acquisition costs | Purchase accounting adjustments related to inventory | Restructuring costs | Loss on sale of Dabir assets | Non- GAAP | ||||||||||||||||||||||
(Loss) income from operations | $ | (3.0 | ) | $ | — | $ | — | $ | — | $ | 0.1 | $ | — | $ | (2.9 | ) | ||||||||||||
Pre-tax (loss) income | $ | (10.5 | ) | $ | — | $ | — | $ | — | $ | 0.1 | $ | — | $ | (10.4 | ) | ||||||||||||
Net (loss) income | $ | (11.6 | ) | $ | — | $ | — | $ | — | $ | 0.1 | $ | — | $ | (11.5 | ) | ||||||||||||
Diluted (loss) income per share | $ | (0.33 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (0.33 | ) |
Reconciliation of Non-GAAP Financial Measures for the Three Months Ended | ||||||||||||||||||||||||||||
(as reported) | impairment | Acquisition costs | Purchase accounting adjustments related to inventory | Restructuring costs | Loss on sale of Dabir assets | Non- GAAP | ||||||||||||||||||||||
Income from operations | $ | 27.3 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 27.3 | ||||||||||||||
Pre-tax income | $ | 23.0 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 23.0 | ||||||||||||||
Net income | $ | 19.9 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 19.9 | ||||||||||||||
Diluted income per share | $ | 0.54 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 0.54 |
Reconciliation of Non-GAAP Financial Measures for the Nine Months Ended | ||||||||||||||||||||||||||||
(as reported) | impairment | Acquisition costs | Purchase accounting adjustments related to inventory | Restructuring costs | Loss on sale of Dabir assets | Non- GAAP | ||||||||||||||||||||||
(Loss) income from operations | $ | (50.5 | ) | $ | 56.5 | $ | 0.5 | $ | 0.5 | $ | 1.4 | $ | — | $ | 8.4 | |||||||||||||
Pre-tax (loss) income | $ | (65.0 | ) | $ | 56.5 | $ | 0.5 | $ | 0.5 | $ | 1.4 | $ | 0.6 | $ | (5.5 | ) | ||||||||||||
Net (loss) income | $ | (66.0 | ) | $ | 56.5 | $ | 0.4 | $ | 0.4 | $ | 1.1 | $ | 0.5 | $ | (7.1 | ) | ||||||||||||
Diluted (loss) income per share | $ | (1.86 | ) | $ | 1.59 | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | 0.01 | $ | (0.21 | ) |
Reconciliation of Non-GAAP Financial Measures for the Nine Months Ended | ||||||||||||||||||||||||||||
(as reported) | impairment | Acquisition costs | Purchase accounting adjustments related to inventory | Restructuring costs | Loss on sale of Dabir assets | Non- GAAP | ||||||||||||||||||||||
Income from operations | $ | 81.9 | $ | — | $ | — | $ | — | $ | 0.6 | $ | — | $ | 82.5 | ||||||||||||||
Pre-tax income | $ | 82.3 | $ | — | $ | — | $ | — | $ | 0.6 | $ | — | $ | 82.9 | ||||||||||||||
Net income | $ | 69.0 | $ | — | $ | — | $ | — | $ | 0.5 | $ | — | $ | 69.5 | ||||||||||||||
Diluted income per share | $ | 1.87 | $ | — | $ | — | $ | — | $ | 0.01 | $ | — | $ | 1.88 |
Source:
2024 GlobeNewswire, Inc., source