Methode Electronics, Inc. Reports Fiscal Third Quarter 2022 Financial Results
Methode Electronics, Inc. (NYSE: MEI) reported its third-quarter fiscal 2022 results, showing net sales of $291.6 million, a 1.3% decrease year-over-year. Electric and hybrid vehicle applications reached a record 19% of net sales. Net income stood at $29.4 million, or $0.78 per diluted share, impacted by restructuring costs of $2.7 million. The company initiated $21.3 million in share buybacks and expects annual sales from new programs to surpass $100 million. Full-year sales guidance was raised to $1,160-$1,170 million, while EPS guidance was narrowed to $3.05-$3.15.
- Record 19% of net sales from electric and hybrid vehicle applications.
- New program awards expected to generate over $100 million in annual sales.
- Share buybacks of $21.3 million reflecting confidence in company performance.
- Increased full-year net sales guidance to $1,160-$1,170 million.
- Net sales down 1.3% year-over-year, reflecting lower automotive demand in Europe.
- Net income decreased from $31.9 million to $29.4 million year-over-year.
- Free cash flow significantly down to $11.8 million from $82.2 million a year ago.
- Higher restructuring costs of $3.1 million compared to $0.7 million in the previous year.
- Record Electric and Hybrid Vehicle Application Sales
$21 Million in Share Buybacks- Over
$100 Million in New Program Awards
CHICAGO, March 03, 2022 (GLOBE NEWSWIRE) -- Methode Electronics, Inc. (NYSE: MEI), a leading global supplier of custom-engineered solutions for user interface, LED lighting and power distribution applications, today announced financial results for the third quarter of fiscal 2022 ended January 29, 2022.
Fiscal Third Quarter 2022 Highlights
- Net sales were
$291.6 million - Electric and hybrid vehicle applications were a record 19 percent of net sales
- Net income was
$29.4 million , or$0.78 per diluted share, and included$2.7 million of restructuring costs, or$0.07 per diluted share, and discrete tax benefits of$2.2 million , or$0.06 per diluted share - Company purchased 460,161 shares of its common stock for
$21.3 million - Company was awarded new programs with expected annual sales of over
$100 million with approximately70% of the expected sales in electric and hybrid vehicle applications
Consolidated Fiscal Third Quarter 2022 Financial Results
Methode's net sales were
Income from operations was
Other income was
Income tax expense was
Net income was
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization of Intangibles), a non-GAAP financial measure, was
Debt was
Free cash flow, a non-GAAP financial measure defined as net cash provided by operating activities less purchases of property, plant, and equipment, was
On March 31, 2021, the Board of Directors authorized the purchase of up to
Segment Fiscal Third Quarter 2022 Financial Results
Comparing the Automotive segment's quarter to the same quarter of fiscal 2021,
- Net sales were
$195.4 million , down$15.1 million or7.2% from$210.5 million . The decrease was mainly due to lower sales volumes in Europe resulting from reduced OEM demand due to semiconductor shortages. The segment net sales in the quarter were positively impacted by$2.0 million of premium freight cost recovery, partially offset by$1.6 million from foreign currency translation. - Income from operations was
$24.5 million , down$5.1 million or17.2% from$29.6 million primarily due to lower sales volumes and slightly higher selling and administrative expense, partially offset by$2.0 million of premium freight cost recovery. Income from operations was12.5% of net sales, down from14.1% .
Comparing the Industrial segment's quarter to the same quarter of fiscal 2021,
- Net sales were
$80.0 million , up$13.5 million or20.3% from$66.5 million . All product categories had higher sales including electric vehicle busbars, commercial vehicle lighting, and radio remote controls. The segment net sales in the quarter were positively impacted by$6.6 million of premium freight cost recovery, partially offset by$0.4 million from foreign currency translation. - Income from operations was
$17.7 million , up$0.8 million or4.7% from$16.9 million primarily due to higher sales volumes. The increase was negatively impacted by restructuring costs of$3.1 million , partially offset by$0.9 million of premium freight cost recovery. Income from operations was22.1% of net sales, down from25.4% .
Comparing the Interface segment's quarter to the same quarter of fiscal 2021,
- Net sales were
$15.2 million , down$2.4 million or13.6% from$17.6 million primarily due to lower sales in appliance applications, which were negatively impacted by the semiconductor shortages. - Income from operations was
$2.1 million , down$1.1 million or34.4% from$3.2 million . Income from operations was13.8% of net sales, down from18.2% .
Comparing the Medical segment's quarter to the same quarter of fiscal 2021,
- Net sales were
$1.0 million , up from$0.7 million . - Loss from operations was
$1.6 million , compared to a loss of$1.0 million mainly due to higher material costs from expediting components due to shortages.
Fiscal 2022 Full Year Guidance
For the fiscal year 2022, the company increased its expectation for net sales to be in the range of
The guidance is subject to disruption due to a variety of factors including the impact from the COVID-19 pandemic, the ongoing semiconductor shortages, other supply chain disruptions, and both short and long-term supply chain rationalization and restructuring efforts.
Management Comments
President and Chief Executive Officer Donald W. Duda said, “Despite the significant demand headwind in auto, particularly in Europe, and the ongoing supply chain challenges, our mitigation efforts in the quarter helped to deliver solid sales, which were driven by a strong performance in our Industrial segment and yet another record for EV application sales."
Mr. Duda added, "Even more encouraging was our strong award bookings of over
Non-GAAP Financial Measures
To supplement the company's financial statements presented in accordance with generally accepted accounting principles in the United States (“GAAP”), Methode uses certain non-GAAP financial measures, such as EBITDA, Net Debt, and Free Cash Flow. Reconciliation to the nearest GAAP measures of all non-GAAP measures included in this press release can be found at the end of this release. Management believes EBITDA is useful to investors as it is a measure that is commonly used by other companies in our industry and provides a comparison for investors to the company’s performance versus its competitors. Management believes Net Debt is a meaningful measure to investors because management assesses the company’s leverage position after considering available cash that could be used to repay outstanding debt. Management believes Free Cash Flow is a meaningful measure to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures, which are both necessary to maintain the company’s asset base and which are expected to generate future cash flows from operations. Methode's definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.
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, Donald W. Duda, and Chief Financial Officer, Ronald L. G. Tsoumas, today at 10:00 a.m. CST.
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 March 17, 2022, by dialing 877-481-4010 and providing passcode 44597. A webcast replay will also be available through the company’s website, www.methode.com, on the Investors page.
About Methode Electronics, Inc.
Methode Electronics, Inc. (NYSE: MEI) is a leading global supplier of custom-engineered solutions with sales, engineering and manufacturing locations in North America, Europe, Middle East and Asia. We design, engineer, and produce mechatronic products for OEMs utilizing our broad range of technologies for user interface, LED lighting system, power distribution and sensor applications.
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, consumer appliance, and medical devices. Our business is managed on a segment basis, with those segments being Automotive, Industrial, Interface and Medical.
Forward-Looking Statements
This press release contains certain forward-looking statements, which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are subject to the safe harbor protection provided under the securities laws. Methode undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Methode's expectations on a quarterly basis or otherwise. The forward-looking statements in this press release involve a number of risks and uncertainties. The factors that could cause actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission, such as our annual and quarterly reports. Such factors may include, without limitation, the following: 1) Impact from pandemics, such as the COVID-19 pandemic; 2) Dependence on the automotive and commercial vehicle industries; 3) Dependence on our supply chain, including semiconductor suppliers; 4) Dependence on a small number of large customers, including two large automotive customers; 5) Dependence on the availability and price of materials; 6) Failure to attract and retain qualified personnel; 7) Timing, quality and cost of new program launches; 8) Risks related to conducting global operations; 9) Ability to compete effectively; 10) Investment in programs prior to the recognition of revenue; 11) Ability to withstand pricing pressures, including price reductions; 12) Impact from production delays or cancelled orders; 13) Ability to successfully benefit from acquisitions and divestitures; 14) Ability to withstand business interruptions; 15) Breaches to our information technology systems; 16) Ability to keep pace with rapid technological changes; 17) Ability to protect our intellectual property; 18) Costs associated with environmental, health and safety regulations; 19) International trade disputes resulting in tariffs and our ability to mitigate tariffs; 20) Impact from climate change and related regulations; 21) Ability to avoid design or manufacturing defects; 22) Recognition of goodwill and long-lived asset impairment charges; 23) Ability to manage our debt levels and any restrictions thereunder; 24) Currency fluctuations; 25) Income tax rate fluctuations; 26) Judgments related to accounting for tax positions; 27) Adjustments to compensation expense for performance-based awards; 28) Timing and magnitude of costs associated with restructuring activities; and 29) Impact to interest expense from the replacement or modification of LIBOR.
For Methode Electronics, Inc.
Robert K. Cherry
Vice President, Investor Relations
rcherry@methode.com
708-457-4030
| METHODE ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in millions, except per-share data) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| January 29, 2022 | January 30, 2021 | January 29, 2022 | January 30, 2021 | |||||||||||||
| Net sales | $ | 291.6 | $ | 295.3 | $ | 874.9 | $ | 787.0 | ||||||||
| Cost of products sold | 222.5 | 222.7 | 664.9 | 588.5 | ||||||||||||
| Gross profit | 69.1 | 72.6 | 210.0 | 198.5 | ||||||||||||
| Selling and administrative expenses | 34.5 | 32.4 | 98.5 | 89.8 | ||||||||||||
| Amortization of intangibles | 4.8 | 4.8 | 14.4 | 14.5 | ||||||||||||
| Income from operations | 29.8 | 35.4 | 97.1 | 94.2 | ||||||||||||
| Interest expense, net | 0.7 | 1.3 | 2.9 | 4.3 | ||||||||||||
| Other income, net | (4.4 | ) | (2.4 | ) | (7.1 | ) | (8.4 | ) | ||||||||
| Income before income taxes | 33.5 | 36.5 | 101.3 | 98.3 | ||||||||||||
| Income tax expense | 4.1 | 4.6 | 15.3 | 7.1 | ||||||||||||
| Net income | $ | 29.4 | $ | 31.9 | $ | 86.0 | $ | 91.2 | ||||||||
| Basic and diluted income per share: | ||||||||||||||||
| Basic | $ | 0.80 | $ | 0.84 | $ | 2.30 | $ | 2.40 | ||||||||
| Diluted | $ | 0.78 | $ | 0.83 | $ | 2.26 | $ | 2.39 | ||||||||
| Cash dividends per share | $ | 0.14 | $ | 0.11 | $ | 0.42 | $ | 0.33 | ||||||||
| METHODE ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in millions, except share and per-share data) | ||||||||
| January 29, 2022 | May 1, 2021 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 153.1 | $ | 233.2 | ||||
| Accounts receivable, net | 285.2 | 282.5 | ||||||
| Inventories | 167.0 | 124.2 | ||||||
| Income taxes receivable | 14.2 | 11.5 | ||||||
| Prepaid expenses and other current assets | 20.9 | 22.6 | ||||||
| Total current assets | 640.4 | 674.0 | ||||||
| Long-term assets: | ||||||||
| Property, plant and equipment, net | 200.6 | 204.0 | ||||||
| Goodwill | 234.0 | 235.6 | ||||||
| Other intangible assets, net | 213.3 | 229.4 | ||||||
| Operating lease right-of-use assets, net | 18.0 | 22.3 | ||||||
| Deferred tax assets | 38.8 | 41.2 | ||||||
| Pre-production costs | 28.7 | 25.0 | ||||||
| Other long-term assets | 37.5 | 35.5 | ||||||
| Total long-term assets | 770.9 | 793.0 | ||||||
| Total assets | $ | 1,411.3 | $ | 1,467.0 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 115.9 | $ | 122.9 | ||||
| Accrued employee liabilities | 26.6 | 33.5 | ||||||
| Other accrued liabilities | 24.7 | 25.0 | ||||||
| Short-term operating lease liabilities | 6.1 | 6.1 | ||||||
| Short-term debt | 13.2 | 14.9 | ||||||
| Income tax payable | 17.2 | 20.3 | ||||||
| Total current liabilities | 203.7 | 222.7 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt | 202.4 | 225.2 | ||||||
| Long-term operating lease liabilities | 12.9 | 17.5 | ||||||
| Long-term income taxes payable | 22.1 | 24.8 | ||||||
| Other long-term liabilities | 16.4 | 20.5 | ||||||
| Deferred tax liabilities | 37.4 | 38.3 | ||||||
| Total long-term liabilities | 291.2 | 326.3 | ||||||
| Total liabilities | 494.9 | 549.0 | ||||||
| Shareholders' equity: | ||||||||
| Common stock, | 19.2 | 19.8 | ||||||
| Additional paid-in capital | 166.4 | 157.6 | ||||||
| Accumulated other comprehensive (loss) income | (10.6 | ) | 6.1 | |||||
| Treasury stock, 1,346,624 shares as of January 29, 2022 and May 1, 2021 | (11.5 | ) | (11.5 | ) | ||||
| Retained earnings | 752.9 | 746.0 | ||||||
| Total shareholders' equity | 916.4 | 918.0 | ||||||
| Total liabilities and shareholders' equity | $ | 1,411.3 | $ | 1,467.0 | ||||
| METHODE ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) | ||||||||
| Nine Months Ended | ||||||||
| January 29, 2022 | January 30, 2021 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 86.0 | $ | 91.2 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 39.6 | 38.2 | ||||||
| Stock-based compensation expense | 9.2 | 4.3 | ||||||
| Change in cash surrender value of life insurance | (0.3 | ) | (1.4 | ) | ||||
| Amortization of debt issuance costs | 0.5 | 0.5 | ||||||
| Gain on sale of property, plant and equipment | (0.4 | ) | — | |||||
| Impairment of long-lived assets | 3.1 | 0.6 | ||||||
| Change in deferred income taxes | (0.5 | ) | (5.9 | ) | ||||
| Other | 0.3 | 1.0 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (7.6 | ) | (77.1 | ) | ||||
| Inventories | (45.1 | ) | 11.8 | |||||
| Prepaid expenses and other assets | (9.3 | ) | 21.3 | |||||
| Accounts payable | (2.1 | ) | 43.5 | |||||
| Other liabilities | (16.6 | ) | 15.8 | |||||
| Net cash provided by operating activities | 56.8 | 143.8 | ||||||
| Investing activities: | ||||||||
| Purchases of property, plant and equipment | (29.6 | ) | (20.1 | ) | ||||
| Sale of property, plant and equipment | 0.6 | 0.1 | ||||||
| Net cash used in investing activities | (29.0 | ) | (20.0 | ) | ||||
| Financing activities: | ||||||||
| Taxes paid related to net share settlement of equity awards | (0.3 | ) | (3.9 | ) | ||||
| Repayments of finance leases | (0.5 | ) | (0.4 | ) | ||||
| Proceeds from exercise of stock options | 0.5 | 0.1 | ||||||
| Purchases of common stock | (63.9 | ) | — | |||||
| Cash dividends | (15.4 | ) | (13.2 | ) | ||||
| Proceeds from borrowings | — | 1.5 | ||||||
| Repayments of borrowings | (24.2 | ) | (111.9 | ) | ||||
| Net cash used in financing activities | (103.8 | ) | (127.8 | ) | ||||
| Effect of foreign currency exchange rate changes on cash and cash equivalents | (4.1 | ) | 5.4 | |||||
| (Decrease) increase in cash and cash equivalents | (80.1 | ) | 1.4 | |||||
| Cash and cash equivalents at beginning of the period | 233.2 | 217.3 | ||||||
| Cash and cash equivalents at end of the period | $ | 153.1 | $ | 218.7 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 2.7 | $ | 4.3 | ||||
| Income taxes, net of refunds | $ | 25.6 | $ | 9.6 | ||||
| Operating lease obligations | $ | 6.6 | $ | 6.7 | ||||
| METHODE ELECTRONICS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES (Unaudited) (in millions) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| January 29, 2022 | January 30, 2021 | January 29, 2022 | January 30, 2021 | |||||||||||||
| EBITDA: | ||||||||||||||||
| Net income | $ | 29.4 | $ | 31.9 | $ | 86.0 | $ | 91.2 | ||||||||
| Income tax expense | 4.1 | 4.6 | 15.3 | 7.1 | ||||||||||||
| Interest expense, net | 0.7 | 1.3 | 2.9 | 4.3 | ||||||||||||
| Amortization of intangibles | 4.8 | 4.8 | 14.4 | 14.5 | ||||||||||||
| Depreciation | 8.9 | 8.7 | 25.2 | 23.7 | ||||||||||||
| EBITDA | $ | 47.9 | $ | 51.3 | $ | 143.8 | $ | 140.8 | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| January 29, 2022 | January 30, 2021 | January 29, 2022 | January 30, 2021 | |||||||||||||
| Free Cash Flow: | ||||||||||||||||
| Net cash provided by operating activities | $ | 20.1 | $ | 87.1 | $ | 56.8 | $ | 143.8 | ||||||||
| Purchases of property, plant and equipment | (8.3 | ) | (4.9 | ) | (29.6 | ) | (20.1 | ) | ||||||||
| Free cash flow | $ | 11.8 | $ | 82.2 | $ | 27.2 | $ | 123.7 | ||||||||
| January 29, 2022 | May 1, 2021 | |||||||
| Net Debt: | ||||||||
| Short-term debt | $ | 13.2 | $ | 14.9 | ||||
| Long-term debt | 202.4 | 225.2 | ||||||
| Total debt | 215.6 | 240.1 | ||||||
| Less: cash and cash equivalents | (153.1 | ) | (233.2 | ) | ||||
| Net debt | $ | 62.5 | $ | 6.9 | ||||
FAQ
What were Methode Electronics' Q3 2022 earnings per share (EPS)?
How much did Methode spend on share buybacks in Q3 2022?
What is Methode Electronics' updated full-year sales guidance for fiscal 2022?
What percentage of net sales did electric and hybrid vehicle applications account for in Q3 2022?
What were the main factors affecting Methode's Q3 2022 net sales?
