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Methode Electronics, Inc. (MEI)
F1Q2011 Earnings Call Transcript
September 2, 2010 11:00 am ET
Don Duda – President and CEO
Doug Koman – VP, Corporate Finance and CFO
David Leiker – Robert W. Baird
Jeremy Hellman – Divine Capital Markets
Gregory Macosko – Lord Abbett
Josh Brown [ph]
Previous Statements by MEI
» Methode Electronics Inc. F4Q10 (Qtr End 05/01/2010) Earnings Call Transcript
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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 statements 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 conference call involve the 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 limitations, the following, dependence on a small number of large customers, including two large automotive customers, dependence on the automotive appliance, computer and communications industries, seasonal and cyclical nature of some of our businesses, ability to compete effectively, customary risks related to conducting global operations, ability to keep pace with rapid technological changes, ability to avoid design or manufacturing defects, ability to protect our intellectual property, dependence on the availability and price of raw materials, ability to successfully benefit from acquisitions, currency fluctuations, unfavorable tax loss, the future trading price of our stock and the risks of owning real property.
It is now my pleasure to introduce your host, Don Duda, President and Chief Executive Officer for Methode Electronics. Mr. Duda, you may begin.
Thank you, Edward and good morning, everyone. Thank you for joining us today for our fiscal 2011 first quarter financial results conference call. I’m joined today by Doug Koman, Chief Financial Officer and Ron Tsoumas, Methode’s Controller. Both Doug and I have comments today and afterwards, we will be pleased to take your questions.
This morning, we released our first quarter financial results for fiscal 2011. I’m pleased to report that net sales and our earnings in the first quarter improved year-over-year from the first quarter of last year. In fiscal 2009 and 2010, we’ve restructured our operations, which lowered our breakeven point and refocused all our business segments on solution selling. Thus far in the fiscal 2011, we are seeing evidence of the business structure we put in place, is starting to show positive results.
Total sales in the first quarter were up over 9% from the first quarter of last year, despite the loss of the Delphi business, which represented $7.5 million in sales in the first quarter of last year. Additionally, total sales were up 3% sequentially versus the fourth quarter of fiscal 2010.
The momentum from the fourth quarter continued into the first quarter with market demand, particularly in our European and Asian Automotive Businesses at the high end of our expectations. Earnings for the first quarter of fiscal 2011 were $0.11 per share, compared to breakeven for the same period of last year as a result of various factors, including the absence of restructuring expenses and other items in the current period, which Doug will expand upon in his discussion.
Consolidated gross margins were down, both year-over-year and sequentially for a few reasons, versus I mentioned earlier, there was an absence of sales to Delphi, which was a higher margin business volume for us. Secondly, we had higher design in overhead costs in the company’s U.S. based Automotive and Powered product’s businesses, which are necessary to book and launch new programs.
Although, we believe we have successfully repositioned our North American businesses for a sustained growth and profitability. We may continue to incur similar and normally a higher cost associated with these efforts, until additional programs launch and offset these expenses. And third, decreased other income in the current period compared to last year relating to lower engineering design fees received in our European Automotive business.
Automotive segment sales were down 3.7% year-over-year, due mainly to the absence of Delphi revenues, which totaled $7.5 million in the first quarter of last year. If we take the Delphi sales out of last year’s first quarter, automotive sales actually improved over $5 million. Sequentially, automotive sales were up more than 3% over the fourth quarter of last year, again with our European and Asian operations demonstrating particular strength.
As we have said in previous conference calls, we expect the MyFord Touch Center Console Program will ramp in the third quarter of this year and total about $12 million for the fiscal year. We also expect the least time in business to continue to do well.
Although, our European Automotive segments performed well in the first quarter, we remain cautious about this market. Overall, we still expect automotive segment sales to be down for the year, mostly due to loss of sales from Delphi.
Automotive gross margins were down to the loss of – due to the loss of higher margin sales from Delphi, but also from our continued investment in our automotive business. Again, as we launched more programs, margins would improve. For competitor purposes, we still see about a month and half of Delphi in the second quarter or we will see about a month and half.