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Methode Electronics (MEI)
Q1 2012 Earnings Call
September 01, 2011 11:00 am ET
Douglas Koman - Chief Financial Officer, Principal Accounting Officer and Vice President of Corporate Finance
Donald Duda - Chief Executive Officer, President and Director
Jeremy Hellman - Singular Research
David Leiker - Robert W. Baird & Co. Incorporated
Previous Statements by MEI
» Methode Electronics' CEO Discusses Q4 2011 Results - Earnings Call Transcript
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» Methode Electronics CEO Discusses F2Q2011 Results – Earnings Call Transcript
It is now my pleasure to introduce your host, Don Duda, President and CEO of Methode Electronics. Thank you. Mr. Duda, you may begin.
Thank you, Christine, and good morning, everyone. Thank you for joining us today for our fiscal 2012 first quarter financial results conference call. I am joined today by Doug Koman, Chief Financial Officer; and Ron Tsoumas, Controller. Both Doug and I have comments and afterwards, we will be pleased to take your questions.
Our 2 business segments have showed year-over-year higher sales in fourth quarter of 2011, namely Automotive and Power Products, continue to experience revenue improvement in the first quarter of fiscal 2012. These results reflect the impact of our new product introductions and higher market penetration. On a consolidated basis, net sales grew nearly 12% to $111 million, driven by organic growth in our North American and Asian Automotive businesses, improved safety rating remote control sales in both Europe and Asia and increased power product demand in North America as well as Asia. We continue to rebuild Methode's revenue from a 6-year low of $378 million in fiscal 2010 despite the reduction of legacy Automotive products and the unplanned loss of the Delphi business.
On the earnings front, we posted net income of $1.5 million or $0.04 per share compared to $4.1 million or $0.11 per share in the first quarter of fiscal 2011. As we detailed in the press release this morning, there were a number of items which negatively affected our net income, Doug will address each of these in more details in a few minutes. However, I'd like to discuss the 2 major items that have impacted our results. First, costs related to the vendor production delivery issues, as well as cost related to the design, development and launch of 2 large Automotive programs; and secondly, the new product development expenses in our Power Products segment. In total, these costs lowered our first quarter net income by approximately $2.4 million or $0.06 per share. Let me address these items.
As we announced in our release this morning, we intend to acquire an injection molding and painting operation. This acquisition will be a key step in mitigating the vendor production and delivery issues. As we discussed last quarter, the vertical integration of this critical process is expected to reduce costs, improve quality and mitigate certain supply risks experienced during the past few quarters. We intend to close the acquisition in September and complete the integration of the operation by the end of fiscal 2012.
That being said, we anticipate the vendor production and delivery issues will impact net income by approximately $2 million for the remainder of fiscal 2012. The $1.2 million costs related to the design, development and launch of 2 large Automotive programs are for the additional T-76 business in North America, which will launch in the second half of this fiscal year and represents about half of the cost and for the General Motors center console program, which will launch in the fourth quarter of fiscal 2013 and represent the other half of the expense in the quarter. We anticipate the design, development and launch costs for these Automotive programs will be approximately $1.8 million for the balance of fiscal 2012.