Impairment and Restructuring Charges Impact Fourth-Quarter and Full-Year Results

CHICAGO, IL -- (Marketwire) -- 07/02/09 -- Methode Electronics, Inc. (NYSE: MEI), a global designer and manufacturer of electro-mechanical devices, today announced operating results for the fiscal-year 2009 fourth quarter and year ended May 2, 2009. Due to the timing of the Company's fiscal calendar, the 12 months ended May 2, 2009, represent 52 weeks of results, while the 12 months ended May 3, 2008, represent 53 weeks of results.

Fourth-Quarter Fiscal Year 2009

Methode's fourth-quarter fiscal year 2009 net sales decreased $65.4 million, or 42.4 percent, to $89.0 million from $154.4 million in the fourth quarter of fiscal year 2008. Net income decreased $105.5 million to a loss of $92.6 million, or $2.50 per share, in the fourth quarter of fiscal year 2009 compared to income of $12.9 million, or $0.34 per share, in the same period of fiscal year 2008.

The decrease in net income in the fiscal-year 2009 fourth quarter is due to an impairment of goodwill and intangible assets charge of $61.7 million ($1.99 per share after tax), restructuring charges of $10.3 million ($0.41 per share after tax), and lower sales attributable to the continuing softness of the global economic environment, especially the effect on the North American automotive market, as compared to the fiscal-year 2008 fourth quarter, which had restructuring charges of $4.7 million ($0.08 per share after tax). Excluding the restructuring and impairment of goodwill and intangible assets charges, Methode's net loss was $3.6 million, or $0.10 per share, in the fourth-quarter fiscal year 2009 compared to net income of $15.7 million, or $0.42 per share, excluding restructuring charges, in the same period of fiscal year 2008.

Based on Methode's reduced market capitalization and general business declines in the last half of fiscal year 2009, the Company performed goodwill impairment tests in accordance with generally accepted accounting principles as of May 2, 2009. As a result, it was determined that the fair value of the net assets of certain reporting units was less than the carrying value. Therefore, a goodwill impairment charge was recorded for $45.1 million in the fourth quarter of fiscal year 2009. Also, in accordance with generally accepted accounting principles, the Company determined that certain identifiable intangible assets were impaired based on the Company's future estimates of the undiscounted cash flows, which resulted in an impairment charge of $16.6 million in the fourth quarter of fiscal year 2009.

In the fourth quarter of fiscal year 2009, Automotive segment net sales were negatively impacted by the continuing softness of the global economic environment, especially the effect on the North American automotive industry, and by negligible Chrysler sales volumes as compared to the prior period due to the Company's decision to exit the Chrysler business. The transfer of the Chrysler product was substantially completed during the second quarter of fiscal year 2009. Additionally, as a result of the Company's agreement with Ford Motor Company to transfer all production at Methode's Reynosa, Mexico, facility to another supplier, the Company's sales to Ford were further reduced in the fourth quarter of fiscal 2009. Methode expects to complete the transfer of this Ford business by August 2009.

In January 2008, Methode announced a restructuring of its U.S.-based automotive operations and the decision to discontinue producing certain legacy products in the Interconnect segment. In March 2009, Methode announced several additional restructuring actions to further reduce its exposure to the North American automotive industry, and to reduce costs by consolidating facilities and migrating manufacturing to lower cost regions. The Company expects to complete these restructuring activities by the end of the 2010 fiscal year and estimates that it will record pre-tax charges in fiscal year 2010 of between $9.2 million and $19.2 million.

Consolidated cost of products sold decreased $32.4 million, or 28.1 percent, to $82.7 million in the fiscal-year 2009 fourth quarter, compared to $115.1 million in the same period of fiscal year 2008. The decrease is due to lower sales volumes. Cost of products sold as a percentage of sales was 92.9 percent and 74.6 percent in the fourth-quarter fiscal years 2009 and 2008, respectively. The increase in cost of products sold as a percentage of net sales in the current period is the result of manufacturing inefficiencies caused by the significant drop in sales experienced in the last half of fiscal year 2009.

Selling and administrative expenses decreased $3.0 million, or 18.8 percent, to $13.0 million for the fourth-quarter fiscal year 2009, compared to $16.0 million in the prior-year period. The decrease relates to lower performance-based compensation expense and commission expense as a result of lower sales and earnings. Due to the significant drop in sales experienced in the last half of fiscal year 2009, selling and administrative expenses as a percentage of sales increased to 14.6 percent in the fourth-quarter fiscal year 2009, compared to 10.4 percent in the same period of fiscal year 2008.

Fiscal Year 2009 Results

For the year ended May 2, 2009, net sales decreased $125.5 million, or 22.8 percent, to $425.6 million from $551.1 million for the year ended May 3, 2008. Net income decreased $152.3 million to a loss of $112.5 million, or $3.05 per share, in fiscal year 2009 compared to income of $39.8 million, or $1.06 per share, in fiscal year 2008.

The decrease in net income is due mainly to an impairment of goodwill and intangible assets charge of $94.4 million ($2.54 per share after tax), restructuring charges of $25.3 million ($0.68 per share after tax), and lower sales attributable to the softening of the global economic environment in fiscal year 2009. Fiscal year 2008 results included restructuring charges of $5.2 million ($0.08 per share after tax). Excluding the restructuring and impairment of goodwill and intangible asset charges, Methode achieved net income of $6.4 million, or $0.17 per share, in fiscal year 2009 compared to $42.9 million, or $1.14 per share, excluding restructuring charges, in fiscal year 2008.

In fiscal year 2009, net sales were negatively impacted by the softening of the global economic environment, especially the effect on the North American automotive industry, and by planned lower Chrysler and Ford sales volumes in the Automotive segment.

Consolidated cost of products sold decreased $72.0 million, or 16.8 percent, to $356.4 million in fiscal year 2009, compared to $428.4 million in fiscal year 2008. The decrease is due to lower sales volumes. Cost of products sold as a percentage of sales was 83.7 percent and 77.7 percent in fiscal years 2009 and 2008, respectively.