Methode reported first quarter fiscal year 2008 net sales of $125.0 million and net income of $8.3 million, or $0.22 per share. This compares with net sales of $103.6 million and net income of $4.4 million, or $0.12 per share, in the first quarter fiscal year 2007. Methode's fiscal 2008 first quarter sales increased 20.7 percent over the fiscal 2007 first quarter. This increase is primarily due to sales from the TouchSensor business unit, which was acquired in March 2007, and higher Automotive segment sales from Europe and China operations that were partially offset by decreased automotive sales from U.S. operations.
Methode's fiscal 2008 first quarter net income increased $3.9 million or 88.6 percent compared to the fiscal 2007 first quarter. The increase is attributable to TouchSensor sales and generally higher sales with lower cost of products sold, partially offset by an increase in selling and administrative expense. Additionally, the effective tax rate decreased to 25.3 percent in the fiscal 2008 first quarter compared to 37.3 percent in the fiscal 2007 first quarter.
As a percentage of net sales, cost of products sold was 78.6 percent in the first quarter of fiscal 2008 compared to 81.1 percent in the first quarter of fiscal 2007. The improvement is primarily due to efficiencies gained from the transfer of operations from Scotland to Malta, which concluded in the fourth quarter of fiscal 2007. Additionally, operations in Shanghai have become more efficient and have benefited from increased sales covering relatively flat fixed costs.
As a percentage of net sales, selling and administrative expenses for the first quarter of fiscal 2008 decreased to 12.8 percent, compared to 13.3 percent in the first quarter of fiscal 2007. This decrease is primarily due to overall higher sales and efficiencies gained from the transfer of operations from Scotland to Malta.
For the first quarter of fiscal 2008, Methode's effective tax rate was 25.3 percent compared to 37.3 percent in the prior fiscal year's quarter. The rates for each of first quarter fiscal 2008 and 2007 reflect utilization of investment tax credits, the effect of lower tax rates on foreign earnings and higher earnings at those foreign subsidiaries. The effective rate for the first quarter of fiscal 2007 increased primarily due to the establishment of a valuation allowance for potentially non-deductible stock-based compensation.
On August 31, 2007, Methode acquired the assets of Value Engineered Products, Inc. (VEP). This acquisition is anticipated to be accretive to Methode's fiscal year 2008 earnings. Based in suburban Chicago, VEP is a thermal management solutions provider, manufacturing customized heat sinks and related products for high-powered applications. These components complement Methode's Power Distribution product offerings and, in some instances, are joined with its bus bars to aid thermal management of power systems. VEP's trailing twelve-months net sales were approximately $6.7 million.
Commenting on the acquisition, Mr. Donald W. Duda, President and Chief Executive Officer of Methode Electronics, said, "Bringing VEP onboard directly complements Methode's business plans, offering expected near- and long-term synergies. VEP's applications are already found in multiple markets including transportation and industrial, and offer Methode a new product portfolio from which to continue our expansion into Europe and Asia."
Methode reiterates its fiscal 2008 full-year guidance for sales to be between $455 million and $475 million and earnings per share between $0.65 and $0.75.
As previously announced, the Company will conduct a conference call today led by its President and Chief Executive Officer, Donald W. Duda, and Chief Financial Officer, Douglas A. Koman, at 10:00 a.m. Central Time on September 6, 2007. Methode invites you to listen to the webcast of this call by visiting the Company's website at http://www.methode.com and entering the "Investor Relations" page and then clicking on the "Webcast" icon. You may participate on the conference call by dialing 877-407-8031 for domestic and 201-689-8031 for international callers. For those who cannot listen to the live broadcast, a replay, as well as an MP3 download will be available shortly after the call. The call will be available for seven days and can be accessed by dialing 877-660-6853 for domestic and 201-612-7415 for international callers, both using the playback account number 286 and conference ID number 253077.
About Methode Electronics
Methode Electronics, Inc. (NASDAQ:METH) is a global manufacturer of component and subsystem devices with manufacturing, design and testing facilities in the United States, Malta, Mexico, United Kingdom, Germany, Czech Republic, China and Singapore. We design, manufacture and market devices employing electrical, electronic, wireless, sensing and optical technologies to control and convey signals through sensors, interconnections and controls. Our business is managed on a segment basis, with those segments being Automotive, Interconnect, Power Distribution and Other. Our components are in the primary end markets of the automobile, computer, information processing and networking equipment, voice and data communication systems, consumer electronics, appliances, aerospace vehicles and industrial equipment. Further information can be found at Methode's website at http://www.methode.com.