EX-99.1 2 bairdconference.htm BAIRD PRESENTATION
Investor Presentation Baird Industrial Conference November 2011
Safe Harbor This presentation 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 presentation 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) dependence on a small number of large customers, including two large automotive customers; (2) dependence on the automotive, appliance, computer and communications industries; (3) further downturns in the automotive industry or the bankruptcy of certain automotive customers; (4) automotive program launches may be delayed or certain makes and models of automobiles and trucks may have lower than anticipated volumes; (5) ability to compete effectively; (6) customary risks related to conducting global operations; (7) dependence on the availability and price of raw materials; (8) dependence on our supply chain; (9) ability to keep pace with rapid technological changes; (10) ability to avoid design or manufacturing defects; (11) ability to protect our intellectual property; (12) the mix of products sold and the ability to withstand price pressure; (13) the usage of a significant amount of our cash and resources to launch new North American automotive programs and the ability to design, develop and launch such programs at or below quoted costs; (14) location of a significant amount of cash outside of the U.S.; (15) currency fluctuations; (16) ability to successfully benefit from acquisitions and divestitures; (17) ability to withstand business interruptions; (18) changes in tax rates or the adoption of unfavorable tax laws; (19) ability to implement and profit from newly acquired technology; and (20) the future trading price of our stock. 2
Methode Is …
Three World Class Solution Groups Au tomoti ve • Integrated center stack modules • Electronic and electromechanical devices • Customized sensors In te rc onnec t • Field-effect technology and user- interface panels • Copper and fiber optic interconnect solutions • Conductive polymer and thick film inks • Safety radio remote controls P o w er P roduct s • High current-carrying bus devices • Eetrex – Power electronics for chargers, inverters and battery management systems for electric vehicles and stationary storage systems • Flexible cabling systems • Thermal management and high current interconnects 4
Fiscal 2011 Sales By Manufacturing Location Fiscal 2011 Sales By Reporting Segment 5 Diverse Business With Global Operations Automotive 52.8% Interconnect 32.4% Power 11.8% Other 3.0% North America 40.2% Europe 34.3% Asia 25.5%
Investment Appeals > Differentiate our customers’ products to drive higher margins > Through recent restructuring, repositioned global manufacturing footprint to lower cost countries > Capitalizing on fundamental changes in large, growth markets (+$14 billion in total available markets) > Global engineering and manufacturing capabilities with 200+ engineers in 14 design centers worldwide and 3 primary manufacturing campuses > “World Class” automotive pedigree ensures strong design, engineering and manufacturing capabilities > Projected revenue stream of booked business represents approximately 16% compound annual growth (FY 2012-2015) > Strong balance sheet; annual dividend of 28¢ per share > Financial flexibility to pursue strategic acquisitions 6
Methode Is Poised For Improved Performance
$373 $428 $457 $510 $630 $709 $0 $100 $200 $300 $400 $500 $600 $700 $800 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 8 Rebuilding Methode’s Revenue Stream Methode’s Historical High Sales of $555 in Fiscal 2008 *All numbers millions of dollars > Sales projections as of November 2011 > Projections are approximate and may vary 15% to 20% based on economic conditions, customer demands, and other factors > Based on current J.D. Powers and Associates automotive volume data and other sources > Projections for FY 12 and FY 13 represent the midpoint of guidance range Approximate 16% CAGR
9 Rebuilding Methode’s Revenue Stream > Major Fiscal 2013 Anticipated Revenues • Approximately $15m from the second award of the MyFord Touch center console (part of $40m annualized award) • Approximately $9m from the GM integrated center stack (part of approximate $100m annualized award) • Approximately $14m from Nissan-Renault busbars for electric vehicles • Approximately $15m from recent acquisition of decorative molder > Major Fiscal 2014 Anticipated Revenues • Approximately $100m from the GM integrated center stack • Additional $4m from Nissan-Renault busbars for electric vehicles • Approximately $8m from Volkswagen ergonomic switches • Approximately $8m from premium vehicle ergonomic switches (Jaguar, McLaren)
Long-Term Objectives/Strategy > Use Methode's technology toolbox to design and engineer custom products that will drive margin expansion > Drive sustainable, profitable growth by continuing to provide customers with solutions that create a competitive advantage in their market > Invest in Methode’s future by maintaining infrastructure necessary to book and launch new programs to drive organic growth > Generate new platforms for growth while improving profitability > Seek opportunistic acquisitions, investments, partnerships and/or license arrangements 10
Automotive
Critical Solutions to the Automotive Industry 12
Advanced Technology Brings Innovation to Automotive 13 > Field Effect > Touchscreen (Harsh/Severe environment) > Integrated Back-Lighting > Eddy Current > Hall Effect > Magneto-elastic > Multi-spectral Imaging** > Conductive printable inks > Thick film inks > Haptics** **Strategic partner
> Expanded TouchSensor’s field-effect technology from white goods to automotive > Innovated automotive switches • From simple commodities to custom engineered modular solutions • From strictly competing on price to winning business based on ability to differentiate customer’s product > Improved Reliability • Backed by over 200 million field-effect touch points in use • No moving parts to damage or wear > Differentiation • System solutions approach produces unique, brand-differentiating User Interface designs with common cross-platform architecture, reducing development time and manufacturing costs Field Effect Technology Enables Innovation and Differentiation From To 14
TouchSensor Differentiates Center Stacks > Touch sensitive technology allows driver to engage and operate center console and climate controls with the touch of a finger instead of traditional buttons and switches > Featuring patented solid-state, field- effect technology > Uniquely illuminated volume and fan controls > Ergonomically designed surface > Methode provides entire center console assembly, which includes solid state touch points, (excluding touchscreen) 15 Use the touch-sensitive Audio and Climate controls instead of the touch screen, if desired: – Touch the words or icons to activate – Slide a finger along the top of the light bar for volume and fan speed
GM Center Stack Award > “Next generation” Integrated Center Stack program for multiple GM vehicle platforms > Center stacks to be featured on certain vehicles starting in model year 2013 > Expected to have a five-year program life > Production will begin during Methode’s fiscal year 2013 fourth quarter > Expected to represent over $100 million in revenue per year starting in fiscal year 2014 16
> Monterrey, Mexico, injection molding and painting business from Nypro Inc. > Vertically integrate intricate paint process for automotive center consoles for Ford and GM programs • Enhance quality • Mitigate supply risk • Improve gross margins > State-of-the-art facility with • 52 injection mold machines • 3 decorative paint lines • 230 experienced employees > Acquisition will be $1.3 - $2.0m dilutive to earnings during 12 months following acquisition > Sales of $15m during remainder of Fiscal 2012 Acquisition And Vertical Integration Provides Cost Savings 17
> Automotive Lead Frame • Integrated power and signal distribution backbone for a transmission controller • Highly complex insert molded assembly that reduces electrical connections required with traditional design • Improves system reliability and reduces cost • Three awards total $40 million in average annual revenue at full launch Process Technology Enables Transmission Solution 18
Groundbreaking Technology 19 > Patented magneto-elastic technology > Utilizes magnetic properties of the material to measure various process parameters > Potential uses include active measurement of • Torque • Speed • Linear position • Load • Force > Rugged, reliable, and designed to operate under harsh environmental conditions
> Provide top tier automotive OEM with custom sensor for measurement of clutch plate position in fuel-efficient, dual clutch, six-speed transmission • Measures linear position with resolution nearly ten times current, commercially viable technology • Sensor designed to withstand harsh environment of transmission • Operates at temperatures in excess of 180 degrees Celsius (356 degrees Fahrenheit) • Represents first major deployment of magneto-elastic technology in automotive • Culmination of over five years of development efforts > Program Total (North American OEM Award + Chinese JV Award) : Approximately $1.5 million in revenue in Fiscal 2014, ramping to $20 million in Fiscal 2016 Magneto-Elastic Automotive Awards 20
Torque-Sensing Awards 21 > Bosch eBike • Traditional pedal bikes with electric motor that provides pedal assist • Magneto-elastic sensor determines how hard the rider is pedaling, and instantly adjusts the amount of support the motor needs to deliver • Approximately $2 million in revenue in Fiscal 2012 • Award demonstrates viability of technology outside of automotive This innovative high-tech drive doesn’t relieve you of the job of pedaling, but it does give you a leg up. Depending on the support level selected, the electronics adapt flexibly to what the cyclist is doing and instantly adjust the amount of support the motor has to deliver.
Magneto-Elastic Automotive Opportunities > Referred to in recent Ford press release on advanced technologies • Technology used on new fuel-efficient powertrains, featuring 8-speed automatic transmission • Methode's torque sensor will allow significant advancement in powertrain controls, improves shift quality and reliability, enable faster selection of proper gear • http://corporate.ford.com/news-center/press-releases-detail/pr-ford-adds-new- fuelsaving-10liter-34736 > Recent article on PopularMechanics.com • “In this era of dual-clutch transmissions, this 8-speed…packs a technology wallop, with one particularly impressive feature: the real-time engine-torque sensor.” • “…it could deliver better performance and fuel economy for Ford's small cars of the future.” • Refers to torque sensor as “the holy grail of transmission control.” • The Clever New Transmission That Could Improve Performance in Ford's Small Cars - Popular Mechanics 22
Interconnect
Interconnect Encompasses User Interface Technology 24 > Expanded presence in User-Interface (UI) market through acquisitions of • TouchSensor in March 2007 – 15 patents and solid platform into new markets • Hetronic in October 2008 - application specific radio remote controls, path to market to industrial customers > Technology toolbox • Field Effect • Magneto-elastic • Multi-spectral Imaging** • Conductive printable inks • Thick film inks • Eddy Current • Hall Effect > User Interface Solutions • Interface panels • Remote controls • Touchscreens • GUI (Graphic User Interface) Software • Rotary Haptic controls • Field effect touch cell, keypad • Biometric Identification **Strategic partner
TouchSensor’s Field Effect Technology Enabling Differentiation > TouchSensor technology used on 70% of North American kitchen appliances with solid-state touch interfaces > User interface solutions for medical, industrial and vending applications will make devices easier to use and more reliable 25 Whirlpool KitchenAid Ice/Water Dispenser Jenn-Air Wall oven Life Fitness Treadmill Whirlpool Washer and Dryer KitchenAid built-in side-by-side refrigerator Kenmore dishwasher user-interface
Hetronic’s World Class Safety Solutions > Hetronic safety radio remote controls are used on five continents controlling multi-million dollar equipment > Touch and biometric technologies are enabling safer and more efficient operations Hetronic Locomotive Radio Remote Control Hetronic Radio Remote Control For Miller Wireless Welding Controls 26
Power Solutions
Methode’s Power Solutions 28 Power Rail Power Connectors and Contacts Thermal Management Bus Bar Power Cables and FusionLug High Precision Machined Bus Bar Power PCBs Powder Coated Bus Bar Power PCBs Power PCBs Power Connector Power Cabling Thermal Management Laminated Bus Bar
> Technology Toolbox • Heat Sinks • Tribotek™ Connectors • Heavy Copper PCBs** • Laminated Busbars • Powerflex ™cable • FusionLug™ • Sonicrimp™ Power Solutions Possibilities 29 **Strategic partner > Design and manufacture innovative products for military, aerospace, industrial and automotive markets > Collaborate with customers to develop robust systems that meet stringent electrical and thermal performance, weight and cost needs > Fortune 100 customer base > Expanding global footprint
Growth in Hybrids Creates Opportunities For Power Solutions > Transportation Segment • Electric and Hybrid vehicles require power distribution components • Powerflex™, FusionLug® and bus bars are designed into electric vehicle battery and charging systems > Investment in • Developer of chargers, inverters, and battery management systems for all electric, hybrid and plug-in hybrid electric vehicles (PHEV) • Methode has 90% ownership interest 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 2010 2015 2020 2030 Hybrid And Electric Vehicle Sales Percent Of Total Vehicle Sales* * Source: Deutsche Bank 30
> On-board integrated power unit for pure electric commercial truck • 10 kW charger, auxiliary 14-volt power supply and associated vehicle interface controller • Based on Eetrex’s power electronics technology and know-how and Methode’s automotive engineering and design for manufacturing expertise, the Eetrex-Methode team worked together from concept to production readiness • Production award approximately $0.5 million in Fiscal 2012 ramping to $10 million in Fiscal 2014 Power Solutions Technologies Enable “Green” Awards 31
Financial Performance
33 Recent Financial History > Remained operating cash flow positive through recession and restructuring > 35 years of uninterrupted dividends > $57.4 million net cash (Q1 Fiscal 2012) * Millions + Earnings have been adjusted to eliminate restructuring and impairment charges and other one-time charges and credits Fiscal Period 2007 2008 2009 2010 2011 Q1 2012 Total Revenue* $448.4 $551.1 $425.6 $373.1 $428.2 $110.8 Gross Margin 20.1% 22.6% 17.0% 21.4% 20.8% 18.1% EPS (GAAP) $0.72 $1.07 $(3.05) $0.37 $0.27 $0.04 EPS (Non-GAAP)+ $0.77 $0.82 $0.17 $0.48 $0.16 N/A Dividend Paid $0.20 $0.20 $0.26 $0.28 $0.28 $0.07
34 Fiscal 2012 and 2013 Guidance > Fiscal 2012 • Sales of $450 - $465m • EPS of $0.13 - $0.21 • Q4 expected to be strongest quarter • Vendor production and delivery issues of $2.5 - $3.0m • Design, development, launch costs for automotive programs of $3.0m • Development costs for on-board integrated power unit of $2.0m • Sales from acquisition of former Nypro business of $15m (dilutive) • Significantly higher effective tax rate > Fiscal 2013 • Sales of $495 - $525m • EPS of $0.52 - $0.67 • Vertical integration of paint and laser etch capabilities completed • Design, development, launch costs for automotive programs of $3.0m • Development costs for on-board integrated power unit of $2.0m • Sales from acquisition of former Nypro business dilutive through first quarter only • Significantly lower effective tax rate
35 Rebuilding Methode’s Margins Restructuring Post - Restructuring Fiscal 2009 Fiscal 2010 Post- Restructuring Target Fiscal 2011 Fiscal 2014 Target Auto 16.5% 18.3% High teens to low 20% 17.6% Low to mid 20% Interconnect 24.0% 28.7% High 20% 30.3% Low to mid 30% Power 12.9% 26.0% Mid to high 20% 21.0%* High 20% Gross Margin * Includes Eetrex development costs of $0.5 million
Conclusion
Methode Is Positioned For Growth > Projected revenue stream of booked business represents approximately 16% compound annual growth (FY 2012-2015) > Expanding business with current customers > Global restructuring actions have lowered MEI’s revenue break-even point > Proprietary engineered solutions reduce risk and volatility > Global manufacturing footprint differentiates and aligns us with global customers > Conservative balance sheet and positive cash flow > Seeking opportunistic acquisitions 37