This presentation discusses Methode's forward-looking statements and the various risks and uncertainties that could affect the company's actual results. It notes 21 specific factors that could cause actual results to differ from expectations. The document also provides an overview of Methode's business strategies and growth opportunities.
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Methode Presentation
1.
2. 2
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) investment in
programs prior to the recognition of revenue; (4) ability to withstand price pressure;
(5) timing, volume, quality and cost of new program launches; (6) dependence on
our supply chain; (7) dependence on the availability and price of raw materials; (8)
customary risks related to conducting global operations; (9) currency fluctuations;
(10) income tax rate fluctuations; (11) fluctuations in our gross margins; (12) the
recognition of goodwill impairment charges; (13) ability to keep pace with rapid
technological changes; (14) location of a significant amount of cash outside of the
U.S.; (15) ability to successfully benefit from acquisitions and divestitures; (16)
ability to avoid design or manufacturing defects; (17) ability to protect our intellectual
property; (18) ability to compete effectively; (19) ability to withstand business
interruptions; (20) a breach of our information technology systems; and (21) costs
and expenses due to regulations regarding conflict minerals.
4. 4
Investment Appeals
• Portfolio of products and solutions in several growing end
markets
• Opportunities for expansion into additional end markets
• Global engineering, design and manufacturing
• Unique patented technologies – strong product development
heritage
• Seasoned management team with a track record of growing
revenue and earnings
• Strong balance sheet with sufficient liquidity to fund growth
organically and through acquisition
• Targeting 5-year compounded EBITDA growth rate of 9-10%
• Share repurchase plan up to $100 million and quarterly
dividend of $0.09
5. 5
Core Strategy
Design and engineer products that incorporate
Methode’s broad range of field-proven
technologies and utilize our global
manufacturing capabilities to deliver unique
solutions that provide genuine value for our
customers and higher margins for our
shareholders.
6. 6
Portfolio of Strong, Global Businesses
Auto-
motive
71%
Other
1%
Interface
18%
Power
Products
10%
Segment Sales
North
America
57%Europe
22%
Asia
18%
ROW
3%
Manufacturing Location Sales
FY15 Revenue of $881m
7. 7
Field-Proven
Technologies
Competitive Advantages
Vertical
Integration
Global
Manufacturing
Footprint
Seasoned
Launch and
Design Teams
• Provide innovative solutions for our customers and
competitive advantage to Methode
• Over 290 patents
• Provide innovative solutions for our customers and
competitive advantage to Methode
• Over 290 patents
• Provides continuous improvement of manufacturing
systems
• Reduces reliance on suppliers
• Demonstrated improvement in quality
• Provides continuous improvement of manufacturing
systems
• Reduces reliance on suppliers
• Demonstrated improvement in quality
• Regional design and engineering capabilities
• 3 primary manufacturing campuses
• Lean and continuous improvement philosophy
• Identical systems used globally
• Successful launch of large programs for General
Motors, Ford, Whirlpool and others
• Low defective parts per million
• High on-time delivery
• Utilizes Methode’s proven manufacturing system
• Successful launch of large programs for General
Motors, Ford, Whirlpool and others
• Low defective parts per million
• High on-time delivery
• Utilizes Methode’s proven manufacturing system
10. 10
Fiscal 2015
Strong Financial Results
• Sales, income from operations and EPS highest in Company’s
history
• Consolidated gross margin improved 450 basis points over
FY14
• Operating margin increased to 14% from 9.7% in FY14*
• Income from operations grew 63.7% to $123.3m*
• EPS of $2.44 compared to $1.62 in FY14*
* See Website for Non-GAAP
reconciliation
11. 11
Fiscal 2016 Outlook
Fiscal 2016
• Guidance – Expect 2nd best year in company history
Sales ─ $830-$865m
Operating income ─ $108-$119m
EPS ─ $2.07-$2.22
Operating margin ─ 13%-13.8%
• Sales and income expected to be lower year over year due to
Ford center console program going end of life
Price concessions in Automotive
Reduced appliance sales
Lower Big Data product sales in Power Products
Sale of Trace Laboratories
• Strong balance sheet with ~ $265M in net cash and credit
availability+
• FY16 free cash flow estimate of $80M-$90M
+ As of August 1, 2015
12. 12
Automotive Solutions
Integrated Center
Console
54%
Other
1%
Hidden Switches
14%
Ergonomic
Switches
16%
Transmission
9%
Steering Angle
Sensor
6%
FY15 Revenue of $628m
GM Yukon Integrated
Center Console
Transmission Lead Frame
Transmission Sensor
FCA Floor Console
Multi-Media Interface
McLaren ICP
13. 13
Integrated Center Console
Automotive Milestones
• Ford - 2011-2015 MKX, Edge, Explorer
and 2013-2017 Taurus, Flex, MKS, MKT
• General Motors - 2014-2019 Tahoe,
Yukon, Silverado, Sierra, Suburban,
Yukon XL and 2015-2021 Canyon,
Colorado
• Renault – Launching FY16
• General Motors - 2 programs launching
FY17 and 1 launching in FY18
• Fiat - Launching FY18
• Aston Martin - Launching FY17
• North American OEM - next generation
of existing program with this customer
Transmission Solutions
• Lead Frame
Integrated power and signal
distribution backbone for
transmission controller
Customers - General Motors, Ford,
Volkswagen
• Clutch Plate Position Sensor
First deployment of patented
Magneto-elastic technology in
transmission
Deployed in new generation of fuel
efficient, dual-clutch transmissions
14. 14
Torque Sensor for Active
Role Stabilization
Automotive Milestones
• Schaeffler/BMW selected
Methode’s torque sensor to
measure “roll” in vehicles during
cornering
• Replaces existing hydraulic
systems to give better vehicle
handling, greener
• Precision sensor designed for
safety applications
• Schaeffler plans to introduce to
other customers
• Estimated award life of 10 years
• Initial launch on BMW 7-series
Hidden and Ergonomic
Switches
• Hidden switch global market share
of 18%
• Hidden switch European Union
market share of 35%
• Fully automated production
• Vertically integrated plants
Molding
Decorative finishes
Stamping
• ~40 million switches produced
annually
• Launched the first volumes of the
Integrated Tail gate module
16. 16
Consumer Touch Panels
Interface Milestones
• TouchSensor’s user interfaces found on over 30% of
commercial/industrial solid-state touch interfaces in North America
• Integrate touch, LED’s, displays and decorative fascia into one sub-
assembly
• Discrete key designs as well as high-resolution LCD touchscreens
• Found on the following brands
17. 17
Interface Milestones
Industrial User Interfaces
• Radio Remote Control Solutions
• Custom engineered control solutions for industrial machinery and
equipment – to provide safety and improved efficiency
• Pioneering data capture solutions for next generation of radio remote
control systems – more info for the user
• Integration of HMI wireless and wired controls with sensor, hydraulic &
pneumatic components to expand applications
• Proven expertise with over 300,000 global installations for:
Tower, crawler, all-terrain cranes
Concrete pumps, material spreaders
Material handling
Drilling rigs
Locomotives & railway support
“Explosion proof” applications
18. 18
Data Center Infrastructure Solutions
Interface Milestones
• Supporting data and
telecommunications industries
Data Center Infrastructure
Management (DCIM) enabled
cabinet (sensors and centralized
data collection)
Fiber optic and copper cable
assemblies
Intelligent power distribution,
assurance & management devices
Largest customers – Hitachi Data
Systems, Rackspace
• Lithium Ion Uninterruptable Power
Supply – AC6000
Line interactive 6kw Uninterruptible
Power Supply (UPS)
Utilizes years of research in battery
management systems
Highest power density per UPS
footprint providing 6kw in 2 rack
units
Enables peak shaving
UL certification received
Have sold over 30 units since
product launch in July 2015
20. 20
Bus Bars and
Thermal
Management
Power Products Milestones
• Integrated bus bar
assemblies
• Fusion lug termination
systems
• Patented, high-density
power contact and
connector systems
EV Bus Bar
Assemblies
• Nissan Leaf
North America and
Europe
Connect lithium-ion
battery cells
Each vehicle
requires 48 battery
modules
Three Methode
assemblies utilized
on each battery
module
• Tesla S
PowerRail®
• Patented power-
distribution system
provides flexibility with
multiple quick connect
interconnect points
• Easily customized in
lengths, number of rails,
connect and disconnect
options
• Adds flexibility and
redundancy with easy
hot pluggable add-ons
• Currently shipping to
“Big Data” customer
21. 21
Methode’s Evolution
• SmartCenter Stack
• Transmission Torque
Measurement
• HighPerTouch™
• Digital Printing On Glass
• Lean Touch™
• 10G Transceiver Modules
• Bypass Switch
• Radio Remote Control with
Video Feedback
• Dabir Surfaces
22. 22
SmartCenter Stack
Methode’s Evolution
• One complete system - Integrated
center stack, Video screen,
Capacitive touch screen,
Wired/wireless cell phone
connection, Audio, Tactile
knobs/buttons
• Operator’s cell phone acts as
media server and duplicates phone
functionality through vehicle
touchscreen
• Single source for all HMI functions
• Earliest deployment FY18
Transmission Torque
Measurement
• Patented Magneto-elastic
technology
• Outputs instantaneous and precise
torque measurement
• Allows automakers ability to
measure real-time torque vs.
elaborate algorithms that only
estimate torque
• Currently being prototyped and
tested with several automotive
OEMs
• Earliest deployment FY19
23. 23
Digital Printing on Glass
• Replaces traditional screen printing
of decorative flat glass or plastic on
user interface panels
• Utilizes 6-color, ultra-violet curable
inks dispensed via large-scale,
digital printer
• Superior resolution and graphic
options
• Leans out supply chain and costly
inventory
• Vertically integrated and in
production today
Lean Touch ®
• Digital printing of graphics and
circuits via Methode Nano-particle
conductive ink
• Replaces conventional printed
circuit board
• Reduces inventory, lead-time and
tooling (print on demand)
• Deployment late FY17
Methode’s Evolution
24. 24
HighPerTouch™
• Provides significantly enhanced
touch performance, enabling
systems to sense touch…
Through thicker substrates, about
8 times what a smartphone senses
through
Through air gaps, which provide
design freedom
Through thick gloves, key for many
automotive and industrial
applications
With water immunity, such as in
automotive door handles
10G Copper Transceiver
Modules
• Transceivers in data
communications networks allow
flexibility when connecting switches
to other networking equipment
• More cost effective than optical
counterparts
• Meets/exceeds industry low power
requirement
• Launching FY17
• Largest customer - Cisco
Methode’s Evolution
25. 25
Bypass Switch
• Patented “fast close switchgear”
delivering safe and reliable circuit
protection for high voltage, high
current power management
Initial application was off-shore
wind farm to on-shore power grid
Smaller, lighter and more flexible in
design than current market
alternatives
10,000+ in service today offering
vital protection to power grid
converter stations
Radio Remote Control
with Video
• Full-color, transmissive 4.3 inch
display and/or 8 inch “touch” displays
integrated with Remote Controls
• Customized remote control GUI and
software to meet customer
application
• Extended transmission distance via
integrated repeater grid network
• Multiple command & control
frequency capability
• Separate video feedback channel
• Supports up to 4 live, simultaneous
wireless video camera feeds
• Video playback and recording option
Methode’s Evolution
26. 26
Dabir Surfaces
• New technology aimed at pressure ulcer prevention
Prevention, care & treatment is an $11 billion/ year spend in U.S.
Of that $11 billion, nearly $2 billion is attributed to Hospital Acquired Pressure
Ulcers which are no longer covered by Medicaid & Medicare
• Pressure Ulcers
Caused by prolonged pressure, skin shear, excess moisture and heat
Dabir technology addresses all the above in an easy to use, semi-disposable
overlay
• Licensed and owned IP combined with Methode’s
Manufacturing expertise
Existing technology portfolio
TouchSensor user interface
Encrypted wireless communication
Methode’s Evolution
27. 27
Dabir Surfaces
• Provides
Alternating Micropressure support and tissue relief
Adjustable cycle speed and firmness control
Reduced skin shear during operation
Optional low-air-loss Microclimate control
Enhanced infection control as a semi-disposable overlay
• Overlay Features
Placed between mattress and cover linen
Multi-patient use with standard cleaning
200 hour product life for Surgical
2,160 hour product life for MedSurg Bed
Wireless electronic intelligence
X-ray translucent
Methode’s Evolution
28. 28
Dabir Surfaces
Methode’s Evolution
• Application Potential
Long-duration surgical procedures
Recovery & long-term care settings (Nursing Homes, Home Care)
Any patient group which is either immobilized or at-risk for pressure ulcer
formation
• Currently concentrating on long-duration surgical procedures
Controlled launch at beta hospital
As of September 2015 – 500+ procedures from 4-20 hours duration
No adverse tissue effects or quality concerns to date
29. 29
Dabir Surfaces
Methode’s Evolution
• Commercialization
FDA Device Class II – 510k exempt registration complete
Direct regional sales network, national medical representatives and partners
• FY15 second-quarter introductory sales
• Continue to develop product and IP
• Clinical Research
Dialysis – completed outpatient dialysis comfort study with 20% improvement
Pressure mapping and limited MRI perfusion study performed at Cleveland Clinic
with good results
30. 30
Summary
• Will continue to follow a balanced strategy of investing in our
business, maintaining a strong and flexible financial position
and returning cash to shareholders
Continue to invest in core businesses to grow, defend and improve our competitive
position
Continue to invest in engineering and launch management to provide customer
solutions and near-flawless execution
Maintain strong and flexible balance sheet with ample liquidity to support continued
growth organically and through acquisitions
• Investing approximately 3-4% of net sales in R&D
• Leverage global footprint, vertical integration and continuous
manufacturing systems improvement
• Targeting 5-year compounded EBITDA growth rate of 9-10%