January 25, 2008 -- Methode Electronics, Inc. announced a restructuring at its U.S.-based automotive operations in Carthage and Golden, IL. The company will also discontinue producing legacy electronic connector products in Rolling Meadows, IL.
At their peak, these automotive plants produced nearly sixty percent of Methode's sales. The company maintains that, today, with offshore manufacturing being a necessity to compete in the global automotive market, revenue produced at these facilities has been severely diminished.
The company has previously moved several programs to its foreign operations and announced its decision to begin exiting several low profit and unprofitable programs earlier this fiscal year. As a result of fewer programs remaining for these plants and anticipated continued reduction in customer production volumes, Methode says it is taking this action to transfer the remaining programs from its U.S. facilities.
The automotive restructuring process is expected to be completed by the end of this calendar year. The legacy electronic connector exit should conclude in the next three to four months. Once complete, these actions will result in the elimination of approximately 700 jobs with only limited production and support staff remaining in Carthage and Rolling Meadows. Affected employees will be offered severance and outplacement support. Methode will begin immediate discussions with customers affected by these actions.
Donald W. Duda, president and CEO of Methode Electronics, explains, "The decision to initiate this restructuring was made with great difficulty as we are cognizant of the number of Methode employees being affected by this action. It is imperative, however, that we address this situation as these operations are becoming unprofitable."
Methode estimates that it will record a pre-tax charge during the fiscal years 2008 and 2009 between $19.0 million and $25.0 million ($11.0 million and $15.0 million net of tax), or between $0.30 to $0.40 earnings per share. The cash portion of this charge will be between $11.0 million and $14.0 million.
"Our operations have made massive efforts to control costs," continues Duda. "Despite these efforts, U.S. economic conditions, coupled with volume reductions from Methode's legacy automotive customers, have become too great an obstacle to overcome."
Fiscal year 2008 guidance for the company's sales between $500.0 million and $515.0 million is reaffirmed. Previous earnings per share guidance between $0.80 and $0.87 did not reflect any charge for restructuring that will be recorded in Methode's third or fourth quarter of fiscal 2008.
