Tableof Contents

 

 

 

**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-K**

 

**ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE**

**SECURITIES EXCHANGE ACT OF 1934**

 

**For thefiscal year ended May 2, 2009**

** **

**CommissionFile Number 0-2816**

 

**METHODEELECTRONICS, INC.**

(Exact name of Registrantas specified in its charter)

 

| **Delaware**                     | ** ** | **36-2090085**      |
|----------------------------------|------------|---------------------|
| (State or other  jurisdiction of |       | (IRS Employer       |
| incorporation or organization)   |       | Identification No.) |

 

| **7401  West Wilson Avenue**              | ** ** | ** **     |
|-------------------------------------------|------------|----------------|
| **Chicago,  Illinois**                    | ** ** | **60706-4548** |
| (Address of Principal  Executive Offices) |       | (Zip Code)     |

 

Registrant’stelephone number (including area code): ** (708) 867-6777**

 

Securities registeredpursuant to Section 12(b) of the Act:

 

| ** ** | **Title of  each Class**       | ** ** | **Name of  each exchange  on which registered** | ** ** |
|------------|--------------------------------|------------|-------------------------------------------------|------------|
|       | Common Stock, $0.50 Par  Value |       | New York Stock Exchange                         |       |

 

Securities registeredpursuant to Section 12(g) of the Act:

** **

**None**

**(Title of Class)**

** **

Indicate by check mark if the Registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o     No x

 

Indicate by check mark if the Registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) ofthe Act. Yes o     No x

 

Indicate by check mark whether the Registrant (1) hasfiled all reports required to be filed by Section 13 or 15 (d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the Registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.    Yesx    No o

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, and willnot be contained, to the best of Registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K. o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T during the preceding 12 months (or for such shorter periodthat the registrant was required to submit and post such files).    Yeso    No o

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,a non-accelerated filer, or a smaller reporting company. See definitions of “largeaccelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2of the Exchange Act. (Check one):

 

| Large accelerated filer   o |   | Accelerated  filer   x         |
|--------------------------------------------|--------|-----------------------------------------------|
|                                       |   |                                          |
| Non-accelerated filer   o   |   | Smaller reporting  company   o |

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the****Act).   Yes   o    No    x

 

The aggregate market value of common stock, $0.50 parvalue, held by non-affiliates of the Registrant on November 1, 2008, basedupon the average of the closing bid and asked prices on that date as reportedby the New York Stock Exchange was $278.5 million.

 

Registrant had 38,174,261 shares of common stock,$0.50 par value, outstanding as of July 1, 2009.

 

**DOCUMENTSINCORPORATED BY REFERENCE**

 

**Portions of the proxy statement for the annualshareholders meeting to be held September 17, 2009 are incorporated byreference into Part III.**

 

 

 

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Table of Contents

 

METHODE ELECTRONICS, INC.

FORM 10-K

May 2, 2009

 

TABLE OF CONTENTS

 
| PART I   |                                                                                                                |
|---------------|---------------------------------------------------------------------------------------------------------------------|
| Item 1.  | Business                                                                                                            | 1 |
| Item 1A.      | Risk Factors                                                                                                        | 5 |
| Item 2.  | Properties                                                                                                          | 9 |
| Item 3.  | Legal Proceedings                                                                                                   | 10 |
|          |                                                                                                                |   |
| PART II  |                                                                                                                |
| Item 5.  | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities | 11 |
| Item 6.  | Selected  Financial Data                                                                                            | 13 |
| Item 7.  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                         | 14 |
| Item 7A. | Quantitative  and Qualitative Disclosures About Market Risk                                                         | 38 |
| Item 8.  | Financial  Statements and Supplementary Data                                                                        | 38 |
| Item 9A. | Controls and  Procedures                                                                                            | 39 |
|          |                                                                                                                |   |
| PART III |                                                                                                                |
| Item 10. | Directors,  Executive Officers and Corporate Governance                                                             | 40 |
| Item 11. | Executive Compensation                                                                                              | 40 |
| Item 12. | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                    | 40 |
| Item 13. | Certain  Relationships and Related Transactions, and Director Independence                                          | 40 |
| Item 14. | Principal  Accounting Fees and Services                                                                             | 40 |
|          |                                                                                                                |   |
| PART IV  |                                                                                                                |
| Item 15. | Exhibits,  Financial Statement Schedules                                                                            | 41 |

 

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**PART I**

 

**Item 1.  Business**

 

Methode Electronics, Inc. was incorporated in1946 as an Illinois corporation and reincorporated in Delaware in 1966.  As used herein, “we,” “us,” “our,” the “Company”or “Methode” mean Methode Electronics, Inc. and its subsidiaries.

 

We are a global designer and manufacturer ofelectro-mechanical devices.  We design,manufacture and market devices employing electrical, radio remote control,electronic, wireless, sensing and optical technologies.  Our components are found in the primary endmarkets of the aerospace, appliance, automotive, consumer and industrialequipment markets, communications (including information processing andstorage, networking equipment, wireless and terrestrial voice/data systems),rail and other transportation industries.

 

On September 30, 2008, we acquired certain assetsof Hetronic LLC (Hetronic) for $53.6 million in cash.  We also incurred $2.4 million in transactioncosts related to the purchase.  Hetronicis a global leader in industrial safety radio remote controls with locations inthe U.S., Malta, the Philippines and Germany. Hetronic is represented in 45 countries by direct sales associates,licensed partners, distributors and representatives.  Hetronic provides application specific andstandard controls to many different industries, such as material handling,transportation, mining, military, agriculture and construction.  The accounts and transactions of Hetronichave been included in the Interconnect segment in the Consolidated FinancialStatements from the effective date of the acquisition.

 

Our business has been and will likely continue to be materially adversely affected by the current economic environment, particularly as it impacts the automotive industry.  The disruptions in global financial and credit markets have significantly impacted global economic activity and led to an economic recession.  As a result of these disruptions, our customers and markets have been adversely affected.  We have experienced a significant drop in sales in all our reporting segments.  If demand for our products continues to decline, our business, results of operations and financial condition could be materially adversely affected.  If we are unable to successfully anticipate changing economic and financial conditions, we may be unable to effectively plan for and respond to these changes and our business could be adversely affected.

 

We have recorded and may record additional impairmentcharges which would adversely impact our results of operations.  We review our goodwill and other intangibleassets for impairment whenever events or changes in circumstances indicate thatthe carrying amount of these assets may not be recoverable, and we also reviewour goodwill annually in accordance with Statement of Financial AccountingStandards, (SFAS) No. 142, “Goodwill and Other Intangibles”.  The values assigned to goodwill andintangible assets are normally based on estimates and judgments regardingexpectations for the success and life cycle of products and technologiesacquired.  A decline in expectations,future cash flows, a change in strategic direction or our market capitalizationremaining below our net book value for a significant additional period of timecould result in further significant impairment charges, which could have amaterial adverse effect on our financial condition and results ofoperations.  See Note 4 to ourConsolidated Financial Statements for additional information regarding ourgoodwill and other intangible asset impairment charges.

 

On March 12, 2009, weannounced several additional restructuring actions to further reduce ourexposure to the North American automotive industry and to consolidatemanufacturing facilities in lower cost regions to reduce costs.  After these actions, our principalmanufacturing operations will be in Mexico, Malta and China.  In addition, we have decided to transfercertain new General Motors (GM) business to other suppliers.  This business was scheduled to be produced inour Shanghai, China automotive facility.

 

All Ford Motor Company production at our Reynosa,Mexico facility is being moved to another supplier.  TouchSensor manufacturing currently in westsuburban Chicago, Illinois will be moved to Monterrey, Mexico.  Additionally, our operations in Shanghai,China will be consolidated to two facilities from three.

 

In total, this additional restructuring will affectapproximately 850 employees worldwide. We estimate that we will record apre-tax charge between $16.0 million and $25.0 million, during fiscal 2009 and2010. The cash portion of this charge is estimated between $7.0 million and$8.0 million.  During the fiscal yearended May 2, 2009, we recorded a restructuring charge of $7.3 million,which consisted of $0.1 million for employee severance, $1.4 million forimpairment and accelerated depreciation for buildings and improvements andmachinery and equipment,

 

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**Item 1.  Business - Continued**

 

$5.4 million for customerfunded tooling and $0.1 in forfeited security deposits related to thecancellation of the new GM business and $0.3 million relating to professionalfees.  We estimate that we will recordpre-tax restructuring charges in fiscal 2010 between $8.7 million and $17.7million.  See Note 2 to our ConsolidatedFinancial Statements for additional information regarding the March 2009restructuring.

 

On January 24, 2008, we announced a restructuringof our U.S.-based automotive operations and a decision to discontinue producingcertain legacy products in the Interconnect segment.  The Automotive and Interconnect segmentrestructuring is expected to be completed during fiscal 2010.  On January 24, 2008, the total pre-taxcharges were estimated to be between $19.0 million and $25.0 million.  Through May 2, 2009, we have recorded$23.2 million of charges, of which $18.0 million was recorded during fiscal2009.  We estimate that we will recordpre-tax restructuring charges in fiscal 2010 between $0.5 million and $1.5million, of which $0.5 million will relate to the termination of approximately225 employees and the cost of one-time employee benefits, retention, COBRA andoutplacement services.  See Note 2 to ourConsolidated Financial Statements for additional information regarding the January 2008restructuring.

 

We maintain our financialrecords on the basis of a fifty-two or fifty-three week fiscal year ending onthe Saturday closest to April 30. Due to the timing of our fiscal calendar, the fiscal year ended May 2,2009 represents 52 weeks of results, the fiscal year ended May 3, 2008represents 53 weeks of results and the fiscal year ended April 28, 2007represents 52 weeks of results.

 

*Segments. *Our business is managed and our financial results arereported on a segment basis, with those segments being Automotive,Interconnect, Power Products and Other.

 

The Automotive segment supplies electronic andelectromechanical devices and related products to automobile OEMs, eitherdirectly or through their tiered suppliers, including control switches forelectrical power and signals, connectors for electrical devices, integratedcontrol components, switches and sensors that monitor the operation or statusof a component or system, and packaging of electrical components.

 

The Interconnect segment provides a variety of copperand fiber-optic interconnect and interface solutions for the aerospace,appliance, commercial, computer, construction, consumer, material handling,medical, military, mining, networking, storage, and telecommunicationsmarkets.  Solutions include connectors,conductive polymer, thick film inks, custom cable assemblies, industrial safetyradio remote controls, solid-state field effect interface panels, optical andcopper transceivers, PC and express card packaging and terminators.  Services include the design and installationof fiber optic and copper infrastructure systems, and manufacturing active andpassive optical components.

 

The Power Products segment manufactures braidedflexible cables, current-carrying laminated bus devices, custom power-productassemblies, high-current low voltage flexible power cabling systems and powdercoated bus bars that are used in various markets and applications, includingaerospace, computers, industrial and power conversion, insulated gate bipolartransistor solutions, military, telecommunications, and transportation.

 

The Other segment includes a designer and manufacturerof magnetic torque sensing products, and independent laboratories that provideservices for qualification testing and certification, and analysis ofelectronic and optical components.

 

Financial results by segment are summarized in Note 13to the Consolidated Financial Statements.

 

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**Item 1.  Business - Continued**

 

*Sales.*  The followingtable reflects the percentage of net sales of the segments of the Company forthe last three fiscal years.

 
| ** **     | ** ** | **Year Ended**  | ** ** |
|----------------|------------|-----------------|------------|
| ** **     | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | **April 28,** | ** ** |
| ** **     | ** ** | **2009**        | ** ** | **2008** | ** ** | **2007** | ** ** |
| Automotive     |       | 57.2            | %          | 65.7 | % | 70.4 | % |
| Interconnect   |       | 30.8            | %          | 24.7 | % | 18.3 | % |
| Power Products |       | 10.0            | %          | 8.3 | % | 9.6 | % |
| Other          |       | 1.9             | %          | 1.3 | % | 1.7 | % |

 

Our sales activities are directed by sales managerswho are supported by field application engineers and other engineeringpersonnel who work with customers to design our products into theirsystems.  Our field application engineersalso help us identify emerging markets and new products.  Our products are sold through in-house salesstaff and through independent manufacturers’ representatives with officesthroughout the world.  Information aboutour sales and operations in different geographic regions is summarized in Note13 to the Consolidated Financial Statements. Sales are made primarily to OEMs, either directly or through theirtiered suppliers as well as selling partners and distributors.

 

*Sources and Availability of Raw Materials*. Principal raw materials that we purchase include coil and bar stock, diecastings, ferrous and copper alloy sheet, glass, plastic molding materials,precious metals, semiconductor components, silicon and urethane.  All of these items are available from severalsuppliers and we generally rely on more than one supplier for each item.  We have not experienced any significantshortages of raw materials and normally do not carry inventories of raw materialsor finished products in excess of those reasonably required to meet productionand shipping schedules.  We didexperience significant price increases in fiscal 2008 and 2007 for copper,precious metals and petroleum-based raw materials.

 

*Patents; Licensing Agreements*.  We have numerous United States and foreignpatents and license agreements covering certain of our products andmanufacturing processes, several of which are considered significant to ourbusiness.   Our ability to competeeffectively with other companies depends, in part, on our ability to maintainthe proprietary nature of our technology. Although we have been awarded, havefiled applications for, or have been licensed under numerous patents in theUnited States and other countries, there can be no assurance concerning thedegree of protection afforded by these patents or the likelihood that pendingpatents will be issued.

 

*Seasonality*.  A significantportion of our business is dependent on automotive sales and the vehicleproduction schedules of our customers. The automotive market is cyclical and depends on general economicconditions, interest rates, fuel prices and consumer spending patterns.  During fiscal 2009, we experiencedsignificantly lower automotive sales due to the global recession.  Also in fiscal 2009, wesignificantly reduced shipments to Chrysler, LLC (“Chrysler”) due to our decision to exitunprofitable or marginally profitable legacy business and we are transferringsome Ford businessfrom our Reynosa, Mexico facility to other suppliers.  In addition, new GM business from ourShanghai, China facility will be transferred to other suppliers during thefirst quarter of fiscal 2010.  Thisloss of business will affect our U.S. automotive results in futureperiods.  Traditionally, in prior fiscalyears, our businesswas moderately seasonal as our North American automotive customers historicallyhalt operations for approximately two weeks in July for model changeoversand one to two weeks during the December holiday period.   Duringthe second half of fiscal 2009, we experienced additional customer plantshutdowns due to lower demand for their products.  Accordingly, if we experience additionalshutdowns, future quarterly results may be affected.

 

*Material Customers*.  During thefiscal year ended May 2, 2009, shipments to Ford and Delphi Corporation (“Delphi”),each represented approximately 10% or greater of consolidated net sales and, inthe aggregate, amounted to approximately 28.5% of consolidated net sales.  Such shipments included a wide variety of ourautomotive component products.

 

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**Item 1.  Business - Continued**

 

*Backlog*. Our backlog of orders was approximately $66.7million at May 2, 2009, and $120.6 million at May 3, 2008.  It is expected that most of the total backlogat May 2, 2009 will be shipped within fiscal 2010.

 

*Competitive Conditions*. The markets in which we operate are highly competitive and characterizedby rapid changes due to technological improvements and developments.  We compete with a large number of othermanufacturers in each of our product areas; many of these competitors havegreater resources and sales.  Price,service and product performance are significant elements of competition in thesale of our products.

 

*Research and Development*. We maintain a research and development program involving a number ofprofessional employees who devote a majority of their time to the developmentof new products and processes and the advancement of existing products.  Senior management of our Company participatesdirectly in the program.  Expendituresfor such activities amounted to $22.0 million, $25.6 million and $21.3 millionfor fiscal 2009, 2008 and 2007, respectively.

 

*Environmental Quality*. Compliance with foreign, federal, state and local provisions regulatingthe discharge of materials into the environment has not materially affected ourcapital expenditures, earnings or our competitive position.  Currently, we do not have any environmentalrelated lawsuits or material administrative proceedings pending againstus.  Further information as toenvironmental matters affecting us is presented in Note 9 to the ConsolidatedFinancial Statements.

 

*Employees.* At May 2, 2009 and May 3, 2008, we had 2,876 and 3,580employees, respectively.  We also fromtime to time employ part-time employees and hire independent contractors.  As of May 2, 2009 our employees from ourMalta and Mexico facilities, which account for about 45% of the total number ofemployees, are represented by a collective bargaining agreement.  We have never experienced a work stoppage andwe believe that our employee relations are good.

 

*Segment Information and Foreign Sales*. Information about our operations by segment and in different geographicregions is summarized in Note 13 to the Consolidated Financial Statements.

 

*AvailableInformation*.  We are subject to the informationalrequirements of the Securities Exchange Act of 1934 (Exchange Act) and fileperiodic reports, proxy statements and other information with the Securitiesand Exchange Commission (SEC). Such reports may be obtained by visiting thePublic Reference Room of the SEC at 100 F Street, NE, Washington, D.C.20549, or by calling the SEC at (800) SEC-0330. In addition, the SEC maintainsan internet site (www.sec.gov) that contains reports, proxy and informationstatements and other information.

 

Financialand other information can also be accessed on the investor section of ourwebsite at www.methode.com. We make available, free of charge, copies of ourannual report on Form 10-K, quarterly reports on Form 10-Q, currentreports on Form 8-K, and amendments to those reports filed or furnishedpursuant to Section 13(a) or 15(d) of the Exchange Act as soonas reasonably practicable after filing such material electronically orotherwise furnishing it to the SEC.  Also posted on our website are the Company’s Corporate GovernanceGuidelines, Code of Conduct and the charters of the Audit Committee,Compensation Committee, Nominating and Governance Committee and TechnologyCommittee. Copies of these documents are also available free of charge bysending a request to Methode Electronics, Inc., 7401 West Wilson Avenue,Chicago, Illinois 60706, Attention: Investor Relations Department.  Information on our website is notincorporated into this Form 10-K or our other securities filings and isnot a part of them.

 

*Certifications.*  Asrequired by the rules and regulations of the New York Stock Exchange (“NYSE”),we delivered to the NYSE a certification signed by our Chief Executive Officer,Donald W. Duda, certifying that Mr. Duda was not aware of any violation bythe Company of the NYSE’s corporate governance listing standards as of October 20,2008.

 

Asrequired by the rules and regulations of the SEC, the Sarbanes-Oxley Act Section 302certifications regarding the quality of our public disclosures are filed asexhibits to this Annual Report on Form 10-K.

 

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**Item 1A.  Risk Factors**

 

Certain statements in thisreport are forward-looking statements that are subject to certain risks anduncertainties.  We undertake no duty toupdate any such forward-looking statements to conform to actual results orchanges in our expectations.  Ourbusiness is highly dependent upon two large automotive customers and specificmakes and models of automobiles.  Ourresults will be subject to many of the same risks that apply to the automotive,appliance, computer and telecommunications industries, such as general economicconditions, interest rates, consumer spending patterns and technologicalchanges.   Other factors, which mayresult in materially different results for future periods, include thefollowing risk factors.  These riskfactors should be considered in connection with evaluating the forward-lookingstatements contained in this report because these factors could cause ouractual results and condition to differ materially from those projected inforward-looking statements.  Theforward-looking statements in this report are subject to the safe harbor protectionprovided under the securities laws and are made as of the date of thisreport.  We undertake no duty to updateany such forward-looking statements.

 

**We depend on a small number of large customers.  If we were to lose any of these customers or any of these customers decreased the number of orders it placed, or if any of the customers declare bankruptcy, our future results could be adversely affected.**

 

During the year ended May 2, 2009, shipments to Ford and Delphi, each represented 10% or greater of consolidated net sales and, in the aggregate, amounted to approximately 28.5% of consolidated net sales.  It is expected that in fiscal 2010, we will significantly reduce sales to Ford in North America due to our decision to transfer business from our Reynosa, Mexico facility to other suppliers.  The exit of this business will affect our U.S. automotive segment results in future periods.  The loss of all or a substantial portion of the sales to Delphi, which has been in bankruptcy since October 2005, could have a material adverse effect on our sales, margins, profitability and, as a result, our share price.  The Company is involved in certain disputes with Delphi, which could have an adverse impact on the Company’s future sales to Delphi. The contracts we have entered into with many of our customers provide for supplying the customers’ requirements for a particular model, rather than for manufacturing a specific quantity of products. Such contracts range from one year to the life of the model, which is generally three to seven years. Therefore, the loss of a contract for a major model or a significant decrease in demand for certain key models or group of related models sold by Ford or Delphi could have a material adverse impact on our results of operations and financial condition. We also compete to supply products for successor models and are subject to the risk that Ford or Delphi will not select us to produce products on any such model, which could have a material adverse impact on our results of operations and financial condition.

 

In addition, we have significant receivable balances related to these customers and other major customers that would be at risk in the event of their bankruptcy.  Due to the financial stresses within the worldwide automotive industry, certain automakers and tiered customers have already declared bankruptcy or may be considering bankruptcy.

 

****Becausewe derive a substantial portion of our revenues from customers in theautomotive, appliance, computer and communications industries, we aresusceptible to trends and factors affecting those industries.****

 

Our components are found inthe primary end markets of the automotive, communications (includinginformation processing and storage, networking equipment, wireless andterrestrial voice/data systems), aerospace, rail and other transportationindustries, appliances and the consumer and industrial equipment markets.  Factors negatively affecting these industriesand the demand for products also negatively affect our business, financialcondition and operating results. Recently, we have experienced slow-downs inall segments due to the recession.  Anyadverse occurrence, including additional industry slowdown, recession, risinginterest rates, political instability, costly or constraining regulations,armed hostilities, terrorism, excessive inflation, prolonged disruptions in oneor more of our customers’ production schedules or labor disturbances, thatresults in significant decline in the volume of sales in these industries, orin an overall downturn in the business and operations of our customers in theseindustries, could materially adversely affect our business, financial conditionand operating results.

 

**Our business is cyclical and seasonal in nature and further downturns in the automotive industry could reduce the sales and profitability of our business.**

 

A large portion of our business is dependent on automotive sales andthe vehicle production schedules of our customers.  The automotive market is cyclical and dependson general economic conditions, interest rates and consumer spendingpatterns.  Any significant reduction invehicle production by our customers would have a

 

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**Item 1A.  Risk Factors - Continued**

 

materialadverse effect on our business.  Duringfiscal 2009, we experienced significantly lower automotive sales due to theglobal recession.  Also in fiscal 2009,we significantly reduced shipments to Chrysler due to our decision to exitunprofitable or marginally profitable legacy business and we are transferringsome Ford business from our Reynosa, Mexico facility to other suppliers duringthe first quarter of fiscal 2010.  Inaddition, we are in the process of transferring new GM business from ourShanghai, China facility to other suppliers, which is expected to be completedduring the first quarter of fiscal 2010. The loss of business will affect our U.S. automotive results in futureperiods.  Traditionally, in prior fiscalyears, our business was moderately seasonal as our North American automotivecustomers historically halt operations for approximately two weeks in July formodel changeovers and one to two weeks during the December holidayperiod.   During the second half of fiscal2009, we experienced additional customer plant shutdowns due to lower demandfor their products.  Accordingly, if weexperience additional shutdowns, quarterly results may be affected.

 

**If we are unable to protect our intellectual property or we infringe, or are alleged to infringe, on another person’s intellectual property, our business, financial condition and operating results could be materially adversely affected.**

 

We have numerous United States and foreign patents and license agreements covering certain of our products and manufacturing processes, several of which are considered material to our business.  Our ability to compete effectively with other companies depends, in part, on our ability to maintain the proprietary nature of our technology. Although we have been awarded, have filed applications for, or have been licensed under numerous patents in the United States and other countries, there can be no assurance concerning the degree of protection afforded by these patents or the likelihood that pending patents will be issued.  The loss of any significant patents and trade secrets could adversely affect our sales, margins, profitability and, as a result, share price.

 

We may become involved inlitigation in the future to protect our intellectual property or because othersmay allege that we infringe on their intellectual property. These claims andany resulting lawsuit could subject us to liability for damages and invalidateour intellectual property rights. If an infringement claim is successfullyasserted by a holder of intellectual property rights, we may be required tocease marketing or selling certain products, pay a penalty for pastinfringement and spend significant time and money to develop a non-infringingproduct or process or to obtain licenses for the technology, process orinformation from the holder. We may not be successful in the development of anon-infringing alternative, or licenses may not be available on commerciallyacceptable terms, if at all, in which case we may lose sales and profits. Inaddition, any litigation could be lengthy and costly and could materiallyadversely affect us even if we are successful in the litigation.

 

****Weface risks relating to our international operations.****

 

Because we have significant international operations, our operatingresults and financial condition could be adversely affected by economic,political, health, regulatory and other factors existing in foreign countriesin which we operate. Our international operations are subject to inherent risks,which may adversely affect us, including: fluctuations in exchange rates;political and economic instability in countries in which our products aremanufactured; expropriation, or the imposition of government controls; changesin government regulations; export license requirements; trade restrictions;earnings expatriation restrictions; exposure to different legal standards; lessfavorable intellectual property laws; health conditions and standards; currencycontrols; increases in the duties and taxes we pay; high levels of inflation ordeflation; greater difficulty in collecting our accounts receivable and longerpayment cycles; changes in labor conditions and difficulties in staffing andmanaging our international operations; limitations on insurance coverageagainst geopolitical risks, natural disasters and business operations; andcommunication among and management of international operations. In addition,these same factors may also place us at a competitive disadvantage to some ofour foreign competitors.

 

**We cannot assure you that thenewly acquired Hetronic business will be successful or that we can implementand profit from any new applications of the acquired technology.**

 

We acquired Hetronic on September 30,2008.  As a result of this acquisition, wenow design and manufacture industrial safety radio remote controls that areused primarily in the material handling, transportation, mining, military,agriculture and construction industries. The current economic recession has had an adverse effect on the Hetronicbusiness and our operating results. Also, the market for safety radio remote controls is competitive

 

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**Item 1A.  Risk Factors - Continued**

 

and rapidly changing.  If we do not keep pace with technologicalinnovations in the industry, our products may not be competitive and our revenue and operating resultsmay suffer.  Furthermore, while we intendto expand the Hetronic business by integrating the technology into additionalautomotive and other applications, we can make no guarantee that such ventureswill be successful or profitable.

 

**Our technology-based business and the markets in which we operate are highly competitive.  If we are unable to compete effectively, our sales will decline.**

 

The markets in which weoperate are highly competitive and characterized by rapid changes due totechnological improvements and developments. We compete with a large number of other manufacturers in each of ourproduct areas; many of these competitors have greater resources and sales.  Price, service and product performance aresignificant elements of competition in the sale of our products.  Competition may intensify further if morecompanies enter the markets in which we operate. Our failure to competeeffectively could materially adversely affect our business, financial conditionand operating results.

 

****Wemay acquire businesses or divest business operations. These transactions maypose significant risks and may materially adversely affect our business,financial condition and operating results.****

 

We intend to explore opportunities to acquire other businesses ortechnologies that could complement, enhance or expand our current business orproduct lines or that might otherwise offer growth opportunities. Anytransactions that we are able to identify and complete may involve a number ofrisks, including: the diversion of our management’s attention from our existingbusiness to integrate the operations and personnel of the acquired or combinedbusiness or joint venture; possible adverse effects on our operating resultsduring the integration process; and our possible inability to achieve theintended objectives of the transaction. In addition, we may not be able tosuccessfully or profitably integrate, operate, maintain and manage our newlyacquired operations or employees. We may not be able to maintain uniformstandards, controls, procedures and policies, and this may lead to operationalinefficiencies. In addition, future acquisitions may result in dilutiveissuances of equity securities, a reduction of cash or the incurrence of debt.

 

We have in the past, and mayin the future, consider divesting certain business operations. Divestitures mayinvolve a number of risks, including the diversion of management’s attention,significant costs and expenses, the loss of customer relationships and cashflow, and the disruption of operations in the affected business. Failure totimely complete a divestiture or to consummate a divestiture may negativelyaffect valuation of the affected business or result in restructuring charges.

 

****Wemay be unable to keep pace with rapid technological changes, which wouldadversely affect our business.****

 

The technologies relating tosome of our products have undergone, and are continuing to undergo, rapid andsignificant changes. Specifically, end markets for electronic components andassemblies are characterized by technological change, frequent new productintroductions and enhancements, changes in customer requirements and emergingindustry standards.  These changes couldrender our existing products unmarketable before we can recover any or all ofour research, development and other expenses. Furthermore, the life cycles ofour products vary, may change and are difficult to estimate. If we are unable,for technological or other reasons, to develop and market new products orproduct enhancements in a timely and cost-effective manner, our business,financial condition and operating results could be materially adverselyaffected.

 

****Productswe manufacture may contain design or manufacturing defects that could result inreduced demand for our products or services and liability claims against us.****

 

Despite our quality controland quality assurance efforts, defects may occur in the products we manufacturedue to design or manufacturing errors or component failure. Product defects mayresult in delayed shipments and reduced demand for our products. We may besubject to increased costs due to warranty claims on defective products.Product defects may result in product liability claims against us where defectscause, or are alleged to cause, property damage, bodily injury or death. We maybe required to participate in a recall involving products that are, or arealleged to be, defective. We carry insurance for certain legal mattersinvolving product liability, however, we do not have coverage for all costsrelated to product defects and the costs of such claims, including costs of

 

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**Item 1A.  Risk Factors - Continued**

 

defense and settlement, may exceed ouravailable coverage.

 

**We are dependent on theavailability and price of raw materials.**

 

We require substantialamounts of raw materials, including petroleum-based products, glass, copper andprecious metals, and all raw materials we require are purchased from outsidesources. The availability and prices of raw materials may be subject tocurtailment or change due to, among other things, new laws or regulations,suppliers’ allocations to other purchasers, interruptions in production bysuppliers, changes in exchange rates and worldwide price levels. Any change inthe supply of, or price for, these raw materials could materially affect ourresults of operations and financial condition.  We didexperience price increases in fiscal 2008 and 2007 for copper, precious metalsand petroleum-based raw materials.

 

****Becausewe derive approximately 57% of our revenues from customers in the automotivesegment, rising oil prices could adversely affect future results.****

 

****A large portion of our revenue is derived from partsand components that are provided in our customers’ less fuel-efficientvehicles.  Increasing oil and gasolineprices have, and, are expected to continue to negatively affect the sales ofthose vehicles in the future, which could negatively impact our future automotiverevenue.****

 

**We have andmay continue to incur additional significant restructuring charges that willadversely affect our results of operations.**

 

Due to the economic downturn, we have incurred $25.3 million in restructuring charges in fiscal 2009, and we expect to incur $9.2 million to $19.2 million of restructuring charges in fiscal 2010.  This will have an adverse effect on our financial condition and results of operations.  If economic conditions worsen, we could have additional restructuring efforts in addition to those mentioned above.

 

**We may incur additional goodwill and other asset impairments.**

 

Our business has been and may continue to be materially adversely affected by the current economic environment.  The recent disruptions in global financial and credit markets have significantly impacted global economic activity and led to an economic recession.  As a result of these disruptions, our customers and markets have been adversely affected.  We have recently experienced a significant drop in sales in all our reporting segments.  If we experience reduced demand because of these disruptions in the macroeconomic environment or other factors, our business, results of operation and financial condition could be materially adversely affected.  If we are unable to successfully anticipate changing economic and financial conditions, we may be unable to effectively plan for and respond to these changes and our business could be adversely affected.

 

We have recorded and may record additional impairment charges that would adversely impact our results of operations.  We review our goodwill and other assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable, and we also review our goodwill annually in accordance with SFAS No. 142, “Goodwill and Other Intangibles” as well as SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.  The values assigned to goodwill and intangible assets are normally based on estimates and judgments regarding expectations for the success and life cycle of products and technologies acquired.  A decline in expectations, future cash flows, a change in strategic direction or our market capitalization remaining below our net book value for a significant period of time could result in significant impairment charges, which could have a material adverse effect on our financial condition and results of operations.  See Note 4 to our Consolidated Financial Statements for additional information regarding our goodwill and other asset impairment charges.

 

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**Item2.  Properties**

 

We operate the followingmanufacturing and other facilities, all of which we believe to be in goodcondition and adequate to meet our current and reasonably anticipated needs:

 
| ** **                  | ** ** | ** **                           | ** ** | **Owned/** | ** ** | **Approximate**    | ** ** |
|-----------------------------|------------|--------------------------------------|------------|------------|------------|--------------------|------------|
| **Location**                | ** ** | **Use**                              | ** ** | **Leased** | ** ** | **Square Footage** | ** ** |
|                        |       |                                 |       |       |       |               |       |
| Chicago,  Illinois          |       | Corporate Headquarters               |       | Owned      |       | 15,000             |       |
|                        |       |                                 |       |       |       |               |       |
| **Automotive Segment:**     |       |                                 |       |       |       |               |       |
| Carthage,  Illinois         |       | Manufacturing                        |       | Owned      |       | 261,000            |       |
| Mriehel,  Malta             |       | Manufacturing                        |       | Leased     |       | 209,000            |       |
| Reynosa,  Mexico            |       | Manufacturing                        |       | Leased     |       | 102,000            |       |
| Golden,  Illinois           |       | Manufacturing                        |       | Owned      |       | 90,000             |       |
| Shanghai,  China            |       | Manufacturing                        |       | Leased     |       | 75,500             |       |
| McAllen,  Texas             |       | Warehousing                          |       | Leased     |       | 38,000             |       |
| Monterrey,  Mexico          |       | Manufacturing                        |       | Leased     |       | 36,000             |       |
| Southfield,  Michigan       |       | Sales and Engineering  Design Center |       | Owned      |       | 17,000             |       |
| Gau-Algesheim,  Germany     |       | Sales and Engineering  Design Center |       | Leased     |       | 6,800              |       |
| Burnley,  England           |       | Engineering Design  Center           |       | Leased     |       | 5,900              |       |
|                        |       |                                 |       |       |       |               |       |
| **Interconnect Segment:**   |       |                                 |       |       |       |               |       |
| Rolling  Meadows, Illinois  |       | Manufacturing                        |       | Owned      |       | 75,000             |       |
| Carol  Stream, Illinois     |       | Manufacturing                        |       | Leased     |       | 50,000             |       |
| Shanghai,  China            |       | Manufacturing                        |       | Leased     |       | 49,000             |       |
| Richardson,  Texas          |       | Manufacturing                        |       | Leased     |       | 45,000             |       |
| Chicago,  Illinois          |       | Manufacturing                        |       | Owned      |       | 38,400             |       |
| Jihlava,  Czech Republic    |       | Manufacturing                        |       | Owned      |       | 36,000             |       |
| Mosta,  Malta               |       | Manufacturing                        |       | Leased     |       | 32,500             |       |
| Laguna,  Philippines        |       | Manufacturing                        |       | Leased     |       | 22,800             |       |
| Wheaton,  Illinois          |       | Manufacturing                        |       | Leased     |       | 22,500             |       |
| Oklahoma  City, Oklahoma    |       | Manufacturing/Design  Center         |       | Leased     |       | 19,800             |       |
| San  Jose, California       |       | Sales and Design                     |       | Leased     |       | 7,250              |       |
| Warsaw,  Poland             |       | Sales and Distribution               |       | Leased     |       | 5,700              |       |
| Limerick,  Ireland          |       | Sales and Distribution               |       | Leased     |       | 4,700              |       |
| Singapore                   |       | Sales and  Administrative            |       | Leased     |       | 3,000              |       |
| Kiev,  Ukraine              |       | Sales and Distribution               |       | Leased     |       | 900                |       |
| Bucharest,  Romania         |       | Sales and Distribution               |       | Leased     |       | 400                |       |
| Ljubljana,  Slovenia        |       | Sales and Distribution               |       | Leased     |       | 400                |       |
|                        |       |                                 |       |       |       |               |       |
| **Power Products Segment:** |       |                                 |       |       |       |               |       |
| Shaghai,  China             |       | Manufacturing                        |       | Leased     |       | 60,000             |       |
| Rolling  Meadows, Illinois  |       | Manufacturing                        |       | Owned      |       | 52,000             |       |
| Naperville,  Illinois       |       | Manufacturing                        |       | Leased     |       | 30,000             |       |
| Reynosa,  Mexico            |       | Manufacturing                        |       | Leased     |       | 27,000             |       |
| San  Jose, California       |       | Prototype and Design  Center         |       | Leased     |       | 7,250              |       |
|                        |       |                                 |       |       |       |               |       |
| **Other Segment:**          |       |                                 |       |       |       |               |       |
| Palatine,  Illinois         |       | Test Laboratory                      |       | Owned      |       | 27,000             |       |
| Hunt  Valley, Maryland      |       | Test Laboratory                      |       | Owned      |       | 16,000             |       |
| Chicago,  Illinois          |       | Manufacturing                        |       | Owned      |       | 10,000             |       |

 

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**Item 3.  Legal Proceedings**

 

As of July 2, 2009,we were not involved in any material legal proceedings or any legal proceedingsor material administrative proceedings with governmental authorities pertainingto the discharge of materials into the environment or otherwise.

 

**ExecutiveOfficers of the Registrant**

 
| **Name**            | ** ** | **Age** | ** ** | **Offices and Positions Held and Length of Service as Officer**                                                                                                                                                                                                                                                                                                                                                                     |
|---------------------|------------|---------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Donald W. Duda      |       | 54      |       | Chief Executive Officer  of the Company since May 1, 2004. President and Director of the Company  since February 2001. Prior thereto Mr. Duda was Vice  President-Interconnect Group since March 2000. Prior thereto  Mr. Duda was with Amphenol Corporation through November 1998 as  General Manager of its Fiber Optic Products Division since 1988.                                               |
|                |       |    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Douglas A. Koman    |       | 59      |       | Chief Financial Officer  of the Company since May 1, 2004. Vice President, Corporate Finance, of  the Company since April 2001. Prior thereto Mr. Koman was Assistant  Vice President-Financial Analysis since December 2000. Prior thereto  Mr. Koman was with Illinois Central Corporation through March 2000  as Controller since November 1997 and Treasurer since July 1991.           |
|                |       |    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Thomas D. Reynolds  |       | 46      |       | Senior Vice President,  Worldwide Automotive Operations, of the Company since September 14,  2006. Vice President and General Manager, North American Automotive  Operations, of the Company since October 2001. Prior thereto  Mr. Reynolds was with Donnelly Corporation through October 2001 as  Senior Manager of Operations since 1999, and as Director of Transnational  Business Unit from 1995 to 1999. |
|                |       |    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Timothy R. Glandon  |       | 45      |       | Vice President and  General Manager, North American Automotive, of the Company since  September 14, 2006. Prior thereto Mr. Glandon was General Manager  of Automotive Safety Technologies since August 1, 2001. Prior thereto  Mr. Glandon was Vice President and General Manager with American Components,  Inc. from 1996 to 2001.                                                                                |
|                |       |    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Theodore D. Kill    |       | 58      |       | Vice President,  Worldwide Automotive Sales, of the Company since August 2006. Prior  thereto Mr. Kill was a principal with Kill and Associates from 2003 to  2006. Prior thereto Mr. Kill was a principal with Kill and Bolton  Associates from 1995 to 2003.                                                                                                                                                       |
|                |       |    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Ronald L.G. Tsoumas |       | 48      |       | Controller and  Treasurer of the Company since September 2007. Prior thereto  Mr. Tsoumas was Assistant Controller of the Company since  July 1998.                                                                                                                                                                                                                                                                  |

 

All executive officers are elected by the Board of Directors and servea term of one year or until their successors are duly elected and qualified.

 

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**PART II**

 

**Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters andIssuer Purchases of Equity Securities**

 

The following is a tabulation of high and low sales prices for theperiods indicated as reported by the New York Stock Exchange.

 
| ** **                          | ** ** | ** **                | ** ** | ** ** | ** ** | **Dividends** | ** ** |
|-------------------------------------|------------|---------------------------|------------|------------|------------|---------------|------------|
| ** **                          | ** ** | **Sales Price Per Share** | ** ** | **Paid**   | ** ** |
| ** **                          | ** ** | **High**                  | ** ** | **Low**    | ** ** | **Per Share** | ** ** |
| Fiscal  Year ended May 2, 2009 |       |                      |       |       |       |          |       |
| First  Quarter                      |       | $                         | 12.51      |       | $          | 9.50          |       | $ | 0.05 |   |
| Second  Quarter                     |       | 13.65                     |       | 6.11       |       | 0.07          |       |
| Third  Quarter                      |       | 9.66                      |       | 4.45       |       | 0.07          |       |
| Fourth  Quarter                     |       | 6.43                      |       | 2.59       |       | 0.07          |       |
|                                |       |                      |       |       |       |          |       |
| Fiscal  Year ended May 3, 2008 |       |                      |       |       |       |          |       |
| First  Quarter                      |       | $                         | 18.90      |       | $          | 14.30         |       | $ | 0.05 |   |
| Second  Quarter                     |       | 17.04                     |       | 10.27      |       | 0.05          |       |
| Third  Quarter                      |       | 16.94                     |       | 10.53      |       | 0.05          |       |
| Fourth  Quarter                     |       | 12.95                     |       | 9.89       |       | 0.05          |       |

 

On June 23, 2009, the Board declared a dividend of $0.07 per shareof common stock, payable on July 31, 2009, to holders of record on July 17,2009.

 

As of July 1, 2009,the number of record holders of our common stock was 636.

 

**Equity Compensation Plan Information**

** **

The following table provides information about shares of our commonstock that may be issued upon exercise of stock options or granting of stockawards under all of the existing equity compensation plans as of May 2,2009.

 
| **Plan category**                                           | ** ** | **Number  of securities  to be issued upon  exercise of   outstanding options,  warrants and rights** | ** ** | **Weighted-average  exercise price of  outstanding options,  warrants and rights** | ** ** | **Number  of securities  remaining available  for future issuance  under equity  compensation plans  (excluding securities  reflected in the first  column)** | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity compensation  plans approved by security holders     |       | 910,633                                                                                               |       | $                                                                                  | 7.97       |                                                                                                                                                          | 394,718    |   |
|                                                        |       |                                                                                                  |       |                                                                               |       |                                                                                                                                                          |       |
| Equity compensation  plans not approved by security holders |       | —                                                                                                |       | —                                                                             |       | —                                                                                                                                                        |       |
| Total                                                       |       | 910,633                                                                                               |       | $                                                                                  | 7.97       |                                                                                                                                                          | 394,718    |   |

 

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**Purchaseof Equity Securities by the Company and Affiliated Purchasers**

** **
| ** **                                            | ** ** | ** **         | ** ** | ** **      | ** ** | **Total  Number of**       | ** ** | **Maximum  Number of**         | ** ** |
|-------------------------------------------------------|------------|--------------------|------------|-----------------|------------|----------------------------|------------|--------------------------------|------------|
| ** **                                            | ** ** | **Total**          | ** ** | ** **      | ** ** | **Shares  Purchased as**   | ** ** | **Shares  that**               | ** ** |
| ** **                                            | ** ** | **Number  of**     | ** ** | **Average**     | ** ** | **Part of  Publicly** | ** ** | **May Yet  Be Purchased** | ** ** |
| ** **                                            | ** ** | **Shares**         | ** ** | **Price  Paid** | ** ** | **Announced  Plans**       | ** ** | **Under  the Plans or**        | ** ** |
| **Period**                                            | ** ** | **Purchased  (1)** | ** ** | **Per  Share**  | ** ** | **or  Programs (2)**       | ** ** | **Programs  (2)**              | ** ** |
|                                                  |       |               |       |            |       |                       |       |                           |       |
| February 1,  2009 through February 28, 2009 |       | 297                |       | $               |  4.62 |                       | —     |                           | 2,360,120  |   |
|                                                  |       |               |       |            |       |                       |       |                           |       |
| March 1,  2009 through April 4, 2009        |       | 29,600             |       | $               | 3.88       |                       | 29,600     |                           | 2,330,520  |   |
|                                                  |       |               |       |            |       |                       |       |                           |       |
| April 5,  2009 through May 2, 2009          |       | 14,252             |       | $               |  6.20 |                       | —     |                           | 2,330,520  |   |
|                                                  |       | 44,149             |       | $               |  4.63 |                       | 29,600     |                           | 2,330,520  |   |

 

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(1)  The amount includes the repurchase andcancellation of shares of common stock redeemed by the Company for the paymentof minimum withholding taxes on the value of restricted stock awards vestingduring the period.

 

(2)  On September 18, 2008, the Boardof Directors adopted a plan to repurchase up to 3 million shares of its commonstock.  The plan will expire onMay 1, 2010.

 

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**Item6.  Selected Financial Data**

 

The following selected financial data should be readin conjunction with “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” and the Company’s Consolidated FinancialStatements and related notes included elsewhere in this report.  The consolidated statement of operations datafor fiscal 2009, 2008 and 2007, and the consolidated balance sheet data as of May 2,2009 and May 3, 2008, are derived from, and are qualified by reference to,the Company’s audited Consolidated Financial Statements included elsewhere inthis report.  The consolidated statementof operations data for fiscal 2006 and 2005, and the consolidated balance sheetdata as of April 28, 2007, April 29, 2006 and April 30, 2005,are derived from audited consolidated financial statements not included in thisreport.  Due to the timing of our fiscalcalendar, fiscal 2008 represents 53 weeks of results.  Fiscal 2009, 2007, 2006 and 2005 represent 52weeks of results.

 
| ** **                                                                    | ** ** | **Fiscal Year Ended**                                        | ** **  |
|-------------------------------------------------------------------------------|------------|--------------------------------------------------------------|-------------|
| ** **                                                                    | ** ** | **May 2,**                                              | ** **  | **May 3,** | ** ** | **April 28,** | ** ** | **April 29,** | ** ** | **April 30,** | ** ** |
| ** **                                                                    | ** ** | **2009**                                                     | ** **  | **2008 (53 wks)** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                                    | ** ** | **(In Millions, Except Percentages and Per Share  Amounts)** | ** **  |
| Income  Statement Data:                                                       |       |                                                         |        |   |   |   |   |   |   |   |   |
| Net  sales                                                                    |       | $                                                            |  425.6 |   | $ |  551.1 |   | $ |  448.4 |   | $ |  421.6 |   | $ |  392.7 |   |
| Income/(loss)  before income taxes and cumulative affect of accounting change |       | (110.8                                                       | )(1)        | 49.5 | (2) | 35.8 | (3) | 32.4 | (4) | 38.4 | (5) |
| Income  taxes                                                                 |       | 1.7                                                          | (1)         | 9.7 | (2) | 9.8 | (3) | 15.3 | (4) | 12.9 | (5) |
| Cumulative  effect of accounting change                                       |       | —                                                       |        | — |   | 0.1 |   | — |   | — |   |
| Net  income/(loss)                                                            |       | (112.5                                                       | )(1)        | 39.8 | (2) | 26.1 | (3) | 17.0 | (4) | 25.5 | (5) |
| Per  Common Share:                                                            |       |                                                         |        |   |   |   |   |   |   |   |   |
| Basic  net income/(loss)                                                      |       | (3.05                                                        | )(1)        | 1.07 | (2) | 0.72 | (3) | 0.47 | (4) | 0.71 | (5) |
| Diluted  net income/(loss)                                                    |       | (3.05                                                        | )(1)        | 1.06 | (2) | 0.71 | (3) | 0.47 | (4) | 0.71 | (5) |
| Dividends                                                                     |       | 0.26                                                         |        | 0.20 |   | 0.20 |   | 0.20 |   | 0.20 |   |
| Book  Value                                                                   |       | 6.28                                                         |        | 9.93 |   | 8.69 |   | 7.82 |   | 7.62 |   |
| Long-term  Debt                                                               |       | —                                                       |        | — |   | — |   | — |   | — |   |
| Retained  Earnings                                                            |       | 143.6                                                        |        | 265.8 |   | 233.7 |   | 215.1 |   | 205.5 |   |
| Fixed  Assets (net)                                                           |       | 69.9                                                         |        | 90.3 |   | 86.9 |   | 90.5 |   | 92.6 |   |
| Total  Assets                                                                 |       | 305.3                                                        |        | 470.2 |   | 411.7 |   | 374.6 |   | 356.7 |   |
| Return  on Average Equity                                                     |       | -37.2                                                        | %(1)        | 11.4 | %(2) | 8.5 | %(3) | 5.9 | %(4) | 9.6 | %(5) |
| Pre-tax  Income/(loss) as a Percentage of Sales                               |       | -26.0                                                        | %(1)        | 9.0 | %(2) | 8.0 | %(3) | 7.7 | %(4) | 9.8 | %(5) |
| Net  Income/(loss) as a Percentage of Sales                                   |       | -26.4                                                        | %(1)        | 7.2 | %(2) | 5.8 | %(3) | 4.0 | %(4) | 6.5 | %(5) |
|                                                                               |            |                                                              |             |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1) Fiscal 2009 results include a pre-taxcharge of $94.4 million relating to goodwill and other asset impairments.  In addition, fiscal 2009 results include apre-tax charge of $25.3 million relating to restructuring activities.  The income tax expense includes a $28.0million valuation charge related to the uncertainty of the future realizationof our deferred tax assets.

 

(2) Fiscal 2008 results include a pre-taxcharge of $5.2 million relating to a restructuring of our U.S.-based automotiveoperations and the decision to discontinue producing certain legacy products inthe Interconnect segment.

 

(3) Fiscal 2007 results include a pre-tax andan after-tax restructuring charge of $2.0 million related to the closing of ourScotland automotive parts manufacturing plant and transfer of production linesfrom that facility to our automotive parts manufacturing facility in Malta.

 

(4) Fiscal 2006 results include $4.5 millionof income tax expense related to the repatriation of $38.1 million of foreignearnings for which income taxes were not previously provided, and an after-taxcharge of $1.5 million ($2.3 million pre-tax) related to receivables deemed tobe impaired due to the Chapter 11 bankruptcy filing by Delphi.

 

(5) Fiscal 2005results include $1.0 million of tax-free income from life insurance proceeds.

 

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# **Item 7. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations**

#  

##### **Overview**

##### ** **

We are a global manufacturer of component andsubsystem devices with manufacturing, design and testing facilities in China,Czech Republic, Germany, Malta, Mexico, the Philippines, Singapore, the UnitedKingdom and the United States.  We are aglobal designer and manufacturer of electro-mechanical devices.  We design, manufacture and market devicesemploying electrical, radio remote control, electronic, wireless, sensing andoptical technologies.  Our business ismanaged on a segment basis, with those segments being Automotive, Interconnect,Power Products and Other.   For moreinformation regarding the business and products of these segments, see “Item 1.Business.”

 

Our components arefound in the primary end markets of the aerospace, appliance, automotive,consumer and industrial equipment markets, communications (includinginformation processing and storage, networking equipment, wireless andterrestrial voice/data systems), rail and other transportation industries.  Recent trends in the industries that we serveinclude:

 

·                  Automotiveindustry sales volume in the United States and European markets declinedsuddenly and substantially in fiscal 2009 and continue at historically lowlevels into fiscal 2010;

 

·                  Thedeteriorating condition of certain of our customers and the uncertainty as theyundergo restructuring initiatives, including in some cases, reorganizationunder bankruptcy laws;

 

·                  Decline in demand for new houses and theover-supply of new and existing houses;

 

·                  Demand for construction and materialhandling equipment is cyclical and has been impacted by the weakness of theeconomy, availability of credit and higher interest rates;

 

Our business has been and will likely continue to bematerially adversely affected by the current economic environment, particularlyas it impacts the automotive industry. The recent disruptions in global financial and credit markets havesignificantly impacted global economic activity and led to an economicrecession.  As a result of thesedisruptions, our customers and markets have been adversely affected.  We have recently experienced a significantdrop in sales in all of our reporting segments. If we experience reduced demand because of these disruptions in themacroeconomic environment or other factors, our business, results of operationand financial condition could be materially adversely affected.  If we are unable to successfully anticipatechanging economic and financial conditions, we may be unable to effectivelyplan for and respond to these changes and our business could be adverselyaffected.

 

We review our goodwilland other intangible assets for impairment whenever events or changes incircumstances indicate that the carrying amount of these assets may not berecoverable, and we also review our goodwill annually in accordance with SFAS No. 142,“Goodwill and Other Intangibles”.  Thevalues assigned to goodwill and intangible assets are normally based onestimates and judgments regarding expectations for the success and life cycleof products and technologies acquired.  Asevere decline in expectations, future cash flows, a change in strategicdirection or our market capitalization remaining below our net book value for asignificant period of time could result in significant impairment charges,which could have a material adverse effect on our financial condition andresults of operations.  Based on eventsand general business declines, we performed “step one” of the goodwillimpairment test in accordance with paragraph 19 of SFAS No. 142, on thereporting units that have goodwill during fiscal 2009.  Based on this test, we determined that thefair value was less than the carrying value of the net assets for certainreporting units.  We completed  “step two” of the goodwill test and concludedthat goodwill was impaired.  Therefore,during fiscal 2009, we recorded a goodwill impairment charge of $25.8 millionin our Automotive segment, $30.8 million in our Interconnect segment, $5.4million in our Power Products segment and $1.2 million in our Other segment fora total of $63.2 million related to these assets.

 

Also, inaccordance with FASB Statement No. 144, “Accounting for the Impairment orDisposal of Long-Lived Assets”, we record impairment losses on long-livedassets used in operations when events and circumstances indicate thatlong-lived assets might be impaired and the undiscounted cash flows estimatedto be generated by those assets are less than the carrying amounts of thoseassets. During fiscal 2009, based on our future estimates of the

 

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##### **Overview - Continued**

##### ** **

undiscounted cash flows,it was determined that certain identifiable assets of our TouchSensor andHetronic businesses in the Interconnect segment, the Automotive SafetyTechnologies business in our Automotive segment and Magna-Lastic Devices, Inc.from our Other segment were impaired. Therefore, we recorded an impairment charge of $26.2 million in theInterconnect segment, $4.6 million in the Automotive segment and $0.4 millionin the Other segment for a total of $31.2 million for these assets.

 

On September 30,2008, we acquired certain assets of Hetronic LLC (Hetronic) for $53.6 millionin cash.  We also incurred $2.4 millionin transaction costs related to the purchase. Hetronic is a global leader in industrial safety radio remote controlswith locations in the U.S., Malta, the Philippines and Germany.  Hetronic is represented in 45 countries bydirect sales associates, licensed partners, distributors and representatives.  Hetronic provides application specific andstandard controls to many different industries, such as material handling,transportation, mining, military, agriculture and construction.

 

On January 24, 2008, we announced arestructuring of our U.S.-based automotive operations and a decision todiscontinue producing certain legacy products in the Interconnect segment.  The Automotive and Interconnect restructuringis expected to be completed during fiscal 2010. We record the expense in the restructuring section of our ConsolidatedStatement of Operations. On January 24, 2008, the total pre-tax chargeswere estimated between $19.0 million and $25.0 million.  As of May 2, 2009, we have recorded$23.2 million of the charges.  Weestimate that we will record pre-tax restructuring charges in fiscal 2010between $0.5 million and $1.5 million, of which $0.5 million will relate to thetermination of approximately 225 employees and the cost of one-time employeebenefits, retention, COBRA and outplacement services.  We continue to perform periodic impairmenttesting, if indicators exist, and will record any charges incurred as per SFAS No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets”, (“SFAS No. 144”)in the period when impairment is incurred.

 

On March 12, 2009, we announced severaladditional restructuring actions to further reduce our exposure to the NorthAmerican automotive industry and to consolidate manufacturing facilities inlower cost regions to reduce costs. After these actions our principal manufacturing operations will be inMexico, Malta and China.  In addition, wedecided to transfer certain new GM business to other suppliers.  This business was scheduled to be produced inour Shanghai, China automotive facility.

 

All Ford Motor Company production at Methode’sReynosa, Mexico, facility will be moved to another supplier.  TouchSensor manufacturing currently in westsuburban Chicago, Illinois, will be moved to Monterrey, Mexico.  Additionally, our operations in Shanghai,China, will be consolidated to two facilities from three. The addition of aplant in Morocco has been put on indefinite hold.

 

In total, this additional restructuring will affectapproximately 850 employees worldwide. We estimate that we will record a pre-taxcharge between $16.0 million and $25.0 million, during fiscal years 2009 and2010. The cash portion of this charge is estimated between $7.0 million and$8.0 million.  We estimate that we willrecord pre-tax restructuring charges in fiscal 2010 between $8.7 million and$17.7 million.

 

**Business Outlook**

 

We are very cautious about fiscal 2010, expectingthat it will be another challenging year. The financial sector crisis andstagnant global economic conditions have increased uncertainty in the markets inevery geographic region we serve. We expect the unprecedented current globaleconomic environment to continue to affect near-term results and to createdifficult conditions. Looking forward, visibility is low and forecasting isvery challenging.  Sales of Automotivesegment products are expected to decline, as our forecasted sales from NorthAmerican and European automotive OEMs are lower. Additionally, we took actionsin fiscal 2008 and 2009 to exit certain unprofitable or marginally profitableNorth American automotive business. Sales of sensor pads for passiveoccupant-detection systems are expected to decline due to lower North Americanautomotive volumes, and as the current systems are replaced, with newtechnology.  We expect sales declines inthe Interconnect and Power Products segments as well as demand for informationprocessing and networking equipment, construction, voice and datacommunications systems, consumer electronics, appliance, aerospace vehicles andindustrial equipment to be stagnant.  Inour Interconnect segment, sales from our Hetronic acquisition will be offset bysales lost due to our decision to exit certain unprofitable component productsin fiscal 2009.  While we have takensteps to restructure our businesses, operating margin improvement will not berealized until economic conditions begin to improve.

 

Results may differ materially from what is expressedor forecasted.  See “ Item 1A RiskFactors” herein.

 

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**Results of Operations**

 

**Results of Operations for the Fiscal Year Ended May 2,2009 (52 weeks) as Compared to the Fiscal Year Ended May 3, 2008 (53weeks)**

 

**Consolidated Results**

** **

Below is a table summarizing results for the years ended:

(in millions)

 
| ** **                               | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|----------------|------------|----------------|------------|
| ** **                               | ** ** | **2009**        | ** ** | **2008**        | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net sales                                |       | $               | 425.6      |            | $          | 551.1          |       | $              | (125.5     | ) | -22.8 | % |
| Other income                             |       | 3.2             |       | 1.9             |       | 1.3            |       | 68.5           | %          |
|                                     |       | 428.8           |       | 553.0           |       | (124.2         | )          | -22.5          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Cost of products  sold                   |       | 356.4           |       | 428.4           |       | (72.0          | )          | -16.8          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Gross margins  (including other income)  |       | 72.4            |       | 124.6           |       | (52.2          | )          | -41.9          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Restructuring                            |       | 25.3            |       | 5.2             |       | 20.1           |       | 386.5          | %          |
| Impairment of  goodwill and other assets |       | 94.4            |       | 1.5             |       | 92.9           |       | 6193.3         | %          |
| Selling and  administrative expenses     |       | 57.5            |       | 61.5            |       | (4.0           | )          | -6.5           | %          |
| Amortization of  intangibles             |       | 6.9             |       | 6.0             |       | 0.9            |       | 15.0           | %          |
| Interest income,  net                    |       | 1.4             |       | 2.3             |       | (0.9           | )          | -39.9          | %          |
| Other, net -  expense                    |       | (0.5            | )          | (3.2            | )          | 2.7            |       | -85.0          | %          |
| Income taxes -  expense                  |       | 1.7             |       | 9.7             |       | (8.0           | )          | -82.7          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Net  income/(loss)                       |       | $               | (112.5     | )               | $          | 39.8           |       | $              | (152.3     | ) | -382.6 | % |

 
| ** **                               | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|------------|------------|------------|------------|
| **Percent  of sales:**                   | ** ** | **2009**        | ** ** | **2008**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                |       | 100.0           | %          | 100.0           | %          |       |       |       |       |
| Other income                             |       | 0.8             | %          | 0.3             | %          |       |       |       |       |
| Cost of products  sold                   |       | 83.7            | %          | 77.7            | %          |       |       |       |       |
| Gross margins  (including other income)  |       | 17.0            | %          | 22.6            | %          |       |       |       |       |
| Restructuring                            |       | 5.9             | %          | 0.9             | %          |       |       |       |       |
| Impairment of  goodwill and other assets |       | 22.2            | %          | 0.3             | %          |       |       |       |       |
| Selling and  administrative expenses     |       | 13.5            | %          | 11.2            | %          |       |       |       |       |
| Amortization of  intangibles             |       | 1.6             | %          | 1.1             | %          |       |       |       |       |
| Interest income,  net                    |       | 0.3             | %          | 0.4             | %          |       |       |       |       |
| Other, net -  expense                    |       | -0.1            | %          | -0.6            | %          |       |       |       |       |
| Income taxes -  expense                  |       | 0.4             | %          | 1.8             | %          |       |       |       |       |
| Net  income/(loss)                       |       | -26.4           | %          | 7.2             | %          |       |       |       |       |

 

*Net Sales*. Consolidated net sales decreased $125.5 million, or 22.8%, to $425.6million for the fiscal year ended May 2, 2009 from $551.1 million for thefiscal year ended May 3, 2008.  The Automotivesegment net sales declined $118.5 million or 32.7% to $243.6 million for fiscal2009 from $362.1 million for fiscal 2008. The decline is attributable to the softening of the global economicenvironment, especially the effect on the automotive industry.  The Automotive segment net sales were alsonegatively impacted by planned lower Chrysler sales volumes of $14.8 million infiscal 2009, compared to $59.2 million in fiscal 2008.  In July 2007, we decided to exitproduction for certain Chrysler products at the expiration of our manufacturingcommitment.  The transfer of the Chryslerproduct was completed during the second quarter of fiscal 2009.  Excluding Chrysler, the North American Automotivesegment net sales declined 18.5% in fiscal 2009, as compared to fiscal2008.  The Interconnect segment net sales

 

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**Consolidated Results - Continued**

 

decreased $5.3 million, or 3.9% to $131.0 million infiscal 2009 as compared to $136.3 million in fiscal 2008.  The Interconnect segment net sales werefavorably impacted by the Hetronic acquisition, which was purchased on September 30,2008, offset by lower sales in the other Interconnect businesses.  The Power Products segment net salesdecreased $3.1 million to $42.7 million in fiscal 2009, compared to $45.8million in fiscal 2008.  Translation ofnet sales from our foreign operations increased reported net sales by $1.6million or 0.4% due to currency rate fluctuations.

 

*Other Income*. Other income increased $1.3 million to $3.2 million for the fiscal yearended May 2, 2009 from $1.9 million for the fiscal year ended May 3,2008.  Other income consisted primarilyof earnings from engineering design fees and royalties.

 

*Cost of Products Sold*. Consolidated cost of products sold decreased $72.0 million, or 16.8%, to$356.4 million for the fiscal year ended May 2, 2009 from $428.4 millionfor the fiscal year ended May 3, 2008. The decrease is due to the lower sales volumes.  Consolidated cost of products sold as apercentage of sales was 83.7% for fiscal 2009 and 77.7% for fiscal 2008.  This increase relates to manufacturinginefficiencies experienced in the third and fourth quarters of fiscal 2009 dueto a significant, unexpected drop in sales, in addition to the drop in theplanned sales to Chrysler.  A largeportion of the drop in sales is due to the North American automotivemanufacturers extending plant shutdowns that occurred during the second half offiscal 2009.

 

*GrossMargins (including other income). *Consolidated gross margins (includingother income) decreased $52.2 million, or 41.9%, to $72.4 million for thefiscal year ended May 2, 2009 as compared to $124.6 million for the fiscalyear ended May 3, 2008.  Grossmargins as a percentage of net sales were 17.0% for fiscal 2009 and 22.6% forfiscal 2008.  Gross margins were impactednegatively due to manufacturing inefficiencies during the third and fourthquarters of fiscal 2009 related to significantly lower sales volumes.  In addition, gross margins were impacted dueto unfavorable product mix and production costs for the Power Products segment.

 

*Restructuring*. On January 24, 2008, we announced a restructuring of our U.S.-basedautomotive operations and the decision to discontinue producing certain legacyproducts in the Interconnect segment. During the fiscal year ended May 2, 2009, we recorded arestructuring charge of $18.0 million, which consisted of  $6.1 million for employee severance, $10.8million for impairment and accelerated depreciation for buildings andimprovements and machinery and equipment, $0.2 million for inventory write-downsand $0.9 million relating to professional fees. During fiscal 2008, we recorded restructuring charges of $5.2 million,which consisted of $3.4 million for employee severance, $1.3 million for assetwrite-downs and $0.5 million for professional fees.

 

On March 12, 2009,we announced several additional restructuring actions to further reduce ourexposure to the North American automotive industry and to consolidatemanufacturing facilities in lower cost regions to reduce costs. During the fiscal year ended May 2, 2009, we recorded arestructuring charge of $7.3 million, which consisted of $0.1 million foremployee severance, $1.4 million for impairment and accelerated depreciationfor buildings and improvements and machinery and equipment, $5.4 million forimpairment of customer funded tooling and $0.1 million in forfeited securitydeposits related to the cancellation of the new GM business and $0.3 millionrelating to professional fees.

 

*Impairment of Goodwill and OtherAssets*.  We review our goodwill and other intangibleassets for impairment whenever events or changes in circumstances indicate thatthe carrying amount of these assets may not be recoverable, and we also reviewour goodwill annually in accordance with SFAS No. 142, “Goodwill and OtherIntangibles”.  The values assigned togoodwill and intangible assets are normally based on estimates and judgmentsregarding expectations for the success and life cycle of products andtechnologies acquired.  A severe declinein expectations, future cash flows, a change in strategic direction or ourmarket capitalization remaining below our net book value for a significantperiod of time could result in significant impairment charges, which could havea material adverse effect on our financial condition and results ofoperations.  Based on events and generalbusiness declines, we performed “step one” of the goodwill impairment test inaccordance with paragraph 19 of SFAS No. 142, on the reporting units thathad goodwill during fiscal 2009.  Basedon this test, we determined that the fair value was less than the carryingvalue of the net assets for certain reporting units.  We completed “step two” of the goodwill test and concluded that goodwill wasimpaired.  During fiscal 2009, werecorded a goodwill impairment charge of $25.8 million in our Automotivesegment, $30.8 million in our Interconnect segment, $5.4 million in our PowerProducts segment and $1.2 million in our Other segment for a total of $63.2million related to these assets.

 

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**Consolidated Results - Continued**

 

Also, in accordance withFinancial Accounting Standards Board, (“FASB”) Statement No. 144, “Accountingfor the Impairment or Disposal of Long-Lived Assets”, we record impairmentlosses on long-lived assets used in operations when events and circumstancesindicate that long-lived assets might be impaired and the undiscounted cashflows estimated to be generated by those assets are less than the carryingamounts of those assets. During fiscal 2009, based on our future estimates ofthe undiscounted cash flows, it was determined that certain identifiable assetsof our TouchSensor and Hetronic businesses in the Interconnect segment, the AutomotiveSafety Technologies business from our Automotive segment and Magna-LasticDevices, Inc. from our Other segment were impaired.  Therefore, we recorded an impairment chargeof $26.2 million in the Interconnect segment, $4.6 million in the Automotivesegment and $0.4 million in the Other segment for a total of $31.2 million forthese assets.

 

In fiscal 2008, werecorded a $1.5 million impairment of assets relating to a $0.7 millionwrite-down of machinery and equipment as a result of lower anticipated revenuesover the life of the related project and $0.8 million for the impairment of aparticular patent (classified as an intangible asset) where the underlyingtechnology was deemed to be commercially impractical.

 

*Selling and AdministrativeExpenses*.  Selling and administrative expenses decreased$4.0 million, or 6.5%, to $57.5 million for the fiscal year ended May 2,2009 compared to $61.5 million for the fiscal year ended May 3, 2008.  Selling and administrative expenses werefavorably impacted by an adjustment of pre-tax compensation expense associatedwith the performance-based restricted stock awards granted in fiscal 2007,2008 and 2009.  The adjustment was madebecause we determined that these awards were unlikely to vest based on theCompany’s performance under the revenue growth and return on invested capitaltargets.  The pre-tax compensationexpense for fiscal 2009 was a reversal of expense of $0.6 million, whichrelates to compensation expense reversed from previous years.  The pre-tax compensation expense for fiscal2008 was $3.3 million.  Partiallyoffsetting the reversal of pre-tax compensation expense, selling and administrative expenses wereimpacted by higher amortization expense relating to the Hetronic, ValueEngineered Products, Inc. and TouchSensor acquisitions.  In addition, management positions were filledfor our testing facilities in fiscal 2009, which were vacant in fiscal2008.  Selling and administrativeexpenses as a percentage of net sales increased to 13.5% in fiscal 2009 from11.2% in fiscal 2008.

 

*Amortization of Intangibles*. Amortization of intangibles increased $0.9 million, or 15.0%, to $6.9million for the fiscal year ended May 2, 2009 compared to $6.0 million forthe fiscal year ended May 3, 2008. The increase is due to the amortization expenses for the Hetronicacquisition.

 

*Interest Income, Net*. Net interest income was $1.4 million for the fiscal year ended May 2,2009 and $2.3 million for the fiscal year ended May 3, 2008.  The average cash balance was $81.4 millionduring fiscal 2009 as compared to $83.0 million during fiscal 2008.  The average interest rate earned in fiscal2009 was 2.22% compared to 3.07% in fiscal 2008.  The average interest rate earned includesboth taxable interest and tax-exempt municipal interest.  Interest expense was $0.4 million for fiscal2009 compared to $0.2 million for fiscal 2008.

 

*Other, Net*. Other, net was an expense of $0.5 million for the fiscal year ended May 2,2009, compared to an expense of $3.2 million for the fiscal year ended May 3,2008.  The decrease is primarily due tothe strengthening of the U.S. dollar versus the Euro and Czech koruna duringfiscal 2009 as compared to fiscal 2008. The functional currencies of our international operations are theBritish pound, Chinese yuan, Czech koruna, Euro, Mexican peso and Singaporedollar.  Some foreign operations havetransactions denominated in currencies other than their functional currencies,primarily sales in U.S. dollars and Euros, creating exchange ratesensitivities.

 

At May 2, 2009, approximately $3.5 millionwas invested in an enhanced cash fund sold as an alternative to traditionalmoney-market funds. We have historically invested a portion of our on hand cashbalances in this fund. These investments are subject to credit, liquidity,market and interest rate risk. Based on the information available to us, wehave estimated the fair value of this fund at $0.72 per unit as of May 2,2009. For fiscal 2009, we recorded a loss of $1.2 million, of which $0.6million was realized on partial redemptions of $8.8 million, and $0.6 million was unrealized.  See the Financial Condition, Liquidity andCapital Resources section for more information.

 

*IncomeTaxes.*  The effective income tax rate was a netprovision of 1.5% in fiscal 2009 compared with a provision of 19.7% in fiscal2008.  The income tax rate in fiscal 2009was a benefit due to the impairment of goodwill and intangible assets,restructuring charges and slowing of business in our U.S.-based businesses,causing a loss before income taxes. Offsetting the benefit recorded in fiscal 2009, a valuation allowanceagainst our deferred

 

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**ConsolidatedResults - Continued**

 

tax assets of $28.0 wasrecorded in accordance with FASB No. 109 “Accounting for Income Taxes”.  This was recorded due to the uncertainty ofthe future utilization of our deferred tax assets.  See Note 7 for additional information.  The effective tax rates for both fiscal 2009and 2008 reflect utilization of foreign investment tax credits and the effectof lower tax rates on income of the Company’s foreign earnings and a higherpercentage of earnings at those foreign operations.

 

*NetIncome/(Loss).*  Net income decreased $152.3 million to a lossof $112.5 million for the fiscal year ended May 2, 2009 as compared to netincome of $39.8 million for the fiscal year ended May 3, 2008 due to theimpairment of goodwill and intangible assets, lower sales volumes, the incometax valuation allowance recorded against our deferred tax assets, increasedrestructuring expenses, offset by favorable other income and lower selling andadministrative expenses.

 

## **OperatingSegments**

 

**AutomotiveSegment Results**

** **

Below is a tablesummarizing results for the years ended:

(in millions)

 
| ** **                               | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|----------------|------------|----------------|------------|
| ** **                               | ** ** | **2009**        | ** ** | **2008**        | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net  sales                               |       | $               | 243.6      |            | $          | 362.1          |       | $              | (118.5     | ) | -32.7 | % |
| Other  income                            |       | 2.5             |       | 0.9             |       | 1.6            |       | 177.8          | %          |
|                                     |       | 246.1           |       | 363.0           |       | (116.9         | )          | -32.2          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Cost  of products sold                   |       | 206.0           |       | 282.1           |       | (76.1          | )          | -27.0          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Gross  margins (including other income)  |       | 40.1            |       | 80.9            |       | (40.8          | )          | -50.4          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Restructuring                            |       | 19.3            |       | 4.4             |       | 14.9           |       | 338.6          | %          |
| Impairment  of goodwill and other assets |       | 30.5            |       | 1.5             |       | 29.0           |       | 1933.3         | %          |
| Selling  and administrative expenses     |       | 14.6            |       | 18.0            |       | (3.4           | )          | -18.9          | %          |
| Other,  net - income/(expense)           |       | 0.3             |       | (1.7            | )          | 2.0            |       | -117.6         | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Income/(loss)  before income taxes       |       | $               | (24.0      | )               | $          | 55.3           |       | $              | (79.3      | ) | -143.4 | % |

 
| ** **                               | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|------------|------------|------------|------------|
| **Percent of sales:**                    | ** ** | **2009**        | ** ** | **2008**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  sales                               |       | 100.0           | %          | 100.0           | %          |       |       |       |       |
| Other  income                            |       | 1.0             | %          | 0.2             | %          |       |       |       |       |
| Cost  of products sold                   |       | 84.6            | %          | 77.9            | %          |       |       |       |       |
| Gross  margins (including other income)  |       | 16.5            | %          | 22.3            | %          |       |       |       |       |
| Restructuring                            |       | 7.9             | %          | 1.2             | %          |       |       |       |       |
| Impairment  of goodwill and other assets |       | 12.5            | %          | 0.4             | %          |       |       |       |       |
| Selling  and administrative expenses     |       | 6.0             | %          | 5.0             | %          |       |       |       |       |
| Other,  net                              |       | 0.1             | %          | -0.5            | %          |       |       |       |       |
| Income/(loss)  before income taxes       |       | -9.9            | %          | 15.3            | %          |       |       |       |       |

 

*Net Sales*. Automotive segment net sales decreased $118.5 million, or 32.7%, to$243.6 million for the fiscal year ended May 2, 2009 from $362.1 millionfor the fiscal year ended May 3, 2008. The decline is attributable to the softening of the global economicenvironment, especially the effect on the North American automotiveindustry.  Net sales have declined infiscal 2009 as compared to fiscal 2008 by 34.2% in North America, 30.6% inEurope and 30.7% in Asia.  A largeportion of the drop in sales is due to the North American automotive

 

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**AutomotiveSegment Results - Continued**

 

manufacturersextending plant shutdowns that occurred during the third and fourth quarters offiscal 2009.  The Automotive segment netsales were also negatively impacted by anticipated lower Chrysler sales volumesof $14.8 million in fiscal 2009, compared to $59.2 million in fiscal 2008.  Excluding Chrysler, the North AmericanAutomotive segment net sales declined 18.5% in fiscal 2009, as compared tofiscal 2008.  Translation of net salesfrom our foreign operations in the fiscal year ended May 2, 2009 increasedreported net sales by $1.3 million, or 0.5%, due to currency rate fluctuations.

 

*OtherIncome*.  Other income increased $1.6 million, or177.8%, to $2.5 million for the fiscal year ended May 2, 2009 from $0.9million for the fiscal year ended May 3, 2008.  Other income consisted primarily of earningsfrom engineering design fees and royalties.

 

*Cost ofProducts Sold*.  Automotive segment cost of products solddecreased $76.1 million to $206.0 million for the fiscal year ended May 2,2009 from $282.1 million for the fiscal year ended May 3, 2008.  The decrease relates to lower salesvolumes.  Automotive segment costs ofproducts sold as a percentage of sales increased to 84.6% for fiscal 2009 from77.9% for fiscal 2008.  This increaserelates to manufacturing inefficiencies experienced in the third and fourthquarters of fiscal 2009 due to a significant, unexpected drop in sales, inaddition to lower planned sales to Chrysler. A large portion of the drop in sales is due to the North Americanautomotive manufacturers extending plant shutdowns that occurred during thesecond half of fiscal 2009.

 

*GrossMargins (including other income). *Automotive segment gross margins(including other income) decreased $40.8 million, or 50.4%, to $40.1 millionfor the fiscal year ended May 2, 2009 as compared to $80.9 million for thefiscal year ended May 3, 2008. Gross margins as a percentage of net sales decreased to 16.5% for fiscal2009 from 22.3% for fiscal 2008.  Grossmargins were impacted negatively due to manufacturing inefficiencies during thesecond half of fiscal 2009 due to significantly lower sales volumes.  In addition, gross margins were impacted bythe planned lower Chrysler sales volumes in fiscal 2009.

 

*Restructuring*.  On January 24, 2008, we announced a restructuring of our U.S.-basedautomotive operations.  During fiscal2009, we recorded a restructuring charge of $12.8 million, which consisted of$4.7 million for employee severance, $7.4 million for impairment andaccelerated depreciation for buildings, building improvements and machinery andequipment and  $0.7 million forprofessional fees.  We expect therestructuring to be complete during fiscal 2010.

 

In fiscal 2008, werecorded a restructuring charge of $4.4 million, $2.7 million relating toemployee severance, $1.3 million relating to impairment and accelerateddepreciation for assets and $0.4 million for professional fees relating to the January 2008restructuring.

 

On March 12,2009, we announced several additional restructuring actions to further reduceour exposure to the North American automotive industry and to consolidatemanufacturing facilities in lower cost regions to reduce costs. During the fiscal year ended May 2, 2009, we recorded arestructuring charge of $6.5 million, which consisted of  $1.0 million for impairment and accelerateddepreciation for buildings and improvements and machinery and equipment and$5.4 million for customer funded tooling and $0.1 million in forfeited securitydeposits related to the cancellation of the new GM business.

 

*Impairmentof Goodwill and Other Assets*.  Based onevents and general business declines, we performed “step one” and “step two” ofthe goodwill impairment test in accordance with paragraph 19 of SFAS No. 142,on the reporting units that had goodwill during fiscal 2009.  Based on these tests, we concluded thatgoodwill was impaired.  We recorded agoodwill impairment charge of $25.8 million in our Automotive segment relatedto these assets.  See Note 4 for moreinformation.

 

Also, in accordance with FASB Statement No. 144, “Accountingfor the Impairment or Disposal of Long-Lived Assets”, during the fourth quarterof fiscal 2009, based on our future estimates of the undiscounted cash flows,it was determined that certain identifiable assets were impaired.  We recorded an impairment charge of$4.7million for these assets.  See Note 4for more information.

 

In fiscal 2008, werecorded a $1.5 million impairment of assets relating to a $0.7 millionwrite-down of machinery and equipment as a result of lower anticipated revenuesover the life of the related project and $0.8

 

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**AutomotiveSegment Results - Continued**

 

million for the impairmentof a particular patent (classified as an intangible asset) where the underlyingtechnology was deemed to be commercially impractical.

 

*Sellingand Administrative Expenses*.  Selling andadministrative expenses decreased $3.4 million, or 18.9%, to $14.6 million forthe fiscal year ended May 2, 2009 compared to $18.0 million for the fiscalyear ended May 3, 2008.  Thedecrease is due to lower commission expense as a result of lower sales duringfiscal 2009.  Selling and administrativeexpenses as a percentage of net sales increased to 6.0% in fiscal 2009 from5.0% in fiscal 2008.

 

*Other,Net*.  Other, net was income of $0.3 million for thefiscal year ended May 2, 2009, compared to an expense of $1.7 million forthe fiscal year ended May 3, 2008. The decrease is primarily due to the strengthening of the U.S. dollarversus the Euro during fiscal 2009 as compared to fiscal 2008.  The functional currencies of ourinternational operations are the British pound, Chinese yuan, Euro and Mexicanpeso.  Some foreign operations havetransactions denominated in currencies other than their functional currencies,primarily sales in U.S. dollars and Euros, creating exchange ratesensitivities.

 

*Income/(Loss)Before Income Taxes. *Automotive segment income/(loss) beforeincome taxes decreased $79.3 million, or 143.4%, to a loss of $24.0 million forthe fiscal year ended May 2, 2009 compared to income of $55.3 million forthe fiscal year ended May 3, 2008. The decrease occurred due to goodwill and intangible asset write-offs,manufacturing inefficiencies due to significantly lower sales volumes duringthe third and fourth quarters of fiscal 2009, increased restructuring expenses,partially offset by lower selling and administrative expenses.

 

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**InterconnectSegment Results**

** **

Below is a tablesummarizing results for the years ended:

(in millions)

 
| ** **                               | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|----------------|------------|----------------|------------|
| ** **                               | ** ** | **2009**        | ** ** | **2008**        | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net  sales                               |       | $               | 131.0      |            | $          | 136.3          |       | $              | (5.3       | ) | -3.9 | % |
| Other  income                            |       | 0.2             |       | 0.3             |       | (0.1           | )          | -33.3          | %          |
|                                     |       | 131.2           |       | 136.6           |       | (5.4           | )          | -4.0           | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Cost  of products sold                   |       | 99.7            |       | 104.7           |       | (5.0           | )          | -4.8           | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Gross  margins (including other income)  |       | 31.5            |       | 31.9            |       | (0.4           | )          | -1.3           | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Restructuring                            |       | 5.5             |       | 0.6             |       | 4.9            |       | 816.7          | %          |
| Impairment  of goodwill and other assets |       | 56.9            |       | —          |       | 56.9           |       | —         |       |
| Selling  and administrative expenses     |       | 31.0            |       | 25.9            |       | 5.1            |       | 19.7           | %          |
| Interest  income                         |       | 0.5             |       | 0.4             |       | 0.1            |       | 25.0           | %          |
| Other,  net - income/(expense)           |       | 0.7             |       | (1.2            | )          | 1.9            |       | -158.3         | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Income/(loss)  before income taxes       |       | $               | (60.7      | )               | $          | 4.6            |       | $              | (65.3      | ) | -1419.6 | % |

 
| ** **                               | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|------------|------------|------------|------------|
| **Percent of sales:**                    | ** ** | **2009**        | ** ** | **2008**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  sales                               |       | 100.0           | %          | 100.0           | %          |       |       |       |       |
| Other  income                            |       | 0.2             | %          | 0.2             | %          |       |       |       |       |
| Cost  of products sold                   |       | 76.1            | %          | 76.8            | %          |       |       |       |       |
| Gross  margins (including other income)  |       | 24.0            | %          | 23.4            | %          |       |       |       |       |
| Restructuring                            |       | 4.2             | %          | 0.4             | %          |       |       |       |       |
| Impairment  of goodwill and other assets |       | 43.4            | %          | 0.0             | %          |       |       |       |       |
| Selling  and administrative expenses     |       | 23.7            | %          | 19.0            | %          |       |       |       |       |
| Interest  income                         |       | 0.4             | %          | 0.3             | %          |       |       |       |       |
| Other,  net                              |       | 0.5             | %          | -0.9            | %          |       |       |       |       |
| Income/(loss)  before income taxes       |       | -46.3           | %          | 3.4             | %          |       |       |       |       |

 

*Net Sales*. Interconnect segment net sales decreased $5.3 million, or 3.9%, to$131.0 million for the fiscal year ended May 2, 2009 from $136.3 million forthe fiscal year ended May 3, 2008. Net sales were favorably impacted by the Hetronic acquisition on September 30,2008.  Excluding Hetronic, North Americannet sales decreased 14.7%, Europe decreased 22.8% and Asia decreased 7.8% infiscal 2009 as compared to fiscal 2008. The net sales decline was primarily due to the general economicslowdown.  Translation of net sales fromour foreign operations in the fiscal year ended May 2, 2009 increasedreported net sales by $0.3 million, or 0.2%, due to currency rate fluctuations.

 

*OtherIncome*.  Other income was $0.2 million for the fiscalyear ended May 2, 2009 and $0.3 million for the fiscal year ended May 3,2008.  Other income consisted primarilyof earnings from engineering design fees and royalties.

 

*Cost ofProducts Sold*.  Interconnect segment cost of products solddecreased $5.0 million to $99.7 million for the fiscal year ended May 2,2009 compared to $104.7 million for the fiscal year ended May 3,2008.  The majority of the decrease isdue to lower net sales.  Interconnectsegment cost of products sold as a percentage of net sales decreased to 76.1%in fiscal 2009 compared to 76.8% in fiscal 2008.  The decrease in cost of products sold as apercentage of net sales relates primarily to product mix related to theHetronic acquisition and the impact of the Interconnect restructuring.

 

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**InterconnectSegment Results - Continued**

 

*GrossMargins (including other income) *Interconnect segment gross margins(including other income) decreased $0.4 million, or 1.3%, to $31.5 million forthe fiscal year ended May 2, 2009 as compared to $31.9 million for thefiscal year ended May 3, 2008. Gross margins as a percentage of net sales increased to 24.0% in fiscal2009 from 23.4% in fiscal 2008.  Theincrease in gross margins as a percentage of net sales relates primarily toproduct mix related to the Hetronic acquisition and the impact of theInterconnect restructuring.

 

*Restructuring*. On January 24, 2008, we announced our decision to discontinueproducing certain legacy products in the Interconnect segment.  During fiscal 2009, we recorded arestructuring charge of $5.2 million, which consisted of $1.4 million foremployee severance, $3.4 million for impairment and accelerated depreciationfor buildings, building improvements and machinery and equipment, $0.2 millionfor inventory write-downs and $0.2 million relating to professional fees.  We expect the Interconnect restructuring tobe complete in fiscal 2010.

 

In fiscal 2008, werecorded a restructuring charge of $0.7 million, $0.6 million for employeeseverance and $0.1 million for professional fees relating to the January 2008restructuring.

 

On March 12,2009, we announced several additional restructuring actions to consolidatemanufacturing facilities in lower cost regions to reduce costs. During the fiscal year ended May 2, 2009, we recorded arestructuring charge of $0.3 million, which consisted of  $0.1 million for employee severance and $0.2million relating to professional fees.

 

*Impairmentof Goodwill and Intangible Assets*.  Based onevents and general business declines, we performed “step one” and “step two” ofthe goodwill impairment test in accordance with paragraph 19 of SFAS No. 142,on the reporting units that had goodwill during fiscal 2009.  Based on these tests, we concluded thatgoodwill was impaired.  We recorded agoodwill impairment charge of $30.8 million in our Interconnect segment relatedto these assets.  See Note 4 for moreinformation.

 

Also, inaccordance with FASB Statement No. 144, “Accounting for the Impairment orDisposal of Long-Lived Assets”, during the fourth quarter of fiscal 2009, basedon our future estimates of the undiscounted cash flows, it was determined thatcertain identifiable assets were impaired. We recorded an impairment charge of $26.1 million for these assets.  See Note 4 for more information.

 

*Sellingand Administrative Expenses*.  Selling andadministrative expenses increased $5.1 million, or 19.7%, to $31.0 million forthe fiscal year ended May 2, 2009 compared to $25.9 million for the fiscalyear ended May 3, 2008.  Selling andadministrative expenses are higher due to the Hetronic acquisition, higheramortization expense, slightly offset by lower commission expense due to lowersales in fiscal 2009 as compared to fiscal 2008.  Selling and administrative expenses as apercentage of net sales increased to 23.7% in fiscal 2009 from 19.0% in fiscal2008.

 

*InterestIncome, Net*.  Net interest income was $0.5 million for thefiscal year ended May 2, 2009, compared to $0.4 million for the fiscalyear ended May 3, 2008.

 

*Other,Net*.  Other, net was income of $0.7 million for thefiscal year ended May 2, 2009, compared to an expense of $1.2 million forthe fiscal year ended May 3, 2008. The increase is primarily due to the strengthening of the U.S. dollarversus the Euro and Czech koruna during fiscal 2009 as compared to fiscal2008.  The functional currencies of theseoperations are the Chinese yuan, Czech koruna, Euro and Singapore dollar.  Some foreign operations have transactionsdenominated in currencies other than their functional currencies, primarilysales in U.S. dollars and Euros, creating exchange rate sensitivities.

 

*Income/(Loss)Before Income Taxes. *Interconnect segment income/(loss) beforeincome taxes decreased $65.3 million to a loss of $60.7 million for the fiscalyear ended May 2, 2009 compared to income of $4.6 million for the fiscalyear ended May 3, 2008 due to the goodwill and intangible asset write-off,higher selling and administrative expenses, increased amortization expense andincreased restructuring expenses.

 

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**PowerProducts Segment Results**

** **

Below is a tablesummarizing results for the years ended:

(in millions)

 
| ** **                               | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|----------------|------------|----------------|------------|
| ** **                               | ** ** | **2009**        | ** ** | **2008**        | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net  sales                               |       | $               | 42.7       |            | $          | 45.8           |       | $              | (3.1       | ) | -6.8 | % |
|                                     |       |            |       |            |       |           |       |           |       |
| Cost  of products sold                   |       | 37.2            |       | 33.2            |       | 4.0            |       | 12.0           | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Gross  margins                           |       | 5.5             |       | 12.6            |       | (7.1           | )          | -56.0          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Restructuring                            |       | 0.5             |       | —          |       | 0.5            |       | 0.0            | %          |
| Impairment  of goodwill and other assets |       | 5.4             |       | —          |       | 5.4            |       | —         |       |
| Selling  and administrative expenses     |       | 5.1             |       | 4.1             |       | 1.0            |       | 25.4           | %          |
| Other  - expense                         |       | (0.2            | )          | —          |       | (0.2           | )          | 0.0            | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Income/(loss)  before income taxes       |       | $               | (5.7       | )               | $          | 8.5            |       | $              | (14.2      | ) | -166.7 | % |

 
| ** **                               | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|------------|------------|------------|------------|
| **Percent of sales:**                    | ** ** | **2009**        | ** ** | **2008**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  sales                               |       | 100.0           | %          | 100.0           | %          |       |       |       |       |
| Cost  of products sold                   |       | 87.1            | %          | 72.5            | %          |       |       |       |       |
| Gross  margins (including other income)  |       | 13.0            | %          | 27.5            | %          |       |       |       |       |
| Restructuring                            |       | 1.2             | %          | 0.0             | %          |       |       |       |       |
| Impairment  of goodwill and other assets |       | 12.5            | %          | 0.0             | %          |       |       |       |       |
| Selling  and administrative expenses     |       | 12.0            | %          | 9.0             | %          |       |       |       |       |
| Other  - expense                         |       | -0.4            | %          | 0.0             | %          |       |       |       |       |
| Income/(loss)  before income taxes       |       | -13.3           | %          | 18.6            | %          |       |       |       |       |

 

*Net Sales*. Power Products segment net sales decreased $3.1 million, or 6.8%, to$42.7 million for the fiscal year ended May 2, 2009 from $45.8 million forthe fiscal year ended May 3, 2008. Net sales were favorably impacted by the VEP acquisition on August 31,2007.  Excluding VEP, Power Products netsales decreased 10.9% in fiscal 2009 as compared to fiscal 2008.

 

*Cost ofProducts Sold*.  Power Products segment cost of products soldincreased $4.0 million, or 12.0%, to $37.2 million for the fiscal year ended May 2,2009 compared to $33.2 million for the fiscal year ended May 3, 2008.  The Power Products segment cost of productssold as a percentage of sales increased to 87.1% for fiscal 2009 from 72.5% forfiscal 2008.   The increase is partiallydue to a product that reached end-of-life at the end of fiscal 2008 and had alower cost as a percentage of sales than the remaining sales during fiscal2009.  In addition, we experienced anunfavorable product mix in our busbar businesses, as well as, increasedshipping and distribution costs.

 

*GrossMargins.* Power Products segment gross margins decreased$7.1 million, or 56.0%, to $5.5 million for the fiscal year ended May 2,2009 as compared to $12.6 million for the fiscal year ended May 3, 2008.Gross margins as a percentage of net sales decreased to 13.0% in fiscal 2009from 27.5% in fiscal 2008.  The decreaseis due to a product that reached end-of-life at the end of fiscal 2008 and hadhigher gross margins than the remaining sales and gross margins during fiscal2009.  We also experienced an unfavorableproduct mix, and increases in labor costs, as well as, shipping anddistribution costs.

 

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**PowerProducts Segment Results - Continued**

 

*Restructuring*. On March 12, 2009, we announced several additional restructuringactions to consolidate manufacturing facilities in lower cost regions to reducecosts.  During the fiscal year ended May 2,2009, we recorded a restructuring charge of $0.5 million, which consistedof  $0.4 million for impairment andaccelerated depreciation for buildings and improvements and machinery andequipment and $0.1 million relating to professional services.

 

*Impairmentof Goodwill and Intangible Assets*.  Based onevents and general business declines, we performed “step one” and “step two” ofthe goodwill impairment test in accordance with paragraph 19 of SFAS No. 142,on the reporting units that had goodwill during fiscal 2009.  Based on these tests, we concluded thatgoodwill was impaired.  We recorded agoodwill impairment charge of $5.4 million in our Power Products segmentrelated to these assets.  See Note 4 formore information.

 

*Sellingand Administrative Expenses*.  Selling andadministrative expenses increased $1.0 million, or 25.4%, to $5.1 million forthe fiscal year ended May 2, 2009 compared to $4.1 million for the fiscalyear ended May 3, 2008.  Selling andadministrative expenses increased due to the Tribotek acquisition on March 30,2008, partially offset by lower commission and bonus expenses in fiscal2009.  Selling and administrativeexpenses as a percentage of net sales increased to 12.0% in the fiscal 2009from 9.0% in fiscal 2008.

 

*Other,Net*.  Other, net was an expense of $0.2 million forthe fiscal year ended May 2, 2009, compared to no other, net for thefiscal year ended May 3, 2008.

 

*Income/(Loss)Before Income Taxes. *Power Products segment income/(loss)before income taxes decreased by $14.2 million to a loss of $5.7 million forthe fiscal year ended May 2, 2009 from a profit of $8.5 million for thefiscal year ended May 3, 2008 due to impairment of goodwill, decreasedsales of products which became end-of-life at the end of fiscal year 2008,restructuring costs, higher material, labor and shipping costs, expensesrelated to Tribotek, partially offset by lower commission and bonus expenses.

 

**OtherSegment Results**

** **

Below is a tablesummarizing results for the years ended:

(in millions)

 
| ** **                                    | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | ** **      | ** ** | ** **      | ** ** |
|-----------------------------------------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|
| ** **                                    | ** ** | **2009**        | ** ** | **2008**        | ** ** | **Net  Change** | ** ** | **Net  Change** | ** ** |
| Net  sales                                    |       | $               | 8.2        |            | $          | 6.9             |       | $               | 1.3        |   | 18.8 | % |
|                                          |       |            |       |            |       |            |       |            |       |
| Cost  of products sold                        |       | 8.9             |       | 6.7             |       | 2.2             |       | 32.8            | %          |
|                                          |       |            |       |            |       |            |       |            |       |
| Gross  margins                                |       | (0.7            | )          | 0.2             |       | (0.9            | )          | 0.0             | %          |
|                                          |       |            |       |            |       |            |       |            |       |
| Impairment  of goodwill and intangible assets |       | 1.6             |       | —          |       | 1.6             |       | 0.0             | %          |
| Selling  and administrative expenses          |       | 2.8             |       | 2.0             |       | 0.8             |       | 40.0            | %          |
|                                          |       |            |       |            |       |            |       |            |       |
| Loss  before income taxes                     |       | $               | (5.1       | )               | $          | (1.8            | )          | $               | (3.3       | ) | 183.3 | % |

 
| ** **                                    | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|-----------------|------------|-----------------|------------|------------|------------|------------|------------|
| **Percent of sales:**                         | ** ** | **2009**        | ** ** | **2008**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  sales                                    |       | 100.0           | %          | 100.0           | %          |       |       |       |       |
| Cost  of products sold                        |       | 108.5           | %          | 97.1            | %          |       |       |       |       |
| Gross  margins                                |       | -8.5            | %          | 2.9             | %          |       |       |       |       |
| Impairment  of goodwill and intangible assets |       | 19.5            | %          | 0.0             | %          |       |       |       |       |
| Selling  and administrative expenses          |       | 34.1            | %          | 29.0            | %          |       |       |       |       |
| Loss  before income taxes                     |       | -62.2           | %          | -26.1           | %          |       |       |       |       |

 

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**OtherSegment Results - Continued**

 

*Net Sales*. The Other segment net sales increased $1.3 million to $8.2 million forthe fiscal year ended May 2, 2009 as compared to $6.9 million for thefiscal year ended May 3, 2008.  Netsales from our torque-sensing business increased 60.6% and net sales from ourtesting facilities increased 11.2% in fiscal 2009 as compared to fiscal 2008.

 

*Cost ofProducts Sold*.  Other segment cost of products sold increased$2.2 million to $8.9 million for the fiscal year ended May 2, 2009compared to $6.7 million for the fiscal year ended May 3, 2008.  The increase is due to additional supportstaff in our U.S. testing facilities and a new testing facility that was openedin Shanghai, China during the second quarter of fiscal 2009.

 

*GrossMargins . *The Other segment gross margins was aloss of $0.7 million for fiscal 2009, compared to income $0.2 million forfiscal 2008.  Gross margins declined infiscal 2009 due to the increase in additional support staff in our U.S. testingfacilities and the new testing facility in Shanghai, China.

 

*Impairmentof Goodwill and Intangible Assets*.  Based onevents and general business declines, we performed “step one” and “step two” ofthe goodwill impairment test in accordance with paragraph 19 of SFAS No. 142,on the reporting units that had goodwill during fiscal 2009.  Based on these tests, we concluded thatgoodwill was impaired.  We recorded agoodwill impairment charge of $1.2 million in our Other segment related tothese assets.  See Note 4 for moreinformation.

 

Also, inaccordance with FASB Statement No. 144, “Accounting for the Impairment orDisposal of Long-Lived Assets”, during the fourth quarter of fiscal 2009, basedon our future estimates of the undiscounted cash flows, it was determined thatcertain identifiable assets were impaired. We recorded an impairment charge of $0.4 million for these assets.  See Note 4 for more information.

 

*Sellingand Administrative Expenses*.  Selling andadministrative expenses increased $0.8 million to $2.8 million for the fiscalyear ended May 2, 2009 compared to $2.0 million for the fiscal year ended May 3,2008.   The increase is primarily due tothe new testing facility in Shanghai, China. Selling and administrative expenses as a percentage of net salesincreased to 34.1% in fiscal 2009 from 29.0% in fiscal 2008.

 

*LossBefore Income Taxes. *The Other segment loss before incometaxes was $5.1 million for the fiscal year ended May 2, 2009 compared to$1.8 million for the fiscal year ended May 3, 2008.   The increase in the loss before income taxesis due the impairment of goodwill and intangible assets, additional supportstaff for our North American testing facilities as well as costs associatedwith the new testing facility in Shanghai, China.

 

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**Resultsof Operations for the Fiscal Year Ended May 3, 2008 (53 weeks) as Comparedto the Fiscal Year Ended April 28, 2007 (52 weeks)**

 

**ConsolidatedResults**

Below is a tablesummarizing results for the years ended:

(in millions)

 
| ** **                              | ** ** | **May 3,** | ** ** | **April 28,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|-----------------------------------------|------------|-----------------|------------|--------------------|------------|----------------|------------|----------------|------------|
| ** **                              | ** ** | **2008**        | ** ** | **2007**           | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net  sales                              |       | $               | 551.1      |               | $          | 448.4          |       | $              | 102.7      |   | 22.9 | % |
| Other  income                           |       | 1.9             |       | 1.6                |       | 0.3            |       | 18.8           | %          |
|                                    |       | 553.0           |       | 450.0              |       | 103.0          |       | 22.9           | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Cost  of products sold                  |       | 428.4           |       | 359.9              |       | 68.5           |       | 19.0           | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Gross  margins (including other income) |       | 124.6           |       | 90.1               |       | 34.5           |       | 38.3           | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Restructuring                           |       | 5.2             |       | 2.0                |       | 3.2            |       | 160.0          | %          |
| Selling  and administrative expenses    |       | 61.5            |       | 50.2               |       | 11.3           |       | 22.5           | %          |
| Amortization  of intangibles            |       | 6.0             |       | 4.7                |       | 1.3            |       | 27.7           | %          |
| Impairment  of assets                   |       | 1.5             |       | 0.4                |       | 1.1            |       | 290.5          | %          |
| Interest  income, net                   |       | 2.3             |       | 3.4                |       | (1.1           | )          | -32.4          | %          |
| Other,  net                             |       | (3.2            | )          | (0.4               | )          | (2.8           | )          | 700.0          | %          |
| Income  taxes                           |       | 9.7             |       | 9.8                |       | (0.1           | )          | -1.0           | %          |
| Cumulative  effect of accounting change |       | —          |       | 0.1                |       | (0.1           | )          | -100.0         | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Net  income                             |       | $               | 39.8       |               | $          | 26.1           |       | $              | 13.7       |   | 52.5 | % |

 
|                                    |   | **May 3,** | ** ** | **April 28,** | ** ** |   |   |   |   |
|-----------------------------------------|--------|-----------------|------------|--------------------|------------|--------|--------|--------|--------|
| **Percent of sales:**                   |   | **2008**        | ** ** | **2007**           | ** ** |   |   |   |   |
| Net  sales                              |   | 100.0           | %          | 100.0              | %          |   |   |   |   |
| Other  income                           |   | 0.3             | %          | 0.4                | %          |   |   |   |   |
| Cost  of products sold                  |   | 77.7            | %          | 80.3               | %          |   |   |   |   |
| Gross  margins (including other income) |   | 22.6            | %          | 20.1               | %          |   |   |   |   |
| Restructuring                           |   | 0.9             | %          | 0.4                | %          |   |   |   |   |
| Selling  and administrative expenses    |   | 11.2            | %          | 11.2               | %          |   |   |   |   |
| Amortization  of intangibles            |   | 1.1             | %          | 1.0                | %          |   |   |   |   |
| Impairment  of assets                   |   | 0.3             | %          | 0.1                | %          |   |   |   |   |
| Interest  income, net                   |   | 0.4             | %          | 0.8                | %          |   |   |   |   |
| Other,  net                             |   | -0.6            | %          | -0.1               | %          |   |   |   |   |
| Income  taxes                           |   | 1.8             | %          | 2.2                | %          |   |   |   |   |
| Cumulative  effect of accounting change |   | 0.0             | %          | 0.0                | %          |   |   |   |   |
| Net  income                             |   | 7.2             | %          | 5.8                | %          |   |   |   |   |

* *

*Net Sales*. Consolidated net sales increased $102.7 million, or 22.9%, to $551.1million for the fiscal year ended May 3, 2008 from $448.4 million for thefiscal year ended April 28, 2007. Of the increase, $51.3 million relates to our TouchSensor and VEPacquisitions.   The increase was alsodriven by strong organic growth from our European and Asian operations.  Sales from those operations increased 36.1%during fiscal 2008 as compared to fiscal 2007. Automotive segment sales were also favorably impacted by price increasesof $20.7 million on what were previously marginally profitable and unprofitableproducts, which we had decided to exit at the expiration of our manufacturingcommitment, but, at the request of the customer, have agreed to continue toproduce at higher prices.  Excluding TouchSensor, theInterconnect segment sales increased 9.9% for fiscal 2008 due to strong salesfrom our Asian connector and European optical businesses.  Excluding VEP, the Power Products segmentsales decreased 3.6% for fiscal 2008 as compared to fiscal 2007.  Translation of foreign operations net salesin fiscal 2008

 

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**ConsolidatedResults - Continued**

 

increased reported netsales by $10.5 million or 1.9% due to the weaker U.S. dollar versus foreigncurrencies.

 

*OtherIncome*.  Other income increased $0.3 million, or18.8%, to $1.9 million for the fiscal year ended May 3, 2008 from $1.6million for the fiscal year ended April 28, 2007.  Other income consisted primarily of earningsfrom our automotive joint venture, grants, engineering design fees androyalties.

 

*Cost ofProducts Sold*.  Consolidated cost of products sold increased$68.5 million, or 19.0%, to $428.4 million for fiscal 2008 from $359.9 millionfor fiscal 2007.  The increase is due tothe higher sales volumes.  Consolidatedcost of products sold, as a percentage of sales was 77.7% for the fiscal yearended May 3, 2008 and 80.3% for the fiscal year ended April 28,2007.  Automotive segment cost of goodssold as a percentage of sales were favorably impacted by price increases andthe transfer of certain operations from Scotland to Malta during the thirdquarter of fiscal 2007. Additionally, in anticipation of the forecasted lowerautomotive sales in the U.S. market, we had previously made our North Americanoperations more efficient and cost effective.

 

*GrossMargins (including other income). *Consolidated gross margins (includingother income) increased $34.5 million, or 38.3%, to $124.6 million for thefiscal year ended May 3, 2008 as compared to $90.1 million for the fiscalyear ended April 28, 2007.  Grossmargins as a percentage of net sales increased to 22.6% for fiscal 2008 from20.1% for fiscal 2007.  The increase ingross margins as a percentage of sales is primarily due to the North Americanautomotive segment price increases and integration of the Scotland operation toMalta.

 

*Restructuring.* On January 24, 2008, we announced a restructuring of our U.S.-basedautomotive operations and the decision to discontinue producing certain legacyelectronic Interconnect products.  As aresult, we recorded a restructuring charge of $5.2 million for the fiscal yearended May 3, 2008.  We recorded $2.0million of restructuring and impairment costs in the third quarter of fiscal2007 relating to the closing of our Scotland automotive parts manufacturingplant and transferred all production lines from that facility to our automotiveparts manufacturing operation in Malta.

 

*Sellingand Administrative Expenses*.  Selling andadministrative expenses increased $11.3 million, or 22.5%, to $61.5 million forthe fiscal year ended May 3, 2008 compared to $50.2 million for the fiscalyear ended April 28, 2007.  Of theincrease, $3.3 million relates to the recently acquired TouchSensor and VEP businesses.  The majority of the additional increaserelates to additional global support staff and increased long-term incentivecompensation due to improved performance and higher share price and higherprofessional fees.  Selling andadministrative expenses as a percentage of net sales were 11.2% in both fiscal2008 and 2007.

 

*Amortizationof Intangibles*.  Amortization of intangibles increased $1.3million, or 27.7%, to $6.0 million for the fiscal year ended May 3, 2008compared to $4.7 million for the fiscal year ended April 28, 2007.  The increase is due to the amortizationexpenses for the TouchSensor and VEP acquisitions.

 

*Impairmentof Assets*.  Impairment of assets increased $1.1 millionto $1.5 million for the fiscal year ended May 3, 2008 compared to $0.4million for the fiscal year ended April 28, 2007.  The increase includes a $0.7 millionwrite-down of machinery and equipment as a result of lower anticipated revenuesover the life of the related project and $0.4 million for the impairment of aparticular patent (classified as an intangible asset) where the underlyingtechnology was deemed to be commercially impractical.

 

*InterestIncome, Net*.  Net interest income decreased 32.4% in thefiscal year ended May 3, 2008 to $2.3 million as compared to $3.4 millionin the fiscal year ended April 28, 2007. The average cash balance was $83.0 million during fiscal 2008 ascompared to $89.0 million during fiscal 2007. The average interest rate earned in fiscal 2008 was 3.07% as compared to4.23% in fiscal 2007.  The averageinterest rate earned includes both taxable interest and tax-exempt municipalinterest.  The cash balance decreasedprimarily due to the recent acquisitions of TouchSensor and VEP.  Interest expense was $0.2 million and $0.3million for fiscal 2008 and 2007, respectively.

 

*Other,Net*.  Other, net was an expense of $3.2 million forthe fiscal year ended May 3, 2008 versus an expense of $0.4 million forthe fiscal year ended April 28, 2007. Other, net consists primarily of currency exchange gains and losses atthe Company’s foreign operations.  Thefunctional currencies of these operations are the British pound, Chinese yuan,Czech koruna, Euro, Maltese lira, Mexican peso and Singapore dollar.  Some foreign operations have transactionsdenominated in currencies other than their functional currencies, primarilysales in U.S.

 

28

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**ConsolidatedResults - Continued**

 

dollars and Euros,creating exchange rate sensitivities. Effective January 1, 2008, the Euro replaced the Maltese lira asthe functional currency of Malta.

 

During fiscal2008, we recorded a charge of $0.5 million relating to a reduction of the net assetvalue (NAV) on a portion of our short-term investments which is an enhancedcash fund sold as an alternative to traditional money market funds. We havehistorically invested a portion of our cash in the fund. During the thirdquarter, the fund was overwhelmed with withdrawal requests and a restrictionwas placed on the redemption ability of the fund. Therefore, during the fiscalyear, we recorded a realized loss of $0.1 million on partial redemptions and anunrealized loss of  $0.4 million for thereduction in the NAV’s principal balance.

 

*IncomeTaxes.*  The effective income tax rate was 19.7% forfiscal 2008 compared with 27.4% for the fiscal 2007.  During fiscal 2008, we recognized a benefitof $0.3 million relating to the expiration of certain statute of limitationsfor tax positions that were not challenged by the taxing authorities.  In addition, we recognized $1.5 millionrelating to tax return reconciliations compared to income tax provisions duringthe fiscal year ended May 3, 2008. The effective tax rates for both fiscal years 2008 and 2007 reflectutilization of foreign investment tax credits and the effect of lower tax rateson income of our foreign earnings and higher earnings at those operations.

 

*NetIncome.*  Net income increased $13.7 million, or 52.5%,to $39.8 million for the fiscal year ended May 3, 2008 as compared to$26.1 million for the fiscal year ended April 28, 2007 due to theautomotive segment price increases, strong sales and increased efficienciesfrom our European and Asian operations, offset slightly by higher selling andadministrative expenses.  In addition,restructuring costs increased by $3.2 million and our effective tax rate was19.7% during fiscal 2008.  Net income asa percentage of sales increased to 7.2% for the fiscal year ended May 3,2008 as compared to 5.8% for fiscal 2007.

 

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## **Table of Contents**

 

## **OperatingSegments**

## ** **

**AutomotiveSegment Results**

** **

Below is a tablesummarizing results for the years ended:

(in millions)

 
| ** **                              | ** ** | **May 3,** | ** ** | **April 28,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|-----------------------------------------|------------|-----------------|------------|--------------------|------------|----------------|------------|----------------|------------|
| ** **                              | ** ** | **2008**        | ** ** | **2007**           | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net  sales                              |       | $               | 362.1      |               | $          | 315.7          |       | $              | 46.4       |   | 14.7 | % |
| Other  income                           |       | 0.9             |       | —             |       | 0.9            |       | 0.0            | %          |
|                                    |       | 363.0           |       | 315.7              |       | 47.3           |       | 15.0           | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Cost  of products sold                  |       | 282.0           |       | 265.1              |       | 16.9           |       | 6.4            | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Gross  margins (including other income) |       | 81.0            |       | 50.6               |       | 30.4           |       | 60.1           | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Restructuring                           |       | 4.5             |       | 2.0                |       | 2.5            |       | 125.0          | %          |
| Impairment  of assets                   |       | 1.5             |       | 0.4                |       | 1.1            |       | 275.0          | %          |
| Selling  and administrative expenses    |       | 18.0            |       | 19.2               |       | (1.2           | )          | -6.3           | %          |
| Interest,  net - income/(expense)       |       | —          |       | (0.3               | )          | 0.3            |       | 0.0            | %          |
| Other,  net - income/(expense)          |       | (1.7            | )          | (1.3               | )          | (0.4           | )          | 30.8           | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Income  before income taxes             |       | $               | 55.3       |               | $          | 27.4           |       | $              | 27.9       |   | 101.8 | % |

 
|                                    |   | **May 3,** | ** ** | **April 28,** | ** ** |   |   |   |   |
|-----------------------------------------|--------|-----------------|------------|--------------------|------------|--------|--------|--------|--------|
| **Percent of sales:**                   |   | **2008**        | ** ** | **2007**           | ** ** |   |   |   |   |
| Net  sales                              |   | 100.0           | %          | 100.0              | %          |   |   |   |   |
| Other  income                           |   | 0.2             | %          | 0.0                | %          |   |   |   |   |
| Cost  of products sold                  |   | 77.9            | %          | 84.0               | %          |   |   |   |   |
| Gross  margins (including other income) |   | 22.4            | %          | 16.0               | %          |   |   |   |   |
| Restructuring                           |   | 1.2             | %          | 0.6                | %          |   |   |   |   |
| Impairment  of assets                   |   | 0.4             | %          | 0.1                | %          |   |   |   |   |
| Selling  and administrative expenses    |   | 5.0             | %          | 6.1                | %          |   |   |   |   |
| Interest  income, net                   |   | 0.0             | %          | -0.1               | %          |   |   |   |   |
| Other,  net                             |   | -0.5            | %          | -0.4               | %          |   |   |   |   |
| Income  before income taxes             |   | 15.3            | %          | 8.7                | %          |   |   |   |   |

 

*Net Sales*. Automotive segment net sales increased $46.4 million, or 14.7%, to$362.1 million for the fiscal year ended May 3, 2008 from $315.7 millionfor the fiscal year ended April 28, 2007. Sales were also favorably impacted by price increases of $20.7 millionon what was previously marginally profitable and unprofitable products, whichwe had decided to exit at the expiration of our manufacturing commitment, but, at therequest of the customer, have agreed to continue to produce at higherprices.  Additionally, automotive segment net sales increasedfrom organic growth from our European and Asian operations.  Net sales from these operations increased32.7% for fiscal 2008.    We expect to discontinue producing theseproducts during fiscal 2009.  Excluding the price increases, NorthAmerican automotive segment sales decreased 5.5% in fiscal 2008.  Translation of foreign operations net salesin fiscal 2008 increased reported net sales by $9.2 million, or 2.5%, due tothe weaker U.S. dollar versus foreign currencies.

 

*OtherIncome*.  Other income was $0.9 million for the fiscal yearended May 3, 2008 from no other income for fiscal year ended April 28,2007.  Other income consisted primarilyof earnings from engineering design fees and royalties.

 

*Cost ofProducts Sold*.  Automotive segment cost of products soldincreased $16.9 million to $282.0 million for the fiscal year ended May 3,2008 from $265.1 for the fiscal year ended April 28, 2007.  The increase

 

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**AutomotiveSegment Results - Continued**

 

relates to highersales volumes.  Automotive segment costsof products sold as a percentage of sales decreased to 77.9% for fiscal 2008from 84.0% for fiscal 2007.  Automotivesegment cost of goods sold as a percentage of sales was favorably impacted bythe price increases.  The integration ofour Scotland operation to our Malta operation has increased efficiency in ourEuropean manufacturing processes. Additionally, in anticipation of the forecasted lower automotive salesin the U.S. market, we had previously made our North American operations moreefficient and cost effective.

 

*GrossMargins (including other income). *Automotive segment gross margins(including other income) increased $30.4 million, or 60.1%, to $81.0 millionfor the fiscal year ended May 3, 2008 as compared to $50.6 million for thefiscal year ended April 28, 2007. The increase in gross profit as a percentage of sales is primarily dueto the price increases and integration of the Scotland operation to Malta.  Gross margins (including other income) as apercentage of net sales increased to 22.4% for fiscal 2008 from 16.0% forfiscal 2007.

 

*Restructuring*. On January 24, 2008, we announced a restructuring of our U.S.-basedautomotive operations.  As a result, werecorded a restructuring charge of $4.5 million, $2.7 million relating toemployee severance, $1.3 million relating to impairment and accelerated depreciationfor assets and $0.5 million for professional fees.  We recorded $2.0 million of restructuring andimpairment costs in the third quarter of fiscal 2007 relating to the closing ofour Scotland automotive parts manufacturing plant and transferred allproduction lines from that facility to our automotive parts manufacturingoperation in Malta.

 

*Impairmentof Assets*.  Impairment of assets increased $1.1 millionto $1.5 million for the fiscal year ended May 3, 2008 compared to $0.4million for the fiscal year ended April 28, 2007.  The increase includes a $0.7 millionwrite-down of machinery and equipment as a result of lower anticipated revenuesover the life of the related project and $0.4 million for the impairment of aparticular patent (classified as an intangible asset) where the underlyingtechnology was deemed to be commercially impractical.

 

*Sellingand Administrative Expenses*.  Selling andadministrative expenses decreased $1.2 million, or 6.3%, to $18.0 million forthe fiscal year ended May 3, 2008 compared to $19.2 million for the fiscalyear ended April 28, 2007.  Thedecrease is due the integration of the Scotland operation to Malta in the thirdquarter of fiscal 2007.  Selling andadministrative expenses as a percentage of net sales decreased to 5.0% infiscal 2008 from 6.1% in fiscal 2007.

 

*InterestExpense, Net*.  Net interest expense was zero for the fiscalyear ended May 3, 2008, compared to an expense of $0.3 million for thefiscal year ended April 28, 2007.

 

*OtherExpense, Net*.  Other expense, net was $1.7 million for thefiscal year ended May 3, 2009, compared to $1.3 million for the fiscalyear ended April 28, 2007.  Theincrease is primarily due to the weakening of the U.S. dollar versus the Euroand Czech koruna during fiscal 2008 as compared to fiscal 2007.  The functional currencies of these operationsare the British pound, Chinese yuan, Czech koruna, Euro, Mexican peso andSingapore dollar.  Some foreign operationshave transactions denominated in currencies other than their functionalcurrencies, primarily sales in U.S. dollars and Euros, creating exchange ratesensitivities.

 

*IncomeBefore Income Taxes. *Automotive segment income before incometaxes increased $27.9 million, or 101.8%, to $55.3 million for the fiscal yearended May 3, 2008 compared to $27.4 million for the fiscal year ended April 28,2007 due to the price increases, strong sales in Europe and Asia andintegration of our Scotland operation to our Malta operation, offset byrestructuring costs.

 

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**InterconnectSegment Results**

 

Below is a tablesummarizing results for the years ended:

(in millions)

 
| ** **                              | ** ** | **May 3,** | ** ** | **April 28,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|-----------------------------------------|------------|-----------------|------------|--------------------|------------|----------------|------------|----------------|------------|
| ** **                              | ** ** | **2008**        | ** ** | **2007**           | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net  sales                              |       | $               | 136.3      |               | $          | 82.1           |       | $              | 54.2       |   | 66.0 | % |
| Other  income                           |       | 0.3             |       | 0.6                |       | (0.3           | )          | -50.0          | %          |
|                                    |       | 136.6           |       | 82.7               |       | 53.9           |       | 65.2           | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Cost  of products sold                  |       | 104.7           |       | 58.0               |       | 46.7           |       | 80.5           | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Gross  margins (including other income) |       | 31.9            |       | 24.7               |       | 7.2            |       | 29.1           | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Restructuring                           |       | 0.7             |       | —             |       | 0.7            |       | 0.0            | %          |
| Selling  and administrative expenses    |       | 25.8            |       | 16.3               |       | 9.5            |       | 58.3           | %          |
| Interest,  net - income/(expense)       |       | 0.4             |       | 0.4                |       | —         |       | 0.0            | %          |
| Other,  net - income/(expense)          |       | (1.2            | )          | 0.5                |       | (1.7           | )          | -340.0         | %          |
|                                    |       |            |       |               |       |           |       |           |       |
| Income  before income taxes             |       | $               | 4.6        |               | $          | 9.3            |       | $              | (4.7       | ) | -50.5 | % |

 
| ** **                              | ** ** | **May 3,** | ** ** | **April 28,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|-----------------|------------|--------------------|------------|------------|------------|------------|------------|
| **Percent of sales:**                   | ** ** | **2008**        | ** ** | **2007**           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  sales                              |       | 100.0           | %          | 100.0              | %          |       |       |       |       |
| Other  income                           |       | 0.2             | %          | 0.7                | %          |       |       |       |       |
| Cost  of products sold                  |       | 76.8            | %          | 70.6               | %          |       |       |       |       |
| Gross  margins (including other income) |       | 23.4            | %          | 30.1               | %          |       |       |       |       |
| Restructuring                           |       | 0.5             | %          | 0.0                | %          |       |       |       |       |
| Selling  and administrative expenses    |       | 18.9            | %          | 19.9               | %          |       |       |       |       |
| Interest  income, net                   |       | 0.3             | %          | 0.5                | %          |       |       |       |       |
| Other,  net                             |       | -0.9            | %          | 0.6                | %          |       |       |       |       |
| Income  before income taxes             |       | 3.4             | %          | 11.3               | %          |       |       |       |       |

 

*Net Sales*.  Interconnectsegment net sales increased $54.2 million, or 66.0%, to $136.3 million for thefiscal year ended May 3, 2008 from $82.1 million for the fiscal year endedApril 28, 2007.  A majority of thesales increase is due to the TouchSensor acquisition.  Sales from our Asian connector businessincreased 73.3% for fiscal 2008. Excluding TouchSensor, the Interconnect segment sales increased 9.9% forfiscal 2008 due to the strong sales from our Asian connector business.  In addition, sales increased from ourEuropean optical business, offset by lower sales in our domestic datainstallation business.  Translation offoreign operations net sales in fiscal 2008 increased reported net sales by$1.3 million, or 0.9%, due to the weaker U.S. dollar versus foreign currencies.

 

*OtherIncome*.  Other income was $0.3 million for the fiscalyear ended May 3, 2008 and $0.6 million for the fiscal year ended April 28,2007.  Other income consisted primarilyof earnings from engineering design fees and royalties.

 

*Cost ofProducts Sold*.  Interconnect segment cost of products soldincreased $46.7 million to $104.7 million for the fiscal year ended May 3,2008 compared to $58.0 million for the fiscal year ended April 28,2007.  The majority of the increase isdue to cost of products sold from our TouchSensor acquisition.  Interconnect segment cost of products sold asa percentage of net sales increased to 76.8% for fiscal 2008 compared to 70.6%for fiscal 2007.  The increase isprimarily due to the TouchSensor business, which has higher cost of productssold as a percentage of sales as compared to the other businesses in theInterconnect segment.  We experiencedlower sales in our domestic data center installation business and higher costsrelated to PC card adapters during fiscal 2008. In addition, we experienced increased costs due to overall lower salesvolumes in our North American operations (excluding TouchSensor).

 

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**InterconnectSegment Results - Continued**

 

*GrossMargins (including other income). *Interconnect segment gross margins(including other income) increased $7.2 million, or 29.1%, to $31.9 million forthe fiscal year ended May 3, 2008 as compared to $24.7 million for thefiscal year ended April 28, 2007. The majority of the increase is due to the TouchSensor acquisition.  In addition, gross margins increased in ourAsian connector business and European optical business, partially offset byincreased cost of products sold in our PC card adapter and data installationbusinesses.  Gross margins (includingother income) as a percentage of net sales decreased to 23.4% for fiscal 2008from 30.1% for fiscal 2007.

 

*Restructuring*. On January 24, 2008, we announced our decision to discontinueproducing certain legacy electronic Interconnect products.  As a result, we recorded a restructuringcharge of $0.7 million, $0.6 million for employee severance and $0.1 millionfor professional fees.

 

*Sellingand Administrative Expenses*.  Selling andadministrative expenses increased $9.5 million, or 58.3%, to $25.8 million forthe fiscal year ended May 3, 2008 compared to $16.3 million for the fiscalyear ended April 28, 2007.  Sellingand administrative expenses are higher due to the TouchSensor acquisition andhigher amortization expense in fiscal 2008 as compared to fiscal 2007.  Selling and administrative expenses as apercentage of net sales decreased to 18.9% in fiscal 2008 from 19.9% in fiscal2007.

 

*InterestIncome, Net*.  Net interest income was $0.4 million for boththe fiscal years ended May 3, 2008 and April 28, 2007.

 

*Other,Net*.  Other, net was expense of $1.2 million forthe fiscal year ended May 3, 2008, compared to income of $0.5 million forthe fiscal year ended April 28, 2007. The increase is primarily due to the weakening of the U.S. dollar versusthe Euro and Czech koruna during fiscal 2008 as compared to fiscal 2007.  The functional currencies of these operationsare the British pound, Chinese yuan, Czech koruna, Euro, Mexican peso andSingapore dollar.  Some foreignoperations have transactions denominated in currencies other than theirfunctional currencies, primarily sales in U.S. dollars and Euros, creatingexchange rate sensitivities.

 

*IncomeBefore Income Taxes. *Interconnect income before income taxesdecreased $4.7 million, or 50.5%, to $4.6 million for the fiscal year ended May 3,2008 compared to $9.3 million for the fiscal year ended April 28, 2007 dueto the gross margin declines in our PC card adapter and data installationbusinesses, partially offset with increases from the TouchSensor business.

 

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**PowerProducts Segment Results**

** **

Below is a tablesummarizing results for the years ended:

(in millions)

 
| ** **                           | ** ** | **May 3,** | ** ** | **April 28,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|--------------------------------------|------------|-----------------|------------|--------------------|------------|----------------|------------|----------------|------------|
| ** **                           | ** ** | **2008**        | ** ** | **2007**           | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net  sales                           |       | $               | 45.8       |               | $          | 43.0           |       | $              | 2.8        |   | 6.5 | % |
|                                 |       |            |       |               |       |           |       |           |       |
| Cost  of products sold               |       | 33.2            |       | 30.8               |       | 2.4            |       | 7.8            | %          |
|                                 |       |            |       |               |       |           |       |           |       |
| Gross  margins                       |       | 12.6            |       | 12.2               |       | 0.4            |       | 3.3            | %          |
|                                 |       |            |       |               |       |           |       |           |       |
| Selling  and administrative expenses |       | 4.1             |       | 3.4                |       | 0.7            |       | 20.6           | %          |
|                                 |       |            |       |               |       |           |       |           |       |
| Income  before income taxes          |       | $               | 8.5        |               | $          | 8.8            |       | $              | (0.3       | ) | -3.4 | % |

 
| ** **                              | ** ** | **May 3,** | ** ** | **April 28,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|-----------------|------------|--------------------|------------|------------|------------|------------|------------|
| **Percent of sales:**                   | ** ** | **2008**        | ** ** | **2007**           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  sales                              |       | 100.0           | %          | 100.0              | %          |       |       |       |       |
| Cost  of products sold                  |       | 72.5            | %          | 71.6               | %          |       |       |       |       |
| Gross  margins (including other income) |       | 27.5            | %          | 28.4               | %          |       |       |       |       |
| Selling  and administrative expenses    |       | 9.0             | %          | 7.9                | %          |       |       |       |       |
| Income  before income taxes             |       | 18.6            | %          | 20.5               | %          |       |       |       |       |

 

*Net Sales*. Power Products segment net sales increased $2.8 million to $45.8 millionfor the fiscal year ended May 3, 2008 from $43.0 million for the fiscalyear ended April 28, 2007.  Netsales increased due to the VEP acquisition and were more than offset by lowersales from our bus bar business. Excluding VEP, the Power Products segment sales decreased 3.6% in fiscal2008.  The majority of the decreaserelates to certain projects for a customer, which reached end of life at theend of fiscal 2007.  In addition,effective at the beginning of fiscal 2008, we are no longer the sole supplierfor another customer.

 

*Cost ofProducts Sold*.  Power Products segment cost of products soldincreased $2.4 million, or 7.8%, to $33.2 million for the fiscal year ended May 3,2008 compared to $30.8 million for the fiscal year ended April 28,2007.  The Power Products segment cost ofproducts sold as a percentage of sales increased to 72.5% for fiscal 2008 from71.6% for fiscal 2007.  The increase isprimarily due to higher material costs and price erosion at our North Americanoperations, partially offset by margin improvement at our Shanghai, Chinaoperation.

 

*GrossMargins.* Power Products segment gross margins increased$0.4 million, or 3.3%, to $12.6 million for the fiscal year ended May 3,2008 as compared to $12.2 million for the fiscal year ended April 28,2007. Gross margins as a percentage of net sales decreased to 27.5% for fiscal2008 from 28.4% for fiscal 2007.  Theincrease is primarily due to the VEP business, offset by higher material costsfrom our bus bar business.

 

*Sellingand Administrative Expenses*.  Selling andadministrative expenses increased $0.7 million, or 20.6%, to $4.1 million forthe fiscal year ended May 3, 2008 compared to $3.4 million for the fiscalyear ended April 28, 2007.  Sellingand administrative expenses increased due to the VEP and Tribotek acquisitionsduring fiscal 2008.  Selling andadministrative expenses as a percentage of net sales increased to 9.0% infiscal 2008 from 7.9% in fiscal 2007.

 

*IncomeBefore Income Taxes. *Power Products segment income beforeincome taxes decreased $0.3 million to $8.5 million for the fiscal year ended May 3,2008 compared to $8.8 million for the fiscal year ended April 28, 2007,due to certain projects ending at the end of fiscal 2007, no longer being thesole supplier for another customer and higher material costs and customer priceerosion at our North American operation.

 

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**OtherSegment Results**

** **

Below is a tablesummarizing results for the years ended:

(in millions)

 
| ** **                           | ** ** | **May 3,** | ** ** | **April 28,** | ** ** | ** **          | ** ** | ** **          | ** ** |
|--------------------------------------|------------|-----------------|------------|--------------------|------------|---------------------|------------|---------------------|------------|
| ** **                           | ** ** | **2008**        | ** ** | **2007**           | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net  sales                           |       | $               | 6.9        |               | $          | 7.6                 |       | $                   | (0.7       | ) | -9.2 | % |
|                                 |       |            |       |               |       |                |       |                |       |
| Cost  of products sold               |       | 6.7             |       | 5.8                |       | 0.9                 |       | 15.5                | %          |
|                                 |       |            |       |               |       |                |       |                |       |
| Gross  margins                       |       | 0.2             |       | 1.8                |       | (1.6                | )          | -88.9               | %          |
|                                 |       |            |       |               |       |                |       |                |       |
| Selling  and administrative expenses |       | 2.0             |       | 2.1                |       | (0.1                | )          | -4.8                | %          |
|                                 |       |            |       |               |       |                |       |                |       |
| Loss  before income taxes            |       | $               | (1.8       | )                  | $          | (0.3                | )          | $                   | (1.5       | ) | 500.0 | % |

 
| ** **                           | ** ** | **May 3,** | ** ** | **April 28,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------|------------|-----------------|------------|--------------------|------------|------------|------------|------------|------------|
| **Percent  of sales:**               | ** ** | **2008**        | ** ** | **2007**           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  sales                           |       | 100.0           | %          | 100.0              | %          |       |       |       |       |
| Cost  of products sold               |       | 97.1            | %          | 76.3               | %          |       |       |       |       |
| Gross  margins                       |       | 2.9             | %          | 23.7               | %          |       |       |       |       |
| Selling  and administrative expenses |       | 29.0            | %          | 27.6               | %          |       |       |       |       |
| Loss  before income taxes            |       | -26.1           | %          | -3.9               | %          |       |       |       |       |

 

*Net Sales*. The Other segment net sales decreased $0.7 million to $6.9 million forthe fiscal year ended May 3, 2008 as compared to $7.6 million for thefiscal year ended April 28, 2007. Sales from our testing facilities decreased 11.9% during the fiscal yearended May 3, 2008 compared to the fiscal year ended April 28, 2007primarily due to lower demand for vibration testing.

 

*Cost ofProducts Sold*.  Other segment cost of products sold increased$0.9 million to $6.7 million for the fiscal year ended May 3, 2008compared to $5.8 million for the fiscal year ended April 28, 2007.  The majority of the increase is due toincreased initiatives in our torque-sensing business.

 

*GrossMargins. *The Other segment gross margins decreased $1.6 millionto $0.2 million for the fiscal year ended May 3, 2008 as compared to $1.8million for the fiscal year ended April 28, 2007.  The majority of the decrease is due toincreased cost initiatives in our torque-sensing business and the decrease innet sales in our test facilities.

 

## ***Selling and Administrative Expenses***. Selling and administrative expenses decreased $0.1 million to $2.0million for the fiscal year ended May 3, 2009 compared to $2.1 million forthe fiscal year ended April 28, 2007. Selling and administrative expenses as a percentage of net salesincreased to 29.0% in fiscal 2008 from 27.6% in fiscal 2007.

## ** **

## ***Loss Before Income Taxes. ***TheOther segment loss before income taxes was $1.8 million for the fiscal yearended May 3, 2008 compared to a loss of $0.3 million for the fiscal yearended April 28, 2007 due to the increased initiatives in ourtorque-sensing business and lower sales volumes in our test facilities.

## ** **

## **FinancialCondition, Liquidity and Capital Resources**

## ** **

We have historicallyfinanced our cash requirements through cash flows from operations.  Our future capital requirements will dependon a number of factors, including our future net sales and the timing and rateof expansion of our business.  We believeour current cash balances together with the cash flow expected to be generatedfrom future domestic and foreign operations will be sufficient to supportcurrent operations.

 

We have an agreement with our primary bank for a revolving creditfacility to

 

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## **FinancialCondition, Liquidity and Capital Resources - Continued**

## ** **

provide up to$75,000 ready financing for general corporate purposes, including acquisitionopportunities that may become available. The bank credit agreement, which expires on January 31, 2011,requires maintenance of certain financial ratios and a minimum net worth level.At May 2, 2009, we were in compliance with these covenants and had noborrowings against this credit facility.

 

At May 2, 2009,approximately $3.5 million remains invested in an enhanced cash fund soldas an alternative to traditional money-market funds. We had historicallyinvested a portion of our on hand cash balances in this fund. These investmentsare subject to credit, liquidity, market and interest rate risk. In December 2007,****the****fundwas overwhelmed with withdrawal requests from investors and was closed with arestriction placed upon the cash redemption ability of its holders. Based onthe information available to us, we have estimated the fair value of this fundat $0.72 per unit as of May 2, 2009. For fiscal 2009, we recorded a loss of $1.2 million, of which $0.6million was realized on partial redemptions of $8.8 million, and  $0.6 million was unrealized. Since December2007, we recorded a loss of $1.7 million, of which, $0.7 million was realizedon partial redemptions of $17.4 million, and $1.0 million was unrealized.

 

To date, 83% of the fundhas been liquidated. The latest information from fund management states thatits goal is to have 92% of the portfolio liquidated by December 2009.Information and the markets relating to these investments remain dynamic, andthere may be further declines in the value of these investments, the value ofthe collateral held by these entities, and the liquidity of our investments. Tothe extent we determine that there is a further decline in fair value, we mayrecognize additional losses in future periods.

 

Net cash provided by operations was $43.2 million,$77.0 million and $53.9 million in fiscal 2009, 2008 and 2007,respectively.  The primary factor in theCompany’s ability to generate cash from operations is our net income.  Net income/(loss) decreased $152.3 million,or 382.6%, to a loss of $112.5 million for the fiscal year ended May 2,2009 as compared to net income of $39.8 million for the fiscal year ended May 3,2008.  Additionally, cash flows fromoperations exceed net income because non-cash charges (impairment charges,depreciation, amortization of intangibles and restricted stock awards)negatively impact net income but do not result in the use of cash. Similarly,non-cash credits such as deferred income tax benefits increase net income butdo not provide cash.

 

Operating cash flow is summarized below (in millions):

 
| ** **                                   | ** ** | **Fiscal  Year Ended** | ** ** |
|----------------------------------------------|------------|------------------------|------------|
| ** **                                   | ** ** | **May 2,**        | ** ** | **May 3,** | ** ** | **April 28,** | ** ** |
| ** **                                   | ** ** | **2009**               | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net income/(loss)                            |       | $                      | (112.5     | ) | $ | 39.8 |   | $ | 26.1 |   |
| Depreciation and  amortization               |       | 37.0                   |       | 28.2 |   | 23.6 |   |
| Changes in operating  assets and liabilities |       | 6.3                    |       | 6.8 |   | 1.0 |   |
| Other non-cash items                         |       | 112.4                  |       | 2.2 |   | 3.2 |   |
| Cash flow from  operations                   |       | $                      | 43.2       |   | $ | 77.0 |   | $ | 53.9 |   |

 

Netcash used in investing activities was $76.1 million for fiscal 2009, $29.0million for fiscal 2008 and $73.4 million for fiscal 2007.  Purchases of property, plant and equipmentwere $17.1 million, $20.0 million and $10.7 million for the fiscal years endedMay 2, 2009, May 3, 2008 and April 28, 2007, respectively.  On September 30, 2008, we acquired certainassets of Hetronic LLC for $53.6 million in cash.  We also incurred $2.4 million in transactioncosts related to the purchase.  In fiscal2009, we made a contingent payment of $0.8 million related to the VEPacquisition and a contingent payment of $0.6 million for CablecoTechnologies.  In fiscal 2008, net cashused in investing activities also included $9.6 million relating to theTouchSensor, VEP and Tribotek acquisitions. During fiscal 2008, we also paid a $1.0 million dividend for ourautomotive joint venture.  Cash used ininvesting activities in fiscal 2007 included $60.3 million for the acquisitionof TouchSensor and $2.7 million final contingent payment related to the ASTacquisition.

 

Netcash used in financing activities was $15.1 million in fiscal 2009, $7.1million in fiscal 2008 and $2.7 million in fiscal 2007.  We paid cash dividends of $9.8 million, $7.6million and $7.5 million in fiscal 2009, 2008

 

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## **FinancialCondition, Liquidity and Capital Resources - Continued**

## ** **

and2007, respectively.  We repurchased53,012 shares, 95,420 shares and 134,807 shares in fiscal 2009, 2008 and 2007,respectively, of our common stock from the former owners of Cableco inaccordance with the terms of the earn-out provision of the Cableco purchaseagreement. Our board of directors approved a stock repurchase plan in September 2009,which expires May 1, 2010.  Werepurchased 669,480 shares of common stock at an average price of $7.85 infiscal 2009 on the open market.

 

**ContractualObligations**

 

The following tablesummarizes contractual obligations and commitments, as of May 2, 2009 (inthousands):

 
| ** **             | ** ** | **Payments Due By Period** | ** ** |
|------------------------|------------|----------------------------|------------|
| ** **             | ** ** | ** **                 | ** ** | **Less than** | ** ** | ** ** | ** ** | ** ** | ** ** | **More than** | ** ** |
| ** **             | ** ** | **Total**                  | ** ** | **1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **5 years** | ** ** |
| Operating  leases      |       | $                          | 7,820      |   | $ | 3,685 |   | $ | 3,042 |   | $ | 993 |   | $ | 100 |   |
| Purchase  obligations  |       | 34,550                     |       | 34,550 |   | — |   | — |   | — |   |
| Deferred  compensation |       | 4,884                      |       | 1,023 |   | 1,132 |   | 291 |   | 2,438 |   |
| Other  obligations     |       | 1,250                      |       | 1,250 |   | — |   | — |   | — |   |
| Total                  |       | $                          | 48,504     |   | $ | 40,508 |   | $ | 4,174 |   | $ | 1,284 |   | $ | 2,538 |   |

 

**Off-Balance Sheet Arrangements**

 

We do not have any off-balance sheetarrangements, other than the operating leases and purchase obligations noted inthe preceding table.

 

### **Critical Accounting Policies andEstimates**

###  

Management’s discussionand analysis of financial condition and results of operations is based upon ourconsolidated financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States. The preparationof these financial statements requires us to make estimates and judgments thataffect the reported amounts of assets, liabilities, revenues and expenses and relateddisclosure of contingent assets and liabilities. Actual results may differ fromthese estimates under different assumptions or conditions; however, we do notbelieve that it is reasonably likely that changes will occur.  We believe the following critical accountingpolicies affect our more significant judgments and estimates used in thepreparation of our consolidated financial statements.

 

*Revenue Recognition.* We recognize revenue on product sales when i) persuasive evidence of anagreement exists, ii) the price is fixed or determinable, iii) delivery hasoccurred or services have been rendered, and iv) collection of the salesproceeds is reasonably assured.  Revenuefrom our product sales not requiring installation, net of trade discounts andestimated sales allowances, is recognized when title passes, which is generallyupon shipment.  We do not have anyadditional obligations or customer acceptance provisions after shipment of suchproducts.  We handle returns byreplacing, repairing or issuing credit for defective products whenreturned.  Revenue from cablinginfrastructure systems installations is recognized when the installation iscompleted, tested and accepted by the customer.

 

*Allowancefor Doubtful Accounts.*  We maintain an allowance fordoubtful accounts for estimated losses resulting from the inability ofcustomers to make required payments. The amount of the allowance is based onthe age of unpaid amounts, information about the creditworthiness of customers,and other relevant information. Estimates of uncollectible amounts are revisedeach period, and changes are recorded in the period they become known. If thefinancial condition of our customers were to deteriorate, resulting in animpairment of their ability to make payments, additional allowances may berequired.

 

Inaddition, our revenues and accounts receivable are concentrated in a relativelysmall number of customers.  A significantchange in the liquidity or financial position of any one of these customers ora

 

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### **Critical Accounting Policies andEstimates - Continued**

###  

deterioration in the economic environment or automotive industry, ingeneral, could have a material adverse impact on the collectability of ouraccounts receivable and our future operating results, including a reduction infuture revenues and additional allowances for doubtful accounts.

 

*Allowancefor Excess and Obsolete Inventory.*  Inventoriesare valued at the lower-of-cost-or-market value and have been reduced byallowances for excess and obsolete inventories. The estimated allowances arebased on our review of inventories on hand compared to estimated future usageand sales, using assumptions about future product life cycles, product demandand market conditions.  If actual productlife cycles, product demand and market conditions are less favorable than thoseprojected by us, additional inventory write-downs may be required.

 

*IntangibleAssets.*  We have significant intangible assets relatedto goodwill and other acquired intangibles. The determination of related estimated useful lives and whether theseassets are impaired involves significant judgment.  In assessing the recoverability of ourintangibles, we must make assumptions regarding estimated future cash flows andother factors to determine the fair value of the respective assets.  If these estimates or their relatedassumptions change in the future, we may be required to record impairmentcharges for these assets.  In accordancewith SFAS No. 142, “*Goodwill and OtherIntangible Assets,*” on May 1, 2002, we ceased amortizinggoodwill.  In lieu of amortization, weare required to perform an annual impairment review (see Note 4 to the ConsolidatedFinancial Statements).

 

*IncomeTaxes.*  As part of the process of preparing ourConsolidated Financial Statements, we are required to estimate income taxes ineach of the jurisdictions in which we operate. The process involves estimatingactual current tax expense along with assessing temporary differences resultingfrom differing treatment of items for book and tax purposes. These temporarydifferences result in deferred tax assets and liabilities, which are includedin our consolidated balance sheet. We record a valuation allowance to reduceour deferred tax assets to the amount that is more likely than not to berealized. We have considered future taxable income and ongoing tax planningstrategies in assessing the need for the valuation allowance.  The tax laws of Malta provide for investmenttax credits of 50% of certain qualified expenditures.  Unused credits can be carried forwardindefinitely.  We have accumulatedinvestment tax credits in excess of amounts more likely than not to be realizedbased upon projections of taxable income to be generated within a reasonabletime period.  Valuation allowances havebeen provided for this excess.

 

*Contingencies.* We are subject to various investigations, claims, legal andadministrative proceedings covering a wide range of matters that arise in theordinary course of business activities. A significant amount of judgment and use of estimates is required toquantify our ultimate exposure in these matters. For those matters that we canestimate a range of loss, we have established reserves at levels within thatrange to provide for the most likely scenario based upon availableinformation.  The valuation of reservesfor contingencies is reviewed on a quarterly basis to assure that the Companyis properly reserved. Reserve balances are adjusted to account for changes incircumstances for ongoing issues and the establishment of additional reservesfor emerging issues. While we believe that the current level of reserves isadequate, changes in the future could impact these determinations.

 

##### **Item 7A.  Quantitative and Qualitative DisclosuresAbout Market Risk**

##### ** **

Certain of our foreignoperations enter into transactions in currencies other than their functionalcurrency, primarily the U.S. dollar and the Euro.  A 10% change in foreign currency exchangerates from balance sheet date levels could impact our income before incometaxes by $2.8 million and $1.1 million at May 2, 2009 and May 3,2008, respectively.  We also have foreigncurrency exposure arising from the translation of our net equity investment inour foreign operations to U.S. dollars. We generally view our investments in foreign operations with functionalcurrencies other than the U.S. dollar as long-term.  The currencies to which we are exposed arethe British pound, Chinese yuan, Czech koruna, Euro, Mexican peso and Singaporedollar.  A 10% change in foreign currencyexchange rates from balance sheet date levels could impact our net foreigninvestments by $10.8 million at May 2, 2009 and $15.1 million at May 3,2008.

 

**Item8.  Financial Statements andSupplementary Data**

 

See Item 15 for an Indexto Financial Statements and Financial Statement Schedule.  Such Financial Statements and Schedule areincorporated herein by reference.

 

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**Item 9A. Controls and Procedures**

 

***Evaluation of Disclosure Controls and Procedures***

 

As of the end of the period covered by this annualreport on Form 10-K, we performed an evaluation under the supervision andwith the participation of our management, including our Chief Executive Officerand our Chief Financial Officer, of our “disclosure controls and procedures”(as defined in Rules 13a-15(e) and 15d-15(e) of the SecuritiesExchange Act of 1934 (the “Exchange Act”).  Our disclosure controls andprocedures are designed to ensure that the information required to be disclosedby us in the reports that we file or submit under the Exchange Act is recorded,processed, summarized and reported within the time periods specified in theSecurities and Exchange Commission’s applicable rules and forms.  Asa result of this evaluation, our Chief Executive Officer and Chief FinancialOfficer have concluded that, as of the end of the period covered by thisreport, our disclosure controls and procedures were effective.

 

***Management’s Report on Internal Control overFinancial Reporting***

 

Our management is responsible for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in ExchangeAct Rules 13a-15(f) and 15d-15(f). Under the supervision and with theparticipation of our management, including our Chief Executive Officer andChief Financial Officer, we conducted an evaluation of the effectiveness of ourinternal control over financial reporting as of May 2, 2009 based on theguidelines established in *Internal Control —Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO).  Our internal control over financial reportingincludes policies and procedures that provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financialstatements for external reporting purposes in accordance with U.S. generallyaccepted accounting principles.

 

Management’s assessment of and conclusion on the effectiveness ofinternal control over financial reporting did not include the internal controlsof Hetronic LLC, acquired on September 30, 2008, which is included in ourfiscal 2009 consolidated financial statements and constituted $21.9 million and$20.0 million of total and net assets, respectively, as of May 2, 2009 and$14.4 million of revenue and a net loss of $36.1 million as of May 2,2009.

 

Based on the results of our evaluation, with the exception of HetronicLLC mentioned above, our management concluded that our internal control overfinancial reporting was effective as of May 2, 2009. Management reviewedthe results of its assessment with the Audit Committee.  Our independent registered public accountingfirm, Ernst and Young, LLP, has issued an attestation report on our internalcontrol over financial reporting.  Thisreport is included on page F-2 of this report on Form 10-K.

 

***Changes in Internal Control over FinancialReporting***

 

There were no changes in our internal control over financial reportingidentified in connection with the evaluation required by paragraph (d) ofExchange Act Rules 13a-15 or 15d-15 that was conducted during the lastfiscal quarter that have materially affected, or are reasonably likely tomaterially affect, our internal control over financial reporting.

 

***Inherent Limitations on Effectiveness of Controls***

 

Our management, including our Chief Executive Officer and ChiefFinancial Officer, do not expect that our disclosure controls or our internalcontrol over financial reporting will prevent all errors and all fraud. Acontrol system, no matter how well conceived and operated, can provide only reasonable,not absolute, assurance that the objectives of the control system are met.Further, the design of a control system must reflect the fact that there areresource constraints, and the benefits of controls must be considered relativeto their costs. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within the Company have been detected. Theseinherent limitations include the realities that judgments in decision-makingcan be faulty, and that breakdowns can occur because of a simple error ormistake. Additionally, controls can be circumvented by the individual acts ofsome persons, by collusion of two or more people or by management override ofthe controls. The design of any system of controls also is based in part uponcertain assumptions about the likelihood of future events, and there can be noassurance that any design will succeed in achieving its stated goals under allpotential future conditions; over time, controls may become inadequate becauseof changes in conditions, or the degree of compliance with policies orprocedures may

 

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***Inherent Limitations on Effectiveness of Controls -Continued***

 

deteriorate.Because of the inherent limitations in a cost-effective control system,misstatements due to error or fraud may occur and not be detected.

 

**PART III**

** **

**Item10.  Directors, Executive Officers andCorporate Governance**

 

Information regarding ourdirectors will be included under the caption “Proposal One:  Election of Directors” and “CorporateGovernance” in the definitive proxy statement for our 2009 annual meeting to beheld on September 17, 2009, and is incorporated herein by reference.  Information regarding our executive officersis included under a separate caption in Part I hereof, and is incorporatedherein by reference, in accordance with General Instruction G(3) to Form 10-Kand Instruction 3 to Item 401(b) of Regulation S-K.  Information regarding compliance with Section 16(a) ofthe Exchange Act is included under the caption “Section 16(a) BeneficialOwnership Reporting Compliance” and “Audit Committee Matters” in the definitiveproxy statement for our 2009 annual meeting and is incorporated herein byreference.

 

We have adopted a Code of Business Conduct (the “Code”)that applies to our directors, our principal executive officer, principalfinancial officer, principal accounting officer or controller and personsperforming similar functions, as well as other employees.  The Code of Business Conduct is publiclyavailable on our website at www.methode.com. If we make any substantive amendments to the Code or grant any waiver,including any implicit waiver, from a provision of the Code to our principalexecutive officer, principal financial officer, principal accounting officer orcontroller or persons performing similar functions, we will disclose the natureof such amendment or waiver on our website or in a report on Form 8-K inaccordance with applicable rules and regulations.

 

**Item11.  Executive Compensation**

 

Information regardingthe above will be included under the caption “ Compensation Discussion andAnalysis,” “Compensation Committee Report,” “Executive Compensation Tables” and“Director Compensation” in the definitive proxy statement for our 2009 annualmeeting to be held on September 17, 2009, and is incorporated herein by reference.

 

##### **Item 12. Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters**

##### ** **

Information regardingthe above will be included under the caption “Security Ownership” and “ExecutiveCompensation Discussion and Analysis” and in subsequent compensation tables inthe definitive proxy statement for our 2009 annual meeting to be held on September 17,2009, and is incorporated herein by reference.

 

**Item13.  Certain Relationships and RelatedTransactions, and Director Independence**

 

Information regardingthe above will be included under the caption “Corporate Governance” in thedefinitive proxy statement for our 2009 annual meeting to be held on September 17,2009, and is incorporated herein by reference.

 

**Item 14.  Principal Accounting Fees and Services**

 

Information regardingthe above will be included under the caption “Audit Committee Matters” in thedefinitive proxy statement for our 2009 annual meeting to be held on September 17,2009, and is incorporated herein by reference.

 

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**PART IV**

 

**Item15.  Exhibits and Financial StatementSchedule**

 

**(a) **Thedocuments included in the following indexes are filed as part of this annualreport on Form 10-K.

 
| **(1) (2)** | The response to this portion of Item 15 is included in this report  under the caption “Financial Statements” and “Financial Statement Schedule”  below, which is incorporated herein by reference. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |                                                                                                                                                                                                                   |
| **(3)**          | See “Index to Exhibits” immediately following the financial statement  schedule.                                                                                                                             |
|             |                                                                                                                                                                                                                   |
| **(a)**          | See “Index to Exhibits” immediately following the  financial statement schedule.                                                                                                                             |
|             |                                                                                                                                                                                                                   |
| **(b)**          | See “Financial Statements” and “Financial Statement Schedule.”                                                                                                                                     |

 

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**SIGNATURES**

** **

Pursuant to therequirements of Section 13 or 15 (d) of the Securities Exchange Actof 1934, the Registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.

 
|   | METHODE ELECTRONICS,  INC.                    |
|--------|-----------------------------------------------|
|   | (Registrant)                                  |
|   |                                          |
|   | By:                                           | /s/ DOUGLAS A. KOMAN |
|   | Douglas A. Koman                              |
|   | Chief Financial Officer                       |
|   | (Principal Accounting  and Financial Officer) |

 

 

Dated:  July 2, 2009

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the Registrant and in thecapacities and on the dates indicated.

 
| **Signature**                | ** ** | **Title**                                               | ** ** | **Date**          |
|------------------------------|------------|---------------------------------------------------------|------------|-------------------|
|                         |       |                                                    |       |              |
| /s / WARREN L. BATTS         |       | Chairman of the Board                                   |       | July 2, 2009 |
| Warren L. Batts              |       |                                                    |       |              |
|                         |       |                                                    |       |              |
| /s/ DONALD W. DUDA           |       | Chief Executive  Officer, President & Director |       | July 2, 2009 |
| Donald W. Duda               |       | (Principal Executive  Officer)                          |       |              |
|                         |       |                                                    |       |              |
| /s / DOUGLAS A. KOMAN        |       | Chief Financial Officer                                 |       | July 2, 2009 |
| Douglas A. Koman             |       |                                                    |       |              |
|                         |       |                                                    |       |              |
| /s / WALTER J. ASPATORE      |       | Director                                                |       | July 2, 2009 |
| Walter J. Aspatore           |       |                                                    |       |              |
|                         |       |                                                    |       |              |
| /s/ J. EDWARD COLGATE        |       | Director                                                |       | July 2, 2009 |
| J. Edward Colgate            |       |                                                    |       |              |
|                         |       |                                                    |       |              |
| /s/ DARREN M. DAWSON         |       | Director                                                |       | July 2, 2009 |
| Darren M. Dawson             |       |                                                    |       |              |
|                         |       |                                                    |       |              |
| /s / ISABELLE C.  GOOSSEN    |       | Director                                                |       | July 2, 2009 |
| Isabelle C. Goossen          |       |                                                    |       |              |
|                         |       |                                                    |       |              |
| /s / CHRISTOPHER J.  HORNUNG |       | Director                                                |       | July 2, 2009 |
| Christopher J. Hornung       |       |                                                    |       |              |
|                         |       |                                                    |       |              |
| /s / LAWRENCE B.  SKATOFF    |       | Director                                                |       | July 2, 2009 |
| Lawrence B. Skatoff          |       |                                                    |       |              |
|                         |       |                                                    |       |              |
| /s / PAUL G. SHELTON         |       | Director                                                |       | July 2, 2009 |
| Paul G. Shelton              |       |                                                    |       |              |

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

** **

**FORM 10-K**

 

**ITEM 15 (a) (1) and(2)**

 

**(1)****                                ****Financial Statements**

 

The followingconsolidated financial statements of Methode Electronics, Inc. andsubsidiaries are included in Item 8:

 
| Report  of Independent Registered Public Accounting Firm                                                                            | F1     |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                |   |
| Report of Independent  Registered Public Accounting Firm on Internal Control over Financial  Reporting                              | F2     |
|                                                                                                                                |   |
| Consolidated  Balance Sheets — May 2, 2009 and May 3, 2008                                                           | F3     |
|                                                                                                                                |   |
| Consolidated  Statements of Operations — Years Ended May 2, 2009, May 3, 2008 and  April 28, 2007               | F4     |
|                                                                                                                                |   |
| Consolidated Statements of Shareholders’ Equity —  Years Ended May 2, 2009, May 3, 2008 and April 28, 2007 | F5     |
|                                                                                                                                |   |
| Consolidated Statements of Cash Flows — Years Ended  May 2, 2009, May 3, 2008 and April 28, 2007                | F6     |
|                                                                                                                                |   |
| Notes to Consolidated Financial Statements                                                                                          | F7     |

 

**(2)****                                ****Financial Statement Schedule**

 
| Schedule II — Valuation and Qualifying Accounts | F34 |
|------------------------------------------------------|-----|

 

All other schedules forwhich provision is made in the applicable accounting regulation of theSecurities and Exchange Commission are not required under the relatedinstructions or are immaterial and, therefore, have been omitted.

 

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

 

Board of Directors andShareholders

Methode Electronics, Inc.

 

We have audited theaccompanying consolidated balance sheets of Methode Electronics, Inc. andsubsidiaries as of May 2, 2009 and May 3, 2008, and the relatedconsolidated statements of operations, shareholders’ equity and cash flows foreach of the three years in the period ended May 2, 2009.  Our audits also included the financial statementschedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of theCompany’s management.  Our responsibilityis to express an opinion on these financial statements and schedule based onour audits.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation.  We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, thefinancial statements referred to above present fairly, in all materialrespects, the consolidated financial position of Methode Electronics, Inc.and subsidiaries at May 2, 2009 and May 3, 2008, and the consolidatedresults of their operations and their cash flows for each of the three years inthe period ended May 2, 2009, in conformity with U.S. generally acceptedaccounting principles.  Also, in ouropinion, the related financial statement schedule, when considered in relationto the basic financial statements taken as a whole, presents fairly in allmaterial respects the information set forth therein.

 

As discussed in Note 7 tothe consolidated financial statements, effective April 29, 2007, theCompany adopted Financial Accounting Standards Board Interpretation No. 48,“Accounting for Uncertainty in Income Taxes”.

 

We also have audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the effectiveness of Methode Electronics, Inc.’s internalcontrol over financial reporting as of May 2, 2009, based on criteriaestablished in *Internal Control — Integrated Framework*issued by the Committee of Sponsoring Organizations of the Treadway Commissionand our report dated July 1, 2009 expressed an unqualified opinionthereon.

 

 

/s/  ERNST & YOUNG LLP

 

Chicago, Illinois

July 1, 2009

 

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING**

 

Board of Directors and Shareholders

Methode Electronics, Inc.

 

We have audited Methode Electronics, Inc.’s internal control overfinancial reporting as of May 2, 2009, based on criteria established in *Internal Control—Integrated Framework* issued by theCommittee of Sponsoring Organizations of the Treadway Commission (the COSOcriteria). Methode Electronics, Inc.’smanagement is responsible for maintaining effective internal control overfinancial reporting, and for its assessment of the effectiveness of internalcontrol over financial reporting included in the accompanying Report onInternal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internalcontrol over financial reporting based on our audit.

 

We conducted our audit in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whethereffective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internalcontrol over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness ofinternal control, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonablebasis for our opinion.

 

A company’s internal control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internalcontrol over financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financialreporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.

 

As indicated inthe accompanying Report on Internal Control over Financial Reporting,management’s assessment of and conclusion on the effectiveness of internalcontrol over financial reporting did not include the internal controls ofHetronic LLC, which is included in the May 2, 2009 consolidated financialstatements of Methode Electronics, Inc. and constituted $21.9 million and$20.0 million of total and net assets, respectively, as of May 2, 2009 and$14.4 million and $36.1 million of revenues and net loss, respectively, for theyear then ended.  Our audit of internalcontrol over financial reporting of Methode Electronics, Inc. also did notinclude an evaluation of the internal control over financial reporting ofHetronic LLC.

 

In our opinion, Methode Electronics, Inc. maintained effectiveinternal control over financial reporting as of May 2, 2009, based on theCOSO criteria.

 

We also have audited, in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), the consolidated balancesheets of Methode Electronics, Inc. as of May 2, 2009 and May 3,2008, and the related consolidated statements of operations, shareholders’equity, and cash flows for each of the three years in the period ended May 2,2009 and our report dated July 1, 2009 expressed an unqualified opinionthereon.

 

/s/  ERNST & YOUNG LLP

 

Chicago, Illinois

July 1, 2009

 

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Table of Contents

 

**METHODEELECTRONICS, INC AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(inthousands, except share data)**

 
| ** **                                                                                                                                                        | ** ** | **May 2, 2009** | ** **    | **May 3, 2008** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|---------------|----------------------|------------|
| ASSETS                                                                                                                                                            | ** ** | ** **           | ** **    | ** **           | ** ** |
| CURRENT ASSETS                                                                                                                                                    |       |                 |          |                 |       |
| Cash and cash equivalents                                                                                                                                         |       | $                    | 54,030        |                 | $          | 104,305 |   |
| Accounts receivable, net, less allowance (2009 —  $1,444; 2008 —$2,309)                                                                                 |       | 60,406               |          | 85,805               |       |
| Inventories:                                                                                                                                                      |       |                 |          |                 |       |
| Finished products                                                                                                                                                 |       | 11,865               |          | 15,384               |       |
| Work in process                                                                                                                                                   |       | 10,765               |          | 20,715               |       |
| Materials                                                                                                                                                         |       | 17,796               |          | 19,850               |       |
|                                                                                                                                                              |       | 40,426               |          | 55,949               |       |
| Deferred income taxes                                                                                                                                             |       | 4,928                |          | 8,730                |       |
| Refundable income taxes                                                                                                                                           |       | 14,764               |          | —               |       |
| Prepaid expenses and other current assets                                                                                                                         |       | 6,692                |          | 6,028                |       |
| TOTAL CURRENT ASSETS                                                                                                                                              |       | 181,246              |          | 260,817              |       |
|                                                                                                                                                              |       |                 |          |                 |       |
| PROPERTY, PLANT AND EQUIPMENT                                                                                                                                     |       |                 |          |                 |       |
| Land                                                                                                                                                              |       | 3,236                |          | 3,205                |       |
| Buildings and building improvements                                                                                                                               |       | 54,378               |          | 44,894               |       |
| Machinery and equipment                                                                                                                                           |       | 231,470              |          | 260,165              |       |
|                                                                                                                                                              |       | 289,084              |          | 308,264              |       |
| Less allowances for depreciation                                                                                                                                  |       | 219,167              |          | 217,984              |       |
|                                                                                                                                                              |       | 69,917               |          | 90,280               |       |
| OTHER ASSETS                                                                                                                                                      |       |                 |          |                 |       |
| Goodwill                                                                                                                                                          |       | 11,771               |          | 54,476               |       |
| Other intangibles, less accumulated amortization                                                                                                                  |       | 20,501               |          | 41,282               |       |
| Cash surrender value of life insurance                                                                                                                            |       | 11,177               |          | 10,345               |       |
| Deferred income taxes                                                                                                                                             |       | 4,993                |          | 10,099               |       |
| Other                                                                                                                                                             |       | 5,683                |          | 2,921                |       |
|                                                                                                                                                              |       | 54,125               |          | 119,123              |       |
|                                                                                                                                                              |       | $                    |  305,288 |                 | $          | 470,220 |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                         |       |                 |          |                 |       |
|                                                                                                                                                              |       |                 |          |                 |       |
| CURRENT LIABILITIES                                                                                                                                               |       |                 |          |                 |       |
| Accounts payable                                                                                                                                                  |       | $                    | 24,495        |                 | $          | 42,810 |   |
| Salaries, wages and payroll taxes                                                                                                                                 |       | 7,918                |          | 13,317               |       |
| Other accrued expenses                                                                                                                                            |       | 19,921               |          | 19,207               |       |
| Income taxes                                                                                                                                                      |       | 1,184                |          | 1,378                |       |
| TOTAL CURRENT LIABILITIES                                                                                                                                         |       | 53,518               |          | 76,712               |       |
|                                                                                                                                                              |       |                 |          |                 |       |
| OTHER LIABILITIES                                                                                                                                                 |       | 16,686               |          | 13,833               |       |
| DEFERRED COMPENSATION                                                                                                                                             |       | 3,308                |          | 6,890                |       |
| SHAREHOLDERS’ EQUITY                                                                                                                                         |       |                 |          |                 |       |
| Common stock, $0.50 par value, 100,000,000 shares  authorized, 38,290,776 and 38,225,379 shares issued as of May 2, 2009  and May 3, 2008, respectively |       | 19,145               |          | 19,113               |       |
| Unearned common stock issuances                                                                                                                                   |       | (3,632               | )             | (4,257               | )          |
| Additional paid-in capital                                                                                                                                        |       | 68,506               |          | 69,953               |       |
| Retained earnings                                                                                                                                                 |       | 143,577              |          | 265,838              |       |
| Accumulated other comprehensive income                                                                                                                            |       | 15,675               |          | 28,381               |       |
| Treasury stock, 1,372,188 and 702,708 shares as of  May 2, 2009 and May 3, 2008, respectively                                                           |       | (11,495              | )             | (6,243               | )          |
|                                                                                                                                                              |       | 231,776              |          | 372,785              |       |
|                                                                                                                                                              |       | $                    |  305,288 |                 | $          | 470,220 |   |

 

Seenotes to consolidated financial statements.

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(inthousands, except per share data)**

 
| ** **                                                                    | ** ** | **Fiscal Year Ended** | ** ** |
|-------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                    | ** ** | **May 2,**       | ** ** | **May 3,** | ** ** | **April 28,** | ** ** |
| ** **                                                                    | ** ** | **2009**              | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                                          |       |                  |       |   |   |   |   |
| INCOME                                                                        |       |                  |       |   |   |   |   |
| Net  sales                                                                    |       | $                     | 425,644    |   | $ | 551,073 |   | $ | 448,427 |   |
| Other                                                                         |       | 3,202                 |       | 1,879 |   | 1,596 |   |
|                                                                          |       | 428,846               |       | 552,952 |   | 450,023 |   |
|                                                                          |       |                  |       |   |   |   |   |
| COSTS  AND EXPENSES                                                           |       |                  |       |   |   |   |   |
| Cost  of products sold                                                        |       | 356,496               |       | 428,355 |   | 359,914 |   |
| Restructuring                                                                 |       | 25,278                |       | 5,159 |   | 2,027 |   |
| Impairment  of goodwill and other assets                                      |       | 94,374                |       | 1,472 |   | 377 |   |
| Selling  and administrative expenses                                          |       | 57,471                |       | 61,550 |   | 50,182 |   |
| Amortization  of intangibles                                                  |       | 6,933                 |       | 6,013 |   | 4,708 |   |
|                                                                          |       | 540,552               |       | 502,549 |   | 417,208 |   |
|                                                                          |       |                  |       |   |   |   |   |
| Income/(loss)  from operations                                                |       | (111,706              | )          | 50,403 |   | 32,815 |   |
|                                                                          |       |                  |       |   |   |   |   |
| Interest  income, net                                                         |       | 1,382                 |       | 2,324 |   | 3,428 |   |
| Other,  net                                                                   |       | (479                  | )          | (3,250 | ) | (468 | ) |
| Income/(loss)  before income taxes and cumulative effect of accounting change |       | (110,803              | )          | 49,477 |   | 35,775 |   |
|                                                                          |       |                  |       |   |   |   |   |
| Income  taxes                                                                 |       | 1,680                 |       | 9,723 |   | 9,792 |   |
| Income/(loss)  before cumulative effect of accounting change                  |       | (112,483              | )          | 39,754 |   | 25,983 |   |
|                                                                          |       |                  |       |   |   |   |   |
| Cumulative  effect of accounting change, net of taxes of $28                  |       | —                |       | — |   | 101 |   |
|                                                                          |       |                  |       |   |   |   |   |
| NET INCOME/(LOSS)                                                             |       | $                     | (112,483   | ) | $ | 39,754 |   | $ | 26,084 |   |
|                                                                          |       |                  |       |   |   |   |   |
| Amounts  per common share:                                                    |       |                  |       |   |   |   |   |
| Basic  net income/(loss)                                                      |       | $                     | (3.05      | ) | $ | 1.07 |   | $ | 0.72 |   |
| Diluted  net income/(loss)                                                    |       | $                     | (3.05      | ) | $ | 1.06 |   | $ | 0.71 |   |
|                                                                          |       |                  |       |   |   |   |   |
| Cash  dividends:                                                              |       |                  |       |   |   |   |   |
| Common  stock                                                                 |       | $                     | 0.26       |   | $ | 0.20 |   | $ | 0.20 |   |

 

See notes toconsolidated financial statements.

 

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**METHODEELECTRONICS, INC AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OFSHAREHOLDERS’ EQUITY**

**YearsEnded May 2, 2009, May 3, 2008 and April 28, 2007**

(Dollar amounts inthousands, except share data)

 
| ** **                                                                                      | ** ** | ** **     | ** ** | ** ** | ** ** | **Unearned**  | ** ** | ** **     | ** ** | ** **   | ** ** | ** **      | ** ** | ** **   | ** ** | ** **             | ** ** | ** **        | ** **   |
|-------------------------------------------------------------------------------------------------|------------|----------------|------------|------------|------------|---------------|------------|----------------|------------|--------------|------------|-----------------|------------|--------------|------------|------------------------|------------|-------------------|--------------|
| ** **                                                                                      | ** ** | **Common**     | ** ** | **Common** | ** ** | **Common**    | ** ** | **Additional** | ** ** | ** **   | ** ** | **Currency**    | ** ** | ** **   | ** ** | **Total**              | ** ** | ** **        | ** **   |
| ** **                                                                                      | ** ** | **Stock**      | ** ** | **Stock**  | ** ** | **Stock**     | ** ** | **Paid-in**    | ** ** | **Retained** | ** ** | **Translation** | ** ** | **Treasury** | ** ** | **Shareholders’** | ** ** | **Comprehensive** | ** **   |
| ** **                                                                                      | ** ** | **Shares**     | ** ** | **$**      | ** ** | **Issuances** | ** ** | **Capital**    | ** ** | **Earnings** | ** ** | **Adjustments** | ** ** | **Stock**    | ** ** | **Equity**             | ** ** | **Income/(loss)** | ** **   |
| **Balance at April 29, 2006**                                                              | ** ** | **37,700,484** | ** ** | **$**      | **18,850** | ** **    | **$**      | **(9,132**     | **)**      | **$**        | **59,411** | ** **      | **$**      | **215,072**  | ** ** | **$**                  | **11,039** | ** **        | **$**        | **(3,531** | **)** | **$** | **291,709** |   |   |   |
| Release  of restriction pursuant to acquisition earn-out                                        |       | —         |       | —     |       | 1,233         |       | —         |       | —       |       | —          |       | —       |       | 1,233                  |       |              |         |
| Purchase  and cancellation of shares related to acquisition earn-out                            |       | (95,420        | )          | (48        | )          | —        |       | (1,077         | )          | —       |       | —          |       | —       |       | (1,125                 | )          |              |         |
| Reversal  of unvested stock awards for adoption of SFAS 123R                                    |       | (463,957       | )          | (232       | )          | 3,382         |       | (3,150         | )          | —       |       | —          |       | —       |       | —                 |       |              |         |
| Cumulative  effect of accounting change                                                         |       | —         |       | —     |       | —        |       | (129           | )          | —       |       | —          |       | —       |       | (129                   | )          |              |         |
| Earned  portion of restricted stock awards                                                      |       | 145,765        |       | 73         |       | —        |       | (73            | )          | —       |       | —          |       | —       |       | —                 |       |              |         |
| Stock  award and stock option amortization expense                                              |       | —         |       | —     |       | —        |       | 3,026          |       | —       |       | —          |       | —       |       | 3,026                  |       |              |         |
| Vested  stock awards withheld for payroll taxes                                                 |       | (35,060        | )          | (18        | )          | —        |       | (529           | )          | —       |       | —          |       | —       |       | (547                   | )          |              |         |
| Exercise  of options                                                                            |       | 699,017        |       | 350        |       | —        |       | 6,858          |       | —       |       | —          |       | —       |       | 7,208                  |       |              |         |
| Common  stock repurchased                                                                       |       | —         |       | —     |       | —        |       | —         |       | —       |       | —          |       | (1,924       | )          | (1,924                 | )          |              |         |
| Tax  benefit from stock options                                                                 |       | —         |       | —     |       | —        |       | 1,175          |       | —       |       | —          |       | —       |       | 1,175                  |       |              |         |
| Foreign  currency translation adjustments                                                       |       | —         |       | —     |       | —        |       | —         |       | —       |       | 4,971           |       | —       |       | 4,971                  |       | $                 | 4,971        |   |
| Net  income for year                                                                            |       | —         |       | —     |       | —        |       | —         |       | 26,084       |       | —          |       | —       |       | 26,084                 |       | 26,084            |         |
| Cash  dividends on common stock                                                                 |       | —         |       | —     |       | —        |       | —         |       | (7,472       | )          | —          |       | —       |       | (7,472                 | )          | **$**             | **31,055**   | ** ** |
| **Balance at April 28, 2007**                                                              | ** ** | **37,950,829** | ** ** | **$**      | **18,975** | ** **    | **$**      | **(4,517**     | **)**      | **$**        | **65,512** | ** **      | **$**      | **233,684**  | ** ** | **$**                  | **16,010** | ** **        | **$**        | **(5,455** | **)** | **$** | **324,209** |   |   |   |
| Cumulative  impact of change in accounting for uncertainties in income taxes (FIN 48  adoption) |       | —         |       | —     |       | —        |       | —         |       | (25          | )          | —          |       | —       |       | (25                    | )          |              |         |
| Release  of restriction pursuant to acquisition earn-out                                        |       | —         |       | —     |       | 260           |       | —         |       | —       |       | —          |       | —       |       | 260                    |       |              |         |
| Earned  portion of restricted stock awards                                                      |       | 188,982        |       | 94         |       | —        |       | (94            | )          | —       |       | —          |       | —       |       | —                 |       |              |         |
| Stock  award and stock option amortization expense                                              |       | —         |       | —     |       | —        |       | 3,359          |       | —       |       | —          |       | —       |       | 3,359                  |       |              |         |
| Vested  stock awards withheld for payroll taxes                                                 |       | (40,140        | )          | (20        | )          | —        |       | (441           | )          | —       |       | —          |       | —       |       | (461                   | )          |              |         |
| Exercise  of options                                                                            |       | 125,708        |       | 64         |       | —        |       | 1,234          |       | —       |       | —          |       | —       |       | 1,298                  |       |              |         |
| Common  stock repurchased                                                                       |       | —         |       | —     |       | —        |       | —         |       | —       |       | —          |       | (788         | )          | (788                   | )          |              |         |
| Tax  benefit from stock options                                                                 |       | —         |       | —     |       | —        |       | 383            |       | —       |       | —          |       | —       |       | 383                    |       |              |         |
| Foreign  currency translation adjustments                                                       |       | —         |       | —     |       | —        |       | —         |       | —       |       | 12,371          |       | —       |       | 12,371                 |       | $                 | 12,371       |   |
| Net  income for year                                                                            |       | —         |       | —     |       | —        |       | —         |       | 39,754       |       | —          |       | —       |       | 39,754                 |       | 39,754            |         |
| Cash  dividends on common stock                                                                 |       | —         |       | —     |       | —        |       | —         |       | (7,575       | )          | —          |       | —       |       | (7,575                 | )          | **$**             | **52,125**   | ** ** |
| **Balance at May 3, 2008**                                                                 | ** ** | **38,225,379** | ** ** | **$**      | **19,113** | ** **    | **$**      | **(4,257**     | **)**      | **$**        | **69,953** | ** **      | **$**      | **265,838**  | ** ** | **$**                  | **28,381** | ** **        | **$**        | **(6,243** | **)** | **$** | **372,785** |   |   |   |
| Release  of restriction pursuant to acquisition earn-out                                        |       | (53,012        | )          | (27        | )          | 625           |       | (598           | )          | —       |       | —          |       | —       |       | —                 |       |              |         |
| Earned  portion of restricted stock awards                                                      |       | 120,041        |       | 60         |       | —        |       | (60            | )          | —       |       | —          |       | —       |       | —                 |       |              |         |
| Stock  award and stock option amortization expense                                              |       | —         |       | —     |       | —        |       | (553           | )          | —       |       | —          |       | —       |       | (553                   | )          |              |         |
| Vested  stock awards withheld for payroll taxes                                                 |       | (20,721        | )          | (11        | )          | —        |       | (130           | )          | —       |       | —          |       | —       |       | (141                   | )          |              |         |
| Exercise  of options                                                                            |       | 19,089         |       | 10         |       | —        |       | 103            |       | —       |       | —          |       | —       |       | 113                    |       |              |         |
| Common  stock repurchased                                                                       |       | —         |       | —     |       | —        |       | —         |       | —       |       | —          |       | (5,252       | )          | (5,252                 | )          |              |         |
| Tax  expense from stock options                                                                 |       | —         |       | —     |       | —        |       | (209           | )          | —       |       | —          |       | —       |       | (209                   | )          |              |         |
| Foreign  currency translation adjustments                                                       |       | —         |       | —     |       | —        |       | —         |       | —       |       | (12,706         | )          | —       |       | (12,706                | )          | $                 | (12,706      | ) |
| Net  income/(loss) for year                                                                     |       | —         |       | —     |       | —        |       | —         |       | (112,483     | )          | —          |       | —       |       | (112,483               | )          | (112,483          | )            |
| Cash  dividends on common stock                                                                 |       | —         |       | —     |       | —        |       | —         |       | (9,778       | )          | —          |       | —       |       | (9,778                 | )          | **$**             | **(125,189** | **)** |
| **Balance at May 2, 2009**                                                                 | ** ** | **38,290,776** | ** ** | **$**      | **19,145** | ** **    | **$**      | **(3,632**     | **)**      | **$**        | **68,506** | ** **      | **$**      | **143,577**  | ** ** | **$**                  | **15,675** | ** **        | **$**        | **(11,495** | **)** | **$** | **231,776** |   |   |   |

 

See notes to consolidated financial statements

 

F5

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(inthousands)**

 
| ** **                                                                                | ** ** | **Fiscal Year Ended** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                | ** ** | **May 2,**       | ** ** | **May 3,** | ** ** | **April 28,** | ** ** |
| ** **                                                                                | ** ** | **2009**              | ** ** | **2008** | ** ** | **2007** | ** ** |
| OPERATING ACTIVITIES                                                                      |       |                  |       |   |   |   |   |
| Net income/(loss)                                                                         |       | $                     | (112,483   | ) | $ | 39,754 |   | $ | 26,084 |   |
| Adjustments to reconcile net income/(loss) to net cash  provided by operating activities: |       |                  |       |   |   |   |   |
| Provision for minority interest                                                           |       | 343                   |       | 329 |   | 241 |   |
| (Gain)/loss of sale of fixed assets                                                       |       | (407                  | )          | (120 | ) | 268 |   |
| Provision for depreciation                                                                |       | 30,103                |       | 22,146 |   | 18,915 |   |
| Amortization of intangible assets                                                         |       | 6,933                 |       | 6,013 |   | 4,708 |   |
| Impairment of tangible assets                                                             |       | 10,313                |       | 1,472 |   | 377 |   |
| Impairment of goodwill and other assets                                                   |       | 94,374                |       | — |   | — |   |
| Stock-based compensation                                                                  |       | (553                  | )          | 3,359 |   | 2,897 |   |
| Provision for bad debt                                                                    |       | 120                   |       | 195 |   | 372 |   |
| Deferred income taxes                                                                     |       | 8,078                 |       | (2,948 | ) | (1,012 | ) |
| Changes in operating assets and liabilities:                                              |       |                  |       |   |   |   |   |
| Accounts receivable                                                                       |       | 33,347                |       | (793 | ) | 4,942 |   |
| Inventories                                                                               |       | 19,918                |       | (482 | ) | 1,875 |   |
| Prepaid expenses and other current assets                                                 |       | (16,086               | )          | 7,989 |   | 2,478 |   |
| Accounts payable and accrued expenses                                                     |       | (30,832               | )          | 107 |   | (8,230 | ) |
| NET CASH PROVIDED BY OPERATING ACTIVITIES                                                 |       | 43,168                |       | 77,021 |   | 53,915 |   |
|                                                                                      |       |                  |       |   |   |   |   |
| INVESTING ACTIVITIES                                                                      |       |                  |       |   |   |   |   |
| Purchases of property, plant and equipment                                                |       | (17,064               | )          | (20,018 | ) | (10,667 | ) |
| Acquisition of businesses                                                                 |       | (57,469               | )          | (9,647 | ) | (63,168 | ) |
| Acquisition of technology licenses                                                        |       | (1,575                | )          | — |   | (113 | ) |
| Proceeds from the sale of property and equipment                                          |       | —                |       | 1,706 |   | 800 |   |
| Joint venture dividend                                                                    |       | —                |       | (1,000 | ) | — |   |
| Other                                                                                     |       | (14                   | )          | (27 | ) | (218 | ) |
| NET CASH USED IN INVESTING ACTIVITIES                                                     |       | (76,122               | )          | (28,986 | ) | (73,366 | ) |
|                                                                                      |       |                  |       |   |   |   |   |
| FINANCING ACTIVITIES                                                                      |       |                  |       |   |   |   |   |
| Purchase of common stock                                                                  |       | (5,252                | )          | (1,249 | ) | (3,596 | ) |
| Proceeds from exercise of stock options                                                   |       | 113                   |       | 1,298 |   | 7,208 |   |
| Tax (expense)/benefit from stock options and awards                                       |       | (209                  | )          | 383 |   | 1,175 |   |
| Cash dividends                                                                            |       | (9,778                | )          | (7,575 | ) | (7,472 | ) |
| NET CASH USED IN FINANCING ACTIVITIES                                                     |       | (15,126               | )          | (7,143 | ) | (2,685 | ) |
|                                                                                      |       |                  |       |   |   |   |   |
| Effect of foreign currency exchange rate changes on  cash                                 |       | (2,195                | )          | 3,322 |   | 581 |   |
|                                                                                      |       |                  |       |   |   |   |   |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                          |       | (50,275               | )          | 44,214 |   | (21,555 | ) |
|                                                                                      |       |                  |       |   |   |   |   |
| Cash and cash equivalents at beginning of year                                            |       | 104,305               |       | 60,091 |   | 81,646 |   |
|                                                                                      |       |                  |       |   |   |   |   |
| CASH AND CASH EQUIVALENTS AT END OF YEAR                                                  |       | $                     | 54,030     |   | $ | 104,305 |   | $ | 60,091 |   |

 

See notes to condensed consolidated financial statements.

 

F6

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

 

(Dollar amounts inthousands, except number of shares and per share data)

 

**1.**  **Significant Accounting Policies**

 

*Principlesof Consolidation.*  The consolidated financial statements includethe accounts and operations of Methode Electronics, Inc. (“the Company”)and its subsidiaries.  As used herein, “we,”“us,” “our,” the “Company” or “Methode” means Methode Electronics, Inc.and its subsidiaries.

 

*FinancialReporting Periods. *We maintain our financial records on thebasis of a fifty-two or fifty-three week fiscal year ending on the Saturdayclosest to April 30.  Due to thetiming of our fiscal calendar, the fiscal year ended May 2, 2009 and thefiscal year ended April 28, 2007 represent 52 weeks of results and thefiscal year ended May 3, 2008 represents 53 weeks of results.

 

*CashEquivalents.*  Generally, all highly liquid investments witha maturity of three months or less when purchased are carried at theirapproximate fair value and classified in the consolidated balance sheets ascash equivalents.

 

*Accounts Receivable and Allowance for Doubtful Accounts.*  We carry accounts receivable at their face amounts less an allowance for doubtful accounts. On a regular basis, we record an allowance for uncollectible receivables based upon past transaction history with customers, customer payment practices and economic conditions. Actual collection experience may differ from the current estimate of net receivables. A change to the allowance for uncollectible amounts may be required if a future event or other change in circumstances results in a change in the estimate of the ultimate collectability of a specific account.  We do not require collateral for our accounts receivable balances.  Accounts are written off against the allowance account when they are determined to be no longer collectible.

 

*Inventories.* Inventories are stated at the lower-of-cost (first-in, first-outmethod)-or-market.

 

*Property,Plant and Equipment.*  Properties are stated on the basis ofcost.  We amortize such costs by annualcharges to income, computed on the straight-line method using estimated usefullives of 5 to 40 years for buildings and improvements and 3 to 15 years formachinery and equipment for financial reporting purposes.  Accelerated methods are generally used forincome tax purposes.

 

*IncomeTaxes.* Deferred tax assets and liabilities aredetermined based on differences between financial reporting and tax bases ofassets and liabilities and are measured using the enacted tax rates and lawsthat will be in effect when the differences are expected to reverse.

 

*RevenueRecognition.*  We recognize revenue on product sales when i)persuasive evidence of an agreement exists, ii) the price is fixed ordeterminable, iii) delivery has occurred or services have been rendered, andiv) collection of the sales proceeds is reasonably assured.  Revenue from our product sales not requiringinstallation, net of trade discounts and estimated sales allowances, isrecognized when title passes, which is generally upon shipment.  We do not have any additional obligations orcustomer acceptance provisions after shipment of such products.  We handle returns by replacing, repairing orissuing credit for defective products when returned.  Return costs were not significant in fiscal2009, 2008 and 2007.  Revenue fromcabling infrastructure systems installations is recognized when the installationis completed, tested and accepted by the customer.

 

*Shippingand Handling Fees and Costs*.  Shipping andhandling fees billed to customers are included in net sales, and the relatedcosts are included in cost of products sold.

 

*ForeignCurrency Translation.*  The functional currencies ofthe majority of our foreign subsidiaries are in their local currencies.  Accordingly, the results of operations ofthese foreign subsidiaries are translated into U.S. dollars using averageexchange rates during the year, while the assets and liabilities are translatedusing period end exchange rates. Adjustments from the translation process are classified as a componentof shareholders’ equity.  Exchange gainsand losses arising from transactions denominated in a currency other than thefunctional currency of the foreign subsidiary are included in the ConsolidatedStatements of Operations in other, net. In fiscal 2009, 2008 and 2007, we had foreign exchange losses of $479,$3,250 and $468, respectively.

 

F7

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Tableof Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

 

(Dollar amounts inthousands, except number of shares and per share data)

 

##### **1.  Significant Accounting Policies - Continued**

##### ** **

*Long-LivedAssets. *In accordance with Statement of Financial AccountingStandards (“SFAS”) No. 144, “*Accountingfor the Impairment or Disposal of Long-Lived Assets*,” we continuallyevaluate whether events and circumstances have occurred which indicate that theremaining estimated useful lives of our intangible assets, excluding goodwill,and other long-lived assets, may warrant revision or that the remaining balanceof such assets may not be recoverable. In the event that the undiscounted cashflows resulting from the use of the asset group is less than the carryingamount, an impairment loss equal to the excess of the asset’s carrying amountover its fair value is recorded.

 

In accordance with SFAS No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets”, we recordimpairment losses on long-lived assets used in operations when events andcircumstances indicate that long-lived assets might be impaired and theundiscounted cash flows estimated to be generated by those assets are less thanthe carrying amounts of those assets. During fiscal 2009, based on our futureestimates of the undiscounted cash flows, it was determined that certainidentifiable intangible assets of our TouchSensor and Hetronic businesses inthe Interconnect segment, the Automotive Safety Technologies business in ourAutomotive segment and Magna-Lastic Devices, Inc from our Other segment wereimpaired.  Therefore, we recorded animpairment charge of $26.2 million in the Interconnect segment, $4.6 million inthe Automotive segment and $0.4 million in the Other segment for a total of$31.2 million for these assets.

 

*Goodwilland Intangibles.*  Costs assigned to the fair value ofintangible assets acquired with finite lives are being amortized over periodsranging from 3 to 20 years, generally on a straight-line basis or acceleratedbasis, depending on the nature of the intangible asset.  The fair value of certain intangible assetsis being amortized over projected revenues used to initially value such intangibleassets.  Goodwill represents the excessof purchase price over the estimated fair value of net assets of acquiredcompanies, which has not been allocated to other intangible assets.

 

The Companyevaluates goodwill for impairment at the reporting unit level, which is onelevel below the operating segment level (herein referred to as the reportingunit).  The impairment test for goodwillis a two-step process.  The first step isto identify when goodwill impairment has occurred by comparing the fair valueof a reporting unit with its carrying amount, including goodwill.  If the fair value of a reporting unit exceedsits carrying amount, goodwill of the reporting unit is not considered impaired.  If the carrying amount of the reporting unitexceeds its fair value, the second step of the goodwill test is performed tomeasure the amount of the impairment loss, if any.  In this second step, the implied fair valueof the reporting unit’s goodwill is compared with the carrying amount of thegoodwill.  If the carrying amount of thereporting unit’s goodwill exceeds the implied fair value of that goodwill, animpairment loss is recognized in an amount equal to that excess, not to exceedthe carrying amount of the goodwill. Based on events and general business declines, we performed “step one”of the goodwill impairment test in accordance with paragraph 19 of SFAS No. 142,“Goodwill and Other Intangible Assets”, on the reporting units that havegoodwill during fiscal 2009.  Based onthis test, we determined that the fair value was less than the carrying valueof the net assets for certain reporting units. We completed  “step two” of thegoodwill test and concluded that goodwill was impaired.  During fiscal 2009, we recorded a goodwillimpairment charge of $25,840 in our Automotive segment, $30,750 in ourInterconnect segment, $5,358 in our Power Products segment and $1,203 in ourOther segment for a total of $63,151 related to these assets.

 

*Researchand Development Costs.*  Costs associated with thedevelopment of new products are charged to expense when incurred.  Research and development costs for the fiscalyears ended May 2, 2009, May 3, 2008 and April 28, 2007 amountedto $21,995, $25,595 and $21,336, respectively.

 

*Stock-BasedCompensation.*  See Note 5, Shareholders’ Equity for adescription of our stock-based compensation plans.  In the first quarter of fiscal 2007, weadopted SFAS No. 123(R), “Share Based Payments,” which revises SFAS No. 123,“Accounting for Stock Based Compensation.” SFAS No. 123(R) requires us to record compensation expense forall share-based payments, including employee stock options, at fair value.

 

*Use of Estimates.*  The preparation of financial statements inconformity with accounting principles

 

F8

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Tableof Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

 

(Dollar amounts inthousands, except number of shares and per share data)

 

**1.**  **Significant Accounting Policies - Continued**

 

generallyaccepted in the United States requires management to make estimates andassumptions that affect the amounts reported in the financial statements andaccompanying notes.  Actual results coulddiffer from those estimates.

 

*Fair Value of Other FinancialInstruments.* The carrying values of our short-term financial instruments, includingcash and cash equivalents, accounts receivable and accounts payable approximatetheir fair values because of the short maturity of these instruments.

 

*ComprehensiveIncome.*  SFAS No. 130, “Reporting ComprehensiveIncome,” requires companies to report all changes in equity during a period,except those resulting from investment by owners and distribution to owners, ina financial statement for the period in which they were recognized.  We chose to disclose comprehensive income,which encompasses net income and foreign currency translation adjustments, in theConsolidated Statement of Shareholders’ Equity.

 

*Recent Accounting Pronouncements*

 

Weadopted Financial Accounting Standards Board (“FASB”) SFAS No. 157, “FairValue Measurements” (“SFAS No. 157”) as of May 4, 2008 forfinancial assets and liabilities, and non-financial assets and liabilities thatare recognized or disclosed at fair value in the financial statements on arecurring basis. SFAS No. 157 defines fair value, establishes aframework for measuring fair value as required by other accountingpronouncements and expands fair value measurement disclosures. The provisionsof SFAS No. 157 are applied prospectively upon adoption and did nothave a material impact on our Consolidated Financial Statements. Thedisclosures required by SFAS No. 157 are included in Note 15, “FairValue Measurements,” to our Consolidated Financial Statements.

 

In February 2008,the FASB issued FASB Staff Position No. 157-2, which delays the effectivedate of SFAS No. 157 for non-financial assets and liabilities, whichare not measured at fair value on a recurring basis (at least annually) untilfiscal years beginning after November 15, 2008, which is our fiscal year2010 that began May 3, 2009.  We arecurrently assessing the impact of adopting SFAS No. 157 fornon-financial assets and liabilities on our Consolidated Financial Statements.

 

We adoptedSFAS No. 159, “The Fair Value Option for Financial Assets andFinancial Liabilities—Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”)as of May 4, 2008. SFAS No. 159 permits entities to elect tomeasure many financial instruments and certain other items at fair value. Wedid not elect the fair value option for any assets or liabilities that were notpreviously carried at fair value. Accordingly, the adoption of SFAS No. 159had no impact on our Consolidated Financial Statements.

 

We adoptedEmerging Issues Task Force (EITF) No. 06-4, “Accounting for DeferredCompensation and Postretirement Benefit Aspects of Endorsement Split-DollarLife Insurance Arrangements” (“EITF No. 06-4”) as of May 4,2008. EITF No. 06-4 requires that endorsement split-dollar lifeinsurance arrangements, which provide a benefit to an employee beyond thepostretirement period be recorded in accordance with SFAS No. 106, “Employer’sAccounting for Postretirement Benefits Other Than Pensions” or AccountingPrinciple Board (“APB”) Opinion No. 12, “Omnibus Opinion—1967” based onthe substance of the agreement with the employee.  The adoption of EITF No. 06-4 had noimpact on our Consolidated Financial Statements.

 

In December 2007,the FASB issued SFAS No. 141 (revised 2007) (“SFAS No. 141R”),a revision of SFAS No. 141, “Business Combinations.” SFAS No. 141Restablishes requirements for the recognition and measurement of acquiredassets, liabilities, goodwill and non-controlling interests.  SFAS No. 141R also providesdisclosure requirements related to business combinations. SFAS No. 141Ris effective for fiscal years beginning after December 15, 2008, which isour fiscal year 2010 that began May 3, 2009.  SFAS No. 141R will be applied prospectivelyto business combinations with an acquisition date on or after the effectivedate.  This statement will generallyaffect acquisitions occurring after the adoption date.

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

 

(Dollar amounts inthousands, except number of shares and per share data)

 

**1.**  **Significant Accounting Policies - Continued**

 

In December 2007,the FASB issued SFAS No. 160, “Non-Controlling Interests inConsolidated Financial Statements, an amendment of ARB No. 51” (“SFAS No. 160”).SFAS No. 160 establishes new standards for the accounting for andreporting of non-controlling interests (formerly minority interests) and forthe loss of control of partially owned and consolidated subsidiaries.SFAS No. 160 does not change the criteria for consolidating apartially owned entity. SFAS No. 160 is effective for fiscal yearsbeginning after December 15, 2008, which is our fiscal year 2010 thatbegan May 3, 2009. The provisions of SFAS No. 160 will beapplied prospectively upon adoption except for the presentation and disclosurerequirements, which will be applied retrospectively. We do not expect theadoption of SFAS No. 160 to have a material impact on ourConsolidated Financial Statements.

 

In March 2008,the FASB issued SFAS No. 161, “Disclosures about DerivativeInstruments and Hedging Activities, an amendment of SFAS No. 133” (“SFAS No. 161”).SFAS No. 161 requires enhanced disclosures about an entity’sderivative and hedging activities and is effective for fiscal years and interimperiods beginning after November 15, 2008, which is our fiscal year 2010that began May 3, 2009. We do not believe the adoption of SFAS No. 161will have a material impact on our Consolidated Financial Statements.

 

In April 2008,the FASB issued FASB Staff Position No. FAS 142-3, “Determination of theUseful Life of Intangible Assets” (“FSP 142-3”).  FSP 142-3 amends the factors that should beconsidered in developing renewal or extension assumptions used to determine theuseful life of a recognized intangible asset under FASB Statement No. 142,“Goodwill and Other Intangible Assets.” The provision of FSP 142-3 will be effective for financial statementsissued for fiscal years beginning after December 15, 2008, which is ourfiscal year 2010 that began May 3, 2009. Since this guidance will be applied prospectively, upon adoption, therewill be no impact to our financial position, results of operations or cashflows.

 

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy ofGenerally Accepted Accounting Principles” (“SFAS No 162”).  SFAS No. 162 identifies the sources of accountingprinciples and the framework for selecting the principles to be used in thepreparation of financial statements. SFAS No. 162 is effective 60 days following the SEC’s approval ofthe Public Company Accounting Oversight Board (“PCAOB”) amendments to AU Section 411,“The Meaning of ‘Present Fairly in Conformity With Generally AcceptedAccounting Principles “.  We do notbelieve the adoption of this standard will have a material impact on ourConsolidated Financial Statements.

 

In April 2009, the Financial Accounting Standards Board (FASB)issued three FSPs related to fair value measurements. The first, FSP FAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset orLiability Have Significantly Decreased and Identifying Transactions That AreNot Orderly, provides guidance on determining whether a market is inactive andwhether transactions in that market are distressed.  The second FSP issued, FSP FAS 115-2, FAS124-2, and EITF 99-20-2, Recognition and Presentation of Other-Than-TemporaryImpairments, provides guidance on how to assess whether an asset hasexperienced an other-than-temporary impairment and, if so, where the impairmentshould be recorded in the financial statements. The third FSP issued, FSP FAS 107-1 and APB 28-1, Interim DisclosuresAbout Fair Value of Financial Instruments, requires that disclosures currentlyrequired under SFAS No. 107, Disclosures about Fair Value of FinancialInstruments, be presented for interim periods as well as annual periods.  These FSPs are first effective for interimperiods ending after June 15, 2009 and are not expected to have a materialimpact on our Consolidated Financial Statements.

 

In June 2008, the FASB issued EITF Issue No. 03-6-1, “DeterminingWhether Instruments Granted in Share-Based Payment Transactions AreParticipating Securities”; (“EITF 03-6-1”). EITF 03-6-1 addresses whetherinstruments granted in share-based payment transactions are participatingsecurities prior to vesting and, therefore, need to be included in the earningsallocation in computing earnings per share (EPS) under the two-class methoddescribed in paragraphs 60 and 61 of FASB No. 128,  “Earnings per Share”. EITF 03-6-1 iseffective for fiscal years beginning after December 15, 2008 and is to beapplied retrospectively. The adoption of EITF 03-6-1 is not expected to have amaterial impact on the Company’s consolidated financial position and results ofoperations.

 

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Tableof Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

 

(Dollar amounts inthousands, except number of shares and per share data)

 

**2.  Restructurings**

 

**March 2009 Restructuring**

 

On March 12, 2009, we announced several additional restructuringactions to further reduce our exposure to the North American automotiveindustry and to consolidate manufacturing facilities in lower cost regions toreduce costs.  After these actions ourprincipal manufacturing operations will be in Mexico, Malta and China.  In addition, we have decided to transfercertain new GM business to other suppliers. This business was scheduled to be produced in our Shanghai, Chinaautomotive facility.

 

All Ford Motor Company production at Methode’s Reynosa, Mexico,facility will be moved to another supplier. TouchSensor manufacturing currently in west suburban Chicago, Illinois,will be moved to Monterrey, Mexico. Additionally, our operations in Shanghai, China, will be consolidated totwo facilities from three.

 

In total, this additional restructuring will affect approximately 850employees worldwide. We estimate that we will record a pre-tax charge between$16,000 and $25,000, during fiscal years 2009 and 2010. The cash portion ofthis charge is estimated between $7,000 and $8,000.

 

During the fiscal yearended May 2, 2009, we recorded a restructuring charge of $7,263, whichconsisted of $100 for employee severance, $1,373 in impairment for buildingsand improvements and machinery and equipment, $5,418 for impairment of customerfunded tooling and $133 in forfeited security deposits related to the transferof the new GM business and $239 relating to professional fees.  We estimate that we will record pre-taxrestructuring charges in fiscal 2010 of between $8,700 and $17,700.

 

As of May 2, 2009,we had an accrued restructuring liability of $141 reflected in the currentliabilities section of our consolidated balance sheet.  We expect this liability to be paid outduring fiscal 2010.

 

The table below reflectsthe activity related to the March 2009 restructuring as of May 2,2009:

 
| ** **                           | ** ** | **One-Time**  | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------|------------|---------------|------------|-----------------|------------|------------|------------|------------|------------|
| ** **                           | ** ** | **Employee**  | ** ** | **Asset**       | ** ** | **Other**  | ** ** | ** ** | ** ** |
| ** **                           | ** ** | **Severance** | ** ** | **Write-Downs** | ** ** | **Costs**  | ** ** | **Total**  | ** ** |
| ** **                           | ** ** | ** **    | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Accrued  balance at May 3, 2008 |       | $             | —     |            | $          | —     |       | $          | —     |   | $ | — |   |
| FY  2009 restructuring charges       |       | 100           |       | 6,924           |       | 239        |       | 7,263      |       |
| Payments  and asset write-downs      |       | —        |       | (6,924          | )          | (198       | )          | (7,122     | )          |
| Accrued  balance at May 2, 2009 |       | $             | 100        |            | $          | —     |       | $          | 41         |   | $ | 141 |   |

 

**January 2008 Restructuring**

 

On January 24, 2008, we announced a restructuring of ourU.S.-based automotive operations and a decision to discontinue producingcertain legacy products in the Interconnect segment.  The Automotive and Interconnect restructuringis expected to be completed during fiscal 2010. We record the expense in the restructuring section of our ConsolidatedStatement of Operations. On January 24, 2008, the total pre-tax chargeswere estimated between $19,000 and $25,000. As of May 2, 2009, we have recorded $23,174 of the charges.  We estimate that we will record pre-taxrestructuring charges in fiscal 2010 of between $500 and $1,500, of which $500will relate to the termination of approximately 225 employees and the cost ofone-time employee benefits, retention, COBRA and outplacement services.  We continue to perform periodic impairmenttesting, if indicators exist, and will record any charges incurred as per SFAS No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets”, (“SFAS No. 144”)in the period when impairment is incurred.

 

During the fiscal yearended May 3, 2008, we recorded a restructuring charge of $5,159, whichconsisted of

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

 

(Dollar amounts inthousands, except number of shares and per share data)

 

**January 2008 Restructuring - Continued**

 

$3,355 for employee severance,$1,346 in impairments and accelerated depreciation for buildings andimprovements and machinery and equipment and $458 relating to professionalfees.  As of May 3, 2008, we had anaccrued restructuring liability of $3,176 reflected in the current liabilitiessection of our consolidated balance sheet.

 

During the fiscal yearended May 2, 2009, we recorded a restructuring charge of $18,015, whichconsisted of $6,099 for employee severance, $3,522 and $7,276 in impairmentsand accelerated depreciation, respectively, for buildings and improvements andmachinery and equipment, $153 in inventory write-downs and $965 relating toprofessional fees.  As of May 2,2009, we had an accrued restructuring liability of $1,849 reflected in thecurrent liabilities section of our consolidated balance sheet.  We expect this liability to be paid outduring fiscal 2010.

 

The table below reflectsthe January 2008 restructuring activity for fiscal years ended May 3,2008 and May 2, 2009.

 
| ** **                                  | ** ** | **One-Time**  | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|---------------|------------|-----------------|------------|------------|------------|------------|------------|
| ** **                                  | ** ** | **Employee**  | ** ** | **Asset**       | ** ** | **Other**  | ** ** | ** ** | ** ** |
| ** **                                  | ** ** | **Severance** | ** ** | **Write-Downs** | ** ** | **Costs**  | ** ** | **Total**  | ** ** |
| Accrued  balance at April 28, 2007     |       | $             | —     |            | $          | —     |       | $          | —     |   | $ | — |   |
| Fiscal  2008 restructuring charges          |       | 3,355         |       | 1,346           |       | 458        |       | 5,159      |       |
| Fiscal  2008 payments and asset write-downs |       | (203          | )          | (1,346          | )          | (434       | )          | (1,983     | )          |
| Accrued  balance at May 3, 2008        |       | 3,152         |       | —          |       | 24         |       | 3,176      |       |
|                                        |       |          |       |            |       |       |       |       |       |
| Fiscal  2009 restructuring charges          |       | 6,099         |       | 10,951          |       | 965        |       | 18,015     |       |
| Fiscal  2009 payments and asset write-downs |       | (7,402        | )          | (10,951         | )          | (989       | )          | (19,342    | )          |
| Accrued  balance at May 2, 2009        |       | $             | 1,849      |            | $          | —     |       | $          | —     |   | $ | 1,849 |   |

 

**Fiscal2007 Restructuring**

 

In the third quarter offiscal 2007, we closed our Scotland automotive parts manufacturing plant andtransferred all production lines from that facility to our automotive partsmanufacturing operation in Malta.  We recorded charges of $2,518 relatedto the closing and transfer of operations, consisting of involuntary severanceof $1,525 for termination of 140 employees, equipment moving and installationcosts of $667, provision for the permanent impairment of assets of $174, andprofessional fees and lease and other obligations of $152, reduced by acumulative currency translation credit of $491.   All restructuring costs relating to theScotland restructuring have been paid out as of May 3, 2008.

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

 

(Dollar amounts inthousands, except number of shares and per share data)

 

**3**.  **Acquisitions**

 

*Fiscal 2009 Acquisitions*

 

On September 30, 2008, we acquired certain assets of Hetronic LLC(Hetronic) for $53,639 in cash.  We alsoincurred $2,447 in transaction costs related to the purchase.  Hetronic is a global leader in industrialsafety radio remote controls with locations in the U.S., Malta, the Philippinesand Germany.  Hetronic is represented in45 countries by direct sales associates, licensed partners, distributors andrepresentatives.  Hetronic providesapplication specific and standard controls to many different industries, suchas material handling, transportation, mining, military, agriculture andconstruction.

 

Based on a third-party valuation report, the tangible net assetsacquired had a fair value of $20,533. The fair values assigned to intangible assets acquired were $12,170 forcustomer relationships, $2,700 for the trade name and trademarks, $1,450 fortechnology valuation, and $170 for non-competes, resulting in $19,063 of goodwill.  The customer relationships, technologyvaluation and non-competes are being amortized over 5 to approximately 12years.  The trade name and trademarks arenot subject to amortization but are subject to periodic impairmenttesting.  The accounts and transactionsof Hetronic have been included in the Interconnect segment in the consolidatedfinancial statements from the effective date of the acquisition.

 

*Fiscal 2008 Acquisitions*

 

On August 31, 2007,we acquired 100% of the assets of Value Engineered Products, Inc. (VEP)for $5,750 in cash.  We also incurred $79in transaction costs related to the purchase. VEP is a thermal management solutions provider, manufacturing heat sinksand related products for high-powered applications.  These components complement our Power Productofferings and, in some instances, are joined with bus bars to aid thermalmanagement of power systems.  The termsof the acquisition provide for an additional payment of up to a maximum of $1,000if sales reach specified targets during the twelve-month period following theclosing.  The final payout was $758 andwas recorded in the second quarter of fiscal 2009.

 

Based on a third-partyvaluation report, the tangible net assets acquired in the VEP transaction had afair value of $915.  The fair valuesassigned to intangible assets acquired were $2,900 for customer relationshipsand $600 for trademarks, resulting in $2,172 of goodwill.  The customer relationships acquired are beingamortized over a period of approximately 16 years, which began in September 2007.  The trademark intangible assets are notsubject to amortization but are subject to periodic impairment testing.  The accounts and transactions of the acquiredbusiness have been included in the Power Products segment in the consolidatedfinancial statements from the effective date of the acquisition.

 

On March 30, 2008,we acquired 100% of the assets of Tribotek, Inc for $1,750 in cash.  We also incurred $61 in transaction costsrelated to the purchase.  Tribotekdesigns, develops and manufactures high current power connectors and powerproduct systems for products such as power supplies, servers, rectifiers,inverters, robotics and automated test equipment, in addition to variousmilitary and telecommunication applications.

 

The tangible net assetsacquired in the Tribotek transaction had a fair value of $1,445.  The fair values assigned to intangible assetsacquired were $366 for patents that are being amortized over a period ofapproximately 18 years beginning March 2008.  There was no goodwill recorded for thisacquisition.  The accounts andtransactions of the acquired business have been included in the Power Productssegment in the consolidated financial statements from the effective date of theacquisition.

 

*Fiscal 2007 Acquisition*

 

As of March 1, 2007,we acquired 100% of the member interest of TouchSensor Technologies, LLC fromGemtron Corporation for $58,474 in cash and assumed liabilities of $7,061.  We also incurred $2,239 in transaction costsrelated to the purchase.  TouchSensor isa North American market leader in solid-state, field-effect switching.  Using its patented technology, TouchSensordesigns and manufactures touch-sensitive user interface panels found

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)**

 

(Dollar amounts inthousands, except number of shares and per share data)

 

**3**.  **Acquisitions - Continued**

 

on products suchas home appliances, exercise equipment, electronic bath/shower controls,commercial beverage dispensers and automobiles.

 

The tangible net assetsacquired had a fair value of $6,886.  Thefair values assigned to intangible assets acquired were $9,800 for patents,$250 for covenants not to compete, $18,200 for customer relationships, and$2,900 for trade name, resulting in $22,677 of goodwill.  The intangible assets acquired are beingamortized over periods of 15 to 20 years. The accounts and transactions of the acquired business have beenincluded in the Interconnect segment in the consolidated financial statementsfrom the effective date of the acquisition. The pro forma results of operations, assuming the purchase occurred at May 2,2005, would not differ materially from the reported amounts.  Included in our results for fiscal 2007 areapproximately 8 weeks of TouchSensor sales of $7,100 and operating income of$400.

 

**4**.  **Intangible Assets and Goodwill**

 

*Goodwill and Intangible Asset Write-Offs*

 

We review ourgoodwill and other intangible assets for impairment whenever events or changesin circumstances indicate that the carrying amount of these assets may not berecoverable, and we also review our goodwill annually in accordance with SFAS No. 142,“Goodwill and Other Intangibles”.  Thevalues assigned to goodwill and intangible assets are normally based onestimates and judgments regarding expectations for the success and life cycleof products and technologies acquired.  Asevere decline in expectations, future cash flows, a change in strategicdirection or our market capitalization remaining below our net book value for asignificant period of time could result in significant impairment charges,which could have a material adverse effect on our financial condition andresults of operations.  Based on eventsand general business declines, we performed “step one” of the goodwillimpairment test in accordance with paragraph 19 of SFAS No. 142, on thereporting units that have goodwill during fiscal 2009.  Based on this test, we determined that thefair value was less than the carrying value of the net assets for certainreporting units.  We completed  “step two” of the goodwill test and concludedthat goodwill was impaired.  Therefore,during fiscal 2009, we recorded a goodwill impairment charge of $25,840 in ourAutomotive segment, $30,750 in our Interconnect segment, $5,358 in our PowerProducts segment and $1,203 in our Other segment for a total of $63,151 relatedto these assets.

 

Also, in accordance withFASB Statement No. 144, “Accounting for the Impairment or Disposal ofLong-Lived Assets”, we record impairment losses on long-lived assets used inoperations when events and circumstances indicate that long-lived assets mightbe impaired and the undiscounted cash flows estimated to be generated by thoseassets are less than the carrying amounts of those assets. During fiscal 2009,based on our future estimates of the undiscounted cash flows, it was determinedthat certain identifiable intangible assets of our TouchSensor and Hetronicbusinesses in the Interconnect segment, the Automotive Safety Technologiesbusiness in our Automotive segment and Magna-Lastic Devices, Inc. from ourOther segment were impaired.  Therefore,we recorded an impairment charge of $26,176 in the Interconnect segment, $4,626in the Automotive segment and $421 in the Other segment for a total of $31,063for these assets.

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**4**.  **Intangible Assets and Goodwill - Continued**

 

The following table presents details ofthe goodwill and other asset impairments during fiscal 2009:

 
| ** **      | ** ** | ** **                                 | ** ** | ** **   | ** ** | **Intangible** | ** ** | ** ** | ** ** |
|-----------------|------------|--------------------------------------------|------------|--------------|------------|----------------|------------|------------|------------|
| **Segment**     | ** ** | **Reporting Unit**                         | ** ** | **Goodwill** | ** ** | **Assets**     | ** ** | **Total**  | ** ** |
| Automotive      |       | Methode Electronics  Malta Ltd.            |       | $            | 16,987     |           | $          | 160        |       | $ | 17,147 |   |
|            |       | Automotive Safety  Technologies, Inc. |       | 8,853        |       | 4,466          |       | 13,319     |       |
|            |       | Subtotal Automotive                        |       | 25,840       |       | 4,626          |       | 30,466     |       |
|            |       |                                       |       |         |       |           |       |       |       |
| Interconnect    |       | Hetronic                                   |       | 19,063       |       | 11,587         |       | 30,650     |       |
|            |       | TouchSensor  Technologies                  |       | 11,528       |       | 14,589         |       | 26,117     |       |
|            |       | Methode Development  Company               |       | 159          |       | —         |       | 159        |       |
|            |       | Subtotal Interconnect                      |       | 30,750       |       | 26,176         |       | 56,926     |       |
|            |       |                                       |       |         |       |           |       |       |       |
| Power  Products |       | Cableco  Technologies, Inc.           |       | 3,186        |       | —         |       | 3,186      |       |
|            |       | Value Engineered  Products, Inc.      |       | 2,172        |       | —         |       | 2,172      |       |
|            |       | Subtotal Power Products                    |       | 5,358        |       | —         |       | 5,358      |       |
|            |       |                                       |       |         |       |           |       |       |       |
| Other           |       | Magna-Lastic  Devices, Inc.           |       | 933          |       | 421            |       | 1,354      |       |
|            |       | Trace Laboratories                         |       | 270          |       | —         |       | 270        |       |
|            |       | Subtotal Other                             |       | 1,203        |       | 421            |       | 1,624      |       |
|            |       |                                       |       |         |       |           |       |       |       |
|            |       | Total                                      |       | $            | 63,151     |           | $          | 31,223     |       | $ | 94,374 |   |

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**4**.  **Intangible Assets and Goodwill - Continued**

 

*Intangible Assets*

 

Thefollowing tables present details of our remaining identifiable intangibleassets:

 
| ** **                             | ** ** | **May 2, 2009**  | ** ** |
|----------------------------------------|------------|-----------------------|------------|
| ** **                             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | **Wtd. Avg.** | ** ** |
| ** **                             | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | **Remaining** | ** ** |
| ** **                             | ** ** | ** **            | ** ** | **Accumulated** | ** ** | ** ** | ** ** | **Amortization** | ** ** |
| ** **                             | ** ** | **Gross**             | ** ** | **Amortization** | ** ** | **Net** | ** ** | **Periods (Years)** | ** ** |
| Customer  relationships and agreements |       | $                     | 14,995     |   | $ | 12,718 |   | $ | 2,277 |   | 14.7 |   |
| Patents  and technology licenses       |       | 23,244                |       | 5,169 |   | 18,075 |   | 13.4 |   |
| Covenants  not to compete              |       | 480                   |       | 331 |   | 149 |   | 2.8 |   |
| Total                                  |       | $                     | 38,719     |   | $ | 18,218 |   | $ | 20,501 |   |   |   |
|                                   |       | ** **            |       |
|                                   |       | **May 3,  2008** |       |
|                                   | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | **Wtd.  Avg.** | ** ** |
|                                   | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | **Remaining** | ** ** |
|                                   | ** ** | ** **            | ** ** | **Accumulated** | ** ** | ** ** | ** ** | **Amortization** | ** ** |
|                                   | ** ** | **Gross**             | ** ** | **Amortization** | ** ** | **Net** | ** ** | **Periods  (Years)** | ** ** |
| Customer  relationships and agreements |       | $                     | 41,324     |   | $ | 19,168 |   | $ | 22,156 |   | 16.2 |   |
| Patents  and technology licenses       |       | 24,692                |       | 5,795 |   | 18,897 |   | 15.5 |   |
| Covenants  not to compete              |       | 2,480                 |       | 2,251 |   | 229 |   | 12.1 |   |
| Total                                  |       | $                     | 68,496     |   | $ | 27,214 |   | $ | 41,282 |   |   |   |

 

The estimated aggregateamortization expense for each of the five succeeding fiscal years is asfollows:

 
| 2010 |   | $     | 2,248  |   |
|------|--------|-------|--------|--------|
| 2011 |   | 2,187 |   |
| 2012 |   | 1,675 |   |
| 2013 |   | 1,298 |   |
| 2014 |   | 1,185 |   |

 

As of May 2, 2009, the patents andtechnology licenses include $2,400 of trade names that are not subject toamortization.

 

**5.  Shareholders’ Equity**

 

*PreferredStock.*  We have 50,000 authorized shares of Series AJunior Participating Preferred Stock, par value $100 per share, of which nonewere outstanding during any of the periods presented.

 

*CommonStock.*

 

Common stock, par value$0.50 per share, authorized, issued and in treasury, was as follows:

 
| ** **   | ** ** | **May 2, 2009** | ** ** | **May 3, 2008** | ** ** |
|--------------|------------|----------------------|------------|----------------------|------------|
| Authorized   |       | 100,000,000          |       | 100,000,000          |       |
| Issued       |       | 38,290,776           |       | 38,225,379           |       |
| In  treasury |       | 1,372,188            |       | 702,708              |       |

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**5.  Shareholders’ Equity - Continued**

 

At May 2, 2009, 394,718 shares of common stock are reserved forfuture issuance in connection with our stock plans.

 

*Shareholders’ Rights Agreement. *On January 8, 2004, our Board of Directorsdeclared a dividend of one preferred share purchase right (a “Right”) for eachshare of common stock (“Common Shares”) outstanding on January 18, 2004 tothe stockholders of record on that date. Each Right entitles the registered holder to purchase from us oneten-thousandth of a share of our Series A Junior Participating PreferredStock at an exercise price of $65.00 per one ten-thousandth of a preferredshare, subject to adjustment.

 

The Rights, which are not detachable, will trade automatically with theCommon Shares and will not be exercisable until it is announced that a personor group has become an “acquiring person” by acquiring 15% or more of theCommon Shares, or a person or group commences a tender offer that will resultin such person or group owning 15% or more of the Common Shares.  Thereafter, separate right certificates willbe distributed, and each right will entitle its holder to purchase for theexercise price, a fraction of a share of our Series A Junior ParticipatingPreferred Stock having economic and voting terms similar to one share of commonstock.

 

Uponannouncement that any person or group has become an acquiring person, eachRight will entitle all right-holders (other than the acquiring person) topurchase, for the exercise price, a number of shares of Common Shares having amarket value of twice the exercise price. Right-holders would also be entitled to purchase the common stock ofanother entity having a value of twice the exercise price if, after a personhas become an acquiring person, the Company were to enter into certain mergersor other transactions with such other entity. If any person becomes an acquiring person, the Company’s Board ofDirectors may, at its option and subject to certain limitations, exchange oneshare of common stock for each Right.

 

The Rights may be redeemed by our Board of Directors for $0.01 perRight at any time prior to a person or group having become an acquiringperson.  The Rights will expire on January 8,2014.

 

##### **Dividends**

##### ** **

We paid quarterlydividends totaling  $9,778 during fiscal2009.  We intend to retain the remainderof our earnings not used for dividend payments to provide funds for theoperation and expansion of our business. Our board of directors approved a stock repurchase plan in September 2008,which expires at the end of fiscal 2010. There were 669,480 shares purchased at an average price of $7.85 underthe plan in fiscal 2009.

 

**2007Stock Plan**

 

On June 21, 2007,our Board of Directors, on the recommendation of our Compensation Committee,adopted the Methode Electronics, Inc. 2007 Stock Plan (the “Stock Plan”).  The Stock Plan was voted on and approved bythe shareholders at our annual meeting on September 13, 2007.  Upon adoption of the Stock Plan, our board ofdirectors elected to terminate the 2004 Plan and the 2000 Plan with respect tothe shares reserved under these plans that are not subject to outstandingawards.

 

The Stock Plan permits atotal of 1,250,000 shares of our common stock to be awarded toparticipants.  Shares issued under theStock Plan may be either authorized but unissued shares, or treasuryshares.  If any award terminates,expires, is cancelled or forfeited as to any number of shares of common stock,new awards may be granted with respect to such shares.  The total number of shares with respect towhich awards may be granted to any participant in any calendar year shall notexceed 200,000 shares.  As of May 2,2009 there were 394,718 shares still available for award under the Stock Plan.

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**5.  Shareholders’ Equity - Continued**

 

**StockOptions Granted Under the 2000 and 2004 Stock Plans**

 

There are 625,633 stockoptions that were granted in previous years under the 2000 and 2004 stock plansthat are outstanding and exercisable as of May 2, 2009.  No options were granted under the Plans sincethe first quarter of fiscal 2005.  Stockoptions granted under the Plans vest over a period of six months to forty-eightmonths after the date of the grant and have a term of ten years.  There was no remaining compensation expense relatingto these options in fiscal 2009.

 

| ** **          | ** ** | **Options Outstanding** | ** ** | **Exercisable Options** | ** ** |
|---------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **          | ** ** | ** **              | ** ** | **Wtd. Avg.**           | ** ** | ** ** | ** ** | **Wtd. Avg.** | ** ** |
| ** **          | ** ** | ** **              | ** ** | **Exercise**            | ** ** | ** ** | ** ** | **Exercise** | ** ** |
| ** **          | ** ** | **Shares**              | ** ** | **Price**               | ** ** | **Shares** | ** ** | **Price** | ** ** |
| April 29, 2006 |       | 1,657,699               |       | $                       | 10.38      |   | 1,463,623 |   | $ | 10.28 |   |
| Granted             |       | —                  |       | —                  |       |   |   |   |   |
| Exercised           |       | (699,017                | )          | 10.31                   |       |   |   |   |   |
| Cancelled           |       | (139,764                | )          | 11.45                   |       |   |   |   |   |
| April 28, 2007 |       | 818,918                 |       | 10.26                   |       | 777,668 |   | 10.20 |   |
| Granted             |       | —                  |       | —                  |       |   |   |   |   |
| Exercised           |       | (125,708                | )          | 10.32                   |       |   |   |   |   |
| Cancelled           |       | (3,521                  | )          | 8.03                    |       |   |   |   |   |
| May 3, 2008    |       | 689,689                 |       | 10.26                   |       | 689,689 |   | 10.26 |   |
| Granted             |       | —                  |       | —                  |       |   |   |   |   |
| Exercised           |       | (19,089                 | )          | 5.90                    |       |   |   |   |   |
| Cancelled           |       | (44,967                 | )          | 10.65                   |       |   |   |   |   |
| May 2, 2009    |       | 625,633                 |       | 10.36                   |       | 625,633 |   | 10.36 |   |
|                     |            |                         |            |                         |            |  |  |  |  |  |  |

** **

| **Options Outstanding and**         |   |       |       |
|-------------------------------------|--------|------------|------------|
| **Exercisable at May 2, 2009** |   |       |       |
|                                |   | ** ** | ** ** | **Wtd.  Avg.** |   | **Avg.** |   |   |   |
| **Range of**                        |   | ** ** | ** ** | **Exercise** | ** ** | **Remaining** |   |   |   |
| **Exercise Prices**                 |   | **Shares** | ** ** | **Price** | ** ** | **Life  (Years)** |   |   |   |
| $5.12  - $7.69                      |   | 154,125    |       | $ | 6.68 |   | 2.0 |   |   |   |
| $8.08  - $11.64                     |   | 336,748    |       | 10.60 |   | 1.9 |   |   |   |
| $12.11  - $17.66                    |   | 134,760    |       | 13.98 |   | 1.0 |   |   |   |
|                                |   | 625,633    |       | 10.36 |   |   |   |   |   |
|                                     |        |            |            |  |  |  |  |  |  |  |

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**5.  Shareholders’ Equity - Continued**

 

**StockOptions Granted Under the 2007 Stock Plan**

 

On March 16, 2009, the Compensation Committee approved 285,000stock option grants to our executive officers under the Company’s 2007 StockPlan.  These options vest in full on March 16,2012, and have a ten-year term.

 
| ** **       | ** ** | **Options Outstanding** | ** ** |
|------------------|------------|-------------------------|------------|
| ** **       | ** ** | ** **              | ** ** | **Exercise** | ** ** |
| ** **       | ** ** | **Shares**              | ** ** | **Price** | ** ** |
| May 3, 2008 |       | —                  |       | $ | — |   |
| Granted          |       | 285,000                 |       | 2.72 |   |
| Exercised        |       | —                  |       | — |   |
| Cancelled        |       | —                  |       | — |   |
| May 2, 2009 |       | 285,000                 |       | $ | 2.72 |   |

 
| **Options Outstanding** | ** ** |
|-------------------------|------------|
| **at May 2, 2009** | ** ** |
| ** **              | ** ** | ** ** | ** ** | **Avg.** | ** ** |
| ** **              | ** ** | ** ** | ** ** | **Remaining** | ** ** |
| **Exercise Price**      | ** ** | **Shares** | ** ** | **Life (Years)** | ** ** |
| $                       |  2.72 |   | 285,000 |   | 9.9 |   |
|                         |            |  |  |  |  |  |

 

We estimated the fair value of our employeestock options on the date of grant using the Black-Scholes option-pricing modelwith the following assumptions:

 
| Expected  volatility                    |   | 69.58      | %      |
|-----------------------------------------|--------|------------|--------|
| Risk-Free  interest rate                |   | 1.39       | %      |
| Dividend  yield                         |   | 2.26       | %      |
| Expected  life of options               |   | 6.87 years |   |
| Weighted-average  grant-date fair value |   | $          | 1.46   |   |
|                                         |        |            |        |  |

 

Expected volatility was based on the monthlychanges in our historical common stock prices over the expected life of theaward.  The risk-free rate is based onthe U.S. Treasury yield curve in effect at the time of the grant correspondingto the expected life of the options.  Ourdividend yield is based on the average dividend yield for the previous twoyears from the date of grant.  Theexpected life of options is based on historical stock option exercise patternsand the terms of the options.

 

**RestrictedStock Awards and Restricted Stock Units**

 

In April 2007, 225,000 shares of common stocksubject to performance-based Restricted Stock Awards (RSAs) granted to our CEOin fiscal 2006 and 2007 were converted to Restricted Stock Units (RSUs).  The RSUs are subject to the same vestingschedule and other major provisions of the RSAs they replaced, except the RSUsare not payable until the earlier of: (1) thirty days after the CEO’s dateof termination of employment with the Company and all of its subsidiaries andaffiliates; or (2) the last day of our fiscal year in which the payment ofcommon stock in satisfaction of the RSUs becomes deductible to the Companyunder Section 162(m) of the Internal Revenue Code.  All further discussion of RSAs in this reportincludes the RSUs described above.

 

At thebeginning of fiscal 2009, there were 525,589 performance-based and time-basedRSAs outstanding.  The time-based RSAsvest in three equal annual installments from the grant date.  All RSAs awarded to senior

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**5.  Shareholders’ Equity - Continued**

 

management are performance-based and vest after three years if therecipient remains employed by the Company until that date and we have metcertain revenue growth and return on invested capital targets.  All of the unvested RSAs are entitled tovoting rights and to payment of dividends. During fiscal 2009, we awarded 356,665 restricted stock awards.  Of the shares granted, 24,000 shares vestedimmediately upon grant, 255,065 are performance-based RSAs and 77,600 aretime-based RSAs.

 

Duringfiscal 2009, it was determined that based on the current economic environment,the performance shares granted in fiscal years 2007, 2008 and 2009 are notmeeting the revenue growth and return on invested capital targets.  Due to the performance shares not meetingfinancial targets, all of the 220,750, performance-based stock awards grantedin fiscal 2007, were cancelled.  Inaddition, we have recorded an adjustment to the pre-tax compensation expense toreflect the performance shares not meeting current and future anticipatedrevenue growth and return on invested capital targets.  We recognized pre-tax compensation expensereversal for RSAs in the fiscal year ended May 2, 2009 of $570, a pre-taxcompensation expense of $3,348 for the fiscal year ended May 3, 2008 and$2,922 for the fiscal year ended April 28, 2007.  We record the expense in the selling andadministrative section of our Consolidated Statement of Operations.

** **

The followingtable summarizes the RSA activity:

 
|   |   |                                  |   |    |   | **Fiscal Year** |       |
|--------|--------|---------------------------------------|--------|---------|--------|-----------------|------------|
|   |   |                                  |   |    |   | **2009**        | ** ** | **2008** | ** ** | **2007** |   |
|   |   | Unvested  at beginning of fiscal year |   | 582,298 |   | 525,589         |       | 471,957 |   |
|   |   | Awarded                               |   |    |   | 356,665         |       | 246,123 |   | 316,390 |   |
|   |   | Vested                                |   |    |   | (105,522        | )          | (188,982 | ) | (245,765 | ) |
|   |   | Cancelled                             |   |    |   | (220,750        | )          | — |   | — |   |
|   |   | Forfeited                             |   |    |   | (34,404         | )          | (432 | ) | (16,993 | ) |
|   |   | Unvested  at end of period            |   |    |   | 578,287         |       | 582,298 |   | 525,589 |   |

 

The table belowshows the Company’s unvested RSAs at May 2, 2009:

 
| ** ** | ** ** | ** ** | ** ** | ** **                        | ** ** | ** **   | ** ** | **Probable**         | ** ** | **Target**           | ** ** |
|------------|------------|------------|------------|-----------------------------------|------------|--------------|------------|----------------------|------------|----------------------|------------|
| ** ** | ** ** | ** ** | ** ** | ** **                        | ** ** | ** **   | ** ** | **Unearned**         | ** ** | **Unearned**         | ** ** |
| **Grant**  | ** ** | ** ** | ** ** | ** **                        | ** ** | **Weighted** | ** ** | **Compensation**     | ** ** | **Compensation**     | ** ** |
| **Fiscal** | ** ** | ** ** | ** ** | ** **                        | ** ** | **Average**  | ** ** | **Expense at**       | ** ** | **Expense at**       | ** ** |
| **Year**   | ** ** | **RSAs**   | ** ** | **Vesting Period**                | ** ** | **Value**    | ** ** | **May 2, 2009** | ** ** | **May 2, 2009** | ** ** |
| 2006       |       | 125,000    |       | 3-year cliff  performanced-based  |       | $            | 12.42      |                 | $          | —               |       | $ | — |   |
| 2007       |       | 834        |       | 3-year equal annual  installments |       | 11.07        |       | —               |       | —               |       |
| 2007       |       | —     |       | 3-year cliff performanced-based   |       | —       |       | —               |       | —               |       |
| 2008       |       | 18,460     |       | 3-year equal annual  installments |       | 14.77        |       | 91,228               |       | 91,228               |       |
| 2008       |       | 149,730    |       | 3-year cliff  performanced-based  |       | 15.14        |       | —               |       | 933,944              |       |
| 2009       |       | 49,724     |       | 3-year equal annual  installments |       | 10.64        |       | 322,004              |       | 322,004              |       |
| 2009       |       | 234,539    |       | 3-year cliff  performanced-based  |       | 11.35        |       | —               |       | 2,031,495            |       |
|            |            |            |            |                                   |            |              |            |                      |            |                      |            |  |  |  |

 

At May 2, 2009, theaggregate unvested RSAs had a weighted average fair value of $12.61 and aweighted average vesting period of approximately 15 months.

 

In connection with theperformance-based RSAs, we agreed to pay each recipient a cash bonus if theCompany meets certain additional financial targets, which shall be measured asof the vesting date. The amount of the cash bonuses, if any, will be calculatedby multiplying the number representing up to 50% of each recipient’s RSAsdescribed in the paragraphs above by the closing price of our common stock asof the vesting date.  This

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**5.  Shareholders’ Equity - Continued**

 

additional cashbonus is recorded as compensation expense ratably over the vesting period,based upon the market value of our common stock as of the latest balance sheetdate, if such targets are being met as of the latest balance sheet date.  As of May 2, 2009, we were not meetingcertain of these additional financial targets, no compensation expense has beenaccrued as a liability.

 

**6.  Employee 401(k) Savings Plan**

 

We have an Employee 401(k) SavingsPlan covering substantially all U.S. employees to which we make contributionsequal to 3% of eligible compensation. Our contributions to the Employee 401(k) Savings Plan were $1,950,$2,075 and $1,806 in fiscal 2009, 2008 and 2007, respectively.

 

**7.  Income Taxes**

 

Significant components ofour deferred tax assets and liabilities were as follows:

 
| ** **                                          | ** ** | **May 2,** | ** **  | **May 3,** | ** ** |
|-----------------------------------------------------|------------|-----------------|-------------|-----------------|------------|
| ** **                                          | ** ** | **2009**        | ** **  | **2008**        | ** ** |
| Deferred  tax liabilities:                          |       |            |        |            |       |
| Accelerated  tax depreciation                       |       | $               | 2,104       |            | $          | 2,101 |   |
|                                                |       |            |        |            |       |
| Deferred  tax assets:                               |       |            |        |            |       |
| Deferred  compensation and stock award amortization |       | 3,576           |        | 3,083           |       |
| Inventory  valuation differences                    |       | 2,855           |        | 3,015           |       |
| Property  valuation differences                     |       | 1,031           |        | 1,001           |       |
| Accelerated  book amortization                      |       | 22,025          |        | 2,656           |       |
| Environmental  reserves                             |       | 1,191           |        | 994             |       |
| Bad  debt reserves                                  |       | 639             |        | 562             |       |
| Vacation  accruals                                  |       | 966             |        | 1,383           |       |
| Restructuring  accruals                             |       | 866             |        | 1,261           |       |
| Foreign  investment tax credit                      |       | 26,518          |        | 28,986          |       |
| Foreign  net operating loss carryover               |       | 3,032           |        | 252             |       |
| State  net operating loss carryover                 |       | 443             |        | —          |       |
| Other  accruals                                     |       | 260             |        | 1,699           |       |
|                                                |       | 63,402          |        | 44,892          |       |
| Less  valuation allowance                           |       | 51,377          |        | 23,962          |       |
| Total  deferred tax assets                          |       | 12,025          |        | 20,930          |       |
| Net  deferred tax assets                            |       | $               | 9,921       |            | $          | 18,829 |   |
|                                                |       |            |        |            |       |
| Balance  sheet classification:                      |       |            |        |            |       |
| Current  asset                                      |       | $               | 4,928       |            | $          | 8,730 |   |
| Non-current  asset                                  |       | 4,993           |        | 10,099          |       |
|                                                |       | $               |  9,921 |            | $          | 18,829 |   |

 

F21

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**7.  Income Taxes - Continued**

 

At May 2, 2009, we had valuation allowances against our deferredtax assets of $51,377.  In accordancewith FASB No. 109, “Accounting for Income Taxes”, a valuation allowance isrequired to be recorded when it is more likely than not that deferred taxassets will not be realized.  Futurerealization depends on the existence of sufficient taxable income within thecarry forward period available under the tax law.  Sources of future taxable income includefuture reversals of taxable temporary differences, future taxable incomeexclusive of reversing taxable differences, taxable income in carry back yearsand tax planning strategies.  Thesesources of positive evidence of realizability must be weighed against negativeevidence, such as cumulative losses in recent years.

 

In forming a judgment about the future realization of our deferred taxassets, we considered both the positive and negative evidence of realizabilityand gave significant weight to the negative evidence from our recent cumulativeloss.  We will continue to assess thissituation and make appropriate adjustments to the valuation allowance based onour evaluation of the positive and negative evidence existing at the time.  We are currently unable to forecast whenthere will be sufficient positive evidence for us to reverse the remainder ofthe valuation allowances that we have recorded.

 

The valuation allowance is associated with the deferred tax assets forthe differences between book and tax that result from net operating losses(NOL), foreign investment tax credits with unlimited carryovers generated inthe current and prior years and temporary differences which become deductiblewhen the related asset is recovered or related liability is settled.

 

The foreign and state NOL carry forwards relate to the current years’NOLs, which may be used to reduce tax liabilities in future years.  If not realized, the state tax benefits of$443 expire over a twelve to twenty year period.

 

Income taxes consistedof the following:

 
| ** ** | ** ** | **Fiscal Year Ended** | ** **  |
|------------|------------|-----------------------|-------------|
| ** ** | ** ** | **May 2,**       | ** **  | **May 3,** | ** ** | **April 28,** | ** ** |
| ** ** | ** ** | **2009**              | ** **  | **2008** | ** ** | **2007** | ** ** |
| Current    | ** ** | ** **            | ** **  | ** ** | ** ** | ** ** | ** ** |
| Federal    |       | $                     | (6,956      | ) | $ | 10,580 |   | $ | 8,414 |   |
| Foreign    |       | 867                   |        | 1,502 |   | (4 | ) |
| State      |       | (309                  | )           | 589 |   | 2,422 |   |
|       |       | (6,398                | )           | 12,671 |   | 10,832 |   |
| Deferred   |       | 8,078                 |        | (2,948 | ) | (1,012 | ) |
|       |       | $                     |  1,680 |   | $ | 9,723 |   | $ | 9,820 |   |

 

F22

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**7.  Income Taxes - Continued**

 

A reconciliation of theconsolidated provisions for income taxes to amounts determined by applying theprevailing statutory federal income tax rate to pre-tax earnings/(loss) is asfollows:

 
| ** **                                     | ** ** | **Fiscal Year Ended** | ** ** |
|------------------------------------------------|------------|-----------------------|------------|
| ** **                                     | ** ** | **May 2,**       | ** ** | ** ** | ** ** | **May 3,** | ** ** | ** ** | ** ** | **April 28,** | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | **2009**              | ** ** | ** ** | ** ** | **2008** | ** ** | ** ** | ** ** | **2007** | ** ** | ** ** | ** ** |
| Income  tax at statutory rate                  |       | $                     | (38,779    | ) | 35.0 | % | $ | 17,317 |   | 35.0 | % | $ | 12,566 |   | 35.0 | % |
| Effect  of:                                    |       |                  |       |   |   |   |   |   |   |   |   |   |   |
| State  income taxes, net of federal benefit    |       | (2,559                | )          | 2.3 |   | 244 |   | 0.5 |   | 1,609 |   | 4.5 |   |
| Foreign  operations with lower statutory rates |       | (2,578                | )          | 2.3 |   | (5,718 | ) | (11.6 | ) | (4,179 | ) | (11.6 | ) |
| Foreign  losses with no tax benefit            |       | 13,498                |       | (12.2 | ) | 12 |   | 0.0 |   | 1,802 |   | 5.0 |   |
| Foreign  investment tax credit (FTC)           |       | (2,027                | )          | 1.8 |   | (6,360 | ) | (12.8 | ) | (4,059 | ) | (11.3 | ) |
| Change  in tax contingency reserve             |       | 37                    |       | — |   | 1,910 |   | 3.9 |   | (213 | ) | (0.6 | ) |
| Manufacturing  deduction                       |       | —                |       | — |   | (318 | ) | (0.6 | ) | (53 | ) | (0.1 | ) |
| Research  and development credit               |       | (255                  | )          | 0.2 |   | (470 | ) | (1.0 | ) | — |   | — |   |
| Foreign  plant closing benefit                 |       | —                |       | — |   | (1,846 | ) | (3.7 | ) | — |   | — |   |
| Goodwill                                       |       | 6,422                 |       | (5.8 | ) | — |   | — |   | — |   | — |   |
| Other  - net                                   |       | (32                   | )          | — |   | 213 |   | 0.4 |   | (485 | ) | (1.4 | ) |
| Valuation  allowance                           |       | 27,953                |       | (25.1 | ) | 4,739 |   | 9.6 |   | 2,832 |   | 7.9 |   |
| Income  tax provision                          |       | $                     | 1,680      |   | -1.5 | % | $ | 9,723 |   | 19.7 | % | $ | 9,820 |   | 27.4 | % |

 

We paid income taxes of$8,280 in 2009, $10,628 in 2008 and $13,963 in 2007.  No provision has been made for income taxeson undistributed net income of foreign operations, as we expect them to be indefinitelyreinvested in our foreign operations.  Ifthe undistributed net income of $49,860 were distributed as dividends, we wouldbe subject to foreign tax withholdings and incur additional income tax expenseof approximately $19,944, before available foreign tax credits.  It is not practical to estimate the amount offoreign tax withholdings or foreign tax credits that may be available.

 

We adopted FIN 48 on April 29,2007.  As a result of the implementationof FIN 48, we recognized a $1,039 increase in the liability for unrecognizedtax benefits which was accounted for as an increase of $1,014 to the April 29,2007 balance of deferred tax assets and a decrease of $25 to the April 29,2007 balance of retained earnings.

 

As of May 2, 2009,our FIN 48 gross unrecognized tax benefits totaled $6,126.  After considering the federal impact on thestate issues, $5,905 of this total would favorably affect the effective taxrate if resolved in our favor.

 

The following tablepresents a reconciliation of the beginning and ending amounts of unrecognizedtax benefits:

 
| Balance  at May 3, 2008                         |   | $      | 5,770  |   |
|------------------------------------------------------|--------|--------|--------|--------|
| Increases  for positions related to the current year |   | — |   |
| Increases  for positions related to the prior years  |   | 570    |   |
| Decreases  for positions related to prior years      |   | (135   | )      |
| Lapsing  of statutes of limitations                  |   | (79    | )      |
| Balance  at May 2, 2009                         |   | $      | 6,126  |   |

 

Webelieve that it is reasonably possible that the total amount of unrecognizedtax benefits will change within the next twelve months.  We have certain tax return years subject tostatutes of limitation, which will close within twelve months from the end ofthe fiscal 2009.  Unless challenged bytax authorities, the closure of those

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**7.  Income Taxes - Continued**

 

statutesof limitation is expected to result in the recognition of uncertain taxpositions in the range between $100 and $2,500.

 

Weare generally no longer subject to U.S. federal, state or non-U.S. income taxexaminations by tax authorities for years prior to fiscal year ended April 30,2006.

 

Thecontinuing practice of the Company is to recognize interest and penaltiesrelated to income tax matters in the provision for income taxes.  We had $935 accrued for interest and noaccrual for penalties at May 2, 2009. We recorded interest expense related to unrecognized tax provision of$155 in fiscal 2009 and no expense for penalties.

 

**8.  Earnings Per Share**

 

A basic earnings pershare (EPS) is calculated by dividing net earnings by the weighted averagenumber of common shares outstanding for the applicable period.  Diluted EPS is calculated after adjusting thenumerator and the denominator of the basic EPS calculation for the effect ofall potential dilutive common shares outstanding during the period.

 

The following table setsforth the computation of basic and diluted earnings/(loss) per share:

 
| ** **                                                                                                           | ** ** | **Fiscal Year Ended** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                           | ** ** | **May 2,**       | ** ** | **May 3,** | ** ** | **April 28,** | ** ** |
| ** **                                                                                                           | ** ** | **2009**              | ** ** | **2008** | ** ** | **2007** | ** ** |
| Numerator  - net income/(loss)                                                                                       |       | $                     | (112,483   | ) | $ | 39,754 |   | $ | 26,084 |   |
|                                                                                                                 |       |                  |       |   |   |   |   |
| Denominator:                                                                                                         |       |                  |       |   |   |   |   |
| Denominator  for basic earnings per share-weighted average shares (in thousands)                                     |       | 36,879                |       | 37,069 |   | 36,328 |   |
| Dilutive  potential common shares-employee and director stock options (in thousands)                                 |       | —                |       | 424 |   | 315 |   |
| Denominator  for diluted earnings per share adjusted weighted average shares and assumed  conversions (in thousands) |       | 36,879                |       | 37,493 |   | 36,643 |   |
|                                                                                                                 |       |                  |       |   |   |   |   |
| Basic  and diluted net income/(loss) per share:                                                                      |       |                  |       |   |   |   |   |
| Basic  income/(loss) per share                                                                                       |       | $                     | (3.05      | ) | $ | 1.07 |   | $ | 0.72 |   |
| Diluted  net income/(loss) per share                                                                                 |       | $                     | (3.05      | ) | $ | 1.06 |   | $ | 0.71 |   |

 

Options topurchase 625,633, 35,296 and 370,506 shares of common stock were outstanding at May 2, 2009, May 3,2008 and April 28, 2007, respectively, but were not included in thecomputation of diluted earnings/(loss) per share because the exercise price wasgreater than the average market price of the common shares; therefore, theeffect would have been anti-dilutive. Potential common shares have not been included in the calculation ofdiluted net loss per share, as the effect would be anti-dilutive.  As such, the numerator and the demoninatorused in computing both basic and diluted net loss per share for the fiscal yearended May 2, 2009 are the same.

 

**9.  Environmental Matters**

 

We apply the guidance ofSOP 96-1 *Environmental Remediation Liabilities*inaccounting for known environmental obligations. We are not aware of any potential unasserted environmental claims thatmay be brought

 

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**METHODE ELECTRONICS, INC. ANDSUBSIDIARIES**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**9.  Environmental Matters - Continued**

 

against us.** **We are involved inenvironmental investigation and/or remediation at two of our former plantsites.  We use environmental consultantsto assist us in evaluating our environmental liabilities in order to establishappropriate accruals in our financial statements.  Accruals are recorded when environmentalremediation is probable and the costs can be reasonably estimated.  A number of factors affect the cost ofenvironmental remediation, including the determination of the extent ofcontamination, the length of time remediation may require, the complexity ofenvironmental regulations and the advancement of remediation technology.  Considering these factors, we have estimated(without discounting) the costs of remediation, which will be incurred over aperiod of several years.  Recovery frominsurance or other third parties is not anticipated.  We are not yet able to determine when suchremediation activity will be complete, but estimates for certain remediationefforts are projected through 2015.

 

At May 2, 2009 and May 3,2008, we had accruals, primarily based upon independent engineering studies,for environmental matters of $4,271 and $2,580, respectively, of which $600 wasclassified in other accrued expenses and the remainder was included in otherliabilities.  We believe the provisionsmade for environmental matters are adequate to satisfy liabilities relating tosuch matters, however it is reasonably possible that costs could exceed accruedamounts if the selected methods of remediation do not reduce the contaminatesat the sites to levels acceptable to federal and state regulatory agencies.

 

In fiscal 2009, we spent$685 on remediation cleanups and related studies compared with $387 in fiscal 2008and $591 in fiscal 2007.  The costsassociated with environmental matters as they relate to day-to-day activitieswere not material.

 

**10.  Pending Litigation**

 

Certain litigationarising in the normal course of business is pending against us.  We, from time to time, are subject to variouslegal actions and claims incidental to our business, including those arisingout of alleged defects, breach of contracts, employment-related matters andenvironmental matters.  We considerinsurance coverage and third party indemnification when determining requiredaccruals for pending litigation and claims. Although the outcome of potential legal actions and claims cannot bedetermined, it is the opinion of our management, based on the informationavailable, that we have adequate reserves for these liabilities and that theultimate resolution of these matters will not have a significant effect on ourconsolidated financial statements.

 

**11.  Material Customers**

 

Sales to two customers inthe Automotive segment, either directly or through their tiered suppliers,represented a significant portion of our business.  Net sales to these two customers approximated18.8% and 9.7% of consolidated net sales in fiscal 2009; three customers accountedfor 25.1%, 13.8% and 9.4% of consolidated net sales, respectively in fiscal2008 and three customers accounted for 27.3%, 16.5% and 13.6% of consolidatednet sales in fiscal 2007.  Sales of PODSsensor pads to one of these customers were 9.7%, 9.4% and 13.6% of consolidatednet sales in fiscal 2009, 2008 and 2007, respectively.

 

At May 2, 2009 and May 3, 2008, accounts receivable fromcustomers in the automotive industry were approximately $26,834 and $49,774,respectively, which included $14,386 and $22,888, respectively, at our Maltesesubsidiary.  Accounts receivable aregenerally due within 30 to 60 days. Credit losses relating to all customers generally have been withinmanagement’s expectation.

 

**12.  Line of Credit**

 

We have an agreement with our primarybank for a revolving credit facility to provide up to $75,000 ready financingfor general corporate purposes, including acquisition opportunities that maybecome available.  This facility, which expires January 31, 2011,bears interest at (a) LIBOR plus 2.75% or (b) the bank’s prime rate(or, if

 

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**METHODE ELECTRONICS, INC. ANDSUBSIDIARIES**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**12.  Line of Credit - Continued**

 

higher,the Federal Funds Rate plus 0.5%) plus 1.50%.  The facility also includesa fee of 0.50% of the unused balance.  The facility requires that wemaintain a minimum consolidated net worth equalto 85% of consolidated net worth ($197,010 at May 2, 2009) plus 50% ofconsolidated net income earned in each fiscal quarter, with no deduction for anet loss in any quarter, and maintain consolidated interest coverage, asdefined, of not less than 3.50:1.00, and maintain on a monthly basis aconsolidated debt to EBITDA ratio, as defined, of not more than 2.50:1.00.  Wewere in compliance at May 2, 2009.  We borrowed $10,000 under thisfacility to finance a portion of the Hetronic acquisition on September 30,2009.  The amount was repaid in full thefollowing month.

 

**13.  Segment Information and Geographic AreaInformation**

 

We are a globalmanufacturer of component and subsystem devices.  We design, manufacture and market devicesemploying electrical, electronic, wireless, sensing and opticaltechnologies.  Our components are foundin the primary end markets of the automotive, appliance, communications(including information processing and storage, networking equipment, wirelessand terrestrial voice/data systems), aerospace, rail and other transportationindustries; and the consumer and industrial equipment markets.

 

SFAS No. 131, *Disclosures about Segments of an Enterprise and Related Information*(“SFAS No. 131”), establishes annual and interim reporting standards for anenterprise’s operating segments and related disclosures about its products,services, geographic areas and major customers. An operating segment is definedas a component of an enterprise that engages in business activities from whichit may earn revenues and incur expenses, and about which separate financialinformation is regularly evaluated by the Chief Operating Decision Maker (“CODM”)in deciding how to allocate resources. The CODM, as defined by SFAS No. 131, is the Company’s President andChief Executive Officer (“CEO”).

 

The Automotive segment supplieselectronic and electromechanical devices and related products to automobileOEMs, either directly or through their tiered suppliers, including controlswitches for electrical power and signals, connectors for electrical devices,integrated control components, switches and sensors that monitor the operationor status of a component or system, and packaging of electrical components.

 

The Interconnect segment provides avariety of copper and fiber-optic interconnect and interface solutions for theappliance, computer, networking, telecommunications, storage, medical,military, aerospace, commercial and consumer markets.  Solutions include solid-state field effectinterface panels, PC and express card packaging, optical and coppertransceivers, terminators, connectors, custom cable assemblies and conductivepolymer and thick film inks.  Servicesinclude the design and installation of fiber optic and copper infrastructuresystems, and manufacture of active and passive optical components.

 

The Power Productssegment manufactures current-carrying laminated bus devices, custompower-product assemblies; powder coated bus bars, braided flexible cables andhigh-current low voltage flexible power cabling systems that are used invarious markets and applications, including telecommunications, computers,transportation, industrial and power conversion, insulated gate bipolartransistor solutions, aerospace and military.

 

The Other segmentincludes a designer and manufacturer of magnetic torque sensing products, andindependent laboratories that provide services for qualification testing andcertification, and analysis of electronic and optical components.

 

The accounting policies of the segmentsare the same as those described in the summary of significant accountingpolicies.  We allocate resources to andevaluate performance of segments based on operating income. Transfers betweensegments are recorded using internal transfer prices set by us.

 

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**METHODE ELECTRONICS, INC. ANDSUBSIDIARIES**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**13.  SegmentInformation and Geographic Area Information - Continued**

 

The table below presents informationabout our reportable segments:

 
| ** **                                                                                          | ** ** | **Fiscal Year Ended May 2, 2009** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                                          | ** ** | ** **                             | ** ** | **Inter-** | ** ** | **Power** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                          | ** ** | **Automotive**                         | ** ** | **Connect** | ** ** | **Products** | ** ** | **Other** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Net sales                                                                                           |       | $                                      | 243,650    |   | $ | 131,998 |   | $ | 43,097 |   | $ | 8,353 |   | $ | 1,454 |   | $ | 425,644 |   |
| Transfers between segments                                                                          |       | —                                 |       | (952 | ) | (399 | ) | (103 | ) | (1,454 | ) | — |   |
| Net sales to unaffiliated customers                                                                 |       | $                                      | 243,650    |   | $ | 131,046 |   | $ | 42,698 |   | $ | 8,250 |   | $ | — |   | $ | 425,644 |   |
|                                                                                                |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Segment income (loss) before restructuring charge, impairment  of goodwill and intangible assets    |       | $                                      | 25,782     |   | $ | 1,681 |   | $ | 137 |   | $ | (3,506 | ) | $ | — |   | $ | 24,094 |   |
|                                                                                                |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Restructuring                                                                                       |       | (19,283                                | )          | (5,468 | ) | (527 | ) | — |   | — |   | (25,278 | ) |
| Impairment of goodwill and intangible assets                                                        |       | (30,466                                | )          | (56,926 | ) | (5,358 | ) | (1,624 | ) | — |   | (94,374 | ) |
|                                                                                                |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Segment income (loss) including restructuring  charge, impairment of goodwill and intangible assets |       | $                                      | (23,967    | ) | $ | (60,713 | ) | $ | (5,748 | ) | $ | (5,130 | ) | $ | — |   | $ | (95,558 | ) |
|                                                                                                |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Corporate expenses, net                                                                             |       |                                   |       |   |   |   |   |   |   |   |   | (15,245 | ) |
|                                                                                                |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Loss before income taxes                                                                            |       |                                   |       |   |   |   |   |   |   |   |   | $ | (110,803 | ) |
|                                                                                                |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                                       |       | $                                      | 17,408     |   | $ | 15,262 |   | $ | 2,153 |   | $ | 1,019 |   | $ | — |   | $ | 35,842 |   |
| Corporate depreciation and amortization                                                             |       |                                   |       |   |   |   |   |   |   |   |   | 1,194 |   |
|                                                                                                |       |                                   |       |   |   |   |   |   |   |   |   | $ | 37,036 |   |
|                                                                                                |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Identifiable assets                                                                                 |       | $                                      | 121,572    |   | $ | 115,085 |   | $ | 23,925 |   | $ | 6,613 |   | $ | — |   | $ | 267,195 |   |
| General corporate assets                                                                            |       |                                   |       |   |   |   |   |   |   |   |   | 38,093 |   |
| Total assets                                                                                        |       |                                   |       |   |   |   |   |   |   |   |   | $ | 305,288 |   |

 

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** **

**METHODE ELECTRONICS, INC. ANDSUBSIDIARIES**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**13.  SegmentInformation and Geographic Area Information - Continued**

 
| ** **                                                             | ** ** | **Fiscal  Year Ended May 3, 2008** | ** ** |
|------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                             | ** ** | ** **                              | ** ** | **Inter-** | ** ** | **Power** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                             | ** ** | **Automotive**                          | ** ** | **Connect** | ** ** | **Products** | ** ** | **Other** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Net sales                                                              |       | $                                       | 362,165    |   | $ | 137,239 |   | $ | 46,839 |   | $ | 6,982 |   | $ | 2,152 |   | $ | 551,073 |   |
| Transfers between segments                                             |       | (69                                     | )          | (979 | ) | (1,023 | ) | (81 | ) | (2,152 | ) | — |   |
| Net sales to unaffiliated customers                                    |       | $                                       | 362,096    |   | $ | 136,260 |   | $ | 45,816 |   | $ | 6,901 |   | $ | — |   | $ | 551,073 |   |
| Segment income (loss) before restructuring charge                      |       | $                                       | 59,783     |   | $ | 5,268 |   | $ | 8,546 |   | $ | (1,798 | ) |   |   | $ | 71,799 |   |
|                                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Restructuring                                                          |       | (4,487                                  | )          | (672 | ) | — |   | — |   |   |   | (5,159 | ) |
|                                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Segment income (loss) including restructuring  charge                  |       | $                                       | 55,296     |   | $ | 4,596 |   | $ | 8,546 |   | $ | (1,798 | ) |   |   | $ | 66,640 |   |
| Corporate expenses, net                                                |       |                                    |       |   |   |   |   |   |   |   |   | (17,163 | ) |
|                                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Income before income taxes and cumulative effect of  accounting change |       |                                    |       |   |   |   |   |   |   |   |   | $ | 49,477 |   |
|                                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                          |       | $                                       | 19,007     |   | $ | 6,257 |   | $ | 1,409 |   | $ | 602 |   |   |   | $ | 27,275 |   |
| Corporate depreciation and amortization                                |       |                                    |       |   |   |   |   |   |   |   |   | 884 |   |
|                                                                   |       |                                    |       |   |   |   |   |   |   |   |   | $ | 28,159 |   |
|                                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Indentifiable assets                                                   |       | $                                       | 185,905    |   | $ | 134,412 |   | $ | 37,063 |   | $ | 7,332 |   |   |   | $ | 364,712 |   |
| General corporate assets                                               |       |                                    |       |   |   |   |   |   |   |   |   | 105,508 |   |
| Total assets                                                           |       |                                    |       |   |   |   |   |   |   |   |   | $ | 470,220 |   |

 

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**METHODE ELECTRONICS, INC. ANDSUBSIDIARIES**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**13.  SegmentInformation and Geographic Area Information - Continued**

 

Thetable below presents information about our reportable segments:

 
| ** **                                                             | ** ** | **Fiscal Year Ended April 28, 2007** | ** ** |
|------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                             | ** ** | ** **                                | ** ** | **Inter-** | ** ** | **Power** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                             | ** ** | **Automotive**                            | ** ** | **Connect** | ** ** | **Products** | ** ** | **Other** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Net sales                                                              |       | $                                         | 315,691    |   | $ | 83,221 |   | $ | 43,398 |   | $ | 7,715 |   | $ | 1,598 |   | $ | 448,427 |   |
| Transfers between segments                                             |       | —                                    |       | (1,082 | ) | (402 | ) | (114 | ) | (1,598 | ) | — |   |
| Net sales to unaffiliated customers                                    |       | $                                         | 315,691    |   | $ | 82,139 |   | $ | 42,996 |   | $ | 7,601 |   | $ | — |   | $ | 448,427 |   |
| Segment income (loss) before restructuring charge                      |       | $                                         | 29,328     |   | $ | 9,264 |   | $ | 8,845 |   | $ | (321 | ) | $ | — |   | $ | 47,116 |   |
|                                                                   |       |                                      |       |   |   |   |   |   |   |   |   |   |   |
| Restructuring                                                          |       | (2,027                                    | )          | — |   | — |   | — |   | — |   | (2,027 | ) |
|                                                                   |       |                                      |       |   |   |   |   |   |   |   |   |   |   |
| Segment income (loss) including restructuring  charge                  |       | $                                         | 27,301     |   | $ | 9,264 |   | $ | 8,845 |   | $ | (321 | ) |   |   | $ | 45,089 |   |
| Corporate expenses, net                                                |       |                                      |       |   |   |   |   |   |   |   |   | (9,314 | ) |
|                                                                   |       |                                      |       |   |   |   |   |   |   |   |   |   |   |
| Income before income taxes and cumulative effect of  accounting change |       |                                      |       |   |   |   |   |   |   |   |   | $ | 35,775 |   |
|                                                                   |       |                                      |       |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                          |       | $                                         | 18,927     |   | $ | 3,122 |   | $ | 585 |   | $ | 475 |   |   |   | $ | 23,109 |   |
| Corporate depreciation and amortization                                |       |                                      |       |   |   |   |   |   |   |   |   | 514 |   |
|                                                                   |       |                                      |       |   |   |   |   |   |   |   |   | $ | 23,623 |   |
|                                                                   |       |                                      |       |   |   |   |   |   |   |   |   |   |   |
| Indentifiable assets                                                   |       | $                                         | 197,107    |   | $ | 119,979 |   | $ | 22,979 |   | $ | 7,799 |   |   |   | $ | 347,864 |   |
| General corporate assets                                               |       |                                      |       |   |   |   |   |   |   |   |   | 63,876 |   |
| Total assets                                                           |       |                                      |       |   |   |   |   |   |   |   |   | $ | 411,740 |   |

 

F29

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Tableof Contents

 

**METHODE ELECTRONICS, INC. ANDSUBSIDIARIES**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**13.  Segment Information and Geographic AreaInformation - Continued**

 

The following table setsforth certain geographic financial information for fiscal years ended May 2,2009, May 3, 2008 and April 28, 2007. Geographic net sales and income are determined based our sales andincome from our various operational locations.

 
| ** **                                                                     | ** ** | **Fiscal Year Ended** | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                     | ** ** | **May 2,**       | ** ** | **May 3,** | ** ** | **April 28,** | ** ** |
| ** **                                                                     | ** ** | **2009**              | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net  Sales:                                                                    |       |                  |       |   |   |   |   |
| North  American                                                                |       | $                     | 259,539    |   | $ | 356,240 |   | $ | 305,232 |   |
| Asia  Pacific                                                                  |       | 53,378                |       | 51,915 |   | 30,141 |   |
| Malta                                                                          |       | 100,594               |       | 127,880 |   | 75,425 |   |
| Europe,  excluding Malta                                                       |       | 12,133                |       | 15,038 |   | 37,629 |   |
|                                                                           |       | $                     | 425,644    |   | $ | 551,073 |   | $ | 448,427 |   |
|                                                                           |       |                  |       |   |   |   |   |
| Income  (loss) before income taxes and cumulative effect of accounting change: |       |                  |       |   |   |   |   |
| North  American                                                                |       | $                     | (82,328    | ) | $ | 26,922 |   | $ | 22,873 |   |
| Asia  Pacific                                                                  |       | (30,610               | )          | 4,598 |   | 1,346 |   |
| Europe                                                                         |       | 753                   |       | 15,633 |   | 8,128 |   |
| Income  and expenses not allocated                                             |       | 1,382                 |       | 2,324 |   | 3,428 |   |
|                                                                           |       | $                     | (110,803   | ) | $ | 49,477 |   | $ | 35,775 |   |
|                                                                           |       |                  |       |   |   |   |   |
| Property,  Plant and Equipment:                                                |       |                  |       |   |   |   |   |
| United  States                                                                 |       | $                     | 30,200     |   | $ | 35,921 |   | $ | 48,097 |   |
| Mexico                                                                         |       | 2,389                 |       | 7,149 |   | 564 |   |
| Asia  Pacific                                                                  |       | 7,523                 |       | 11,847 |   | 8,893 |   |
| Malta                                                                          |       | 24,561                |       | 29,255 |   | 23,434 |   |
| Europe,  excluding Malta                                                       |       | 5,244                 |       | 6,108 |   | 5,869 |   |
|                                                                           |       | $                     | 69,917     |   | $ | 90,280 |   | $ | 86,857 |   |

 

F30

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Tableof Contents

 

**METHODE ELECTRONICS, INC. ANDSUBSIDIARIES**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**14.  Lease Commitments**

 

Welease certain office and manufacturing properties under non-cancelableoperating leases expiring at various dates through fiscal 2014.  Rental expense under non-cancelable operatingleases amounted to $4,841, $4,032 and $3,123 in fiscal years 2009, 2008 and2007, respectively.

 

Ouraggregate minimum rental commitments under all non-cancelable operating leasesare summarized in the table below for the next succeeding five fiscal years:

 
| 2010 |   | $     | 3,685  |   |
|------|--------|-------|--------|--------|
| 2011 |   | 1,887 |   |
| 2012 |   | 1,155 |   |
| 2013 |   | 621   |   |
| 2014 |   | 371   |   |

 

**15.  Pre-Production Costs Related to Long-TermSupply Arrangements**

 

Weincur pre-production tooling costs related to the products produced for ourcustomers under long-term supply agreements. We had $3,182 and $8,211 as of fiscal year ended May 2, 2009 and May 3,2008, respectively, of pre-production tooling costs related to customer-ownedtools for which reimbursement is contractually guaranteed by the customer orfor which the customer has provided a non-cancelable right to use thetooling.  These amounts are included inour work-in-process inventory in the consolidated balance sheets.  Net revenues and costs on projects aredeferred and recognized over the life of the related long-term supplyagreement.

 

**16.  Fair Value Measurements**

 

We adopted SFAS No. 157,“Fair Value Measurements” (“SFAS No. 157”) as of May 4, 2008.  SFAS No. 157 defines fair value as theexchange price that would be received for an asset or paid to transfer aliability (an exit price) in the principal or most advantageous market for theasset or liability in an orderly transaction between market participants.

 

In February 2008,the FASB issued FASB Staff Position No. 157-2, which delays the effectivedate of SFAS No. 157 for non-financial assets and liabilities, whichare not measured at fair value on a recurring basis (at least annually) untilfiscal years beginning after November 15, 2008, which is our fiscal year2010 that began May 3, 2009.  We arecurrently assessing the impact of adopting SFAS No. 157 fornon-financial assets and liabilities on our consolidated financial statements.

 

SFAS No. 157also specifies a fair value hierarchy based upon the observation of inputs invaluation techniques.  Observable inputs(highest level) reflect market data obtained from independent sources, whileunobservable inputs (lowest level) reflect internally developed marketassumptions.  In accordance with SFAS No. 157,fair value measurements are classified under the following hierarchy:

 

·               Level 1 – Quoted prices in active markets for identical assets andliabilities.

 

·               Level 2 – Quoted prices in active markets for similar assets andliabilities, or other inputs that are observable for the asset or liability,either directly or indirectly, for substantially the full term of the financialinstrument.

 

·               Level 3 – Unobservable inputs that are supported by little or no marketactivity and that are significant to the fair value of the assets andliabilities.  This includes certainpricing models, discounted cash flow methodologies and similar techniques thatuse significant unobservable inputs.

 

The adoption ofSFAS No. 157 had no effect on our consolidated financial position orresults of operations.  Assets andliabilities recorded at fair value are valued using quoted market prices orunder a market approach using

 

F31

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**METHODE ELECTRONICS, INC. ANDSUBSIDIARIES**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**16.  Fair Value Measurements - Continued**

 

other relevant information generated by markettransactions involving identical or comparable instruments and included:

 

Belowis a table that summarizes the fair value of assets and liabilities as of May 2,2009:

** **
| ** **                                   | ** ** | **Fair Value Measurement Used** | ** **   |
|----------------------------------------------|------------|---------------------------------|--------------|
| ** **                                   | ** ** | ** **                      | ** **   | **Quoted prices** | ** ** | **Quoted prices** | ** ** | ** ** | ** ** |
| ** **                                   | ** ** | ** **                      | ** **   | **in active** | ** ** | **in active** | ** ** | ** ** | ** ** |
| ** **                                   | ** ** | ** **                      | ** **   | **markets for** | ** ** | **markets for** | ** ** | **Other** | ** ** |
| ** **                                   | ** ** | ** **                      | ** **   | **identical** | ** ** | **similar** | ** ** | **unobservable** | ** ** |
| ** **                                   | ** ** | **Recorded**                    | ** **   | **instruments** | ** ** | **instruments** | ** ** | **inputs** | ** ** |
| ** **                                   | ** ** | **Value**                       | ** **   | **(Level 1)** | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| Assets:                                      |       |                            |         |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents (1)                |       | $                               |  54,030 |   | $ |  51,520 |   | $ |  2,510 |   | $ |  — |   |
| Assets related to deferred compensation plan |       | $                               |  2,443  |   | $ |  — |   | $ |  2,443 |   | $ |  — |   |
| Total assets at fair value                   |       | $                               |  56,473 |   | $ |  51,520 |   | $ |  4,953 |   | $ |  — |   |
|                                         |       |                            |         |   |   |   |   |   |   |
| Liabilities:                                 |       |                            |         |   |   |   |   |   |   |
| Deferred compensation plan                   |       | $                               |  2,252  |   | $ |  2,252 |   | $ |  — |   | $ |  — |   |
| Total liabilities at fair value              |       | $                               |  2,252  |   | $ |  2,252 |   | $ |  — |   | $ |  — |   |

 

----

(1) Includescash, money-market investments and certificates of deposit.

 

**17.  Summary of Quarterly Results of Operations(Unaudited)**

 

The following is asummary of unaudited quarterly results of operations for the two years ended May 2,2009 and May 3, 2008:

 
| ** **                                | ** ** | **Fiscal Year 2009** | ** **    |
|-------------------------------------------|------------|----------------------|---------------|
| ** **                                | ** ** | **Quarter Ended**    | ** **    |
| ** **                                | ** ** | ** **           | ** **    | **Restated** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                      | ** ** | **August 2**    | ** **    | **November 1** | ** ** | **January 31** | ** ** | **May 2** | ** ** |
| Net  sales                                |       | $                    |  134,514 |   | $ |  121,304 |   | $ |  80,781 |   | $ |  89,045 |   |
| Gross  profit                             |       | 29,084               |          | 23,489 |   | 10,269 |   | 6,306 |   |
| Net  income/(loss)                        |       | 6,816                |          | 238 |   | (26,985 | ) | (92,552 | ) |
| Net  income/(loss) per basic common share |       | 0.18                 |          | 0.01 |   | (0.74 | ) | $ | (2.50 | ) |
|                                           |            |                      |               |  |  |  |  |  |  |  |  |  |  |

 
| ** **                         | ** ** | **Fiscal Year 2008** | ** **    |
|------------------------------------|------------|----------------------|---------------|
| ** **                         | ** ** | **Quarter Ended**    | ** **    |
| ** **                         | ** ** | **July 28**     | ** **    | **October 27** | ** ** | **February 2** | ** ** | **May 3** | ** ** |
| Net  sales                         |       | $                    |  125,009 |   | $ |  133,239 |   | $ |  138,465 |   | $ |  154,360 |   |
| Gross  profit                      |       | 26,674               |          | 27,339 |   | 29,433 |   | 39,272 |   |
| Net  income                        |       | 8,272                |          | 8,806 |   | 9,757 |   | 12,919 |   |
| Net  income per basic common share |       | 0.22                 |          | 0.24 |   | 0.26 |   | 0.35 |   |
|                                    |            |                      |               |  |  |  |  |  |  |  |  |  |  |

 

**Quarterended November 1, 2009 Restatement:**

 

Wehave restated our balance sheet as of November 1, 2008 and the relatedstatement of income and cash flows.  We discovered an error related to unrealizedcurrency exchange losses arising from an intercompany loan between ourcorporate headquarters and one of our foreign subsidiaries in conjunction witha recent acquisition of

 

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**METHODE ELECTRONICS, INC. ANDSUBSIDIARIES**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

** **

(Dollar amounts inthousands, except number of shares and per share data)

 

**17.  Summary of Quarterly Results of Operations(Unaudited) - Continued**

 

Hetronic,LLC, purchased on September 30, 2008. The loan amount was $20,858.  Dueto the U.S. Dollar increasing versus the Euro, from 0.69230 on September 30,2008 to 0.78500 on November 1, 2008, an unrealized currency loss of $2,463should have been recorded during the second quarter.

 

Theeffects of the restatement are as follows:

 

·                  Adjustment to the November 1, 2008 Condensed Consolidated BalanceSheet decreases retained earnings by $2,463 from $270,826 as previouslyreported, to $268,363 and increases the accumulated other comprehensive incomeby $2,463 from $11,472 as previously reported, to $13,935.

 

·                  Adjustment to the three months ended November 1, 2008 CondensedConsolidated Statement of Income decreases other income by $2,463 from $1,853as previously reported to an expense of $610. Net income for the three months ended November 1, 2008 decreased$2,463 from $2,701 as previously reported to $238.  Basic and diluted earnings per share bothdecreased $0.06, from $0.07 as previously reported to $0.01.

 

·                  Adjustment to the six months ended November 1, 2008 CondensedConsolidated Statement of Income decreases other income by $2,463 from $1,584as previously reported to an expense of $879. Net income for the six months ended November 1, 2008 decreased$2,463 from $9,517 as previously reported to $7,054.  Basic earnings per share decreased $0.06,from $0.26 as previously reported to $0.19. Diluted earnings per share decreased $0.05, from $0.25 as previouslyreported to $0.19.

 

·                  Adjustmentto the six months ended November 1, 2008 condensed consolidated statementof cash flows decreases net income by $2,463, from $9,517 as previouslyreported to $7,054.  In addition, anon-cash add-back of translation loss of $2,463 has been added in the operatingactivities section.

 

·                  Theloan has been fully paid to corporate and all transactions have been properlyrecorded as of May 2, 2009.

 

**OtherSignificant Items for Fiscal 2009**

 

The first, second, thirdand fourth quarter of fiscal 2009 includes a pre-tax restructuring charge of$4,917, $6,284, $3,796 and $10,281, respectively.  In addition, the third and fourth quarter offiscal 2009 include impairment charges for goodwill and intangible assetswrite-down of $32,678 and $61,696, respectively.

 

**SignificantItems for Fiscal 2008**

 

The third and fourthquarter of fiscal 2008 include a pre-tax restructuring charges of $450 and$4,709, respectively, relating to a restructuring of our U.S.-based automotiveoperations and a decision to discontinue producing certain legacy electronicconnector products.

 

Quarter ended February 2, 2008 includes 14 weeks of activity dueto the timing of our fiscal calendar.

 

**SignificantItems for Fiscal 2007**

 

Third quarter fiscal 2007results include a restructuring charge of $2,027 for the closing of our Scotlandfacility.

 

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SCHEDULEII—VALUATION AND QUALIFYING ACCOUNTS

 

METHODE ELECTRONICS, INC.AND SUBSIDIARIES

 

(in thousands)

 
| **COL. A**                                             | ** ** | **COL. B**                           | ** **  | **COL. C**                         | ** ** | **COL. D.**                                    | ** ** | **COL. E**                     | ** ** |
|--------------------------------------------------------|------------|--------------------------------------|-------------|------------------------------------|------------|------------------------------------------------|------------|--------------------------------|------------|
| ** **                                             | ** ** | ** **                           | ** **  | **Additions**                      | ** ** | ** **                                     | ** ** | ** **                     | ** ** |
| **Description**                                        | ** ** | **Balance at  Beginning of  Period** | ** **  | **Charged to Costs  and Expenses** | ** ** | **Charged to Other  Accounts—  Describe** | ** ** | **Deductions—  Describe** | ** ** | **Balance at End of  Period** | ** ** |
| YEAR  ENDED MAY 2, 2009:                          |       |                                 |        |                               |       |                                           |       |                           |       |   |   |
| Reserves  and allowances deducted from asset accounts: |       |                                 |        |                               |       |                                           |       |                           |       |   |   |
| Allowance  for uncollectible accounts                  |       | $                                    |  2,309 |                               | $          |  120                                      |       | $                              |  625  | (1) | $ |  360 | (2) | $ |  1,444 |   |
| Deferred  tax valuation allowance                      |       | 31,164                               |        | 27,506                             |       | (7,293                                         | )(1)       |                           |       | 51,377 |   |
|                                                   |       |                                 |        |                               |       |                                           |       |                           |       |   |   |
| YEAR  ENDED MAY 3, 2008:                          |       |                                 |        |                               |       |                                           |       |                           |       |   |   |
| Reserves  and allowances deducted from asset accounts: |       |                                 |        |                               |       |                                           |       |                           |       |   |   |
| Allowance  for uncollectible accounts                  |       | $                                    |  2,231 |                               | $          |  195                                      |       | $                              |  45   | (1) | $ |  162 | (2) | $ |  2,309 |   |
| Deferred  tax valuation allowance                      |       | 25,762                               |        | 3,892                              |       | 1,510                                          | (1)        |                           |       | 31,164 |   |
|                                                   |       |                                 |        |                               |       |                                           |       |                           |       |   |   |
| YEAR  ENDED APRIL 28, 2007:                            |       |                                 |        |                               |       |                                           |       |                           |       |   |   |
| Reserves  and allowances deducted from asset accounts: |       |                                 |        |                               |       |                                           |       |                           |       |   |   |
| Allowance  for uncollectible accounts                  |       | $                                    |  3,752 |                               | $          |  372                                      |       | $                              |  140  | (1) | $ |  2,032 | (2) | $ |  2,231 |   |
| Deferred  tax valuation allowance                      |       | 25,187                               |        | 298                                |       | 277                                            | (1)        |                           |       | 25,762 |   |

 

----

(1) Impact offoreign currency translation and other reclassifications.

(2) Uncollectibleaccounts written off, net of recoveries.

 

F34

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Tableof Contents

 

**INDEX TOEXHIBITS**

 
| **Exhibit   Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|---------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                       |       | Certificate of  Incorporation of Registrant, as amended and currently in effect (1)                                                                                                                                                                                                                                                                                                                                                                  |
| 3.2                       |       | Bylaws of Registrant,  as amended and currently in effect (17)                                                                                                                                                                                                                                                                                                                                                                                       |
| 4.1                       |       | Article Fourth of  Certificate of Incorporation of Registrant, as amended and currently in  effect (included in Exhibit 3.1) (1)                                                                                                                                                                                                                                                                                                           |
| 4.2                       |       | Rights Agreement dated  as of January 8, 2004 between Methode Electronics, Inc. and Mellon  Investor Services LLC, which includes as Exhibit A thereto, the  Certificate of Designation of Series A Junior Participating Preferred  Stock of Methode Electronics, Inc.; as Exhibit B thereto, the  Form of Right Certificate; as Exhibit C thereto, the Summary of  Rights to Purchase Preferred Shares. (2) |
| 10.1*                     |       | Methode  Electronics, Inc. Managerial Bonus and Matching Bonus Plan (also  referred to as the Longevity Contingent Bonus Program) (3)                                                                                                                                                                                                                                                                                                           |
| 10.2*                     |       | Methode  Electronics, Inc. 2000 Stock Plan (4)                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.3*                     |       | Methode  Electronics, Inc. 2004 Stock Plan (5)                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.4*                     |       | Form of Methode  Electronics, Inc. Restricted Stock Award Agreement (Executive  Award/Cliff Vesting) under the 2000 Stock Plan (6)                                                                                                                                                                                                                                                                                                         |
| 10.5                      |       | Credit Agreement dated  as of December 19, 2002 among Methode Electronics, Inc. as the  Borrower, Bank of America, N.A., as Administrative Agent and L/C Issuer, and  The Other Lenders Party Thereto (7)                                                                                                                                                                                                                                  |
| 10.6                      |       | Amendment to Credit  Agreement dated as of November 2005 among Methode Electronics, Inc.  as the Borrower, Bank of America, N.A., as Administrative Agent and L/C  Issuer, and The Other Lenders Party Thereto (6)                                                                                                                                                                                                                         |
| 10.7*                     |       | Form of Methode  Electronics, Inc. Restricted Stock Award Agreement (Outside Director)  under the 2004 Stock Plan (8)                                                                                                                                                                                                                                                                                                                      |
| 10.8*                     |       | Form of Methode  Electronics, Inc. Restricted Stock Award Agreement (Executive  Award/Performance Based) under the 2004 Stock Plan (8)                                                                                                                                                                                                                                                                                                     |
| 10.9                      |       | Amendment to Credit  Agreement dated as of January 31, 2006, among Methode  Electronics, Inc., the Borrower, Bank of America, N.A., as Administrative  Agent, and L/C Issuer, and The Other Lenders Party Thereto (9)                                                                                                                                                                                                                      |
| 10.10*                    |       | Change in Control  Agreement dated September 1, 2006 between Methode Electronics, Inc.  and Donald W. Duda (10)                                                                                                                                                                                                                                                                                                                            |
| 10.11*                    |       | Change in Control  Agreement dated September 1, 2006 between Methode Electronics, Inc.  and Douglas A. Koman (10)                                                                                                                                                                                                                                                                                                                          |
| 10.12*                    |       | Change in Control  Agreement dated September 1, 2006 between Methode Electronics, Inc.  and Thomas D. Reynolds (10)                                                                                                                                                                                                                                                                                                                        |
| 10.13*                    |       | Change in Control  Agreement dated September 1, 2006 between Methode Electronics, Inc.  and Paul E. Whybrow (10)                                                                                                                                                                                                                                                                                                                           |
| 10.14*                    |       | Change in Control  Agreement dated September 14, 2006 between Methode  Electronics, Inc. and Theodore P. Kill (11)                                                                                                                                                                                                                                                                                                                         |
| 10.15*                    |       | Change in Control  Agreement dated September 14, 2006 between Methode Electronics, Inc.  and Timothy R. Glandon (11)                                                                                                                                                                                                                                                                                                                       |
| 10.16*                    |       | First Amendment to  Methode Electronics, Inc. 2000 Stock Plan effective as of  December 14, 2006 (12)                                                                                                                                                                                                                                                                                                                                      |
| 10.17*                    |       | Amended and Restated  Restricted Stock Unit Award Agreement (Executive Award/Performance Based)  effective as of June 18, 2004 between Methode Electronics, Inc. and  Donald W. Duda (12)                                                                                                                                                                                                                                                  |
| 10.18*                    |       | Amended and Restated  Restricted Stock Unit Award Agreement (Executive Award/Cliff Vesting)  effective as of June 18, 2004 between Methode Electronics, Inc. and  Donald W. Duda (12)                                                                                                                                                                                                                                                      |
| 10.19                     |       | Waiver and Amendment  dated as of February 28, 2007 among Methode Electronics, Inc., the  Borrower, Bank of America, N.A., as Administrative Agent, and L/C Issuer, and  The Other Lenders Party Thereto (13)                                                                                                                                                                                                                              |
| 10.20*                    |       | Amended Cash Bonus  Agreement effective as of April 6, 2007 between Methode Electronics, Inc.  and Donald W. Duda (14)                                                                                                                                                                                                                                                                                                                |
| 10.21*                    |       | Amended and Restated  Restricted Stock Unit Award Agreement (Executive Award/Performance Based)  effective as of June 15, 2005 between Methode Electronics, Inc. and  Donald W. Duda (14)                                                                                                                                                                                                                                                  |
|                           |            |                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |  |

 

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Tableof Contents

 
| 10.22* |   | Amended and Restated  Restricted Stock Unit Award Agreement (Executive Award/Performance Based)  effective as of August 7, 2006 between Methode Electronics, Inc.  and Donald W. Duda (14) |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.23* |   | Methode  Electronics, Inc. 2007 Stock Plan (15)                                                                                                                                                 |
| 10.24* |   | Methode  Electronics, Inc. 2007 Cash Incentive Plan (15)                                                                                                                                        |
| 10.25* |   | Form Performance  Based RSA Award Agreement (15)                                                                                                                                                |
| 10.26* |   | Form Annual Cash  Bonus Award Agreement (15)                                                                                                                                                    |
| 10.27* |   | Form RSA Tandem  Cash Award Agreement (15)                                                                                                                                                      |
| 10.28* |   | Form Director RSA  Award Agreement (15)                                                                                                                                                         |
| 10.29* |   | Change in Control  Agreement dated July 15, 2008 between Methode Electronics, Inc. and  Ronald L. G. Tsoumas (17)                                                                          |
| 10.30  |   | Asset and Share  Purchase Agreement for Hetronic (18)                                                                                                                                                |
| 21     |   | Subsidiaries of Methode  Electronics, Inc.                                                                                                                                                      |
| 23     |   | Consent of  Ernst & Young LLP                                                                                                                                                               |
| 31.1   |   | Rule 13a-14(a)/15d-14(a) Certification  of Principal Executive Officer                                                                                                                     |
| 31.2   |   | Rule 13a-14(a)/15d-14(a) Certification  of Principal Financial Officer                                                                                                                     |
| 32     |   | Certification of  Periodic Financial Report Pursuant to 18 U.S.C. Section 1350                                                                                                                  |

 

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| (1)  |   | Previously filed with  Registrant’s Form 8-K filed January 9, 2004, and incorporated  herein by reference.                        |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  |   | Previously filed with  Registrant’s Form 8-A filed January 8, 2004, and incorporated  herein by reference.                        |
| (3)  |   | Previously filed with  Registrant’s Form 10-K for the year ended April 30, 2005, and  incorporated herein by reference.           |
| (4)  |   | Previously filed with  Registrant’s Form 10-Q for the three months ended October 31, 2000,  and incorporated herein by reference. |
| (5)  |   | Previously filed with  Registrant’s Form 8-K filed December 7, 2004, and incorporated  herein by reference.                       |
| (6)  |   | Previously filed with  Registrant’s Form 10-Q for the three months ended October 31, 2004,  and incorporated herein by reference. |
| (7)  |   | Previously filed with  Registrant’s Form 10-Q for the three months ended January 31, 2003,  and incorporated herein by reference. |
| (8)  |   | Previously filed with  Registrant’s Form 8-K filed August 11, 2006, and incorporated  herein by reference.                        |
| (9)  |   | Previously filed with  Registrant’s Form 8-K filed February 3, 2006, and incorporated  herein by reference.                       |
| (10) |   | Previously filed with  Registrant’s Form 8-K filed September 6, 2006, and incorporated  herein by reference.                      |
| (11) |   | Previously filed with  Registrant’s Form 8-K filed September 18, 2006, and incorporated  herein by reference.                     |
| (12) |   | Previously filed with  Registrant’s Form 10-Q for the three months ended January 27, 2007,  and incorporated herein by reference. |
| (13) |   | Previously filed with  Registrant’s Form 8-K filed March 12, 2007, and incorporated herein  by reference.                         |
| (14) |   | Previously filed with  Registrant’s Form 8-K filed April 6, 2007, and incorporated herein  by reference.                          |
| (15) |   | Previously filed with  Registrant’s Form 8-K filed September 19, 2007, and incorporated  herein by reference.                     |
| (16) |   | Previously filed with  Registrant’s Form 8-K filed November 2, 2007, and incorporated  herein by reference.                       |
| (17) |   | Previously filed with  Registrant’s Form 10-K filed July 17, 2008, and incorporated herein  by reference.                         |
| (18) |   | Previously filed with  Registrant’s Form 10-K filed July 2, 2009, and incorporated herein  by reference.                          |

 

*****  Management Compensatory Plan

 

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