Table ofContents

 

 

 

**UNITED STATES SECURITIES ANDEXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-K**

 

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

**SECURITIES EXCHANGE ACT OF 1934**

 

**For thefiscal year ended May 1, 2010**

 

**CommissionFile Number 0-2816**

 

**METHODE ELECTRONICS, INC.**

(Exact name of Registrant as specified in itscharter)

 

| **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 registered pursuantto Section 12(b) of the Act:

 

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

 

Securities registered pursuantto Section 12(g) of the Act:

 

**None**

(Title of Class)

 

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

 

Indicate by check mark if the Registrant is not requiredto file reports pursuant to Section 13 or Section 15(d) of theAct. 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.   Yes x    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).   Yes o    No o

 

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

 

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

 

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

 

The aggregate market value of common stock, $0.50 parvalue, held by non-affiliates of the Registrant on October 31, 2009, basedupon the average of the closing bid and asked prices on that date as reportedby the New York Stock Exchange was $240.1 million.

 

Registrant had 38,146,646 shares of common stock, $0.50par value, outstanding as of July 1, 2010.

 

**DOCUMENTSINCORPORATED BY REFERENCE**

 

Portions of the proxystatement for the annual shareholders meeting to be held September 16,2010 are incorporated by reference into Part III.

 

 

 

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METHODE ELECTRONICS, INC.

FORM 10-K

May 1, 2010

 

TABLE OF CONTENTS

 
| PART I   |
|---------------|
| Item 1.  | Business | 1 |
| Item 1A.      | Risk  Factors | 4 |
| Item 2.  | Properties | 8 |
| Item 3.  | Legal Proceedings | 9 |
|          |   |   |
| PART II  |
| Item 5.  | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities | 10 |
| 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 | 39 |
| Item 8.  | Financial  Statements and Supplementary Data | 39 |
| Item 9A. | Controls and  Procedures | 39 |
|          |   |   |
| PART III |
| Item 10. | Directors,  Executive Officers and Corporate Governance | 40 |
| Item 11. | Executive  Compensation | 41 |
| Item 12. | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters | 41 |
| Item 13. | Certain  Relationships and Related Transactions, and Director Independence | 41 |
| Item 14. | Principal  Accounting Fees and Services | 41 |
|          |   |   |
| PART IV  |
| Item 15. | Exhibits,  Financial Statement Schedules | 42 |

 

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**PART I**

 

**Item 1.  Business**

 

Methode Electronics, Inc. was incorporated in 1946as 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, construction, consumer andindustrial equipment markets, communications (including information processingand storage, networking equipment, wireless and terrestrial voice/datasystems), rail and other transportation industries.

 

Since January 2008, we’ve undertaken two separaterestructuring initiatives to reposition our company to be more competitive inthe marketplace.  Both restructuringinitiatives were completed during fiscal 2010. We have recorded a total of $25.7 million of costs related to the January 2008restructuring, of which $2.5 million was recorded in fiscal 2010.  We have also recorded a total of $12.5million of costs related to the March 2009 restructuring, of which $5.3million was recorded in fiscal 2010.

 

We maintain our financial records on the basis ofa fifty-two or fifty-three week fiscal year ending on the Saturday closest to April 30.  Due to the timing of our fiscal calendar, thefiscal years ended May 1, 2010 and May 2, 2009 represent 52 weeks ofresults and the fiscal year ended May 3, 2008 represents 53 weeks ofresults.

 

*Segments. *Ourbusiness is managed and our financial results are reported on a segment basis,with those segments being Automotive, Interconnect, Power Products andOther.

 

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 braided flexiblecables, 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 14to the consolidated financial statements.

 

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*Sales.*  The following table reflects thepercentage of net sales of the segments of the Company for the last threefiscal years.

 
| ** **     | ** ** | **Year Ended**  | ** ** |
|----------------|------------|-----------------|------------|
| ** **     | ** ** | **May 1,** | ** ** | **May 2,** | ** ** | **May 3,** | ** ** |
| ** **     | ** ** | **2010**        | ** ** | **2009** | ** ** | **2008** | ** ** |
| Automotive     |       | 53.4            | %          | 57.2 | % | 65.7 | % |
| Interconnect   |       | 33.3            | %          | 30.8 | % | 24.7 | % |
| Power Products |       | 10.8            | %          | 10.0 | % | 8.3 | % |
| Other          |       | 2.5             | %          | 1.9 | % | 1.3 | % |

 

Our sales activities are directed by sales managers whoare supported by field application engineers and other engineering personnelwho work with customers to design our products into their systems.  Our field application engineers also help usidentify emerging markets and new products. Our products are sold through in-house sales staff and throughindependent manufacturers’ representatives with offices throughout theworld.  Information about our sales andoperations in different geographic regions is summarized in Note 14 to theconsolidated financial statements.  Salesare made primarily to OEMs, either directly or through their tiered suppliersas well as selling partners and distributors.

 

*Sources and Availability ofMaterials*.  Principal materials that we purchase includecoil and bar stock, die castings, ferrous and copper alloy sheet, glass,plastic molding materials, precious metals, application-specific integratedcircuits, light-emitting diode (LED) displays and silicon.  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 did notexperience significant price increases in fiscal 2010 and 2009 for copper,precious metals and petroleum-based raw materials.  We did, however, experience significant priceincreases in fiscal 2008 related to those items.

 

*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 significant portion of ourbusiness is dependent on automotive sales and the vehicle production schedulesof our customers.  The automotive marketis cyclical and depends on general economic conditions, interest rates, fuelprices and consumer spending patterns. Historically, our business was moderatelyseasonal as our North American automotive customers halt operations forapproximately two weeks in July for model changeovers and for one to twoweeks during the December holiday period.  During the second half of fiscal 2009 and the first quarter of fiscal2010, we experienced additional customer plant shutdowns due to lower demandfor their products.  If we continue toexperience shutdowns in addition to July and December, future quarterlyresults may be affected.

 

*Material Customers*.  During the fiscal year ended May 1,2010, shipments to Ford Motor Company (“Ford”) and General Motors Corporation (“GM”),or their tiered suppliers, each represented approximately 10% or greater ofconsolidated net sales and, in the aggregate, amounted to approximately 32.1%of consolidated net sales.  Suchshipments included a wide variety of our automotive component products.

 

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*Backlog*. Our backlog of orders was approximately $59.3 million at May 1,2010, and $66.7 million at May 2, 2009. It is expected that most of the total backlog at May 1, 2010 willbe shipped within fiscal 2011.

 

*Competitive Conditions*.  The markets in which we operateare highly competitive and characterized by rapid changes due to technologicalimprovements and developments.  Wecompete with a large number of other manufacturers in each of our productareas; many of these competitors have greater resources and sales.  Price, service and product performance aresignificant elements of competition in the sale of our products.

 

*Research and Development*.  We maintain a research anddevelopment program involving a number of professional employees who devote amajority of their time to the development of new products and processes and theadvancement of existing products.  Seniormanagement of our Company participates directly in the program.  Expenditures for such activities amounted to$18.4 million, $22.0 million and $25.6 million for fiscal 2010, 2009 and 2008,respectively.

 

*Environmental Matters*.  Compliance with foreign,federal, state and local provisions regulating the discharge of materials intothe environment has not materially affected our capital expenditures, earningsor our competitive position.  Currently,we do not have any environmental related lawsuits or material administrativeproceedings pending against us.  Furtherinformation as to environmental matters affecting us is presented in Note 9 tothe consolidated financial statements.

 

*Employees.*  At May 1, 2010 and May 2,2009, we had 2,315 and 2,876 employees, respectively.  We also from time to time employ part-timeemployees and hire independent contractors. As of May 1, 2010 our employees from our Malta and Mexicofacilities, which account for about 50% of the total number of employees, arerepresented by a collective bargaining agreement.  We have never experienced a work stoppage andwe believe that our employee relations are good.

 

*Segment Information and ForeignSales*. Information about our operations by segment and in different geographicregions is summarized in Note 14 to the consolidated financial statements.

 

*Available Information*.  We are subject tothe informational requirements of the Securities Exchange Act of 1934 (ExchangeAct) and file periodic reports, proxy statements and other information with theSecurities and Exchange Commission (SEC). Such reports may be obtained byvisiting the Public 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 maintains an internet site (www.sec.gov) that contains reports, proxyand information statements and other information.

 

Financial and other information canalso be accessed on the investor section of our website at www.methode.com. Wemake available, free of charge, copies of our annual report on Form 10-K,quarterly reports on Form 10-Q, current reports on Form 8-K, andamendments to those reports filed or furnished pursuant to Section 13(a) or15(d) of the Exchange Act as soon as reasonably practicable after filingsuch material electronically or otherwise furnishing it to the SEC.   Also posted on our website are the Company’sCorporate Governance Guidelines, Code of Conduct and the charters of the AuditCommittee, Compensation Committee, Nominating and Governance Committee andTechnology Committee. Copies of these documents are also available free ofcharge by sending a request to Methode Electronics, Inc., 7401 West WilsonAvenue, Chicago, Illinois 60706, Attention: Investor RelationsDepartment.  Information on our websiteis not incorporated into this Form 10-K or our other securities filingsand is not a part of them.

 

*Certifications.*  As required by the rules andregulations of the New York Stock Exchange (“NYSE”), we delivered to the NYSE acertification signed by our Chief Executive Officer, Donald W. Duda, certifyingthat Mr. Duda was not aware of any violation by the Company of the NYSE’scorporate governance listing standards as of October 20, 2009.

 

As required by the rules andregulations of the SEC, the Sarbanes-Oxley Act Section 302 certificationsregarding the quality of our public disclosures are filed as exhibits to thisAnnual Report on Form 10-K.

 

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**Item 1A.  Risk Factors**

 

Certain statements in this report are forward-lookingstatements that are subject to certain risks and uncertainties.  We undertake no duty to update any suchforward-looking statements to conform to actual results or changes in ourexpectations.  Our business is highlydependent upon two large automotive customers and specific makes and models ofautomobiles.  Our results will be subjectto many of the same risks that apply to the automotive, appliance, computer andtelecommunications industries, such as general economic conditions, interestrates, consumer spending patterns and technological changes.   Other factors, which may result inmaterially different results for future periods, include the following riskfactors.  These risk factors should beconsidered in connection with evaluating the forward-looking statementscontained in this report because these factors could cause our actual resultsand condition to differ materially from those projected in forward-lookingstatements.  The forward-lookingstatements in this report are subject to the safe harbor protection providedunder the securities laws and are made as of the date of this report.  We undertake no duty to update any suchforward-looking statements.

 

**We depend on a small number of large customers, specifically two largeautomotive customers.  If we were to loseany of these customers or any of these customers volume of products purchased,or if any of the customers declare bankruptcy, our future results could beadversely affected.**

 

Duringthe year ended May 1, 2010, shipments to Ford and GM, or their tieredsuppliers, each represented 10% or greater of consolidated net sales and, inthe aggregate, amounted to approximately 32.1% of consolidated net sales.  The contracts we have entered into with manyof our customers provide for supplying the customers’ requirements for aparticular model, rather than for manufacturing a specific quantity ofproducts. Such contracts range from one year to the life of the model, which isgenerally three to seven years. Therefore, the loss of a contract for a majormodel or a significant decrease in demand for certain key models or group ofrelated models sold by Ford or GM could have a material adverse impact on ourresults of operations and financial condition. We also compete to supplyproducts for successor models and are subject to the risk that Ford or GM willnot select us to produce products on any such model, which could have amaterial adverse impact on our results of operations and financial condition.

 

Inaddition, we have significant receivable balances related to these customersand other major customers that would be at risk in the event of theirbankruptcy.  Due to the financialstresses within the worldwide automotive industry, certain automakers andsuppliers have already declared bankruptcy or may be susceptible to bankruptcy.

 

**Because we derive a substantial portion of our revenues from customersin the automotive, appliance, computer and communications industries, we aresusceptible to trends and factors affecting those industries.**

 

Our components are found in the primary end markets ofthe automotive, communications (including information processing and storage,networking equipment, wireless and terrestrial voice/data systems), aerospace,rail and other transportation industries, appliances and the consumer andindustrial equipment markets.  Factorsnegatively affecting these industries and the demand for products alsonegatively affect our business, financial condition and operating results. Infiscal 2010 and 2009, we experienced slow-downs in all significant segments dueto the recession.  Any adverseoccurrence, including additional industry slowdown, recession, rising interestrates, political instability, costly or constraining regulations, armedhostilities, terrorism, excessive inflation, prolonged disruptions in one ormore of our customers’ production schedules or labor disturbances, that resultsin significant decline in the volume of sales in these industries, or in anoverall 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 downturnsin the automotive industry could reduce the sales and profitability of ourbusiness.**

 

A large portion of our business is dependent onautomotive sales and the 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 material adverse effect on ourbusiness.  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 offiscal 2009 and the first quarter of fiscal 2010, we experienced additionalcustomer plant shutdowns due to lower demand

 

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for their products. If we continue to experience shutdowns in addition to July andDecember, future quarterly results may be affected.

 

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

 

The markets in which we operate are highly competitiveand characterized by rapid changes due to technological improvements anddevelopments.  We compete with a largenumber of other manufacturers in each of our product areas; many of thesecompetitors have greater resources and sales. Price, service and product performance are significant elements ofcompetition in the sale of our products. Competition may intensify further if more companies enter the markets inwhich we operate. Our failure to compete effectively could materially adverselyaffect our business, financial condition and operating results.

 

**We face risks relating to our international operations.**

 

Because we have significant international operations,our operating results and financial condition could be adversely affected byeconomic, political, health, regulatory and other factors existing in foreigncountries in which we operate. Our international operations are subject toinherent risks, which may adversely affect us, including: fluctuations inexchange rates; political and economic instability; expropriation, or theimposition of government controls; changes in government regulations; exportlicense requirements; trade restrictions; earnings expatriation restrictions;exposure to different legal standards; less favorable intellectual propertylaws; health conditions and standards; currency controls; increases in dutiesand taxes; high levels of inflation or deflation; greater difficulty incollecting our accounts receivable and longer payment cycles; changes in laborconditions and difficulties in staffing and managing our internationaloperations; limitations on insurance coverage against geopolitical risks,natural disasters and business operations; and communication among and management of international operations. Inaddition, these same factors may also place us at a competitive disadvantage tosome of our foreign competitors.

 

**We may be unable to keep pace with rapid technological changes, whichwould adversely affect our business.**

 

The technologies relating to some of our products haveundergone, and are continuing to undergo, rapid and significant changes.Specifically, end markets for electronic components and assemblies arecharacterized by technological change, frequent new product introductions andenhancements, changes in customer requirements and emerging industrystandards.  These changes could renderour existing products unmarketable before we can recover any or all of ourresearch, development and other expenses. Furthermore, the life cycles of ourproducts vary, may change and are difficult to estimate. If we are unable, fortechnological or other reasons, to develop and market new products or productenhancements in a timely and cost-effective manner, our business, financialcondition and operating results could be materially adversely affected.

 

**Products we manufacture may contain design or manufacturing defectsthat could result in reduced demand for our products or services and liabilityclaims against us.**

 

Despite our quality control and quality assuranceefforts, defects may occur in the products we manufacture due to design ormanufacturing errors or component failure. Product defects may result indelayed shipments and reduced demand for our products. We may be subject toincreased costs due to warranty claims on defective products. Product defectsmay result in product liability claims against us where defects cause, or arealleged to cause, property damage, bodily injury or death. We may be requiredto participate in a recall involving products that are, or are alleged to be,defective. We carry insurance for certain legal matters involving productliability, however, we do not have coverage for all costs related to productdefects and the costs of such claims, including costs of defense andsettlement, may exceed our available coverage.

 

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

 

Wehave numerous United States and foreign patents and license agreements coveringcertain of our products and manufacturing processes, several of which areconsidered material to our business.  Ourability to

 

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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.  The loss of anysignificant patents and trade secrets could adversely affect our sales,margins, profitability and, as a result, share price.

 

We may become involved in litigation in the future toprotect our intellectual property or because others may allege that we infringeon their intellectual property. These claims and any resulting lawsuit couldsubject us to liability for damages and invalidate our intellectual propertyrights. If an infringement claim is successfully asserted by a holder ofintellectual property rights, we may be required to cease marketing or sellingcertain products, pay a penalty for past infringement and spend significanttime and money to develop a non-infringing product or process or to obtainlicenses for the technology, process or information from the holder. We may notbe successful in the development of a non-infringing alternative, or licensesmay not be available on commercially acceptable terms, if at all, in which casewe may lose sales and profits. In addition, any litigation could be lengthy andcostly and could materially adversely affect us even if we are successful inthe litigation.

 

**We aredependent on the availability and price of materials.**

 

We require substantial amounts of materials, includingpetroleum-based products, glass, copper and precious metals, application-specificintegrated circuits, light-emitting diode (LED) displays, and all materials werequire are purchased from outside sources. The availability and prices ofmaterials may be subject to curtailment or change due to, among other things,new laws or regulations, suppliers’ allocations to other purchasers,interruptions in production by suppliers, changes in exchange rates andworldwide price levels. Any change in the supply of, or price for, thesematerials could materially affect our results of operations and financialcondition.  We did not experiencesignificant price increases in fiscal 2010 and 2009 for copper, precious metalsand petroleum-based materials.  We did,however, experience significant price increases in fiscal 2008 related to thoseitems.

 

**We may acquire businesses or divest business operations. Thesetransactions may pose significant risks and may materially adversely affect ourbusiness, financial condition and operating results.**

 

We intend to explore opportunities to acquire otherbusinesses or technologies that could complement, enhance or expand our currentbusiness or product lines or that might otherwise offer growth opportunities.Any transactions that we are able to identify and complete may involve a numberof risks, including: the diversion of our management’s attention from ourexisting business to integrate the operations and personnel of the acquired orcombined business or joint venture; possible adverse effects on our operatingresults during the integration process; and our possible inability to achievethe intended 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 may in the future, considerdivesting certain business operations. Divestitures may involve a number ofrisks, including the diversion of management’s attention, significant costs andexpenses, the loss of customer relationships and cash flow, and the disruptionof operations in the affected business. Failure to timely complete adivestiture or to consummate a divestiture may negatively affect valuation ofthe affected business or result in restructuring charges.

 

**A significant fluctuation between the U.S. dollar and other currenciescould adversely impact our operating results.**

 

Although our financial results are reported in U.S.dollars, a significant portion of our sales and operating costs are realized inother currencies, mainly in Europe and China. Our profitability is affected by movements of the U.S. dollar againstthe euro and Chinese yuan in which we generate revenue and incur expenses.  Significant long-term fluctuations inrelative currency values, in particular an increase in the value of the U.S.dollar against foreign currencies, could have an adverse effect on ourprofitability and financial condition.

 

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**Unfavorable tax law changes may adversely affect results.**

 

We are subject to income taxes in the U.S. and invarious foreign jurisdictions.  Domesticand international tax liabilities are subject to the allocation of income amongvarious tax jurisdictions.  Our effectivetax rate could be adversely affected by changes in the mix of earnings amongcountries with differing statutory tax rates or changes in the tax laws.

 

**The futuretrading price of our common stock could be subject to wide fluctuations inresponse to a variety of factors.**

 

The market price of our common stock has fluctuatedsignificantly in the past and is likely to fluctuate in thefuture.  The future trading price of our common stock could besubject to wide fluctuations in response to a variety of factors, many of whichare beyond our control, including, but not limited to:

 

·                 quarterly variations in our operating results and the operating resultsof other technology companies;

·                 actual or anticipated announcements of technical innovations or newproducts by us or our competitors;

·                 changes in analysts’ estimates of our financial performance or buy/sellrecommendations;

·                 any acquisitions we pursue or complete;

·                 general conditions in the aerospace, appliance, automotive, consumer andindustrial equipment markets, communications, rail and other transportationindustries; and

·                 global economic and financial conditions.

 

In addition, the stock market has from time to timeexperienced significant price and volume fluctuations that have affected themarket prices for many companies and that often have been unrelated to theoperating performance of such companies.  These broad marketfluctuations and other factors have harmed and may harm the market price of ourcommon stock.

 

**We aresubject to the risks of owning real property.**

 

A majority of our real properties in the U.S. are ownedby us.  Ownership of property is subjectto the risks of owning real property, which may include:

 

·                 the possibility of environmental contamination and the costs associatedwith correcting any environmental problems;

·                 adverse changes in the value of these properties, due to interest ratechanges, changes in the neighborhood in which the property is located, or otherfactors;

·                 increased cash commitments for improving the current buildings;

·                 the risk of financial loss in excess of amounts covered by insurance, oruninsured risks, such as the loss caused by damage to the buildings as a resultof fire, floods, or other natural disasters;

·                 rising real estate taxes; and

·                 the potential difficulty of selling the real property, if we chose to doso, due to the stagnant real estate market.

 

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**Item 2.  Properties**

 

Weoperate the following manufacturing and other facilities, all of which webelieve to be in good condition and adequate to meet our current and reasonablyanticipated 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            |       |
| 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              |       |
| Bangalore, India           |       | Engineering Design Center           |       | Leased     |       | 4,000              |       |
| Sin El Fil, Lebanon             |       | Engineering Design Center           |       | Leased     |       | 2,300              |       |
|                            |       |                                |       |       |       |               |       |
| **Interconnect  Segment:**      |       |                                |       |       |       |               |       |
| 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                |       |
| Ljubljana, Slovenia             |       | Sales and Distribution              |       | Leased     |       | 400                |       |
|                            |       |                                |       |       |       |               |       |
| **Power  Products Segment:**    |       |                                |       |       |       |               |       |
| Shaghai, China                  |       | Manufacturing                       |       | Leased     |       | 60,000             |       |
| Rolling  Meadows, Illinois |       | Manufacturing                       |       | Owned      |       | 52,000             |       |
| 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             |       |

 

8

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**Item 3.  LegalProceedings**

 

As of July 1, 2010, we were not involved in anymaterial legal proceedings or any legal proceedings or material administrativeproceedings with governmental authorities pertaining to the discharge ofmaterials into the environment or otherwise.

 

In March 2010, DPH Holdings Corp. and certain ofits affiliated debtors, as successors to Delphi Corporation and certain of itsaffiliates (“Delphi”), served the Company with a complaint seeking toavoid and recover approximately $19.7 million in alleged preferencepayments that Delphi made to the Company within the 90-day periodpreceding Delphi’s bankruptcy filing in October 2005 (the “Complaint”). Delphi is pursuing similar preference complaints against approximately 175other, unrelated third-parties.  The Complaint, dated September 28,2007, was originally filed under seal with the United States Bankruptcy Courtfor the Southern District of New York (titled as Delphi Corporation, etal. v. Methode Electronics, Inc, Adversary Proceeding No. 07-2432) andpursuant to certain court orders, the Complaint was not unsealed and servedupon the Company until March 2010.  The Company hasfiled a joinder to third-parties’ motions to dismiss the Delphi preferencecomplaints based on violations of due process and other defenses connected tothe unusual manner that Delphi filed and served the preferencecomplaints.   Additionally, the Company possesses several othersubstantive defenses to the Complaint including, but not limitedto, the affirmative defenses available under the BankruptcyCode, statute of limitations, setoff, waiver andestoppel.   Although the ultimate liabilities resulting fromthis proceeding could be significant to the Company’s results of operations inthe period recognized, management does not anticipate that they will havea material adverse effect on the Company’s consolidated financial position.

 

**Executive Officers 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 2004.  President and Director of the Company since 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   |       | 60      |       | Chief Financial Officer of the Company since 2004.  Vice President, Corporate Finance, of the Company since 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 |       | 47      |       | Chief Operating Officer, of the Company since  June 24, 2010. Senior Vice President, Worldwide Automotive Operations,  of the Company since 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 |       | 46      |       | Vice President and General Manager, North American  Automotive, of the Company since 2006. Prior thereto Mr. Glandon was  General Manager of Automotive Safety Technologies since 2001. Prior thereto  Mr. Glandon was Vice President and General Manager with American  Components, Inc. from 1996 to 2001.                                                                                                                                                        |

 

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| Joseph. E. Khoury   |   | 46     |   | Vice President and General Manager, European  Automotive, of the Company since 2004. Prior thereto Mr. Khoury was  General Manager of Methode Electronics International, GMBH since 2000.                                                                               |
|---------------------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |   |   |   |                                                                                                                                                                                                                                                                         |
| Theodore D. Kill    |   | 59     |   | 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 |   | 49     |   | Controller and Treasurer of the Company since 2007.  Prior thereto Mr. Tsoumas was Assistant Controller of the Company since  July 1998.                                                                                                                           |

 

All executive officers are elected by the Board ofDirectors and serve a term of one year or until their successors are dulyelected and qualified.

 

**PART II**

 

**Item5.  Market for Registrant’s CommonEquity, Related Stockholder Matters and Issuer Purchases of Equity Securities**

 

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

 
| ** **                          | ** ** | ** **                | ** ** | ** ** | ** ** | **Dividends** | ** ** |
|-------------------------------------|------------|---------------------------|------------|------------|------------|---------------|------------|
| ** **                          | ** ** | **Sales Price Per Share** | ** ** | **Paid**   | ** ** |
| ** **                          | ** ** | **High**                  | ** ** | **Low**    | ** ** | **Per Share** | ** ** |
| Fiscal Year ended  May 1, 2010 |       |                      |       |       |       |          |       |
| First Quarter                       |       | $                         | 8.18       |       | $          | 5.28          |       | $ | 0.07 |   |
| Second Quarter                      |       | 9.75                      |       | 6.92       |       | 0.07          |       |
| Third Quarter                       |       | 12.75                     |       | 6.99       |       | 0.07          |       |
| Fourth Quarter                      |       | 14.32                     |       | 9.70       |       | 0.07          |       |
|                                |       |                      |       |       |       |          |       |
| 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          |       |

 

On June 24, 2010, the Board declared a dividend of$0.07 per share of common stock, payable on July 30, 2010, to holders ofrecord on July 16, 2010.

 

As of June 30, 2010, the number of record holdersof our common stock was 636.

 

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**Equity Compensation Plan Information**

 

Thefollowing table provides information about shares of our common stock that maybe issued upon exercise of stock options or granting of stock awards under allof the existing equity compensation plans as of May 1, 2010.

 
| **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     |       | 1,125,276                                                                                           |       | $                                                                                  | 7.28       |                                                                                                                                                         | 473,181    |   |
|                                                        |       |                                                                                                |       |                                                                               |       |                                                                                                                                                         |       |
| Equity compensation plans  not approved by security holders |       | —                                                                                              |       | —                                                                             |       | —                                                                                                                                                       |       |
| Total                                                       |       | 1,125,276                                                                                           |       | $                                                                                  | 7.28       |                                                                                                                                                         | 473,181    |   |

 

**Recent Sales of Unregistered Securities**

 

In March 2010, we sold 30,000 shares of our commonstock (the “Methode shares”) in exchange for the shares of Hetronic AsiaManufacturing & Trading Corporation (the “Hetronic shares”) held byeach investor.  Methode also paid certaincash consideration for the Hetronic shares. The Methode shares vest for each investor one-third per year over aperiod of three years ending on April 28, 2012, subject to certain eventsof forfeiture.

 

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**Purchase of Equity Securities by theCompany 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)**              | ** ** |
|                                                    |       |              |       |           |       |                      |       |                          |       |
| January 31, 2010  through February 27, 2010   |       | 218               |       | $              | 10.99      |                      |       |                          |       |   |
|                                                    |       |              |       |           |       |                      |       |                          |       |
| February 28, 2010  through April 3, 2010 |       |              |       |           |       |                      |       |                          |       |
|                                                    |       |              |       |           |       |                      |       |                          |       |
| April 4, 2010 through  May 1, 2010       |       | 10,487            |       | $              | 11.10      |                      | —     |                          | —     |   |
|                                                    |       | 10,705            |       | $              | 11.10      |                      | —     |                          | —     |   |

 

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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 Board ofDirectors adopted a plan to repurchase up to 3 million shares of its common stock.  There were 669,480 shares purchased under theplan, however, no shares were purchased in fiscal 2010.  The plan expired on May 1, 2010.

 

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**Item 6.  Selected Financial Data**

 

The following selected financial data should beread in 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 2010, 2009 and 2008, and the consolidated balance sheet data as ofMay 1, 2010 and May 2, 2009, are derived from, and are qualified byreference to, the Company’s audited consolidated financial statements includedelsewhere in this report.  Theconsolidated statement of operations data for fiscal 2007 and 2006, and theconsolidated balance sheet data as of May 3, 2008, April 28, 2007 andApril 29, 2006, are derived from audited consolidated financial statementsnot included in this report.  Due to thetiming of our fiscal calendar, fiscal 2008 represents 53 weeks of results.  Fiscal 2010, 2009, 2007 and 2006 represent 52weeks of results.

 
| ** **                                                                    | ** ** | **Fiscal Year Ended**                                        | ** ** |
|-------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                                                    | ** ** | **May 1,**                                              | ** ** | **May 2,** | ** ** | **May 3,** | ** ** | **April 28,** | ** ** | **April 29,** | ** ** |
| ** **                                                                    | ** ** | **2010**                                                     | ** ** | **2009** | ** ** | **2008 (53 wks)** | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                          |       | **(In Millions, Except Percentages and Per Share  Amounts)** |       |
| Income Statement Data:                                                        |       |                                                         |       |   |   |   |   |   |   |   |   |
| Net sales                                                                     |       | $                                                            | 373.1      |   | $ | 425.6 |   | $ | 551.1 |   | $ | 448.4 |   | $ | 421.6 |   |
| Income/(loss) before income  taxes and cumulative affect of accounting change |       | 7.8                                                          | (1)        | (110.5 | )(2) | 49.8 | (3) | 35.5 | (4) | 32.2 | (5) |
| Income tax expense/(benefit)                                                  |       | (6.0                                                         | )(1)       | 1.7 | (2) | 9.7 | (3) | 9.8 | (4) | 15.3 | (5) |
| Cumulative effect of  accounting change                                       |       | —                                                       |       | — |   | — |   | 0.1 |   | — |   |
| Net income/(loss) applicable  to Methode Electronics, Inc.               |       | 13.7                                                         | (1)        | (112.5 | )(2) | 39.8 | (3) | 26.1 | (4) | 17.0 | (5) |
| Per Common Share:                                                             |       |                                                         |       |   |   |   |   |   |   |   |   |
| Basic net income/(loss)                                                       |       | 0.37                                                         | (1)        | (3.05 | )(2) | 1.07 | (3) | 0.72 | (4) | 0.47 | (5) |
| Diluted net income/(loss)                                                     |       | 0.37                                                         | (1)        | (3.05 | )(2) | 1.06 | (3) | 0.71 | (4) | 0.47 | (5) |
| Dividends                                                                     |       | 0.28                                                         |       | 0.26 |   | 0.20 |   | 0.20 |   | 0.20 |   |
| Book Value                                                                    |       | 6.43                                                         |       | 6.28 |   | 9.93 |   | 8.69 |   | 7.82 |   |
| Long-term Debt                                                                |       | —                                                       |       | — |   | — |   | — |   | — |   |
| Retained Earnings                                                             |       | 146.8                                                        |       | 143.6 |   | 265.8 |   | 233.7 |   | 215.1 |   |
| Fixed Assets (net)                                                            |       | 61.9                                                         |       | 69.9 |   | 90.3 |   | 86.9 |   | 90.5 |   |
| Total Assets                                                                  |       | 310.8                                                        |       | 305.3 |   | 470.2 |   | 411.7 |   | 374.6 |   |
| Return on Average Equity                                                      |       | 6.0                                                          | %(1)       | -37.2 | %(2) | 11.4 | %(3) | 8.5 | %(4) | 5.9 | %(5) |
| Pre-tax Income/(loss) as a  Percentage of Sales                               |       | 2.1                                                          | %(1)       | -26.0 | %(2) | 9.0 | %(3) | 8.0 | %(4) | 7.7 | %(5) |
| Net Income/(loss) as a  Percentage of Sales                                   |       | 3.8                                                          | %(1)       | -26.4 | %(2) | 7.2 | %(3) | 5.8 | %(4) | 4.0 | %(5) |
|                                                                               |            |                                                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

(1) Fiscal 2010 results include a pre-tax charge of $7.8 million relating torestructuring activities.  In addition,fiscal 2010 includes $5.8 million of pre-tax legal expense relating to theDelphi supply agreement and patent lawsuit. Income tax includes a $8.4 million loss carry-back benefit related tolosses in our U.S.-based businesses.

 

(2) Fiscal 2009 results include a pre-tax charge of $94.4 million relating togoodwill and other asset impairments.  Inaddition, fiscal 2009 results include a pre-tax charge of $25.3 millionrelating to restructuring activities. The income tax expense includes a $28.0 million valuation charge relatedto the uncertainty of the future realization of our deferred tax assets.

 

(3) Fiscal 2008 results include a pre-tax charge of $5.2 million relating toa restructuring of our U.S.-based automotive operations and the decision todiscontinue producing certain legacy products in the Interconnect segment.

 

(4) Fiscal 2007 results include a pre-tax and an after-tax restructuringcharge of $2.0 million related to the closing of our Scotland automotive partsmanufacturing plant and transfer of production lines from that facility to ourautomotive parts manufacturing facility in Malta.

 

(5) Fiscal 2006 results include $4.5 million of income tax expense related tothe repatriation of $38.1 million

 

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of foreign earnings for which income taxes were notpreviously provided, and an after-tax charge of $1.5 million ($2.3 million pre-tax)related to receivables deemed to be impaired due to the Chapter 11 bankruptcyfiling by Delphi.

 

**Item 7.  Management’s Discussionand Analysis of Financial Condition and Results of Operations**

 

**Overview**

 

We are a global manufacturer of component and subsystemdevices with manufacturing, design and testing facilities in China, CzechRepublic, Germany, Lebanon, Malta, Mexico, the Philippines, Singapore, theUnited Kingdom and the United States.  Weare a global designer and manufacturer of electro-mechanical devices.  We design, manufacture and market devicesemploying electrical, radio remote control, electronic, wireless, sensing andoptical technologies.  Our business is managedon a segment basis, with those segments being Automotive, Interconnect, PowerProducts and Other.   For moreinformation regarding the business and products of these segments, see “Item 1.Business.”

 

Our components are found in the primary end markets ofthe aerospace, appliance, automotive, construction, consumer and industrialequipment markets, communications (including information processing andstorage, networking equipment, wireless and terrestrial voice/data systems),rail and other transportation industries

 

Since January 2008, we’ve undertaken two separaterestructuring initiatives to reposition our company to be more competitive inthe marketplace.  Both restructuringactions were completed during fiscal 2010. We have recorded a total of $25.7 million related to the January 2008restructuring, of which $2.5 million was recorded in fiscal 2010.  We have also recorded a total of $12.5million related to the March 2009 restructuring, of which $5.3 million wasrecorded in fiscal 2010.

 

On September 4, 2008, Methode and Delphi AutomotiveSystems LLC (“Delphi”) entered into a supply agreement pursuant to whichMethode was to supply all of Delphi’s requirements for the seat bladders usedin Delphi’s occupant restraint system from October 1, 2008 through September 30,2011.  On August 26, 2009, Delphinotified us that effective September 10, 2009, our supply arrangement wasterminated.  We are contesting Delphi’sright to terminate this long-term supply arrangement and the parties areengaged in litigation regarding this supply arrangement and our relatedintellectual property.

 

As described in more detail in Part I, Item 3 “LegalProceedings” of this Annual Report on Form 10-K, in March 2010,DPH Holdings Corp., as successor to Delphi Corporation, served theCompany with a complaint seeking to recover approximately$19.7 million in alleged preference payments that Delphi made to theCompany within the 90-day preference period preceding Delphi’s bankruptcyfiling.  The Company is seeking to dismiss theDelphi preference complaint based on violations of due processand the Company possesses several other substantive defenses.

 

**Business Outlook**

 

Dueto the loss of the Delphi business and the exit of legacy Ford products infiscal 2010, we expect a decline in our Automotive segment sales in fiscal2011.  In addition, it is unclear inEurope what the impact will be with regard to the phase out of the “scrappage”incentives, which governments paid owners to trade in old cars to purchase newmodels.  It is also unclear what thecurrent European debt crisis will have on our European businesses.  For our other businesses, if the economicconditions continue to stabilize, with no significant further deterioration, weexpect modest sales growth during fiscal 2011 as compared to fiscal 2010.  The restructuring actions undertaken by usover the past three fiscal years, targeted at reducing our cost structure areexpected to positively impact our futureearnings and cash flows.  The additionaloperating cash flow generated by these cost savings will continue to bestrategically deployed to strengthen our competitive position.

 

Results may differ materially from what is expressed orforecasted.  See “ Item 1A Risk Factors”herein.

 

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**Results of Operations**

 

**Results of Operations for the Fiscal Year Ended May 1, 2010 asCompared to the Fiscal Year Ended May 2, 2009**

 

**Consolidated Results**

** **

Below is a table summarizing results for theyears ended:

(in millions)

(Not meaningful equals “N/M”)

 
| ** **                                                        | ** ** | **May 1,** | ** ** | **May 2,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|-------------------------------------------------------------------|------------|-----------------|------------|-----------------|------------|----------------|------------|----------------|------------|
| ** **                                                        | ** ** | **2010**        | ** ** | **2009**        | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net sales                                                         |       | $               | 373.1      |            | $          | 425.6          |       | $              | (52.5      | ) | -12.3 | % |
| Other income                                                      |       | 4.5             |       | 3.2             |       | 1.3            |       | 40.6           | %          |
|                                                              |       | 377.6           |       | 428.8           |       | (51.2          | )          | -11.9          | %          |
|                                                              |       |            |       |            |       |           |       |           |       |
| Cost of products sold                                             |       | 297.7           |       | 356.4           |       | (58.7          | )          | -16.5          | %          |
|                                                              |       |            |       |            |       |           |       |           |       |
| Gross margins (including  other income)                           |       | 79.9            |       | 72.4            |       | 7.5            |       | 10.4           | %          |
|                                                              |       |            |       |            |       |           |       |           |       |
| Restructuring                                                     |       | 7.8             |       | 25.3            |       | (17.5          | )          | -69.2          | %          |
| Impairment of goodwill and  other assets                          |       | —          |       | 94.4            |       | (94.4          | )          | N/M            |       |
| Selling and administrative  expenses                              |       | 62.4            |       | 57.2            |       | 5.2            |       | 9.1            | %          |
| Amortization of intangibles                                       |       | 2.3             |       | 6.9             |       | (4.6           | )          | -66.7          | %          |
| Interest income/(expense),  net                                   |       | (0.1            | )          | 1.4             |       | (1.5           | )          | N/M            |       |
| Other, net -  income/(expense)                                    |       | 0.5             |       | (0.5            | )          | 1.0            |       | N/M            |       |
| Income taxes -  expense/(benefit)                                 |       | (6.0            | )          | 1.7             |       | (7.7           | )          | N/M            |       |
| Net income attributable to  noncontrolling interest               |       | 0.1             |       | 0.3             |       | (0.2           | )          | -66.7          | %          |
|                                                              |       |            |       |            |       |           |       |           |       |
| Net income/(loss)  attributable to Methode Electronics, Inc. |       | $               | 13.7       |            | $          | (112.5         | )          | $              | 126.2      |   | N/M |   |

 
| ** **                                                        | ** ** | **May 1,** | ** ** | **May 2,** | ** ** |   |   |   |   |
|-------------------------------------------------------------------|------------|-----------------|------------|-----------------|------------|--------|--------|--------|--------|
| **Percent of sales:**                                             | ** ** | **2010**        | ** ** | **2009**        | ** ** |   |   |   |   |
| Net sales                                                         |       | 100.0           | %          | 100.0           | %          |   |   |   |   |
| Other income                                                      |       | 1.2             | %          | 0.8             | %          |   |   |   |   |
| Cost of products sold                                             |       | 79.8            | %          | 83.7            | %          |   |   |   |   |
| Gross margins (including  other income)                           |       | 21.4            | %          | 17.0            | %          |   |   |   |   |
| Restructuring                                                     |       | 2.1             | %          | 5.9             | %          |   |   |   |   |
| Impairment of goodwill and  other assets                          |       | 0.0             | %          | 22.2            | %          |   |   |   |   |
| Selling and administrative expenses                               |       | 16.7            | %          | 13.4            | %          |   |   |   |   |
| Amortization of intangibles                                       |       | 0.6             | %          | 1.6             | %          |   |   |   |   |
| Interest income/(expense),  net                                   |       | 0.0             | %          | 0.3             | %          |   |   |   |   |
| Other, net -  income/(expense)                                    |       | 0.1             | %          | -0.1            | %          |   |   |   |   |
| Income taxes -  expense/(benefit)                                 |       | -1.6            | %          | 0.4             | %          |   |   |   |   |
| Net income attributable to  noncontrolling interest               |       | 0.0             | %          | 0.1             | %          |   |   |   |   |
| Net income/(loss)  attributable to Methode Electronics, Inc. |       | 3.7             | %          | -26.4           | %          |   |   |   |   |

 

*Net Sales*.  Consolidated net sales decreased$52.5 million, or 12.3%, to $373.1 million for fiscal 2010 from $425.6 millionfor fiscal 2009.  The Automotive segmentnet sales declined $44.3 million or 18.2% to $199.3 million for fiscal 2010from $243.6 million for fiscal 2009.  Thedecline is primarily attributable to lower sales to Delphi, Ford and Chryslerand the weak economic environment.  TheInterconnect segment net sales decreased $6.9 million, or 5.3% to $124.1million for fiscal 2010 as compared to $131.0 million for fiscal 2009.  The Power Products segment net salesdecreased $2.3 million, or 5.4% to $40.4 million for 2010 as compared to $42.7million for fiscal 2009.  The Othersegment net sales increased $1.1 million, or 13.4%, to $9.3 million for fiscal2010, as

 

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compared to $8.2 million for fiscal 2009.  Translation of foreign operations net salesfor fiscal 2010 increased reported net sales by $1.0 million or 0.3% due tocurrency rate fluctuations.

 

*Other Income*.  Other income increased $1.3million, or 40.6%, to $4.5 million for fiscal 2010 from $3.2 million for fiscal2009.  Other income consisted primarilyof earnings from engineering design fees and royalties.  The increase relates to engineering designfees in our European automotive business.

 

*Cost of Products Sold*.  Consolidated cost of productssold decreased $58.7 million, or 16.5%, to $297.7 million for fiscal 2010compared to $356.4 million for fiscal 2009. The decrease is due to the lower sales volumes.  Consolidated cost of products sold as apercentage of sales were 79.8% for fiscal 2010, compared to 83.7% for fiscal2009.  The decrease relates torestructuring and consolidation efforts that were undertaken in prior periodsto improve inefficiencies in the business.

 

*Gross Margins (including otherincome). *Consolidatedgross margins (including other income) increased $7.5 million, or 10.4%, to$79.9 million for fiscal 2010 compared to $72.4 million for fiscal 2009.  Gross margins (including other income) as apercentage of net sales were 21.4% for fiscal 2010 compared to 17.0% for fiscal2009.  The increase relates to higherother income in fiscal 2010 as well as restructuring and consolidation effortsthat were undertaken in prior periods.

 

*Restructuring*.  In March 2009, we announcedadditional restructuring actions to consolidate manufacturing facilities toreduce costs.  During fiscal 2010, werecorded a restructuring charge of $5.3 million related to this restructuringinitiative, which consisted of $3.6 million for employee severance and $1.7million relating to other costs.  Duringfiscal 2009, we recorded a restructuring charge of $7.3 million related to thisrestructuring initiative, which consisted of $0.1 for employee severance, $1.4million for the impairment of fixed assets, $5.4 million for the impairment ofcustomer funded tooling and $0.4 million for other costs.  All of the restructuring actions related tothe March 2009 restructuring initiative are now complete.

 

In January 2008, we announced a restructuring of ourU.S.-based automotive operations and the decision to discontinue producingcertain legacy products in the Interconnect segment.  During fiscal 2010, we recorded arestructuring charge of $2.5 million related to this restructuring initiative,which consisted of $0.7 million for employee severance, $1.5 million for theimpairment and accelerated depreciation and $0.3 million relating to othercosts.  During fiscal 2009, we recorded arestructuring charge of $18.0 million related to this restructuring initiative,which consisted of $6.1 million for employee severance, $10.8 million forimpairment and accelerated depreciation, $0.2 million for inventory write-downsand $0.9 million relating to other costs. All of the restructuring actions related to the January 2008restructuring initiative are now complete.

 

*Impairment of Goodwill and Other Assets*.  During fiscal 2009, in accordance withAccounting Standards Codification, (“ASC”) No. 350, “Intangibles-Goodwilland Other,” we performed goodwill impairment testing and concluded thatgoodwill was impaired.  Therefore, duringfiscal 2009, we recorded a goodwill impairment charge of $25.8 million in ourAutomotive segment, $30.8 million in our Interconnect segment, $5.4 million inour Power Products segment and $1.2 million in our Other segment for a total of$63.2 million related to these assets.

 

Also during the third quarter of fiscal 2009, inaccordance with ASC No. 360, “Property, Plant and Equipment,” it wasdetermined that certain identifiable assets of our businesses wereimpaired.  Therefore, during fiscal 2009,we recorded an impairment charge of $4.6 million in our Automotive segment,$26.2 million in our Interconnect segment and $0.4 million in our Other segmentfor a total of $31.2 million related to these assets.

 

*Selling and AdministrativeExpenses*.  Selling and administrative expenses increased$5.2 million, or 9.1%, to $62.4 million for fiscal 2010 compared to $57.2million for fiscal 2009.  The increase isdue to $5.8 million in legal fees relating to the Delphi supply agreement andpatent dispute.  In addition, selling andadministrative expenses were negatively impacted by $1.4 million due to $0.8million of stock-based compensation in fiscal 2010, compared to a net reversalof expense of $0.6 million in fiscal 2009. The net reversal in fiscal 2009 was due to performance-based shares notmeeting certain financial targets. Selling and administrative expenses were lower by $2.0 million due torestructuring and consolidation efforts from previous periods.  Selling and administrative expenses as apercentage of net sales increased to 16.7% for fiscal 2010 from 13.4% forfiscal 2009.

 

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*Amortization of Intangibles*.  Amortization of intangiblesdecreased $4.6 million, or 66.7%, to $2.3 million for fiscal 2010, compared to$6.9 million for fiscal 2009.  Thedecrease is due to the impairment of certain intangible assets in fiscal 2009.

 

*Interest Income/(Expense), Net*.  Net interest income/(expense)decreased $1.5 million for fiscal 2010 to an expense of  $0.1 million as compared to income of $1.4million for fiscal 2009.  The averagecash balance in fiscal 2010 was $62.5 million compared to an average cashbalance of $81.4 million for fiscal 2009. The decrease in the average cash balance relates primarily to theHetronic acquisition during the second quarter of fiscal 2009.  The average interest rate earned for fiscal2010 was 0.59% compared to 2.22% for fiscal 2009.  Interest expense was $0.5 million and $0.4million for fiscal 2010 and fiscal 2009, respectively.  The interest expense in fiscal 2010 includes$0.1 million of fees related to the amendment of our bank agreement.

 

*Other Income/(Expense), Net*.  Other income/(expense), netincreased $1.0 million to income of $0.5 million for fiscal 2010 compared to anexpense of $0.5 million for fiscal 2009. Fiscal 2010 included a $1.1 million gain recorded from life insurancepolicies owned by the Company in connection with an employee deferredcompensation plan.  During fiscal 2010,our net currency exchange losses increased due to the strengthening of the U.S.dollar versus the Euro and Czech koruna, resulting in exchange losses.  During fiscal 2009, we recorded $2.5 millionof unrealized currency exchange losses arising from an intercompany loanbetween our corporate headquarters and one of our foreign subsidiaries inconjunction with the acquisition of Hetronic, partially offset by currencyexchange gains recorded in the same period. The functional currencies of these operations are the British pound,Chinese yuan, Czech koruna, euro, Indian rupee, 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.

 

During fiscal 2009 and the first half of fiscal2010, we were invested in an enhanced cash fund sold as an alternative totraditional money-market funds.  At May 1,2010 there was zero invested in the fund. For fiscal 2010 we recorded a gain of $0.6 million, and for fiscal 2009we recorded a loss of $1.2 million.

 

*Income Taxes —Expense/(Benefit).*  Income taxes — expense/(benefit) decreased by$7.7 million to a benefit of $6.0 million for fiscal 2010, compared to anexpense of $1.7 million for fiscal 2009. The $6.0 million for fiscal 2010, includes taxes on foreign profits of$0.5 million, book to income tax return expense adjustments of $2.9 million andother expense of $1.7 million.  Inaddition, a benefit of $3.2 million was recorded due to the settlement ofuncertain tax positions and related interest from prior periods.  For the fiscal 2010, we have a loss beforeincome taxes in our U.S.-based businesses. Therefore, we recorded a tax carry-back benefit of $7.9 million infiscal 2010.  The effective tax rates forboth the fiscal 2010 and 2009 periods reflect utilization of foreign investmenttax credits and the effect of lower tax rates on income of the Company’sforeign operations and a higher percentage of earnings at those foreignoperations.

 

*Net Income/(Loss) Attributableto Methode Electronics, Inc.*  Net income/(loss) attributable to MethodeElectronics, Inc. increased $126.2 million to net income of $13.7 millionfor fiscal 2010, compared to a net loss of $112.5 million for fiscal 2009,primarily due to zero goodwill and other asset write-offs for fiscal 2010versus $94.4 million in write-offs for fiscal 2009.  Income taxes were favorable by $7.7 millionin fiscal 2010 compared to fiscal 2009, related to a tax loss carry-back forour U.S.-based businesses.  In addition,restructuring charges, amortization expense and other expense were lower as wellas lower overall manufacturing costs due to restructuring efforts.  In addition, fiscal 2010 selling andadministrative expenses were higher due to the Delphi supply agreement andpatent litigation.

 

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**Operating Segments**

 

**Automotive Segment Results**

** **

Below is a table summarizing results for theyears ended:

(in millions)

(Not meaningful equals “N/M”)

 
| ** **                               | ** ** | **May 1,** | ** ** | **May 2,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|----------------|------------|----------------|------------|
| ** **                               | ** ** | **2010**        | ** ** | **2009**        | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net sales                                |       | $               | 199.3      |            | $          | 243.6          |       | $              | (44.3      | ) | -18.2 | % |
| Other income                             |       | 3.9             |       | 2.5             |       | 1.4            |       | 56.0           | %          |
|                                     |       | 203.2           |       | 246.1           |       | (42.9          | )          | -17.4          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Cost of products sold                    |       | 166.7           |       | 206.0           |       | (39.3          | )          | -19.1          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Gross margins (including  other income)  |       | 36.5            |       | 40.1            |       | (3.6           | )          | -9.0           | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Restructuring                            |       | 5.6             |       | 19.3            |       | (13.7          | )          | -71.0          | %          |
| Impairment of goodwill and  other assets |       | —          |       | 30.5            |       | (30.5          | )          | N/M            |       |
| Selling and administrative  expenses     |       | 19.6            |       | 14.6            |       | 5.0            |       | 34.2           | %          |
| Interest, net - income                   |       | 0.1             |       | —          |       | 0.1            |       | N/M            |       |
| Other, net -  income/(expense)           |       | (0.2            | )          | 0.3             |       | (0.5           | )          | N/M            |       |
|                                     |       |            |       |            |       |           |       |           |       |
| Income/(loss) before income  taxes       |       | $               | 11.2       |            | $          | (24.0          | )          | $              | 35.2       |   | N/M |   |

 
| ** **                               | ** ** | **May 1,** | ** ** | **May 2,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|------------|------------|------------|------------|
| **Percent of sales:**                    | ** ** | **2010**        | ** ** | **2009**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                |       | 100.0           | %          | 100.0           | %          |       |       |       |       |
| Other income                             |       | 2.0             | %          | 1.0             | %          |       |       |       |       |
| Cost of products sold                    |       | 83.6            | %          | 84.6            | %          |       |       |       |       |
| Gross margins (including  other income)  |       | 18.3            | %          | 16.5            | %          |       |       |       |       |
| Restructuring                            |       | 2.8             | %          | 7.9             | %          |       |       |       |       |
| Impairment of goodwill and  other assets |       | 0.0             | %          | 12.5            | %          |       |       |       |       |
| Selling and administrative  expenses     |       | 9.8             | %          | 6.0             | %          |       |       |       |       |
| Interest income, net                     |       | 0.1             | %          | 0.0             | %          |       |       |       |       |
| Other, net -  income/(expense)           |       | -0.1            | %          | 0.1             | %          |       |       |       |       |
| Income/(loss) before income  taxes       |       | 5.6             | %          | -9.9            | %          |       |       |       |       |

 

*Net Sales*.  Automotive segment net salesdecreased $44.3 million, or 18.2%, to $199.3 million for fiscal 2010 from$243.6 million for fiscal 2009.  Netsales to Delphi Corporation decreased $27.1 million, or 65.8%, to $14.1 millionfor fiscal 2010 compared to $41.2 million for fiscal 2009 due to thecancellation of the supply agreement on September 10, 2009.  The Automotive segment net sales were alsonegatively impacted by planned lower Chrysler sales volumes of $1.0 million forfiscal 2010, compared to $14.8 million for fiscal 2009.  In addition, the decline is attributable tothe softness of the U.S. economic environment. Net sales declined by 60.2% in North America and increased by 19.8% and154.2% in Europe and Asia, respectively for fiscal 2010 compared to fiscal2009.  Translation of foreign operationsnet sales for fiscal 2010 increased reported net sales by $1.0 million, or0.5%, due to currency rate fluctuations.

 

*Other Income*.  Other income increased $1.4million, or 56.0%, to $3.9 million for fiscal 2010 from $2.5 million for fiscal2009.  Other income consisted primarilyof earnings from engineering design fees and royalties.  The increase relates to engineering designfees in our European automotive business.

 

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*Cost of Products Sold*.  Automotive segment cost ofproducts sold decreased $39.3 million, or 19.1%, to $166.7 million for fiscal2010 from $206.0 million for fiscal 2009. The decrease primarily relates to lower sales volumes.  Included in the cost of products sold forfiscal 2010 is $0.7 million of asset write-downs relating to the termination ofthe Delphi supply agreement.  TheAutomotive segment cost of products sold as a percentage of sales were 83.6%for fiscal 2010, compared to 84.6% for fiscal 2009.  The decrease relates to restructuring andconsolidation efforts in previous periods, partially offset by inefficienciescaused by automotive manufacturers extending plant shut-downs during the firstquarter of fiscal 2010.

 

*Gross Margins (including otherincome). *Automotivesegment gross margins (including other income) decreased $3.6 million, or 9.0%,to $36.5 million for fiscal 2010, compared to $40.1 million for fiscal2009.  Gross margins (including otherincome) as a percentage of net sales increased to 18.3% for fiscal 2010 from16.5% for fiscal 2009.  The increaserelates to higher other income for fiscal 2010 as well as restructuring andconsolidation efforts that occurred in prior periods, partially offset byinefficiencies caused by automotive manufacturers extending plant shut-downsduring the first quarter of fiscal 2010.

 

*Restructuring*.   During fiscal 2010, we recordeda restructuring charge of $3.3 million related to our March 2009restructuring initiative, which consisted of $2.7 million for employeeseverance and $0.6 million relating to other costs.  During fiscal 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.  All of the restructuring actions related tothe March 2009 restructuring initiatives are now complete.

 

During fiscal 2010, the Automotive segmentrecorded a restructuring charge of $2.3 million for our January 2008restructuring initiative, which consisted of $0.7 million for employeeseverance, $1.4 million for the impairment and accelerated depreciation formachinery and equipment and $0.2 in other costs.  During fiscal 2009, we recorded arestructuring charge of $12.8 million, which consisted of $4.7 million foremployee severance, $7.4 million for impairment and accelerated depreciation forbuildings, building improvements and machinery and equipment and $0.7 millionfor other costs.  All of therestructuring actions related to the January 2008 restructuringinitiatives are now complete.

 

*Impairment of Goodwill and OtherAssets*.  During thethird quarter of fiscal 2009, in accordance with ASC No. 350, “Intangibles- Goodwill and Other,” we performed goodwill impairment testing and concludedthat goodwill was impaired.  Therefore,during fiscal 2009, we recorded a goodwill impairment charge of $30.5 millionin our Automotive segment related to these assets.

 

*Selling and AdministrativeExpenses*.  Selling and administrative expenses increased$5.0 million, or 34.2%, to $19.6 million for fiscal 2010 compared to $14.6million for fiscal 2009.  Selling andadministrative expenses increased in fiscal 2010 is due to $5.8 million oflegal fees associated with the Delphi supply agreement termination and patentlitigation, partially offset by restructuring and consolidation efforts.  Selling and administrative expenses as apercentage of net sales were 9.8% for the fiscal 2010 and 6.0% for fiscal 2009.

 

*Interest Income, Net*.  Net interest income was $0.1million for fiscal 2010 compared to zero in fiscal 2009.

 

*Other Income/(Expense), Net*.  Other income/(expense), netdecreased $0.5 million to an expense of $0.2 million for fiscal 2010 comparedto income of $0.3 million for fiscal 2009. The decrease is primarily due to the strengthening of the U.S. dollarversus the Euro during fiscal 2010 compared to fiscal 2009.  The functional currencies of these operationsare the British pound, Chinese yuan, Euro and the Mexican peso.  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 IncomeTaxes. *Automotivesegment income/(loss) before income taxes increased $35.2 million to income of$11.2 million for fiscal 2010 compared to a loss of $24.0 million for fiscal2009 due to zero goodwill and intangible asset write-off for fiscal 2010 versus$30.5 million in write-offs for fiscal 2009, lower restructuring expenses,lower costs relating to prior restructuring and consolidation efforts, offsetby lower sales and gross margins (including other income) and legal feesrelating to the termination of

 

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the Delphi supply agreement.

 

**Interconnect Segment Results**

** **

Below is a table summarizing results for theyears ended:

(in millions)

(Not meaningful equals “N/M”)

 
| ** **                               | ** ** | **May 1,** | ** ** | **May 2,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|----------------|------------|----------------|------------|
| ** **                               | ** ** | **2010**        | ** ** | **2009**        | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net sales                                |       | $               | 124.1      |            | $          | 131.0          |       | $              | (6.9       | ) | -5.3 | % |
| Other income                             |       | 0.1             |       | 0.2             |       | (0.1           | )          | -50.0          | %          |
|                                     |       | 124.2           |       | 131.2           |       | (7.0           | )          | -5.3           | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Cost of products sold                    |       | 88.6            |       | 99.7            |       | (11.1          | )          | -11.1          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Gross margins (including  other income)  |       | 35.6            |       | 31.5            |       | 4.1            |       | 13.0           | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Restructuring                            |       | 1.6             |       | 5.5             |       | (3.9           | )          | -70.9          | %          |
| Impairment of goodwill and  other assets |       | —          |       | 56.9            |       | (56.9          | )          | N/M            |       |
| Selling and administrative  expenses     |       | 23.0            |       | 31.0            |       | (8.0           | )          | -25.8          | %          |
| Interest income                          |       | 0.2             |       | 0.5             |       | (0.3           | )          | -60.0          | %          |
| Other, net -  income/(expense)           |       | (0.9            | )          | 0.7             |       | (1.6           | )          | N/M            |       |
|                                     |       |            |       |            |       |           |       |           |       |
| Income/(loss) before income  taxes       |       | $               | 10.3       |            | $          | (60.7          | )          | $              | 71.0       |   | N/M |   |

 
| ** **                               | ** ** | **May 1,** | ** ** | **May 2,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|------------|------------|------------|------------|
| **Percent of sales:**                    | ** ** | **2010**        | ** ** | **2009**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                |       | 100.0           | %          | 100.0           | %          |       |       |       |       |
| Other income                             |       | 0.1             | %          | 0.2             | %          |       |       |       |       |
| Cost of products sold                    |       | 71.4            | %          | 76.1            | %          |       |       |       |       |
| Gross margins (including  other income)  |       | 28.7            | %          | 24.0            | %          |       |       |       |       |
| Restructuring                            |       | 1.3             | %          | 4.2             | %          |       |       |       |       |
| Impairment of goodwill and  other assets |       | 0.0             | %          | 43.4            | %          |       |       |       |       |
| Selling and administrative  expenses     |       | 18.5            | %          | 23.7            | %          |       |       |       |       |
| Interest income                          |       | 0.2             | %          | 0.4             | %          |       |       |       |       |
| Other, net -  income/(expense)           |       | -0.7            | %          | 0.5             | %          |       |       |       |       |
| Income/(loss) before income  taxes       |       | 8.3             | %          | -46.3           | %          |       |       |       |       |

 

*Net Sales*.  Interconnect segment net salesdecreased $6.9 million, or 5.3%, to $124.1 million for fiscal 2010 from $131.0million for fiscal 2009.  Net sales werefavorably impacted by the Hetronic acquisition on September 30, 2008.  European net sales increased 21.7% and NorthAmerican and Asia declined 5.1% and 28.2%, respectively for fiscal 2010 ascompared to fiscal 2009.  The net salesdecline in North America and Asia was primarily due to the restructuring of ourlegacy Interconnect segment businesses, which included exiting certainbusinesses during the fourth quarter of fiscal 2008 and the first quarter offiscal 2009.  There was no impact to netsales for fiscal 2010 compared to fiscal 2009 due to currency ratefluctuations.

 

*Other Income*.  Other income was $0.1 millionfor fiscal 2010, compared to $0.2 million for fiscal 2009.  Other income consisted primarily of earningsfrom engineering design fees and royalties.

 

*Cost of Products Sold*.  Interconnect segment cost ofproducts sold decreased $11.1 million, or 11.1%, to $88.6 million for fiscal2010 compared to $99.7 million for fiscal 2009. Interconnect segment cost of products sold as a percentage of net salesdecreased to 71.4% for fiscal 2010 compared to 76.1% for fiscal 2009.  The decrease in cost of products sold as apercentage of net sales primarily relates to restructuring efforts undertakenin previous

 

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periods, partially offset by lower sales volumesin fiscal 2010 as compared to fiscal 2009.

 

*Gross Margins (including otherincome). *Interconnectsegment gross margins (including other income) increased $4.1 million, or13.0%, to $35.6 million for fiscal 2010 as compared to $31.5 million for fiscal2009.  Gross margins (including otherincome) as a percentage of net sales increased to 28.7% for fiscal 2010 from 24.0%for fiscal 2009.  The increase in grossmargins (including other income) as a percentage of net sales primarily relatesto restructuring efforts undertaken in previous periods, partially offset bylower sales volumes for fiscal 2010 compared to fiscal 2009.

 

*Restructuring*.  During fiscal 2010, theInterconnect segment recorded a restructuring charge of $1.4 million related toour March 2009 restructuring initiative, which consisted of $0.7 millionfor employee severance and $0.7 million for other costs.  During fiscal 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. All of the restructuring actions related to the March 2009restructuring initiatives are now complete.

 

During fiscal 2010, the Interconnect segment recorded arestructuring charge of $0.2 million related to our January 2008restructuring initiative, which consisted of $0.2 million in accelerateddepreciation.  During fiscal 2009, werecorded a restructuring charge of $5.2 million, which consisted of $1.4million for employee severance, $3.4 million for impairment and accelerateddepreciation for buildings, building improvements and machinery and equipment,$0.2 million for inventory write-downs and $0.2 million relating to othercosts.

 

*Impairment of Goodwill and Other Assets*.  During the third quarter of fiscal 2009, inaccordance with ASC No. 350, “Intangibles - Goodwill and Other,” weperformed goodwill impairment testing and concluded that goodwill wasimpaired.  Therefore, during fiscal 2009,we recorded a goodwill impairment charge of $30.8 million in our Interconnectsegment related to these assets.

 

Also during fiscal 2009, in accordance with ASC No. 360,“Property, Plant and Equipment,” it was determined that certain identifiableassets of our Interconnect businesses were impaired.  Therefore, during fiscal 2009, we recorded animpairment charge of $26.1 million for these assets.

 

*Selling and AdministrativeExpenses*.  Selling and administrative expenses decreased$8.0 million, or 25.8%, to $23.0 million for fiscal 2010 compared to $31.0million for fiscal 2009.  Selling andadministrative expenses are lower due to reduced intangible asset amortizationexpenses, partially offset by higher selling and administrative expenses due tothe Hetronic acquisition.  In addition,selling and administrative expenses (not including Hetronic) were lower due tothe restructuring efforts undertaken in the first and second quarters of fiscal2009.  Selling and administrativeexpenses as a percentage of net sales decreased to 18.5% for fiscal 2010 from23.7% for fiscal 2009.

 

*Interest Income, Net*.  Interest income, net decreased$0.3 million, or 60.0%, to $0.2 million for fiscal 2010, compared to $0.5million for fiscal 2009.

 

*Other Income/(Expense), Net*.  Other income/(expense), netdecreased $1.6 million, to an expense of $0.9 million for fiscal 2010, comparedto income of $0.7 million for fiscal 2009 The functional currencies of these operations are the British pound,Czech koruna, Euro and Singapore dollar. Some foreign operations have transactions denominated in currenciesother than their functional currencies, primarily sales in U.S. dollars andEuros, creating exchange rate sensitivities.

 

*Income/(Loss) Before IncomeTaxes. *Interconnectsegment income/(loss) before income taxes increased $71.0 million to income of$10.3 million for fiscal 2010 compared to a loss of $60.7 million for fiscal2009 due to zero goodwill and intangible asset write-off for fiscal 2010 versus$56.9 million in write-offs for fiscal 2009. In addition, income/(loss) before income taxes increased due to lowerintangible asset amortization expenses, lower selling and administrativeexpenses due to prior restructuring efforts, lower restructuring expenses,partially offset by lower sales and gross margins (including other income).

 

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**Power Products Segment Results**

 

Below is a table summarizing results for theyears ended:

(in millions)

(Not meaningful equals “N/M”)

 
| ** **                               | ** ** | **May 1,** | ** ** | **May 2,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|----------------|------------|----------------|------------|
| ** **                               | ** ** | **2010**        | ** ** | **2009**        | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net sales                                |       | $               | 40.4       |            | $          | 42.7           |       | $              | (2.3       | ) | -5.4 | % |
| Other income                             |       | 0.1             |       | —          |       | 0.1            |       | N/M            |       |
|                                     |       | 40.5            |       | 42.7            |       | (2.2           | )          | -5.2           | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Cost of products sold                    |       | 30.0            |       | 37.2            |       | (7.2           | )          | -19.4          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Gross margins (including  other income)  |       | 10.5            |       | 5.5             |       | 5.0            |       | 90.9           | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Restructuring                            |       | 0.6             |       | 0.5             |       | 0.1            |       | 20.0           | %          |
| Impairment of goodwill and  other assets |       | —          |       | 5.4             |       | (5.4           | )          | N/M            |       |
| Selling and administrative  expenses     |       | 6.5             |       | 5.1             |       | 1.4            |       | 27.5           | %          |
| Other - expense                          |       | —          |       | (0.2            | )          | 0.2            |       | N/M            |       |
|                                     |       |            |       |            |       |           |       |           |       |
| Income/(loss) before income  taxes       |       | $               | 3.4        |            | $          | (5.7           | )          | $              | 9.1        |   | N/M |   |

 
| ** **                               | ** ** | **May 1,** | ** ** | **May 2,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|------------|------------|------------|------------|
| **Percent of sales:**                    | ** ** | **2010**        | ** ** | **2009**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                |       | 100.0           | %          | 100.0           | %          |       |       |       |       |
| Cost of products sold                    |       | 74.3            | %          | 87.1            | %          |       |       |       |       |
| Gross margins (including  other income)  |       | 26.0            | %          | 12.9            | %          |       |       |       |       |
| Restructuring                            |       | 1.5             | %          | 1.2             | %          |       |       |       |       |
| Impairment of goodwill and  other assets |       | 0.0             | %          | 12.6            | %          |       |       |       |       |
| Selling and administrative  expenses     |       | 16.1            | %          | 11.9            | %          |       |       |       |       |
| Other - expense                          |       | 0.0             | %          | -0.5            | %          |       |       |       |       |
| Income/(loss) before income  taxes       |       | 8.4             | %          | -13.3           | %          |       |       |       |       |

 

*Net Sales*.  Power Products segment net salesdecreased $2.3 million, or 5.4% to $40.4 million for fiscal 2010 compared to$42.7 million for fiscal 2009.  Net saleshave declined in fiscal 2010 as compared to fiscal 2009 by 9.8% in NorthAmerica and increased by 14.1% in Asia. The overall decline was driven by lower demand for our flexible cablingand heat sink products in the U.S.

 

*Other Income*.  Other income was $0.1 millionfor fiscal 2010, compared to zero for fiscal 2009.  Other income consisted primarily of earningsfrom engineering design fees and royalties.

 

*Cost of Products Sold*.  Power Products segment cost of productssold decreased $7.2 million, or 19.4%, to $30.0 million for fiscal 2010compared to $37.2 million for fiscal 2009. The Power Products segment cost of products sold as a percentage ofsales decreased to 74.3% for fiscal 2010 from 87.1% for fiscal 2009.  The decrease is due to restructuring andconsolidation efforts for our Power Products businesses in the U.S. during thefourth quarter of fiscal 2009 and the first quarter of fiscal 2010.

 

*Gross Margins (including otherincome).* Power Products segment gross margins(including other income) increased $5.0 million, or 90.9%, to $10.5 million forfiscal 2010, compared to $5.5 million for fiscal 2009. Gross margins as apercentage of net sales increased to 26.0% for fiscal 2010 from 12.9% forfiscal 2009.  The increase is due torestructuring and consolidation efforts for our Power Products businesses inthe U.S. during the fourth quarter of fiscal 2009 and the first quarter offiscal 2010.

 

*Restructuring*.   During fiscal 2010, the PowerProducts segment recorded a restructuring charge of $0.6 million related to ourMarch 2009 restructuring initiative, which consisted of $0.1 million foremployee severance

 

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and $0.5 million relating to real estate taxesand other facility related costs.  Duringfiscal 2009, we recorded a restructuring charge of $0.5 million, whichconsisted of  $0.4 million for impairmentand accelerated depreciation for buildings and improvements and machinery andequipment and $0.1 million relating to other costs.  All of the restructuring actions related tothe March 2009 restructuring initiative are now complete.

 

*Impairment of Goodwill and OtherAssets*.  Duringfiscal 2009, in accordance with ASC No. 350, “Intangibles - Goodwill andOther,” we performed goodwill impairment testing and concluded that goodwillwas impaired.  Therefore, during fiscal2009, we recorded a goodwill impairment charge of $5.4 million in our PowerProducts segment related to these assets.

 

*Selling and AdministrativeExpenses*.  Selling and administrative expenses increased$1.4 million, or 27.5%, to $6.5 million for fiscal 2010 compared to $5.1million for fiscal 2009.  Selling andadministrative expenses increased due to higher professional services fees andallocated management resources during fiscal 2010 as compared to fiscal2009.  Selling and administrativeexpenses as a percentage of net sales increased to 16.1% for fiscal 2010 from11.9% for fiscal 2009.

 

*Other Expense.*  Other expense was zero for fiscal2010, compared to $0.2 million for fiscal 2009.

 

*Income/(Loss) Before IncomeTaxes. *PowerProducts income/(loss) before income taxes increased $9.1 million to income of$3.4 million for fiscal 2010, compared to a loss of $5.7 million for fiscal2009 due to zero goodwill and intangible asset write-off for fiscal 2010 versus$5.4 million in write-offs for fiscal 2009. In addition, income/(loss) before income taxes increased due to lowersales volumes, higher restructuring expenses, and higher professional fees,more than offset by lower cost of products sold due to prior restructuring andconsolidation efforts.

 

**Other Segment Results**

** **

Below is a table summarizing results for theyears ended:

(in millions)

(Not meaningful equals “N/M”)

 
| ** **                                    | ** ** | **May 1,** | ** ** | **May 2,** | ** ** | ** **     | ** ** | ** **     | ** ** |
|-----------------------------------------------|------------|-----------------|------------|-----------------|------------|----------------|------------|----------------|------------|
| ** **                                    | ** ** | **2010**        | ** ** | **2009**        | ** ** | **Net Change** | ** ** | **Net Change** | ** ** |
| Net sales                                     |       | $               | 9.3        |            | $          | 8.2            |       | $              | 1.1        |   | 13.4 | % |
|                                          |       |            |       |            |       |           |       |           |       |
| Cost of products sold                         |       | 9.5             |       | 8.9             |       | 0.6            |       | 6.7            | %          |
|                                          |       |            |       |            |       |           |       |           |       |
| Gross margins                                 |       | (0.2            | )          | (0.7            | )          | 0.5            |       | N/M            |       |
|                                          |       |            |       |            |       |           |       |           |       |
| Impairment of goodwill and  intangible assets |       | —          |       | 1.6             |       | (1.6           | )          | N/M            |       |
| Selling and administrative  expenses          |       | 2.1             |       | 2.8             |       | (0.7           | )          | -25.0          | %          |
|                                          |       |            |       |            |       |           |       |           |       |
| Loss before income taxes                      |       | $               | (2.3       | )               | $          | (5.1           | )          | $              | 2.8        |   | N/M |   |

 
| ** **                                    | ** ** | **May 1,** | ** ** | **May 2,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|-----------------|------------|-----------------|------------|------------|------------|------------|------------|
| **Percent of sales:**                         | ** ** | **2010**        | ** ** | **2009**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                     |       | 100.0           | %          | 100.0           | %          |       |       |       |       |
| Cost of products sold                         |       | 102.2           | %          | 108.5           | %          |       |       |       |       |
| Gross margins                                 |       | -2.2            | %          | -8.5            | %          |       |       |       |       |
| Impairment of goodwill and  intangible assets |       | 0.0             | %          | 19.5            | %          |       |       |       |       |
| Selling and administrative  expenses          |       | 22.6            | %          | 34.1            | %          |       |       |       |       |
| Loss before income taxes                      |       | -24.7           | %          | -62.2           | %          |       |       |       |       |

 

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*Net Sales*.  The Other segment net salesincreased $1.1 million, or 13.4%, to $9.3 million for fiscal 2010, compared to$8.2 million for fiscal 2009.  Net salesfrom our torque-sensing business increased 38.0% in fiscal 2010 compared tofiscal 2009.  Net sales from our testingfacilities increased 5.1% for fiscal 2010 compared to fiscal 2009.

 

*Cost of Products Sold*.  Other segment cost of productssold increased $0.6 million, or 6.7%, to $9.5 million for fiscal 2010 comparedto $8.9 million for fiscal 2009.  Theincrease is due to an increase in prototypes in our torque-sensing business infiscal 2010 compared to fiscal 2009. Cost of products sold as a percentage of sales decreased to 102.2% infiscal 2010 compared to 108.5% in fiscal 2009.

 

*Gross Margins. *TheOther segment gross margins increased $0.5 million to a loss of $0.2 millioncompared to a loss of $0.7 million for fiscal 2009.  The increase in net sales was more thanoffset by an increase in prototypes in our torque-sensing business in fiscal2010.

 

*Impairment of Goodwill and OtherAssets*.  Duringfiscal 2009, in accordance with ASC No. 350, “Intangible - Goodwill andOther,” we performed goodwill impairment testing and concluded that goodwillwas impaired.  Therefore, during fiscal2009, we recorded a goodwill impairment charge of $1.6 million in our Othersegment related to these assets.

 

*Selling and AdministrativeExpenses*.  Selling and administrative expenses decreased$0.7 million, or 25.0%, to $2.1 million for fiscal 2010, compared to $2.8million for fiscal 2009.  Selling andadministrative expenses as a percentage of net sales decreased to 22.6% forfiscal 2010 from 34.1% for fiscal 2009.

 

*Loss Before Income Taxes. *TheOther segment loss before income taxes decreased $2.8 million to $2.3 millionfor fiscal 2010, compared to $5.1 million for fiscal 2009 due to zero goodwilland intangible asset write-off for fiscal 2010 versus $1.6 million inwrite-offs for fiscal 2009.  In addition,the loss before income taxes decreased due to higher net sales and grossmargins, as well as lower selling and administrative expenses.

 

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

 

**Consolidated Results**

 

Below is a table summarizing results for theyears ended:

(in millions)

(Not meaningful equals “N/M”)

 
| ** **                               | ** ** | **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           |       | N/M            |       |
| Impairment of goodwill and  other assets |       | 94.4            |       | 1.5             |       | 92.9           |       | N/M            |       |
| 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            |       | N/M            |       |
| Income taxes - expense                   |       | 1.7             |       | 9.7             |       | (8.0           | )          | -82.7          | %          |
|                                     |       |            |       |            |       |           |       |           |       |
| Net income/(loss)                        |       | $               | (112.5     | )               | $          | 39.8           |       | $              | (152.3     | ) | N/M |   |

 
| ** **                               | ** ** | **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 $425.6 million for the fiscal year ended May 2,2009 from $551.1 million for the fiscal year ended May 3, 2008.  The Automotive segment net sales declined$118.5 million or 32.7% to $243.6 million for fiscal 2009 from $362.1 millionfor fiscal 2008.  The decline isattributable to the softening of the global economic environment, especiallythe effect on the automotive industry.  TheAutomotive segment net sales were also negatively impacted by planned lowerChrysler sales volumes of $14.8 million in fiscal 2009, compared to $59.2million in fiscal 2008.  In July 2007,we decided to exit production for certain Chrysler products at the expirationof our manufacturing commitment.  Thetransfer of the Chrysler product was completed during the second quarter offiscal 2009.  Excluding Chrysler, theNorth American Automotive segment net sales declined 18.5% in fiscal 2009, ascompared to fiscal 2008.  TheInterconnect segment net sales

 

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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 $1.3million to $3.2 million for the fiscal year ended May 2, 2009 from $1.9million for the fiscal year ended May 3, 2008.  Other income consisted primarily of earningsfrom engineering design fees and royalties.

 

*Cost of Products Sold*.  Consolidated cost of productssold decreased $72.0 million, or 16.8%, to $356.4 million for the fiscal yearended May 2, 2009 from $428.4 million for the fiscal year ended May 3,2008.  The decrease is due to the lowersales volumes.  Consolidated cost ofproducts sold as a percentage of sales was 83.7% for fiscal 2009 and 77.7% forfiscal 2008.  This increase relates tomanufacturing inefficiencies experienced in the third and fourth quarters offiscal 2009 due to a significant, unexpected drop in sales, in addition to thedrop in the planned sales to Chrysler.  Alarge portion of the drop in sales is due to the North American automotivemanufacturers extending plant shutdowns that occurred during the second half offiscal 2009.

 

*Gross Margins (including otherincome). *Consolidatedgross margins (including other income) decreased $52.2 million, or 41.9%, to$72.4 million for the fiscal year ended May 2, 2009 as compared to $124.6million for the fiscal year ended May 3, 2008.  Gross margins as a percentage of net saleswere 17.0% for fiscal 2009 and 22.6% for fiscal 2008.  Gross margins were impacted negatively due tomanufacturing inefficiencies during the third and fourth quarters of fiscal2009 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, weannounced a restructuring of our U.S.-based automotive operations and thedecision to discontinue producing certain legacy products in the Interconnectsegment.  During the fiscal year ended May 2,2009, we recorded a restructuring charge of $18.0 million, which consistedof  $6.1 million for employee severance,$10.8 million for impairment and accelerated depreciation for buildings andimprovements and machinery and equipment, $0.2 million for inventorywrite-downs and $0.9 million relating to professional fees.  During fiscal 2008, we recorded restructuringcharges of $5.2 million, which consisted of $3.4 million for employeeseverance, $1.3 million for asset write-downs and $0.5 million for professionalfees.

 

On March 12, 2009, we announced several additionalrestructuring actions to further reduce our exposure to the North Americanautomotive industry and to consolidate manufacturing facilities in lower costregions to reduce costs.  During thefiscal year ended May 2, 2009, we recorded a restructuring charge of $7.3million, which consisted of $0.1 million for employee severance, $1.4 millionfor impairment and accelerated depreciation for buildings and improvements andmachinery and equipment, $5.4 million for impairment of customer funded toolingand $0.1 million in forfeited security deposits related to the cancellation ofthe new GM business and $0.3 million relating to professional fees.

 

*Impairment of Goodwill and OtherAssets*.  Wereview our goodwill and other intangible assets for impairment whenever eventsor changes in circumstances indicate that the carrying amount of these assetsmay not be recoverable, and we also review our goodwill annually in accordancewith ASC No. 350, “Intangibles — Goodwill and Other”.  The values assigned to goodwill andintangible assets are normally based on estimates and judgments regardingexpectations for the success and life cycle of products and technologies acquired.  A severe decline in expectations, future cashflows, a change in strategic direction or our market capitalization remainingbelow our net book value for a significant period of time could result insignificant impairment charges, which could have a material adverse effect onour financial condition and results of operations.  Based on events and general businessdeclines, we performed “step one” of the goodwill impairment test in accordancewith ASC No. 350, on the reporting units that had goodwill during fiscal2009.  Based on this test, we determinedthat the fair value was less than the carrying value of the net assets forcertain reporting units.  We completed  “step two” of the goodwill test and concludedthat goodwill was impaired.  During fiscal2009, we recorded a goodwill impairment charge of $25.8 million in ourAutomotive segment, $30.8 million in our Interconnect segment, $5.4 million inour Power Products segment and $1.2 million in our Other segment for a total of$63.2 million related to these assets.

 

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Also, in accordance with ASC No. 360, “Property,Plant and Equipment”, 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 assets of our TouchSensor and Hetronic businesses inthe Interconnect segment, the Automotive Safety Technologies business from ourAutomotive segment and Magna-Lastic Devices, Inc. from our Other segmentwere impaired.  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.

 

In fiscal 2008, we recorded a $1.5 million impairment ofassets relating to a $0.7 million write-down of machinery and equipment as aresult of lower anticipated revenues over the life of the related project and$0.8 million for the impairment of a particular patent (classified as anintangible asset) where the underlying technology was deemed to be commerciallyimpractical.

 

*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, 2008and 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 andadministrative expenses were impacted by higher amortization expense relatingto the Hetronic, Value Engineered Products, Inc. and TouchSensoracquisitions.  In addition, managementpositions were filled for our testing facilities in fiscal 2009, which werevacant in fiscal 2008.  Selling andadministrative expenses as a percentage of net sales increased to 13.5% infiscal 2009 from 11.2% in fiscal 2008.

 

*Amortization of Intangibles*.  Amortization of intangiblesincreased $0.9 million, or 15.0%, to $6.9 million for the fiscal year ended May 2,2009 compared to $6.0 million for the fiscal year ended May 3, 2008.  The increase is due to the amortizationexpenses for the Hetronic acquisition.

 

*Interest Income, Net*.  Net interest income was $1.4million for the fiscal year ended May 2, 2009 and $2.3 million for thefiscal year ended May 3, 2008.  Theaverage cash balance was $81.4 million during fiscal 2009 as compared to $83.0million during fiscal 2008.  The averageinterest rate earned in fiscal 2009 was 2.22% compared to 3.07% in fiscal2008.  The average interest rate earnedincludes both 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 expenseof $3.2 million for the fiscal year ended May 3, 2008.  The decrease is primarily due to thestrengthening of the U.S. dollar versus the Euro and Czech koruna during fiscal2009 as compared to fiscal 2008.  Thefunctional currencies of our international operations are the British pound,Chinese yuan, Czech koruna, Euro, Mexican peso 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.

 

At May 2, 2009, approximately $3.5 million wasinvested 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 theFinancial Condition, Liquidity and Capital Resources section for moreinformation.

 

*Income Taxes.*  The effective income tax rate wasa net provision of 1.5% in fiscal 2009 compared with a provision of 19.7% infiscal 2008.  The income tax rate infiscal 2009 was a benefit due to the impairment of goodwill and intangibleassets, restructuring charges and slowing of business in our U.S.-basedbusinesses, causing a loss before income taxes. Offsetting the benefit recorded in fiscal 2009, a valuation allowanceagainst our deferred

 

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tax assets of $28.0 was recorded in accordance ASC No. 740“Income Taxes”.  This was recorded due tothe uncertainty of the 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.

 

*Net Income/(Loss).*  Net income decreased $152.3million to a loss of $112.5 million for the fiscal year ended May 2, 2009as compared to net income of $39.8 million for the fiscal year ended May 3,2008 due to the impairment of goodwill and intangible assets, lower salesvolumes, the income tax valuation allowance recorded against our deferred taxassets, increased restructuring expenses, offset by favorable other income andlower selling and administrative expenses.

 

**Operating Segments**

 

**Automotive Segment Results**

** **

Below is a table summarizing results for theyears ended:

(in millions)

(Not meaningful equals “N/M”)

 
| ** **                               | ** ** | **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           |       | N/M            |       |
| Impairment of goodwill and  other assets |       | 30.5            |       | 1.5             |       | 29.0           |       | N/M            |       |
| Selling and administrative  expenses     |       | 14.6            |       | 18.0            |       | (3.4           | )          | -18.9          | %          |
| Other, net -  income/(expense)           |       | 0.3             |       | (1.7            | )          | 2.0            |       | N/M            |       |
|                                     |       |            |       |            |       |           |       |           |       |
| Income/(loss) before income  taxes       |       | $               | (24.0      | )               | $          | 55.3           |       | $              | (79.3      | ) | N/M |   |

 
| ** **                               | ** ** | **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 salesdecreased $118.5 million, or 32.7%, to $243.6 million for the fiscal year endedMay 2, 2009 from $362.1 million for the fiscal year ended May 3,2008.  The decline is attributable to thesoftening of the global economic environment, especially the effect on theNorth American automotive industry.  Netsales have declined in fiscal 2009 as compared to fiscal 2008 by 34.2% in NorthAmerica, 30.6% in Europe and 30.7% in Asia. A large portion of the drop in sales is due to the North Americanautomotive

 

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manufacturers extending plant shutdowns thatoccurred during the third and fourth quarters of fiscal 2009.  The Automotive segment net sales were alsonegatively impacted by anticipated lower Chrysler sales volumes of $14.8million 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.

 

*Other Income*.  Other income increased $1.6million, or 177.8%, to $2.5 million for the fiscal year ended May 2, 2009from $0.9 million for the fiscal year ended May 3, 2008.  Other income consisted primarily of earningsfrom engineering design fees and royalties.

 

*Cost of Products Sold*.  Automotive segment cost ofproducts sold decreased $76.1 million to $206.0 million for the fiscal yearended May 2, 2009 from $282.1 million for the fiscal year ended May 3,2008.  The decrease relates to lowersales volumes.  Automotive segment costsof products sold as a percentage of sales increased to 84.6% for fiscal 2009from 77.9% for fiscal 2008.  Thisincrease relates to manufacturing inefficiencies experienced in the third andfourth quarters of fiscal 2009 due to a significant, unexpected drop in sales,in addition to lower planned sales to Chrysler. A large portion of the drop in sales is due to the North American automotivemanufacturers extending plant shutdowns that occurred during the second half offiscal 2009.

 

*Gross Margins (including otherincome). *Automotivesegment gross margins (including other income) decreased $40.8 million, or50.4%, to $40.1 million for the fiscal year ended May 2, 2009 as comparedto $80.9 million for the fiscal year ended May 3, 2008.  Gross margins as a percentage of net salesdecreased to 16.5% for fiscal 2009 from 22.3% for fiscal 2008.  Gross margins were impacted negatively due tomanufacturing inefficiencies during the second half of fiscal 2009 due tosignificantly lower sales volumes.  Inaddition, gross margins were impacted by the planned lower Chrysler salesvolumes in fiscal 2009.

 

*Restructuring*.   On January 24, 2008, we announceda restructuring of our U.S.-based automotive operations.  During fiscal 2009, we recorded arestructuring charge of $12.8 million, which consisted of $4.7 million foremployee severance, $7.4 million for impairment and accelerated depreciationfor buildings, building improvements and machinery and equipment and $0.7million for professional fees.

 

In fiscal 2008, we recorded a restructuringcharge of $4.4 million, $2.7 million relating to employee severance, $1.3million relating to impairment and accelerated depreciation for assets and $0.4million for professional fees relating to the January 2008 restructuring.

 

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. 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.

 

*Impairment of Goodwill and OtherAssets*.  Based onevents and general business declines, we performed “step one” and “step two” ofthe goodwill impairment test in accordance with ASC No. 350, on thereporting units that had goodwill during fiscal 2009.  Based on these tests, we concluded that goodwillwas impaired.  We recorded a goodwillimpairment charge of $25.8 million in our Automotive segment related to theseassets.

 

Also, in accordance with ASC No. 360, “Property,Plant and Equipment”, during the fourth quarter of fiscal 2009, based on our futureestimates of the undiscounted cash flows, it was determined that certainidentifiable assets were impaired.  Werecorded an impairment charge of $4.7 million for these assets.

 

In fiscal 2008, we recorded a $1.5 millionimpairment of assets relating to a $0.7 million write-down of machinery andequipment as a result of lower anticipated revenues over the life of therelated project and $0.8  million for theimpairment of a particular patent (classified as an intangible asset) where theunderlying technology was deemed to be commercially impractical.

 

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*Selling and AdministrativeExpenses*.  Selling and administrative expenses decreased$3.4 million, or 18.9%, to $14.6 million for the fiscal year ended May 2,2009 compared to $18.0 million for the fiscal year ended May 3, 2008.  The decrease is due to lower commissionexpense as a result of lower sales during fiscal 2009.  Selling and administrative expenses as apercentage of net sales increased to 6.0% in fiscal 2009 from 5.0% in fiscal2008.

 

*Other, Net*.  Other, net was income of $0.3million for the fiscal year ended May 2, 2009, compared to an expense of$1.7 million for the fiscal year ended May 3, 2008.  The decrease is primarily due to thestrengthening of the U.S. dollar versus the Euro during fiscal 2009 as comparedto fiscal 2008.  The functionalcurrencies of our international operations are the British pound, Chinese yuan,Euro and Mexican peso.  Some foreignoperations have transactions denominated in currencies other than theirfunctional currencies, primarily sales in U.S. dollars and Euros, creatingexchange rate sensitivities.

 

*Income/(Loss) Before IncomeTaxes. *Automotivesegment income/(loss) before income taxes decreased $79.3 million to a loss of$24.0 million for the fiscal year ended May 2, 2009 compared to income of$55.3 million for the fiscal year ended May 3, 2008.  The decrease occurred due to goodwill andintangible asset write-offs, manufacturing inefficiencies due to significantlylower sales volumes during the third and fourth quarters of fiscal 2009,increased restructuring expenses, partially offset by lower selling andadministrative expenses.

 

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**Interconnect Segment Results**

 

Below is a table summarizing results for theyears ended:

(in millions)

(Not meaningful equals “N/M”)

 
| ** **                               | ** ** | **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            |       | N/M            |       |
| Impairment of goodwill and  other assets |       | 56.9            |       | —          |       | 56.9           |       | N/M            |       |
| 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            |       | N/M            |       |
|                                     |       |            |       |            |       |           |       |           |       |
| Income/(loss) before income  taxes       |       | $               | (60.7      | )               | $          | 4.6            |       | $              | (65.3      | ) | N/M |   |

 
| ** **                               | ** ** | **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 salesdecreased $5.3 million, or 3.9%, to $131.0 million for the fiscal year ended May 2,2009 from $136.3 million for the fiscal year ended May 3, 2008.  Net sales were favorably impacted by theHetronic acquisition on September 30, 2008.  Excluding Hetronic, North American net salesdecreased 14.7%, Europe decreased 22.8% and Asia decreased 7.8% in fiscal 2009as compared to fiscal 2008.  The netsales decline was primarily due to the general economic slowdown.  Translation of net sales from our foreignoperations in the fiscal year ended May 2, 2009 increased reported netsales by $0.3 million, or 0.2%, due to currency rate fluctuations.

 

*Other Income*.  Other income was $0.2 millionfor the fiscal year ended May 2, 2009 and $0.3 million for the fiscal yearended May 3, 2008.  Other incomeconsisted primarily of earnings from engineering design fees and royalties.

 

*Cost of Products Sold*.  Interconnect segment cost ofproducts sold decreased $5.0 million to $99.7 million for the fiscal year endedMay 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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*Gross Margins (including otherincome) *Interconnectsegment gross margins (including other income) decreased $0.4 million, or 1.3%,to $31.5 million for the fiscal year ended May 2, 2009 as compared to$31.9 million for the fiscal year ended May 3, 2008.  Gross margins as a percentage of net salesincreased to 24.0% in fiscal 2009 from 23.4% in fiscal 2008.  The increase in gross margins as a percentageof net sales relates primarily to product mix related to the Hetronicacquisition and the impact of the Interconnect restructuring.

 

*Restructuring*.  On January 24, 2008, weannounced our decision to discontinue producing certain legacy products in theInterconnect segment.  During fiscal2009, we recorded a restructuring charge of $5.2 million, which consisted of$1.4 million for employee severance, $3.4 million for impairment andaccelerated depreciation for buildings, building improvements and machinery andequipment, $0.2 million for inventory write-downs and $0.2 million relating toprofessional fees.  We expect theInterconnect restructuring to be complete in fiscal 2010.

 

In fiscal 2008, we recorded a restructuringcharge of $0.7 million, $0.6 million for employee severance and $0.1 millionfor professional fees relating to the January 2008 restructuring.

 

On March 12, 2009, we announced severaladditional restructuring actions to consolidate manufacturing facilities inlower 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.

 

*Impairment of Goodwill and OtherAssets*.  Based onevents and general business declines, we performed “step one” and “step two” ofthe goodwill impairment test in accordance with ASC No. 350, on thereporting 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

 

Also, in accordance with ASC No. 360, duringthe fourth quarter of fiscal 2009, based on our future estimates of theundiscounted cash flows, it was determined that certain identifiable assetswere impaired.  We recorded an impairmentcharge of $26.1 million for these assets.

 

*Selling and AdministrativeExpenses*.  Selling and administrative expenses increased$5.1 million, or 19.7%, to $31.0 million for the fiscal year ended May 2,2009 compared to $25.9 million for the fiscal year ended May 3, 2008.  Selling and administrative expenses arehigher due to the Hetronic acquisition, higher amortization expense, slightlyoffset by lower commission expense due to lower sales in fiscal 2009 ascompared to fiscal 2008.  Selling andadministrative expenses as a percentage of net sales increased to 23.7% infiscal 2009 from 19.0% in fiscal 2008.

 

*Interest Income, Net*.  Net interest income was $0.5million for the fiscal year ended May 2, 2009, compared to $0.4 millionfor the fiscal year ended May 3, 2008.

 

*Other, Net*.  Other, net was income of $0.7million for the fiscal year ended May 2, 2009, compared to an expense of$1.2 million for the fiscal year ended May 3, 2008.  The increase is primarily due to thestrengthening of the U.S. dollar versus the Euro and Czech koruna during fiscal2009 as compared to fiscal 2008.  Thefunctional currencies of these operations are the Chinese yuan, Czech koruna,Euro and Singapore dollar.  Some foreignoperations have transactions denominated in currencies other than theirfunctional currencies, primarily sales in U.S. dollars and Euros, creatingexchange rate sensitivities.

 

*Income/(Loss) Before IncomeTaxes. *Interconnectsegment income/(loss) before income taxes decreased $65.3 million to a loss of$60.7 million for the fiscal year ended May 2, 2009 compared to income of$4.6 million for the fiscal year ended May 3, 2008 due to the goodwill andintangible asset write-off, higher selling and administrative expenses,increased amortization expense and increased restructuring expenses.

 

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**Power Products Segment Results**

 

Below is a table summarizing results for theyears ended:

(in millions)

(Not meaningful equals “N/M”)

 
| ** **                               | ** ** | **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            |       | N/M            |       |
| Impairment of goodwill and  other assets |       | 5.4             |       | —          |       | 5.4            |       | N/M            |       |
| Selling and administrative  expenses     |       | 5.1             |       | 4.1             |       | 1.0            |       | 25.4           | %          |
| Other - expense                          |       | (0.2            | )          | —          |       | (0.2           | )          | N/M            |       |
|                                     |       |            |       |            |       |           |       |           |       |
| Income/(loss) before income  taxes       |       | $               | (5.7       | )               | $          | 8.5            |       | $              | (14.2      | ) | N/M |   |

 
| ** **                               | ** ** | **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 salesdecreased $3.1 million, or 6.8%, to $42.7 million for the fiscal year ended May 2,2009 from $45.8 million for the fiscal year ended May 3, 2008.  Net sales were favorably impacted by theValue Engineering Products (“VEP”) acquisition on August 31, 2007.  Excluding VEP, Power Products net salesdecreased 10.9% in fiscal 2009 as compared to fiscal 2008.

 

*Cost of Products Sold*.  Power Products segment cost ofproducts sold increased $4.0 million, or 12.0%, to $37.2 million for the fiscalyear ended May 2, 2009 compared to $33.2 million for the fiscal year endedMay 3, 2008.  The Power Productssegment cost of products sold as a percentage of sales increased to 87.1% forfiscal 2009 from 72.5% for fiscal 2008.  The increase is partially due to a product that reached end-of-life atthe end of fiscal 2008 and had a lower cost as a percentage of sales than theremaining sales during fiscal 2009.  Inaddition, we experienced an unfavorable product mix as well as increasedshipping and distribution costs.

 

*Gross Margins.* Power Products segment grossmargins decreased $7.1 million, or 56.0%, to $5.5 million for the fiscal yearended 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 fiscal2009 from 27.5% in fiscal 2008.  Thedecrease is due to a product that reached end-of-life at the end of fiscal 2008and had higher gross margins than the remaining sales and gross margins duringfiscal 2009.  We also experienced anunfavorable product mix, and increases in labor costs, as well as, shipping anddistribution costs.

 

*Restructuring*.  On March 12, 2009, weannounced several additional restructuring actions to consolidate manufacturingfacilities in lower cost regions to reduce costs.  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

 

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services.

 

*Impairment of Goodwill andIntangible Assets*.  Based on events and general businessdeclines, we performed “step one” and “step two” of the goodwill impairmenttest in accordance with ASC No. 350, on the reporting units that hadgoodwill during fiscal 2009.  Based onthese tests, we concluded that goodwill was impaired.  We recorded a goodwill impairment charge of$5.4 million in our Power Products segment related to these assets.

 

*Selling and AdministrativeExpenses*.  Selling and administrative expenses increased$1.0 million, or 25.4%, to $5.1 million for the fiscal year ended May 2,2009 compared to $4.1 million for the fiscal year ended May 3, 2008.  Selling and administrative expenses increaseddue to the Tribotek acquisition on March 30, 2008, partially offset bylower commission and bonus expenses in fiscal 2009.  Selling and administrative expenses as a percentageof net sales increased to 12.0% in the fiscal 2009 from 9.0% in fiscal 2008.

 

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

 

*Income/(Loss) Before IncomeTaxes. *PowerProducts segment income/(loss) before income taxes decreased by $14.2 millionto a loss of $5.7 million for the fiscal year ended May 2, 2009 from aprofit of $8.5 million for the fiscal year ended May 3, 2008 due to impairmentof goodwill, decreased sales of products which became end-of-life at the end offiscal year 2008, restructuring costs, higher material, labor and shippingcosts, expenses related to Tribotek, partially offset by lower commission andbonus expenses.

 

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**Other Segment Results**

 

Below is a table summarizing results for theyears ended:

(in millions)

(Not meaningful equals “N/M”)

 
| ** **                                    | ** ** | **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           | )          | N/M            |       |
|                                          |       |            |       |            |       |           |       |           |       |
| Impairment of goodwill and  intangible assets |       | 1.6             |       | —          |       | 1.6            |       | N/M            |       |
| 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           | %          |       |       |       |       |

 

*Net Sales*.  The Other segment net salesincreased $1.3 million to $8.2 million for the fiscal year ended May 2,2009 as compared to $6.9 million for the fiscal year ended May 3,2008.  Net sales from our torque-sensingbusiness increased 60.6% and net sales from our testing facilities increased11.2% in fiscal 2009 as compared to fiscal 2008.

 

*Cost of Products Sold*.  Other segment cost of productssold increased $2.2 million to $8.9 million for the fiscal year ended May 2,2009 compared 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.

 

*Gross Margins . *TheOther segment gross margins was a loss of $0.7 million for fiscal 2009,compared to income $0.2 million for fiscal 2008.  Gross margins declined in fiscal 2009 due tothe increase in additional support staff in our U.S. testing facilities and thenew testing facility in Shanghai, China.

 

*Impairment of Goodwill andIntangible Assets*.  Based on events and general businessdeclines, we performed “step one” and “step two” of the goodwill impairmenttest in accordance with ASC No. 350, on the reporting units that hadgoodwill during fiscal 2009.  Based onthese tests, we concluded that goodwill was impaired.  We recorded a goodwill impairment charge of$1.2 million in our Other segment related to these assets.

 

Also, in accordance with ASC No. 360,  during the fourth quarter of fiscal 2009,based on our future estimates of the undiscounted cash flows, it was determinedthat certain identifiable assets were impaired. We recorded an impairment charge of $0.4 million for these assets.

 

*Selling and AdministrativeExpenses*.  Selling and administrative expenses increased$0.8 million to $2.8 million for the fiscal year ended May 2, 2009compared to $2.0 million for the fiscal year ended May 3, 2008.   The increase is primarily due to the newtesting 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.

 

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*Loss Before Income Taxes. *TheOther segment loss before income taxes was $5.1 million for the fiscal yearended May 2, 2009 compared to $1.8 million for the fiscal year ended May 3,2008.   The increase in the loss beforeincome taxes is due the impairment of goodwill and intangible assets,additional support staff for our North American testing facilities as well ascosts associated with the new testing facility in Shanghai, China.

 

**Financial Condition, Liquidity and Capital Resources**

 

We have historically financed our cash requirementsthrough cash flows from operations.  Ourfuture cash flow will depend on a number of factors, including our future netsales and the timing and rate of expansion of our business.  We believe our current cash balances togetherwith the cash flow expected to be generated from future domestic and foreignoperations will be sufficient to support current operations.

 

We have an agreement with our primary bank for arevolving credit facility to provide up to $75.0 million ready financing forgeneral corporate purposes, including acquisition opportunities that may becomeavailable.  The bank credit agreement,which expires on January 31, 2011, requires maintenance of certainfinancial ratios and a minimum net worth level. At May 1, 2010, we were in compliance with these covenants and hadno borrowings against this credit facility.

 

During fiscal 2009 and thefirst half of fiscal 2010, we were invested in an enhanced cash fund sold as analternative to traditional money-market funds. We have historically invested a portion of our on hand cash balances inthis fund.  These investments are subjectto credit, liquidity, market and interest rate risk. In December 2007, thefund was overwhelmed with withdrawal requests from investors and was closedwith a restriction placed upon the cash redemption ability of its holders. In September 2009,we received the remaining principal in the fund. The balance in the fund as of May 1,2010 was zero. For fiscal 2010, we recordeda gain of $0.6 million and for fiscal 2009, we recorded a loss of $1.2 million.

 

Operating cash flow is summarized below (in millions):

 
| ** **                                   | ** ** | **Fiscal Year Ended** | ** ** |
|----------------------------------------------|------------|-----------------------|------------|
| ** **                                   | ** ** | **May 1,**       | ** ** | **May 2,** | ** ** | **May 3,** | ** ** |
| ** **                                   | ** ** | **2010**              | ** ** | **2009** | ** ** | **2008** | ** ** |
| Net income/(loss)                            |       | $                     | 13.8       |   | $ | (112.2 | ) | $ | 40.1 |   |
| Depreciation and  amortization               |       | 19.4                  |       | 37.0 |   | 28.2 |   |
| Changes in operating assets  and liabilities |       | (11.5                 | )          | 6.3 |   | 6.8 |   |
| Other non-cash items                         |       | 5.7                   |       | 112.1 |   | 1.9 |   |
| Cash flow from operations                    |       | $                     | 27.4       |   | $ | 43.2 |   | $ | 77.0 |   |

 

**OperatingActivities — Fiscal 2010 Compared to Fiscal 2009**

 

Net cash provided by operating activities decreased$15.8 million to $27.4 million for fiscal 2010 compared to $43.2 million forfiscal 2009. While our net income increased $126.0 million to net income of$13.8 million for fiscal 2010, compared to a loss of $112.2 million for fiscal2009, $106.4 million of the change related to non-cash charges ($5.7 millionfor fiscal 2010 compared to $112.1 million for fiscal 2009). The depreciationand amortization add back to cash flow from operations decreased $17.6 millionto $19.4 million for fiscal 2010, compared to $37.0 million in fiscal 2009. Thedecrease for both depreciation and other non-cash items in fiscal 2010 comparedto fiscal 2009 is primarily due to goodwill and fixed assets that were writtenoff in fiscal 2009. The changes in operating assets and liabilities decreasedby $17.8 million, to cash used of $11.5 million in fiscal 2010, compared to$6.3 million of cash generated in fiscal 2009 primarily driven by higheraccounts receivable balances at the end of fiscal 2010 due to higher sales inthe fourth quarter of fiscal 2010, compared to the fourth quarter of fiscal2009.

 

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**OperatingActivities — Fiscal 2009 Compared to Fiscal 2008**

 

Net cash provided by operating activities decreased$33.8 million to $43.2 million for fiscal 2009 compared to $77.0 million forfiscal 2008.  The decrease was due to ournet income/(loss) decreasing $152.3 million to net loss of $112.2 million forfiscal 2009, compared to net income of $40.1 million for fiscal 2008, which ispartially offset by non-cash charge add-backs difference of $119.0 million forgoodwill and intangible asset write-offs as well as depreciation andamortization expenses in fiscal 2009 compared to fiscal 2008.  The changes in operating assets andliabilities decreased by $0.5 million, to cash generated of $6.3 million infiscal 2009, compared to $6.8 million of cash generated in fiscal 2008.

 

**InvestingActivities — Fiscal 2010 Compared to Fiscal 2009**

 

Net cash used in investing activities decreased $68.3million to $7.8 million for fiscal 2010, compared to $76.1 million for fiscal2009.  Purchases of plant and equipmentdecreased $7.7 million, to $9.4 million for fiscal 2010, compared to $17.1million for fiscal 2009.  In fiscal 2010,we received $2.4 million from life insurance polices in connection with anemployee deferred compensation plan.  In September 2008,we acquired certain assets of Hetronic LLC (Hetronic) for $53.6 million incash.  We also incurred $2.4 million intransaction costs related to the purchase. Also in fiscal 2009, we made a contingent payment of $0.8 millionrelated to the VEP acquisition.  Inaddition, we made a contingent payment of $0.3 million and $0.6 million infiscal 2010 and 2009, respectively for the Cableco Technologies acquisition.

 

**InvestingActivities — Fiscal 2009 Compared to Fiscal 2008**

 

Netcash used in investing activities was $76.1 million for fiscal 2009 and $29.0million for fiscal 2008.  Purchases ofproperty, plant and equipment was $17.1 million and $20.0 million for fiscal2009 and 2008, respectively.  In fiscal 2009, we purchased Hetronic and madethe contingent payments related to the VEP and Cableco acquisitions describedabove.  During fiscal 2008, wealso paid a $1.0 million dividend for our automotive joint venture.

 

**FinancingActivities — Fiscal 2010 Compared to Fiscal 2009**

 

Net cash used in financing activities was $10.3million for fiscal 2010, compared to $15.1 million for fiscal 2009.  We paid cash dividends of $10.4 million infiscal 2010, compared to $9.8 million in fiscal 2009.  Our board of directors approved a stockrepurchase plan in September 2008 to purchase up to 3,000,000 shares.  The plan expired May 1, 2010.    In fiscal 2009, we purchased 669,480 sharesfor $5.3 million.  There were no sharespurchased in fiscal 2010.

 

**FinancingActivities — Fiscal 2009 Compared to Fiscal 2008**

 

Net cash used in financing activities was $15.1million in fiscal 2009 and  $7.1 millionin fiscal 2008.  We paid cash dividendsof $9.8 million and  $7.6 million infiscal 2009 and 2008, respectively.  Werepurchased 53,012 and  95,420 shares infiscal 2009 and  2008, respectively, ofour common stock from the former owners of Cableco in accordance with the termsof the earn-out provision of the Cableco purchase agreement.  We repurchased 669,480 shares of common stockfor $5.3 million in fiscal 2009.

 

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**ContractualObligations**

 

The following table summarizes contractual obligationsand commitments, as of May 1, 2010 (in thousands):

 
| ** **            | ** ** | **Payments Due By Period** | ** ** |
|-----------------------|------------|----------------------------|------------|
| ** **            | ** ** | ** **                 | ** ** | **Less than** | ** ** | ** ** | ** ** | ** ** | ** ** | **More than** | ** ** |
| ** **            | ** ** | **Total**                  | ** ** | **1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **5 years** | ** ** |
| Operating leases      |       | $                          | 4,906      |   | $ | 2,604 |   | $ | 1,963 |   | $ | 271 |   | $ | 68 |   |
| Purchase obligations  |       | 46,251                     |       | 46,251 |   | — |   | — |   | — |   |
| Deferred compensation |       | 4,356                      |       | 379 |   | 876 |   | 328 |   | 2,773 |   |
| Total                 |       | $                          | 55,513     |   | $ | 49,234 |   | $ | 2,839 |   | $ | 599 |   | $ | 2,841 |   |

 

**Off-BalanceSheet Arrangements**

 

Wedo not have any off-balance sheet arrangements, other than the operating leasesand purchase obligations noted in the preceding table.

 

**Critical Accounting Policies and Estimates**

 

Management’sdiscussion and analysis of financial condition and results of operations isbased upon our consolidated financial statements, which have been prepared inaccordance with accounting principles generally accepted in the United States.The preparation of these financial statements requires us to make estimates andjudgments that affect the reported amounts of assets, liabilities, revenues andexpenses and related disclosure of contingent assets and liabilities. Actualresults may differ from these estimates under different assumptions orconditions; however, we do not believe that it is reasonably likely thatchanges will occur.  We believe thefollowing critical accounting policies affect our more significant judgmentsand estimates used in the preparation of our consolidated financial statements.

 

*Revenue Recognition.*  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.  Revenue from cabling infrastructure systemsinstallations is recognized when the installation is completed, tested andaccepted by the customer.

 

*Allowance for 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.

 

In addition, our revenues and accounts receivable areconcentrated in a relatively small number of customers.  A significant change in the liquidity orfinancial position of any one of these customers or a deterioration in theeconomic environment or automotive industry, in general, could have a materialadverse impact on the collectability of our accounts receivable and our futureoperating results, including a reduction in future revenues and additionalallowances for doubtful accounts.

 

*Allowance for Excess and ObsoleteInventory.*  Inventories are valued at the lower-of-cost-or-marketvalue and have been reduced by allowances for excess and obsolete inventories.The estimated allowances are based on our review of inventories on handcompared to estimated future usage and sales, using assumptions about futureproduct life cycles, product demand and market conditions.  If actual product life cycles, product demandand market conditions are less favorable than those projected by us, additionalinventory write-downs may be required.

 

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*Intangible Assets.*  We have significant intangibleassets related to goodwill and other acquired intangibles.  The determination of related estimated usefullives and whether these assets 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 ASC No. 350, “*Goodwill and OtherAssets,*” on May 1, 2002, we ceased amortizing goodwill.  In lieu of amortization, we are required toperform an annual impairment review (see Note 4 to theConsolidated Financial Statements).

 

*Income Taxes.*  As part of the process ofpreparing our Consolidated Financial Statements, we are required to estimateincome taxes in each of the jurisdictions in which we operate. The processinvolves estimating actual current tax expense along with assessing temporarydifferences resulting from differing treatment of items for book and taxpurposes. These temporary differences result in deferred tax assets andliabilities, which are included in our consolidated balance sheet. We record avaluation allowance to reduce our deferred tax assets to the amount that ismore likely than not to be realized. We have considered future taxable incomeand ongoing tax planning strategies in assessing the need for the valuationallowance.  The tax laws of Malta providefor investment tax 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 variousinvestigations, claims, legal and administrative proceedings covering a widerange of matters that arise in the ordinary course of business activities.  A significant amount of judgment and use ofestimates is required to quantify our ultimate exposure in these matters. Forthose matters that we can estimate a range of loss, we have establishedreserves at levels within that range to provide for the most likely scenariobased upon available information.  Thevaluation of reserves for contingencies is reviewed on a quarterly basis toassure that the Company is properly reserved. Reserve balances are adjusted toaccount for changes in circumstances for ongoing issues and the establishmentof additional reserves for emerging issues. While we believe that the currentlevel of reserves is adequate, changes in the future could impact thesedeterminations.

 

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

 

Certainof our foreign operations enter into transactions in currencies other thantheir functional currency, 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 $4.7 million and $2.8 million at May 1, 2010 and May 2,2009, 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, Indian rupee, Mexican pesoand Singapore dollar.  A 10% change inforeign currency exchange rates from balance sheet date levels could impact ournet foreign investments by $12.8 million at May 1, 2010 and $10.8 millionat May 2, 2009.

 

**Item 8.  Financial Statements and Supplementary Data**

 

See Item 15 for an Index to Financial Statements andFinancial Statement Schedule.  SuchFinancial Statements and Schedule are incorporated herein by reference.

 

**Item 9A. Controls and Procedures**

 

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

 

Asof the end of the period covered by this annual report on Form 10-K, weperformed an evaluation under the supervision and with the participation of ourmanagement, including our Chief Executive Officer and our Chief FinancialOfficer, of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)). Our disclosure controls and procedures are designed to ensure that theinformation required to be disclosed by us in the reports that we file orsubmit under the Exchange Act is recorded, processed, summarized and reportedwithin the time periods specified in the Securities and

 

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ExchangeCommission’s applicable rules and forms.  As a result of thisevaluation, our Chief Executive Officer and Chief Financial Officer haveconcluded that, as of the end of the period covered by this report, ourdisclosure controls and procedures were effective.

 

***Management’s Report on Internal Control over Financial Reporting***

 

Ourmanagement is responsible for establishing and maintaining adequate internalcontrol over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and15d-15(f). Under the supervision and with the participation of our management,including our Chief Executive Officer and Chief Financial Officer, we conductedan evaluation of the effectiveness of our internal control over financialreporting as of May 1, 2010 based on the guidelines established in *Internal Control — Integrated Framework* issued by theCommittee of Sponsoring Organizations 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.

 

Basedon the results of our evaluation, our management concluded that our internalcontrol over financial reporting was effective as of May 1, 2010.Management reviewed the results of its assessment with the AuditCommittee.  Our independent registeredpublic accounting firm, Ernst and Young, LLP, has issued an attestation reporton our internal control over financial reporting.  This report is included on page F-2 ofthis report on Form 10-K.

 

***Changes in Internal Control over Financial Reporting***

 

Therewere no changes in our internal control over financial reporting identified inconnection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15or 15d-15 that was conducted during the last fiscal quarter that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

 

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

 

Ourmanagement, including our Chief Executive Officer and Chief Financial Officer,do not expect that our disclosure controls or our internal control overfinancial reporting will prevent all errors and all fraud. A control system, nomatter how well conceived and operated, can provide only reasonable, notabsolute, assurance that the objectives of the control system are met. Further,the design of a control system must reflect the fact that there are resourceconstraints, and the benefits of controls must be considered relative to theircosts. 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 or proceduresmay deteriorate. Because of the inherent limitations in a cost-effectivecontrol system, misstatements due to error or fraud may occur and not bedetected.

 

**PART III**

 

**Item 10.  Directors, Executive Officers and CorporateGovernance**

 

Information regarding our directors will be includedunder the caption “Proposal One: Election of Directors” and “Corporate Governance” in the definitiveproxy statement for our 2010 annual meeting to be held on September 16,2010, and is incorporated herein by reference. Information regarding our executive officers is included under aseparate caption in Part I hereof, and is incorporated herein byreference, in accordance with General Instruction G(3) to Form 10-Kand Instruction 3 to Item 401(b) of Regulation S-K.  Information regarding

 

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compliance with Section 16(a) of the ExchangeAct is included under the caption “Section 16(a) Beneficial OwnershipReporting Compliance” and “Audit Committee Matters” in the definitive proxystatement for our 2010 annual meeting and is incorporated herein by reference.

 

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.

 

**Item 11.  Executive Compensation**

 

Information regarding the above will be included underthe caption “ Compensation Discussion and Analysis,” “Compensation CommitteeReport,” “Executive Compensation Tables” and “Director Compensation” in thedefinitive proxy statement for our 2010 annual meeting to be held on September 16,2010, and is incorporated herein by reference.

 

**Item 12.  SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters**

 

Information regarding the above will be included underthe caption “Security Ownership” and “Executive Compensation Discussion andAnalysis” and in subsequent compensation tables in the definitive proxystatement for our 2010 annual meeting to be held on September 16, 2010,and is incorporated herein by reference.

 

**Item 13.  Certain Relationships and RelatedTransactions, and Director Independence**

 

Information regarding the above will be included underthe caption “Corporate Governance” in the definitive proxy statement for our2010 annual meeting to be held on September 16, 2010, and is incorporatedherein by reference.

 

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

 

Information regarding the above will be included underthe caption “Audit Committee Matters” in the definitive proxy statement for our2010 annual meeting to be held on September 16, 2010, and is incorporatedherein by reference.

 

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**PART IV**

 

**Item 15.  Exhibits and Financial Statement Schedule**

 

**(a) **The documents included in the following indexes are filed as part of thisannual report on Form 10-K.

 

**(1) (2) **The response to this portion of Item 15 isincluded in this report under the caption “Financial Statements” and “Financial Statement Schedule” below, whichis incorporated herein by reference.

 

**(3)    **See “Indexto Exhibits” immediately following the financial statement schedule.

 

**(b)****               **See “Index to Exhibits”immediately following the financial statement schedule.

 

**(c)****               **See “Financial Statements” and “FinancialStatement Schedule.”

 

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**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15 (d) ofthe Securities Exchange Act of 1934, the Registrant has duly caused this reportto be signed on its behalf by 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 1,2010

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the Registrant and in the capacities and on the datesindicated.

 
| **Signature**                 | ** ** | **Title**                                              | ** ** | **Date**     |
|-------------------------------|------------|--------------------------------------------------------|------------|--------------|
|                          |       |                                                   |       |         |
| /s / WARREN L. BATTS          |       | Chairman of the Board                                  |       | July 1, 2010 |
| Warren L. Batts               |       |                                                   |       |         |
|                          |       |                                                   |       |         |
| /s/ DONALD W. DUDA            |       | Chief Executive Officer, President & Director |       | July 1, 2010 |
| Donald W. Duda                |       | (Principal Executive Officer)                          |       |         |
|                          |       |                                                   |       |         |
| /s / DOUGLAS A. KOMAN HORNUNG |       | Chief Financial Officer                                |       | July 1, 2010 |
| Douglas A. Koman              |       |                                                   |       |         |
|                          |       |                                                   |       |         |
| /s / WALTER J. ASPATORE       |       | Director                                               |       | July 1, 2010 |
| Walter J. Aspatore            |       |                                                   |       |         |
|                          |       |                                                   |       |         |
| /s/ J. EDWARD COLGATE         |       | Director                                               |       | July 1, 2010 |
| J. Edward Colgate             |       |                                                   |       |         |
|                          |       |                                                   |       |         |
| /s/ DARREN M. DAWSON          |       | Director                                               |       | July 1, 2010 |
| Darren M. Dawson              |       |                                                   |       |         |
|                          |       |                                                   |       |         |
| /s / ISABELLE C. GOOSSEN      |       | Director                                               |       | July 1, 2010 |
| Isabelle C. Goossen           |       |                                                   |       |         |
|                          |       |                                                   |       |         |
| /s / CHRISTOPHER J. HORNUNG   |       | Director                                               |       | July 1, 2010 |
| Christopher J. Hornung        |       |                                                   |       |         |
|                          |       |                                                   |       |         |
| /s / LAWRENCE B. SKATOFF      |       | Director                                               |       | July 1, 2010 |
| Lawrence B. Skatoff           |       |                                                   |       |         |
|                          |       |                                                   |       |         |
| /s / PAUL G. SHELTON          |       | Director                                               |       | July 1, 2010 |
| Paul G. Shelton               |       |                                                   |       |         |

 

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**METHODE ELECTRONICS, INC. AND SUBSIDIARIES**

 

**FORM 10-K**

 

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

 
| **(1)** | **Financial Statements**                                                                                                         |   |
|---------|----------------------------------------------------------------------------------------------------------------------------------|--------|
|    |                                                                                                                             |   |
|    | The following consolidated financial statements of  Methode Electronics, Inc. and subsidiaries 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 1, 2010 and  May 2, 2009                                                        | F3     |
|    |                                                                                                                             |   |
|    | Consolidated Statements of Operations — Years Ended  May 1, 2010, May 2, 2009 and May 3, 2008                | F4     |
|    |                                                                                                                             |   |
|    | Consolidated Statements of Shareholders’ Equity —  Years Ended May 1, 2010, May 2, 2009 and May 3, 2008 | F5     |
|    |                                                                                                                             |   |
|    | Consolidated Statements of Cash Flows — Years Ended  May 1, 2010, May 2, 2009 and May 3, 2008                | F6     |
|    |                                                                                                                             |   |
|    | Notes to Consolidated Financial Statements                                                                                       | F7     |
|    |                                                                                                                             |   |
| **(2)** | **Financial Statement Schedule**                                                                                                 |   |
|    |                                                                                                                             |   |
|    | Schedule II — Valuation and Qualifying Accounts                                                                             | F35    |

 

All other schedules for which provision is made in theapplicable accounting regulation of the Securities and Exchange Commission arenot required under the related instructions or are immaterial and, therefore,have been omitted.

 

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

Board of Directors and Shareholders

Methode Electronics, Inc.

 

We have audited the accompanying consolidated balancesheets of Methode Electronics, Inc. and subsidiaries as of May 1,2010 and May 2, 2009, and the related consolidated statements ofoperations, shareholders’ equity and cash flows for each of the three years inthe period ended May 1, 2010.  Ouraudits also included the financial statement schedule listed in the Index atItem 15(a)(2).  These financialstatements and schedule are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these financial statements and schedule based on ouraudits.

 

We conducted our audits in accordance with the standardsof the Public Company 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 bymanagement, as well as evaluating the overall financial statementpresentation.  We believe that our auditsprovide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred toabove present fairly, in all material respects, the consolidated financialposition of Methode Electronics, Inc. and subsidiaries at May 1, 2010and May 2, 2009, and the consolidated results of their operations andtheir cash flows for each of the three years in the period ended May 1,2010, in conformity with U.S. generally accepted accounting principles.  Also, in our opinion, the related financialstatement schedule, when considered in relation to the basic financialstatements taken as a whole, presents fairly in all material respects theinformation set forth therein.

 

We also have audited, in accordance with the standardsof the Public Company Accounting Oversight Board (United States), theeffectiveness of Methode Electronics, Inc.’s internal control overfinancial reporting as of May 1, 2010, based on criteria established in *Internal Control — Integrated Framework* issued by theCommittee of Sponsoring Organizations of the Treadway Commission and our reportdated June 30, 2010 expressed an unqualified opinion thereon.

 

 
|                   | /s/ ERNST & YOUNG LLP |
|------------------------|--------------------------------|
|                   |                           |
|                   |                           |
| Chicago, Illinois |                           |
| July 1, 2010           |                           |

 

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNALCONTROL OVER FINANCIAL REPORTING**

 

Board of Directors and Shareholders

Methode Electronics, Inc.

 

Wehave audited Methode Electronics, Inc.’s internal control over financialreporting as of May 1, 2010, 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.

 

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan 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.

 

Acompany’s internal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’s internal controlover 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.

 

Becauseof its inherent limitations, internal control over financial reporting may notprevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

 

Inour opinion, Methode Electronics, Inc. maintained effective internalcontrol over financial reporting as of May 1, 2010, based on the COSOcriteria.

 

Wealso have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the consolidated balance sheets ofMethode Electronics, Inc. as of May 1, 2010 and May 2, 2009, andthe related consolidated statements of operations, shareholders’ equity, andcash flows for each of the three years in the period ended May 1, 2010 andour report dated June 30, 2010 expressed an unqualified opinion thereon.

 
|                   | /s/ ERNST & YOUNG LLP |
|------------------------|--------------------------------|
|                   |                           |
| Chicago, Illinois |                           |
| July 1, 2010           |                           |

 

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**METHODE ELECTRONICS, INCAND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(in thousands, except sharedata)**

 
| ** **                                                                                                                                                        | ** ** | **May 1, 2010** | ** ** | **May 2, 2009** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|----------------------|------------|
| ASSETS                                                                                                                                                            |       |                 | ** ** | ** **           | ** ** |
| CURRENT ASSETS                                                                                                                                                    |       |                 |       |                 |       |
| Cash and cash equivalents                                                                                                                                         |       | $                    | 63,821     |                 | $          | 54,030 |   |
| Accounts receivable, less  allowance (2010 — $1,102; 2009 —$1,444)                                                                                      |       | 68,649               |       | 60,406               |       |
| Inventories:                                                                                                                                                      |       |                 |       |                 |       |
| Finished products                                                                                                                                                 |       | 5,487                |       | 11,865               |       |
| Work in process                                                                                                                                                   |       | 7,686                |       | 7,583                |       |
| Materials                                                                                                                                                         |       | 16,587               |       | 17,796               |       |
|                                                                                                                                                              |       | 29,760               |       | 37,244               |       |
| Deferred income taxes                                                                                                                                             |       | 2,272                |       | 4,928                |       |
| Prepaid and refundable  income taxes                                                                                                                              |       | 13,956               |       | 14,764               |       |
| Prepaid expenses and other  current assets                                                                                                                        |       | 6,138                |       | 6,692                |       |
| TOTAL CURRENT ASSETS                                                                                                                                              |       | 184,596              |       | 178,064              |       |
| PROPERTY, PLANT AND  EQUIPMENT                                                                                                                                    |       |                 |       |                 |       |
| Land                                                                                                                                                              |       | 3,240                |       | 3,236                |       |
| Buildings and building  improvements                                                                                                                              |       | 49,398               |       | 54,378               |       |
| Machinery and equipment                                                                                                                                           |       | 228,112              |       | 231,470              |       |
|                                                                                                                                                              |       | 280,750              |       | 289,084              |       |
| Less allowances for depreciation                                                                                                                                  |       | 218,874              |       | 219,167              |       |
|                                                                                                                                                              |       | 61,876               |       | 69,917               |       |
| OTHER ASSETS                                                                                                                                                      |       |                 |       |                 |       |
| Goodwill                                                                                                                                                          |       | 12,096               |       | 11,771               |       |
| Other intangibles, less  accumulated amortization                                                                                                                 |       | 18,811               |       | 20,501               |       |
| Cash surrender value of life  insurance                                                                                                                           |       | 9,391                |       | 11,177               |       |
| Deferred income taxes                                                                                                                                             |       | 3,657                |       | 4,993                |       |
| Pre-production costs                                                                                                                                              |       | 11,984               |       | 3,182                |       |
| Other                                                                                                                                                             |       | 8,412                |       | 5,683                |       |
|                                                                                                                                                              |       | 64,351               |       | 57,307               |       |
| TOTAL ASSETS                                                                                                                                                      |       | $                    | 310,823    |                 | $          | 305,288 |   |
|                                                                                                                                                              |       |                 |       |                 |       |
| LIABILITIES AND  SHAREHOLDERS’ EQUITY                                                                                                                        |       |                 |       |                 |       |
| CURRENT LIABILITIES                                                                                                                                               |       |                 |       |                 |       |
| Accounts payable                                                                                                                                                  |       | $                    | 29,743     |                 | $          | 24,495 |   |
| Salaries, wages and payroll  taxes                                                                                                                                |       | 8,252                |       | 7,918                |       |
| Other accrued expenses                                                                                                                                            |       | 18,283               |       | 19,921               |       |
| Income taxes                                                                                                                                                      |       | 2,467                |       | 1,184                |       |
| TOTAL CURRENT LIABILITIES                                                                                                                                         |       | 58,745               |       | 53,518               |       |
|                                                                                                                                                              |       |                 |       |                 |       |
| OTHER LIABILITIES                                                                                                                                                 |       | 10,251               |       | 13,561               |       |
| DEFERRED COMPENSATION                                                                                                                                             |       | 1,885                |       | 3,308                |       |
| SHAREHOLDERS’ EQUITY                                                                                                                                         |       |                 |       |                 |       |
| Common stock, $0.50 par  value, 100,000,000 shares authorized, 38,149,946 and 38,290,776 shares issued  as of May 1, 2010 and May 2, 2009, respectively |       | 19,075               |       | 19,145               |       |
| Unearned common stock  issuances                                                                                                                                  |       | —               |       | (3,632               | )          |
| Additional paid-in capital                                                                                                                                        |       | 65,991               |       | 68,506               |       |
| Accumulated other  comprehensive income                                                                                                                           |       | 16,247               |       | 15,675               |       |
| Treasury stock, 1,342,188  and 1,372,188 shares as of May 1, 2010 and May 2, 2009,  respectively                                                        |       | (11,377              | )          | (11,495              | )          |
| Retained earnings                                                                                                                                                 |       | 146,818              |       | 143,577              |       |
| TOTAL METHODE  ELECTONICS, INC. SHAREHOLDERS’ EQUITY                                                                                                    |       | 236,754              |       | 231,776              |       |
| Noncontrolling interest                                                                                                                                           |       | 3,188                |       | 3,125                |       |
| TOTAL EQUITY                                                                                                                                                      |       | 239,942              |       | 234,901              |       |
| TOTAL LIABILITIES AND EQUITY                                                                                                                                      |       | $                    | 310,823    |                 | $          | 305,288 |   |

 

See notes to consolidated financial statements.

 

F-3

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Table of Contents

 

**METHODE ELECTRONICS, INC.AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(in thousands, except per sharedata)**

 
| ** **                                                        | ** ** | **Fiscal Year Ended** | ** ** |
|-------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                        | ** ** | **May 1,**       | ** ** | **May 2,** | ** ** | **May 3,** | ** ** |
| ** **                                                        | ** ** | **2010**              | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                                              |       |                  |       |   |   |   |   |
| INCOME                                                            |       |                  |       |   |   |   |   |
| Net sales                                                         |       | $                     | 373,136    |   | $ | 425,644 |   | $ | 551,073 |   |
| Other                                                             |       | 4,510                 |       | 3,202 |   | 1,879 |   |
|                                                              |       | 377,646               |       | 428,846 |   | 552,952 |   |
|                                                              |       |                  |       |   |   |   |   |
| COSTS AND EXPENSES                                                |       |                  |       |   |   |   |   |
| Cost of products sold                                             |       | 297,711               |       | 356,496 |   | 428,355 |   |
| Restructuring                                                     |       | 7,770                 |       | 25,278 |   | 5,159 |   |
| Impairment of goodwill and  other assets                          |       | —                |       | 94,374 |   | 1,472 |   |
| Selling and administrative  expenses                              |       | 62,427                |       | 57,128 |   | 61,221 |   |
| Amortization of intangibles                                       |       | 2,297                 |       | 6,933 |   | 6,013 |   |
|                                                              |       | 370,205               |       | 540,209 |   | 502,220 |   |
|                                                              |       |                  |       |   |   |   |   |
| Income/(loss) from  operations                                    |       | 7,441                 |       | (111,363 | ) | 50,732 |   |
|                                                              |       |                  |       |   |   |   |   |
| Interest income/(expense),  net                                   |       | (139                  | )          | 1,382 |   | 2,324 |   |
| Other income/(expense), net                                       |       | 515                   |       | (479 | ) | (3,250 | ) |
| Income/(loss) before income  taxes                                |       | 7,817                 |       | (110,460 | ) | 49,806 |   |
|                                                              |       |                  |       |   |   |   |   |
| Income tax expense/(benefit)                                      |       | (5,964                | )          | 1,680 |   | 9,723 |   |
| Net income/(loss)                                                 |       | 13,781                |       | (112,140 | ) | 40,083 |   |
| Less: Net income  attributable to noncontrolling interest         |       | 126                   |       | 343 |   | 329 |   |
| NET INCOME/(LOSS)  ATTRIBUTABLE TO METHODE ELECTRONICS, INC. |       | $                     | 13,655     |   | $ | (112,483 | ) | $ | 39,754 |   |
|                                                              |       |                  |       |   |   |   |   |
| Amounts per common share:                                         |       |                  |       |   |   |   |   |
| Basic net income/(loss)                                           |       | $                     | 0.37       |   | $ | (3.05 | ) | $ | 1.07 |   |
| Diluted net income/(loss)                                         |       | $                     | 0.37       |   | $ | (3.05 | ) | $ | 1.06 |   |
|                                                              |       |                  |       |   |   |   |   |
| Cash dividends:                                                   |       |                  |       |   |   |   |   |
| Common stock                                                      |       | $                     | 0.28       |   | $ | 0.26 |   | $ | 0.20 |   |

 

See notes to consolidated financial statements.

 

F-4

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Table ofContents

 

**METHODE ELECTRONICS, INCAND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY**

**Years Ended May 1, 2010,May 2, 2009 and May 3, 2008**

(Dollar amounts in thousands, except share data)

 
| ** **                                                                                     | ** ** | ** **     | ** ** | ** ** | ** ** | **Unearned**  | ** ** | ** **     | ** ** | ** **   | ** ** | ** **      | ** ** | ** **   | ** ** | ** **             | ** ** |
|------------------------------------------------------------------------------------------------|------------|----------------|------------|------------|------------|---------------|------------|----------------|------------|--------------|------------|-----------------|------------|--------------|------------|------------------------|------------|
| ** **                                                                                     | ** ** | **Common**     | ** ** | **Common** | ** ** | **Common**    | ** ** | **Additional** | ** ** | ** **   | ** ** | **Currency**    | ** ** | ** **   | ** ** | **Total**              | ** ** |
| ** **                                                                                     | ** ** | **Stock**      | ** ** | **Stock**  | ** ** | **Stock**     | ** ** | **Paid-in**    | ** ** | **Retained** | ** ** | **Translation** | ** ** | **Treasury** | ** ** | **Shareholders’** | ** ** |
| ** **                                                                                     | ** ** | **Shares**     | ** ** | **$**      | ** ** | **Issuances** | ** ** | **Capital**    | ** ** | **Earnings** | ** ** | **Adjustments** | ** ** | **Stock**    | ** ** | **Equity**             | ** ** |
| **Balance at  April 28, 2007**                                                            | ** ** | **37,950,829** | ** ** | **$**      | **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                 |       |
| Net income for year                                                                            |       | —         |       | —     |       | —        |       | —         |       | 39,754       |       | —          |       | —       |       | 39,754                 |       |
| Cash dividends on common  stock                                                                |       | —         |       | —     |       | —        |       | —         |       | (7,575       | )          | —          |       | —       |       | (7,575                 | )          |
| **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                | )          |
| Net income/(loss) for year                                                                     |       | —         |       | —     |       | —        |       | —         |       | (112,483     | )          | —          |       | —       |       | (112,483               | )          |
| Cash dividends on common  stock                                                                |       | —         |       | —     |       | —        |       | —         |       | (9,778       | )          | —          |       | —       |       | (9,778                 | )          |
| **Balance at  May 2, 2009**                                                               | ** ** | **38,290,776** | ** ** | **$**      | **19,145** | ** **    | **$**      | **(3,632**     | **)**      | **$**        | **68,506** | ** **      | **$**      | **143,577**  | ** ** | **$**                  | **15,675** | ** ** | **$** | **(11,495** | **)** | **$** | **231,776** | ** ** |
| Cancellation of shares  pursuant to acquisition earn-out                                       |       | (239,695       | )          | (120       | )          | 3,307         |       | (3,187         | )          | —       |       | —          |       | —       |       | —                 |       |
| Release of restriction  pursuant to acquisition earn-out                                       |       | —         |       | —     |       | 325           |       | —         |       | —       |       | —          |       | —       |       | 325                    |       |
| Earned portion of restricted  stock awards                                                     |       | 62,140         |       | 31         |       | —        |       | (31            | )          | —       |       | —          |       | —       |       | —                 |       |
| Stock award and stock option  amortization expense                                             |       | —         |       | —     |       | —        |       | 871            |       | —       |       | —          |       | —       |       | 871                    |       |
| Vested stock awards withheld  for payroll taxes                                                |       | (10,923        | )          | (5         | )          | —        |       | (99            | )          | —       |       | —          |       | —       |       | (104                   | )          |
| Exercise of options                                                                            |       | 17,648         |       | 9          |       | —        |       | 176            |       | —       |       | —          |       | —       |       | 185                    |       |
| Treasury shares issued for  minority shares purchased                                          |       | 30,000         |       | 15         |       | —        |       | (214           | )          | —       |       | —          |       | 118          |       | (81                    | )          |
| Tax expense from stock  options                                                                |       | —         |       | —     |       | —        |       | (31            | )          | —       |       | —          |       | —       |       | (31                    | )          |
| Foreign currency translation  adjustments                                                      |       | —         |       | —     |       | —        |       | —         |       | —       |       | 572             |       | —       |       | 572                    |       |
| Net income for year                                                                            |       | —         |       | —     |       | —        |       | —         |       | 13,655       |       | —          |       | —       |       | 13,655                 |       |
| Cash dividends on common  stock                                                                |       | —         |       | —     |       | —        |       | —         |       | (10,414      | )          | —          |       | —       |       | (10,414                | )          |
| **Balance at  May 1, 2010**                                                               | ** ** | **38,149,946** | ** ** | **$**      | **19,075** | ** **    | **$**      | **—**     | ** ** | **$**        | **65,991** | ** **      | **$**      | **146,818**  | ** ** | **$**                  | **16,247** | ** ** | **$** | **(11,377** | **)** | **$** | **236,754** | ** ** |

** **

See notes toconsolidated financial statements

 

F-5

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Table ofContents

 

**METHODE ELECTRONICS, INC.AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(in thousands)**

 
| ** **                                                                                | ** ** | **Fiscal Year Ended** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                | ** ** | **May 1,**       | ** ** | **May 2,** | ** ** | **May 3,** | ** ** |
| ** **                                                                                | ** ** | **2010**              | ** ** | **2009** | ** ** | **2008** | ** ** |
| OPERATING ACTIVITIES                                                                      |       |                  |       |   |   |   |   |
| Net income/(loss)                                                                         |       | $                     | 13,781     |   | $ | (112,140 | ) | $ | 40,083 |   |
| Adjustments to reconcile net  income/(loss) to net cash provided by operating activities: |       |                  |       |   |   |   |   |
| Gain on sale of fixed assets                                                              |       | —                |       | (407 | ) | (120 | ) |
| Provision for depreciation                                                                |       | 17,112                |       | 30,103 |   | 22,146 |   |
| Amortization of intangible  assets                                                        |       | 2,297                 |       | 6,933 |   | 6,013 |   |
| Impairment of tangible  assets                                                            |       | 710                   |       | 10,313 |   | 1,472 |   |
| Impairment of goodwill and  other assets                                                  |       | —                |       | 94,374 |   | — |   |
| Stock-based compensation                                                                  |       | 871                   |       | (553 | ) | 3,359 |   |
| Provision for bad debt                                                                    |       | 142                   |       | 120 |   | 195 |   |
| Deferred income taxes                                                                     |       | 3,992                 |       | 8,078 |   | (2,948 | ) |
| Changes in operating assets  and liabilities:                                             |       |                  |       |   |   |   |   |
| Accounts receivable                                                                       |       | (12,436               | )          | 33,347 |   | (793 | ) |
| Inventories                                                                               |       | 645                   |       | 19,918 |   | (482 | ) |
| Prepaid expenses and other  current assets                                                |       | (39                   | )          | (16,086 | ) | 7,989 |   |
| Accounts payable and accrued  expenses                                                    |       | 291                   |       | (30,832 | ) | 107 |   |
| NET CASH PROVIDED BY  OPERATING ACTIVITIES                                                |       | 27,366                |       | 43,168 |   | 77,021 |   |
|                                                                                      |       |                  |       |   |   |   |   |
| INVESTING ACTIVITIES                                                                      |       |                  |       |   |   |   |   |
| Purchases of property, plant  and equipment                                               |       | (9,379                | )          | (17,064 | ) | (20,018 | ) |
| Acquisition of businesses                                                                 |       | (325                  | )          | (57,469 | ) | (9,647 | ) |
| Acquisition of technology  licenses                                                       |       | (530                  | )          | (1,575 | ) | — |   |
| Proceeds from life insurance  policies                                                    |       | 2,464                 |       | — |   | 1,706 |   |
| Joint venture dividend                                                                    |       | —                |       | — |   | (1,000 | ) |
| Other                                                                                     |       | —                |       | (14 | ) | (27 | ) |
| NET CASH USED IN INVESTING  ACTIVITIES                                                    |       | (7,770                | )          | (76,122 | ) | (28,986 | ) |
|                                                                                      |       |                  |       |   |   |   |   |
| FINANCING ACTIVITIES                                                                      |       |                  |       |   |   |   |   |
| Purchase of common stock                                                                  |       | —                |       | (5,252 | ) | (1,249 | ) |
| Proceeds from exercise of  stock options                                                  |       | 185                   |       | 113 |   | 1,298 |   |
| Tax (expense)/benefit from  stock options and awards                                      |       | (31                   | )          | (209 | ) | 383 |   |
| Cash dividends                                                                            |       | (10,414               | )          | (9,778 | ) | (7,575 | ) |
| NET CASH USED IN FINANCING  ACTIVITIES                                                    |       | (10,260               | )          | (15,126 | ) | (7,143 | ) |
|                                                                                      |       |                  |       |   |   |   |   |
| Effect of foreign currency  exchange rate changes on cash                                 |       | 455                   |       | (2,195 | ) | 3,322 |   |
|                                                                                      |       |                  |       |   |   |   |   |
| INCREASE (DECREASE) IN CASH  AND CASH EQUIVALENTS                                         |       | 9,791                 |       | (50,275 | ) | 44,214 |   |
|                                                                                      |       |                  |       |   |   |   |   |
| Cash and cash equivalents at  beginning of year                                           |       | 54,030                |       | 104,305 |   | 60,091 |   |
|                                                                                      |       |                  |       |   |   |   |   |
| CASH AND CASH EQUIVALENTS AT  END OF YEAR                                                 |       | $                     | 63,821     |   | $ | 54,030 |   | $ | 104,305 |   |

 

See notes to condensed consolidated financialstatements.

 

F-6

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Tableof Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**1.**  **Significant AccountingPolicies**

 

*Principles of Consolidation.*  The consolidated financialstatements include the accounts and operations of Methode Electronics, Inc.(“the Company”) and its subsidiaries.  Asused herein, “we,” “us,” “our,” the “Company” or “Methode” means MethodeElectronics, Inc. and its subsidiaries.

 

*Financial Reporting Periods. *Wemaintain our financial records on the basis of a fifty-two or fifty-three weekfiscal year ending on the Saturday closest to April 30.  Due to the timing of our fiscal calendar, thefiscal year ended May 1, 2010 and the fiscal year ended May 2, 2009represent 52 weeks of results and the fiscal year ended May 3, 2008represents 53 weeks of results.

 

*Cash Equivalents.*  Generally, all highly liquidinvestments with a maturity of three months or less when purchased are carriedat their approximate fair value and classified in the consolidated balancesheets as cash equivalents.

 

*Accounts Receivable and Allowance for Doubtful Accounts.*  We carry accountsreceivable at their face amounts less an allowance for doubtful accounts. On aregular basis, we record an allowance for uncollectible receivables based uponpast transaction history with customers, customer payment practices andeconomic conditions. Actual collection experience may differ from the currentestimate of net receivables. A change to the allowance for uncollectibleamounts may be required if a future event or other change in circumstancesresults in a change in the estimate of the ultimate collectability of aspecific account.  We do not requirecollateral for our accounts receivable balances.  Accounts are written off against theallowance account when they are determined to be no longer collectible.

 

*Inventories.*  Inventories are stated at thelower-of-cost (first-in, first-out method) or market.

 

*Property, Plant and Equipment.*  Properties are stated on thebasis of cost.  We amortize such costs byannual charges to income, computed on the straight-line method using estimateduseful lives of 5 to 40 years for buildings and improvements and 3 to 15 yearsfor machinery and equipment for financial reporting purposes.  Accelerated methods are generally used forincome tax purposes.

 

*Income Taxes.* Deferred tax assets andliabilities are determined based on differences between financial reporting andtax bases of assets and liabilities and are measured using the enacted taxrates and laws that will be in effect when the differences are expected toreverse.

 

*Revenue Recognition.*  We recognize revenue on productsales when i) persuasive evidence of an agreement exists, ii) the price isfixed or determinable, iii) delivery has occurred or services have beenrendered, and iv) 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 fiscal2010, 2009 and 2008.  Revenue fromcabling infrastructure systems installations is recognized when the installationis completed, tested and accepted by the customer.

 

*Shipping and Handling Fees andCosts*.  Shippingand handling fees billed to customers are included in net sales, and therelated costs are included in cost of products sold.

 

*Foreign Currency Translation.*  The functional currencies of themajority 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 2010, 2009 and 2008, we had foreign exchange losses of $1,151,$479 and $3,250, respectively.

 

F-7

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**1.  Significant Accounting Policies - Continued**

 

*Long-Lived Assets. *Inaccordance with Accounting Standards Codification, (“ASC”) No. 360, “Property,Plant and Equipment” we continually evaluate whether events and circumstanceshave occurred which indicate that the remaining estimated useful lives of ourintangible assets, excluding goodwill, and other long-lived assets, may warrantrevision or that the remaining balance of such assets may not be recoverable. Inthe event that the undiscounted cash flows resulting from the use of the assetgroup is less than the carrying amount, an impairment loss equal to the excessof the asset’s carrying amount over its fair value is recorded.

 

*Goodwill and Intangibles.*  Costs assigned to the fair valueof intangible assets acquired with finite lives are being amortized overperiods ranging from 3 to 20 years, generally on a straight-line basis oraccelerated basis, depending on the nature of the intangible asset.  The fair value of certain intangible assetsis being amortized over projected revenues used to initially value suchintangible assets.  Goodwill representsthe excess of purchase price over the estimated fair value of net assets ofacquired companies, which has not been allocated to other intangible assets.

 

The Company evaluates goodwill for impairment atthe reporting unit level, which is one level below the operating segment level(herein referred to as the reporting unit). The impairment test for goodwill is a two-step process.  The first step is to identify when goodwillimpairment has occurred by comparing the fair value of a reporting unit withits carrying amount, including goodwill. If the fair value of a reporting unit exceeds its 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 ASC No. 350, “Intangibles— Goodwill and Other”, on the reporting units that had goodwill as of May 1,2010.

 

*Research and Development Costs.*  Costs associated with thedevelopment of new products are charged to expense when incurred.  Research and development costs for the fiscalyears ended May 1, 2010, May 2, 2009 and May 3, 2008 amounted to$18,412, $21,995 and $25,595, respectively.

 

*Stock-Based Compensation.*  See Note 5, Shareholders’ Equityfor a description of our stock-based compensation plans.

 

*Use of Estimates.*  Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States requires management to make estimatesand assumptions that affect the amounts reported in the financial statementsand accompanying notes.  Actual resultscould differ from those estimates.

 

*Fair Value of Other Financial Instruments.*  The carrying values of our short-termfinancial instruments, including cash and cash equivalents, accounts receivableand accounts payable approximate their fair values because of the shortmaturity of these instruments.

 

*Comprehensive Income.*  ASC No. 220, “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, inthe consolidated statement of shareholders’ equity.

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**1.  Significant Accounting Policies - Continued**

 

*Recently Adopted AccountingPronouncements*

 

Effective November 1, 2009, we adopted ASC No. 810,“Consolidation” (“ASC No. 810”). ASC No. 810 is intended to improve financial reporting by providingadditional guidance to companies involved with variable interest entities andby requiring additional disclosures about a company’s involvement in variableinterest entities.  This standard iseffective for interim and annual periods ending after November 15,2009.  The adoption of this standard didnot have a material impact on our financial statements.

 

Effective November 1, 2009, we adopted ASC No. 860,“Transfers and Servicing” (“ASC No. 860”). ASC No. 860 requires more information about transfers of financialassets, including continuing exposure to the risk related to transferredfinancial assets.  It eliminates theconcept of a qualifying special purpose entity, changes the requirements forderecognizing financial assets, and requires additional disclosure.  This standard is effective for interim andannual periods ending after November 15, 2009.  The adoption of this standard did not have animpact on our financial statements.

 

Effective October 31, 2009, we adopted ASC No. 105,“Generally Accepted Accounting Principles,” (“ASC No. 105”), the FASBAccounting Standards Codification the “Codification” and the Hierarchy ofGenerally Accepted Accounting Principles. The Codification is now the single source of authoritative GAAP for allnon-governmental entities.  TheCodification changes the referencing and organization of accountingguidance.  The issuance of ASC No. 105did not change GAAP and therefore the adoption of ASC No. 105 affected howspecific references to GAAP literature are disclosed in the notes to ourconsolidated financial statements.

 

In December 2007, the FASB issued new guidanceunder ASC No. 810, an Amendment of Accounting Research Bulletin No. 51,“Consolidated Financial Statements”.  ASCNo. 810 establishes accounting and reporting standards for thenoncontrolling interest in a subsidiary and for the deconsolidation of asubsidiary.  It clarifies that anoncontrolling interest in a subsidiary is an ownership interest in theconsolidated entity that should be reported as equity in the consolidatedfinancial statements.  We adopted ASC No. 810on May 3, 2009.  As a result, wehave reclassified financial statement line items within our condensedconsolidated balance sheet and statement of operations for the prior period toconform with this standard.

 

In June 2008, the FASB issued ASC No. 260, “DeterminingWhether Instruments Granted in Share-Based Payment Transactions areParticipating Securities” (“ASC No. 260”). ASC No. 260 was issued to clarify that unvested share-based paymentawards with a right to receive non-forfeitable dividends are participatingsecurities.  This ASC also providesguidance on how to allocate earnings to participating securities and computebasic earnings per share using the two-class method.  We adopted ASC No. 260 on May 3,2009.  The adoption did not have amaterial impact on our earnings per share calculations.

 

In February 2008, the FASB issued new guidanceunder ASC No. 820, (FASB Staff Position No. 157-2), which delays theeffective date of SFAS No. 157 for non-financial assets andliabilities, which are not measured at fair value on a recurring basis (atleast annually) until fiscal years beginning after November 15, 2008,which is our fiscal year 2010 that began May 3, 2009.  The adoption of ASC No. 820 fornon-financial assets and liabilities did not have a material impact on ourcondensed consolidated financial statements.

 

On May 3, 2009, we adopted the provisions of ASC No. 805-10,“Business Combinations” (“ASC No. 805-10”).  ASC No. 805-10 establishes principlesand requirements on how an acquirer recognizes and measures in its financialstatements identifiable assets acquired, liabilities assumed, noncontrollinginterests in the acquiree, goodwill or gain from a bargain purchase andaccounting for transaction costs. Additionally, ASC No. 805-10 determineswhat information must be disclosed to enable users of the financial statementsto evaluate the nature and financial effects of the business combination. Theadoption of ASC No. 805-10 did not have a material impact on ourconsolidated financial statements, but will have an impact on the accountingfor future business combinations.

 

In April 2009, the FASB issued three FASB StaffPositions, (“FSPs”) related to fair value measurements.

 

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**1.  Significant Accounting Policies - Continued**

 

The first, FSP ASC No. 820, “Fair ValueMeasurements and Disclosures,” provides guidance on determining whether amarket is inactive and whether transactions in that market are distressed. Thesecond FSP issued, ASC No. 320, “Investments — Debt and Equity Securities,”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, ASC No. 825,“Financial Instruments,” and ASC No. 270, “Interim Reporting,” requiresthat disclosures currently required under ASC No. 825, Disclosures aboutFair Value of Financial Instruments, be presented for interim periods as wellas annual periods. The Company adopted these FSPs during the first quarter offiscal 2010. The adoption of these FSPs did not have a material impact on theCompany’s consolidated financial statements.

 

In May 2009, the FASB issued ASC No. 855, “SubsequentEvents” (“ASC No. 855”). ASC No. 855 establishes general standards ofaccounting for, and disclosure of, events that occur after the balance sheetdate but before financial statements are issued or are available to beissued.  In particular, this statementsets forth:  (1) the period afterthe balance sheet date during which management of a reporting entity shouldevaluate events or transactions that may occur for potential recognition ordisclosure in the financial statements, (2) the circumstances under whichan entity should recognize events or transactions occurring after the balancesheet date in the financial statements and (3) the disclosure that anentity should make about events or transactions that occurred after the balancesheet date.  We adopted ASC No. 855on August 1, 2009 and the adoption did not have a material impact on ourfinancial statements.

 

**2.  Restructurings**

 

**March 2009 Restructuring**

 

InMarch 2009, we announced additional restructuring actions to consolidatemanufacturing facilities to reduce costs. All of the restructuring actions were complete as of the end of fiscal2010.

 

Intotal, this additional restructuring affected approximately 850 employeesworldwide. We recorded a total pre-tax charge of $12,511 during fiscal years2009 and 2010 related to this restructuring.

 

During the fiscal year ended May 1, 2010, werecorded a restructuring charge of $5,248, which consisted of $3,512 foremployee severance, $279 in the cancellation of lease agreements and $1,457 forother costs.

 

During the fiscal year ended May 2, 2009, werecorded a restructuring charge of $7,263, which consisted of $100 for employeeseverance, $1,373 in impairment for buildings and improvements and machineryand equipment, $5,418 for impairment of customer funded tooling and $133 inforfeited security deposits related to the transfer of the new GM business and$239 relating to professional fees.

 

As of May 1, 2010, we had an accrued restructuringliability of $420 reflected in the current liabilities section of ourconsolidated balance sheet.  We expectthis liability to be paid out during fiscal 2011.

 

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**2.  Restructurings -Continued**

 

The table below reflects the activity related tothe March 2009 restructuring for fiscal 2009 and 2010.

 
| ** **                           | ** ** | **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 |   |
|                                 |       |          |       |            |       |       |       |       |       |
| FY 2010 restructuring charges        |       | 3,512         |       | —          |       | 1,736      |       | 5,248      |       |
| Payments and asset  write-downs      |       | (3,612        | )          | —          |       | (1,357     | )          | (4,969     | )          |
| Accrued balance at  May 1, 2010 |       | $             | —     |            | $          | —     |       | $          | 420        |   | $ | 420 |   |

 

**January 2008 Restructuring**

 

InJanuary  2008, we announced a restructuring of our U.S.-based automotiveoperations and a decision to discontinue producing certain legacy products inthe Interconnect segment.  The Automotiveand Interconnect segment restructuring was completed during fiscal 2010.  We record the expense in the restructuringsection of our consolidated statement of operations. We recorded a totalpre-tax charge of $25,696 related to this restructuring initiative.

 

During the fiscal year ended May 1, 2010, werecorded a restructuring charge of $2,522, which consisted of $697 for employeeseverance, $1,564 for accelerated depreciation for buildings equipment, and$261 relating to other costs.  As of May 1,2010, we had an accrued restructuring liability of $155 reflected in thecurrent liabilities section of our consolidated balance sheet.  We expect this liability to be paid outduring fiscal 2011.

 

During the fiscal year ended May 2, 2009, werecorded a restructuring charge of $18,015, which consisted of $6,099 foremployee severance, $3,522 and $7,276 in impairments and accelerateddepreciation, respectively, for buildings and improvements and machinery andequipment, $153 in inventory write-downs and $965 relating to professionalfees.  As of May 2, 2009, we had anaccrued restructuring liability of $1,849 reflected in the current liabilitiessection of our consolidated balance sheet.

 

During the fiscal year ended May 3, 2008, werecorded a restructuring charge of $5,159, which consisted of $3,355 foremployee severance, $1,346 in impairments and accelerated depreciation forbuildings and improvements and machinery and equipment and $458 relating toprofessional fees.  As of May 3,2008, we had an accrued restructuring liability of $3,176 reflected in thecurrent liabilities section of our consolidated balance sheet.

 

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**2.  Restructurings -Continued**

 

The table below reflects the January 2008restructuring activity for fiscal 2008, 2009 and 2010.

 
| ** **                                  | ** ** | **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 |   |
|                                        |       |          |       |            |       |       |       |       |       |
| Fiscal 2010 restructuring  charges          |       | 697           |       | 1,564           |       | 261        |       | 2,522      |       |
| Fiscal 2010 payments and  asset write-downs |       | (2,429        | )          | (1,564          | )          | (223       | )          | (4,216     | )          |
| Accrued balance at  May 1, 2010        |       | $             | 117        |            | $          | —     |       | $          | 38         |   | $ | 155 |   |

 

**3**.  **Acquisitions**

 

*Fiscal 2009 Acquisitions*

 

OnSeptember 30, 2008, we acquired certain assets of Hetronic LLC (Hetronic)for $53,639 in cash.  We also incurred$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.

 

Basedin part on a third-party valuation report, management determined that thetangible net assets had a fair value of $20,533.  The fair values assigned to intangible assetsacquired were $12,170 for customer relationships, $2,700 for the trade name andtrademarks, $1,450 for technology valuation, and $170 for non-competes,resulting in $19,063 of goodwill.  Thecustomer relationships, technology valuation and non-competes are beingamortized over 5 to approximately 12 years. The trade name and trademarks are not subject to amortization but aresubject to periodic impairment testing. The accounts and transactions of Hetronic have been included in theInterconnect segment in the consolidated financial statements from theeffective date of the acquisition.

 

*Fiscal 2008 Acquisitions*

 

OnAugust 31, 2007, we acquired 100% of the assets of Value EngineeredProducts, Inc. (VEP) for $5,750 in cash. We also incurred $79 in transaction costs related to the purchase.  VEP is a thermal management solutionsprovider, manufacturing heat sinks and related products for high-poweredapplications.  These componentscomplement our Power Product offerings and, in some instances, are joined withbus bars to aid thermal management of power systems.  The terms of the acquisition provide for anadditional payment of up to a maximum of $1,000 if sales reach specifiedtargets during the twelve-month period following the closing.  The final payout was $758 and was recorded inthe second quarter of fiscal 2009.

 

Basedin part on a third-party valuation report, management determined that thetangible net assets acquired in the VEP transaction had a fair value of$915.  The fair values assigned tointangible assets acquired were $2,900 for customer relationships and $600 fortrademarks, resulting in $2,172 of goodwill. The customer relationships acquired are being amortized over a period ofapproximately 16 years, which began in September 2007.  The

 

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

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

 

trademarkintangible assets are not subject to amortization but are subject to periodicimpairment testing.  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.

 

OnMarch 30, 2008, we acquired 100% of the assets of Tribotek, Inc for$1,750 in cash.  We also incurred $61 intransaction costs related to the purchase. Tribotek designs, develops and manufactures high current powerconnectors and power product systems for products such as power supplies,servers, rectifiers, inverters, robotics and automated test equipment, inaddition to various military and telecommunication applications.

 

Thetangible net assets acquired in the Tribotek transaction had a fair value of$1,445.  The fair values assigned tointangible assets acquired were $366 for patents that are being amortized overa period of approximately 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.

 

**4**.  **Intangible Assets andGoodwill**

 

We review our goodwill and other intangible assets forimpairment whenever events or changes in circumstances indicate that thecarrying amount of these assets may not be recoverable, and we also review ourgoodwill annually in accordance with ASC No. 350, “Intangibles - Goodwilland Other”.  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.  We performed the annualgoodwill impairment analysis as of May 1, 2010, using an internaldiscounted cash flow model for each reporting unit based on our internallydeveloped forecasted budgets using the business conditions which existed as ofthe testing date.  The internal discountrate and forecast assumptions used for our individual reporting units, as wellas overall methodology, was validated through the reconciliation to ourexternal market capitalization.

 

In fiscal 2009, based on events and general businessdeclines, we performed “step one” of the goodwill impairment test in accordancewith ASC No. 350, on the reporting units. Based on this test, we determined that the fair value was less than thecarrying value of the net assets for certain reporting units.  We completed “step two” of the goodwill test and concluded that goodwill wasimpaired.  Therefore, during fiscal 2009,we recorded a goodwill impairment charge of $25,838 in our Automotive segment,$30,752 in our Interconnect segment, $5,358 in our Power Products segment and$1,203 in our Other segment for a total of $63,151 related to these assets.

 

Also, in accordance with ASC No. 360, “Property,Plant and Equipment”, 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.

 

 

Goodwill increased $325 in fiscal 2010, related to afinal payout for the 2005 acquisition of Cableco Technologies Corporation.  We had originally issued 623,526 shares ofrestricted common stock in connection with the contingent payments related tothis transaction.  The contingentpayments were to be earned if certain operational and financial milestones weremet, depending on certain factors.  Infiscal 2010, the sellers earned 27,567 of the restricted shares.  Since acquisition, including the 27,567shares earned in fiscal 2010, the sellers earned a total of 383,831 of therestricted shares.  The remaining 239,695restricted shares were cancelled in fiscal

 

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**4**.  **Intangible Assets andGoodwill - Continued**

 

2010.

 

The following table shows the roll-forward of goodwillin the financial statements resulting from our acquisition and impairmentactivities for fiscal 2008, 2009 and 2010.

 
| ** **                                                    | ** ** | ** **     | ** ** | ** **       | ** ** | **Power**    | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------|------------|----------------|------------|------------------|------------|--------------|------------|------------|------------|------------|------------|
| ** **                                                    | ** ** | **Automotive** | ** ** | **Interconnect** | ** ** | **Products** | ** ** | **Other**  | ** ** | **Total**  | ** ** |
| Balance as of April 28,  2007                            |       | $              | 25,838     |             | $          | 21,553       |       | $          | 2,926      |       | $          | 1,203 |   | $ | 51,520 |   |
|                                                          |       |           |       |             |       |         |       |       |       |       |       |
| Attibutable to 2008  acquisitions                             |       | —         |       | —           |       | 1,414        |       | —     |       | 1,414      |       |
| Adjustments due to earn-out                                   |       | —         |       | —           |       | 260          |       | —     |       | 260        |       |
| Adjustments due to  finalization of purchase price allocation |       | —         |       | 1,282            |       | —       |       | —     |       | 1,282      |       |
| Balance as of May 3,  2008                               |       | $              | 25,838     |             | $          | 22,835       |       | $          | 4,600      |       | $          | 1,203 |   | $ | 54,476 |   |
|                                                          |       |           |       |             |       |         |       |       |       |       |       |
| Attibutable to 2009  acquisitions                             |       | —         |       | 19,063           |       | —       |       | —     |       | 19,063     |       |
| Adjustments due to earn-out                                   |       | —         |       | —           |       | 625          |       | —     |       | 625        |       |
| Adjustments due to  finalization of purchase price allocation |       | —         |       | —           |       | 758          |       | —     |       | 758        |       |
| Impairment                                                    |       | (25,838        | )          | (30,752          | )          | (5,358       | )          | (1,203     | )          | (63,151    | )          |
| Balance as of May 2,  2009                               |       | $              | —     |             | $          | 11,146       |       | $          | 625        |       | $          | — |   | $ | 11,771 |   |
|                                                          |       |           |       |             |       |         |       |       |       |       |       |
| Adjustments due to earn-out                                   |       | —         |       | —           |       | 325          |       | —     |       | 325        |       |
| Balance as of May 1,  2010                               |       | $              | —     |             | $          | 11,146       |       | $          | 950        |       | $          | — |   | $ | 12,096 |   |

 

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Table ofContents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**4**.  **Intangible Assets andGoodwill - Continued**

 

*Intangible Assets*

 

The following tables present details of our remainingidentifiable intangible assets:

 
| ** **                             | ** ** | **As of May 1, 2010** | ** ** |
|----------------------------------------|------------|----------------------------|------------|
| ** **                             | ** ** | ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** | **Wtd. Avg.** | ** ** |
| ** **                             | ** ** | ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** | **Remaining** | ** ** |
| ** **                             | ** ** | ** **                 | ** ** | **Accumulated** | ** ** | ** ** | ** ** | **Amortization** | ** ** |
| ** **                             | ** ** | **Gross**                  | ** ** | **Amortization** | ** ** | **Net** | ** ** | **Periods (Years)** | ** ** |
| Customer relationships and  agreements |       | $                          | 14,995     |   | $ | 13,066 |   | $ | 1,929 |   | 13.7 |   |
| Patents and technology  licenses       |       | 23,774                     |       | 6,991 |   | 16,783 |   | 13.0 |   |
| Covenants not to compete               |       | 480                        |       | 381 |   | 99 |   | 1.8 |   |
| Total                                  |       | $                          | 39,249     |   | $ | 20,438 |   | $ | 18,811 |   |   |   |

 
| ** **                             | ** ** | **As of 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 |   |   |   |

 

The estimated aggregate amortization expense for each ofthe five succeeding fiscal years is as follows:

 
| 2011 |   | $     | 2,230  |   |
|------|--------|-------|--------|--------|
| 2012 |   | 1,701 |   |
| 2013 |   | 1,324 |   |
| 2014 |   | 1,212 |   |
| 2015 |   | 1,123 |   |

 

As of May 1, 2010, thepatents and technology licenses include $2,400 of trade names that are notsubject to amortization.

 

**5.  Shareholders’ Equity**

 

*Preferred Stock.*  We have 50,000 authorized sharesof Series A Junior Participating Preferred Stock, par value $100 pershare, of which none were outstanding during any of the periods presented.

 

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

 
| ** **  | ** ** | **May 1, 2010** | ** ** | **May 2, 2009** | ** ** |
|-------------|------------|----------------------|------------|----------------------|------------|
| Authorized  |       | 100,000,000          |       | 100,000,000          |       |
| Issued      |       | 38,149,946           |       | 38,290,776           |       |
| In treasury |       | 1,342,188            |       | 1,372,188            |       |

 

F-15

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**5.  Shareholders’ Equity -Continued**

 

At May 1, 2010, 473,181 shares of common stock arereserved for future issuance in connection with our 2007 Stock Plans.

 

*Shareholders’ RightsAgreement. *On January 8, 2004, our Board of Directors declared a dividend ofone preferred share purchase right (a “Right”) for each share of common stock (“CommonShares”) outstanding on January 18, 2004 to the stockholders of record onthat date.  Each Right entitles theregistered holder to purchase from us one ten-thousandth of a share of our Series AJunior Participating Preferred Stock at an exercise price of $65.00 per oneten-thousandth of a preferred share, subject to adjustment.

 

The Rights, which are not detachable, will tradeautomatically with the Common Shares and will not be exercisable until it isannounced that a person or group has become an “acquiring person” by acquiring15% or more of the Common Shares, or a person or group commences a tender offerthat will result in such person or group owning 15% or more of the CommonShares.  Thereafter, separate rightcertificates will be distributed, and each right will entitle its holder topurchase for the exercise price, a fraction of a share of our Series AJunior Participating Preferred Stock having economic and voting terms similarto one share of common stock.

 

Upon announcement that any person or group has become anacquiring person, each Right will entitle all right-holders (other than theacquiring person) to purchase, for the exercise price, a number of shares ofCommon Shares having a market value of twice the exercise price.  Right-holders would also be entitled topurchase the common stock of another entity having a value of twice theexercise price if, after a person has become an acquiring person, the Companywere to enter into certain mergers or other transactions with such otherentity.  If any person becomes anacquiring person, the Company’s Board of Directors may, at its option andsubject to certain limitations, exchange one share of common stock for eachRight.

 

The Rights may be redeemed by our Board of Directors for$0.01 per Right at any time prior to a person or group having become anacquiring person.  The Rights will expireon January 8, 2014.

 

**Dividends**

 

We paid quarterly dividends totaling $10,414, $9,778 and$7,575 during fiscal 2010, 2009 and 2008, respectively.  We intend to retain the remainder of ourearnings not used for dividend payments to provide funds for the operation andexpansion of our business.  Our board ofdirectors approved a stock repurchase plan in September 2008, whichexpired at the end of fiscal 2010.  Therewere no shares purchased under the plan during fiscal 2010 and there were669,480 shares purchased at an average price of $7.85 under the plan in fiscal2009.

 

**2007 Stock Plan**

 

On June 21, 2007, our Board of Directors, on therecommendation of our Compensation Committee, adopted the Methode Electronics, Inc.2007 Stock Plan (the “Stock Plan”).  TheStock Plan was voted on and approved by the shareholders at our annual meetingon September 13, 2007.  Uponadoption of the Stock Plan, our board of directors elected to terminate the2004 Plan and the 2000 Plan with respect to the shares reserved under theseplans that are not subject to outstanding awards.

 

The Stock Plan permits a total of 1,250,000 shares ofour common stock to be awarded to participants. Shares issued under the Stock Plan may be either authorized but unissuedshares, or treasury shares.  If any awardterminates, expires, is cancelled or forfeited as to any number of shares ofcommon 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 1,2010 there were 473,181 shares still available for award under the Stock Plan.

 

F-16

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**5.  Shareholders’ Equity -Continued**

 

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

 

There are 529,776 stock options that were granted inprevious years under the 2000 and 2004 stock plans that are outstanding andexercisable as of May 1, 2010.  Nooptions were granted under the Plans since the first quarter of fiscal2005.  Stock options granted under thePlans vest over a period of six months to forty-eight months after the date ofthe grant and have a term of ten years. There was no remaining compensation expense relating to these options infiscal 2010.

 
| ** **           | ** ** | **Options Outstanding** | ** ** | **Exercisable Options** | ** ** |
|----------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **           | ** ** | ** **              | ** ** | **Wtd. Avg.**           | ** ** | ** ** | ** ** | **Wtd. Avg.** | ** ** |
| ** **           | ** ** | ** **              | ** ** | **Exercise**            | ** ** | ** ** | ** ** | **Exercise** | ** ** |
| ** **           | ** ** | **Shares**              | ** ** | **Price**               | ** ** | **Shares** | ** ** | **Price** | ** ** |
| 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 |   |
| Granted              |       | —                  |       | —                  |       |   |   |   |   |
| Exercised            |       | (17,648                 | )          | 10.62                   |       |   |   |   |   |
| Cancelled            |       | (78,209                 | )          | 12.08                   |       |   |   |   |   |
| May 1,  2010    |       | 529,776                 |       | 10.10                   |       | 529,776 |   | 10.10 |   |
|                      |            |                         |            |                         |            |  |  |  |  |  |  |

 
| **Options  Outstanding and**         |
|--------------------------------------|
| **Exercisable  at May 1, 2010** |
| ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                           | ** ** | ** ** | ** ** | **Wtd. Avg.** | ** ** | **Avg.** | ** ** |
| **Range of**                         | ** ** | ** ** | ** ** | **Exercise** | ** ** | **Remaining** | ** ** |
| **Exercise Prices**                  | ** ** | **Shares** | ** ** | **Price** | ** ** | **Life (Years)** | ** ** |
| $5.12 - $7.69                        |   | 148,125 |   | $ | 6.72 |   | 1.0 |   |
| $8.08 - $11.64                       |   | 283,367 |   | 10.87 |   | 2.6 |   |
| $12.11 - $14.70                      |   | 98,284 |   | 12.99 |   | 0.1 |   |
|                                 |   | 529,776 |   | 10.10 |   |   |   |
|                                      |  |  |  |  |  |  |  |  |

 

F-17

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**5.  Shareholders’ Equity -Continued**

 

**Stock Options Granted Under the 2007Stock Plan**

 

In March 2009, the Compensation Committee approvedthe grant of options to purchase 285,000 shares of our common stock to ourexecutive officers under the 2007 Stock Plan. The March 2009 stock options vest on the third anniversary of thedate of grant.  In July 2009, theCompensation Committee approved the grant of options to purchase 275,000 sharesof our common stock to our executive officers and other members of managementunder the same plan.  The July 2009stock options vest one-third per year on each anniversary of the date ofgrant.  Additionally, in December 2009,the Compensation Committee approved the grant of options to purchase 35,500shares of our common stock to some members of the management team.  The December 2009 stock options vest onthe third anniversary of the date of grant. The stock options granted under the 2007 plan have a ten-year term.  We recognized pre-tax compensation expensefor stock options in the fiscal 2010 of $450 and a pre-tax compensation expenseof $17 for fiscal 2009.  We record theexpense in the selling and administrative section of our Consolidated Statementof Operations.

 

Thefollowing tables summarize the stock option activity and related informationfor the stock options granted under the 2007 Stock Plan as of May 1, 2010:

 
| ** **                       | ** ** | **Summary of Option Activity** | ** ** |
|----------------------------------|------------|--------------------------------|------------|
| ** **                       | ** ** | ** **                     | ** ** | **Wtd. Avg.** | ** ** |
| ** **                       | ** ** | **Shares**                     | ** ** | **Exercise Price** | ** ** |
| Outstanding at May 2,  2009 |       | 285,000                        |       | $ | 2.72 |   |
| Granted                          |       | 310,500                        |       | 6.65 |   |
| Exercised                        |       | —                         |       | — |   |
| Cancelled                        |       | —                         |       | — |   |
| Outstanding at May 1,  2010 |       | 595,500                        |       | $ | 4.77 |   |

 

**Options Outstanding**

**at May 1, 2010**

 
| ** **         | ** ** | ** ** | ** ** | **Avg.**         | ** ** |
|--------------------|------------|------------|------------|------------------|------------|
| ** **         | ** ** | ** ** | ** ** | **Remaining**    | ** ** |
| **Exercise Price** | ** ** | **Shares** | ** ** | **Life (Years)** | ** ** |
| $                  |  2.72 |       | 285,000    |             | 8.8        |   |
| $                  |  6.46 |       | 275,000    |             | 9.2        |   |
| $                  |  8.13 |       | 35,500     |             | 9.6        |   |

 

Weestimated the fair value of our employee stock options on the date of grantusing the Black-Scholes option-pricing model with the following assumptions:

 
| ** **                              | ** ** | **Fiscal 2009** | ** ** | **Fiscal 2010** | ** ** |
|-----------------------------------------|------------|-----------------|------------|-----------------|------------|
| ** **                              | ** ** | **Grants**      | ** ** | **Grants**      | ** ** |
|                                    |       |            |       |            |       |
| Average expected volatility             |       | 69.58           | %          | 86.88           | %          |
| Average risk-free interest  rate        |       | 1.39            | %          | 1.43            | %          |
| Dividend yield                          |       | 2.26            | %          | 2.77            | %          |
| Expected life of options                |       | 6.87 years      |       | 6.87 years      |       |
| Weighted-average grant-date  fair value |       | $               | 1.46       |            | $          | 4.02 |   |
|                                         |            |                 |            |                 |            |  |  |

 

Expectedvolatility was based on the monthly changes in our historical common stockprices over the expected life of the award. The risk-free rate is based on the U.S. Treasury yield curve in effectat the time of the

 

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Tableof Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**5. Shareholders’ Equity - Continued**

 

grant corresponding to theexpected life of the options.  Ourdividend yield is based on the average dividend yield for the previous twoyears from the date of grant.  The expectedlife of options is based on historical stockoption exercise patterns and the terms of the options.

 

**Restricted Stock Awards and RestrictedStock 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 the beginning of fiscal 2010, there were 678,287performance-based and time-based RSAs outstanding.  The time-based RSAs vest in three equalannual installments from the grant date. All RSAs awarded to senior management are performance-based and vestafter three years if the recipient remains employed by the Company until thatdate and we have met certain revenue growth and return on invested capitaltargets.  All of the unvested RSAs areentitled to voting rights and to payment of dividends.  During fiscal 2010, we awarded 24,000restricted stock awards which vested immediately upon grant.

 

During fiscal 2010, it was determined that based on thecurrent economic environment, the performance shares granted in fiscal 2008 and2009 were not meeting the revenue growth and return on invested capitaltargets.  Due to the performance sharesnot meeting financial targets, all of the 382,769, performance-based stockawards granted in fiscal 2008 and fiscal 2009 were cancelled.  There was no adjustment to the pre-taxcompensation expense to reflect the performance shares not meeting current andfuture anticipated revenue growth and return on invested capital targetsbecause the compensation expense was fully reversed in fiscal 2009.  We recognized pre-tax compensation expensefor RSAs in fiscal 2010 of $421, a pre-tax compensation expense reversal of$570 for fiscal 2009 and $3,348 for fiscal 2008.  We record the expense in the selling andadministrative expenses section of our consolidated statement of operations.

 

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**5.  Shareholders’ Equity -Continued**

 

The following table summarizes the RSA activity:

 
| ** **                            | ** ** | **Fiscal Year** | ** ** |
|---------------------------------------|------------|-----------------|------------|
| ** **                            | ** ** | **2010**        | ** ** | **2009** | ** ** | **2008** | ** ** |
| Unvested at beginning of  fiscal year |       | 678,287         |       | 582,298 |   | 525,589 |   |
| Awarded                               |       | 24,000          |       | 356,665 |   | 246,123 |   |
| Vested                                |       | (62,140         | )          | (105,522 | ) | (188,982 | ) |
| Cancelled                             |       | (382,769        | )          | (120,750 | ) | — |   |
| Forfeited                             |       | (7,028          | )          | (34,404 | ) | (432 | ) |
| Unvested at end of period             |       | 250,350         |       | 678,287 |   | 582,298 |   |

 

The table below shows the Company’s unvested RSAsat May 1, 2010:

 
| ** ** | ** ** | ** ** | ** ** | ** **                       | ** ** | ** **   | ** ** | **Probable**         | ** ** | **Target**           | ** ** |
|------------|------------|------------|------------|----------------------------------|------------|--------------|------------|----------------------|------------|----------------------|------------|
| ** ** | ** ** | ** ** | ** ** | ** **                       | ** ** | ** **   | ** ** | **Unearned**         | ** ** | **Unearned**         | ** ** |
| **Grant**  | ** ** | ** ** | ** ** | ** **                       | ** ** | **Weighted** | ** ** | **Compensation**     | ** ** | **Compensation**     | ** ** |
| **Fiscal** | ** ** | ** ** | ** ** | ** **                       | ** ** | **Average**  | ** ** | **Expense at**       | ** ** | **Expense at**       | ** ** |
| **Year**   | ** ** | **RSAs**   | ** ** | **Vesting Period**               | ** ** | **Value**    | ** ** | **May 1, 2010** | ** ** | **May 1, 2010** | ** ** |
| 2006       |       | 125,000    |       | 3-year cliff performanced-based  |       | $            | 12.42      |                 | $          | —               |       | $ | — |   |
| 2007       |       | 100,000    |       | 3-year cliff performanced-based  |       | 7.64         |       | —               |       | —               |       |
| 2008       |       | 666        |       | 3-year equal annual installments |       | 11.74        |       | —               |       | —               |       |
| 2009       |       | 24,684     |       | 3-year equal annual installments |       | 10.64        |       | 89,314               |       | 89,314               |       |
|            |            |            |            |                                  |            |              |            |                      |            |                      |            |  |  |  |

 

At May 1, 2010, theaggregate unvested RSAs had a weighted average fair value of $10.33 and aweighted average vesting period of approximately 12 months.

 

**6.  Employee 401(k) SavingsPlan**

 

We have an Employee 401(k) Savings Plan coveringsubstantially all U.S. employees to which we make contributions equal to 3% ofeligible compensation.  Our contributionsto the Employee 401(k) Savings Plan were $1,429, $1,950 and $2,075 infiscal 2010, 2009 and 2008, respectively.

 

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Table ofContents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**7.  Income Taxes**

 

Significant components of our deferred tax assets andliabilities were as follows:

 
| ** **                                          | ** ** | **May 1,** | ** ** | **May 2,** | ** ** |
|-----------------------------------------------------|------------|-----------------|------------|-----------------|------------|
| ** **                                          | ** ** | **2010**        | ** ** | **2009**        | ** ** |
| Deferred tax liabilities:                           |       |            |       |            |       |
| Accelerated tax depreciation                        |       | $               | 2,978      |            | $          | 2,104 |   |
|                                                |       |            |       |            |       |
| Deferred tax assets:                                |       |            |       |            |       |
| Deferred compensation and  stock award amortization |       | 1,875           |       | 3,576           |       |
| Inventory valuation  differences                    |       | 1,364           |       | 2,855           |       |
| Property valuation  differences                     |       | 4,456           |       | 1,031           |       |
| Accelerated book  amortization                      |       | 19,738          |       | 22,025          |       |
| Environmental reserves                              |       | 1,569           |       | 1,191           |       |
| Bad debt reserves                                   |       | 710             |       | 639             |       |
| Vacation accruals                                   |       | 855             |       | 966             |       |
| Restructuring accruals                              |       | 197             |       | 866             |       |
| Foreign investment tax  credit                      |       | 23,933          |       | 26,518          |       |
| Foreign net operating loss  carryover               |       | —          |       | 3,032           |       |
| State net operating loss  carryover                 |       | 1,312           |       | 443             |       |
| Other accruals                                      |       | 1,300           |       | 260             |       |
|                                                |       | 57,309          |       | 63,402          |       |
| Less valuation allowance                            |       | 48,402          |       | 51,377          |       |
| Total deferred tax assets                           |       | 8,907           |       | 12,025          |       |
| Net deferred tax assets                             |       | $               | 5,929      |            | $          | 9,921 |   |
|                                                |       |            |       |            |       |
| Balance sheet  classification:                      |       |            |       |            |       |
| Current asset                                       |       | $               | 2,272      |            | $          | 4,928 |   |
| Non-current asset                                   |       | 3,657           |       | 4,993           |       |
|                                                |       | $               | 5,929      |            | $          | 9,921 |   |

 

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**7.  Income Taxes - Continued**

 

At May 1, 2010, we had valuation allowances againstour deferred tax assets of $48,402.  Inaccordance with ASC No. 740, “Income Taxes”, a valuation allowance isrequired to be recorded when it is more likely than not that deferred taxassets will not be realized.  In fiscal2010, we utilized all ability to carry-back federal U.S. losses to prior years.  Future realization depends on the existenceof sufficient taxable income within the carry forward period available underthe tax law.  Sources of future taxableincome include future reversals of taxable temporary differences, futuretaxable income exclusive of reversing taxable differences, taxable income incarry back years and tax planning strategies. These sources of positive evidence of realizability must be weighedagainst negative evidence, such as cumulative losses in recent years.

 

In forming a judgment about the future realization ofour deferred tax assets, we considered both the positive and negative evidenceof realizability and gave significant weight to the negative evidence from ourrecent cumulative loss.  We will continueto assess this situation and make appropriate adjustments to the valuationallowance based on our evaluation of the positive and negative evidenceexisting at the time.  We are currentlyunable to forecast when there will be sufficient positive evidence for us toreverse the remainder of the valuation allowances that we have recorded.

 

The valuation allowance is associated with the deferredtax assets for the differences between book and tax that result from netoperating losses (NOL), foreign investment tax credits with unlimitedcarryovers generated in the current and prior years and temporary differenceswhich become deductible when the related asset is recovered or relatedliability is settled.

 

The 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$1,312 expire over a twelve to twenty year period.

 

Income taxes consisted of the following:

 
| ** ** | ** ** | **Fiscal Year Ended** | ** ** |
|------------|------------|-----------------------|------------|
| ** ** | ** ** | **May 1,**       | ** ** | **May 2,** | ** ** | **May 3,** | ** ** |
| ** ** | ** ** | **2010**              | ** ** | **2009** | ** ** | **2008** | ** ** |
| Current    | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Federal    |       | $                     | (11,356    | ) | $ | (6,956 | ) | $ | 10,580 |   |
| Foreign    |       | 1,339                 |       | 867 |   | 1,502 |   |
| State      |       | 61                    |       | (309 | ) | 589 |   |
|       |       | (9,956                | )          | (6,398 | ) | 12,671 |   |
| Deferred   |       | 3,992                 |       | 8,078 |   | (2,948 | ) |
|       |       | $                     | (5,964     | ) | $ | 1,680 |   | $ | 9,723 |   |

 

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**7.  Income Taxes - Continued**

 

A reconciliation of the consolidated provisions forincome taxes to amounts determined by applying the prevailing statutory federalincome tax rate to pre-tax earnings/(loss) is as follows:

 
| ** **                                     | ** ** | **Fiscal Year Ended** | ** ** |
|------------------------------------------------|------------|-----------------------|------------|
| ** **                                     | ** ** | **May 1,**       | ** ** | ** ** | ** ** | **May 2,** | ** ** | ** ** | ** ** | **May 3,** | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | **2010**              | ** ** | ** ** | ** ** | **2009** | ** ** | ** ** | ** ** | **2008** | ** ** | ** ** | ** ** |
| Income tax at statutory rate                   |       | $                     | 2,693      |   | 35.0 | % | $ | (38,779 | ) | 35.0 | % | $ | 17,317 |   | 35.0 | % |
| Effect of:                                     |       |                  |       |   |   |   |   |   |   |   |   |   |   |
| State income taxes, net of  federal benefit    |       | 637                   |       | 8.3 |   | (2,559 | ) | 2.3 |   | 244 |   | 0.5 |   |
| Foreign operations with  lower statutory rates |       | (4,723                | )          | (61.4 | ) | (2,578 | ) | 2.3 |   | (5,718 | ) | (11.6 | ) |
| Foreign losses with no tax  benefit            |       | 532                   |       | 6.9 |   | 13,498 |   | (12.2 | ) | 12 |   | 0.0 |   |
| Foreign investment tax  credit (FTC)           |       | (337                  | )          | (4.4 | ) | (2,027 | ) | 1.8 |   | (6,360 | ) | (12.8 | ) |
| Change in tax contingency  reserve             |       | (3,344                | )          | (43.5 | ) | 37 |   | — |   | 1,910 |   | 3.9 |   |
| Manufacturing deduction                        |       | —                |       | — |   | — |   | — |   | (318 | ) | (0.6 | ) |
| Research and development  credit               |       | (293                  | )          | (3.8 | ) | (255 | ) | 0.2 |   | (470 | ) | (1.0 | ) |
| Foreign plant closing  benefit                 |       | —                |       | — |   | — |   | — |   | (1,846 | ) | (3.7 | ) |
| Goodwill                                       |       | —                |       | — |   | 6,422 |   | (5.8 | ) | — |   | — |   |
| True-up of refundable  receivable estimate     |       | 1,714                 |       | 22.3 |   | — |   | — |   | — |   | — |   |
| Valuation allowance                            |       | (2,975                | )          | (38.6 | ) | 27,953 |   | (25.1 | ) | 4,739 |   | 9.6 |   |
| Other, net                                     |       | 132                   |       | 1.7 |   | (32 | ) | — |   | 213 |   | 0.4 |   |
| Income tax provision                           |       | $                     | (5,964     | ) | -77.5 | % | $ | 1,680 |   | -1.5 | % | $ | 9,723 |   | 19.7 | % |

 

We paid income taxes of $1,392 in 2010, $8,280 in 2009and $10,628 in fiscal 2008.  In fiscal2010, we received a tax refund of $9,334 in the U.S.  No provision has been made for income taxeson undistributed net income of foreign operations, as we expect them to beindefinitely reinvested in our foreign operations.  If the undistributed net income of $75,189were distributed as dividends, we would be subject to foreign tax withholdingsand incur additional income tax expense of approximately $30,076, beforeavailable foreign tax credits.  It is notpractical to estimate the amount of foreign tax withholdings or foreign taxcredits that may be available.

 

As of May 1, 2010, ourFIN 48 gross unrecognized tax benefits totaled $2,782.  After considering the federal impact on thestate issues, $2,738 of this total would favorably affect the effective taxrate if resolved in our favor.

 

The following table presents areconciliation of the beginning and ending amounts of unrecognized taxbenefits:

 
| Balance at May 2, 2009                          |   | $      | 6,126  |   |
|------------------------------------------------------|--------|--------|--------|--------|
| Increases for positions  related to the current year |   | 2      |   |
| Increases for positions  related to the prior years  |   | (171   | )      |
| Settlements                                          |   | (3,125 | )      |
| Lapsing of statutes of  limitations                  |   | (50    | )      |
| Balance at May 1, 2010                          |   | $      | 2,782  |   |

 

We believe that it isreasonably possible that the total amount of unrecognized tax benefits willchange within the next twelve months.  Wehave certain tax return years subject to statutes of limitation, which willclose within twelve months from the end of the fiscal 2010.  Unless challenged by tax authorities, theclosure of those statutes of limitation is expected to result in therecognition of uncertain tax positions in the range between $100 and $2,700.

 

The U.S. Internal RevenueService and the Illinois Department of Revenue have completed their audits for

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**7.  Income Taxes - Continued**

 

the fiscal years ended April 30,2007 and May 3, 2008.  The U.S.federal statute of limitations remains open for fiscal year ended April 29,2006.  Generally, the fiscal years ended April 29,2006 and forward remain open under the state statute of limitations.

 

The continuing practice of theCompany is to recognize interest and penalties related to income tax matters inthe provision for income taxes.  We had$714 accrued for interest and no accrual for penalties at May 1,2010.  We recorded interest expenserelated to unrecognized tax provision of $221 in fiscal 2010 and no expense forpenalties.

 

**8.  Earnings Per Share**

 

Basic earnings per share (EPS) is calculated by dividingnet earnings by the weighted average number of common shares outstanding forthe applicable period.  Diluted EPS iscalculated after adjusting the numerator and the denominator of the basic EPS calculationfor the effect of all potential dilutive common shares outstanding during theperiod.

 

The following table sets forth the computation of basicand diluted earnings/(loss) per share:

 
| ** **                                                                                                           | ** ** | **Fiscal Year Ended** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                           | ** ** | **May 1,**       | ** ** | **May 2,** | ** ** | **May 3,** | ** ** |
| ** **                                                                                                           | ** ** | **2010**              | ** ** | **2009** | ** ** | **2008** | ** ** |
| Numerator - net  income/(loss)                                                                                       |       | $                     | 13,655     |   | $ | (112,483 | ) | $ | 39,754 |   |
|                                                                                                                 |       |                  |       |   |   |   |   |
| Denominator:                                                                                                         |       |                  |       |   |   |   |   |
| Denominator for basic  earnings per share-weighted average shares (in thousands)                                     |       | 36,712                |       | 36,879 |   | 37,069 |   |
| Dilutive potential common  shares-employee and director stock options (in thousands)                                 |       | 220                   |       | — |   | 424 |   |
| Denominator for diluted  earnings per share adjusted weighted average shares and assumed conversions  (in thousands) |       | 36,932                |       | 36,879 |   | 37,493 |   |
|                                                                                                                 |       |                  |       |   |   |   |   |
| Basic and diluted net  income/(loss) per share:                                                                      |       |                  |       |   |   |   |   |
| Basic income/(loss) per  share                                                                                       |       | $                     | 0.37       |   | $ | (3.05 | ) | $ | 1.07 |   |
| Diluted net income/(loss)  per share                                                                                 |       | $                     | 0.37       |   | $ | (3.05 | ) | $ | 1.06 |   |

 

Options to purchase 369,651, 625,633 and 35,296  shares of common stock were outstanding at May 1,2010, May 2, 2009 and May 3, 2008, respectively, but were notincluded in the computation of diluted earnings/(loss) per share because theexercise price was greater than the average market price of the common shares;therefore, the effect would have been anti-dilutive.  Potential common shares have not beenincluded in the calculation of diluted net loss per share, as the effect wouldbe anti-dilutive.  As such, the numeratorand the demoninator used in computing both basic and diluted net loss per sharefor the fiscal year ended May 2, 2009 are the same.

 

**9.  Environmental Matters**

 

We apply the guidance of SOP 96-1 *EnvironmentalRemediation Liabilities*in accounting for known environmentalobligations.  We are not aware of anypotential unasserted environmental claims that may be brought 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

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**9.  Environmental Matters -Continued**

 

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 1, 2010 and May 2, 2009, we hadaccruals, primarily based upon independent engineering studies, forenvironmental matters of $4,017 and $4,271, respectively, of which $500 wasclassified in other accrued expenses and the remainder was included in otherlong term liabilities on our consolidated balance sheet.  We believe the provisions made forenvironmental matters are adequate to satisfy liabilities relating to suchmatters, 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 2010, we spent $474 on remediation cleanupsand related studies compared with $685 in fiscal 2009 and $387 in fiscal2008.  The costs associated withenvironmental matters as they relate to day-to-day activities were notmaterial.

 

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Table of Contents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**10.  Comprehensive Income/(Loss)**

 

The components of our comprehensive income/(loss) forfiscal 2010, 2009 and 2008 include net income/(loss) and adjustments tostockholders’ equity for foreign currency translations.  The foreign currency translation adjustmentwas due to exchange rate fluctuations in our foreign affiliates’ local currencyversus the U.S. dollar.

 

The following table presents details of ourcomprehensive income/(loss):

 
| ** **                 | ** ** | **Fiscal 2010** | ** ** |
|----------------------------|------------|-----------------|------------|
| ** **                 | ** ** | ** **      | ** ** | **Methode** | ** ** | **Noncontrolling** | ** ** |
| ** **                 | ** ** | **Total**       | ** ** | **Shareholders** | ** ** | **Interest** | ** ** |
|                       |       |            |       |   |   |   |   |
| Net income                 |       | $               | 13,781     |   | $ | 13,655 |   | $ | 126 |   |
| Translation adjustment     |       | 682             |       | 572 |   | 110 |   |
| Total comprehensive income |       | $               | 14,463     |   | $ | 14,227 |   | $ | 236 |   |

 
| ** **               | ** ** | **Fiscal 2009** | ** ** |
|--------------------------|------------|-----------------|------------|
| ** **               | ** ** | ** **      | ** ** | **Methode** | ** ** | **Noncontrolling** | ** ** |
| ** **               | ** ** | **Total**       | ** ** | **Shareholders** | ** ** | **Interest** | ** ** |
|                     |       |            |       |   |   |   |   |
| Net income/(loss)        |       | $               | (112,140   | ) | $ | (112,483 | ) | $ | 343 |   |
| Translation adjustment   |       | (13,268         | )          | (12,706 | ) | (562 | ) |
| Total comprehensive loss |       | $               | (125,408   | ) | $ | (125,189 | ) | $ | (219 | ) |

 
| ** **                 | ** ** | **Fiscal 2008** | ** ** |
|----------------------------|------------|-----------------|------------|
| ** **                 | ** ** | ** **      | ** ** | **Methode** | ** ** | **Noncontrolling** | ** ** |
| ** **                 | ** ** | **Total**       | ** ** | **Shareholders** | ** ** | **Interest** | ** ** |
|                       |       |            |       |   |   |   |   |
| Net income                 |       | $               | 40,083     |   | $ | 39,754 |   | $ | 329 |   |
| Translation adjustment     |       | 13,018          |       | 12,371 |   | 647 |   |
| Total comprehensive income |       | $               | 53,101     |   | $ | 52,125 |   | $ | 976 |   |

 

**11.  Pending Litigation**

 

Certain litigation arising in the normal course ofbusiness is pending against us.  We, fromtime to time, are subject to various legal actions and claims incidental to ourbusiness, including those arising out of alleged defects, breach of contracts,employment-related matters and environmental matters.  We consider insurance coverage and thirdparty indemnification when determining required accruals for pending litigationand claims.  Although the outcome ofpotential legal actions and claims cannot be determined, it is the opinion ofour management, based on the information available, that we have adequatereserves for these liabilities and that the ultimate resolution of thesematters will not have a material adverse effect on our consolidated financialstatements.

 

**12.  Material Customers**

 

Sales to two customers in the Automotive segment, eitherdirectly or through their tiered suppliers, represented a significant portionof our business.  Net sales to these twocustomers approximated 18.2% and 13.9% of consolidated net sales in fiscal2010; two customers accounted for 18.8% and 9.7% of consolidated net sales,respectively in fiscal 2009 and three customers accounted for 25.1%, 13.8% and9.4% of consolidated net sales in fiscal 2008. Sales of PODS sensor pads to one of these customers were 9.7% and 9.4%of consolidated net sales in fiscal 2009 and 2008, respectively.

 

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Table ofContents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**12.  Material Customers -Continued**

 

At May 1, 2010 and May 2, 2009, accountsreceivable from customers in the automotive industry were approximately $11,300and $26,834, respectively, which included $5,682 and $14,386, respectively, atour Maltese subsidiary.  Accountsreceivable are generally due within 30 to 60 days.  Credit losses relating to all customersgenerally have been within management’s expectation.

 

**13.  Line of Credit**

 

Wehave an agreement with our primary bank for a revolving credit facility toprovide up to $75,000 ready financing for general corporate purposes, includingacquisition opportunities that may become available.  This facility, whichexpires January 31, 2011, bears interest at (a) LIBOR plus 2.75% or (b) thebank’s prime rate (or, if higher, the Federal Funds Rate plus 0.5%) plus1.50%.  The facility also includes a fee of 0.50% of the unusedbalance.  The facility requires that we maintain a minimum consolidatednet worth equal to 85% of consolidated net worth plus 50% of consolidated netincome earned in each fiscal quarter, with no deduction for a net loss in anyquarter and maintain consolidated interest coverage, as defined, of not lessthan 3.50:1.00, and maintain on a monthly basis a consolidated debt to EBITDAratio, as defined, of not more than 2.50:1.00.  We were in compliance at May 1,2010.

 

**14.  Segment Information and Geographic AreaInformation**

 

We are a global manufacturer of component and subsystemdevices.  We design, manufacture andmarket devices employing 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.

 

ASC No. 280, “Segment Reporting” (“ASC No. 280”),establishes annual and interim reporting standards for an enterprise’soperating segments and related disclosures about its products, services,geographic areas and major customers. An operating segment is defined as acomponent of an enterprise that engages in business activities from which itmay 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 ASC No. 280, is the Company’s President andChief Executive Officer (“CEO”).

 

TheAutomotive segment supplies electronic and electromechanical devices andrelated products to automobile OEMs, either directly or through their tieredsuppliers, including control switches for electrical power and signals,connectors for electrical devices, integrated control components, switches andsensors that monitor the operation or status of a component or system, andpackaging of electrical components.

 

TheInterconnect segment provides a variety of copper and fiber-optic interconnectand interface solutions for the appliance, computer, networking,telecommunications, storage, medical, military, aerospace, commercial andconsumer markets.  Solutions includesolid-state field effect interface panels, PC and express card packaging,optical and copper transceivers, terminators, connectors, custom cableassemblies and conductive polymer and thick film inks.  Services include the design and installationof fiber optic and copper infrastructure systems, and manufacture of active andpassive optical components.

 

The Power Products segment manufactures current-carryinglaminated bus devices, custom power-product assemblies; powder coated bus bars,braided flexible cables and high-current low voltage flexible power cablingsystems that are used in various markets and applications, includingtelecommunications, computers, transportation, industrial and power conversion,insulated gate bipolar transistor solutions, aerospace and military.

 

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.

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**14.  Segment Information and GeographicArea Information - Continued**

 

Theaccounting policies of the segments are the same as those described in thesummary of significant accounting policies. We allocate resources to and evaluate performance of segments based onoperating income. Transfers between segments are recorded using internaltransfer prices set by us.

 

Thetable below presents information about our reportable segments:

 
| ** **                                             | ** ** | **Fiscal Year Ended May 1,  2010** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                             | ** ** | **Automotive**                          | ** ** | **Inter-  Connect** | ** ** | **Power  Products** | ** ** | **Other** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Net sales                                              |       | $                                       | 199,296    |   | $ | 124,474 |   | $ | 40,746 |   | $ | 9,372 |   | $ | 752 |   | $ | 373,136 |   |
| Transfers between segments                             |       | —                                  |       | (355 | ) | (342 | ) | (55 | ) | (752 | ) | — |   |
| Net sales to unaffiliated  customers                   |       | $                                       | 199,296    |   | $ | 124,119 |   | $ | 40,404 |   | $ | 9,317 |   | $ | — |   | $ | 373,136 |   |
|                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Segment income (loss) before  restructuring charges    |       | $                                       | 16,826     |   | $ | 11,849 |   | $ | 3,926 |   | $ | (2,299 | ) | $ | — |   | $ | 30,302 |   |
|                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Restructuring                                          |       | (5,649                                  | )          | (1,552 | ) | (569 | ) | — |   | — |   | (7,770 | ) |
|                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Segment income (loss)  including restructuring charges |       | $                                       | 11,177     |   | $ | 10,297 |   | $ | 3,357 |   | $ | (2,299 | ) | $ | — |   | $ | 22,532 |   |
|                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Corporate expenses, net                                |       |                                    |       |   |   |   |   |   |   |   |   | (14,715 | ) |
|                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Income before income taxes                             |       |                                    |       |   |   |   |   |   |   |   |   | $ | 7,817 |   |
|                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Depreciation and  amortization                         |       | $                                       | 10,691     |   | $ | 4,756 |   | $ | 1,672 |   | $ | 760 |   | $ | — |   | $ | 17,879 |   |
| Corporate depreciation and  amortization               |       |                                    |       |   |   |   |   |   |   |   |   | 1,530 |   |
|                                                   |       |                                    |       |   |   |   |   |   |   |   |   | $ | 19,409 |   |
|                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Identifiable assets                                    |       | $                                       | 127,613    |   | $ | 125,133 |   | $ | 31,081 |   | $ | 7,659 |   | $ | — |   | $ | 291,486 |   |
| General corporate assets                               |       |                                    |       |   |   |   |   |   |   |   |   | 19,337 |   |
| Total assets                                           |       |                                    |       |   |   |   |   |   |   |   |   | $ | 310,823 |   |

 

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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

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

 
| ** **                                                                                          | ** ** | **Fiscal Year Ended May 2,  2009** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                                          | ** ** | **Automotive**                          | ** ** | **Inter-  Connect** | ** ** | **Power  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     |   | $ | 2,024 |   | $ | 137 |   | $ | (3,506 | ) | $ | — |   | $ | 24,437 |   |
|                                                                                                |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| 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    | ) | $ | (60,370 | ) | $ | (5,748 | ) | $ | (5,130 | ) | $ | — |   | $ | (95,215 | ) |
|                                                                                                |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Corporate expenses, net                                                                             |       |                                    |       |   |   |   |   |   |   |   |   | (15,245 | ) |
|                                                                                                |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Loss before income taxes                                                                            |       |                                    |       |   |   |   |   |   |   |   |   | $ | (110,460 | ) |
|                                                                                                |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| 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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**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

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

 

The table below presents information about ourreportable segments:

 
| ** **                                                             | ** ** | **Fiscal Year Ended May 3,  2008** | ** ** |
|------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                             | ** ** | **Automotive**                          | ** ** | **Inter-  Connect** | ** ** | **Power  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     |   | $ | 5,597 |   | $ | 8,546 |   | $ | (1,798 | ) |   |   | $ | 72,128 |   |
|                                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Restructuring                                                          |       | (4,487                                  | )          | (672 | ) | — |   | — |   |   |   | (5,159 | ) |
|                                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Segment income (loss) including  restructuring charge                  |       | $                                       | 55,296     |   | $ | 4,925 |   | $ | 8,546 |   | $ | (1,798 | ) |   |   | $ | 66,969 |   |
| Corporate expenses, net                                                |       |                                    |       |   |   |   |   |   |   |   |   | (17,163 | ) |
|                                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Income before income taxes  and cumulative effect of accounting change |       |                                    |       |   |   |   |   |   |   |   |   | $ | 49,806 |   |
|                                                                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| 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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Table ofContents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**14.  Segment Information andGeographic Area Information - Continued**

 

The following table sets forth certain geographicfinancial information for fiscal years ended May 1, 2010, May 2, 2009and May 3, 2008.  Geographic netsales and income are determined based our sales and income from our variousoperational locations.

 
| ** **                                                                     | ** ** | **Fiscal Year Ended** | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                     | ** ** | **May 1,**       | ** ** | **May 2,** | ** ** | **May 3,** | ** ** |
| ** **                                                                     | ** ** | **2010**              | ** ** | **2009** | ** ** | **2008** | ** ** |
| Net Sales:                                                                     |       |                  |       |   |   |   |   |
| North American                                                                 |       | $                     | 167,721    |   | $ | 259,539 |   | $ | 356,240 |   |
| Asia Pacific                                                                   |       | 70,022                |       | 53,378 |   | 51,915 |   |
| Malta                                                                          |       | 124,604               |       | 100,594 |   | 127,880 |   |
| Europe, excluding Malta                                                        |       | 10,789                |       | 12,133 |   | 15,038 |   |
|                                                                           |       | $                     | 373,136    |   | $ | 425,644 |   | $ | 551,073 |   |
|                                                                           |       |                  |       |   |   |   |   |
| Income (loss) before income  taxes and cumulative effect of accounting change: |       |                  |       |   |   |   |   |
| North American                                                                 |       | $                     | (18,183    | ) | $ | (81,985 | ) | $ | 27,251 |   |
| Asia Pacific                                                                   |       | 14,657                |       | (30,610 | ) | 4,598 |   |
| Europe                                                                         |       | 11,482                |       | 753 |   | 15,633 |   |
| Income and expenses not  allocated                                             |       | (139                  | )          | 1,382 |   | 2,324 |   |
|                                                                           |       | $                     | 7,817      |   | $ | (110,460 | ) | $ | 49,806 |   |
|                                                                           |       |                  |       |   |   |   |   |
| Property, Plant and Equipment:                                                 |       |                  |       |   |   |   |   |
| North American                                                                 |       | $                     | 23,085     |   | $ | 32,589 |   | $ | 43,070 |   |
| Asia Pacific                                                                   |       | 8,968                 |       | 7,523 |   | 11,847 |   |
| Malta                                                                          |       | 25,042                |       | 24,561 |   | 29,255 |   |
| Europe, excluding Malta                                                        |       | 4,781                 |       | 5,244 |   | 6,108 |   |
|                                                                           |       | $                     | 61,876     |   | $ | 69,917 |   | $ | 90,280 |   |

 

F-31

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Table ofContents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**15. Lease Commitments**

 

We lease certain office andmanufacturing properties under non-cancelable operating leases expiring atvarious dates through fiscal 2015. Rental expense under non-cancelable operating leases amounted to $4,191,$4,841 and $4,032 in fiscal 2010, 2009 and 2008, respectively.

 

Our aggregate minimum rentalcommitments under all non-cancelable operating leases are summarized in thetable below for the next succeeding five fiscal years:

 
| 2011 |   | $     | 2,604  |   |
|------|--------|-------|--------|--------|
| 2012 |   | 1,209 |   |
| 2013 |   | 754   |   |
| 2014 |   | 242   |   |
| 2015 |   | 29    |   |

 

**16.  Pre-Production Costs Relatedto Long-Term Supply Arrangements**

 

We incur pre-productiontooling costs related to the products produced for our customers underlong-term supply agreements.  We had$11,984 and $3,182 as of the fiscal year ended May 1, 2010 and May 2,2009, 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 the tooling.  These amounts are included in our otherassets section in the consolidated balance sheets.  Net revenues and costs on projects aredeferred and recognized over the life of the related long-term supplyagreement.

 

**17.   Fair Value Measurements**

 

Accounting standards define fair value based onan exit price model, establish a framework for measuring fair value where ourassets and liabilities are required to be carried at fair values and providefor certain disclosures related to the valuation methods used within avaluation hierarchy as established with the accounting standards.  The hierarchy priorities the inputs intothree broad levels as follows:

 

·               Level 1 — Quoted pricesin active markets for identical assets and liabilities.

 

·               Level 2 — Quoted pricesin active markets for similar assets and liabilities, or other inputs that areobservable for the asset or liability, either directly or indirectly, forsubstantially the full term of the financial instrument.

 

·               Level 3 — Unobservableinputs that are supported by little or no market activity and that aresignificant to the fair value of the assets and liabilities.  This includes certain pricing models,discounted cash flow methodologies and similar techniques that use significantunobservable inputs.

 

Below is a table thatsummarizes the fair value of assets and liabilities as of May 1, 2010:

 

F-32

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Table ofContents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**17.   Fair Value Measurements - Continued**

 
| ** **                                         | ** ** | **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)                     |       | $                               | 63,821     |   | $ | 63,821 |   | $ | — |   | $ | — |   |
| Assets related to deferred  compensation plan      |       | $                               | 2,985      |   | $ | — |   | $ | 2,985 |   | $ | — |   |
| Total assets at fair value                         |       | $                               | 66,806     |   | $ | 63,821 |   | $ | 2,985 |   | $ | — |   |
|                                               |       |                            |       |   |   |   |   |   |   |
| Liabilities:                                       |       |                            |       |   |   |   |   |   |   |
| Liabilities related to  deferred compensation plan |       | $                               | 2,847      |   | $ | 2,847 |   | $ | — |   | $ | — |   |
| Total liabilities at fair  value                   |       | $                               | 2,847      |   | $ | 2,847 |   | $ | — |   | $ | — |   |

 

----

(1) Includes cash, money-market investmentsand certificates of deposit.

 

**18.  Summary of Quarterly Resultsof Operations (Unaudited)**

 

The following is a summary of unaudited quarterlyresults of operations for the two years ended May 1, 2010 and May 2,2009:

 
| ** **                                                        | ** ** | **Fiscal Year 2010** | ** ** |
|-------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                        | ** ** | **Quarter Ended**    | ** ** |
| ** **                                                        | ** ** | **August 1**    | ** ** | **October 31** | ** ** | **January 30** | ** ** | **May 1** | ** ** |
| Net sales                                                         |       | $                    | 89,776     |   | $ | 98,496 |   | $ | 89,127 |   | $ | 95,737 |   |
| Gross profit                                                      |       | 18,867               |       | 20,712 |   | 14,203 |   | 21,643 |   |
| Net income/(loss)  attributable to Methode Electronics, Inc. |       | (19                  | )          | 2,052 |   | (4,475 | ) | 16,097 |   |
| Net income/(loss) per basic  common share                         |       | $                    | —     |   | $ | 0.05 |   | $ | (0.12 | ) | $ | 0.44 |   |

 
| ** **                                                        | ** ** | **Fiscal Year 2009** | ** ** |
|-------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                        | ** ** | **Quarter Ended**    | ** ** |
| ** **                                                        | ** ** | **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)  attributable to Methode Electronics, Inc. |       | 6,816                |       | 238 |   | (26,985 | ) | (92,552 | ) |
| Net income/(loss) per basic  common share                         |       | $                    | 0.18       |   | $ | 0.01 |   | $ | (0.74 | ) | $ | (2.50 | ) |

 

**Significant Items for Fiscal 2010**

 

The first, second, third and fourth quarter of fiscal2010 includes a pre-tax restructuring charge of $3,611, $3,156, $559 and $444,respectively.  In addition, the first,second, third and fourth quarter of fiscal 2010 includes pre-tax legal feesrelating to the Delphi supply agreement and patent lawsuit of $440, $1,489,$2,356 and $1,481, respectively.

 

F-33

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Table ofContents

 

**METHODEELECTRONICS, INC. AND SUBSIDIARIES**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

 

(Dollaramounts in thousands, except number of shares and per share data)

 

**18.  Summary of Quarterly Resultsof Operations (Unaudited) - Continued**

 

**Significant Items for Fiscal 2009**

 

The first, second, third and fourth quarter of fiscal2009 includes a pre-tax restructuring charge of $4,917, $6,284, $3,796 and$10,281, respectively.  In addition, thethird and fourth quarter of fiscal 2009 include impairment charges for goodwilland intangible assets write-down of $32,678 and $61,696, respectively.

 

**19.  Subsequent Event**

 

On May 5, 2010, it was announced that we havebecome an investor in Eetrex Incorporated, a Boulder, Colorado-based developerand manufacturer of chargers, inverters, and battery systems for hybrid andplug-in hybrid electronic vehicles.  Thisinvestment from us will be used by Eetrex to advance their technology andproduct development efforts.

 

We paid $1,000 and acquired 15 percent, on afully diluted basis, of Eetrex’s stock, and pursuant to the investment, we willappoint two board members.  Methode andExtrex have entered into ancillary agreements in which Methode will becomeExtrex’s sales and manufacturing arm. Additionally, Eetrex granted a non-exclusive, world-wide license to usfor fields including alternative energy, defense and aviation/aerospacemarkets.

 

F-34

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Tableof Contents

 

SCHEDULE II—VALUATION ANDQUALIFYING 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 1,  2010:                          |       |                                                       |       |                                                    |       |                                                           |       |                           |       |   |   |
| Reserves and allowances  deducted from asset accounts: |       |                                                       |       |                                                    |       |                                                           |       |                           |       |   |   |
| Allowance for  uncollectible accounts                  |       | $                                                          | 1,444      |                                                    | $          | 142                                                            |       | $                              | 25         | (1) | $ | 509 | (2) | $ | 1,102 |   |
| Deferred tax valuation  allowance                      |       | 51,377                                                     |       | 943                                                     |       | 1,880                                                          | (1)        | 5,798                          | (3)        | 48,402 |   |
|                                                   |       |                                                       |       |                                                    |       |                                                           |       |                           |       |   |   |
| 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 |   |

 

----

(1) Impact of foreign currency translation andother reclassifications.

(2) Uncollectibleaccounts written off, net of recoveries.

(3) Reductionof valuation allowances on foreign tax assets with no effect on net income.

 

F-35

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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 (23)                                                                                                                                                                                                                                                                                                        |
| 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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Table of 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)                                                                                                                                                |
| 10.31  |   | Fourth  Amendment and Waiver to Credit Agreement, effective as of May 2, 2009,  among the Company as the Borrower, Bank of America, N.A.(19)                                                    |
| 10.32  |   | Letter  Agreements dated August 25, 2008 and September 4, 2008 by and  between Methode Electronics, Inc. and Delphi Automotive Systems, LLC  (19)                                     |
| 10.33* |   | Form of  Methode Electronics, Inc. Restricted Stock and Tandem Cash Award  Cancellation Agreement (20)                                                                                     |
| 10.34* |   | Form of  Non-Qualified Stock Option Award Agreement (21)                                                                                                                                        |
| 10.35* |   | Form of  Amendment to Change in Control Agreement (22)                                                                                                                                          |
|   |   |                                                                                                                                                                                                 |
| 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                                                                                                                  |

 

----

| (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, 2005, 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.                        |

 

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Table of Contents

 
| (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.                          |
| (19) |   | Previously  filed with Registrant’s Form 10-Q for the three months ended  August 1, 2009, and incorporated herein by reference.  |
| (20) |   | Previously  filed with Registrant’s Form 8-K filed December 18, 2009, and  incorporated herein by reference.                     |
| (21) |   | Previously  filed with Registrant’s Form 8-K filed July 9, 2009, and  incorporated herein by reference.                          |
| (22) |   | Previously  filed with Registrant’s Form 8-K filed July 20, 2009, and  incorporated herein by reference.                         |
| (23) |   | Previously  filed with Registrant’s Form 10-Q for the three month ended  October 31, 2004, and incorporated herein by reference. |

 

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*****  ManagementCompensatory Plan

 

----