DB Global Auto Industry Conference January 13, 2015 Safe Harbor - - PowerPoint PPT Presentation

DB Global Auto Industry Conference

January 13, 2015

Safe Harbor

This presentation contains certain forward-looking statements, which reflect management's expectations regarding future events and operating performance and speak only as of the date

• hereof. These forward-looking statements are subject to the safe harbor protection provided

under the securities laws. Methode undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Methode's expectations on a quarterly basis or otherwise. The forward-looking statements in this presentation involve a number of risks and uncertainties. The factors that could cause actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission, such as our annual and quarterly reports. Such factors may include, without limitation, the following: (1) dependence on a small number of large customers, including two large automotive customers; (2) dependence on the automotive, appliance, computer and communications industries; (3) investment in programs prior to the recognition of revenue; (4) timing, volume, quality and cost of new program launches; (5) ability to withstand price pressure; (6) dependence on our supply chain; (7) dependence on the availability and price of raw materials; (8) customary risks related to conducting global operations; (9) currency fluctuations; (10) income tax rate fluctuations; (11) fluctuations in our gross margins; (12) the recognition of goodwill impairment charges; (13) ability to keep pace with rapid technological changes; (14) location of a significant amount of cash outside of the U.S.; (15) ability to successfully benefit from acquisitions and divestitures; (16) ability to avoid design or manufacturing defects; (17) ability to protect our intellectual property; (18) ability to compete effectively; (19) ability to withstand business interruptions; (20) a breach of our information technology systems; and (21) costs and expenses due to regulations regarding conflict minerals. 2

Methode’s Core Strategy

Design and engineer products that incorporate Methode’s broad range

• f field-proven technologies and utilize
• ur global manufacturing capabilities

to deliver unique solutions that provide genuine value for our customers and higher margins for our shareholders.

4

Portfolio of Strong, Global Businesses

FY14 14 Re Reve venue o

• f $77

$772M

Auto tomotiv tive 68% 68% Interf rface ce 22% 22% Power wer Prod

• duct

cts 9% 9% Other er 1% 1% Asia ia 13% 13% Europ rope 24% 24% Nort rth Ameri rica ca 59% 59% ROW ROW, , 4% 4%

Seg Segment Sa Sales Manufacturin ring L Locatio ion S Sale les

5

Competitive Advantages

Field-proven technologies provide solutions for our customers and competitive advantage to Methode Vertical integration and continuous improvement of manufacturing systems Global manufacturing footprint with regional design and engineering capabilities Seasoned launch and design teams

Over er 290 290 paten ents Successful launc nch h of lar large pro rogram ams f for r General M Mot

• tor
• rs, For
• rd

d , , Whirlp irlpool l and d ot

• thers

Low defective part arts per millio illion/ H / High on

• n-tim

ime deliv livery 3 3 prim rimar ary y man anufac acturi ring campuses es

6

Strong Financial Results

* In millions + See Non-GAAP reconciliation on Website

$428 $428 $465 $465 $520 $520 $773 $773

$0 $0 $1 $100 $2 $200 $3 $300 $4 $400 $5 $500 $6 $600 $7 $700 $8 $800 $9 $900 FY11 11 FY12 12 FY13 13 FY14 14

Sales es*+

$0. $0.49 $0. $0.22 $0. $0.46 $1. $1.75

$0 $0.00 00 $0 $0.20 20 $0 $0.40 40 $0 $0.60 60 $0 $0.80 80 $1 $1.00 00 $1 $1.20 20 $1 $1.40 40 $1 $1.60 60 $1 $1.80 80 $2 $2.00 00 FY11 11 FY12 12 FY13 13 FY14 14

EPS PS+

$35. $35.4 $27. $27.5 $41. $41.3 $98. $98.9

$0. 0.0 $2 $20.0 $4 $40.0 $6 $60.0 $8 $80.0 $1 $100.0 $1 $120.0 FY11 11 FY12 12 FY13 13 FY14 14

EBIT ITDA DA*+

22% 22% CA CAGR 53% 53% CA CAGR 41% 41% CA CAGR

7

Strong Financial Results

Sales grew nearly 49% Non-GAAP EPS grew 280%* Operating margin improved to 9.5% from 2.5% SG&A as a percentage of revenues decreased to 10.3% from 12.8% Strong expense leverage

 Increased manufacturing efficiencies due to vertical integration  Favorable raw material pricing and product mix in Power Products  Lower than anticipated scrap on General Motors K2xx programs

FY1 FY14 V Versus P Prior Ye Year ar

* Adjusted for the U.S. deferred tax valuation allowance release and other discrete tax adjustments, the gain related to the sale of Lumidigm in Fiscal 2014, the Malta valuation allowance adjustments and the goodwill and intangible asset impairment charges in Fiscals 2014 and 2013, and the gain recorded in connection with a legal settlement in Fiscal 2013.

8

Strong Financial Results

Sales grew 20% Income from operations grew 60% EPS increased 29% despite higher income tax rate Consolidated gross margins improved to 26.2% from 21.7% Operating margin improved to 15% from 11% Fiscal 2015 guidance

 Sales of $870 to $885 million  Income from operations of $114 to $120 million  EPS of $2.20 to $2.30

FY1 FY15 Q2 Vers ersus P Prio rior Ye Year ar

9

Financial Strength

Strong balance sheet with ~ $234 million in net cash and credit availability* Dividend paid for over 30 years Current dividend yield of 1.0%± FY15 free cash flow estimated between $89M and $93M Named one of America’s Most Trustworthy Companies by Forbes in 2012 and 2013

* As of January 7, 2015 ± As of December 11, 2014

10 10

Automotive Solutions

Well Positioned Product Portfolio

Integ egrated ed Center Stack ck 51% 51% Trans nsmissi sion 11% 11% Other er 3% 3% Hid idden Switc itches 12% 12% Ergon

• nom
• mic

c Switc itches 17% 17% Steering Angle e Senso nsor 6% 6%

FY14 14 A Autom tomot

• tive

ve Sales o

• f $522m

12 12

Integrated Center Consoles

Ford - MyFord & MyLincoln Touch

 2011-2015 MKX, Edge, Explorer  2013-2017 Taurus, Flex, MKS, MKT

General Motors K2xx and 31xx

 2014-2019 Tahoe, Yukon, Silverado, Sierra, Suburban, Yukon XL  2015-2021 Canyon, Colorado

Renault

 First high-volume in Europe launching FY16

North American OEM

 2 program launching FY17  SUV program launching in FY18

Fiat Alpha

 Launching FY18

Aston Martin

 Launching FY17

Major competitors

 Alpine  Delphi  Panasonic  Preh  TRW  Kostal

13 13

One complete system includes

 Integrated center stack  Video screen  Capacitive touch screen

Utilize operator’s cell phone as media server and duplicates phone functionality through vehicle touchscreen Advantages

 Reduces discrete modules, vehicle cabling  Single source for all HMI functions

Earliest deployment FY18

What’s Next?

SmartCenter Stack

 Wired/wireless cell phone connection  Audio  Tactile knobs/buttons

14 14

Transmission Solutions

Integrated power and signal distribution backbone for transmission controller Customers - General Motors, Ford, Volkswagen

GM T76 T76 Lea ead Frame

Lead Fr ad Fram ame First deployment of patented Magneto-elastic technology in transmission Deployed in new generation of fuel efficient, dual clutch transmissions Clu lutch P Pla late Posit ition S Sen ensor

Clu lutch P Plat late P Posit itio ion Sensor

15 15

Patented Magneto-elastic technology Outputs instantaneous and very precise torque measurement Allows automakers the ability to measure real-time torque

• vs. elaborate algorithms that
• nly estimate torque

Currently being prototyped and tested with several automotive OEMs Earliest deployment FY18

What’s Next?

Transmission Torque Measurement

Acti tive a and A Absol

• lute

te N Non

• n-Co

Cont ntact cting ng T Torque ue Sens nsor

Chara ract cteri ristic Toda day Metho hode de’s Magnet eto- ela lasti tic Tech chnol

• log
• gy

To Torque cal calcu culated b by Estimation Measurement Compl pletely ly r real ti time me No Yes Accuracy i acy invar arian ant t to te temp mperatu ture a and alti titude No Yes Accuracy o acy of i initial al calibra ibration m maintain ined d

• v
• ver ti

time me Sufficient Excellent Cal Calibrat ation accu accuracy i in car cars Very good Excellent Cal Calibrat ation accu accuracy i in tru rucks a and d SU SUVs Sufficient Excellent Smooth moothness of

• f shift

Sufficient Excellent

16 16

Torque Sensor for Active Roll Stabilization

Sensor is housed in the flange at the base of the stabilization bar. Control system Planetary gear and motor

Schaeffler award for torque sensor to measure the “roll” in vehicles during cornering Replaces exiting hydraulic systems to give better vehicle handling, lower emissions Precision sensor designed for safety applications Schaeffler plans to introduce to

• ther customers

Estimated award life of 10 years Initially being sold into luxury and performance cars AR ARS S Syst ystem

17 17

What’s Next?

HighPerTouch™

Can be used with most off-the-shelf capacitive touch microcontrollers Provides significantly enhanced touch performance, enabling users to sense touch…

 Through thicker substrates, about 8 times what a smartphone

senses through

 Through air gaps, which provide design freedom  Through thick gloves, key for many automotive and industrial

applications

 With water immunity, for example in automotive door handles Award with Honda for passive entry (door handles) Potential deployment in medical and food service equipment markets

18 18

Interface Solutions

Applia liance 45% 45% Industria rial l Soluti tion

• ns

24% 24% Data ta C Comm

• mm

29% 29% Other her 2% 2%

FY14 Inter erface S e Sales es o

• f $168m

Well Positioned Product Portfolio

20 20

Appliance Touch Panels

TouchSensor’s user interfaces found on over 60% of the solid- state touch interfaces in North America Integrate touch, LED’s, displays and decorative fascia into one sub- assembly Discrete key designs as well as high-resolution LCD touchscreens Main customer brands

 Whirlpool  Maytag  Electrolux  Jenn-Air Je Jenn-Air ir W Wall all Oven Whirlp irlpool W l Was asher an and Drye ryer

21 21

What’s Next?

Digital Printing and Lean Touch™

Digital printing on glass

 Replaces conventional screen printed decorative tempered glass on user interface panels, primarily in white goods  Utilizes 6-color, ultra-violet curable inks dispensed via large-scale, digital printer  Leans out the supply chain and costly inventory  Vertically integrated and in production today with customer commitments to convert another 150K+ units with additional customers evaluating

Lean Touch™ - Digital printing of graphics and circuits via Methode Nano-particle conductive ink

 Replaces conventional printed circuit board  Reduces inventory, lead-time and tooling (print on demand)  Methode market potential of ~ $60M by FY19  Earliest deployment late FY16

22 22

Industrial User Interfaces

Custom engineered control solutions for industrial machinery and equipment Pioneering solutions for the next generation of radio remote control systems Proven expertise with over 300,000 global installations for:

 Concrete pumps  Cranes  Material handling  Drilling rigs

Radio R

• Remote

te C Con

• ntr

trol

• l Sol
• luti

tions

 Locomotives  Work platforms  Explosion proof applications

23 23

Data Solutions

Supporting the data and telecommunications industries

 High speed copper transceivers, loop backs and cages  DCIM enabled cabinet (sensors and centralized data collection)  Fiber optic and copper cable assemblies  Data center cabinets, enclosures and cable management  Intelligent power distribution, assurance & management devices  Largest customer - Cisco

Lithium Ion Uninterruptable Power Supply  Line interactive 6kw Uninterruptible Power Supply (UPS)  Utilizes years of research in H/E vehicle market  Highest power density per UPS footprint providing 6kw in 2 rack

units

 UL testing underway, to be completed by end of FY15  Anticipated sales for FY16

24 24

Transceivers in data communications networks allow flexibility when connecting switches to other networking equipment Copper transceivers used for short distance, high- speed communications and are more cost effective than optical counterparts 10G Copper market estimated to be $100M by 2017 Launching in In FY17

What’s Next?

10G Transceiver Modules

25

Power Product Solutions

Power C r Cablin ling 7% 7% Po Power R Rail il 27% 27% Bu Bus Ba Bars 57% 57% The hermal Mg Mgmt 5% 5% Other her 4% 4%

FY14 P Power P Produc uct Sale les o

• f $73m

Well Positioned Product Portfolio

27 27

Technologies and Capabilities

Methode is a global expert in design, application and manufacture of power distribution products, thermal components and subassembly solutions in the focus markets of

 Big data, cloud computing, server farms  Renewable energy  Military/Aerospace  Automotive/Transportation

Active Power System Integration As a tier one integrator, Methode leverages its core capabilities to provide OEMs cost-effective alternatives to managing multiple suppliers

28 28

EV Bus Bar Assemblies

Nissan Leaf

 North America and Europe  Connect lithium-ion battery cells  Each vehicle requires 48 battery modules  Three Methode assemblies utilized on each battery module

Tesla S

Bat attery y Pac ack Wit ith 48 Bat attery y Modul

• dules

29 29

PowerRail

Patented power-distribution provides flexibility with multiple quick connect interconnect points Easily customized in lengths, number of rails, connect/disconnect options Adds flexibility and redundancy with easy pluggable add-ons, allowing customers systems to operate reliably Currently shipping to “Big Data” customer

30 30

Methode is…possibilities

Dabir Surfaces

New technology aimed at pressure ulcer prevention

 Prevention, care & treatment is an

$11 billion/ year spend in U.S.

 Of that $11 billion, nearly $2

billion is attributed to Hospital Acquired Pressure Ulcers which are no longer covered by Medicaid & Medicare

Pressure Ulcers

 Caused by prolonged pressure,

skin shear, excess moisture and heat*

 Dab

abir ir technolo logy ad addre resses all all the ab above in in an an eas asy y to use, semi- dis isposab able le overlay ay

Licensed IP combined with Methode’s

 Manufacturing expertise  Existing technology portfolio  TouchSensor user interface  Encrypted wireless

communication

* Primary device related factors

32 32

Dabir Surfaces

Provides

 Alternating Micropressure support and

tissue relief

 Adjustable cycle speed and firmness control  Reduced skin shear during operation  Optional low-air-loss Microclimate control  Enhanced infection control as a semi-

disposable overlay

Overlay Features

 Placed between mattress and cover linen  Multi-patient use with standard cleaning  120 hour product life for Surgical  Wireless electronic intelligence  X-ray translucent

33 33

Dabir Surfaces

Application Potential

 Long-duration surgical procedures  Recovery & long-term care settings (Nursing Homes, Home Care)  Any patient group which is either immobilized or at-risk for

ulcer formation

Currently concentrating on long-duration surgical procedures

 Controlled launch at beta hospital  As of November 2014 – 60+ procedures, from 4.0 to 8.5 hours

duration, patients’ weights from 150-400+ pounds No adv dverse t tis issue effects o

• r

r qu qualit lity c concern rns t to da date!

34 34

Dabir Surfaces

Commercialization

 FDA Device Class II – 510k exempt registration complete  Direct regional sales network, national medical representatives

and partners

 Potential for market specific distribution partners

FY15 second quarter introductory sales Continue to develop product and IP - Initiating 4 new surgical overlay geometries to accommodate specialized surgeries prone to ulcer development Clinical Research

 Dialysis – have completed outpatient dialysis comfort study  Pressure mapping and limited MRI perfusion study performed at

Cleveland Clinic with good results

35 35

Investing In Our Future

Will continue to follow a balanced strategy of investing in our business, maintaining a strong and flexible financial position and returning cash to shareholders

 Continue to invest in core businesses to grow, defend and improve our competitive position  Continue to invest in engineering and launch management to provide customer solutions and near-flawless execution  Maintain strong and flexible balance sheet with ample liquidity to support continued growth organically and through acquisitions

Investing approximately 3-4% of net sales in R&D Leverage global footprint, vertical integration and continuous manufacturing systems improvement

36 36

Investment Appeals

3-year (FY11-FY14) sales CAGR of 22%, EPS CAGR of 53% and EBITDA CAGR of 41% Portfolio of products and solutions to meet customer needs in several growing end markets Opportunities for expansion into additional end markets Global engineering, design and low-cost manufacturing Unique patented technologies – strong product development heritage Seasoned management team Margin expansion through sales growth and expense leverage Strong balance sheet with sufficient liquidity to fund growth

• rganically and through acquisition

37 37

Thank You.

38 38