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Innovation Drives Long-Term Growth
September 2013
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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 one large automotive customer; (2) dependence on the automotive, appliance, computer and communications industries; (3) customary risks related to conducting global operations; (4) timing, quality and cost of new program launches; (5) ability to avoid design or manufacturing defects; (6) ability to compete effectively; (7) dependence on the availability and price of raw materials; (8) dependence on our supply chain; (9) downturns in the automotive industry or the bankruptcy of certain automotive customers; (10) ability to keep pace with rapid technological changes; (11) ability to protect our intellectual property; (12) ability to withstand price pressure; (13) location of a significant amount of cash outside of the U.S.; (14) the recognition of goodwill impairment and long-lived asset charges; (15) currency fluctuations; (16) ability to successfully benefit from acquisitions and divestitures; (17) ability to withstand business interruptions; (18) income tax rate fluctuations; (19) a breach of our information technology systems; and (20) the cost and implementation of SEC disclosure and reporting requirements regarding conflict minerals.
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Hitting Its Stride
> Transformed to supplier of customized and highly innovative solutions to automotive, white goods and industrial markets
> FY13 sales grew nearly 12% over FY12 > FY13 non-GAAP EPS of $0.52* compared to FY 12 EPS of $0.22 > Rapid revenue growth—15% sales CAGR projection FY12-FY16 > Sustainable innovation, robust technology—290 patents > Capitalizing on fundamental changes in large, growth markets > Strong balance sheet—~$73.4 million in net cash and credit
availability** > Current dividend yield of 1.1%***
**as of July 27, 2013 ***as of September 13, 2013
*Adjusted for the $20.0 million Delphi settlement,$.3 million Eetrex impairment,$2.1 million Tandem Cash Award expense and $7.6 million increase in the Malta deferred tax asset.
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Three World-Class Solution Groups Au
tom
otiv
e • Integrated center console modules
• Electronic and electromechanical devices
• Customized sensors In
terc
onne
ct • Field-effect technology
and user-interface panels
• Safety radio remote controls
• Copper and fiber optic interconnect solutions
• Conductive polymer and thick film inks
Pow
er P
rodu
cts • High current-carrying
bus devices
• Power electronics for chargers, inverters
• Battery management systems for stationary storage systems
• Flexible cabling systems
• Thermal management and high current interconnects
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Global Operations
FY13 Sales By Manufacturing Location
FY13 Sales By Segment
59.7% 27.0%
10.1%
3.2% Automotive
Interconnect
Power Solutions
Other
50.0%
31.0%
19.0% North America
Europe
Asia
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Leader in “Connected” and “Green” Solutions for the Automotive Industry
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Connected Solution: Center Consoles
> “Center Stack is new high-stakes battleground” Auto News September 5, 2011
> Today’s center stacks incorporate • Touchscreens
• Touch panels
• Ambient lighting
• Integrated software which allows multiple components to communicate within, as well as outside of the vehicle
> Methode one of a select few global suppliers with both technology and manufacturing expertise, as well as ability to integrate everything into stylistic design
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Connected Solution: Center Consoles
North American Automotive Major Integrated Center Stack Competitors
Supplier Customer Global MFG Paint and Laser Touch Experience
Methode GM, Ford All 3 regions Yes Yes Alpine GM, Chrysler All 3 regions Yes Minimum
TRW Ford, Chrysler All 3 regions No Minimum (samples only)
Delphi GM All 3 regions Yes Minimum (samples only)
Preh Ford All 3 regions Yes Yes
Panasonic GM, Ford All 3 regions No Yes
Kostal Ford, European OEMs
North America, Europe
No No
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Connected Solution: Center Consoles
> Two awards with Ford for Model Years 2011 and 2013
• Utilize TouchSensor’s Field-Effect and Integrated Back Lighting technologies
• $40 million annually at full production in FY13
• 2011 MKX, Edge, & Explorer • 2013 Taurus, Flex, MKS, & MKT • Standard on Lincoln models, estimated 80%
take rate on Ford models • Five-year program life • PACE 2012 Award Winner for Field-Effect™
solid-state switches
Touch-sensitive Audio and Climate controls utilize Field-Effect technology
and Integrated Back Lighting
Integrated Center Consoles For MyFord and MyLincoln Touch
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Connected Solution: Center Consoles
> GM K2xx truck, K2xx SUV and 31xx lightweight truck platforms
• Five-year program life
• No take rate, standard on every model
• Methode will provide the entire center console including the display, touchscreen and an articulation design on certain platforms
“Next Generation” Integrated Center Consoles For GM Platform Production
K2xx Truck Q1 FY14 (May 2013)
K2xx SUV Q3 FY14 (January 2014)*
31xx Light Truck Q2 FY15 (August 2014)*
*Expected
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Connected Solution: Center Consoles
“Next Generation” Integrated Center Consoles For GM
Platform 2014 Chevrolet Silverado Crew Cab
2014 GMC Sierra Crew Cab
2014 Chevrolet Silverado Extended Cab
2014 GMC Sierra Extended Cab
2014 Chevrolet Silverado Regular Cab
2014 GMC Sierra Regular Cab
2014 Chevrolet Tahoe
2014 GMC Yukon
2014 Chevrolet Suburban
2014 GMC Yukon XL
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Major Automotive Revenues – FY14
*Based on LMC Automotive data
Ranked In Size Of Sales NORTH AMERICA
General Motors Group Ford Group
Mitsubishi Motors Fiat-Chrysler Group Volkswagen Group
EUROPE Volkswagen Group
Ford Group Tata Group
Fiat-Chrysler Group Renault-Nissan Group
Aston Martin McLaren
PSA Group Mazda Motors
General Motors Group BMW Group Geely Group
Mitsubishi Motors Suzuki Group
ASIA General Motors Group
Ford Group Mitsubishi Motors Volkswagen Group
Hyundai Mazda Motors
Great Wall Motor Dongfeng Motor
SAIC Group Renault-Nissan Group
Yulong PSA Group
Fiat-Chrysler Group Tata Group
Suzuki Group BMW Group
SOUTH AMERICA Ford Group
General Motors Group Volkswagen Group
PSA Group Fiat-Chrysler Group
AFRICA General Motors Group
Volkswagen Group Ford Group
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Major Automotive Revenues – FY14
*Based on LMC Automotive data
Percent of Automotive Sales Worldwide*
General Motors Group 51.5%
Ford Group 25.7%
Volkswagen Group 5.9%
Mitsubishi Motors 3.3%
Fiat-Chrysler Group 3.1% All Others
10.5%
General Motors Group 51.5% Ford Group 25.7%
Volkswagen Group 5.9% Mitsubishi Motors 3.3%
Fiat-Chrysler Group 3.1% Tata Group 2.8%
Renault-Nissan Group 2.5% Aston Martin 1.3%
Mazda Motors 1.0% PSA Group 0.8% McLaren 0.7% Hyundai 0.5%
BMW Group 0.3% Geely Group 0.2%
Great Wall Motor 0.2% Dongfeng Motor 0.1%
SAIC Group 0.1% Yulong 0.1%
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Connected Solution: Transmission Lead Frame
> Integrated power and signal distribution backbone for transmission controller
> Highly complex insert molded assembly reduces electrical connections required with traditional design
> Improves system reliability, reduces costs
> Three awards (2 for GM, 1 for Ford) for $40m in average annual revenue at full production in FY14
GM T76 Lead Frame
Ford 6F35 Lead Frame
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Connected Opportunities: Center Consoles
> One of fastest trends in automotive-interior electronics is to replace traditional mechanical switches with solid-state switches
> Lower costs • Lower tooling bills than traditional mechanical systems • Ford Edge - one complete panel versus bezel with 21 individual buttons • Electronic design can be carried over to new platforms
> Saves space where space is at a premium - Thinner than traditional mechanical solutions
> Opportunity for Methode: Once on a platform, have opportunity to provide other innovative and proprietary content
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Connected Opportunities: Touchscreens
> Capacitive touchscreens with functionality similar to iPhone or iPad
• MEI’s capacitive screens considered superior solution
• Have been rigorously tested to automotive standards
> According to IMS Research, in 2011, 5.8 million automotive touchscreens were sold globally and sales are expected to rise six-fold by 2019 to 35.7 million
> iSupply recently estimated that 9 out of 10 vehicles sold in U.S. now offer screens within the center console and those that offer touchscreens almost entirely utilize resistive technology
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Green Solutions: EV Bus Bars
Bus Bar Assemblies for Nissan Leaf Electric Vehicle > Nissan North America and
Europe Lithium-ion battery cells > Each vehicle requires 48 battery
modules > Three Methode assemblies
utilized on each battery module > Methode developed and
implemented an innovative, automated production system
Nissan Battery Pack with 48 battery modules
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Green Solutions: Transmission Sensor
Clutch Plate Position Sensor > Magneto-elastic technology enables accurate and repeatable
measurement > Deployed in new generation of fuel efficient, dual clutch
transmissions > Resolution nearly ten times current, commercially viable
technology > Withstands harsh environment of transmission > Operates at temperatures in excess of 360°F > $6m in revenue in FY15, ramping to $19m in FY16
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Green Opportunities: Transmission Torque Sensor
Characteristic Today Methode’s
Magneto-elastic Technology
Torque calculated by Estimation Measurement
Completely real time No Yes
Accuracy invariant to temperature and altitude
No Yes
Accuracy of initial calibration maintained over time
Sufficient Excellent
Calibration accuracy in cars Very good Excellent
Calibration accuracy in trucks and SUVs
Sufficient Excellent
Smoothness of shift Sufficient Excellent
Fuel efficiency Sufficient Very good
Magneto-elastic Torque-Sensing Technology
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TouchSensor, Hetronic And Data Solutions Enabling Differentiation
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User Interface Solutions: White Goods
> TouchSensor’s user interfaces are found on over 60% of the solid-state touch interfaces in North America
• Integrate Touch, LED’s & Displays and decorative fascia into one UI sub-assembly
• Offering includes discrete key designs as well as high-resolution LCD touchscreens
Jenn-Air Wall Oven KitchenAid Refrigerator Electrolux Dishwasher
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User Interface Solutions: White Goods
> First program win in laundry space with integrated Touch
• Launched in Q2 FY 2013
• Includes Whirlpool “Duet” and Maytag “Maxima” front-load product lines
• $30-40 million at full production in FY14
• Consumer Reports recently rated two versions of this platform as best in class
Whirlpool Washer/Dryer
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User Interface Solutions: Industrial
Hetronic Safety Radio Remote Control Solutions
> Used on five continents to control multi-million dollar equipment safely and precisely
• Locomotives, Rail Car Movers, Trains
• Construction Equipment - Tower Cranes, Loader Cranes, Concrete Pumps, Excavators, Front loaders
• Welding & Utility Equipment
• Mining, Explosion Proof and Material Handling equipment
Hostile Environments
Loader Cranes
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User Interface Solutions: Industrial
Hetronic Safety Radio Remote Control Solutions
> Pioneering features • Fail Safe and Redundant Emergency Stop
Circuitry
• Interference Protection
• Remotely Programmable
• Operator friendly and impact resistant
> Designed to withstand the most challenging work environments
Container Handlers
Drilling Applications
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TouchSensor & Hetronic Opportunities
TouchSensor > “Touch Experts” – combining
touch technology, modern illumination techniques, aesthetics and unrivaled launch management capabilities
> Opportunities in • Medical equipment • Vending • Industrial and consumer level sensing
(LevelGuard brand)
Hetronic > Transition to one-stop shop
- from component supplier to control solution provider
> Opportunities in • Gas & Oil – explosion proof
components • Railway/Locomotive – radio
remote control + pneumatics • Construction - Programmable
logic controllers Ruggedized touchscreens
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Innovative Power Distribution and Thermal Management Solutions
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Power Solutions: High Current Demand
> Design and manufacture innovative products for military, aerospace, industrial and automotive markets
> For • Wind turbines • Solar panels • Electric and Hybrid vehicles • Next generation light rail • New high efficiency servers • Fighter jet radar systems • Boeing Dreamliner
> Solutions • Patented, high current inter-
connects • Thermal management capabilities • Flexible power distribution devices • High voltage power electronics
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Power Solutions: High Current Demand
> Collaborate with customers to develop robust systems that meet stringent electrical and thermal performance, weight and cost needs
> Fortune 100 customer base
> Increase power distribution density
> Improve energy efficiency
> Reduce heat losses
> Variety of applications and products across many end markets
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Power Opportunities: Eetrex
> 90% ownership in Eetrex - developer of power electronics such as chargers, inverters and battery management systems
> Eetrex specializes in application of proprietary embedded system electronics for super efficient power management
> Focused on development of stationary storage to replace lead-acid batteries with lithium ion solutions
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Rebuilding Revenue and Improving Profitability and Margins
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Future Revenue Growth*
> Sales projections as of July 2013
> Projections are approximate and may vary 15%-20% based on economic conditions, customer demands, and other factors
> Approximately 10% of base business goes end of life each year
> Utilized LMC Automotive volume data and other sources
> Projection for FY 14 represents midpoint of guidance range
*All numbers millions of dollars
$373 $428 $465 $520 $685 $720 $720
$105
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
FY10 FY11 FY12 FY13 FY14 FY15 FY16
Methode’s Historical High Sales of $555 in FY08
Approximate 15% CAGR
Pending
$825
Booked and Base Actual
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Major Anticipated New Revenues
FY14
> GM center console
> TouchSensor laundry program (Fully ramped)
> Nissan-Renault EV busbars
> Volkswagen, Jaguar, McLaren ergonomic switches
FY15
> Additional GM center console
> GM Linear Sensor
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Recent Financial History
> FY13 vs. FY12 • Sales improved 11.8%
New product introductions & higher market penetration in North America
Offset by continued softness in Europe
• Significantly lower effective tax rate
> FY13 - Development and launch costs • Lowered net income $7.1m or $0. 19 per share
• Lowered consolidated gross margins 2.3 percentage points
• GM development costs absorbed as product produced and revenue realized beginning in Q1 FY14
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Recent Financial History
> Q1 FY 14 • Sales improved nearly 41% over Q1 FY13
Strong sales for General Motors and Ford center console programs
New product launches in European Automotive and North American Power Products
Strong base appliance sales
• Net income grew 250% to $13.6 million
Higher sales
Strong expense leverage
Increased manufacturing efficiencies due to vertical integration of paint and laser etch process
Favorable raw material pricing and favorable product mix in Power Products
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Recent Financial History
> Q1 FY 14
• Consolidated gross margins improved to 20.3% compared to 18%
Increased sales
Vertical integration and favorable raw material pricing and sales mix in the Power Products segment
Lower than anticipated scrap on the Ford center console and K2XX programs
• Consolidated SG&A as a percentage of revenues decreased to 11.3% from 14.5% in Q1 FY13
• Increased FY14 guidance to sales of $670 million to $700 million and EPS of $1.40 to $1.60
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FY14 Guidance
> Q2 should be similar to Q1 in sales and earnings > Q3 affected by typical holiday slowdowns > Q4 includes planned production of General Motors SUV center
consoles > Low end of guidance reflects
• Concern regarding stabilization of European economy • Potential softening in Interconnect and Power Products segment sales • Potential production delays of new products
> High end of range anticipates • Stabilization in Europe • Higher domestic Automotive revenues • Potential upside from Power Products
Reported FY13 Guidance FY14
Total Revenue $520 $670 - $700
EPS $0.52 $1.40 - $1.60
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Rebuilding Margins
FY11 FY12 FY13 FY14 Target FY15 Target
Automotive 17.6% 14.1% 14.0% High teens% Low to mid 20%
Interconnect 30.3% 28.3% 26.2% Mid to high 20% High 20 to low 30%
Power 21.0% 16.5%* 17.3%* Low 20% Mid 20%
Gross Margins
* Includes Eetrex development costs. Without these costs, gross margins would have been 21.8% in FY 12 and 22.0% in FY13.
> Automotive improvement driven by
• Vertical integration of paint and laser etch process
• Revenue from GM K2XX • Methode capacitive touchscreen in FY15 • Europe and Asia already meeting margin
goals
> Interconnect improvement driven by
• Improved mix from greater revenue contribution from Hetronic
> Power impacted by • Eetrex development costs • Lower military program • Cost control measures
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Rebuilding Margins
FY11 FY12 FY 13
Auto 5.9% 3.7% 5.5%
Interconnect 14.4% 14.1% 13.1%
Power 7.1% 3.2% 1.6%
Consolidated 3.7% 2.5% 4.2%
Pre-Tax Operating Margins
> FY14 goal 9-10% consolidated
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Why Invest in Methode Today?
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Investing In Our Future Growth
> Continue strong investment in engineering group to bid new business opportunities and launch programs
• Most new business wins do not realize revenue for 18-24 months
> Invested approximately 4.6% of net sales in R&D in FY 2013
• Strong business case
• Most development programs will not realize revenues for 3-5 years
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Hitting Our Stride
> Execution, seasoned launch and design teams
> World-class manufacturing capabilities due to Automotive pedigree
> Vertical integration and continuous manufacturing systems improvement
> Technology differentiates customers’ products to drive higher margins
> Increasingly working at “design” phase versus “bid” phase
> Strong backlog of booked programs
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Methode’s Business Strategy
Shareholder Value
Innovation
New Products Offering
Expanded Content
Revenue Growth
Improved Margins and Profitability