Methode Electronics Inc 10-Q for FY2026 Q1
Methode Electronics Inc (MEI)
About this 10-Q
Methode Electronics Inc filed this 10-Q on September 9, 2025, covering the quarter ended August 2, 2025 (FY2026 Q1).
Headline figures
Quarter ended August 2, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $240.5M
- down 7.0% from $258.5M a year earlier
- Net loss
- $10.3M
- compared with a net loss of $18.3M a year earlier
- Diluted EPS
- -$0.29
- compared with -$0.52 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the quarterly period ended
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the transition period from ______ to ______
Commission file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
(Registrant’s telephone number, including area code) (
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
At September 5, 2025, the registrant had
METHODE ELECTRONICS, INC.
INDEX
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PART I. |
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Item 1. |
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2 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) - Three Months Ended August 2, 2025 and July 27, 2024 |
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Condensed Consolidated Balance Sheets as of August 2, 2025 (unaudited) and May 3, 2025 |
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Condensed Consolidated Statements of Shareholders’ Equity (unaudited) - Three Months Ended August 2, 2025 and July 27, 2024 |
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Condensed Consolidated Statements of Cash Flows (unaudited) - Three Months Ended August 2, 2025 and July 27, 2024 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 5. |
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Item 6. |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share data)
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Three Months Ended |
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August 2, 2025 |
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July 27, 2024 |
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(13 Weeks) |
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(13 Weeks) |
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Net sales |
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$ |
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$ |
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Cost of products sold |
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Gross profit |
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Selling and administrative expenses |
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Amortization of intangibles |
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Income (loss) from operations |
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Interest expense, net |
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Other expense, net |
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Pre-tax loss |
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Income tax expense |
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Net loss |
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$ |
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$ |
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Loss per share: |
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Basic |
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Diluted |
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$ |
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$ |
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Cash dividends per share |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
2
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(in millions)
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Three Months Ended |
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August 2, 2025 |
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July 27, 2024 |
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(13 Weeks) |
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(13 Weeks) |
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Net loss |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Foreign currency translation adjustments |
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Derivative financial instruments |
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Other comprehensive income |
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Comprehensive loss |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
3
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
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August 2, 2025 |
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May 3, 2025 |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Income tax receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Long-term assets: |
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Property, plant and equipment, net |
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Goodwill |
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Other intangible assets, net |
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Operating lease right-of-use assets, net |
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Deferred tax assets |
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Pre-production costs |
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Other long-term assets |
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Total long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued employee liabilities |
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Other accrued liabilities |
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Short-term operating lease liabilities |
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Short-term debt |
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Income tax payable |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt |
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Long-term operating lease liabilities |
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Other long-term liabilities |
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Deferred tax liabilities |
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Total long-term liabilities |
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Total liabilities |
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Shareholders' equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Treasury stock, |
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Retained earnings |
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
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$ |
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$ |
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See notes to condensed consolidated financial statements
4
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(in millions, except share data)
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Three Months Ended August 2, 2025 (13 Weeks) |
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Common |
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Common |
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Additional |
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Accumulated |
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Treasury |
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Retained |
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Total |
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Balance as of May 3, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of restricted stock, net of tax withholding |
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( |
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— |
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— |
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( |
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( |
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Cancellation of restricted stock |
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( |
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( |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Dividends on common stock |
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— |
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— |
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— |
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— |
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— |
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( |
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Balance as of August 2, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Three Months Ended July 27, 2024 (13 Weeks) |
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Common |
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Common |
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Additional |
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Accumulated |
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Treasury |
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Retained |
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Total |
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Balance as of April 27, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of restricted stock, net of tax withholding |
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( |
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— |
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— |
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( |
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( |
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Cancellation of restricted stock |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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Conversion of cash bonus to RSUs |
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— |
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— |
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— |
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— |
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— |
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Purchases of common stock |
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( |
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( |
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— |
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— |
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— |
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( |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Dividends on common stock |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance as of July 27, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
5
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
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Three Months Ended |
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August 2, 2025 |
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July 27, 2024 |
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(13 Weeks) |
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(13 Weeks) |
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Operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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Amortization of debt issuance costs |
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Partial write-off of unamortized debt issuance costs |
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Gain on sale of property, plant and equipment |
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Impairment of long-lived assets |
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Inventory obsolescence |
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Change in deferred income taxes |
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Other |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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( |
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Prepaid expenses and other assets |
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( |
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Accounts payable |
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( |
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Other liabilities |
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( |
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Net cash provided by operating activities |
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Investing activities: |
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Purchases of property, plant and equipment |
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( |
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Proceeds from sale of property, plant and equipment |
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Net cash used in investing activities |
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( |
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( |
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Financing activities: |
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Taxes paid related to net share settlement of equity awards |
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( |
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( |
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Repayments of finance leases |
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( |
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( |
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Debt issuance costs |
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( |
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( |
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Purchases of common stock |
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( |
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Cash dividends |
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( |
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( |
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Proceeds from borrowings |
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Repayments of borrowings |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of foreign currency exchange rate changes on cash and cash equivalents |
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Increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents at beginning of the period |
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Cash and cash equivalents at end of the period |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid during the period for: |
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Interest |
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$ |
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$ |
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Income taxes, net of refunds |
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$ |
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$ |
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Operating lease obligations |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
6
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Description of Business and Summary of Significant Accounting Policies
Description of business
Methode Electronics, Inc. (the “Company” or “Methode”) is a leading global supplier of custom engineered solutions with sales, engineering and manufacturing locations in North America, Europe, Middle East and Asia. The Company designs, engineers and produces mechatronic products for Original Equipment Manufacturers (“OEMs”) utilizing its broad range of technologies for user interface, light-emitting diode (“LED”) lighting system, power distribution and sensor applications.
The Company’s solutions are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus and rail), cloud computing infrastructure, construction equipment and consumer appliance.
Basis of presentation
The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. These interim condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments, except as otherwise disclosed) that management believes are necessary for a fair presentation of the results of operations, financial position and cash flows of the Company for the interim periods presented. These financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Form 10-K for the year ended May 3, 2025, filed with the SEC on July 9, 2025. Results may vary from quarter to quarter for reasons other than seasonality.
Financial reporting periods
The Company’s fiscal year ends on the Saturday closest to April 30 of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. The current fiscal year ending May 2, 2026 is a 52-week fiscal year. The three months ended August 2, 2025 and July 27, 2024 were both
Use of estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These estimates and assumptions are subject to an inherent degree of uncertainty and may change, as new events occur, and additional information is obtained. As a result, actual results may differ from previously estimated amounts, and such differences may be material to the condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.
Recent accounting pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU No. 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The Company will include the disclosures required under ASU No. 2023-09 in its Annual Report on Form 10-K for the fiscal year ending May 2, 2026. The Company expects the adoption to only impact its financial statement disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures.” ASU 2024-03 requires public entities to disclose more detailed information about certain costs and expenses presented in the income statement, including inventory purchases, employee compensation, selling expenses and depreciation. ASU 2024-03 will become effective for the Company’s annual periods beginning in fiscal 2028. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its financial statement disclosures.
Summary of significant accounting policies
The Company’s significant accounting policies are described in Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the consolidated financial statements included in the Company’s Form 10-K for the year ended May 3, 2025. There have been no material changes to the significant accounting policies in the three months ended August 2, 2025.
7
Foreign currency translation
The functional currencies of the majority of the Company’s foreign subsidiaries are their local currencies. The results of operations of these foreign subsidiaries are translated into U.S. dollars using average monthly rates, while the assets and liabilities are translated using period-end exchange rates. The resulting translation adjustments are recorded as a component of accumulated other comprehensive loss (“AOCL”). Gains and losses arising from transactions denominated in a currency other than the functional currency, except certain long-term intercompany transactions, are included in the condensed consolidated statements of operations in other expense, net. Net foreign exchange loss was $
Note 2. Revenue
The Company generates revenue from manufacturing products for customers in diversified global markets under multi-year programs. Typically, these programs do not contain a firm commitment by the customer for volume or price and do not reach the level of a performance obligation until the Company receives either a purchase order and/or a materials release from the customer for a specific quantity at a specified price, at which point an enforceable contract exists. Contracts may also provide for annual price reductions over the production life of a program, and prices may be adjusted on an ongoing basis to reflect changes in product content/cost and other commercial factors.
The majority of the Company’s revenue is recognized at a point in time. The Company has determined that the most definitive demonstration that control has transferred to a customer is physical shipment or delivery, depending on the contractual shipping terms, except for consignment transactions. Consignment transactions are arrangements where the Company transfers product to a customer location but retains ownership and control of such product until it is used by the customer. Revenue for consignment arrangements is recognized upon the customer’s usage. The Company’s revenue also includes customer cost recoveries, which represent reimbursements the Company receives from customers for incremental costs associated with spot purchases of raw materials and premium freight incurred in fulfilling its performance obligation to the customer. Given these cost recoveries are generally negotiated after contract inception, the Company accounts for these cost recoveries as a modification to the existing contract. The Company recognizes cost recoveries as revenue when (or as) the remaining performance obligations per the contract are satisfied, or on the modification date if all performance obligations under the contract have been previously satisfied.
Revenue associated with products which the Company believes have no alternative use (such as highly customized parts), and where the Company has an enforceable right to payment, are recognized over time. Revenue is recognized based on progress to date, which is typically ratably over the production process through transfer of control to the customer.
The Company’s payment terms with its customers are typically
Contract balances
The Company receives payment from customers based on the contractual billing schedule and specific performance requirements established in the contract. Billings are recorded as accounts receivable when an unconditional right to the contractual consideration exists. A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer. A contract liability exists when an entity has received consideration, or the amount is due from the customer in advance of revenue recognition. Contract assets and contract liabilities are recognized in other current assets and other accrued liabilities, respectively, in the condensed consolidated balance sheets and were immaterial as of August 2, 2025 and May 3, 2025.
8
Disaggregated revenue information
The following table represents a disaggregation of revenue from contracts with customers by segment and geographical location. Net sales are attributed to regions based on the location of production. Though revenue recognition patterns and contracts are generally consistent, the amount, timing and uncertainty of revenue and cash flows may vary in each reportable segment due to geographic and economic factors.
|
|
Three Months Ended August 2, 2025 (13 Weeks) |
|
|||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Total |
|
||||
Geographic net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Europe, the Middle East & Africa ("EMEA") |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goods transferred at a point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Goods transferred over time |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Three Months Ended July 27, 2024 (13 Weeks) |
|
|||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Total |
|
||||
Geographic net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goods transferred at a point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Goods transferred over time |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 3. Restructuring and Asset Impairment Charges
Restructuring and asset impairment charges includes costs related to restructuring actions taken by the Company as well as long-lived asset impairments.
The Company continually monitors market factors and industry trends and may take restructuring actions to reduce overall costs and improve operational profitability as appropriate. Restructuring actions generally result in charges for employee termination benefits, plant closures, asset impairments and contract termination costs.
Components of restructuring and asset impairment charges were as follows:
|
|
Three Months Ended |
|
|||||
|
|
August 2, 2025 |
|
|
July 27, 2024 |
|
||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Employee termination benefits |
|
$ |
|
|
$ |
|
||
Asset impairment charges |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
9
The table below presents restructuring and asset impairment charges by reportable segment.
|
|
Three Months Ended |
|
|||||
|
|
August 2, 2025 |
|
|
July 27, 2024 |
|
||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Automotive |
|
$ |
|
|
$ |
|
||
Industrial |
|
|
|
|
|
|
||
Interface |
|
|
|
|
|
|
||
Eliminations/Corporate |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Recognized in: |
|
|
|
|
|
|
||
Cost of products sold |
|
$ |
|
|
$ |
|
||
Selling and administrative expenses |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
The Company’s restructuring liability was $
Note 4. Income Taxes
For the three months ended August 2, 2025, the Company utilized the discrete effective tax rate method, treating the year-to-date period as if it was the annual period to calculate its interim income tax provision, as allowed by ASC 740-270-30-18, “Income Taxes-Interim Reporting.” The Company concluded it could not use the estimated annual effective tax rate method as it could not calculate a reliable estimate of the annual effective tax rate due to it being highly sensitive to minor changes in the forecasted amounts, thus generating significant variability in the estimated annual effective tax rate and distorting the customary relationship between income tax expense and pre-tax loss in interim periods.
The Company’s income tax expense and effective tax rate for the three months ended August 2, 2025 and July 27, 2024 were as follows:
|
|
Three Months Ended |
|
|||||
|
|
August 2, 2025 |
|
|
July 27, 2024 |
|
||
($ in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Pre-tax loss |
|
$ |
( |
) |
|
$ |
( |
) |
Income tax expense |
|
|
|
|
|
|
||
Effective tax rate |
|
|
( |
)% |
|
|
( |
)% |
The effective tax rate for the three months ended August 2, 2025 differs from the U.S. federal statutory tax rate of
The Organization for Economic Cooperation and Development’s (“OECD”) Pillar II Initiative introduced a
10
The Company’s gross unrecognized income tax benefits were $
On July 4, 2025, the United States Congress passed the budget reconciliation bill H.R. 1, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA makes permanent many of the provisions previously enacted as part of the 2017 Tax Cut and Jobs Act that were set to expire at the end of 2025 and includes other changes to certain U.S. corporate tax provisions. The changes to U.S. tax law that were enacted under the OBBBA include modifications to capitalization of research and development expenses, changes to interest expense limitations and accelerated fixed asset depreciation. Based on the Company’s current U.S. tax position, the changes did not have a significant impact to the effective tax rate.
Note 5. Balance Sheet Components
Cash and cash equivalents
Cash and cash equivalents consist of cash and highly liquid investments with maturities of three months or less. Highly liquid investments include money market funds which are classified within Level 1 of the fair value hierarchy.
Accounts receivable and allowance for doubtful accounts
Accounts receivable are customer obligations due under normal trade terms and are presented net of an allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts based on the current expected credit loss impairment model. The Company applies a historical loss rate based on historic write-offs to aging categories. The historical loss rate is adjusted for current conditions and reasonable and supportable forecasts of future losses, as necessary. The Company may also record a specific reserve for individual accounts when it becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer’s operating results or financial position. The allowance for doubtful accounts balance was $
Inventories
(in millions) |
|
August 2, 2025 |
|
|
May 3, 2025 |
|
||
Finished products |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Raw materials |
|
|
|
|
|
|
||
Gross inventories |
|
|
|
|
|
|
||
Inventory reserves |
|
|
( |
) |
|
|
( |
) |
Total inventories, net |
|
$ |
|
|
$ |
|
||
Property, plant and equipment
(in millions) |
|
August 2, 2025 |
|
|
May 3, 2025 |
|
||
Land |
|
$ |
|
|
$ |
|
||
Buildings and building improvements |
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Total property, plant and equipment, gross |
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
11
Depreciation expense was $
Pre-production tooling costs related to long-term supply arrangements
The Company incurs pre-production tooling costs related to products produced for its customers under long-term supply arrangements. Engineering, testing and other costs incurred in the design and development of production parts are expensed as incurred, unless the costs are reimbursable by the customer. As of August 2, 2025 and May 3, 2025, the Company had $
Costs for molds, dies and other tools used in products produced for its customers under long-term supply arrangements for which the Company has title are capitalized in property, plant and equipment and amortized over the shorter of the life of the arrangement or the estimated useful life of the assets. As of August 2, 2025 and May 3, 2025, Company-owned tooling was $
Note 6. Goodwill and Other Intangible Assets
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination.
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Total |
|
|||
Balance as of May 3, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|||
Gross balance |
|
|
|
|
|
|
|
|
|
|||
Accumulated impairment |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance as of August 2, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
A summary of goodwill by reporting unit is as follows:
(in millions) |
|
August 2, 2025 |
|
|
May 3, 2025 |
|
||
Grakon Industrial |
|
$ |
|
|
$ |
|
||
Nordic Lights |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
The Company tests goodwill and indefinite-lived intangible assets for impairment on an annual basis as of the beginning of the fourth quarter each fiscal year. In addition, the Company continuously monitors for events and circumstances that could negatively impact the key assumptions used in determining fair value and therefore require interim goodwill impairment testing, including long-term revenue growth projections, profitability, discount rates, volatility in the Company's market capitalization, and general industry, market and macroeconomic conditions. No impairment indicators were identified in the first quarter of fiscal 2026.
Other intangible assets, net
Details of identifiable intangible assets are shown below:
|
|
August 2, 2025 |
|
|||||||||||||
(in millions) |
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Weighted average remaining useful life (years) |
|
||||
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer relationships and agreements |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
Trade names, patents and technology licenses |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Total amortized intangible assets |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Unamortized trade name |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Total other intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
12
|
|
May 3, 2025 |
|
|||||||||||||
(in millions) |
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Weighted average remaining useful life (years) |
|
||||
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer relationships and agreements |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
Trade names, patents and technology licenses |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Total amortized intangible assets |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Unamortized trade name |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Total other intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
Based on the current amount of intangible assets subject to amortization, the estimated aggregate amortization expense for each of the five succeeding fiscal years and thereafter is as follows:
(in millions) |
|
|
|
|
Fiscal Year: |
|
|
|
|
Remainder of fiscal 2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Note 7. Derivative Instruments and Hedging Activities
The Company is exposed to various market risks including, but not limited to, foreign currency exchange rates and market interest rates. The Company strives to control its exposure to these risks through our normal operating activities and, where appropriate, through the use of derivative financial instruments. Derivative financial instruments are measured at fair value on a recurring basis using various pricing models that incorporate observable market parameters, such as interest rate yield curves and foreign currency rates and are classified as Level 2 within the fair value hierarchy.
For a designated cash flow hedge, the effective portion of the change in the fair value of the derivative financial instrument is recorded in AOCL in the condensed consolidated balance sheets. When the underlying hedged transaction is realized, the gain or loss previously included in AOCL is recorded in earnings and reflected in the condensed consolidated statements of operations on the same line as the gain or loss on the hedged item attributable to the hedged risk. The gain or loss associated with changes in the fair value of derivatives not designated as hedges are recorded immediately in the condensed consolidated statements of operations on the same line as the associated risk. For a designated net investment hedge, the effective portion of the change in the fair value of the derivative financial instrument is recorded as a cumulative translation adjustment in AOCL in the condensed consolidated balance sheets.
Net investment hedges
The Company is exposed to the risk that adverse changes in foreign currency exchange rates could impact its net investment in non-U.S. subsidiaries. To manage this risk, the Company designates certain qualifying derivative and non-derivative instruments, including cross-currency swaps and foreign currency-denominated debt, as net investment hedges of certain non-U.S. subsidiaries.
The Company had a fixed-rate, cross-currency swap, with a notional value of $
Hedge effectiveness is assessed at the inception of the hedging relationship and quarterly thereafter, under the spot-to-spot method. The Company recognizes the impact of all other changes in fair value of the derivative, which represents the interest rate differential of the cross-currency swap, through interest expense. For the three months ended August 2, 2025 and July 27, 2024, the Company recorded
13
As of August 2, 2025, the Company designated €
Interest rate swaps
The Company utilizes interest rate swaps to limit its exposure to market fluctuations on its variable-rate borrowings. The interest rate swaps effectively convert a portion of the Company’s variable rate borrowings to a fixed rate based upon a determined notional amount. The Company has an interest rate swap, maturing on
Hedge effectiveness is assessed at the inception of the hedging relationship and quarterly thereafter. The effective portion of the periodic changes in fair value is recognized in AOCL in the condensed consolidated balance sheets. Subsequently, the accumulated gains and losses recorded in AOCL are reclassified to income in the period during which the hedged cash flow impacts earnings, which are expected to be immaterial over the next 12 months. No ineffectiveness was recognized in the three months ended August 2, 2025 and July 27, 2024.
Derivatives not designated as hedges
The Company uses short-term foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-functional currency balance sheet exposures. These forward contracts are not designated as hedging instruments. Gains and losses on these forward contracts are recognized in other expense, net, along with the foreign currency gains and losses on monetary assets and liabilities, in the condensed consolidated statements of operations.
As of August 2, 2025 and May 3, 2025, the Company held foreign currency forward contracts with a notional value of $
Effect of derivative instruments on comprehensive income (loss)
The pre-tax effects of derivative financial instruments recorded in other comprehensive income (loss) were as follows:
|
|
Three Months Ended |
|
|||||
|
|
August 2, 2025 |
|
|
July 27, 2024 |
|
||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Net investment hedges |
|
$ |
|
|
$ |
( |
) |
|
Interest rate swaps |
|
|
|
|
|
( |
) |
|
Total |
|
$ |
|
|
$ |
( |
) |
|
Fair value of derivative instruments on the balance sheet
The fair value of derivative instruments is classified as Level 2 within the fair value hierarchy and is recorded in the condensed consolidated balance sheets as follows:
|
|
|
|
Asset/(Liability) |
|
|||||
(in millions) |
|
Financial Statement Caption |
|
August 2, 2025 |
|
|
May 3, 2025 |
|
||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
||
Interest rate swaps |
|
Other long-term liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
||
Foreign currency forward contracts |
|
Prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
14
Note 8. Debt
A summary of debt is shown below:
(in millions) |
|
August 2, 2025 |
|
|
May 3, 2025 |
|
||
Revolving credit facility |
|
$ |
|
|
$ |
|
||
Other debt |
|
|
|
|
|
|
||
Unamortized debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Total debt |
|
|
|
|
|
|
||
Less: current maturities |
|
|
( |
) |
|
|
( |
) |
Total long-term debt |
|
$ |
|
|
$ |
|
||
Revolving credit facility
On October 31, 2022, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the Lenders and other parties named therein. On March 6, 2024, the Company entered into a First Amendment to Second Amended and Restated Credit Agreement (the “First Amendment”) and on July 9, 2024, the Company entered into a Second Amendment to Second Amended and Restated Credit Agreement and First Amendment to Second Amended and Restated Guaranty (the “Second Amendment”) among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and other parties thereto.
On July 7, 2025, the Company entered into a Third Amendment to Second Amended and Restated Credit Agreement (the “Third Amendment”) among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and other parties thereto. Among other things, the Third Amendment (i) reduced the revolving credit commitments from $
15
As of August 2, 2025, the Company was not in compliance with a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries contained in the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) for the quarter ended August 2, 2025. On September 8, 2025, the Company entered into a Waiver Letter (the “Waiver Letter”) among the Company, Bank of America, N.A., as Administrative Agent, and the other Lenders party thereto. Among other things, the Waiver Letter (i) acknowledged that an event of default under the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) occurred as the result of the Company making approximately $
The Credit Agreement, as amended by the First Amendment, the Second Amendment, the Third Amendment and the Waiver Letter is referred to herein as the “Amended Credit Agreement.”
The Amended Credit Agreement provides for a secured multicurrency revolving credit facility of $
The Third Amendment was accounted for as a debt modification, which resulted in a non-cash loss of $
The Second Amendment was accounted for as a debt modification, which resulted in a non-cash loss of $
Loans denominated in U.S. dollars under the Amended Credit Agreement bear interest at either (a) an adjusted base rate or (b) an adjusted term Secured Overnight Financing Rate (“SOFR”) rate or term SOFR daily floating rate (in each case, as determined in accordance with the provisions of the Amended Credit Agreement) in each case plus an additional applicable rate (the “Applicable Rate”) ranging (subject to the last sentence of this paragraph) between
As of August 2, 2025, the outstanding balance under the revolving credit facility consisted of $
16
The Amended Credit Agreement contains various representations and warranties, financial covenants (including covenants requiring the Company to maintain compliance with a minimum consolidated interest coverage ratio and a maximum consolidated leverage ratio, in each case as of the end of each fiscal quarter), restrictive and other covenants, and events of default. The covenants in the Amended Credit Agreement include an “anti-cash hoarding” requirement, as discussed above. As of August 2, 2025, the Company was in compliance with all the covenants in the Amended Credit Agreement (other than a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries during the quarter ended August 2, 2025, which event of default was subsequently waived as discussed above).
Other debt
One of the Company’s European subsidiaries has debt that consists of
Note 9. Shareholders’ Equity
Share buyback programs
On March 31, 2021, as subsequently amended on June 16, 2022, the Board of Directors authorized the purchase of up to $
Prior to its expiration, a total of
Dividends
The Company paid dividends totaling $
Accumulated other comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.
|
|
Three Months Ended August 2, 2025 (13 Weeks) |
|
|||||||||
(in millions) |
|
Currency translation adjustments |
|
|
Derivative instruments |
|
|
Total |
|
|||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|||
Tax benefit (expense) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net other comprehensive income |
|
|
|
|
|
|
|
|
|
|||
Balance at the end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Three Months Ended July 27, 2024 (13 Weeks) |
|
|||||||||
(in millions) |
|
Currency translation adjustments |
|
|
Derivative instruments |
|
|
Total |
|
|||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Tax benefit |
|
|
|
|
|
|
|
|
|
|||
Net other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
|
||
Balance at the end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
17
Stock-based compensation
The Company has granted restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance stock units (“PSUs”) and stock awards to employees and non-employee directors under the Methode Electronics, Inc. 2022 Omnibus Incentive Plan (“2022 Plan” and the Methode Electronics, Inc. 2014 Omnibus Incentive Plan (“2014 Plan”). The Company can no longer make grants under the 2014 Plan.
Subject to adjustment as provided in the 2022 Plan and the 2022 Plan’s share counting provisions,
Restricted stock awards
As of May 3, 2025, the Company had
Performance stock units
In fiscal 2025, the Company granted
The PSUs earn dividend equivalents during the vesting periods, which are forfeitable if the PSUs do not vest. As of August 2, 2025, unrecognized share-based compensation expense for the PSUs was $
|
|
Performance |
|
|
Weighted |
|
||
Non-vested at May 3, 2025 |
|
|
|
|
$ |
|
||
Awarded |
|
|
|
|
$ |
|
||
Vested |
|
|
|
|
$ |
|
||
Forfeited |
|
|
|
|
$ |
|
||
Non-vested at August 2, 2025 |
|
|
|
|
$ |
|
||
On August 8, 2025, the Company granted
Restricted stock units
RSUs granted vest over a pre-determined period of time, up to
|
|
Restricted |
|
|
Weighted |
|
||
Non-vested at May 3, 2025 |
|
|
|
|
$ |
|
||
Awarded |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Non-vested at August 2, 2025 |
|
|
|
|
$ |
|
||
As of August 2, 2025, unrecognized share-based compensation expense for RSUs was $
18
On August 8, 2025, the Company granted
Non-employee director stock awards
The Company grants stock awards to its non-employee directors as a component of their compensation. The stock awards vest immediately upon grant. Non-employee directors may elect to defer receipt of their shares under the Company’s non-qualified deferred compensation plan.
|
|
Non-employee director awards |
|
|
Deferred non-employee director awards |
|
|
Total |
|
|
Weighted |
|
||||
Outstanding at May 3, 2025 |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Awarded |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Issued |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Non-vested at August 2, 2025 |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Stock-based compensation expense
All stock-based awards to employees and non-employee directors are recognized in selling and administrative expenses on the condensed consolidated statements of operations. Awards subject to graded vesting are recognized using the accelerated recognition method over the requisite service period.
|
|
Three Months Ended |
|
|||||
|
|
August 2, 2025 |
|
|
July 27, 2024 |
|
||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
RSUs |
|
$ |
|
|
$ |
|
||
PSUs |
|
|
|
|
|
|
||
Deferred non-employee director awards |
|
|
|
|
|
|
||
Non-employee director awards |
|
|
|
|
|
|
||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
||
Note 10. Loss per Share
Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding for the applicable period, but excludes any contingently issued shares where the contingency has not been resolved. The weighted average number of common shares used in the diluted loss per share calculation is determined using the treasury stock method which includes the effect of all potential dilutive common shares outstanding during the period.
The following table sets forth the computation of basic and diluted loss per share:
|
|
Three Months Ended |
|
|||||
|
|
August 2, 2025 |
|
|
July 27, 2024 |
|
||
|
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Net loss (in millions) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Basic weighted average shares outstanding |
|
|
|
|
|
|
||
Dilutive effect of common stock equivalents |
|
|
|
|
|
|
||
Diluted weighted average shares outstanding |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Loss per share: |
|
|
|
|
|
|
||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding |
|
|
|
|
|
|
||
19
In the three months ended August 2, 2025 and July 27, 2024, all potential common shares issuable for PSUs and RSUs were excluded from the calculation of diluted loss per share, as the effect of including them would have been anti-dilutive. The dilutive effect of potential common shares issuable for PSUs and RSUs on the weighted-average number of common shares outstanding would have been approximately
Note 11. Segment Information
An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, and about which separate financial information is regularly evaluated by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources. The CODM is the Company’s (“CEO”).
The Automotive segment supplies electronic and electro-mechanical devices and related products to automobile OEMs, either directly or through their tiered suppliers. Products include integrated overhead and center consoles, hidden and ergonomic switches, transmission lead-frames, insert molded components, LED-based lighting and sensors, which incorporate magneto-elastic sensing and other sensing technologies that monitor the operation or status of a component or system.
The Industrial segment manufactures exterior and interior lighting solutions, industrial safety radio remote controls, braided flexible cables, current-carrying laminated busbars and devices, custom power-product assemblies, such as our PowerRail® solution, high-current high-voltage flexible power cabling systems and powder-coated busbars that are used in various markets and applications, including aerospace, commercial vehicles, data centers, industrial equipment, power conversion, military, telecommunications and transportation.
The Interface segment provides a variety of high-speed digital communication over copper media solutions for the data center and broadband markets, and interface panel solutions for the appliance market. Solutions include copper transceivers, distribution point units, and solid-state field-effect consumer touch panels.
Corporate and intersegment eliminations do not meet the requirements for being classified as an operating segment. Corporate costs include various support functions, such as accounting/finance, executive administration, human resources, information technology and legal.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1, “Description of Business and Summary of Significant Accounting Policies.”
The tables below present information about the Company’s reportable segments:
|
|
Three Months Ended August 2, 2025 (13 Weeks) |
|
|||||||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Eliminations/ |
|
|
Consolidated |
|
|||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Transfers between segments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Net sales to unaffiliated customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of products sold |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Selling and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Amortization of intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) from operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Pre-tax loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||
20
|
|
Three Months Ended July 27, 2024 (13 Weeks) |
|
|||||||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Transfers between segments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Net sales to unaffiliated customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of products sold |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Selling and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Amortization of intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) from operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Pre-tax loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||
(in millions) |
|
August 2, 2025 |
|
|
May 3, 2025 |
|
||
Identifiable assets: |
|
|
|
|
|
|
||
Automotive |
|
$ |
|
|
$ |
|
||
Industrial |
|
|
|
|
|
|
||
Interface |
|
|
|
|
|
|
||
Eliminations/Corporate |
|
|
|
|
|
|
||
Total identifiable assets |
|
$ |
|
|
$ |
|
||
Note 12. Contingencies
Certain litigation arising in the normal course of business is pending against us. The Company is, from time-to-time, subject to various legal actions and claims incidental to our business, including those arising out of alleged defects, breach of contracts, employment-related matters, environmental matters and intellectual property matters. The Company has established loss provisions for matters in which losses are deemed probable and reasonably estimable. The Company considers insurance coverage and third-party indemnification, among other things, when determining required accruals for pending litigation and claims. Although the outcome of potential legal actions and claims cannot be predicted with certainty, it is the Company's opinion, based on the information available, that it has adequate reserves for these liabilities. However, the ultimate outcome of any matter could require payment in excess of any amount that the Company may have accrued.
Stockholder Litigation
On August 26, 2024, a putative class action lawsuit on behalf of purchasers of Company common stock between June 23, 2022 and March 6, 2024, inclusive, entitled Marie Salem v. Methode Electronics, Inc. et al. was filed in the U.S. District Court for the Northern District of Illinois against the Company, a former Chief Executive Officer, President and director of the Company and a former Chief Financial Officer of the Company. The complaint alleges, among other things, that the defendants made false and/or misleading statements relating to the Company’s business, operations and prospects, including in respect of the Company’s transition to production of more specialized components for manufacturers of electric vehicles and the Company’s operations at its facility in Monterrey, Mexico, in violation of Sections 10(b) and 20 of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint seeks, among other things, unspecified money damages along with equitable relief and costs and expenses, including counsel fees and expert fees. Another purported shareholder filed a substantially similar action in the U.S. District Court for the Northern District of Illinois on October 7, 2024 against the same defendants and a former Chief Operating Officer of the Company, in a case entitled City of Cape Coral Municipal General Employees Retirement Plan v. Methode Electronics, Inc., et al. The second securities class action was filed on behalf of a broader putative class of purchasers of Company common stock between December 2, 2021 and March 6, 2024. In addition, two purported shareholders filed derivative lawsuits on November 26, 2024 and February 4, 2025, respectively. The derivative lawsuits were filed on behalf of the Company in the U.S. District Court for the Northern District of Illinois against the current members of the Company’s Board of Directors, as well as certain former directors and executives, alleging that the defendants breached their fiduciary duties by allowing the Company to issue various statements that are alleged to have been false or misleading for the same reasons alleged in the securities class action complaints. The derivative lawsuits are entitled Ray Homsi v. Donald Duda, et al. and Kevin D. Murphy v. Mark D. Schwabero, et al. (collectively with the Salem and City of Cape Coral matters, the “Stockholder Actions”).
21
The Company disagrees with and intends to vigorously defend against the Stockholder Actions. The Stockholder Actions could result in costs and losses to the Company, including potential costs associated with the indemnification of the other defendants. At this time, given the current status of the Stockholder Actions, the Company is unable to reasonably estimate an amount or range of reasonably possible loss, if any, that may result from the Stockholder Actions.
SEC Investigation
The Company received subpoenas from the SEC dated November 1, 2024 and March 12, 2025 seeking documents and information relating to, among other things, the Company’s operations in certain foreign countries, certain financial and accounting matters relating thereto, compliance with the Foreign Corrupt Practices Act and other anti-corruption laws, material weaknesses in the Company’s internal control over financial reporting previously reported in its public filings, deficiencies and significant deficiencies in the Company’s internal control over financial reporting, accounting and finance policies and procedures and other accounting and finance matters including new business bookings, certain financial metrics and performance indicators, performance relative to targets and guidance for certain periods, executive compensation policies and amounts, hotline tips and complaints, and terminations or resignations of company executives. The Company is cooperating with the SEC. The subpoenas and related investigation or other future requests for information have resulted and could result in future costs to the Company, including the expenditure of financial and managerial resources. In addition, this request may lead to the assertion of claims or the commencement of legal proceedings against the Company, which in turn may lead to material fines, penalties or other liabilities. However, at this time, the Company is unable to reasonably estimate an amount or range of reasonably possible loss, if any, that may result from these matters.
Note 13. Related Party Transactions
The Company’s former Interim Chief Financial Officer, David Rawden, was a director of AlixPartners, LLP (“AlixPartners”), a business advisory firm that provided a number of consulting services to the Company. The Company’s former Interim Chief Executive Officer, Kevin Nystrom, was a partner and managing director of AlixPartners. In the three months ended July 27, 2024, the Company recognized $
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
As used herein, “we,” “us,” “our,” the “Company” or “Methode” means Methode Electronics, Inc. and its subsidiaries.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect, when made, our current views with respect to current events and financial performance. Such forward-looking statements are subject to many risks, uncertainties and factors relating to our operations and business environment, which may cause our actual results to be materially different from any future results, express or implied, by such forward-looking statements. All statements that address future operating, financial or business performance or our strategies or expectations are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “outlook” or “continue,” and other comparable terminology. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following:
Additional details and factors are discussed under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended May 3, 2025 and in Part II, Item 1A of this Quarterly Report. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Any forward-looking statements made by us speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.
23
Overview
We are a leading global supplier of custom engineered solutions with sales, engineering and manufacturing locations in North America, Europe, Middle East and Asia. We design, engineer and produce mechatronic products for Original Equipment Manufacturers (“OEMs”) utilizing our broad range of technologies for user interface, light-emitting diode (“LED”) lighting system, power distribution and sensor applications.
Our solutions are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus and rail), cloud computing infrastructure, construction equipment and consumer appliance.
Macroeconomic Conditions
There is continued uncertainty about the future relationship between the U.S. and various other countries with respect to tariffs, trade policies, government regulations, treaties and trade agreements. We are exposed to market risk with respect to increased and volatile duties assessed on raw materials (including copper, steel and aluminum), component parts (including semiconductors) and finished goods we import into the U.S. from our various manufacturing sites, including those in Mexico, China, Egypt, Europe and Canada. Should any of these tariffs expand, raw materials and finished goods that we import will face higher prices, which could lead to reduced margins or increased prices that could, in turn, cause decreased customer demand. To the extent that we are unable to obtain price increases or there is a significant decrease in customer demand, the impact of new or higher tariffs could have a material impact on our results of operations.
The global economy continues to experience volatile disruptions including to the commodity, labor and transportation markets, arising from a combination of geopolitical events and various economic and financial factors. These disruptions have affected our operations and may continue to affect our business, financial condition and results of operations. As a result of continued inflation, we have implemented measures to mitigate certain adverse effects of higher costs. However, we have been unable to fully mitigate or pass through the increases in our costs to our customers, which will likely continue in the future.
Our business in the future will be impacted by the broad trend of electrification. The adoption of EVs has been slower than anticipated, which may impact our financial condition and results of operations. In addition, there are various government policies, subsidies, and economic incentives designed to increase EV adoption in many jurisdictions. There is no guarantee these incentive programs will be available in the future.
Global Supply Chain Disruptions
Although we saw improvements in our supply chain in fiscal 2025, including easing of the worldwide semiconductor supply shortage, new supply chain disruptions may occur in the future. In addition, we have experienced, and may continue to experience, business interruptions, including customer shutdowns and increased material and logistics costs and labor shortages. Changes in government regulations in areas including, but not limited to, trade and tariff regulations as noted above, could also increase our costs. We continue to work closely with suppliers and customers to minimize the potential adverse impact from global supply chain disruptions. However, if we are not able to mitigate any direct or indirect supply chain disruptions, this may have a material adverse impact on our financial condition, results of operations and cash flows.
Consolidated Results of Operations
The table below compares our results of operations between the three months ended August 2, 2025 and the three months ended July 27, 2024:
|
|
Three Months Ended |
|
|||||
|
|
August 2, 2025 |
|
|
July 27, 2024 |
|
||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Net sales |
|
$ |
240.5 |
|
|
$ |
258.5 |
|
Cost of products sold |
|
|
197.0 |
|
|
|
213.9 |
|
Gross profit |
|
|
43.5 |
|
|
|
44.6 |
|
Selling and administrative expenses |
|
|
36.6 |
|
|
|
46.2 |
|
Amortization of intangibles |
|
|
5.8 |
|
|
|
5.9 |
|
Interest expense, net |
|
|
5.9 |
|
|
|
4.8 |
|
Other expense, net |
|
|
1.3 |
|
|
|
0.8 |
|
Income tax expense |
|
|
4.2 |
|
|
|
5.2 |
|
Net loss |
|
$ |
(10.3 |
) |
|
$ |
(18.3 |
) |
24
Net sales
Net sales decreased $18.0 million, or 7.0%, to $240.5 million in the three months ended August 2, 2025, compared to $258.5 million in the three months ended July 27, 2024. Foreign currency translation increased net sales by $7.4 million. Excluding foreign currency translation, net sales decreased $25.4 million. The decrease was primarily due to lower sales volumes in the Automotive segment, partially offset by higher sales volumes in the Industrial segment.
Cost of products sold
Cost of products sold decreased $16.9 million, or 7.9%, to $197.0 million (81.9% of net sales) in the three months ended August 2, 2025, compared to $213.9 million (82.7% of net sales) in the three months ended July 27, 2024. Foreign currency translation increased cost of products sold by $5.7 million. Excluding foreign currency translation, cost of products sold decreased $22.6 million. The decrease was primarily due to lower material, freight and operating costs as a result of lower sales volumes.
Gross profit margin
Gross profit margin was 18.1% of net sales in the three months ended August 2, 2025, compared to 17.3% of net sales in the three months ended July 27, 2024. The increase in gross profit margin was primarily a result of product mix from higher sales in the Industrial segment.
Selling and administrative expenses
Selling and administrative expenses decreased $9.6 million, or 20.8%, to $36.6 million (15.2% of net sales) in the three months ended August 2, 2025, compared to $46.2 million (17.9% of net sales) in the three months ended July 27, 2024. Foreign currency translation increased selling and administrative expenses by $0.6 million. Excluding foreign currency translation, selling and administrative expenses decreased $10.2 million. The decrease was primarily due to lower professional fees and compensation expense.
Amortization of intangibles
Amortization of intangibles was $5.8 million in the three months ended August 2, 2025, compared to $5.9 million in the three months ended July 27, 2024.
Interest expense, net
Interest expense, net was $5.9 million in the three months ended August 2, 2025, compared to $4.8 million in the three months ended July 27, 2024. The increase was due to a higher level of borrowings and increased interest rates under our credit facility.
Other expense, net
Other expense, net was $1.3 million in the three months ended August 2, 2025, compared to $0.8 million in the three months ended July 27, 2024. Net foreign exchange loss was $1.5 million in the three months ended August 2, 2025, compared to $0.6 million in the three months ended July 27, 2024.
In the three months ended August 2, 2025, other expense, net included a non-cash write-off of $0.6 million of unamortized debt issuance costs compared to $1.2 million in the three months ended July 27, 2024. Other expense, net also includes $0.5 million of a net gain on sale of assets in the three months ended August 2, 2025.
Income tax expense
Income tax expense was $4.2 million (-68.9% effective tax rate) in the three months ended August 2, 2025, compared to $5.2 million (-39.7% effective tax rate) in the three months ended July 27, 2024.
The effective tax rate for the three months ended August 2, 2025 differs from the U.S. federal statutory tax rate of 21% primarily due to an increase in a valuation allowance for U.S. deferred tax assets, an unfavorable impact from global intangible low-tax income and non-deductible interest, partially offset by the impact of income derived from foreign operations with lower statutory tax rates. The effective tax rate for the three months ended July 27, 2024 differs from the U.S. federal statutory tax rate of 21% primarily due to income derived from foreign operations with lower statutory tax rates and research deductions claimed in foreign jurisdictions, partially offset by global intangible low-tax income and non-deductible expenses.
Net loss
Net loss was $10.3 million in the three months ended August 2, 2025, compared to $18.3 million in the three months ended July 27, 2024. The net loss was a result of the reasons described above.
25
Reportable Operating Segments
Automotive
|
|
Three Months Ended |
|
|||||
|
|
August 2, 2025 |
|
|
July 27, 2024 |
|
||
($ in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Net sales |
|
|
|
|
|
|
||
North America |
|
$ |
36.6 |
|
|
$ |
66.3 |
|
Europe, the Middle East & Africa ("EMEA") |
|
|
61.6 |
|
|
|
59.3 |
|
Asia |
|
|
7.9 |
|
|
|
9.2 |
|
Net sales |
|
|
106.1 |
|
|
|
134.8 |
|
Gross profit |
|
$ |
0.1 |
|
|
$ |
8.6 |
|
As a percent of net sales |
|
|
0.1 |
% |
|
|
6.4 |
% |
Loss from operations |
|
$ |
(12.5 |
) |
|
$ |
(5.7 |
) |
As a percent of net sales |
|
|
(11.8 |
)% |
|
|
(4.2 |
)% |
Net sales
Automotive segment net sales decreased $28.7 million, or 21.3%, to $106.1 million in the three months ended August 2, 2025, compared to $134.8 million in the three months ended July 27, 2024. Excluding foreign currency translation, net sales decreased $32.5 million.
Net sales in North America decreased $29.7 million to $36.6 million in the three months ended August 2, 2025, compared to $66.3 million in the three months ended July 27, 2024. The decrease was due to the roll-off of legacy programs, partially offset by new program launches. Net sales in EMEA increased $2.3 million to $61.6 million in the three months ended August 2, 2025, compared to $59.3 million in the three months ended July 27, 2024. Excluding foreign currency translation, net sales in EMEA decreased $1.4 million due to lower sales volumes of sensor products. Net sales in Asia decreased $1.3 million to $7.9 million in the three months ended August 2, 2025, compared to $9.2 million in the three months ended July 27, 2024. Excluding foreign currency translation, net sales in Asia decreased $1.4 million primarily due to lower sales of products for EVs.
Gross profit
Automotive segment gross profit decreased $8.5 million, or 98.8%, to $0.1 million in the three months ended August 2, 2025, compared to $8.6 million in the three months ended July 27, 2024. Excluding foreign currency translation, gross profit decreased $8.9 million. Gross profit margins decreased to 0.1% in the three months ended August 2, 2025, compared to 6.4% in the three months ended July 27, 2024. The decrease in gross profit was primarily due to lower sales volumes in North America, partially offset by lower freight and warranty costs.
Loss from operations
Automotive segment loss from operations was $12.5 million in the three months ended August 2, 2025, compared to $5.7 million in the three months ended July 27, 2024. The higher loss from operations was due to lower gross profit, partially offset by lower selling and administrative expenses. Selling and administrative expenses decreased primarily due to lower compensation expense.
Industrial
|
|
Three Months Ended |
|
|||||
|
|
August 2, 2025 |
|
|
July 27, 2024 |
|
||
($ in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Net sales |
|
$ |
123.5 |
|
|
$ |
111.5 |
|
Gross profit |
|
$ |
39.7 |
|
|
$ |
32.8 |
|
As a percent of net sales |
|
|
32.1 |
% |
|
|
29.4 |
% |
Income from operations |
|
$ |
26.5 |
|
|
$ |
16.9 |
|
As a percent of net sales |
|
|
21.5 |
% |
|
|
15.2 |
% |
26
Net sales
Industrial segment net sales increased $12.0 million, or 10.8%, to $123.5 million in the three months ended August 2, 2025, compared to $111.5 million in the three months ended July 27, 2024. Excluding foreign currency translation, net sales increased $8.4 million.
The increase was due to higher sales volumes of power products, including for data centers, and lighting products for off-road equipment markets, partially offset by lower sales volumes for radio remote control devices and lighting products for commercial vehicles.
Gross profit
Industrial segment gross profit increased $6.9 million, or 21.0%, to $39.7 million in the three months ended August 2, 2025, compared to $32.8 million in the three months ended July 27, 2024. Excluding foreign currency translation, gross profit increased $5.6 million. Gross profit margins increased to 32.1% in the three months ended August 2, 2025, compared to 29.4% in the three months ended July 27, 2024. Gross profit improved due to higher sales volumes and lower freight costs.
Income from operations
Industrial segment income from operations increased $9.6 million, or 56.8%, to $26.5 million in the three months ended August 2, 2025, compared to $16.9 million in the three months ended July 27, 2024. Excluding foreign currency translation, income from operations increased $8.6 million. The increase was primarily due to higher gross profit and lower selling and administrative expenses. The decrease in selling and administrative expenses was primarily due to lower legal fees.
Interface
|
|
Three Months Ended |
|
|||||
|
|
August 2, 2025 |
|
|
July 27, 2024 |
|
||
($ in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Net sales |
|
$ |
10.9 |
|
|
$ |
12.2 |
|
Gross profit |
|
$ |
3.4 |
|
|
$ |
2.6 |
|
As a percent of net sales |
|
|
31.2 |
% |
|
|
21.3 |
% |
Income from operations |
|
$ |
3.0 |
|
|
$ |
1.9 |
|
As a percent of net sales |
|
|
27.5 |
% |
|
|
15.6 |
% |
Net sales
Interface segment net sales decreased $1.3 million, or 10.7% to $10.9 million in the three months ended August 2, 2025, compared to $12.2 million in the three months ended July 27, 2024. The decrease was primarily due to lower sales volumes of touch panels for appliances, partially offset by higher sales volumes for transceivers for servers.
Gross profit
Interface segment gross profit increased $0.8 million, or 30.8%, to $3.4 million in the three months ended August 2, 2025, compared to $2.6 million in the three months ended July 27, 2024. Gross profit margins increased to 31.2% in the three months ended August 2, 2025, compared to 21.3% in the three months ended July 27, 2024. The improvement was due to product mix.
Income from operations
Interface segment income from operations increased $1.1 million, or 57.9%, to $3.0 million in the three months ended August 2, 2025, compared to $1.9 million in the three months ended July 27, 2024. The increase was primarily due to higher gross profit and lower selling and administrative expenses.
27
Financial Condition, Liquidity and Capital Resources
Our liquidity requirements are primarily to fund our business operations, including capital expenditures and working capital requirements, as well as to fund debt service requirements, dividends and stock repurchases. Our primary sources of liquidity are cash flows from operations, existing cash balances and borrowings under our senior secured credit agreement. We believe our liquidity position will be sufficient to fund our existing operations and current commitments for at least the next twelve months. However, if economic conditions remain impacted for longer than we expect due to supply chain disruptions, inflationary pressure or other geopolitical risks, or if we are unable to maintain compliance with our debt covenants, our liquidity position could be severely impacted.
As of August 2, 2025, we had $121.1 million of cash and cash equivalents, of which $76.1 million was held in subsidiaries outside the U.S. Cash held by these subsidiaries is used to fund operational activities and can be repatriated, primarily through the payment of dividends and the repayment of intercompany loans, without creating material additional income tax expense.
Repurchases of Common Stock
On June 13, 2024, the Board of Directors approved a new share buyback authorization, commencing on June 17, 2024, for the purchase of up to $200.0 million of our outstanding common stock through June 17, 2026 (the “2024 Buyback Authorization”). Purchases may be made on the open market, including pursuant to purchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, or in private transactions. No shares have been purchased under the 2024 Buyback Authorization. As of August 2, 2025, the dollar value of shares that remained available to be purchased under 2024 Buyback Authorization was $200.0 million.
Amended Credit Agreement
On October 31, 2022, we entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the Lenders and other parties named therein. On March 6, 2024, we entered into a First Amendment to Second Amended and Restated Credit Agreement (the “First Amendment”) and on July 9, 2024, we entered into a Second Amendment to Second Amended and Restated Credit Agreement and First Amendment to Second Amended and Restated Guaranty (the “Second Amendment”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and other parties thereto. On July 7, 2025, we entered into a Third Amendment to Second Amended and Restated Credit Agreement (the “Third Amendment”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and other parties thereto.
Among other things, the Third Amendment (i) reduced the revolving credit commitments from $500 million to $400 million, (ii) eliminated our option to increase the revolving credit commitments and/or add one or more tranches of term loans under the credit facility from time to time subject to certain limitations and conditions including approval of certain lenders, (iii) amended the consolidated interest coverage ratio covenant for the quarters ending August 2, 2025, November 1, 2025, January 31, 2026 and May 2, 2026 to relax that covenant to some extent for each of those quarters, (iv) amended the consolidated leverage ratio covenant for the quarters ending August 2, 2025, November 1, 2025, January 31, 2026, May 2, 2026 and August 1, 2026 to relax that covenant to some extent for each of those quarters, (v) amended the definition of “Consolidated EBITDA,” to include an add back for a portion of the inventory write-down taken in the fourth quarter of fiscal 2025, (vi) increased the interest rate during the period from July 7, 2025 to the date that financial statements and a compliance certificate are delivered for the fiscal quarter ending October 31, 2026 (such period, the “Third Amendment Period”), (vii) changed the commitment fee payment during the Third Amendment Period, (viii) extended, through the maturity date, the requirement to provide monthly financial statements to the lenders, (ix) restricted or decreased, during the Third Amendment Period, the amount of certain exceptions to covenants restricting liens on, investments by and indebtedness of the Company and its subsidiaries, (x) limited to $2.5 million, in any fiscal quarter during the Third Amendment Period, the general basket exception to a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries, while allowing under that general basket exceptions up to an aggregate of $25 million of restricted payments during any other period, (xi) extended, through the maturity date, an “anti-cash hoarding” requirement contained in the Second Amendment such that that if we have cash on hand in the U.S. (subject to certain exceptions) of more than $65 million for 10 consecutive business days, we shall prepay the indebtedness under the credit facility by the amount of such excess, and (xii) eliminated, during the Third Amendment Period, the investment, restricted payment and indebtedness baskets that had allowed for unlimited investments, restricted payments and indebtedness, as applicable, so long as (among other requirements) we met certain pro forma consolidated leverage ratio tests.
28
As of August 2, 2025, we were not in compliance with a covenant restricting certain restricted payments (including dividends) by us and our subsidiaries contained in the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) for the quarter ended August 2, 2025. On September 8, 2025, we entered into a Waiver Letter (the “Waiver Letter”) with Bank of America, N.A., as Administrative Agent, and the other Lenders party thereto. Among other things, the Waiver Letter (i) acknowledged that an event of default under the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) occurred as the result of us making approximately $2.8 million of restricted payments during the quarter ended August 2, 2025, which was in excess of the $2.5 million general basket exception to a covenant restricting certain restricted payments (including dividends) by us and our subsidiaries during the quarter ended August 2, 2025, (ii) reduced, for the quarter ending November 1, 2025, the general basket exception to a covenant restricting certain restricted payments (including dividends) by us and our subsidiaries by the amount of excess restricted payments made during the quarter ended August 2, 2025 (which change reduced such basket exception from $2.5 million to approximately $2.2 million for the quarter ending November 1, 2025), and (iii) waived the acknowledged event of default.
The Credit Agreement, as amended by the First Amendment, the Second Amendment, the Third Amendment and the Waiver Letter, is referred to herein as the “Amended Credit Agreement.”
The Amended Credit Agreement provides for a secured multicurrency revolving credit facility of $400 million. The Amended Credit Agreement matures on October 31, 2027.
As of August 2, 2025, the outstanding balance under the revolving credit facility consisted of $295.8 million (€255.3 million) of euro-denominated borrowings and $30.0 million of U.S. denominated borrowings. The Amended Credit Agreement contains various representations and warranties, financial covenants (including covenants requiring us to maintain compliance with a minimum consolidated interest coverage ratio and a maximum consolidated leverage ratio, in each case as of the end of each fiscal quarter), restrictive and other covenants, and events of default. The covenants in the Amended Credit Agreement include an “anti-cash hoarding” requirement, as discussed above. As of August 2, 2025, we were in compliance with all the covenants in the Amended Credit Agreement (other than a covenant restricting certain restricted payments (including dividends) by the Company and its
subsidiaries during the quarter ended August 2, 2025, which event of default was subsequently waived as discussed above). For further information, see Note 8, “Debt” to the condensed consolidated financial statements included in this Quarterly Report.
Although we currently anticipate, based on our current projections and analyses, that we will be in compliance with the financial covenants contained in the Amended Credit Agreement, no assurance can be given that we will be and remain in compliance with such covenants in the future. Factors that could increase our risk of future non-compliance include those identified in Part I – Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended May 3, 2025, as supplemented by subsequent filings with the Securities and Exchange Commission, including under Part II – Item 1A, “Risk Factors” of this Quarterly Report.
Cash Flows
|
|
Three Months Ended |
|
|||||
|
|
August 2, 2025 |
|
|
July 27, 2024 |
|
||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
(10.3 |
) |
|
$ |
(18.3 |
) |
Non-cash items |
|
|
17.7 |
|
|
|
19.8 |
|
Changes in operating assets and liabilities |
|
|
17.7 |
|
|
|
9.4 |
|
Net cash provided by operating activities |
|
|
25.1 |
|
|
|
10.9 |
|
Net cash used in investing activities |
|
|
(5.8 |
) |
|
|
(13.6 |
) |
Net cash used in financing activities |
|
|
(4.5 |
) |
|
|
(48.2 |
) |
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
2.7 |
|
|
|
0.7 |
|
Increase (decrease) in cash and cash equivalents |
|
|
17.5 |
|
|
|
(50.2 |
) |
Cash and cash equivalents at beginning of the period |
|
|
103.6 |
|
|
|
161.5 |
|
Cash and cash equivalents at end of the period |
|
$ |
121.1 |
|
|
$ |
111.3 |
|
Operating activities
Net cash provided by operating activities was $25.1 million in the three months ended August 2, 2025, compared to $10.9 million in the three months ended July 27, 2024. The increase was due to a lower net loss adjusted for non-cash items and higher cash inflows from operating assets and liabilities. The $17.7 million of cash inflows for operating assets and liabilities in the three months ended August 2, 2025 was primarily due to lower accounts receivable, prepaid expenses and other assets, partially offset by lower accounts payable and other liabilities.
29
Investing activities
Net cash used in investing activities was $5.8 million in the three months ended August 2, 2025, compared to $13.6 million in the three months ended July 27, 2024. Capital expenditures were $7.1 million in the three months ended August 2, 2025, compared to $13.6 million in the three months ended July 27, 2024. In the three months ended August 2, 2025, we received proceeds of $1.3 million from the sale of property, plant and equipment.
Financing activities
Net cash used in financing activities was $4.5 million in the three months ended August 2, 2025, compared to $48.2 million in the three months ended July 27, 2024. We paid cash dividends of $2.8 million in the three months ended August 2, 2025, compared to $5.1 million in the three months ended July 27, 2024. Dividends paid in the three months ended August 2, 2025 and July 27, 2024, include $0.3 million and $0.2 million, respectively, of dividend equivalent payments for restricted stock units that vested. In the three months ended August 2, 2025, we had net proceeds from borrowings of $0.4 million, compared to net repayments of borrowings of $39.1 million in the three months ended July 27, 2024. In the three months ended August 2, 2025, we paid $1.6 million of debt issuance costs associated with the Third Amendment, compared to $1.8 million of debt issuance costs associated with the Second Amendment in the three months ended July 27, 2024. In the three months ended July 27, 2024, we used $1.6 million of cash for the purchase of shares under the 2021 Buyback Authorization.
Recent Accounting Pronouncements
See Note 1, “Description of Business and Summary of Significant Accounting Policies” to the condensed consolidated financial statements included in Item 1.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined under SEC rules.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks from foreign currency exchange, interest rates, and commodity prices, which could affect our operating results, financial position and cash flows. We manage a portion of these risks through use of derivative financial instruments in accordance with our policies. We do not enter into derivative financial instruments for speculative or trading purposes.
There has been no significant change in our exposure to market risk during the three months ended August 2, 2025. For a discussion of our exposure to market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in our Annual Report on Form 10-K for the year ended May 3, 2025.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report, we performed an evaluation under the supervision and with the participation of the Company’s management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Our disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Company in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s applicable rules and forms. As a result of this evaluation, our CEO and CFO concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the three months ended August 2, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
30
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 12, “Contingencies” to the condensed consolidated financial statements included in this Quarterly Report for a description of certain of our pending legal proceedings.
Item 1A. Risk Factors
Our business, financial condition, results of operations and cash flows are subject to various risks which could cause actual results to vary from recent results or from anticipated future results. Please refer to Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended May 3, 2025, for a description of certain material risks and uncertainties to which our business, financial condition and results of operations are subject. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
Except as updated below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended May 3, 2025:
We operate our business on a global basis and changes to trade policy, including tariffs and customs regulations, could have a material and adverse effect on our business.
We manufacture and sell our products globally and rely on a global supply chain to deliver the required raw materials, components, and parts, as well as the final products to our customers. Existing free trade laws and regulations, such as the United States-Mexico-Canada Agreement (“USMCA”), provide certain duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements. Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, export licenses, tariffs or taxes on imports from countries or geographic regions where we manufacture products, such as Canada, China, Egypt, Europe and Mexico, could have a material adverse effect on our business, financial condition and operating results.
In the past several months, the U.S. administration has proposed and imposed extensive tariffs on many countries where we do business including a number of broad, product specific tariffs most notably with respect to the automotive and commercial vehicle industries. As such, there is continued uncertainty about the future relationship between the U.S. and various other countries with respect to tariffs, trade policies, government regulations, treaties and trade agreements. Depending upon the continued duration and potential expansion of these tariffs, as well as our ability to mitigate their impact, these tariffs and other regulatory actions could materially affect our business, including in the form of an increase in cost of goods sold, decreased margins, increased pricing for customers, disruptions in our supply chain, impaired ability to compete effectively, and reduced sales. If changes in trade policy cause increased prices for vehicles, consumer demand may decline, prompting a reduction in global vehicle production volumes, which is a material driver of our operations, sales and profitability.
Although the exception for USMCA-qualifying goods is expected to remain in place, the extent and permanence of this exception has not been confirmed by the current U.S. Administration. In addition to potential increases in customs duties and tariffs in the U.S. and other countries, the USMCA is subject to renewal in 2026. There can be no assurance that the USMCA will be renewed or, if renewed, any newly negotiated terms in the USMCA will not adversely affect our business.
Our product portfolio exposes us to several categories that are highly contested in the expanding international trade disputes. For example, because we provide parts to automotive OEMs, some of our finished goods are classified as auto parts and subject to additional tariffs. Our products made for commercial vehicle customers could be potentially exposed to similar tariffs. We also utilize semiconductors and copper--and to a lesser extent--steel and aluminum in our products. This means we are exposed to increased costs for inbound components and could potentially be added as derivative products for tariff purposes in the future. Should any of these tariffs expand, raw materials and finished goods that we import will face higher prices, which could lead to reduced margins or increased prices that could, in turn, cause decreased customer demand.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On June 13, 2024, the Board of Directors approved a share buyback authorization, commencing on June 17, 2024, for the purchase of up to $200.0 million of our outstanding common stock through June 17, 2026 (the “2024 Buyback Authorization”). Purchases under the 2024 Buyback Authorization may be made on the open market, including pursuant to purchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, or in private transactions. We have not made any purchases under the 2024 Buyback Authorization.
31
The following table provides information about our purchases of equity securities during the three months ended August 2, 2025.
Period |
|
Total number of shares purchased1 |
|
|
Average price paid per share |
|
|
Total number of shares purchased as part of publicly announced plan |
|
|
Approximate dollar value of shares that may yet be purchased under the program (in millions) |
|
||||
May 4, 2025 through May 31, 2025 |
|
|
57,208 |
|
|
$ |
6.74 |
|
|
|
— |
|
|
$ |
200.0 |
|
June 1, 2025 through July 5, 2025 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
200.0 |
|
July 6, 2025 through August 2, 2025 |
|
|
7,986 |
|
|
$ |
6.48 |
|
|
|
— |
|
|
$ |
200.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(1) Represents 65,194 shares of common stock that were surrendered by employees to satisfy tax withholding obligations in connection with the vesting of restricted stock units. |
|
|||||||||||||||
Item 3. Defaults Upon Senior Securities
The information set forth under the subheading “Revolving credit facility” contained in Note 8, “Debt” to the Company’s
condensed consolidated financial statements in Part I. Financial Information – Item 1. Financial Statements of this Form 10-Q is
incorporated herein by reference into this Item 3.
Item 5. Other Information
Waiver Letter regarding Second Amended and Restated Credit Agreement
Because we are filing this Quarterly Report within four business days after the triggering event, we are making the following disclosure under this Item 5, “Other Information” instead of filing (as and to the extent required) a Current Report on Form 8-K under Item 1.01, Entry into a Material Definitive Agreement, and Item 2.03, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On September 8, 2025, the Company entered into a Waiver Letter (the “Waiver Letter”) among the Company, Bank of America, N.A., as Administrative Agent, and the other Lenders party thereto.
The Waiver Letter acknowledged that an event of default under the Company’s Second Amended and Restated Credit Agreement, dated as of October 31, 2022, as amended, supplemented, restated or otherwise modified from time to time (which credit agreement, as previously amended by the first amendment, the second amendment and the third amendment thereto, is referred to solely in this Item 5, “Other Information” section of this Quarterly Report as the “Credit Agreement”), by and among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and the other parties thereto, occurred as the result of the Company making approximately $2.8 million of restricted payments during the quarter ended August 2, 2025, which was in excess of the $2.5 million general basket exception to a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries during the quarter ended August 2, 2025. In addition, among other things, the Waiver Letter:
(i) Reduced, for the quarter ending November 1, 2025, the general basket exception to a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries by the amount of excess restricted payments made during the quarter ended August 2, 2025 (which change reduced such basket exception from $2.5 million to approximately $2.2 million for the quarter ending November 1, 2025); and
(ii) Waived the acknowledged event of default.
The foregoing description of the Waiver Letter does not purport to be complete and is qualified in its entirety by reference to the complete text of the Waiver Letter, which is filed as Exhibit 10.7 to this Quarterly Report and is incorporated herein by reference.
Trading Arrangements
During our last fiscal quarter,
32
Item 6. Exhibits
Exhibit Number |
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Description |
10.1 |
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10.2** |
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10.3** |
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10.4** |
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10.5** |
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10.6** |
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10.7 |
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31.1 |
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Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. |
31.2 |
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Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. |
32* |
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Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350. |
101.INS |
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Inline XBRL Instance Document |
101.SCH |
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Inline XBRL Taxonomy Schema With Embedded Linkbase Document |
104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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* |
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Indicates that the exhibit is being furnished with this report and not filed as part of it. |
** |
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Management compensatory plan. |
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33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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METHODE ELECTRONICS, INC. |
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By: |
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/s/ Laura Kowalchik |
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Laura Kowalchik |
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Chief Financial Officer |
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(Principal Financial Officer) |
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Dated: |
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September 9, 2025 |
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34
Exhibit 10.2
EXECUTIVE SEVERANCE AND RETENTION AGREEMENT
This Executive Severance and Retention Agreement (this “Agreement”), dated effective ______ (“Effective Date”), by and between Methode Electronics, Inc., a Delaware corporation (the “Company”), and __________ ”Employee”. This Agreement sets forth the terms and conditions of contingent severance arrangements between the Company and Executive and cancels and supersedes all other severance-related agreements between the parties (except it does not cancel and supersede the Change in Control Agreement between Executive and the Company).
It is hereby agreed by and between the parties, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, as follows:
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[3.2 Additional Vesting Credit on Equity Awards. Notwithstanding the terms of any award agreement, service-based vesting under Executive’s outstanding equity compensation awards shall be determined as if Executive’s employment had terminated on the first anniversary of Executive’s Date of Termination.]
-3-
Notwithstanding anything to the contrary in this Agreement, Executive shall not be obligated to release, (i) any rights of Executive to receive from the Company accrued and unpaid base salary, earned or vested incentive compensation, out of pocket expense reimbursement, or accrued, unused vacation owed to Executive, (ii) any vested equity rights, (iii) any obligations of the Company to pay any severance amounts, if applicable, pursuant to this Agreement, (iv) any claim which cannot be waived as a matter of law, or (v) any rights of indemnification or coverage under any insurance policy, corporate document or any statutory or common law.
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If to Executive, addressed to: the last known residential address reflected in the Company’s records.
If to the Company, addressed to: Methode Electronics, Inc.
8750 W. Bryn Mawr Ave, Suite 1000
Chicago, IL 60631
Attention: Chief Human Resources Officer
E-mail: kkeegans@methode.com
Notice of change in address should be provided as stated in this section.
-6-
[Signature Page Follows]
-7-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first written above.
METHODE ELECTRONICS, INC.
By:
Its: _________________________________
EXECUTIVE:
Name: ____________
-8-
Exhibit 10.3
FORM OF EXECUTIVE (NON CEO) CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement is dated as of [ ], between Methode Electronics, Inc., a Delaware corporation (the “Company”), and [ ] (“Employee”).
WITNESSETH:
WHEREAS, Employee is employed by the Company or one of its subsidiaries or affiliates (referred to collectively as the “Company”) and the Company desires to provide certain security to Employee in connection with any potential change in control of the Company.
NOW, THEREFORE, it is hereby agreed by and between the parties, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, as follows:
-2-
-3-
-4-
-5-
[Signature Page Follows]
-6-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first written above.
METHODE ELECTRONICS, INC.
By:
[ ]
Its: [ ]
EMPLOYEE:
Name: [ ]
-7-
Exhibit 10.4
METHODE ELECTRONICS, INC.
FORM OF LONG-TERM PERFORMANCE-BASED
RESTRICTED STOCK UNIT AWARD AGREEMENT
(2025 LTI PROGRAM)
This Long-Term Performance-Based Restricted Stock Unit Award Agreement (the “Award Agreement”), effective as of [ ] (the “Award Date”), is entered into by and between Methode Electronics, Inc., a Delaware corporation (the “Company”) and [ ] (the “Grantee”).
WHEREAS, the Company desires to encourage Grantee to continue to work for the benefit of the Company in a manner that will benefit all Company stockholders.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations set forth herein, the Company agrees to award to the Grantee Performance-Based Restricted Stock Units (“PSUs”) under the Methode Electronics, Inc. 2022 Omnibus Incentive Plan (the “Plan”) on the terms and conditions set forth herein and in the Plan.
-1-
-2-
-3-
-4-
[Signature Page to Follow]
-5-
IN WITNESS WHEREOF, the Company by one of its duly authorized representatives has executed this Award Agreement as of the day and year first above written.
METHODE ELECTRONICS, INC.
By:
[ ]
Its: [ ]
Please indicate your acceptance of the terms and conditions of this Award Agreement by signing in the space provided below and returning a signed copy of this Award Agreement to the Company. IF A COPY OF THIS AWARD AGREEMENT EXECUTED BY THE GRANTEE HAS NOT BEEN RECEIVED BY THE COMPANY NO LATER THAN THIRTY (30) DAYS AFTER THE AWARD DATE, THE RESTRICTED STOCK UNITS GRANTED UNDER THIS AWARD AGREEMENT SHALL BE CANCELLED.
BY SIGNING BELOW, YOU ACKNOWLEDGE AND AGREE THAT YOU HAVE RECEIVED A COPY OF THE PLAN AND ARE FAMILIAR WITH THE TERMS AND PROVISIONS THEREOF, INCLUDING THE TERMS AND PROVISIONS OF THIS AWARD AGREEMENT. YOU HAVE REVIEWED THE PLAN AND THIS AWARD AGREEMENT IN THEIR ENTIRETY, HAVE HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO EXECUTING THIS AWARD AGREEMENT AND FULLY UNDERSTAND ALL PROVISIONS OF THIS AWARD AGREEMENT. FINALLY, YOU HEREBY AGREE TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE ADMINISTRATOR UPON ANY QUESTIONS ARISING UNDER THE PLAN OR THIS AWARD AGREEMENT.
The undersigned hereby accepts, and agrees to, all terms and provisions of this Award Agreement and the Plan as they pertain hereto.
GRANTEE
____________________________________
[ ]
-6-
Exhibit 10.5
METHODE ELECTRONICS, INC.
FORM OF LONG-TERM TIME-BASED
RESTRICTED STOCK UNIT AWARD AGREEMENT
(2025 LTI PROGRAM)
This Long-Term Time-Based Restricted Stock Unit Award Agreement (the “Award Agreement”), effective as of [ ] (the “Award Date”), is entered into by and between Methode Electronics, Inc., a Delaware corporation (the “Company”) and [ ] (the “Grantee”).
WHEREAS, the Company desires to encourage Grantee to continue to work for the benefit of the Company in a manner that will benefit all Company stockholders.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations set forth herein, the Company agrees to award to the Grantee Restricted Stock Units (“RSUs”) under the Methode Electronics, Inc. 2022 Omnibus Incentive Plan (the “Plan”) on the terms and conditions set forth herein and in the Plan.
8. Change of Control. Notwithstanding Section 6 above, the following provisions shall apply to the Award in the event of a Change of Control prior to September 11, 2027:
3
4
5
[Signature Page to Follow]
6
IN WITNESS WHEREOF, the Company by one of its duly authorized representatives has executed this Award Agreement as of the day and year first above written.
METHODE ELECTRONICS, INC.
By:
[ ]
Its: [ ]
Please indicate your acceptance of the terms and conditions of this Award Agreement by signing in the space provided below and returning a signed copy of this Award Agreement to the Company. IF A COPY OF THIS AWARD AGREEMENT EXECUTED BY THE GRANTEE HAS NOT BEEN RECEIVED BY THE COMPANY NO LATER THAN THIRTY (30) DAYS AFTER THE AWARD DATE, THE RESTRICTED STOCK UNITS GRANTED UNDER THIS AWARD AGREEMENT SHALL BE CANCELLED.
BY SIGNING BELOW, YOU ACKNOWLEDGE AND AGREE THAT YOU HAVE RECEIVED A COPY OF THE PLAN AND ARE FAMILIAR WITH THE TERMS AND PROVISIONS THEREOF, INCLUDING THE TERMS AND PROVISIONS OF THIS AWARD AGREEMENT. YOU HAVE REVIEWED THE PLAN AND THIS AWARD AGREEMENT IN THEIR ENTIRETY, HAVE HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO EXECUTING THIS AWARD AGREEMENT AND FULLY UNDERSTAND ALL PROVISIONS OF THIS AWARD AGREEMENT. FINALLY, YOU HEREBY AGREE TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE ADMINISTRATOR UPON ANY QUESTIONS ARISING UNDER THE PLAN OR THIS AWARD AGREEMENT.
The undersigned hereby accepts, and agrees to, all terms and provisions of this Award Agreement and the Plan as they pertain hereto.
GRANTEE
____________________________________
[ ]
7
Exhibit 10.6
METHODE ELECTRONICS, INC.
FORM OF RESTRICTED STOCK UNIT AWARD AGREEMENT (SIGN-ON AWARD)
This Restricted Stock Unit Award Agreement (the “Award Agreement”), dated and effective as of [ ] (the “Award Date”), is entered into by and between Methode Electronics, Inc., a Delaware corporation (the “Company”), and [ ] (“Grantee”).
WHEREAS, the Company desires to encourage Grantee to work for the benefit of the Company and the Company’s stockholders.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations set forth herein, the Company agrees to award to Grantee Restricted Stock Units under the Methode Electronics, Inc. 2022 Omnibus Incentive Plan (the “Plan”) on the terms and conditions set forth herein and in the Plan.
(a) In the event of a Change of Control, the surviving or successor entity (or its parent corporation) may continue, assume or replace the Restricted Stock Units outstanding as of the date of the Change of Control on substantially the same terms and conditions (with such adjustments as may be required or permitted by Section 4.6 of the Plan), and such Restricted Stock Units or replacements therefor shall remain outstanding and be governed by their respective terms, subject to (c) and (d) below.
(b) If and to the extent that the outstanding Restricted Stock Units are not continued, assumed or replaced in connection with a Change of Control, then all unvested Restricted Stock Units will become immediately vested and non-forfeitable and payable as of the date of the Change of Control.
(c) If and to the extent that the Restricted Stock Units are continued, assumed or replaced under the circumstances described in (a), and if within two years after the Change of Control the Grantee experiences an involuntary termination of employment or other service for reasons other than Cause or Grantee shall terminate employment with Good Reason, then all unvested Restricted Stock Units will become immediately vested and non-forfeitable and payable as of the date of termination of employment.
(d) Notwithstanding whether an Award is continued, assumed or replaced in connection with a Change of Control, if Grantee experiences an involuntary termination of employment or other service for reasons other than Cause or Grantee shall terminate employment with Good Reason during the period beginning on the date an agreement is entered into by the Company with respect to a merger, consolidation or similar transaction of the Company, which would constitute a Change of Control, and the effective time of such merger, consolidation or similar transaction of the Company, then all unvested Restricted Stock Units will become immediately vested and non-forfeitable and payable as of the date of the Change of Control.
“Good Reason” shall exist hereunder if, without Grantee’s express written consent any of the following events or actions occurs, provided that no finding of Good Reason shall be effective unless and until Grantee has provided the Company, within sixty (60) calendar days of becoming aware of the facts and circumstances underlying the finding of Good Reason, with written notice thereof stating with specificity the facts and circumstances underlying the finding of Good Reason and, if the basis for such finding of Good Reason is capable of being cured by the Company, providing the Company with an opportunity to cure the same within thirty (30) calendar days after receipt of such notice: (i) the Company materially reduces the nature, scope or level of Grantee’s responsibilities from the nature, scope or level of such responsibilities prior to the Change in
3
Control (or prior to the Period Pending a Change in Control) or changes Grantee’s reporting relationship to the Board; (ii) the Company requires Grantee to move Grantee’s principal business office more than fifty (50) miles from Grantee’s principal business office at the time of this Agreement; provided, however, that if Grantee’s principal business office is not located at the Company’s then current corporate headquarters, and the Company requires Grantee to move Grantee’s principal business office to such corporate headquarters, such action shall not constitute “Good Reason” under this subsection (ii); (iii) the Company reduces Grantee’s annual salary or annual bonus or long-term incentive opportunity below that in effect as of the date of this Agreement (or as of the Change in Control, if greater); or (iv) the Company breaches in any material respect its obligations hereunder.
4
5
[Signature Page Follows]
6
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Award Agreement as of the Award Date first above written.
METHODE ELECTRONICS, INC.
By:
[ ]
Its: [ ]
Please indicate your acceptance of the terms and conditions of this Award Agreement by signing in the space provided below and returning a signed copy of this Award Agreement to the Company. IF A COPY OF THIS AWARD AGREEMENT EXECUTED BY GRANTEE HAS NOT BEEN RECEIVED BY THE COMPANY WITHIN THIRTY (30) DAYS OF THE AWARD DATE, THE RESTRICTED STOCK UNITS GRANTED UNDER THIS AWARD AGREEMENT SHALL BE CANCELLED.
BY SIGNING BELOW, YOU ACKNOWLEDGE AND AGREE THAT YOU HAVE RECEIVED A COPY OF THE PLAN AND ARE FAMILIAR WITH THE TERMS AND PROVISIONS THEREOF, INCLUDING THE TERMS AND PROVISIONS OF THIS AWARD AGREEMENT. YOU HAVE REVIEWED THE PLAN AND THIS AWARD AGREEMENT IN THEIR ENTIRETY, HAVE HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO EXECUTING THIS AWARD AGREEMENT AND FULLY UNDERSTAND ALL PROVISIONS OF THIS AWARD AGREEMENT. FINALLY, YOU HEREBY AGREE TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE COMMITTEE UPON ANY QUESTIONS ARISING UNDER THE PLAN OR THIS AWARD AGREEMENT.
The undersigned hereby accepts, and agrees to, all terms and provisions of this Award Agreement and the Plan as they pertain hereto.
GRANTEE
____________________________________
Name: [ ]
7
Exhibit 10.7
September 8, 2025
Methode Electronics, Inc.
8750 W. Bryn Mawr Ave., Suite 1000
Chicago, IL 60631
Dear Ladies and Gentlemen:
Reference is hereby made to that certain Second Amended and Restated Credit Agreement, dated as of October 31, 2022 (as amended, supplemented restated or otherwise modified from time to time, the “Credit Agreement”), by and among Methode Electronics, Inc., a Delaware corporation (“Borrower”), certain subsidiaries of the Borrower, the lenders from time to time party hereto (the “Lenders”) and Bank of America, N.A., as administrative agent (solely in such capacity, the “Administrative Agent”), Swing Line lender and L/C Issuer (in each case, as defined therein). Capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement.
The Company has informed the Administrative Agent and the Lenders that it made Restricted Payments pursuant to Section 7.07(e)(i) of the Credit Agreement in an aggregate amount of $2,809,645.05 during its fiscal quarter ending August 2, 2025, which is in excess of the $2,500,000 limitation for such period. The amount of such excess is referred to herein as the “Overage Amount”. Therefore, an Event of Default has occurred and is continuing under Section 8.01(b) of the Credit Agreement as the result of the Loan Parties’ failure to comply with the terms of Section 7.07 for the fiscal quarter of the Company ending August 2, 2025 (the “Acknowledged Event of Default”).
Subject to the effectiveness of this waiver letter, (A) the Company and the Required Lenders agree that the basket in Section 7.07(e)(i) of the Credit Agreement shall be reduced by the Overage Amount for the fiscal quarter of the Company ending November 1, 2025, and (B) the Required Lenders hereby waive the Acknowledged Event of Default. The waiver set forth herein is a one-time waiver and is limited solely to the specific matters set forth herein and nothing contained in this waiver letter shall be deemed to constitute a waiver of any other rights or remedies with respect to any other Defaults or Events of Default the Administrative Agent or any Lender may have under the Credit Agreement, any other Loan Documents or under applicable Law. This waiver letter is a Loan Document.
This waiver letter shall be effective on the date hereof upon the receipt by the Administrative Agent of copies of this waiver letter duly executed by the Borrower, the Administrative Agent and the Required Lenders.
The Company agrees to pay all out-of-pocket fees and expenses owed by the Company to the Administrative Agent and the Lenders including all reasonable and documented fees, charges and disbursements of counsel to the Administrative Agent (directly to such counsel if requested by the Administrative Agent) to the extent payable pursuant to the Loan Documents. This waiver letter may be executed in as many counterparts as necessary or convenient, and by the different parties on separate counterparts each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same agreement. Delivery of an executed counterpart of this waiver letter by telecopy or other electronic imaging means shall be as effective as delivery of a manually executed counterpart of this waiver letter; provided, however, that the telecopy or other electronic image shall be promptly followed by an original if required by the Administrative Agent.
[signature page follows]
14293642v1
This waiver letter shall be governed by and construed in accordance with the laws of the State of New York.
Very truly yours,
BANK OF AMERICA, N.A.,
as Administrative Agent
By: /s/ DeWayne D. Rosse
Name: DeWayne D. Rosse
Title: Assistant Vice President
bank of america, n.a.,
as a Lender
By: /s/ Jonathan M. Phillips
Name: Jonathan M. Phillips
Title: Senior Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as a Lender
By: /s/ Heather Hoopingarner
Name: Heather Hoopingarner
Title: Executive Director
PNC BANK, NATIONAL ASSOCIATION,
as a Lender
By:
Name:
Title:
TD BANK, N.A.,
as a Lender
By: /s/ Leonid Batsevitsky
Name: Leonid Batsevitsky
Title: Vice President
WAIVER LETTER
HSBC BANK USA, NATIONAL ASSOCIATION,
as a Lender
By: /s/ Jillian Clemons
Name: Jillian Clemons
Title: Senior Vice President
BMO HARRIS BANK N.A.,
as a Lender
By: /s/ Lauren Buysse
Name: Lauren Buysse
Title: Managing Director
CITIBANK, N.A.,
as a Lender
By: /s/ Steve Buehler
Name: Steve Buehler
Title: Authorized Signatory
JPMORGAN CHASE BANK, N.A.,
as a Lender
By: /s/ Ayesha Nabi
Name: Ayesha Nabi
Title: Vice President
SANTANDER bank, n.a.,
as a Lender
By: /s/ Jeffrey G. Millman
Name: Jeffrey G. Millman
Title: Vice President
WAIVER LETTER
THE BANK OF EAST ASIA, LIMITED, NEW YORK BRANCH,
as a Lender
By: /s/ James Hua
Name: James Hua
Title: DGM & Head of Corporate Banking
By: /s/ Chong Tan
Name: Chong Tan
Title: DGM & Head of Risk Management
WAIVER LETTER
Acknowledged, agreed and accepted:
METHODE ELECTRONICS, INC.,
a Delaware corporation
By: /s/ Kerry Vyverberg
Name: Kerry Vyverberg
Title: General Counsel
WAIVER LETTER
Exhibit 31.1
CERTIFICATION
I, Jonathan DeGaynor, certify that:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 9, 2025 |
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By: |
/s/ Jonathan DeGaynor |
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Jonathan DeGaynor |
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Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Laura Kowalchik, certify that:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 9, 2025 |
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By: |
/s/ Laura Kowalchik |
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Laura Kowalchik |
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Chief Financial Officer |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Methode Electronics, Inc. (the “Company”) certifies that the Quarterly Report on Form 10-Q of the Company for the quarter ended August 2, 2025 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
.
Date: September 9, 2025 |
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By: |
/s/ Jonathan DeGaynor |
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Jonathan DeGaynor Chief Executive Officer |
Date: September 9, 2025 |
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By: |
/s/ Laura Kowalchik |
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Laura Kowalchik |
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Chief Financial Officer |