MEI 10-Q
Methode Electronics Inc (MEI)
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 |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
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 |
|
☐ |
|
|
☒ |
|
|
|
|
|
|||
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
|
|
|
|
|
|
|
|
Emerging growth company |
|
|
|
|
|
|
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 August 31, 2026, the registrant had
METHODE ELECTRONICS, INC.
INDEX
|
|
Page |
|
|
|
PART I. |
|
|
|
|
|
Item 1. |
|
|
|
|
|
|
2 |
|
|
|
|
|
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Three Months Ended August 1, 2026 and August 2, 2025 |
3 |
|
|
|
|
Condensed Consolidated Balance Sheets as of August 1, 2026 (Unaudited) and May 2, 2026 |
4 |
|
|
|
|
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) - Three Months Ended August 1, 2026 and August 2, 2025 |
5 |
|
|
|
|
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended August 1, 2026 and August 2, 2025 |
6 |
|
|
|
|
7 |
|
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
|
|
|
Item 3. |
29 |
|
|
|
|
Item 4. |
29 |
|
|
|
|
PART II. |
|
|
|
|
|
Item 1 |
30 |
|
|
|
|
Item 1A. |
30 |
|
|
|
|
Item 2. |
30 |
|
|
|
|
Item 5. |
30 |
|
|
|
|
Item 6. |
32 |
|
|
|
|
33 |
||
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)
|
|
Three Months Ended |
|
|||||
|
|
August 1, 2026 |
|
|
August 2, 2025 |
|
||
|
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Net sales |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Cost of products sold |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Gross profit |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Selling and administrative expenses |
|
|
|
|
|
|
||
Amortization of intangibles |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Income (loss) from operations |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
Interest expense, net |
|
|
|
|
|
|
||
Other expense (income), net |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
Pre-tax income (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Income tax expense (benefit) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Income (loss) per share: |
|
|
|
|
|
|
||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Cash dividends per share |
|
$ |
|
|
$ |
|
||
See notes to condensed consolidated financial statements.
2
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(in millions)
|
|
Three Months Ended |
|
|||||
|
|
August 1, 2026 |
|
|
August 2, 2025 |
|
||
|
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Net income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
||
Foreign currency translation adjustments |
|
|
( |
) |
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
|
||
Other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
Comprehensive income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
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)
|
|
August 1, 2026 |
|
|
May 2, 2026 |
|
||
|
|
(unaudited) |
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Inventories, net |
|
|
|
|
|
|
||
Income tax receivable |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Long-term assets: |
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Other intangible assets, net |
|
|
|
|
|
|
||
Operating lease right-of-use assets, net |
|
|
|
|
|
|
||
Deferred tax assets |
|
|
|
|
|
|
||
Pre-production costs |
|
|
|
|
|
|
||
Other long-term assets |
|
|
|
|
|
|
||
Total long-term assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued employee liabilities |
|
|
|
|
|
|
||
Other accrued liabilities |
|
|
|
|
|
|
||
Short-term operating lease liabilities |
|
|
|
|
|
|
||
Short-term debt |
|
|
|
|
|
|
||
Income tax payable |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Long-term liabilities: |
|
|
|
|
|
|
||
Long-term debt |
|
|
|
|
|
|
||
Long-term operating lease liabilities |
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Deferred tax liabilities |
|
|
|
|
|
|
||
Total long-term liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
Shareholders' equity: |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Treasury stock, |
|
|
( |
) |
|
|
( |
) |
Retained earnings |
|
|
|
|
|
|
||
Total shareholders' equity |
|
|
|
|
|
|
||
Total liabilities and shareholders' equity |
|
$ |
|
|
$ |
|
||
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)
|
|
Three Months Ended August 1, 2026 (13 Weeks) |
|
|||||||||||||||||||||||||
|
|
Common |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Treasury |
|
|
Retained |
|
|
Total |
|
|||||||
Balance as of May 2, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Issuance of restricted stock, net of tax withholding |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Cancellation of restricted stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Dividends on common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of August 1, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
|
|
Three Months Ended August 2, 2025 (13 Weeks) |
|
|||||||||||||||||||||||||
|
|
Common |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Treasury |
|
|
Retained |
|
|
Total |
|
|||||||
Balance as of May 3, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Issuance of restricted stock, net of tax withholding |
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
||
Cancellation of restricted stock |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Dividends on common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of August 2, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
See notes to condensed consolidated financial statements.
5
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
|
|
Three Months Ended |
|
|||||
|
|
August 1, 2026 |
|
|
August 2, 2025 |
|
||
|
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Amortization of debt issuance costs |
|
|
|
|
|
|
||
Partial write-off of unamortized debt issuance costs |
|
|
|
|
|
|
||
Gain on sale of property, plant and equipment |
|
|
|
|
|
( |
) |
|
Inventory obsolescence |
|
|
|
|
|
|
||
Change in deferred income taxes |
|
|
( |
) |
|
|
|
|
Other |
|
|
|
|
|
( |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
( |
) |
|
|
|
|
Inventories, net |
|
|
( |
) |
|
|
|
|
Prepaid expenses and other assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
|
|
|
( |
) |
|
Other liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided (used) by operating activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
Investing activities: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from disposition of assets |
|
|
|
|
|
|
||
Net cash provided (used) by investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Financing activities: |
|
|
|
|
|
|
||
Taxes paid related to net share settlement of equity awards |
|
|
( |
) |
|
|
( |
) |
Repayments of finance leases |
|
|
( |
) |
|
|
( |
) |
Debt issuance costs |
|
|
|
|
|
( |
) |
|
Cash dividends |
|
|
( |
) |
|
|
( |
) |
Proceeds from borrowings |
|
|
|
|
|
|
||
Repayments of borrowings |
|
|
( |
) |
|
|
( |
) |
Net cash provided (used) by financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents at beginning of the period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of the period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes, net of refunds |
|
$ |
|
|
$ |
|
||
Operating lease obligations |
|
$ |
|
|
$ |
|
||
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, the Middle East, and Asia. The Company designs, engineers, and manufactures mechatronic products for Original Equipment Manufacturers (“OEMs”) and tiered suppliers across mobility, industrial, and commercial markets. The Company’s capabilities include power distribution, including busbars, smart connect systems, battery disconnect units, and integrated circuit boards; as well as user interface components, specialized light-emitting diode (“LED”) lighting solutions, and sensor applications.
The Company’s products are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus, and rail), cloud computing and data center infrastructure, construction equipment, and consumer appliance.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) have been condensed or omitted pursuant to such rules and regulations for interim financial information. 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 financial statements for the interim periods presented. This Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended May 2, 2026, which was filed with the SEC on June 24, 2026. Interim results are not necessarily indicative of full-year results and may vary from quarter to quarter for reasons other than seasonality.
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 the 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.
Financial reporting periods
The Company’s fiscal year ends on the Saturday closest to April 30, 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 1, 2027 and the previous fiscal year ended May 2, 2026 are both 52-week fiscal years. The three months ended August 1, 2026 and August 2, 2025 are both
Accounting pronouncements not yet adopted
In November 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. The amendments clarify and enhance certain aspects of the hedge accounting guidance in ASC Topic 815. ASU No. 2025-09 will become effective for the Company’s annual periods beginning in fiscal 2028. Early adoption is permitted. The Company is currently evaluating the effects of this ASU on its financial statement disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures.” ASU No. 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 No. 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 effects 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 Annual Report on Form 10-K for the year ended May 2, 2026. There have been no material changes to the significant accounting policies in the three months ended August 1, 2026.
7
Foreign currency translation
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 (income), net. Net foreign exchange gain was $
Supplemental cash flow information
As of August 1, 2026 and May 2, 2026, capital expenditures recorded in accounts payable totaled $
Accounts receivable and allowance for doubtful accounts
Accounts receivable are customer obligations due under the normal trade terms and are presented net of an allowance for doubtful accounts based on the current expected credit loss impairment model. The allowance for doubtful accounts balance was $
Note 2. Revenue
Disaggregated revenue information
Revenue from contracts with customers is disaggregated 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.
In the following table, revenue is disaggregated accordingly:
|
|
Three Months Ended August 1, 2026 (13 Weeks) |
|
|||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Total |
|
||||
Geographic net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Europe, the Middle East & Africa ("EMEA") |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Three Months Ended August 2, 2025 (13 Weeks) |
|
|||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Total |
|
||||
Geographic net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contract assets and liabilities
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 or other accrued liabilities in the condensed consolidated balance sheets. Contract liabilities were $
For the three months ended August 1, 2026 and August 2, 2025, revenue recognized over time was $
8
Note 3. Restructuring and Asset Impairment Charges
Restructuring and asset impairment charges include 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 1, 2026 |
|
|
August 2, 2025 |
|
||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Employee termination benefits |
|
$ |
|
|
$ |
|
||
Restructuring and asset impairment charges by reportable segment were as follows:
|
|
Three Months Ended |
|
|||||
|
|
August 1, 2026 |
|
|
August 2, 2025 |
|
||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Automotive |
|
$ |
|
|
$ |
|
||
Eliminations/Corporate |
|
|
|
|
|
|
||
Recognized in: |
|
|
|
|
|
|
||
Selling and administrative expenses |
|
|
|
|
|
|
||
The Company’s restructuring liability was $
Note 4. Inventories, net
(in millions) |
|
August 1, 2026 |
|
|
May 2, 2026 |
|
||
Finished products |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Raw materials |
|
|
|
|
|
|
||
Gross inventories |
|
|
|
|
|
|
||
Inventory reserves |
|
|
( |
) |
|
|
( |
) |
Total inventories, net |
|
$ |
|
|
$ |
|
||
9
Note 5. 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 2, 2026 |
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|||
Gross carrying value as of May 2, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|||
Foreign currency translation |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Gross carrying value as of August 1, 2026 |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Accumulated impairment loss as of May 2, 2026 |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Accumulated impairment loss as of August 1, 2026 |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Net Carrying value as of August 1, 2026 |
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
A summary of goodwill by reporting unit is as follows:
(in millions) |
|
August 1, 2026 |
|
|
May 2, 2026 |
|
||
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 affect 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 2027.
Other intangible assets, net
Details of identifiable intangible assets are shown below:
|
|
August 1, 2026 |
|
|||||||||||||
(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 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
10
|
|
May 2, 2026 |
|
|||||||||||||
(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 2027 |
|
$ |
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
2031 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Note 6. Derivative Financial Instruments and Fair Value
The Company is exposed to various market risks including, but not limited to, foreign currency exchange rates, commodity prices, and market interest rates. The Company strives to control its exposure to these risks through its 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 accumulated other comprehensive income (loss) (“AOCI(L)”) in the condensed consolidated balance sheets. When the underlying hedged transaction is realized, the gain or loss previously included in AOCI(L) 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 AOCI(L) in the condensed consolidated balance sheets.
Derivative Instruments
Foreign Currency Forwards — The Company uses short-term foreign currency forward contracts to mitigate the effect on earnings that exchange rate fluctuations have on non-functional currency balance sheet exposures. These forward contracts are not designated as hedging instruments.
As of August 1, 2026 and May 2, 2026, the Company held foreign currency forward contracts with a notional value of $
11
Hedging Instruments
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 AOCI(L) in the condensed consolidated balance sheets. Subsequently, the accumulated gains and losses recorded in AOCI(L) are reclassified to income in the period during which the hedged cash flow affects earnings, which are expected to be immaterial over the next 12 months. No ineffectiveness was recognized in the three months ended August 1, 2026 and August 2, 2025.
Net Investment Hedge — Foreign Currency Borrowings
The Company has foreign currency denominated debt under its revolving credit facility (see Note 7, “Debt”). During the period ended August 2, 2025, the Company designated €
Cash Flow Hedge — 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
Effect of hedging 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 1, 2026 |
|
|
August 2, 2025 |
|
||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Net investment hedge - foreign currency borrowings |
|
$ |
|
|
$ |
|
||
Cash flow hedge - interest rate swaps |
|
|
|
|
|
|
||
Assets and Liabilities Measured at Fair Value on a Recurring Basis
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.
Asset and liability instruments
The carrying value of cash and cash equivalents, short and long-term receivables, accounts payable, and short-term and long-term debt approximates fair value.
Derivative instruments
The fair value of derivative instruments is classified as Level 2 within the fair value hierarchy and recorded in the condensed consolidated balance sheets as follows:
|
|
|
|
Asset/(Liability) |
|
|||||
(in millions) |
|
Financial Statement Caption |
|
August 1, 2026 |
|
|
May 2, 2026 |
|
||
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 |
|
$ |
|
|
$ |
|
||
12
Note 7. Debt
A summary of debt is shown below:
(in millions) |
|
August 1, 2026 |
|
|
May 2, 2026 |
|
||
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 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 (as amended and with applicable waivers, the “Existing Credit Agreement”). The Existing Credit Agreement provided for a secured multicurrency revolving credit facility of $
On August 31, 2026, the Company entered into a Fourth Amendment to the Second Amended and Restated Credit Agreement (the “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, which amends the Existing Credit Agreement (as amended by the Amendment, the “Amended Credit Agreement”). Unless defined herein, capitalized terms used in this description of the Amendment have the meanings given to them in the Amended Credit Agreement.
The Amendment, among other things:
On July 7, 2025, the Company entered into an amendment (the “Third Amendment”) and accounted for it as a debt modification, which resulted in a non-cash loss of $
Further information on the previous amendments, applicable waivers, and terms of the Existing Credit Agreement are included in the Company’s Annual Report on Form 10-K for the year ended May 2, 2026.
As of August 1, 2026, the outstanding balance under the revolving credit facility consisted of $
As of August 1, 2026, the Company was in compliance with all the covenants in the Existing Credit Agreement.
13
Other debt
One of the Company’s European subsidiaries has debt that consists of
Note 8. Income Taxes
For the three months ended August 1, 2026, 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. 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 1, 2026 and August 2, 2025 were as follows:
|
|
Three Months Ended |
|
|||||
|
|
August 1, 2026 |
|
|
August 2, 2025 |
|
||
($ in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Pre-tax income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
Income tax expense |
|
|
|
|
|
|
||
Effective tax rate |
|
|
( |
)% |
|
|
( |
)% |
The effective tax rate for the three months ended August 1, 2026 differs from the U.S. federal statutory tax rate of
The effective tax rate for the three months ended August 2, 2025 differs from the U.S. federal statutory tax rate of
The Company’s gross unrecognized income tax benefits were $
Note 9. Commitments and Contingencies
The Company is, from time-to-time, subject to various legal actions, government investigations, and regulatory inquiries. Certain proceedings and claims are pending or may be asserted in the future against the Company, including those arising out of alleged defects, product warranties, breach of contracts, supplier and other contractual relationships, customs and international trade regulations, 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 claims. Although the outcome of any individual matter cannot be predicted with certainty, it is the Company's opinion that it has adequate reserves based on the information available. Due to the inherent subjectivity of assessments and unpredictability of the outcomes related to such matters, the ultimate outcome of any matter could be materially different than the amount the Company may have accrued.
14
Environmental Matters
The Company is not aware of any potential unasserted environmental claims that may be brought against it. The Company is involved in environmental investigations and/or remediation at two of its United States plant sites no longer used for operations and one currently operating site in Mexico. The Company uses environmental consultants to assist it in evaluating its environmental liabilities in order to establish appropriate accruals in its condensed consolidated financial statements. Accruals are recorded when environmental remediation is probable and the costs can be reasonably estimated. A number of factors affect the cost of environmental remediation, including the determination of the extent of contamination, the length of time remediation may require, the complexity of environmental regulations, and the advancement of remediation technology. Considering these factors, the Company has estimated (without discounting) the costs of remediation. Recovery from insurance or other third parties is not anticipated. The Company is not yet able to determine when such remediation activity will be complete.
As of August 1, 2026 and May 2, 2026, the Company had accruals, primarily based upon independent estimates, for environmental matters of $
Litigation
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 stockholder 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. After the cases were consolidated and a lead plaintiff appointed, Defendants moved to dismiss the consolidated complaint in its entirety for failure to state a claim. On February 3, 2026, the judge presiding over the case granted Defendants’ motion to dismiss but allowed Plaintiff an opportunity to file an amended complaint and set a schedule for briefing on any motion to dismiss that amended complaint. Plaintiff subsequently filed a second amended complaint, which Defendants moved to dismiss in its entirety for failure to state a claim, and that motion remains pending.
In addition, two purported stockholders 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”).
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.
15
Note 10. Shareholders’ Equity
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 1, 2026 (13 Weeks) |
|
|||||||||
(in millions) |
|
Currency translation adjustments |
|
|
Derivative instruments |
|
|
Total |
|
|||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Tax (expense) benefit |
|
|
|
|
|
( |
) |
|
|
|
||
Net other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at the end of period |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
Three Months Ended August 2, 2025 (13 Weeks) |
|
|||||||||
(in millions) |
|
Currency translation adjustments |
|
|
Derivative instruments |
|
|
Total |
|
|||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|||
Tax (expense) benefit |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|||
Balance at the end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Currency translation adjustments include a gross gain of approximately $
Stock-based compensation
The Company has granted restricted stock units (“RSUs”), performance stock units (“PSUs”) and stock awards to employees and non-employee directors under its long-term incentive compensation plans.
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.
|
|
Three Months Ended |
|
|||||
|
|
August 1, 2026 |
|
|
August 2, 2025 |
|
||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
RSUs |
|
$ |
|
|
$ |
|
||
PSUs |
|
|
|
|
|
|
||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
||
Restricted stock units (RSUs)
RSUs granted vest over a pre-determined period of time, up to
16
The following table summarizes RSU activity:
|
|
Restricted |
|
|
Weighted |
|
||
Non-vested at May 2, 2026 |
|
|
|
|
$ |
|
||
Awarded |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
|
|
$ |
|
||
Non-vested at August 1, 2026 |
|
|
|
|
$ |
|
||
As of August 1, 2026, unrecognized share-based compensation expense for RSUs was $
Performance stock units (PSUs)
The PSUs granted vest on the third anniversary of the grant date based on a cumulative
The fair value of the PSUs based on an ROIC measure (“ROIC PSUs”) is based on the closing stock price on the date of grant. Compensation expense is recognized when it is probable that the target performance criteria will be achieved. The Company assesses the probability of vesting at each balance sheet date and adjusts compensation expense based on the probability assessment.
The Company estimated the grant date fair value of its PSUs based on a TSR performance measure using a Monte Carlo simulation model, as the TSR metric and changes in stock price are considered market conditions under ASC 718, “Compensation - Stock Compensation.” Compensation expense is recognized ratably over the performance period based on the awards grant date fair value.
The following table summarizes PSU activity:
|
|
Performance |
|
|
Weighted |
|
||
Non-vested at May 2, 2026 |
|
|
|
|
$ |
|
||
Awarded |
|
|
|
|
$ |
|
||
Vested |
|
|
|
|
$ |
|
||
Forfeited |
|
|
( |
) |
|
$ |
|
|
Non-vested at August 1, 2026 |
|
|
|
|
$ |
|
||
As of August 1, 2026, unrecognized share-based compensation expense for the PSUs was $
Restricted stock awards (RSAs)
As of May 3, 2025, the Company had
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. Prior to December 2025, non-employee directors could have elected to defer receipt of their shares under the Company’s non-qualified deferred compensation plan. During the third quarter of fiscal year 2026, the Company terminated its deferred compensation plan and it is expected to be fully liquidated by January 2027.
17
The following table summarizes awards granted to non-employee directors:
|
|
Non-employee director awards |
|
|
Deferred non-employee director awards |
|
|
Total |
|
|
Weighted |
|
||||
Outstanding at May 2, 2026 |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Awarded |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Issued |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Outstanding at August 1, 2026 |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Dividends
The Company paid dividends totaling $
Note 11. Income (Loss) per Share
Basic income (loss) per share is calculated by dividing net income (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 income (loss) per share:
|
|
Three Months Ended |
|
|||||
|
|
August 1, 2026 |
|
|
August 2, 2025 |
|
||
(in millions, except share and per share data) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Net income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Basic weighted average shares outstanding |
|
|
|
|
|
|
||
Dilutive effect of common stock equivalents |
|
|
— |
|
|
|
|
|
Diluted weighted average shares outstanding |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Income (loss) per share: |
|
|
|
|
|
|
||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding |
|
|
— |
|
|
|
|
|
In the three months ended August 1, 2026 and August 2, 2025, 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 12. 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 President and (“CEO”).
The Automotive supplies electronic and electro-mechanical devices and related products to automobile OEMs and their tiered suppliers across a broad range of vehicle platforms and powertrains. Products include a full spectrum of vehicle systems from power distribution solutions, including busbars, smart connect systems, battery disconnect units, and integrated circuit boards, to user interface components, specialized LED lighting solutions, and advanced sensor applications.
18
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 networking and broadband markets, and user interface panel solutions for the appliance market. Solutions include copper transceivers, distribution point units, and solid-state field-effect consumer touch panels. In the fourth quarter of fiscal 2026, the Company sold its dataMate business which was included in the Interface segment. Additionally, the consumer appliance business is winding down as programs roll-off.
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 1, 2026 (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 (income), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Pre-tax income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||
|
|
Three Months Ended August 2, 2025 (13 Weeks) |
|
|||||||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Eliminations/ Corporate |
|
|
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 (income), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Pre-tax income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||
19
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:
20
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 2, 2026. 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.
21
Overview
We are a leading global supplier of custom engineered solutions with sales, engineering, and manufacturing locations in North America, Europe, the Middle East, and Asia. We design, engineer, and manufacture mechatronic products for Original Equipment Manufacturers (“OEMs”) and tiered suppliers across mobility, industrial, and commercial markets. Our capabilities include power distribution, including busbars, smart connect systems, battery disconnect units, and integrated circuit boards; as well as user interface components, specialized light-emitting diode (“LED”) lighting solutions, and sensor applications. Our business is managed on a segment basis, with those segments being Automotive, Industrial and Interface.
Our financial performance depends on varying conditions in the markets we serve. Our products are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus and rail), cloud computing and data center infrastructure, and construction equipment. Demand in these markets tends to fluctuate in response to overall economic conditions. Our sales may also be affected by our customers’ inventory levels and production schedules, consumer adoption rates, and supply chain challenges. Our operations are also affected by geopolitical risks, currency fluctuations, political and economic uncertainty, tariffs and related trade disruptions, and regulatory and trade compliance matters.
Recent Trends and Market Conditions
Global Trade Environment
We operate a global manufacturing and sourcing footprint and our business is subject to tariffs, import duties, and other trade compliance regulations imposed by the jurisdictions in which we operate and subject us to a complex and evolving body of trade compliance laws and regulations. Failure to comply with trade program regulations could increase our manufacturing costs and may have a material effect on our results of operations, financial position, and cash flows. Beginning in 2025, the U.S. implemented tariffs across multiple jurisdictions in which we operate, including broad country-level and product-specific measures, which was followed by retaliatory tariffs and other trade actions against U.S. goods and services. In early 2026, the U.S. Supreme Court ruled that U.S. tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) on goods imported into the U.S. were unauthorized. Following the ruling, new tariffs were subsequently imposed under different statutes.
Given our various manufacturing sites, including Canada, China, Egypt, Europe and Mexico, the continuation or expansion of tariffs or other trade barriers could increase input costs, pressure margins or affect customer demand. During fiscal 2026, we mitigated these effects through a variety of strategies, including negotiated price adjustments and ongoing cost recovery arrangements with our customers, as well as supply chain optimization initiatives. To the extent similar mitigation efforts are insufficient, new or expanded tariffs could have a material effect on our results of operations, financial position, and cash flows.
Geopolitical Conflicts and Global Supply Chain Disruptions
The global economy continues to experience volatile disruptions to the commodity, labor, and transportation markets. The geopolitical tensions and military conflicts in the Middle East have affected global economic and security conditions. Continued or renewed conflict in the region may cause additional disruption to supply chains, including logistics issues and inflationary pressure on energy and transportation costs. We continue to work closely with suppliers and customers to mitigate and minimize the potential adverse effects 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 effect on our results of operations, financial condition, and cash flows.
Vehicle Electrification
Our business in the future will be affected, in part, by the broad trend toward electrification. Adoption of electric vehicles (“EV”) has been slower than anticipated and certain of our customers have announced shifts to their EV strategies. As a result of these changes in EV consumer demand, we may experience production inefficiencies, including underutilized capacity and workforce disruptions, particularly if we are unable to redeploy excess capacity, which may have a material effect on our results of operations, financial condition, and cash flows.
22
Consolidated Results of Operations
Our fiscal year ends on the Saturday closest to April 30, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. Fiscal 2027 and fiscal 2026 are both 52-week years. The three months ended August 1, 2026 and August 2, 2025 are both 13-week periods. The following discussions of comparative results among periods should be reviewed in this context.
The table below compares our results of operations between the three months ended August 1, 2026 and the three months ended August 2, 2025:
|
|
Three Months Ended |
|
||||||||||
|
|
August 1, 2026 |
|
August 2, 2025 |
|
Favorable (Unfavorable) |
|
||||||
(in millions) |
|
(13 Weeks) |
|
(13 Weeks) |
|
$ Change |
|
% Change |
|
||||
Net sales |
|
$ |
265.4 |
|
$ |
240.5 |
|
$ |
24.9 |
|
|
10.4 |
% |
Cost of products sold |
|
|
217.7 |
|
|
197.0 |
|
|
(20.7 |
) |
|
(10.5 |
%) |
Gross profit |
|
|
47.7 |
|
|
43.5 |
|
|
4.2 |
|
|
9.7 |
% |
Selling and administrative expenses |
|
|
45.9 |
|
|
36.6 |
|
|
(9.3 |
) |
|
(25.4 |
%) |
Amortization of intangibles |
|
|
5.7 |
|
|
5.8 |
|
|
0.1 |
|
|
1.7 |
% |
Interest expense, net |
|
|
5.2 |
|
|
5.9 |
|
|
0.7 |
|
|
11.9 |
% |
Other expense (income), net |
|
|
(1.8 |
) |
|
1.3 |
|
|
3.1 |
|
|
238.5 |
% |
Income tax expense (benefit) |
|
|
4.1 |
|
|
4.2 |
|
|
0.1 |
|
|
2.4 |
% |
Net income (loss) |
|
$ |
(11.4 |
) |
$ |
(10.3 |
) |
$ |
(1.1 |
) |
|
(10.7 |
%) |
Net sales
Net sales increased $24.9 million, or 10.4%, to $265.4 million in the three months ended August 1, 2026, compared to $240.5 million in the three months ended August 2, 2025. Foreign currency translation increased net sales by $1.9 million. Excluding foreign currency translation, net sales increased $23.0 million. The increase was primarily driven by higher sales volume and mix in the Industrial segment due to organic growth in the data center business and an increase in demand for on-highway and off-highway lighting products (including customer recoveries). The increase was partially offset by lower sales in the Interface segment due to a divestiture and program roll-offs as the consumer appliance business winds down.
Cost of products sold
Cost of products sold increased $20.7 million, or 10.5%, to $217.7 million (82.0% of net sales) in the three months ended August 1, 2026, compared to $197.0 million (81.9% of net sales) in the three months ended August 2, 2025. Foreign currency translation increased cost of products sold by $1.1 million. Excluding foreign currency translation, cost of products sold increased $19.6 million. The increase was primarily due to higher sales volumes and product mix, including material costs and freight inflation. The increase was partially offset by a divestiture and program roll-offs in the Interface segment.
Gross profit margin
Gross profit margin was 18.0% of net sales in the three months ended August 1, 2026, remaining consistent compared to 18.1% of net sales in the three months ended August 2, 2025.
Selling and administrative expenses
Selling and administrative expenses increased $9.3 million, or 25.4%, to $45.9 million (17.3% of net sales) in the three months ended August 1, 2026, compared to $36.6 million (15.2% of net sales) in the three months ended August 2, 2025. Excluding foreign currency translation, selling and administrative expenses increased $9.1 million. The increase was primarily due to higher employee costs and professional fees.
Amortization of intangibles
Amortization of intangibles was $5.7 million in the three months ended August 1, 2026, compared to $5.8 million in the three months ended August 2, 2025.
23
Interest expense, net
Interest expense, net was $5.2 million in the three months ended August 1, 2026, compared to $5.9 million in the three months ended August 2, 2025. The decrease was primarily driven by lower overall borrowings and lower interest rates during the three months ended August 1, 2026, compared to the three months ended August 2, 2025.
Other expense (income), net
Other income, net was $1.8 million in the three months ended August 1, 2026, compared to other expense, net of $1.3 million in the three months ended August 2, 2025. Net foreign exchange gain was $1.3 million in the three months ended August 1, 2026, compared to a loss of $1.5 million in the three months ended August 2, 2025. In the three months ended August 2, 2025, there was a non-cash write-off of unamortized debt issuance costs of $0.6 million and a net gain on the sale of assets of $0.5 million.
Income tax expense (benefit)
Income tax expense was $4.1 million (-56.2% effective tax rate) in the three months ended August 1, 2026, compared to $4.2 million (-68.9% effective tax rate) in the three months ended August 2, 2025. The effective tax rate for the three months ended August 1, 2026 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 effect from Net Controlled Foreign Corporation (CFC) Tested Income (“NCTI”), non-deductible interest, and Pillar 2 top-up tax, partially offset by the effect of income derived from foreign operations with lower statutory tax rates. 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 deferred tax assets of $1.7 million, additional expense from global intangible low-tax income (“GILTI”), and non-deductible interest, partially offset by earnings from foreign operations with lower statutory tax rates.
Net income (loss)
Net loss was $11.4 million in the three months ended August 1, 2026, compared to $10.3 million in the three months ended August 2, 2025. The change in net loss for both periods was attributable to the aforementioned items.
24
Reportable Operating Segments
Automotive
|
|
Three Months Ended |
|
||||||||||
|
|
August 1, 2026 |
|
August 2, 2025 |
|
Favorable (Unfavorable) |
|
||||||
($ in millions) |
|
(13 Weeks) |
|
(13 Weeks) |
|
$ Change |
|
% Change |
|
||||
Net sales |
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
44.7 |
|
$ |
36.6 |
|
$ |
8.1 |
|
|
22.1 |
% |
Europe, the Middle East & Africa ("EMEA") |
|
|
53.7 |
|
|
61.6 |
|
|
(7.9 |
) |
|
(12.8 |
%) |
Asia |
|
|
7.3 |
|
|
7.9 |
|
|
(0.6 |
) |
|
(7.6 |
%) |
Net sales |
|
|
105.7 |
|
|
106.1 |
|
|
(0.4 |
) |
|
(0.4 |
%) |
Gross profit |
|
$ |
2.0 |
|
$ |
0.1 |
|
$ |
1.9 |
|
|
1900.0 |
% |
As a percent of net sales |
|
|
1.9 |
% |
|
0.1 |
% |
|
|
|
|
||
Income (loss) from operations |
|
$ |
(11.7 |
) |
$ |
(12.5 |
) |
$ |
0.8 |
|
|
6.4 |
% |
As a percent of net sales |
|
|
(11.1 |
)% |
|
(11.8 |
)% |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
||||
Net sales
Automotive segment net sales decreased $0.4 million, or 0.4%, to $105.7 million in the three months ended August 1, 2026, compared to $106.1 million in the three months ended August 2, 2025. Excluding foreign currency translation, net sales decreased $1.0 million. The change is attributable to the following:
Gross profit
Automotive segment gross profit increased $1.9 million to $2.0 million in the three months ended August 1, 2026, compared to $0.1 million in the three months ended August 2, 2025. Gross profit margins increased to 1.9% in the three months ended August 1, 2026, compared to 0.1% in the three months ended August 2, 2025. The higher gross profit was primarily due to improved operational performance, including customer recoveries, lower inventory adjustments, and improved scrap.
Income (loss) from operations
Automotive segment loss from operations was $11.7 million in the three months ended August 1, 2026, compared to $12.5 million in the three months ended August 2, 2025. The decrease in operating loss was primarily due to higher gross profit, partially offset by an increase in selling and administrative expenses.
Industrial
|
|
Three Months Ended |
|
||||||||||
|
|
August 1, 2026 |
|
August 2, 2025 |
|
Favorable (Unfavorable) |
|
||||||
($ in millions) |
|
(13 Weeks) |
|
(13 Weeks) |
|
$ Change |
|
% Change |
|
||||
Net sales |
|
$ |
156.8 |
|
$ |
123.5 |
|
$ |
33.3 |
|
|
27.0 |
% |
Gross profit |
|
$ |
45.9 |
|
$ |
39.7 |
|
$ |
6.2 |
|
|
15.6 |
% |
As a percent of net sales |
|
|
29.3 |
% |
|
32.1 |
% |
|
|
|
|
||
Income (loss) from operations |
|
$ |
31.6 |
|
$ |
26.5 |
|
|
5.1 |
|
|
19.2 |
% |
As a percent of net sales |
|
|
20.2 |
% |
|
21.5 |
% |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
||||
25
Net sales
Industrial segment net sales increased $33.3 million, or 27.0%, to $156.8 million in the three months ended August 1, 2026, compared to $123.5 million in the three months ended August 2, 2025. Excluding foreign currency translation, net sales increased $32.0 million. The increase was due to organic growth in the data center business and an increase in demand for on-highway and off-highway lighting products (including customer recoveries).
Gross profit
Industrial segment gross profit increased $6.2 million, or 15.6%, to $45.9 million in the three months ended August 1, 2026, compared to $39.7 million in the three months ended August 2, 2025. Excluding foreign currency translation, gross profit increased $5.6 million. Gross profit margins decreased to 29.3% in the three months ended August 1, 2026, compared to 32.1% in the three months ended August 2, 2025. Gross profit margins decreased due to higher material and freight costs partially offset by higher sales volumes and customer recoveries.
Income (loss) from operations
Industrial segment income from operations increased $5.1 million, or 19.2%, to $31.6 million in the three months ended August 1, 2026, compared to $26.5 million in the three months ended August 2, 2025. Excluding foreign currency translation, income from operations increased $4.6 million. The increase was primarily due to higher gross profit.
Interface
|
|
Three Months Ended |
|
||||||||||
|
|
August 1, 2026 |
|
August 2, 2025 |
|
Favorable (Unfavorable) |
|
||||||
($ in millions) |
|
(13 Weeks) |
|
(13 Weeks) |
|
$ Change |
|
% Change |
|
||||
Net sales |
|
$ |
2.9 |
|
$ |
10.9 |
|
$ |
(8.0 |
) |
|
(73.4 |
%) |
Gross profit |
|
$ |
(0.7 |
) |
$ |
3.4 |
|
$ |
(4.1 |
) |
|
(120.6 |
%) |
As a percent of net sales |
|
|
(24.1 |
)% |
|
31.2 |
% |
|
|
|
|
||
Income (loss) from operations |
|
$ |
(0.8 |
) |
$ |
3.0 |
|
|
(3.8 |
) |
|
(126.7 |
%) |
As a percent of net sales |
|
|
(27.6 |
)% |
|
27.5 |
% |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
||||
Net sales
Interface segment net sales decreased $8.0 million, or 73.4%, to $2.9 million in the three months ended August 1, 2026, compared to $10.9 million in the three months ended August 2, 2025. The decrease was primarily due to the divestiture of our dataMate business in the fourth quarter of fiscal year 2026 and program roll-offs as the consumer appliance business winds down.
Gross profit
Interface segment gross profit decreased $4.1 million, or 120.6%, to a gross loss of $0.7 million in the three months ended August 1, 2026, compared to gross profit of $3.4 million in the three months ended August 2, 2025. Gross profit margins decreased to negative 24.1% in the three months ended August 1, 2026, compared to 31.2% in the three months ended August 2, 2025. The decrease in gross profit margins was primarily due to lower sales volumes and mix.
Income (loss) from operations
Interface segment income from operations decreased $3.8 million, or 126.7%, to a loss from operations of $0.8 million in the three months ended August 1, 2026, compared to income from operations of $3.0 million in the three months ended August 2, 2025. The decrease was primarily due to lower gross profit.
26
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 and dividends. 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 for longer than we expect due to the uncertainty in the global trade environment (including tariffs, import duties, and other trade compliance regulations), supply chain disruptions, inflationary pressures or other geopolitical risks, or if we are unable to maintain compliance with our debt covenants, our liquidity position could be severely affected. Additionally, we may consider other options to enhance our financial and operating position. Such options may include refinancing or restructuring initiatives, sales of assets, and reductions or delays in capital spending.
As of August 1, 2026, we had $116.2 million of cash and cash equivalents, of which $58.7 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.
Revolving credit facility
On October 31, 2022, we entered into a Second Amended and Restated 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 (as amended and with applicable waivers, the “Existing Credit Agreement”). The Existing Credit Agreement provided for a secured multicurrency revolving credit facility of $400 million and would have matured on October 31, 2027.
On August 31, 2026, we entered into a Fourth Amendment to the Second Amended and Restated Credit Agreement (the “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, which amends the Existing Credit Agreement (as amended by the Amendment, the “Amended Credit Agreement”). Unless defined herein, capitalized terms used in this description of the Amendment have the meanings given to them in the Amended Credit Agreement.
The Amendment, among other things:
Further information on previous amendments, applicable waivers, and terms of the Existing Credit Agreement are included in our Annual Report on Form 10-K for the year ended May 2, 2026, which was filed with the SEC on June 24, 2026.
As of August 1, 2026, the outstanding balance under the revolving credit facility consisted of $294.4 million (€255.3 million) of euro-denominated borrowings and $17.0 million of US dollar denominated borrowings. The weighted-average interest rate on outstanding euro-denominated and US dollar borrowings under the Existing Credit Agreement was approximately 5.7% and 7.3%, respectively, as of August 1, 2026.
As of August 1, 2026, we were in compliance with all the covenants in the Existing Credit Agreement.
During the three months ended August 1, 2026, the Company made net repayments on outstanding borrowings of $10.1 million.
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 or will 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,
27
“Risk Factors” of our Annual Report on Form 10-K for the year ended May 2, 2026, as supplemented by subsequent filings with the Securities and Exchange Commission.
Cash Flows
|
|
Three Months Ended |
|
|||||
|
|
August 1, 2026 |
|
|
August 2, 2025 |
|
||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
(11.4 |
) |
|
$ |
(10.3 |
) |
Non-cash items |
|
|
18.6 |
|
|
|
17.7 |
|
Changes in operating assets and liabilities |
|
|
(15.0 |
) |
|
|
17.7 |
|
Net cash provided (used) by operating activities |
|
|
(7.8 |
) |
|
|
25.1 |
|
Net cash provided (used) by investing activities |
|
|
(3.1 |
) |
|
|
(5.8 |
) |
Net cash provided (used) by financing activities |
|
|
(12.3 |
) |
|
|
(4.5 |
) |
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
(0.2 |
) |
|
|
2.7 |
|
Increase (decrease) in cash and cash equivalents |
|
|
(23.4 |
) |
|
|
17.5 |
|
Cash and cash equivalents at beginning of the period |
|
|
139.6 |
|
|
|
103.6 |
|
Cash and cash equivalents at end of the period |
|
$ |
116.2 |
|
|
$ |
121.1 |
|
Operating activities
Net cash used by operating activities was $7.8 million in the three months ended August 1, 2026, compared to net cash provided by operating activities of $25.1 million in the three months ended August 2, 2025. The decrease was due to higher cash outflows from operating assets and liabilities of $15.0 million in the three months ended August 1, 2026 primarily due to a higher investment in working capital items.
Investing activities
Net cash used by investing activities was $3.1 million in the three months ended August 1, 2026, compared to $5.8 million in the three months ended August 2, 2025. Capital expenditures were $3.1 million in the three months ended August 1, 2026, compared to $7.1 million in the three months ended August 2, 2025. In the three months ended August 1, 2026, we received no proceeds from the sale of assets, compared to $1.3 million in the three months ended August 2, 2025.
Financing activities
Net cash used by financing activities was $12.3 million in the three months ended August 1, 2026, compared to net cash used by financing activities of $4.5 million in the three months ended August 2, 2025. In the three months ended August 1, 2026, we had net repayments from borrowings of $10.1 million, compared to net proceeds from borrowings of $0.4 million in the three months ended August 2, 2025. In the three months ended August 1, 2026, we paid no debt issuance costs compared to $1.6 million of debt issuance costs in the three months ended August 2, 2025.
We paid cash dividends of $1.8 million in the three months ended August 1, 2026, compared to $2.8 million in the three months ended August 2, 2025.
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.
28
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 1, 2026. 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 2, 2026.
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 1, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 9, “Commitments and 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 2, 2026 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about our purchases of equity securities during the three months ended August 1, 2026.
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)2 |
|
||||
May 3, 2026 through May 30, 2026 |
|
|
6,570 |
|
|
$ |
8.63 |
|
|
|
— |
|
|
$ |
200.0 |
|
May 31, 2026 through July 4, 2026 |
|
|
7,852 |
|
|
$ |
15.16 |
|
|
|
— |
|
|
$ |
200.0 |
|
July 5, 2026 through August 1, 2026 |
|
|
7,986 |
|
|
$ |
15.76 |
|
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(1) Represents 22,408 shares of common stock that were surrendered by employees to satisfy tax withholding obligations in connection with the vesting of restricted stock units. |
|
|||||||||||||||
Item 5. Other Information
Fourth Amendment to 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 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 August 31, 2026, the Company entered into a Fourth Amendment to Second Amended and Restated Credit Agreement (the “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, which amends the Second Amended and Restated Credit Agreement, dated as of October 31, 2022, among such parties (as amended and with applicable waivers, the “Amended Credit Agreement”). Unless defined herein, capitalized terms used in this description of the Amendment have the meanings given to them in the Amended Credit Agreement.
The Amendment, among other things:
30
For further information, see Note 7, “Debt” to the condensed consolidated financial statements included in this Quarterly Report.
The foregoing description of each of the Amendment and the Amended Credit Agreement is not intended to be complete and is qualified in its entirety by reference to (i) the complete text of the Amendment, which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and is incorporated herein by reference and (ii) the complete text of the Second Amended and Restated Credit Agreement prior to the Amendment, which is filed as Exhibits 10.1 to 10.5 to the Annual Report on Form 10-K for the fiscal year ended May 2, 2026.
Trading Arrangements
During our last fiscal quarter,
31
Item 6. Exhibits
Exhibit Number |
|
Description |
10.1 |
|
|
31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. |
31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. |
32* |
|
Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350. |
101.INS |
|
Inline XBRL Instance Document |
101.SCH |
|
Inline XBRL Taxonomy Schema With Embedded Linkbase Document |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
|
|
* |
|
Indicates that the exhibit is being furnished with this report and not filed as part of it. |
|
|
|
|
|
|
32
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.
|
|
|
|
METHODE ELECTRONICS, INC. |
||
|
|
|
|
|
|
|
|
|
|
|
By: |
|
/s/ Laura Kowalchik |
|
|
|
|
|
|
Laura Kowalchik |
|
|
|
|
|
|
Chief Financial Officer |
|
|
|
|
|
|
(Principal Financial Officer) |
|
|
|
|
|
|
|
Dated: |
|
September 2, 2026 |
|
|
|
|
33