Methode Electronics Inc 10-Q for FY2023 Q1
Methode Electronics Inc (MEI)
About this 10-Q
Methode Electronics Inc filed this 10-Q on September 1, 2022, covering the quarter ended July 30, 2022 (FY2023 Q1).
Headline figures
Quarter ended July 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $282.4M
- down 1.9% from $287.8M a year earlier
- Net income
- $21.5M
- down 26.1% from net income of $29.1M a year earlier
- Diluted EPS
- $0.58
- down 23.7% from $0.76 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:
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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. (Check one):
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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
At August 26, 2022, 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 Balance Sheets as of July 30, 2022 (unaudited) and April 30, 2022 |
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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 1A. |
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Item 2. |
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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 INCOME (Unaudited)
(in millions, except per share data)
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Three Months Ended |
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July 30, 2022 |
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July 31, 2021 |
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Net sales |
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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 from operations |
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Interest expense, net |
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— |
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Other income, net |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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Basic and diluted income per share: |
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Basic |
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$ |
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$ |
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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 (Unaudited)
(in millions)
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Three Months Ended |
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July 30, 2022 |
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July 31, 2021 |
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Net income |
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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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Total comprehensive income |
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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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July 30, 2022 |
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April 30, 2022 |
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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 taxes 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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Long-term income taxes payable |
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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
(in millions, except share data)
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Three Months Ended July 30, 2022 |
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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 30, 2022 |
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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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( |
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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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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 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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Net 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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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 July 30, 2022 |
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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 31, 2021 |
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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 1, 2021 |
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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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Exercise of stock options |
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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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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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— |
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( |
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Net 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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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 31, 2021 |
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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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July 30, 2022 |
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July 31, 2021 |
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Operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income 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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Change in cash surrender value of life insurance |
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Amortization of debt issuance costs |
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Gain on sale of property, plant and equipment |
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— |
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( |
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Change in deferred income taxes |
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Other |
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— |
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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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Prepaid expenses and other assets |
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Accounts payable |
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( |
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Other liabilities |
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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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Sale of property, plant and equipment |
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— |
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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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Proceeds from exercise of stock options |
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— |
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Purchases of common stock |
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( |
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( |
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Cash dividends |
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( |
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( |
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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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( |
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( |
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Decrease in cash and cash equivalents |
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( |
) |
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( |
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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, consumer appliance and medical devices.
Impact of the COVID-19 pandemic and supply chain disruptions
The COVID-19 pandemic and the ongoing measures to reduce its spread have negatively impacted the global economy, disrupted consumer and customer demand and global supply chains, and resulted in manufacturing inefficiencies and increased freight costs due to global capacity constraints. As a result of a resurgence of the virus in China and corresponding government lock-down orders, the COVID-19 pandemic had a negative impact on the Company's China operations in the three months ended July 30, 2022. Further resurgences of the COVID-19 virus or its variants in other regions, including corresponding lock-downs or similar government orders, could also impact the Company's results of operations.
Various government programs have been enacted to provide assistance to businesses impacted by the COVID-19 pandemic. The amount of assistance the Company received was $
The Company continues to experience increased material and logistics costs, labor shortages, and most significantly, impacts from the worldwide semiconductor supply shortage. The semiconductor supply shortage is due, in part, to increased demand across multiple industries, including the automotive industry, resulting in a slowdown in their production schedules. The semiconductor supply shortage is also impacting the Company’s supply chain and its ability to meet demand at some of its non-automotive customers.
The Russia-Ukraine military conflict has negatively impacted the Company's European customers and suppliers. Although the Company does not have any operations in Russia, economic sanctions imposed by the international community has further increased existing supply chain, logistics, and inflationary challenges.
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 April 30, 2022, filed with the SEC on June 23, 2022. Results may vary from quarter to quarter for reasons other than seasonality.
Financial reporting periods
The Company maintains its financial records on the basis of a 52- or 53-week fiscal year ending on the Saturday closest to April 30. The
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 the accompanying notes. Actual results could differ from these estimates.
7
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 April 30, 2022. There have been no material changes to the significant accounting policies in the three months ended July 30, 2022.
New
In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832),” which requires annual disclosures when an entity has received government assistance. This guidance is intended to improve the transparency of government assistance received by requiring disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on the registrant’s financial statements. The Company will adopt this standard effective April 29, 2023 and expects the standard to only impact annual financial statement footnote disclosures.
Note 2. Revenue
The Company generates revenue from the manufacturing of products for customers in diversified global markets. The substantial majority of the Company’s revenue is recognized at a point in time. The Company has determined that the most definitive demonstration that control of the product 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.
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 on an over time basis. Revenue is recognized based on progress to date, which is typically even over the production process through transfer of control to the customer.
From time to time, customers may negotiate annual price downs. Management has evaluated these price downs and determined that in some instances, these price downs give rise to a material right. In instances that a material right exists, a portion of the transaction price is allocated to the material right and recognized over the life of the contract.
Across all products, the amount of revenue recognized corresponds to the related purchase order and is adjusted for variable consideration (such as discounts). Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue.
The Company’s performance obligations are typically short-term in nature. As a result, the Company has elected the practical expedient that provides an exemption from the disclosure requirements regarding information about remaining performance obligations on contracts that have original expected durations of one year or less.
Contract balances
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. The net changes in the contract asset and contract liability balances for the three months ended July 30, 2022 and July 31, 2021 were not material.
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.
8
|
|
Three Months Ended July 30, 2022 |
|
|||||||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Medical |
|
|
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 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
Three Months Ended July 31, 2021 |
|
|||||||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Medical |
|
|
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. Income Taxes
The provision for income taxes for an interim period is based on an estimated annual effective income tax rate applied to ordinary year-to-date earnings or losses. The estimated annual effective income tax rate is determined excluding the effects of unusual or significant one-time items that are reported net of the related tax effects in the period in which they occur. In addition, any material effects of enacted tax law or rate changes as well as the Company’s ability to utilize various tax assets is recognized in the period in which the change occurs.
The computation of the estimated annual effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year by jurisdiction, certain book to tax adjustments, and the likelihood of the realizability of deferred tax assets generated in the current year. The estimates used to compute the provision or benefit for income taxes may change as new events occur, additional information is obtained or as the Company’s tax environment changes.
The Company’s income tax expense and effective tax rate for the three months ended July 30, 2022 and July 31, 2021 were as follows:
|
|
Three Months Ended |
|
|||||
($ in millions) |
|
July 30, 2022 |
|
|
July 31, 2021 |
|
||
Income before income taxes |
|
$ |
|
|
$ |
|
||
Income tax expense |
|
$ |
|
|
$ |
|
||
Effective tax rate |
|
|
% |
|
|
% |
||
The effective tax rate for the three months ended July 30, 2022 was lower than the U.S. statutory tax rate primarily due income derived from foreign operations with lower statutory tax rates partially offset by non-deductible expenses. The effective tax rate for the three months ended July 31, 2021 was lower than the U.S. statutory tax rate primarily due to income derived from foreign operations with lower statutory tax rates.
The Company’s gross unrecognized income tax benefits were $
9
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was enacted in the United States. The IR Act imposes a
Note 4. 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. As of July 30, 2022 and April 30, 2022, the Company had a balance of $
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) |
|
July 30, 2022 |
|
|
April 30, 2022 |
|
||
Finished products |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Raw materials |
|
|
|
|
|
|
||
Total inventories |
|
$ |
|
|
$ |
|
||
Property, plant and equipment
(in millions) |
|
July 30, 2022 |
|
|
April 30, 2022 |
|
||
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 |
|
$ |
|
|
$ |
|
||
Depreciation expense was $
10
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 July 30, 2022 and April 30, 2022, 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 over the estimated useful life of the assets. As of July 30, 2022 and April 30, 2022, Company-owned tooling was $
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 April 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Foreign currency translation |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of July 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
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.
Other intangible assets, net
Details of identifiable intangible assets are shown below:
|
|
As of July 30, 2022 |
|
|||||||||||||
(in millions) |
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Weighted |
|
||||
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer relationships and agreements |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
Trade names, patents and technology licenses |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Total amortized intangible assets |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Unamortized trade name |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Total other intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
|
|
As of April 30, 2022 |
|
|||||||||||||
(in millions) |
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Weighted |
|
||||
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer relationships and agreements |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
Trade names, patents and technology licenses |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Total amortized intangible assets |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Unamortized trade name |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Total other intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
11
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 2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Note 6. 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.
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 (“AOCI”) in the condensed consolidated balance sheets. When the underlying hedged transaction is realized, the gain or loss previously included in AOCI is recorded in earnings and reflected in the condensed consolidated statements of income 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 income 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 in the condensed consolidated balance sheets.
Net investment hedges
The Company has a variable-rate, cross-currency swap, maturing on
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 July 30, 2022 and July 31, 2021, the Company recorded gains of $
Interest rate swaps
The Company has interest rate swaps, 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 AOCI. Subsequently, the accumulated gains and losses recorded in AOCI 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 July 30, 2022 or July 31, 2021.
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 income, net, along with the foreign currency gains and losses on monetary assets and liabilities in the condensed consolidated statements of income.
As of July 30, 2022 and April 30, 2022, the Company held foreign currency forward contracts with a notional value of $
12
Fair value of derivative instruments on the balance sheet
The fair value of derivative instruments are classified as Level 2 within the fair value hierarchy and are recorded in the balance sheets as follows:
|
|
|
|
Asset/(Liability) |
|
|||||
(in millions) |
|
Financial Statement Caption |
|
July 30, 2022 |
|
|
April 30, 2022 |
|
||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
||
Net investment hedges |
|
Other long-term assets |
|
$ |
|
|
$ |
|
||
Interest rate swaps |
|
Other long-term assets |
|
$ |
|
|
$ |
|
||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
||
Foreign currency forward contracts |
|
Prepaid expenses and other current assets |
|
$ |
|
|
$ |
— |
|
|
Foreign currency forward contracts |
|
Other accrued liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
Effect of derivative instruments on comprehensive income (loss)
Gross amounts recorded in other comprehensive income (loss) were as follows:
|
|
Three Months Ended |
|
|||||
(in millions) |
|
July 30, 2022 |
|
|
July 31, 2021 |
|
||
Net investment hedges |
|
$ |
|
|
$ |
|
||
Interest rate swaps |
|
|
— |
|
|
|
— |
|
Total |
|
$ |
|
|
$ |
|
||
Note 7. Debt
A summary of debt is shown below:
(in millions) |
|
July 30, 2022 |
|
|
April 30, 2022 |
|
||
Term loan |
|
$ |
|
|
$ |
|
||
Other debt |
|
|
|
|
|
|
||
Unamortized debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Total debt |
|
|
|
|
|
|
||
Less: current maturities |
|
|
( |
) |
|
|
( |
) |
Total long-term debt |
|
$ |
|
|
$ |
|
||
Revolving credit facility/term loan
The Company is a party to an Amended and Restated Credit Agreement (“Credit Agreement”) with Bank of America, N.A., as Administrative Agent, and Wells Fargo Bank, N.A. The Credit Agreement terminates in
On December 10, 2021, the Company entered into a First Amendment to the Credit Agreement (“First Amendment”). The First Amendment amended and restated the Credit Agreement to provide, among other things, that upon the occurrence of certain events, the interest rate calculation method will generally transition from the London Interbank Offered Rate (“LIBOR”) to an alternate reference rate, including the Secured Overnight Financing Rate (“SOFR”) for U.S. dollar denominated borrowings.
Outstanding borrowings under the Credit Agreement bear interest at variable rates based on the type of borrowing and the Company’s debt to EBITDA financial ratio, as defined in the Credit Agreement. The weighted-average interest rate on outstanding borrowings under the Credit Agreement was approximately
13
Other debt
One of the Company’s European subsidiaries has debt that consists of
Note 8. Shareholders’ Equity
Share buyback program
On March 31, 2021, the Board of Directors authorized the purchase of up to $
The following table summarizes the Company’s stock buyback activity under this share buyback program:
|
|
Three Months Ended |
|
|||||
(in millions, except share and per share data) |
|
July 30, 2022 |
|
|
July 31, 2021 |
|
||
Shares purchased |
|
|
|
|
|
|
||
Average price per share |
|
$ |
|
|
$ |
|
||
Total cost |
|
$ |
|
|
$ |
|
||
As of July 30, 2022, 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 July 30, 2022 |
|
|||||||||
(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 July 31, 2021 |
|
|||||||||
(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 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
14
Stock-based compensation
On June 16, 2022, the Company's Board of Directors, on the recommendation of the Compensation Committee, adopted the Methode Electronics, Inc. 2022 Omnibus Incentive Plan (the “2022 Incentive Plan”), subject to the approval of the Company's stockholders. The 2022 Incentive Plan provides for discretionary grants of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units and performance grants to employees and directors.
The 2022 Incentive Plan provides that upon approval of the 2022 Incentive Plan by the Company's stockholders, no further awards shall be granted under the Methode Electronics, Inc. 2014 Omnibus Incentive Plan (“2014 Plan”). If the 2022 Incentive Plan is approved, subject to adjustment as provided in the 2022 Incentive Plan and the 2022 Incentive Plan’s share counting provisions,
The Company has granted stock options, restricted stock awards (“RSAs”), performance units (“PUs”), restricted stock units (“RSUs”) and stock awards to employees and non-employee directors under 2014 Plan, the Methode Electronics, Inc. 2010 Stock Plan (“2010 Plan”), the Methode Electronics, Inc. 2007 Stock Plan (“2007 Plan”) and the Methode Electronics, Inc. 2004 Stock Plan (“2004 Plan”). The Company can no longer make grants under the 2010 Plan, 2007 Plan and 2004 Plan. The number of shares of common stock originally authorized under the 2014 Plan is
Restricted stock awards and performance units
As of July 30, 2022, the Company had
The fair value of the RSAs was based on the closing stock price on the date of grant and the RSAs earn dividend equivalents during the vesting period, which are forfeitable if the RSAs do not vest. Compensation expense for the RSAs is recognized when it is probable the minimum threshold performance criteria will be achieved. Compensation expense for the PUs is recognized when it is probable that the target performance criteria will be exceeded. The Company assesses the probability of vesting at each balance sheet date and adjusts compensation costs based on the probability assessment. The cash-settled PUs represent a non-equity unit with a conversion value equal to the fair market value of a share of the Company’s common stock on the vesting date. The PUs are classified as liability awards due to the cash settlement feature and are re-measured at each balance sheet date. In accordance with Accounting Standards Codification 718, based on projections of the Company’s current business portfolio, no compensation expense has not been recognized for the RSAs or PUs to-date, as the performance conditions are not probable of being met. Unrecognized stock-based compensation expense at target level of performance is $
Restricted stock units
RSUs granted under the 2014 Plan vest over a pre-determined period of time, up to
The following table summarizes RSU activity under the 2014 Plan:
|
|
Restricted Stock |
|
|
Weighted |
|
||
Non-vested at April 30, 2022 |
|
|
|
|
$ |
|
||
Awarded |
|
|
|
|
$ |
|
||
Vested |
|
|
— |
|
|
$ |
— |
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Non-vested at July 30, 2022 |
|
|
|
|
$ |
|
||
Under the various stock plans, common stock underlying vested RSUs held by certain executives will not be delivered until termination of employment or a change of control of the Company. As of July 30, 2022, common stock to be delivered to these executives totaled
15
Director 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. In the three months ended July 30, 2022, the Company granted
Stock options
The following table summarizes combined stock option activity under the 2010 Plan:
|
|
Shares |
|
|
Weighted average exercise price |
|
|
Weighted- |
|
|
Aggregate |
|
||||
Outstanding and exercisable at April 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercised |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
||
Forfeited |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
||
Outstanding and exercisable at July 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on that date.
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 income. Awards subject to graded vesting are recognized using the accelerated recognition method over the requisite service period.
|
|
Three Months Ended |
|
|||||
(in millions) |
|
July 30, 2022 |
|
|
July 31, 2021 |
|
||
RSUs |
|
$ |
|
|
$ |
|
||
Deferred director awards |
|
|
|
|
|
|
||
Director awards |
|
|
|
|
|
|
||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
||
16
Note 9. Income per Share
Basic income per share is calculated by dividing net income 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 income 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 per share:
|
|
Three Months Ended |
|
|||||
|
|
July 30, 2022 |
|
|
July 31, 2021 |
|
||
Numerator: |
|
|
|
|
|
|
||
Net income (in millions) |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Denominator: |
|
|
|
|
|
|
||
Denominator for basic income per share - weighted average shares outstanding and vested/unissued restricted stock units |
|
|
|
|
|
|
||
Dilutive potential common shares |
|
|
|
|
|
|
||
Denominator for diluted income per share |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Basic and diluted income per share: |
|
|
|
|
|
|
||
Basic income per share |
|
$ |
|
|
$ |
|
||
Diluted income per share |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding |
|
|
|
|
|
|
||
Note 10. 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 Chief Executive Officer (“CEO”). The Company has four reporting segments as described below.
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 center consoles, hidden switches, ergonomic switches, transmission lead-frames, LED-based lighting and sensors, which incorporate magneto-elastic sensing and other technologies that monitor the operation or status of a component or system.
The Industrial segment manufactures external 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 low-voltage flexible power cabling systems and powder-coated busbars that are used in various markets and applications, including aerospace, computers, industrial, power conversion, military, telecommunications and transportation.
The Interface segment provides a variety of copper and fiber-optic interface and interface solutions for the appliance, commercial food service, construction, consumer, material handling, point-of-sale and telecommunications markets. Solutions include copper transceivers and solid-state field-effect consumer touch panels.
The Medical segment is made up of the Company’s medical device business, Dabir Surfaces, with its surface support technology aimed at pressure injury prevention. Methode has developed the technology for use by patients who are immobilized or otherwise at risk for pressure injuries, including patients undergoing long-duration surgical procedures.
17
The tables below present information about the Company’s reportable segments:
|
|
Three Months Ended July 30, 2022 |
|
|||||||||||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Medical |
|
|
Eliminations |
|
|
Consolidated |
|
||||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Transfers between segments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales to unaffiliated customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income (loss) from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||
|
|
Three Months Ended July 31, 2021 |
|
|||||||||||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Medical |
|
|
Eliminations |
|
|
Consolidated |
|
||||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Transfers between segments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales to unaffiliated customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income (loss) from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||
(in millions) |
|
July 30, 2022 |
|
|
April 30, 2022 |
|
||
Identifiable assets: |
|
|
|
|
|
|
||
Automotive |
|
$ |
|
|
$ |
|
||
Industrial |
|
|
|
|
|
|
||
Interface |
|
|
|
|
|
|
||
Medical |
|
|
|
|
|
|
||
Eliminations/Corporate |
|
|
|
|
|
|
||
Total identifiable assets |
|
$ |
|
|
$ |
|
||
18
Note 11. 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 considers insurance coverage and third-party indemnification when determining required accruals for pending litigation and claims. Although the outcome of potential legal actions and claims cannot be determined, it is the Company's opinion, based on the information available, that it has adequate reserves for these liabilities.
Hetronic Germany-GmbH Matters
For several years, Hetronic Germany-GmbH and Hydronic-Steuersysteme-GmbH (the “Fuchs companies”) served as our distributors for Germany, Austria and other central and eastern European countries pursuant to their respective intellectual property licenses and distribution and assembly agreements. The Company became aware that the Fuchs companies and their managing director, Albert Fuchs, had materially violated those agreements. As a result, the Company terminated all of its agreements with the Fuchs companies. On June 20, 2014, the Company filed a lawsuit against the Fuchs companies in the Federal District Court for the Western District of Oklahoma alleging material breaches of the distribution and assembly agreements and seeking damages, as well as various forms of injunctive relief. The defendants filed counterclaims alleging breach of contract, interference with business relations and business slander. On April 2, 2015, the Company amended its complaint against the Fuchs companies to add additional unfair competition and Lanham Act claims and to add additional affiliated parties.
A trial with respect to the matter began in February 2020. During the trial, the defendants dismissed their one remaining counterclaim with prejudice. On March 2, 2020, the jury returned a verdict in favor of the Company. The verdict included approximately $
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:
Additional details and factors are discussed under the caption “Risk Factors” in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended April 30, 2022. 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.
20
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, consumer appliance and medical devices. Our business is managed on a segment basis, with those segments being Automotive, Industrial, Interface and Medical.
COVID-19 Pandemic Impact
The COVID-19 pandemic and the ongoing measures to reduce its spread have negatively impacted the global economy, disrupted consumer and customer demand and global supply chains, and resulted in manufacturing inefficiencies and increased freight costs due to global capacity constraints. Beginning late in the fourth quarter of fiscal 2022 and continuing into the first quarter of fiscal 2023, various regions in China, including regions where we and our customers have operations, were subjected to lock-downs imposed by governmental authorities to mitigate the spread of COVID-19 in those areas. The resulting industry-wide production interruptions adversely impacted our results of operations in the three months ended July 30, 2022.
Any future resurgence of COVID-19, and its related impacts, could negatively impact our business and future results of operations. The extent of the impact will depend on a number of evolving and uncertain factors, including the duration and spread of COVID-19 (and its variants), the rate of vaccinations, actions taken by governmental authorities to further restrict business operations and social activity and impose travel restrictions, shifting consumer demand, the ability of our supply chain to deliver in a timely and cost-effective manner, the ability of our employees and manufacturing facilities to operate efficiently and effectively, the continued viability and financial stability of our customers and suppliers and future access to capital. We continue to focus on effectively managing the unprecedented challenges and uncertainties of the pandemic on a global basis.
Global Supply Chain Disruptions
We continue to experience business interruptions, including customer shutdowns and increased material and logistics costs, labor shortages, and most significantly, impacts from the worldwide semiconductor supply shortage. The semiconductor supply shortage is due, in part, to increased demand across multiple industries, including the automotive industry, resulting in a slowdown in their production schedules. The semiconductor supply shortage is also impacting our supply chain and our ability to meet demand at some of our non-automotive customers. We expect this semiconductor shortage to have a continued impact on our operating results and financial condition for the remainder of fiscal 2023.
Impacts of Macroeconomic and Geopolitical Conditions
Adverse macroeconomic conditions, including but not limited to inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, higher interest rates, wage and commodity inflation and currency fluctuations could adversely affect demand for our products. In addition, the Russia/Ukraine conflict has resulted in, among other things, economic sanctions imposed by the international community which have impacted the global economy and given rise to potential global security issues that may adversely affect international business and economic conditions. Although we have no operations in Russia or Ukraine, certain of our customers and suppliers have been negatively impacted by these events, which in turn has impacted markets where we do business, including Europe and Asia. The economic sanctions imposed on Russia has further increased existing global supply chain, logistics, and inflationary challenges. For example, in response to the sanctions imposed on Russia by Western countries, Russia has reduced the volume of natural gas it sends to European countries, which has resulted in, and could continue to result in increased energy costs for our EMEA operations. If Russia further reduces or turns off energy supplies to Europe, our EMEA operations could be adversely affected.
21
Consolidated Results of Operations
The table below compares our results of operations between the three months ended July 30, 2022 and the three months ended July 31, 2021:
|
|
Three Months Ended |
|
|||||
(in millions) |
|
July 30, 2022 |
|
|
July 31, 2021 |
|
||
Net sales |
|
$ |
282.4 |
|
|
$ |
287.8 |
|
Cost of products sold |
|
|
220.6 |
|
|
|
216.1 |
|
Gross profit |
|
|
61.8 |
|
|
|
71.7 |
|
Selling and administrative expenses |
|
|
35.3 |
|
|
|
32.8 |
|
Amortization of intangibles |
|
|
4.7 |
|
|
|
4.8 |
|
Interest expense, net |
|
|
- |
|
|
|
1.1 |
|
Other income, net |
|
|
(4.1 |
) |
|
|
(1.8 |
) |
Income tax expense |
|
|
4.4 |
|
|
|
5.7 |
|
Net income |
|
$ |
21.5 |
|
|
$ |
29.1 |
|
Net sales
Net sales decreased $5.4 million, or 1.9%, to $282.4 million in the three months ended July 30, 2022, compared to $287.8 million in the three months ended July 31, 2021. The decrease was primarily due to lower sales in the Automotive segment, partially offset by higher sales in the Industrial segment. Net sales were unfavorably impacted by foreign currency translation of $14.2 million, primarily due to the strengthening of the U.S. dollar relative to the euro and Chinese renminbi. This was partially offset by customer cost recoveries for spot buys of materials and premium freight costs of $11.1 million. Excluding the impact of foreign currency translation and customer cost recoveries, net sales decreased $2.3 million, or 0.8%.
Cost of products sold
Cost of products sold increased $4.5 million, or 2.1%, to $220.6 million (78.1% of net sales) in the three months ended July 30, 2022, compared to $216.1 million (75.1% of net sales) in the three months ended July 31, 2021. Excluding foreign currency translation, cost of products sold increased $14.8 million. The increase was primarily due to higher material costs of $13.3 million as a result of inflationary pressures and costs related to spot buys of materials.
Gross profit margin
Gross profit margin was 21.9% of net sales in the three months ended July 30, 2022, compared to 24.9% of net sales in the three months ended July 31, 2021. The decrease was due to higher material and other costs associated with supply chain disruptions and lower sales volumes.
Selling and administrative expenses
Selling and administrative expenses increased $2.5 million, or 7.6%, to $35.3 million (12.5% of net sales) in the three months ended July 30, 2022, compared to $32.8 million (11.4% of net sales) in the three months ended July 31, 2021. Excluding foreign currency translation, selling and administrative expenses increased $3.6 million. The increase was primarily due to higher salary expense, travel expense and other general administrative expenses.
Amortization of intangibles
Amortization of intangibles was $4.7 million in the three months ended July 30, 2022, compared to $4.8 million in the three months ended July 31, 2021, respectively.
Interest expense, net
Interest expense, net was zero in the three months ended July 30, 2022, compared to $1.1 million in the three months ended July 31, 2021.
The decrease was due to higher interest income of $0.7 million and lower interest expense of $0.4 million recognized during the period. The increase in interest income was primarily from our cash holdings as a result of increasing interest rates. The decrease in interest expense was due to lower average borrowings.
Other income, net
Other income, net was $4.1 million in the three months ended July 30, 2022, compared to $1.8 million in the three months ended July 31, 2021. In the three months ended July 30, 2022, we received $4.1 million of international government assistance with respect to the COVID-19 pandemic, compared to $1.9 million in the three months ended July 31, 2021.
22
Income tax expense
Income tax expense was $4.4 million (17.0% effective tax rate) in the three months ended July 30, 2022, compared to $5.7 million (16.4% effective tax rate) in the three months ended July 31, 2021. The effective tax rate for the three months ended July 30, 2022 was lower than the U.S. statutory tax rate primarily due income derived from foreign operations with lower statutory tax rates partially offset by non-deductible expenses. The effective tax rate for the three months ended July 31, 2021 was lower than the U.S. statutory tax rate primarily due to income derived from foreign operations with lower statutory tax rates.
Net income
Net income decreased $7.6 million, or 26.1%, to $21.5 million in three months ended July 30, 2022, compared to $29.1 million in three months ended July 31, 2021. Net income was unfavorably impacted by foreign currency translation of $2.9 million. Excluding foreign currency translation, net income decreased $4.7 million as a result of the reasons described above.
Operating Segments
Automotive
|
|
Three Months Ended |
|
|||||
($ in millions) |
|
July 30, 2022 |
|
|
July 31, 2021 |
|
||
Net sales |
|
|
|
|
|
|
||
North America |
|
$ |
94.7 |
|
|
$ |
99.1 |
|
EMEA |
|
$ |
52.1 |
|
|
$ |
57.8 |
|
Asia |
|
$ |
29.8 |
|
|
$ |
38.9 |
|
Net sales |
|
$ |
176.6 |
|
|
$ |
195.8 |
|
Gross profit |
|
$ |
29.4 |
|
|
$ |
41.7 |
|
As a percent of net sales |
|
|
16.6 |
% |
|
|
21.3 |
% |
Income from operations |
|
$ |
14.7 |
|
|
$ |
27.3 |
|
As a percent of net sales |
|
|
8.3 |
% |
|
|
13.9 |
% |
Net sales
Automotive segment net sales decreased $19.2 million, or 9.8%, to $176.6 million in the three months ended July 30, 2022, compared to $195.8 million in the three months ended July 31, 2021. Net sales were unfavorably impacted by foreign currency translation of $8.9 million. This was partially offset by customer cost recoveries from spot buys of materials and premium freight costs of $9.1 million (primarily in North America). Excluding foreign currency translation and customer cost recoveries, net sales decreased $19.4 million, or 9.9%.
Net sales in North America decreased $4.4 million to $94.7 million in the three months ended July 30, 2022, compared to $99.1 million in the three months ended July 31, 2021. Net sales in North America benefitted from customer cost recoveries from spot buys of materials and premium freight costs of $7.9 million. Excluding customer cost recoveries, net sales decreased $12.3 million primarily due to a major program roll-off, partially offset by higher vehicle lighting product sales. Net sales in EMEA decreased $5.7 million to $52.1 million in the three months ended July 30, 2022, compared to $57.8 million in the three months ended July 31, 2021. Net sales in EMEA benefitted from customer cost recoveries from spot buys of materials and premium freight costs of $1.2 million. However, the weaker euro, relative to the U.S. dollar, decreased net sales in EMEA by $7.7 million. Excluding customer cost recoveries and the impact of foreign currency translation, net sales in EMEA increased by $0.8 million. Net sales in Asia decreased $9.1 million to $29.8 million in the three months ended July 30, 2022, compared to $38.9 million in the three months ended July 31, 2021. The weaker Chinese renminbi, relative to the U.S. dollar, decreased net sales in Asia by $1.3 million. Excluding the impact of foreign currency translation, Asia net sales decreased $7.8 million primarily due to COVID-19 lockdowns in China.
Gross profit
Automotive segment gross profit decreased $12.3 million, or 29.5%, to $29.4 million in the three months ended July 30, 2022, compared to $41.7 million in the three months ended July 31, 2021. Excluding the impact of foreign currency translation, gross profit decreased $10.2 million. Gross profit margins decreased to 16.6% in the three months ended July 30, 2022, compared to 21.3% in the three months ended July 31, 2021. The decrease in gross profit margins was due to lower sales volumes, the result of inflationary pressures and costs related to spot buys of materials and the impact from product mix.
Income from operations
Automotive segment income from operations decreased $12.6 million, or 46.2%, to $14.7 million in the three months ended July 30, 2022, compared to $27.3 million in the three months ended July 31, 2021. Excluding the impact of foreign currency translation, income from operations decreased $11.4 million. The decrease was primarily due to lower gross profit and higher selling and administrative expenses. Selling and administrative expenses increased due to higher salary expense as a result of wage inflation.
23
Industrial
|
|
Three Months Ended |
|
|||||
($ in millions) |
|
July 30, 2022 |
|
|
July 31, 2021 |
|
||
Net sales |
|
$ |
92.1 |
|
|
$ |
78.5 |
|
Gross profit |
|
$ |
30.4 |
|
|
$ |
28.5 |
|
As a percent of net sales |
|
|
33.0 |
% |
|
|
36.3 |
% |
Income from operations |
|
$ |
22.4 |
|
|
$ |
20.2 |
|
As a percent of net sales |
|
|
24.3 |
% |
|
|
25.7 |
% |
Net sales
Industrial segment net sales increased $13.6 million, or 17.3%, to $92.1 million in the three months ended July 30, 2022, compared to $78.5 million in the three months ended July 31, 2021. Net sales were unfavorably impacted by foreign currency translation of $5.2 million. This was partially offset by customer cost recoveries from spot buys of materials and premium freight costs of $1.4 million. Excluding the impact of foreign currency translation and customer cost recoveries, net sales increased $17.4 million, or 22.2%, primarily due to higher sales volumes of all product categories in the Industrial segment.
Gross profit
Industrial segment gross profit increased $1.9 million, or 6.7%, to $30.4 million in the three months ended July 30, 2022, compared to $28.5 million in the three months ended July 31, 2021. Excluding the impact of foreign currency translation, gross profit increased $3.7 million. Gross profit margins decreased to 33.0% in the three months ended July 30, 2022, compared to 36.3% in the three months ended July 31, 2021. The decrease in gross profit margins was due to higher material costs as a result of supply chain disruptions.
Income from operations
Industrial segment income from operations increased $2.2 million, or 10.9%, to $22.4 million in the three months ended July 30, 2022, compared to $20.2 million in the three months ended July 31, 2021. Excluding the impact of foreign currency translation, income from operations increased $3.7 million. The increase was primarily due to higher gross profit. Selling and administrative expenses were relatively unchanged.
Interface
|
|
Three Months Ended |
|
|||||
($ in millions) |
|
July 30, 2022 |
|
|
July 31, 2021 |
|
||
Net sales |
|
$ |
13.0 |
|
|
$ |
12.7 |
|
Gross profit |
|
$ |
2.2 |
|
|
$ |
1.7 |
|
As a percent of net sales |
|
|
16.9 |
% |
|
|
13.4 |
% |
Income from operations |
|
$ |
1.6 |
|
|
$ |
1.1 |
|
As a percent of net sales |
|
|
12.3 |
% |
|
|
8.7 |
% |
Net sales
Interface segment net sales increased $0.3 million, or 2.4%, to $13.0 million in the three months ended July 30, 2022, compared to $12.7 million in the three months ended July 31, 2021. The increase was primarily due to higher sales of data solutions products as a result of customer cost recoveries of spot buys of materials. This was partially offset by lower sales volumes of appliance products, which were negatively impacted by a shortage of semiconductor chips.
Gross profit
Interface segment gross profit increased $0.5 million, or 29.4%, to $2.2 million in the three months ended July 30, 2022, compared to $1.7 million in the three months ended July 31, 2021. Gross profit margins increased to 16.9% in the three months ended July 30, 2022, compared to 13.4% in the three months ended July 31, 2021. The increase in gross profit margins was primarily due to product mix.
Income from operations
Interface segment income from operations increased $0.5 million, or 45.5%, to $1.6 million in the three months ended July 30, 2022, compared to $1.1 million in the three months ended July 31, 2021. The increase was due to higher gross profit.
24
Medical
|
|
Three Months Ended |
|
|||||
(in millions) |
|
July 30, 2022 |
|
|
July 31, 2021 |
|
||
Net sales |
|
$ |
0.7 |
|
|
$ |
0.8 |
|
Gross profit |
|
$ |
(0.2 |
) |
|
$ |
— |
|
Loss from operations |
|
$ |
(1.5 |
) |
|
$ |
(1.2 |
) |
Net sales
Medical segment net sales decreased $0.1 million to $0.7 million in the three months ended July 30, 2022, compared to $0.8 million in the three months ended July 31, 2021.
Gross profit
Medical segment gross profit was a loss of $0.2 million in the three months ended July 30, 2022 compared to break-even in the three months ended July 31, 2021. Gross profit was impacted by higher operating costs and lower net sales in the three months ended July 30, 2022.
Loss from operations
Medical segment loss from operations increased $0.3 million to $1.5 million in the three months ended July 30, 2022, compared to $1.2 million in the three months ended July 31, 2021. The increase in the loss was primarily due to lower gross profit.
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 unsecured 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 the COVID-19 pandemic, supply chain disruptions, inflationary pressure or other geopolitical risks, including the Russia-Ukraine war, our liquidity position could be severely impacted.
As of July 30, 2022, we had $152.4 million of cash and cash equivalents, of which $104.7 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.
Share Buyback Program
On March 31, 2021, the Board of Directors authorized the purchase of up to $100.0 million of our common stock. On June 16, 2022, the Board of Directors authorized an increase in the existing share buyback program of an additional $100.0 million, and also extended the expiration from March 31, 2023 to June 14, 2024. Such purchases may be made on the open market, in private transactions or pursuant to purchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934. As of July 30, 2022, a total of 1,910,774 shares have been purchased at a total cost of $83.1 million since the commencement of the share buyback program. As of July 30, 2022, the dollar value of shares that remained available to be purchased under this share buyback program was $116.9 million.
Credit Agreement
Our senior unsecured credit agreement provides for a $200.0 million revolving credit facility and a $250.0 million term loan. As of July 30, 2022, no principal was outstanding under the revolving credit facility and we have $199.9 million of availability under the revolving credit facility. As of July 30, 2022, $203.1 million in principal was outstanding under the term loan. The term loan matures in September 2023 and requires quarterly principal payments of $3.1 million over the five-year term, with the remaining balance due upon maturity. We were in compliance with all covenants under the senior unsecured credit agreement as of July 30, 2022. For further information, see Note 7, “Debt” to the condensed consolidated financial statements included in this Quarterly Report.
On December 10, 2021, we entered into an amendment to the senior unsecured credit agreement to provide, among other things, that upon the occurrence of certain events, the interest rate calculation method will generally transition from the London Interbank Offered Rate (“LIBOR”) to an alternate reference rate, including the Secured Overnight Financing Rate (“SOFR”) for U.S. dollar denominated borrowings. The consequences of the discontinuance of LIBOR cannot be entirely predicted but could result in an increase in our cost of borrowing.
25
Our senior unsecured credit agreement provides an option to increase the size of our revolving credit facility and term loan by an additional $200.0 million, subject to customary conditions and approval of the lenders providing the new commitments. There can be no assurance that lenders will approve additional commitments under current circumstances. As a result of the impacts of the COVID-19 pandemic, we may be required to raise additional capital and our access to, and cost of, financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, and our future prospects.
Cash Flows
|
|
Three Months Ended |
|
|||||
(in millions) |
|
July 30, 2022 |
|
|
July 31, 2021 |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
21.5 |
|
|
$ |
29.1 |
|
Non-cash items |
|
|
14.9 |
|
|
|
16.0 |
|
Changes in operating assets and liabilities |
|
|
(23.7 |
) |
|
|
(35.4 |
) |
Net cash provided by operating activities |
|
|
12.7 |
|
|
|
9.7 |
|
Net cash used in investing activities |
|
|
(9.6 |
) |
|
|
(15.4 |
) |
Net cash used in financing activities |
|
|
(20.8 |
) |
|
|
(18.3 |
) |
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
(1.9 |
) |
|
|
(1.3 |
) |
Decrease in cash and cash equivalents |
|
|
(19.6 |
) |
|
|
(25.3 |
) |
Cash and cash equivalents at beginning of the period |
|
|
172.0 |
|
|
|
233.2 |
|
Cash and cash equivalents at end of the period |
|
$ |
152.4 |
|
|
$ |
207.9 |
|
Operating activities
Net cash provided by operating activities increased $3.0 million to $12.7 million in the three months ended July 30, 2022, compared to $9.7 million in the three months ended July 31, 2021. The increase was due to lower cash outflows related to changes in operating assets and liabilities, partially offset by lower net income adjusted for non-cash items. The $23.7 million of cash outflows for operating assets and liabilities in the three months ended July 30, 2022 was primarily due to higher accounts receivable and inventory (as a result of global supply chain and logistics disruptions), partially offset by higher accounts payable.
Investing activities
Net cash used in investing activities was $9.6 million in the three months ended July 30, 2022, compared to $15.4 million in the three months ended July 31, 2021. Capital expenditures were $9.6 million and $15.9 million in the three months ended July 30, 2022 and July 31, 2021, respectively. We received $0.5 million of cash from the sale of property, plant and equipment in the three months ended July 31, 2021.
Financing activities
Net cash used in financing activities was $20.8 million in the three months ended July 30, 2022, compared to $18.3 million in the three months ended July 31, 2021. In the three months ended July 30, 2022, we used $11.9 million of cash for the purchase of shares under our share buyback program, compared to $8.4 million in the three months ended July 31, 2021. We paid cash dividends of $5.0 million in the three months ended July 30, 2022, compared to $5.2 million in the three months ended July 31, 2021. In the three months ended July 30, 2022, we paid $0.5 million in taxes related to the net share settlement of equity awards compared to $0.3 million in the three months ended July 31, 2021. In the three months ended July 30, 2022, we had repayments on our borrowings of $3.3 million, compared to $4.7 million in the three months ended July 31, 2021.
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.
26
Legal Matters
For several years, Hetronic Germany-GmbH and Hydronic-Steuersysteme-GmbH (the “Fuchs companies”) served as our distributors for Germany, Austria and other central and eastern European countries pursuant to their respective intellectual property licenses and distribution and assembly agreements. We became aware that the Fuchs companies and their managing director, Albert Fuchs, had materially violated those agreements. As a result, we terminated all of our agreements with the Fuchs companies. On June 20, 2014, we filed a lawsuit against the Fuchs companies in the Federal District Court for the Western District of Oklahoma alleging material breaches of the distribution and assembly agreements and seeking damages, as well as various forms of injunctive relief. The defendants filed counterclaims alleging breach of contract, interference with business relations and business slander. On April 2, 2015, we amended our complaint against the Fuchs companies to add additional unfair competition and Lanham Act claims and to add additional affiliated parties.
A trial with respect to the matter began in February 2020. During the trial, the defendants dismissed their one remaining counterclaim with prejudice. On March 2, 2020, the jury returned a verdict in favor of the Company. The verdict included approximately $102 million in compensatory damages and $11 million in punitive damages. On April 22, 2020, the Court entered a permanent injunction barring defendants from selling infringing products and ordering them to return Hetronic’s confidential information. Defendants appealed entry of the permanent injunction. On May 29, 2020, the Court held defendants in contempt for violating the permanent injunction and entered the final judgment. Defendants appealed entry of the final monetary judgment as well. The appeal of the permanent injunction and the appeal of the final judgment were consolidated into a single appeal before the U.S. Court of Appeals for the Tenth Circuit. On August 24, 2021, the Tenth Circuit issued a decision affirming the lower court’s ruling with the exception that it instructed the District Court to modify the injunction from the entire world to all of the countries in which Hetronic sells its products. On April 20 and 21, 2022, the District Court held a hearing related to modifying the injunction pursuant to the Tenth Circuit’s opinion, and the parties currently are preparing post-hearing briefs. The defendants also filed a petition for certiorari with the United States Supreme Court seeking to further appeal the extraterritorial application of the Lanham Act in this case. Hetronic has opposed that petition. The Supreme Court has requested the views of the Solicitor General on the petition for certiorari. Like any judgment, particularly any judgment involving defendants outside of the United States, there is no guarantee that the Company will be able to collect all or any portion of the judgment.
In the three months ended July 30, 2022 and July 31, 2021, we incurred Hetronic-related legal fees of $0.8 million and $0.7 million, respectively. These amounts are included in the selling and administrative expenses in the Industrial segment.
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 July 30, 2022. 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 April 30, 2022.
Item 4. Controls and Procedures
As of the end of the period covered by this quarterly report on Form 10-Q, we performed an evaluation under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and our Chief Financial Officer, of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). The Company’s 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 Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.
There have been no changes in our internal control over financial reporting during the quarter ended July 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
27
PART II. OTHER INFORMATION
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. There have been no material changes to the risk factors previously disclosed in Part I - Item 1A, “Risk Factors” of our Form 10-K for the year ended April 30, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 31, 2021, the Board of Directors authorized the purchase of up to $100.0 million of the Company’s outstanding common stock through March 31, 2023. On June 16, 2022, the Board of Directors authorized an increase in the share buyback program of an additional $100.0 million, and also extended the expiration from March 31, 2023 to June 14, 2024. Such purchases may be made on the open market, in private transactions or pursuant to purchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934. As of July 30, 2022, we purchased and retired $83.1 million of common stock since the commencement of the share buyback program.
The following table provides information about our purchases of equity securities during the three months ended July 30, 2022:
Period |
|
Total number of shares purchased |
|
|
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 1, 2022 through May 28, 2022 (1) |
|
|
10,679 |
|
|
$ |
44.61 |
|
|
|
- |
|
|
$ |
28.8 |
|
May 29, 2022 through July 2, 2022 |
|
|
134,991 |
|
|
$ |
37.84 |
|
|
|
134,991 |
|
|
$ |
123.7 |
|
July 3, 2022 through July 30, 2022 |
|
|
182,644 |
|
|
$ |
37.13 |
|
|
|
182,644 |
|
|
$ |
116.9 |
|
(1) Represents shares of common stock that were surrendered by employees to satisfy tax withholding obligations in connection with the vesting of restricted stock units. |
|
|||||||||||||||
Item 6. Exhibits
Exhibit Number |
|
Description |
|
|
|
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 Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation 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. |
|
|
|
|
|
|
|
|
|
28
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/ Ronald L.G. Tsoumas |
|
|
|
|
|
|
Ronald L.G. Tsoumas |
|
|
|
|
|
|
Chief Financial Officer |
|
|
|
|
|
|
(Principal Financial Officer) |
|
|
|
|
|
|
|
Dated: |
|
September 1, 2022 |
|
|
|
|
29
Exhibit 31.1
CERTIFICATION
I, Donald W. Duda, 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 1, 2022 |
|
By: |
/s/ Donald W. Duda |
|
|
|
Donald W. Duda |
|
|
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Ronald L.G. Tsoumas, 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 1, 2022 |
|
By: |
/s/ Ronald L.G. Tsoumas |
|
|
|
Ronald L. G. Tsoumas |
|
|
|
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 July 30, 2022 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 1, 2022 |
|
By: |
/s/ Donald W. Duda |
|
|
|
Donald W. Duda Chief Executive Officer |
Date: September 1, 2022 |
|
By: |
/s/ Ronald L.G. Tsoumas |
|
|
|
Ronald L. G. Tsoumas |
|
|
|
Chief Financial Officer |