Methode Electronics(MEI) - 2026 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements, including statements of operations, comprehensive income, balance sheets, shareholders' equity, and cash flows, with detailed notes on accounting policies and key financial components Condensed Consolidated Statements of Operations (unaudited) The company reported a net loss of $10.3 million for the three months ended August 2, 2025, an improvement from a $18.3 million net loss in the prior year period, despite a decrease in net sales | Metric (in millions, except per share) | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :----------------------------------- | :-------------------------------- | :------------------------------- | | Net sales | $240.5 | $258.5 | | Cost of products sold | $197.0 | $213.9 | | Gross profit | $43.5 | $44.6 | | Selling and administrative expenses | $36.6 | $46.2 | | Amortization of intangibles | $5.8 | $5.9 | | Income (loss) from operations | $1.1 | $(7.5) | | Interest expense, net | $5.9 | $4.8 | | Other expense, net | $1.3 | $0.8 | | Pre-tax loss | $(6.1) | $(13.1) | | Income tax expense | $4.2 | $5.2 | | Net loss | $(10.3) | $(18.3) | | Loss per share: Basic | $(0.29) | $(0.52) | | Loss per share: Diluted | $(0.29) | $(0.52) | | Cash dividends per share | $0.07 | $0.14 | Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) The company reported a comprehensive loss of $3.5 million for the three months ended August 2, 2025, a significant improvement from $17.9 million in the prior year, primarily driven by positive foreign currency translation adjustments and derivative financial instruments | Metric (in millions) | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :----------------------------------------- | :-------------------------------- | :------------------------------- | | Net loss | $(10.3) | $(18.3) | | Other comprehensive income (loss), net of tax: | | | | Foreign currency translation adjustments | $6.3 | $2.1 | | Derivative financial instruments | $0.5 | $(1.7) | | Other comprehensive income | $6.8 | $0.4 | | Comprehensive loss | $(3.5) | $(17.9) | Condensed Consolidated Balance Sheets Total assets slightly decreased to $1,291.3 million as of August 2, 2025, driven by reductions in accounts receivable and inventories, while total liabilities also decreased | Metric (in millions) | August 2, 2025 | May 3, 2025 | | :------------------------------------ | :------------- | :---------- | | ASSETS | | | | Cash and cash equivalents | $121.1 | $103.6 | | Accounts receivable, net | $215.6 | $241.0 | | Inventories | $190.9 | $194.1 | | Total current assets | $549.2 | $559.9 | | Property, plant and equipment, net | $224.5 | $221.6 | | Goodwill | $173.9 | $172.7 | | Other intangible assets, net | $234.9 | $238.4 | | Total long-term assets | $742.1 | $745.9 | | Total assets | $1,291.3 | $1,305.8| | LIABILITIES AND SHAREHOLDERS' EQUITY| | | | Accounts payable | $123.5 | $125.9 | | Accrued employee liabilities | $25.9 | $32.0 | | Other accrued liabilities | $45.6 | $50.2 | | Total current liabilities | $219.6 | $233.2 | | Long-term debt | $323.2 | $317.4 | | Total long-term liabilities | $383.6 | $379.3 | | Total liabilities | $603.2 | $612.5 | | Total shareholders' equity | $688.1 | $693.3 | | Total liabilities and shareholders' equity| $1,291.3 | $1,305.8| Condensed Consolidated Statements of Shareholders' Equity (unaudited) Total shareholders' equity decreased by $5.2 million to $688.1 million as of August 2, 2025, driven by a net loss of $10.3 million and $2.5 million in dividends, partially offset by $6.8 million in other comprehensive income[13] Condensed Consolidated Statements of Cash Flows (unaudited) Net cash provided by operating activities significantly increased to $25.1 million for the three months ended August 2, 2025, compared to $10.9 million in the prior year, primarily due to a lower net loss and improved working capital management | Metric (in millions) | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :------------------------------------------------------- | :-------------------------------- | :------------------------------- | | Net cash provided by operating activities | $25.1 | $10.9 | | Net cash used in investing activities | $(5.8) | $(13.6) | | Net cash used in financing activities | $(4.5) | $(48.2) | | Effect of foreign currency exchange rate changes on cash | $2.7 | $0.7 | | Increase (decrease) in cash and cash equivalents | $17.5 | $(50.2) | | Cash and cash equivalents at end of the period | $121.1 | $111.3 | Notes to Condensed Consolidated Financial Statements These notes provide detailed disclosures on the company's business, accounting policies, revenue, restructuring, income taxes, balance sheet components, and other financial specifics for the unaudited statements Note 1. Description of Business and Summary of Significant Accounting Policies Methode Electronics, Inc. supplies custom mechatronic products for OEMs across diverse markets, with this note detailing accounting policies, fiscal year, and foreign currency translation - Methode Electronics, Inc. is a global supplier of custom engineered mechatronic products for OEMs, serving end markets such as transportation (automotive, commercial vehicle, e-bike, aerospace, bus, rail), cloud computing infrastructure, construction equipment, and consumer appliances[15][16][108] - The company's fiscal year ends on the Saturday closest to April 30, with the current fiscal year (ending May 2, 2026) being a 52-week year. Both the three months ended August 2, 2025, and July 27, 2024, were 13-week periods[18] - Net foreign exchange loss increased to $1.5 million in the three months ended August 2, 2025, from $0.6 million in the prior year period[23] Note 2. Revenue The company primarily recognizes revenue at a point in time, typically upon physical shipment or delivery, for manufacturing products under multi-year programs. Revenue for highly customized parts with no alternative use and enforceable payment rights is recognized over time - The majority of the Company's revenue is recognized at a point in time, usually upon physical shipment or delivery, or customer usage for consignment transactions[25] - Revenue for highly customized parts with no alternative use and an enforceable right to payment is recognized over time, based on progress over the production process[26] Net Sales by Segment (in millions) | Segment (in millions) | August 2, 2025 | July 27, 2024 | | :-------------------- | :------------- | :------------ | | Automotive | $106.1 | $134.8 | | Industrial | $123.5 | $111.5 | | Interface | $10.9 | $12.2 | | Total net sales | $240.5 | $258.5 | Note 3. Restructuring and Asset Impairment Charges Restructuring and asset impairment charges increased to $0.9 million for the three months ended August 2, 2025, from $0.6 million in the prior year, primarily due to higher employee termination benefits in the Automotive segment Restructuring and Asset Impairment Charges (in millions) | Component (in millions) | August 2, 2025 | July 27, 2024 | | :---------------------------- | :------------- | :------------ | | Employee termination benefits | $0.9 | $0.3 | | Asset impairment charges | $0.0 | $0.3 | | Total | $0.9 | $0.6 | - The Automotive segment accounted for $0.7 million of the restructuring and asset impairment charges in the three months ended August 2, 2025, up from $0.3 million in the prior year[35] Note 4. Income Taxes The company reported an income tax expense of $4.2 million on a pre-tax loss of $6.1 million for the three months ended August 2, 2025, resulting in an effective tax rate of -68.9% Income Tax Metrics (in millions) | Metric (in millions) | August 2, 2025 | July 27, 2024 | | :------------------- | :------------- | :------------ | | Pre-tax loss | $(6.1) | $(13.1) | | Income tax expense | $4.2 | $5.2 | | Effective tax rate | (68.9)% | (39.7)% | - The effective tax rate for the three months ended August 2, 2025, was significantly impacted by an increase in valuation allowance for deferred tax assets ($1.7 million) and unfavorable global intangible low-tax income (GILTI) and non-deductible interest[37] - The company performed a calculation of an additional top-up tax under the safe harbor Pillar 2 Framework for fiscal 2026 to determine jurisdictions where the effective tax rate fell below the minimum threshold of 15%[38] Note 5. Balance Sheet Components This note details the composition and changes in key balance sheet accounts including cash and cash equivalents, accounts receivable, inventories, and property, plant and equipment Key Balance Sheet Components (in millions) | Metric (in millions) | August 2, 2025 | May 3, 2025 | | :-------------------------- | :------------- | :---------- | | Cash and cash equivalents | $121.1 | $103.6 | | Accounts receivable, net | $215.6 | $241.0 | | Inventories, net | $190.9 | $194.1 | | Property, plant and equipment, net | $224.5 | $221.6 | - The allowance for doubtful accounts increased to $3.2 million as of August 2, 2025, from $3.0 million on May 3, 2025[42] - Pre-production tooling costs related to customer-owned tools decreased to $28.7 million as of August 2, 2025, from $31.7 million on May 3, 2025[46] Note 6. Goodwill and Other Intangible Assets Goodwill increased slightly to $173.9 million as of August 2, 2025, primarily due to foreign currency translation adjustments, with no impairment indicators identified in the first quarter of fiscal 2026 Goodwill and Other Intangible Assets (in millions) | Metric (in millions) | August 2, 2025 | May 3, 2025 | | :-------------------------------- | :------------- | :---------- | | Goodwill | $173.9 | $172.7 | | Other intangible assets, net | $234.9 | $238.4 | | Customer relationships and agreements, net | $207.2 | $209.5 | | Trade names, patents and technology licenses, net | $25.9 | $27.1 | - Goodwill increased by $1.2 million due to foreign currency translation[48] - No goodwill impairment indicators were identified in the first quarter of fiscal 2026[48] Note 7. Derivative Instruments and Hedging Activities The company uses derivative financial instruments to manage foreign currency exchange rates and interest rate risks, including a fixed-rate cross-currency swap that settled with a $3.1 million gain - The company uses derivative financial instruments (cross-currency swaps, foreign currency-denominated debt, interest rate swaps) to manage foreign currency exchange rate and interest rate risks[51][53][57] - A fixed-rate cross-currency swap with a notional value of $60.0 million (€54.8 million) settled in December 2024, resulting in a gross gain of approximately $3.1 million, which remains in AOCL[54] - As of August 2, 2025, €55.0 million of long-term borrowings under the revolving credit facility were designated as a net investment hedge for euro-denominated subsidiaries[56] Derivative Financial Instruments (in millions) | Derivative Type (in millions) | August 2, 2025 (Asset/(Liability)) | May 3, 2025 (Asset/(Liability)) | | :---------------------------- | :--------------------------------- | :------------------------------ | | Interest rate swaps | $(5.0) | $(5.7) | | Foreign currency forward contracts | $0.2 | $0.7 | Note 8. Debt Total debt increased to $323.4 million as of August 2, 2025, following a Third Amendment to the credit agreement that reduced commitments and relaxed covenants, despite a waived default on restricted payments Debt Summary (in millions) | Metric (in millions) | August 2, 2025 | May 3, 2025 | | :-------------------------------- | :------------- | :---------- | | Revolving credit facility | $325.8 | $319.4 | | Other debt | $1.3 | $1.3 | | Unamortized debt issuance costs | $(3.7) | $(3.1) | | Total debt | $323.4 | $317.6 | | Total long-term debt | $323.2 | $317.4 | - The Third Amendment to the credit agreement reduced revolving credit commitments from $500 million to $400 million and relaxed consolidated interest coverage and leverage ratio covenants for specific quarters[65][144] - The company incurred a non-cash loss of $0.6 million from the partial write-off of unamortized debt issuance costs due to the credit facility reduction in the Third Amendment[68] - The company was not in compliance with a restricted payments covenant for the quarter ended August 2, 2025, due to exceeding the $2.5 million general basket exception, but this event of default was waived on September 8, 2025[66][145] Note 9. Shareholders' Equity Shareholders' equity changes include a new $200.0 million share buyback authorization with no purchases, decreased dividends, and $1.2 million in stock-based compensation expense - A new $200.0 million share buyback authorization (2024 Buyback Authorization) was approved on June 13, 2024, effective June 17, 2024, through June 17, 2026. No shares have been purchased under this authorization as of August 2, 2025[74][75][142] Dividends Paid (in millions) | Metric (in millions) | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :------------------- | :-------------------------------- | :------------------------------- | | Dividends paid | $2.8 | $5.1 | Stock-based Compensation Expense (in millions) | Stock-based Compensation Expense (in millions) | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :--------------------------------------------- | :-------------------------------- | :------------------------------- | | RSUs | $0.9 | $0.7 | | PSUs | $0.3 | $0.0 | | Deferred non-employee director awards | $0.0 | $0.9 | | Non-employee director awards | $0.0 | $0.6 | | Total stock-based compensation expense | $1.2 | $2.2 | - As of August 2, 2025, approximately 5.1 million shares were available for award under the 2022 Omnibus Incentive Plan[79] Note 10. Loss per Share Basic and diluted loss per share were both $(0.29) for the three months ended August 2, 2025, an improvement from $(0.52) in the prior year Loss per Share Metrics | Metric | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :-------------------------------------- | :-------------------------------- | :------------------------------- | | Net loss (in millions) | $(10.3) | $(18.3) | | Basic weighted average shares outstanding | 35,372,619 | 35,423,886 | | Diluted weighted average shares outstanding | 35,372,619 | 35,423,886 | | Loss per share: Basic | $(0.29) | $(0.52) | | Loss per share: Diluted | $(0.29) | $(0.52) | - Approximately 248,195 anti-dilutive potentially issuable shares were excluded from the diluted common shares outstanding calculation for the three months ended August 2, 2025[87] Note 11. Segment Information The company's Automotive segment saw significant sales decline and higher operating loss, while Industrial and Interface segments reported increased sales and operating income - The company's operating segments are Automotive, Industrial, and Interface, with performance evaluated based on operating income by the CEO[89][94] Segment Performance (in millions) | Segment (in millions) | Net Sales (Aug 2, 2025) | Net Sales (Jul 27, 2024) | Income (Loss) from Operations (Aug 2, 2025) | Income (Loss) from Operations (Jul 27, 2024) | | :-------------------- | :---------------------- | :----------------------- | :------------------------------------------ | :------------------------------------------- | | Automotive | $106.1 | $134.8 | $(12.5) | $(5.7) | | Industrial | $123.5 | $111.5 | $26.5 | $16.9 | | Interface | $10.9 | $12.2 | $3.0 | $1.9 | | Consolidated | $240.5 | $258.5 | $1.1 | $(7.5) | Note 12. Contingencies The company faces stockholder litigation and an SEC investigation concerning foreign operations, financial matters, and internal controls, with potential losses currently unestimable - The company is facing stockholder litigation, including class action lawsuits alleging false/misleading statements regarding EV transition and Monterrey, Mexico operations, and derivative lawsuits alleging breach of fiduciary duties[98] - The SEC is investigating the company's operations in certain foreign countries, financial and accounting matters, compliance with anti-corruption laws, and previously reported material weaknesses in internal control over financial reporting[100] - The company is unable to reasonably estimate the amount or range of reasonably possible loss from the stockholder actions and SEC investigation at this time[99][100] Note 13. Related Party Transactions The company recognized $3.5 million in expense for consulting services provided by AlixPartners in the three months ended July 27, 2024, a firm where the company's former Interim CFO and CEO were directors/partners - The company recognized $3.5 million in expense for consulting services from AlixPartners in the three months ended July 27, 2024[101] - AlixPartners is a business advisory firm where the company's former Interim CFO and CEO held director/partner positions[101] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operations, and liquidity, covering key trends, challenges, segment performance, and forward-looking statements CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This section emphasizes that the report contains forward-looking statements subject to various risks, uncertainties, and factors that could cause actual results to differ materially from projections - The report contains forward-looking statements that are subject to risks, uncertainties, and factors that may cause actual results to differ materially from projections[104] - The company is not obligated to update or alter its forward-looking statements due to new information, subsequent events, or otherwise[105] Overview Methode Electronics, Inc. is a global supplier of custom engineered mechatronic solutions for OEMs, serving diverse end markets including transportation, cloud computing infrastructure, construction equipment, and consumer appliances - Methode Electronics, Inc. designs, engineers, and produces mechatronic products for OEMs, utilizing technologies for user interface, LED lighting systems, power distribution, and sensor applications[107] - The company's solutions are found in transportation (automotive, commercial vehicle, e-bike, aerospace, bus, rail), cloud computing infrastructure, construction equipment, and consumer appliance end markets[108] Macroeconomic Conditions The company faces continued uncertainty from global trade policies, including tariffs, which could increase costs and reduce margins or demand, alongside persistent global economic disruptions like inflation - The company is exposed to market risk from increased and volatile duties on raw materials, component parts, and finished goods due to global trade policies and tariffs, which could lead to reduced margins or decreased customer demand[109] - Global economic disruptions, including inflation, have resulted in higher costs that the company has been unable to fully mitigate or pass through to customers[110] - The slower-than-anticipated adoption of electric vehicles (EVs) may impact the company's financial condition and results of operations[111] Global Supply Chain Disruptions While supply chain conditions improved in fiscal 2025, the company remains vulnerable to future disruptions, business interruptions, and increased material, logistics, and labor costs - Improvements in the supply chain were observed in fiscal 2025, including easing of the worldwide semiconductor supply shortage[112] - The company continues to face risks from potential future supply chain disruptions, business interruptions (e.g., customer shutdowns), and increased material, logistics, and labor costs[112] Consolidated Results of Operations For the three months ended August 2, 2025, net sales decreased by 7.0% to $240.5 million, but net loss improved to $10.3 million from $18.3 million in the prior year Consolidated Results of Operations (in millions) | Metric (in millions) | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :------------------------------------ | :-------------------------------- | :------------------------------- | | Net sales | $240.5 | $258.5 | | Cost of products sold | $197.0 | $213.9 | | Gross profit | $43.5 | $44.6 | | Selling and administrative expenses | $36.6 | $46.2 | | Amortization of intangibles | $5.8 | $5.9 | | Interest expense, net | $5.9 | $4.8 | | Other expense, net | $1.3 | $0.8 | | Income tax expense | $4.2 | $5.2 | | Net loss | $(10.3) | $(18.3) | - Net sales decreased by $18.0 million (7.0%) to $240.5 million, primarily due to lower sales volumes in the Automotive segment, partially offset by higher sales in the Industrial segment[114] - Gross profit margin increased to 18.1% from 17.3%, mainly due to a favorable product mix from higher sales in the Industrial segment[116] - Selling and administrative expenses decreased by $9.6 million (20.8%) to $36.6 million, primarily due to lower professional fees and compensation expense[117] Reportable Operating Segments This section details the performance of the Automotive, Industrial, and Interface segments, highlighting significant sales declines and increased operating losses in Automotive, contrasted with strong growth in Industrial Automotive The Automotive segment's net sales decreased by 21.3% to $106.1 million, primarily due to the roll-off of legacy programs and lower EV product sales, leading to a higher operating loss of $12.5 million Automotive Segment Performance (in millions) | Metric (in millions) | August 2, 2025 | July 27, 2024 | | :------------------- | :------------- | :------------ | | Net sales | $106.1 | $134.8 | | Gross profit | $0.1 | $8.6 | | Loss from operations | $(12.5) | $(5.7) | - North American net sales decreased by $29.7 million due to the roll-off of legacy programs[127] - Gross profit margins decreased significantly to 0.1% from 6.4%, primarily due to lower sales volumes in North America[128] Industrial The Industrial segment's net sales increased by 10.8% to $123.5 million, driven by higher sales of power and lighting products, resulting in a 56.8% increase in income from operations to $26.5 million Industrial Segment Performance (in millions) | Metric (in millions) | August 2, 2025 | July 27, 2024 | | :------------------- | :------------- | :------------ | | Net sales | $123.5 | $111.5 | | Gross profit | $39.7 | $32.8 | | Income from operations | $26.5 | $16.9 | - Sales growth was driven by power products (data centers) and lighting products (off-road equipment), partially offset by lower sales of radio remote control devices and commercial vehicle lighting[132] - Gross profit margins increased to 32.1% from 29.4%, attributed to higher sales volumes and lower freight costs[133] Interface The Interface segment's net sales decreased by 10.7% to $10.9 million, primarily due to lower sales of touch panels, yet gross profit increased by 30.8% to $3.4 million due to a favorable product mix Interface Segment Performance (in millions) | Metric (in millions) | August 2, 2025 | July 27, 2024 | | :------------------- | :------------- | :------------ | | Net sales | $10.9 | $12.2 | | Gross profit | $3.4 | $2.6 | | Income from operations | $3.0 | $1.9 | - Sales decreased due to lower volumes of touch panels for appliances, partially offset by higher sales of transceivers for servers[136] - Gross profit margins increased to 31.2% from 21.3%, primarily due to product mix[137] Financial Condition, Liquidity and Capital Resources Liquidity is supported by cash flows, existing balances, and credit agreement, with $121.1 million in cash and equivalents, but faces risks from economic conditions and debt covenants Repurchases of Common Stock A new $200.0 million share buyback authorization was approved in June 2024, valid through June 2026, with no shares purchased under it as of August 2, 2025 - A new $200.0 million share buyback authorization was approved on June 13, 2024, effective June 17, 2024, through June 17, 2026. No purchases have been made under this authorization[142] - As of August 2, 2025, no shares have been purchased under the 2024 Buyback Authorization, with $200.0 million remaining available[142] Amended Credit Agreement The Third Amendment reduced revolving credit commitments from $500 million to $400 million and relaxed covenants, with a subsequent waiver addressing a restricted payments default - The Third Amendment reduced revolving credit commitments from $500 million to $400 million and amended consolidated interest coverage and leverage ratio covenants[144] - The Third Amendment increased the interest rate during the 'Third Amendment Period' and introduced an 'anti-cash hoarding' requirement[144] - An event of default occurred due to exceeding the $2.5 million restricted payments general basket exception for the quarter ended August 2, 2025, but was subsequently waived on September 8, 2025[145] Cash Flows Net cash provided by operating activities increased significantly to $25.1 million, driven by a lower net loss and improved working capital, while investing and financing cash uses decreased Cash Flow Summary (in millions) | Metric (in millions) | Three Months Ended August 2, 2025 | Three Months Ended July 27, 2024 | | :------------------------------------------------------- | :-------------------------------- | :------------------------------- | | Net cash provided by operating activities | $25.1 | $10.9 | | Net cash used in investing activities | $(5.8) | $(13.6) | | Net cash used in financing activities | $(4.5) | $(48.2) | | Increase (decrease) in cash and cash equivalents | $17.5 | $(50.2) | - The increase in net cash from operating activities was due to a lower net loss adjusted for non-cash items and higher cash inflows from operating assets and liabilities[150] - Capital expenditures decreased to $7.1 million from $13.6 million in the prior year period[151] - Financing activities included net proceeds from borrowings of $0.4 million, compared to net repayments of $39.1 million in the prior year[152] Recent Accounting Pronouncements This section refers to Note 1 for details on recent accounting pronouncements, specifically ASU No. 2023-09 (Income Taxes) and ASU 2024-03 (Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures) - ASU No. 2023-09 (Income Taxes) requires disaggregated information about effective tax rate reconciliation and income taxes paid, effective for the fiscal year ending May 2, 2026, and is expected to only impact disclosures[20] - ASU 2024-03 (Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures) requires more detailed disclosure of certain costs and expenses, effective for annual periods beginning in fiscal 2028, with early adoption permitted[21] Off-Balance Sheet Arrangements The company reported that it does not have any off-balance sheet arrangements as defined under SEC rules - The company does not have any off-balance sheet arrangements as defined under SEC rules[154] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from foreign currency exchange, interest rates, and commodity prices, which are partially managed through derivative financial instruments, with no significant change in exposure - The company is exposed to market risks from foreign currency exchange, interest rates, and commodity prices[155] - Derivative financial instruments are used to manage a portion of these risks, not for speculative or trading purposes[155] - No significant change in market risk exposure occurred during the three months ended August 2, 2025[156] Item 4. Controls and Procedures The company's CEO and CFO concluded that its disclosure controls and procedures were effective as of August 2, 2025, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of August 2, 2025[157] - No material changes in internal control over financial reporting occurred during the three months ended August 2, 2025[158] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 12, "Contingencies," for a description of the company's pending legal proceedings, which include stockholder litigation and an SEC investigation - For details on pending legal proceedings, refer to Note 12, "Contingencies," in the condensed consolidated financial statements[161] Item 1A. Risk Factors The company faces various risks, including global operations, trade policy changes (tariffs), and supply chain dependencies, which could adversely impact costs, margins, and sales - The company's business is subject to various risks, including those related to global operations and changes in trade policy, such as tariffs and customs regulations[162][163] - Increased trade restrictions, export licenses, tariffs, or taxes on imports from countries where the company manufactures products could materially affect its business, financial condition, and operating results[163][164] - The company's product portfolio, including auto parts, commercial vehicle parts, semiconductors, and copper, exposes it to highly contested international trade disputes and potential increased costs[166] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds A new $200.0 million share buyback authorization was approved in June 2024, with no purchases made under it as of August 2, 2025, while shares were surrendered by employees for tax obligations - A new $200.0 million share buyback authorization was approved on June 13, 2024, for purchases through June 17, 2026. No purchases have been made under this authorization[167] Share Repurchase Activity (in millions) | Period | Total number of shares purchased | Average price paid per share | Approximate dollar value of shares that may yet be purchased under the program (in millions) | | :------------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------------------- | | May 4, 2025 through May 31, 2025 | 57,208 | $6.74 | $200.0 | | June 1, 2025 through July 5, 2025 | — | $— | $200.0 | | July 6, 2025 through August 2, 2025 | 7,986 | $6.48 | $200.0 | - The purchased shares represent common stock surrendered by employees to satisfy tax withholding obligations related to restricted stock unit vesting[169] Item 3. Defaults Upon Senior Securities This section incorporates by reference the information regarding the revolving credit facility from Note 8, "Debt," which details a default on a restricted payments covenant that was subsequently waived - Information regarding defaults upon senior securities, specifically related to the revolving credit facility, is incorporated by reference from Note 8, "Debt"[170] Item 5. Other Information A Waiver Letter dated September 8, 2025, acknowledged and waived a credit agreement default for exceeding the $2.5 million restricted payments general basket exception - A Waiver Letter dated September 8, 2025, acknowledged an event of default under the credit agreement due to the company making approximately $2.8 million in restricted payments, exceeding the $2.5 million general basket exception for the quarter ended August 2, 2025[173] - The Waiver Letter reduced the general basket exception for restricted payments for the quarter ending November 1, 2025, from $2.5 million to approximately $2.2 million[175] - The Waiver Letter waived the acknowledged event of default[175] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report, including the Third Amendment to the Credit Agreement, various forms of executive compensation agreements, and the Waiver Letter - Key exhibits include the Third Amendment to Second Amended and Restated Credit Agreement (Exhibit 10.1) and the Waiver Letter dated September 8, 2025 (Exhibit 10.7)[176] SIGNATURES The report is duly signed on behalf of Methode Electronics, Inc. by Laura Kowalchik, Chief Financial Officer, on September 9, 2025 - The report was signed by Laura Kowalchik, Chief Financial Officer, on September 9, 2025[180]