10q10k10q10k.net

What changed in METHODE ELECTRONICS INC's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of METHODE ELECTRONICS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+299 added−273 removedSource: 10-K (2024-07-11) vs 10-K (2023-06-27)

Top changes in METHODE ELECTRONICS INC's 2024 10-K

299 paragraphs added · 273 removed · 205 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

29 edited+3 added−5 removed19 unchanged
Biggest changeDiversity and Inclusion At Methode Electronics, we strive to maintain a diverse and inclusive workforce that reflects our global customer base and the communities that we serve. We value every member of our workforce and want everyone to feel safe voicing their opinions and concerns. Our diversity goals apply to our entire organization, including leadership positions.
Biggest changeWe value every member of our workforce and want everyone to feel safe voicing their opinions and concerns. Our diversity goals apply to our entire organization, including leadership positions. We have diverse representation on our executive team and Board of Directors, with three out of ten Board members being women.
Information about our sales and operations in different geographic regions is summarized in Note 15, “Segment Information and Geographic Area Information” to our consolidated financial statements in this Annual Report. Sales are made primarily to OEMs, either directly or through their tiered suppliers, as well as to selling partners and distributors.
Information about our sales and operations in different geographic regions is summarized in Note 15, “Segment Information and Geographic Area Information” to the consolidated financial statements in this Annual Report. Sales are made primarily to OEMs, either directly or through their tiered suppliers, as well as to selling partners and distributors.
See Note 15, “Segment Information and Geographic Area Information” to our consolidated financial statements in this Annual Report for further information. The Automotive segment supplies electronic and electro-mechanical devices and related products to automobile OEMs, either directly or through their tiered suppliers.
See Note 15, “Segment Information and Geographic Area Information” to the consolidated financial statements in this Annual Report for further information. The Automotive segment supplies electronic and electro-mechanical devices and related products to automobile OEMs, either directly or through their tiered suppliers.
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.
We design, engineer and produce mechatronic products for Original Equipment Manufacturers (“OEMs”) utilizing our broad range of technologies for user interface, light-emitting diode (“LED”) lighting system, power distribution and sensor applications. Our solutions are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus and rail), cloud computing infrastructure, construction equipment and consumer appliance.
As a global business, the communication on Environmental, Health and Safety (“EHS”) matters is conducted at the local level and in the local language. All our manufacturing locations structure compliance initiatives to adhere to their local environmental health and safety requirements. Site personnel provide new employee orientation and typically contractor induction training where relevant. Thereafter, relevant job-specific training is provided.
As a global business, the communication on Environmental, Health and Safety (“EHS”) matters is conducted at the local level and in the local language. All our manufacturing location’s structure compliance initiatives to adhere to their local environmental health and safety requirements. Site personnel provide new employee orientation and typically contractor induction training where relevant. Thereafter, relevant job-specific training is provided.
“Risk Factors” in this Annual Report for a discussion of these potential impacts. Human Capital The Human Resources function at Methode is an active and visible partner to the business at all levels. Our Chief Human Resources Officer reports directly to the Chief Executive Officer and interacts frequently with our Board of Directors.
Refer to Item 1A, “Risk Factors” in this Annual Report for a discussion of these potential impacts. Human Capital The Human Resources function at Methode is an active and visible partner to the business at all levels. Our Chief Human Resources Officer reports directly to the Chief Executive Officer and interacts frequently with our Board of Directors.
We seek patents in order to protect our interest in unique and critical products and technologies, including our magneto-elastic torque/force sensing, current sensing, displacement sensing, medical devices and radio-type products.
We seek patents in order to protect our interest in unique and critical products and technologies, including our magneto-elastic torque/force sensing, current sensing, displacement sensing and radio-type products.
Also posted on our website, among other documents, are our Corporate Governance Guidelines, Code of Business Conduct, Anti-Corruption Policy, Insider Trading Policy, Conflict Minerals Policy, Supplier Code of Conduct and other governance policies, and the charters of the Audit Committee, Compensation Committee, Medical Products Committee, Nominating and Governance Committee and Technology Committee.
Also posted on our website, among other documents, are our Corporate Governance Guidelines, Code of Business Conduct, Anti-Corruption Policy, Insider Trading Policy, Conflict Minerals Policy, Supplier Code of Conduct and other governance policies, and the charters of the Audit Committee, Compensation Committee, Executive Committee, Nominating and Governance Committee and Technology Committee.
We also provide employee benefits such as life, disability, and health (medical, dental, and vision) insurance, a 401(k) plan with a company match, paid time off, tuition reimbursement, military leave, and holiday pay. We believe those benefits are competitive within our industry.
Depending on the jurisdiction, we also provide employee benefits such as life, disability, and health (medical, dental, and vision) insurance, a 401(k) plan with a company match, paid time off, tuition reimbursement, military leave, and holiday pay. We believe those benefits are competitive within our industry.
We have been granted a number of patents in the U.S., Europe and Asia and have additional domestic and international patent applications pending related to our products. Our existing patents expire on various dates between 2023 and 2043.
We have been granted a number of patents in the U.S., Europe and Asia and have additional domestic and international patent applications pending related to our products. Our existing patents expire on various dates between 2024 and 2044.
Nevertheless, compliance with existing or future governmental regulations, including, but not limited to, those pertaining to international operations, environmental matters (including climate change), export controls, business acquisitions, consumer and data protection, employee health and safety, and regional quarantine requirements, could have a material impact on our business in subsequent periods. Refer to Item 1A.
Nevertheless, compliance with existing or future governmental regulations, including, but not limited to, those pertaining to international operations, environmental matters (including climate change), export controls, business acquisitions, consumer and data protection, and employee health and safety, could have a material impact on our business in subsequent periods.
Fiscal Year Ended April 29, 2023 April 30, 2022 May 1, 2021 Automotive 62.4 % 67.2 % 69.4 % Industrial 32.6 % 27.3 % 24.6 % Interface 4.7 % 5.1 % 5.7 % Medical 0.3 % 0.4 % 0.3 % 2 Table of Contents Sales and Marketing The majority of our sales activities are directed by sales managers who are supported by field application engineers and other technical personnel who work with customers to design our products into their systems.
Fiscal Year Ended April 27, 2024 April 29, 2023 April 30, 2022 Automotive 53.7 % 62.4 % 67.1 % Industrial 41.3 % 32.6 % 27.3 % Interface 4.8 % 4.7 % 5.1 % Medical 0.2 % 0.3 % 0.4 % 2 Table of Contents Sales and Marketing The majority of our sales activities are directed by sales managers who are supported by field application engineers and other technical personnel who work with customers to design our products into their systems.
Fiscal 2023 ended on April 29, 2023, fiscal 2022 ended on April 30, 2022 and fiscal 2021 ended on May 1, 2021, and each represented 52 weeks of results. Operating Segments Our business is managed, and our financial results are reported, based on the following four segments: Automotive, Industrial, Interface and Medical.
Fiscal 2024 ended on April 27, 2024, fiscal 2023 ended on April 29, 2023 and fiscal 2022 ended on April 30, 2022, and each represented 52 weeks of results. Operating Segments Our business is managed, and our financial results are reported, based on the following four segments: Automotive, Industrial, Interface and Medical.
Research and development costs primarily relate to product engineering and design and development expenses and are classified as a component of costs of products sold on our consolidated statements of income. Expenditures for such activities amounted to $35.0 million for fiscal 2023, $35.7 million for fiscal 2022 and $37.1 million for fiscal 2021.
Research and development costs primarily relate to product engineering and design and development expenses and are classified as a component of costs of products sold on our consolidated statements of operations. Expenditures for such activities amounted to $49.1 million for fiscal 2024, $35.0 million for fiscal 2023 and $35.7 million for fiscal 2022.
Refer to Item 1A. “Risk Factors” in this Annual Report for risks related to supply chain issues, including the worldwide semiconductor supply shortage. Intellectual Property We generally rely on patents, trade secrets, trademarks, licenses, and non-disclosure agreements to protect our intellectual property and proprietary products.
Refer to Item 1A, “Risk Factors” in this Annual Report for risks related to our supply chain. Intellectual Property We generally rely on patents, trade secrets, trademarks, licenses, and non-disclosure agreements to protect our intellectual property and proprietary products.
Our products include integrated center consoles, hidden switches, ergonomic switches, transmission lead-frames, complex insert molded solutions, LED-based lighting solutions, and sensors which incorporate magneto-elastic sensing, eddy current or other sensing technologies that monitor the operation or status of a component or system.
Products include integrated overhead and center consoles, hidden and ergonomic switches, transmission lead-frames, insert molded components, LED-based lighting and sensors, which incorporate magneto-elastic sensing and other sensing technologies that monitor the operation or status of a component or system.
In fiscal 2024, our human capital focus will continue to be on talent acquisition and development, diversity and inclusion and employee health and safety. As of April 29, 2023, we employed approximately 6,700 employees worldwide, substantially all of whom were employed full time with approximately 94% of these employees located outside the U.S.
In fiscal 2025, our human capital focus will continue to be on talent acquisition and development, diversity and inclusion and employee health and safety. As of April 27, 2024, we employed approximately 7,500 employees worldwide, substantially all of whom were employed full time with approximately 95% of these employees located outside the U.S.
Consequently, our Automotive and Industrial segments may experience seasonal fluctuations based on the sales and the production schedules of our customers. Major Customers During fiscal 2023, our five largest customers accounted for approximately 49% of our consolidated net sales. Two customers in the Automotive segment represented more than 10% of our consolidated net sales at 18.7% and 10.8%.
Consequently, our Automotive and Industrial segments may experience seasonal fluctuations based on the sales and the production schedules of our customers. Major Customers During fiscal 2024, our five largest customers accounted for approximately 40% of our consolidated net sales. One customer in the Automotive segment represented more than 10% of our consolidated net sales at 14.6%.
The Industrial segment manufactures external lighting solutions, including driving, work, and signal lights, industrial safety radio remote controls, braided flexible cables, current-carrying laminated and powder-coated busbars, high-voltage high current connector and contracts, custom power-product assemblies, such as our PowerRail® solution, high-current low-voltage flexible power cabling systems that are used in various markets and applications, including aerospace, cloud computing, commercial vehicles, construction equipment, industrial, military, power conversion and transportation.
The Industrial segment manufactures exterior and interior lighting solutions, industrial safety radio remote controls, braided flexible cables, current-carrying laminated busbars and devices, custom power-product assemblies, such as our PowerRail® solution, high-current high-voltage flexible power cabling systems and powder-coated busbars that are used in various markets and applications, including aerospace, commercial vehicles, data centers, industrial equipment, power conversion, military, telecommunications and transportation.
We embrace the diversity of our employees, including their unique backgrounds, experiences, thoughts, and talents. We also strive for diversity in leadership, which has the power to drive innovation and to encompass a wide variety of perspectives in company decision-making.
We also strive for diversity in leadership, which has the power to drive innovation and to encompass a wide variety of perspectives in company decision-making.
Our U.S. employees are not subject to any collective bargaining agreements although certain international employees are covered by national or local labor agreements. Our corporate culture is committed to doing business with integrity, teamwork, and performance excellence. Our management team and all our employees are expected to exhibit the principles of fairness, honesty, and integrity in the actions we undertake.
Our U.S. employees are not subject to any collective bargaining agreements although certain international employees are covered by national or local labor agreements. Our corporate culture includes a commitment to doing business with integrity, teamwork, and performance excellence.
We expect the redemption proceedings to be completed by October 31, 2023. See Note 3, “Acquisition” to our consolidated financial statements in this Annual Report for further information. Fiscal Year We maintain our financial records on the basis of a 52 or 53-week fiscal year ending on the Saturday closest to April 30.
The results of operations of Nordic Lights are reported within the Industrial segment. See Note 3, “Acquisition and Disposition” to the consolidated financial statements in this Annual Report for further information. Fiscal Year We maintain our financial records on the basis of a 52 or 53-week fiscal year ending on the Saturday closest to April 30.
Acquisition of Nordic Lights Group Corporation On April 20, 2023, we acquired 92.2% of the outstanding shares in Nordic Lights Group Corporation (“Nordic Lights”) for €121.8 million ($134.2 million) in cash.
Acquisition of Nordic Lights Group Corporation (“Nordic Lights”) We acquired 92.2% of the outstanding shares of Nordic Lights on April 20, 2023. We acquired the remaining 7.8% of the outstanding shares of Nordic Lights in the year ended April 27, 2024. Accordingly, as of April 27, 2024, we own 100% of Nordic Lights.
Talent Acquisition, Development and Succession Planning We strive to build a diverse and inclusive workforce through investments in talent development and retention strategies. Methode is an Equal Opportunity Employer and offers opportunities to all qualified job seekers. We focus significant attention on attracting and retaining talented and experienced individuals to manage and support our operations.
Our employees participate in annual training on preventing, identifying, reporting, and stopping any type of unlawful discrimination or unethical actions. Talent Acquisition, Development and Succession Planning We strive to build a diverse and inclusive workforce through investments in talent development and retention strategies. Methode is an Equal Opportunity Employer and offers opportunities to all qualified job seekers.
When we hire new employees, we focus not just on the skills required for current positions, but the ever-changing complex skills and competencies that will be required as we move forward. We have a global talent review and succession planning process designed to align our talent plans with the current and future strategies of the business.
We focus significant attention on attracting and retaining talented and experienced individuals to manage and support our operations. When we hire new employees, we focus not just on the skills required for current positions, but the ever-changing complex skills and competencies that will be required as we move forward.
We have diverse representation on our executive team and Board of Directors, with three out of twelve Board members being women. As highlighted in our Diversity & Inclusion Statement (available on our corporate website), diversity and inclusion are business imperatives that will enable us to build and empower our future workforce.
As highlighted in our Diversity & Inclusion Statement (available on our corporate website), diversity and inclusion are business imperatives that will enable us to build and empower our future workforce. We embrace the diversity of our employees, including their unique backgrounds, experiences, thoughts, and talents.
Our employees must adhere to our Code of Conduct that addresses topics such as anti-corruption, discrimination, harassment, privacy, appropriate use of company assets and protecting confidential information. Our employees participate in annual training on preventing, identifying, reporting, and stopping any type of unlawful discrimination or unethical actions.
Our management team and all our employees are expected to exhibit the principles of fairness, honesty, and integrity in the actions we undertake. Our employees must adhere to our Code of Conduct that addresses topics such as anti-corruption, discrimination, harassment, privacy, appropriate use of company assets and protecting confidential information.
The following table reflects the percentage of net sales by segment for the last three fiscal years.
See Note 3, “Acquisition and Disposition” to the consolidated financial statements in this Annual Report for more information. The following table reflects the percentage of net sales by segment for the last three fiscal years.
This includes the identification of key positions, assessment of internal talent and potential successors and plans for talent development. Our teams meet with leaders and team members across the company to develop action plans and goals focused on both personal and professional development.
Our teams meet with leaders and team members across the company to develop action plans and goals focused on both personal and professional development. Diversity and Inclusion At Methode Electronics, we strive to maintain a diverse and inclusive workforce that reflects our global customer base and the communities that we serve.
Removed
Nordic Lights is a premium provider of high-quality lighting solutions for heavy duty equipment and a public limited liability company incorporated in Finland with its shares admitted to trading on Nasdaq First North. The acquisition complements our own existing LED lighting solutions.
Added
The Interface segment provides a variety of high-speed digital communication over copper media solutions for the data center and broadband markets, and interface panel solutions for the appliance market. Solutions include copper transceivers, distribution point units, and solid-state field-effect consumer touch panels.
Removed
In addition, the business aligns well with our inorganic growth framework given its focus on engineered solutions for OEMs, its industrial and non-auto transportation market exposure, and its customer and geographic diversity.
Added
The Medical segment was made up of our medical device business, Dabir Surfaces, with its surface support technology aimed at pressure injury prevention. In the first quarter of fiscal 2024, we made the decision to initiate the discontinuation of Dabir Surfaces. In October 2023, we sold certain assets of the Dabir Surfaces business.
Removed
From May 1, 2023 to June 16, 2023, we acquired an additional 7.2% of the outstanding shares of Nordic Lights for €9.3 million ($10.2 million) resulting in a current ownership of 99.4%. In May 2023, we initiated compulsory redemption proceedings for all remaining shares in Nordic Lights in accordance with Chapter 18 of the Finnish Companies Act.
Added
We have a global talent review and succession planning process designed to align our talent plans with the current and future strategies of the business. This includes the identification of key positions, assessment of internal talent and potential successors and plans for talent development.
Removed
The Interface segment provides a variety of copper-based transceivers and related accessories for the cloud computing hardware equipment and telecommunications broadband equipment markets, user interface solutions for the appliance, commercial food service, and point-of-sale equipment markets, and fluid-level sensors for the marine/recreational vehicle and sump pump markets.
Removed
The Medical segment is made up of our medical device business, Dabir Surfaces, Inc. (“Dabir Surfaces”), our surface support technology aimed at pressure injury prevention. Dabir Surfaces 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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

75 edited+25 added−19 removed71 unchanged
Biggest changeThe continuation of the military conflict between Russia and Ukraine could lead to other supply chain disruptions, increased inflationary pressures, and volatility in global markets and industries that could negatively impact our operations. 11 Table of Contents Technology and Intellectual Property Risks Our operations could be negatively impacted by IT service interruptions, data corruption or misuse, cyber-based attacks, or network security breaches.
Biggest changeGiven our manufacturing operations in the Middle East and Asia, the continuation of the military conflict between Russia and Ukraine, the escalation or expansion of the Israel-Hamas war, or renewed terrorist attacks on Red Sea shipping such as those by the Houthi could lead to other supply chain disruptions, increased inflationary pressures, and volatility in global markets and industries that could negatively impact our operations.
The amount of our outstanding indebtedness could have an adverse effect on our operations and liquidity, including by, among other things: (i) making it more difficult for us to pay or refinance our debts as they become due during adverse economic and industry conditions, because we may not have sufficient cash flows to make our scheduled debt payments; (ii) causing us to use a larger portion of our cash flows to fund interest and principal payments, thereby reducing the availability of cash to fund working capital, product development, capital expenditures and other business activities; (iii) making it more difficult for us to take advantage of significant business opportunities, such as acquisition opportunities or other strategic transactions, and to react to changes in market or industry conditions; and (iv) limiting our ability to borrow additional monies in the future to fund the activities and expenditures described above and for other general corporate purposes as and when needed, which could force us to suspend, delay or curtail business prospects, strategies or operations.
Further, the amount of our outstanding indebtedness could have an adverse effect on our operations and liquidity, including by, among other things: (i) making it more difficult for us to pay or refinance our debts as they become due during adverse economic and industry conditions, because we may not have sufficient cash flows to make our scheduled debt payments; (ii) causing us to use a larger portion of our cash flows to fund interest and principal payments, thereby reducing the availability of cash to fund working capital, product development, capital expenditures and other business activities; (iii) making it more difficult for us to take advantage of significant business opportunities, such as acquisition opportunities or other strategic transactions, and to react to changes in market or industry conditions; and (iv) limiting our ability to borrow additional monies in the future to fund the activities and expenditures described above and for other general corporate purposes as and when needed, which could force us to suspend, delay or curtail business prospects, strategies or operations.
Products we manufacture may contain design or manufacturing defects that could result in reduced demand for our products or services and liability claims against us. Despite our quality control and quality assurance efforts, defects may occur in the products we manufacture due to a variety of factors, including design or manufacturing errors, component failure or counterfeit parts.
Products we manufacture may contain design or manufacturing defects that could result in reduced demand for our products or services and warranty liability claims against us. Despite our quality control and quality assurance efforts, defects may occur in the products we manufacture due to a variety of factors, including design or manufacturing errors, component failure or counterfeit parts.
Our senior unsecured credit agreement imposes various restrictions and covenants regarding the operation of our business, including covenants that require us to obtain the lenders’ consent before we can, among other things and subject to certain exceptions: (i) incur additional indebtedness or additional liens on our property; (ii) consummate certain acquisitions, dispositions, mergers or consolidations; (iii) make any material change in the nature of our business; (iv) enter into certain transactions with our affiliates; or (v) repurchase or redeem any outstanding shares of our common stock or pay cash dividends to our stockholders when a default exists or certain financial covenants are not maintained.
Our senior secured credit agreement imposes various restrictions and covenants regarding the operation of our business, including covenants that require us to obtain the lenders’ consent before we can, among other things and subject to certain exceptions: (i) incur additional indebtedness or additional liens on our property; (ii) consummate certain acquisitions, dispositions, mergers or consolidations; (iii) make any material change in the nature of our business; (iv) enter into certain transactions with our affiliates; or (v) repurchase or redeem any outstanding shares of our common stock or pay cash dividends to our stockholders when a default exists or certain financial covenants are not maintained.
Part of our workforce is unionized which could subject us to work stoppages. A portion of our workforce is unionized, primarily in Mexico and Finland. A prolonged work stoppage or strike at any facility with unionized employees could increase costs and prevent us from supplying customers.
Part of our workforce is unionized which could subject us to work stoppages. A portion of our workforce is unionized, primarily in Mexico, Malta and Finland. A prolonged work stoppage or strike at any facility with unionized employees could increase costs and prevent us from supplying customers.
The loss of certain patents and trade secrets could adversely affect our sales, margins or profitability. We have and may become involved in litigation in the future to protect our intellectual property or because others may allege that we infringe on their intellectual property.
The loss of certain patents and trade secrets could adversely affect our sales, margins or profitability. We have been involved and may become involved in the future in litigation to protect our intellectual property or because others may allege that we infringe on their intellectual property.
Should major public health issues, including pandemics, arise, we could be negatively affected by shutdowns, shelter in place orders, more stringent travel restrictions, additional limitations in freight services, governmental actions limiting the movement of products between regions, and disruptions in the operations of our manufacturing partners and component suppliers.
Should major public health issues, including pandemics, arise or worsen, we could be negatively affected by shutdowns, shelter in place orders, more stringent travel restrictions, additional limitations in freight services, governmental actions limiting the movement of products between regions, and disruptions in the operations of our manufacturing partners and component suppliers.
Product defects may result in delayed shipments and reduced demand for our products. We may be subject to increased costs due to warranty claims on defective products. Product defects may result in product liability claims against us where defects cause, or are alleged to cause, property damage, bodily injury or death.
Product defects may result in delayed shipments and reduced demand for our products. We have incurred warranty liability claims and may be subject to increased costs due to warranty claims on defective products. Product defects may result in product liability claims against us where defects cause, or are alleged to cause, property damage, bodily injury or death.
We generally receive volume estimates, but not firm volume commitments from our customers, and may experience reduced or extended lead times in customer orders. Customers may cancel orders, change production quantities and delay production for a number of reasons.
We generally receive volume estimates, but not firm volume commitments from our customers, and may experience reduced or extended lead times in customer orders. Customers may cancel orders, change production quantities (take rates) and delay production for a number of reasons.
The GDPR also imposes strict rules on the transfer of personal data out of the European Union to countries such as the U.S., enhances enforcement authority and imposes large penalties for noncompliance. We may be unable to keep pace with rapid technological changes, which could adversely affect our business, financial condition and results of operations.
The GDPR also imposes strict rules on the transfer of personal data out of the European Union to countries such as the U.S., enhances enforcement authority and imposes large penalties for noncompliance. 13 Table of Contents We may be unable to keep pace with rapid technological changes, which could adversely affect our business, financial condition and results of operations.
We transact business in various foreign countries. We present our consolidated financial statements in U.S. dollars, but a portion of our revenues and expenditures are transacted in other currencies. As a result, we are exposed to fluctuations in foreign currencies. Additionally, we have currency fluctuation exposure arising from funds held in local currencies in foreign countries.
We present our consolidated financial statements in U.S. dollars, but a portion of our revenues and expenditures are transacted in other currencies. As a result, we are exposed to fluctuations in foreign currencies. Additionally, we have currency fluctuation exposure arising from funds held in local currencies in foreign countries.
Sales to customers outside of the U.S. represented a substantial portion of our fiscal 2023 net sales. We expect our net sales in international markets to continue to represent a significant portion of our consolidated net sales.
Sales to customers outside of the U.S. represented a substantial portion of our fiscal 2024 net sales. We expect our net sales in international markets to continue to represent a significant portion of our consolidated net sales.
Our inability, or our customers' inability, to effectively manage the timing, quality and costs of these new program launches could adversely affect our financial condition and results of operations. Over the last several fiscal years, we have booked many EV-related programs.
Our inability, or our customers' inability, to effectively manage the timing, quality and costs of these new program launches could adversely affect our financial condition and results of operations. 5 Table of Contents Over the last several fiscal years, we have booked many EV-related programs.
These actions could result in impairment charges and various charges for such items as idle capacity, disposition costs and severance costs, in addition to normal or attendant risks and uncertainties. We may be unsuccessful in any of our current or future efforts to restructure or consolidate our business.
These actions could result in impairment charges and various charges for such items as idle capacity, disposition costs and severance costs, in addition to normal or attendant risks and uncertainties. We may be unsuccessful in any of our current or future efforts to restructure or consolidate our business, improve margins and realize efficiencies.
We have worked and will continue to work closely with our suppliers and customers to minimize any potential adverse impacts of the semiconductor supply shortage and monitor the availability of semiconductor microchips and other component parts and raw materials, customer production schedules and any other supply chain inefficiencies that may arise.
We have worked and will continue to work closely with our suppliers and customers to minimize any potential adverse impacts of supply shortages and monitor the availability of component parts and raw materials, customer production schedules and any other supply chain inefficiencies that may arise.
Our senior unsecured credit agreement provides for variable rates of interest based on the currency of the borrowing and our leverage ratio and contains customary representations and warranties, financial covenants, restrictive covenants and events of default.
Our senior secured credit agreement provides for variable rates of interest based on the currency of the borrowing and our consolidated leverage ratio and contains customary representations and warranties, financial covenants, restrictive covenants and events of default.
These claims and any resulting lawsuit could subject us to liability for damages and invalidate our intellectual property rights.
These claims and any resulting lawsuits could subject us to liability for damages and invalidate our intellectual property rights.
Our senior unsecured credit agreement provides an option to increase the size of our revolving credit facility by an additional $250.0 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.
Our senior secured credit agreement provides an option to increase the size of our revolving credit facility by an additional $250 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 or future circumstances.
This material weakness, or difficulties encountered in implementing new or improved controls or remediation, could prevent us from accurately reporting our financial results, result in material misstatements in our financial statements or cause us to fail to meet our reporting obligations.
The material weaknesses, or difficulties encountered in implementing new or improved controls or remediation, could prevent us from accurately reporting our financial results, result in material misstatements in our financial statements or cause us to fail to meet our reporting obligations.
We are actively developing a remediation plan designed to address this material weakness, however, we cannot guarantee that these steps will be sufficient or that we will not have a material weakness in the future.
We are actively developing remediation plans designed to address the material weaknesses; however, we cannot guarantee that these steps will be sufficient or that we will not have a material weakness in the future.
Any such business interruptions could materially affect our business, financial condition and results of operations. Russia’s invasion of Ukraine and the resulting economic sanctions imposed by the international community have impacted the global economy and given rise to potential global security issues that may adversely affect international business and economic conditions.
Any such business interruptions could materially affect our business, financial condition and results of operations. 8 Table of Contents Russia’s invasion of Ukraine and the resulting economic sanctions imposed by the international community impacted the global economy and gave rise to potential global security issues that may adversely affect international business and economic conditions.
In addition, we have significant personnel, property, equipment and operations in a number of countries outside of the U.S., including Belgium, Canada, China, Egypt, Finland, India, Malta, Mexico and the United Kingdom. As of April 29, 2023, approximately 94% of our employees were located outside of the U.S.
In addition, we have significant personnel, property, equipment and operations in a number of countries outside of the U.S., including Belgium, Canada, China, Egypt, Finland, India, Malta, Mexico and the United Kingdom. As of April 27, 2024, approximately 95% of our employees were located outside of the U.S.
We are dependent on the availability and price of raw materials. We require substantial amounts of materials, including application-specific integrated circuits, coil and bar stock, ferrous and copper alloy sheets, extrusions, glass, LED displays, plastic molding resins, precious metals, silicon die castings and wire.
We require substantial amounts of materials, including application-specific integrated circuits, coil and bar stock, ferrous and copper alloy sheets, extrusions, glass, LED displays, plastic molding resins, precious metals, silicon die castings and wire.
Plans to minimize or eliminate any loss of revenues during restructuring or consolidation may not be achieved. These activities may have a material adverse effect on our business, financial condition and results of operations. Changes in our effective tax rate may adversely impact our results of operations.
Plans to minimize or eliminate any loss of revenues during restructuring or consolidation may not be achieved. These activities may have a material adverse effect on our business, financial condition and results of operations.
The success of our acquisitions depends on our ability to: • execute the integration or consolidation of the acquired operations into our existing businesses; • develop or modify the financial reporting and information systems of the acquired entity to ensure overall financial integrity and adequacy of internal control procedures; • retain key personnel and key customers; • identify and take advantage of cost reduction opportunities; and • further penetrate new and existing markets with the product capabilities we may acquire. 9 Table of Contents Integration of acquisitions may take longer than we expect and may never be achieved to the extent originally anticipated.
The success of our acquisitions depends on our ability to: • execute the integration or consolidation of the acquired operations into our existing businesses; • develop or modify the financial reporting and information systems of the acquired entity to ensure overall financial integrity and adequacy of internal control procedures; • retain key personnel and key customers; • identify and take advantage of cost reduction opportunities; and • further penetrate new and existing markets with the product capabilities we may acquire.
In the past, we have taken actions to restructure and optimize our production and manufacturing capabilities and efficiencies through relocations, consolidations, facility closings or asset sales. In the future, we may take additional restructuring actions including the consolidating or closing of facilities and the movement of production from one geographic region to another.
In the past, we have taken actions to restructure and optimize our production and manufacturing capabilities and efficiencies through relocations, consolidations, facility closings or asset sales. We expect to take additional restructuring actions which may include the consolidating or closing of facilities, the movement of production from one geographic region to another, and logistics and sourcing optimization measures.
The process of evaluating the potential impairment of goodwill and other intangible assets requires significant judgement. Negative industry or economic trends, including reduced estimates of future cash flows, disruptions to our business, slower growth rates, or lack of growth in our relevant business units, could lead to impairment charges against our goodwill and other intangible assets.
Negative industry or economic trends, including reduced estimates of future cash flows, disruptions to our business, slower growth rates, or lack of growth in our relevant business units, could lead to further impairment charges against our goodwill and other intangible assets.
A number of factors may increase our effective tax rate, which could reduce our net income, including: • the adoption of Organization for Economic Cooperation and Development (“OECD”) Pillar Two framework, which sets out global minimum tax rules designed to ensure that large multinational businesses pay a minimum effective rate of tax of 15% on profits in all countries; • the jurisdictions in which profits are earned and taxed; • changes in the valuation of our deferred tax assets and liabilities; • adjustments to income taxes upon finalization of tax returns; • increases in expenses not deductible for tax purposes, including write-offs of acquired in-process research and development and impairments of goodwill and long-lived assets; • changes in available tax credits; • changes in tax laws or interpretation, including changes in the U.S. to the taxation of non-U.S. income and expenses; and • changes in U.S. generally accepted accounting principles (“GAAP”).
A number of factors may increase our effective tax rate, which could reduce our net income, including: • the implementation of a global minimum corporate tax of 15% under the Organization for Economic Cooperation and Development (“OECD”) Pillar 2 framework; • the jurisdictions in which profits are earned and taxed; • changes in the valuation of our deferred tax assets and liabilities; • adjustments to income taxes upon finalization of tax returns; • increases in expenses not deductible for tax purposes, including write-offs of acquired in-process research and development and impairments of goodwill and long-lived assets; • changes in available tax credits; • changes in tax laws or interpretation, including changes in the U.S. to the taxation of non-U.S. income and expenses; and • changes in U.S. generally accepted accounting principles (“GAAP”).
The markets in which we operate are highly competitive. We compete with a large number of other manufacturers in each of our product areas and many of these competitors have greater resources and sales. Price, service and product performance are significant elements of competition in the sale of our products.
We compete with a large number of other manufacturers in each of our product areas and many of these competitors have greater resources and sales. Price, service and product performance are significant elements of competition in the sale of our products. Competition may intensify further if more companies enter the markets in which we operate.
War, terrorism, geopolitical uncertainties (including the current military conflict between Russia and Ukraine), public health issues (such as the COVID-19 pandemic), and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on us, our suppliers, logistics providers, and customers.
War, terrorism, geopolitical uncertainties (including the current military conflicts between Russia and Ukraine, and between Israel and Hamas), public health emergencies, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on us, our suppliers, logistics providers, and customers.
If actual production orders from our customers are not consistent with our projected future sales volumes, we could realize substantially less revenue and incur greater expenses over the life of vehicle programs.
If actual production orders from our customers are not consistent with our projected future sales volumes, we could realize substantially less revenue and incur greater expenses over the life of vehicle programs. The receipt of orders and resulting revenues from customers is significantly affected by global automotive production levels.
Operational and Industry Risks The inability of our supply chain, or the supply chain of our customers, to deliver key components, such as semiconductors, could materially adversely affect our business, financial condition and results of operations and cause us to incur significant cost increases. Our products contain a significant number of components that we source globally.
The inability of our supply chain, or the supply chain of our customers, to deliver key components, such as semiconductors, could materially adversely affect our business, financial condition and results of operations and cause us to incur significant cost increases.
Given the complexity of new program launches, we may experience difficulties managing product quality, timeliness and associated costs. In addition, new program launches require a significant ramp up of costs; however, our sales related to these new programs generally are dependent upon the timing and success of our customers' introduction of new products.
In addition, new program launches require a significant ramp up of costs; however, our sales related to these new programs generally are dependent upon the timing and success of our customers' introduction of new products.
Our primary sources of liquidity are cash generated from operations and availability under our $750.0 million revolving credit facility. As of April 29, 2023, $305.4 million was outstanding under the revolving credit facility.
Our primary sources of liquidity are cash generated from operations and availability under our $500 million revolving credit facility. As of April 27, 2024, $333.0 million was outstanding under the revolving credit facility.
Most notably with respect to the automotive and commercial vehicle industries, the U.S. imposed tariffs on imports of certain steel, aluminum and automotive components, and China imposed retaliatory tariffs on imports of U.S. vehicles and certain automotive components.
The U.S. and Chinese governments have imposed a series of significant incremental retaliatory tariffs to certain imported products. Most notably with respect to the automotive and commercial vehicle industries, the U.S. imposed tariffs on imports of electric vehicles and certain steel, aluminum and automotive components, and China imposed retaliatory tariffs on imports of U.S. vehicles and certain automotive components.
We may not be successful in the development of a non-infringing alternative, or licenses may not be available on commercially acceptable terms, if at all, in which case we may lose sales and profits.
We may not be successful in the development of a non-infringing alternative, or licenses may not be available on commercially acceptable terms, if at all, in which case we may lose sales and profits. In addition, any litigation could be lengthy and costly and could materially adversely affect us even if we are successful in the litigation.
This may make it difficult to schedule production and maximize utilization of our manufacturing capacity. Anticipated orders may not materialize and delivery schedules may be deferred as a result of changes in demand for our products or our customers’ products. We often increase staffing and capacity and incur other expenses to meet the anticipated demand of our customers.
This may make it difficult to schedule production and maximize utilization of our manufacturing capacity. Anticipated orders may not materialize leading to lowered take rates for our products and delivery schedules may be deferred as a result of changes in demand for our products or our customers’ products.
The evolution of the industry toward electrification has also attracted increased competition from entrants outside of the traditional automotive and commercial vehicle industries, some of whom may seek to provide products which compete with ours.
If we do not respond appropriately, the evolution toward electrification and other energy sources could adversely affect our business. The evolution of the industry toward electrification has also attracted increased competition from entrants outside of the traditional automotive and commercial vehicle industries, some of whom may seek to provide products which compete with ours.
On occasion, customers may require rapid increases in production, which may stress our resources. Any significant decrease or delay in customer orders could have a material adverse effect on our business, financial condition and results of operations.
We often increase staffing and capacity and incur other expenses to meet the anticipated demand of our customers. On occasion, customers may require rapid increases in production, which may stress our resources. Any significant decrease or delay in customer orders or take rates could have a material adverse effect on our business, financial condition and results of operations.
If interest rates continue to increase, our debt service obligations on any variable rate indebtedness could increase even though the amount borrowed remained the same, which could adversely impact our results of operations.
Borrowings under our senior secured credit agreement are at variable rates of interest and expose us to interest rate risk. If interest rates continue to increase, our debt service obligations on any variable rate indebtedness could increase even if the amount borrowed remained the same, which could adversely impact our results of operations.
If we lost the services of our executive officers or our other highly qualified and experienced employees or cannot attract and retain other qualified personnel, our business could suffer due to less effective management or less successful products due to a reduced ability to design, manufacture and market our products.
If we lose the services of our executive officers or our other highly qualified and experienced employees and cannot attract and retain other qualified personnel, our business could suffer due to less effective management or less successful products due to a reduced ability to design, manufacture and market our products. 6 Table of Contents Our customers may cancel their orders, change production quantities (take rates) or locations or delay production.
Factors negatively affecting these industries also negatively affect our business, financial condition and results of operations. Automotive sales and production are highly cyclical and, in addition to general economic conditions, also depend on other factors, such as consumer confidence and consumer preferences.
Automotive sales and production are highly cyclical and, in addition to general economic conditions, also depend on other factors, such as consumer confidence and consumer preferences.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business, financial condition and results of operations. We are susceptible to trends and factors affecting the automotive and commercial vehicle industries. We derive a substantial portion of our revenues from customers in the automotive and commercial vehicle industries.
Operational and Industry Risks We are susceptible to trends and factors affecting the automotive, commercial vehicle, and construction industries. We derive a substantial portion of our revenues from customers in the automotive, commercial vehicle, and construction industries. Factors negatively affecting these industries also negatively affect our business, financial condition and results of operations.
While we currently have active development programs with various OEMs for a variety of our products, no assurance can be given that our products will be implemented in any particular vehicles. If our products are not selected after a lengthy development process, our business, financial condition and results of operations could be adversely affected.
While we currently have active development programs with various OEMs for a variety of our products, no assurance can be given that our products will be implemented in any particular vehicles.
In the event that we determine that our goodwill or other intangible assets are impaired, we may be required to record a significant charge to earnings that could adversely affect our financial condition and results of operations. We have incurred indebtedness and our level of indebtedness and restrictions under our indebtedness could adversely affect our operations and liquidity.
In the event that we determine that our goodwill or other intangible assets are impaired, we may be required to record a significant charge to earnings that could adversely affect our financial condition and results of operations. If we fail to maintain proper and effective internal controls over financial reporting, our financial results may not be accurately reported.
If we are unable to enter into interest rate swaps, it may adversely impact our results of operations, and, even if we use these instruments to selectively manage risks, there can be no assurance that we will be fully protected against material interest rate fluctuations. 14 Table of Contents A significant fluctuation between the U.S. dollar and other currencies could adversely impact our business, results of operations and financial condition.
If we are unable to enter into interest rate swaps, it may adversely impact our results of operations, and, even if we use these instruments to selectively manage risks, there can be no assurance that we will be fully protected against material interest rate fluctuations. Restructuring activities may lead to additional costs and material adverse effects.
However, if we are not able to mitigate the semiconductor shortage impact, any direct or indirect supply chain disruptions may have a material adverse impact on our business, financial condition and results of operations. 5 Table of Contents We have experienced and may in the future experience supplier price increases that could negatively affect our business, financial condition and results of operations.
However, if we are not able to mitigate any direct or indirect supply chain disruptions may have a material adverse impact on our business, financial condition and results of operations. The global nature of our operations subjects us to political, economic and social risks that could adversely affect our business, financial condition and results of operations.
Our five largest customers accounted for approximately 49% of our consolidated net sales in fiscal 2023. Two customers in the Automotive segment represented more than 10% of our consolidated net sales at 18.7% and 10.8%. In certain cases, the sales to these customers are concentrated in a single product.
Our five largest customers accounted for approximately 40% of our consolidated net sales in fiscal 2024. One customer in the Automotive segment represented 14.6% of our consolidated net sales in fiscal 2024. In certain cases, the sales to these customers are concentrated in a single product.
The global transportation industry is increasingly focused on the development of more fuel-efficient solutions, including electrification, to meet demands from consumers and governments worldwide to address climate change and an increased desire for environmentally sustainable solutions. If we do not respond appropriately, the evolution toward electrification and other energy sources could adversely affect our business.
Our failure to compete effectively could have a material adverse effect on our business, financial condition and results of operations. The global transportation industry is increasingly focused on the development of more fuel-efficient solutions, including electrification, to meet demands from consumers and governments worldwide to address climate change and an increased desire for environmentally sustainable solutions.
Acquisitions may also increase our debt levels. This could result in lower than expected business growth or higher than anticipated costs.
Integration of acquisitions may take longer than we expect and may never be achieved to the extent originally anticipated. Acquisitions may also increase our debt levels. This could result in lower than expected business growth or higher than anticipated costs.
The price increases are often driven by raw material pricing and availability, component or part availability, manufacturing capacity, industry allocations, logistics capacity, military conflicts, natural disasters or pandemics, and significant changes in the financial or business condition of our suppliers. The COVID-19 pandemic has adversely affected, and may continue to adversely affect, our business, financial condition and results of operations.
The price increases are often driven by raw material pricing and availability, component or part availability, manufacturing capacity, industry allocations, logistics capacity, military conflicts, natural disasters or pandemics, and significant changes in the financial or business condition of our suppliers. 7 Table of Contents Our products contain a significant number of components that we source globally.
Our inability to attract or retain key employees and a highly skilled workforce may have an adverse effect on our business, financial condition and results of operations. Our success depends upon the continued contributions of our executive officers and other key employees, many of whom have many years of experience with us and would be extremely difficult to replace.
Our success depends upon the continued contributions of our executive officers and other key employees, many of whom have many years of experience with us and would be difficult to replace.
Any significant disruptions to such supply chains could materially adversely affect our business, financial condition and results of operations. Many of the industries we supply, including the automotive and commercial vehicle industries, are reliant on semiconductors. Globally, there is still some disruption in procuring certain semiconductors. The semiconductor supply chain is complex, with capacity constraints occurring throughout.
Any significant disruptions to such supply chains could materially adversely affect our business, financial condition and results of operations. Many of the industries we supply, including the automotive, commercial vehicle, and construction industries, are reliant on competitive and supply constrained components.
In connection with the awarding of new business, we obligate ourselves to deliver new products that are subject to our customers' timing, performance and quality demands. Additionally, we must effectively coordinate the activities of numerous suppliers and our customers’ personnel in order for the program launches of certain of our products to be successful.
Our inability, or our customers’ inability, to effectively manage the timing, quality and cost of new program launches could adversely affect our financial performance. In connection with the awarding of new business, we obligate ourselves to deliver new products that are subject to our customers' timing, performance and quality demands.
We may overpay for, or otherwise not realize the expected return on, our investments, which could adversely affect our operating results and potentially cause impairments to assets that we record as a part of an acquisition including intangible assets and goodwill. Our customers may cancel their orders, change production quantities or locations or delay production.
We may overpay for, or otherwise not realize the expected return on, our investments, which could adversely affect our operating results and potentially cause impairments to assets that we record as a part of an acquisition including intangible assets and goodwill. 10 Table of Contents Financial Risks We have incurred indebtedness, and our level of indebtedness and restrictions under our indebtedness could adversely affect our operations and liquidity and impair our ability to respond to changing business and economic conditions.
In addition, funding for such companies may be more difficult to obtain and these customer relationships may not continue or materialize to the extent we plan or previously experienced. This tightening of financing for start-up customers, together with many start-up customers’ lack of prior operations and unproven product markets increase our credit risk, especially in trade accounts receivable and inventories.
This tightening of financing for start-up customers, together with many start-up customers’ lack of prior operations and unproven product markets increase our credit risk, especially in trade accounts receivable and inventories.
Failure to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could negatively affect our business, financial condition and results of operations. We have significant goodwill and other intangible assets, and future impairment of these assets could have a material adverse impact on our financial condition and results of operations.
Failure to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could negatively affect our business, financial condition and results of operations. A significant fluctuation between the U.S. dollar and other currencies could adversely impact our business, results of operations and financial condition. We transact business in various foreign countries.
As disclosed in Item 9A, “Controls and Procedures,” we identified a material weakness in our internal control over financial reporting related to revenue at one of our business units. The material weakness did not result in any material identified misstatements to the consolidated financial statements, and there were no changes to previously issued financial results.
As disclosed in Item 9A, “Controls and Procedures,” of this Annual Report, in fiscal 2023, we identified a material weakness in our internal control over financial reporting related to revenue at one of our business units. This material weakness was remediated in fiscal 2024.
Depending upon their duration and implementation, as well as our ability to mitigate their impact, these tariffs and other regulatory actions could materially affect our business, including in the form of an increase in cost of goods sold, decreased margins, increased pricing for customers, and reduced sales.
Depending upon their continued duration and potential expansion, these tariffs and other regulatory actions could materially affect our business, including in the form of an increase in cost of goods sold, decreased margins, increased pricing for customers, and reduced sales. 14 Table of Contents An emphasis on global climate change and other Environmental, Social and Governance (“ESG”) matters by various stakeholders could adversely impact our business and results of operations.
We intend to continue to seek acquisitions to grow our businesses and may divest operations to focus on our core businesses. We may fail to derive significant benefits from such transactions.
We have completed acquisitions and divestitures in the past, including most recently the acquisition of Nordic Lights in April 2023. We may seek other acquisitions to grow our businesses and may divest operations to focus on our core businesses. We may fail to derive significant benefits from such transactions.
Our inability to capitalize on prior or future acquisitions or any decision to strategically divest one or more current businesses may adversely affect our business, financial condition and results of operations. We have completed acquisitions and divestitures in the past, including most recently the acquisition of Nordic Lights in April 2023.
Moreover, additional groups of currently non-unionized employees may seek union or works council representation in the future. Our inability to capitalize on prior or future acquisitions or any decision to strategically divest one or more current businesses may adversely affect our business, financial condition and results of operations.
These customers do not have an extensive product history. As a result, there is less demonstration of market acceptance of their products, making it more difficult for us to forecast needs and requirements than with established customers.
As a result, there is less demonstration of market acceptance of their products, making it more difficult for us to forecast needs and requirements than with established customers. In addition, funding for such companies may be more difficult to obtain and these customer relationships may not continue or materialize to the extent we plan or previously experienced.
In addition, any litigation could be lengthy and costly and could materially adversely affect us even if we are successful in the litigation. 12 Table of Contents Legal, Regulatory and Compliance Risks We are subject to government regulations, including environmental, health, and safety laws and regulations, that expose us to potential financial liability.
Legal, Regulatory and Compliance Risks We are subject to government regulations, including environmental, health, and safety (“EHS”) laws and regulations, that expose us to potential financial liability.
If we are unable to launch new products in a timely and cost-effective manner, our business, financial condition and results of operations could be materially adversely affected. 8 Table of Contents Our businesses and the markets in which we operate are highly competitive and constantly evolving. If we are unable to compete effectively, our sales and profitability could decline.
Our businesses and the markets in which we operate are highly competitive and constantly evolving. If we are unable to compete effectively, our sales and profitability could decline. The markets in which we operate are highly competitive.
Volatility in the exchange rates between the foreign currencies and the U.S. dollar could have an adverse effect on our business, financial condition and results of operations. Performance-based awards under our long-term incentive plan may require significant adjustments to compensation expense which could have a material adverse impact on our results of operations.
Volatility in the exchange rates between the foreign currencies and the U.S. dollar could have an adverse effect on our business, financial condition and results of operations. 12 Table of Contents Changes in our effective tax rate may adversely impact our results of operations.
For example, we expect a significant program for a major EV customer to sunset in fiscal 2024.
For example, a significant program for a major EV customer rolled-off in fiscal 2024 and we expect a major automotive center console program to roll-off prior to the end of fiscal 2025.
Inflation may further exacerbate other risk factors discussed in this Annual Report, including customer demand, supply chain disruptions, availability of financing sources, and risks of international operations and the recruitment and retention of talent. 6 Table of Contents The loss or insolvency of our major customers, or a significant decline in the volume of products purchased by these customers, would adversely affect our future results.
These inflationary pressures have affected wages, the cost and availability of components and materials, and our ability to meet customer demand. Inflation may further exacerbate other risk factors discussed in this Annual Report, including customer demand, supply chain disruptions, availability of financing sources, and risks of international operations and the recruitment and retention of talent.
Our business, financial condition and results of operations may be adversely impacted by the effects of inflation. Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.
Our business, financial condition and results of operations may be adversely impacted by the effects of inflation. Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our overall cost structure. There have been ongoing significant inflationary trends in the cost of components, materials, labor, freight costs and other expenses.
Any change in the availability of, lead times for, or price for, these materials could materially adversely affect our business, financial condition and results of operations. Our inability, or our customers’ inability, to effectively manage the timing, quality and cost of new program launches could adversely affect our financial performance.
Any change in the availability of, lead times for, or price for, these materials could materially adversely affect our business, financial condition and results of operations. The loss or insolvency of our major customers, or a significant decline in the volume of products purchased by these customers, would adversely affect our future results.
For example, we expect a significant program for a major EV customer to sunset in fiscal 2024. Our supply agreements with our OEM customers are generally requirements contracts, and a decline in the production requirements of any of our customers, and in particular our largest customers, could adversely impact our revenues and profitability.
If our products are not selected after a lengthy development process, our business, financial condition and results of operations could be adversely affected. 9 Table of Contents Our supply agreements with our OEM customers are generally requirements contracts, and a decline in the production requirements of any of our customers, and in particular our largest customers, could adversely impact our revenues and profitability.
Any significant variation in the adoption or take rates at our customers could impact the accuracy of our forecasts and could have a material adverse effect on our business, financial condition and results of operations. Certain of our EV customers are start-up or emerging companies which may present additional and different risks than with our more established customers.
Additionally, certain of our EV customers are start-up or emerging companies which may present additional and different risks than with our more established customers. These customers do not have an extensive product history.
Any negative or unexpected outcomes of these examinations and audits could have a material adverse impact on our results of operations and financial condition. 15 Table of Contents Item 1B. Unresolv ed Staff Comments None.
Any negative or unexpected outcomes of these examinations and audits could have a material adverse impact on our results of operations and financial condition. Technology and Intellectual Property Risks Our operations could be negatively impacted by IT service interruptions, data corruption or misuse, cyber-based attacks, or network security breaches.
Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase. Borrowings under our senior unsecured credit agreement are at variable rates of interest and expose us to interest rate risk.
Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms acceptable to us. 11 Table of Contents Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase.
Any such product defects or product liability claims could materially adversely affect our business, financial condition and results of operations. 13 Table of Contents Financial Risks We have identified a material weakness in our internal control over financial reporting, and if we are unable to improve our internal controls, our financial results may not be accurately reported.
Any such product defects or product liability claims could materially adversely affect our business, financial condition and results of operations. Item 1B. Unresolved Staff Comments None.
Competition may intensify further if more companies enter the markets in which we operate. Our failure to compete effectively could have a material adverse effect on our business, financial condition and results of operations.
We have recognized significant impairment charges for our goodwill and may be required to recognize additional impairment charges in the future for goodwill and other intangible assets. Future impairment of these assets could have a material adverse impact on our financial condition and results of operations.
Removed
There is significant competition within the automotive and commercial vehicle supply chains and with other industries to satisfy current and near-term requirements for semiconductors.
Added
Additionally, we must effectively coordinate the activities of numerous suppliers and our customers’ personnel in order for the program launches of certain of our products to be successful. Given the complexity of new program launches, we may experience difficulties managing product quality, timeliness and associated costs.
Removed
The extent of the effects of the COVID-19 pandemic or another future pandemic on our business depends on future events that continue to be highly uncertain and beyond our control. The COVID-19 pandemic has had, and another pandemic in the future could have, a significant impact on our business, financial condition and results of operations.
Added
If we are unable to launch new products in a timely and cost-effective manner, or our customers delay the launch of their new programs, our business, financial condition and results of operations could be materially adversely affected. Changes in EV demand could affect our business. A significant portion of our business is derived from components for use in EV.
Removed
The COVID-19 pandemic, which began during our 2020 fiscal year, negatively impacted the global economy, disrupted consumer and customer demand and global supply chains, and created significant volatility and disruption of financial markets.

… 39 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. P roperties Our corporate headquarters is located in Chicago, Illinois. As of April 29, 2023, we leased or owned 37 operating facilities. We believe our space is in good condition and adequate to meet our current and reasonably anticipated future needs.
Biggest changeItem 2. P roperties Our corporate headquarters is located in Chicago, Illinois. As of April 27, 2024, we leased or owned 34 operating facilities. We believe our facilities are in good condition and adequate to meet our current and reasonably anticipated future needs.
The following table provides details regarding our significant properties as of April 29, 2023: Location Segment(s) Use Owned/ Leased Approximate Square Footage Lontzen, Belgium Automotive Manufacturing and Warehousing Owned 108,500 Dongguan, China Automotive and Industrial Manufacturing Leased 197,000 Shanghai, China Automotive and Industrial Manufacturing Leased 85,000 Suzhou, China Automotive and Industrial Manufacturing Leased 358,000 Cairo, Egypt Automotive and Industrial Manufacturing Leased 277,000 Chicago, Illinois Other Corporate Headquarters Leased 24,000 Chicago, Illinois Interface and Medical Manufacturing Owned 118,000 McAllen, Texas Automotive, Industrial and Interface Manufacturing Leased 230,000 Mriehel, Malta Automotive and Industrial Manufacturing Leased 383,000 Monterrey, Mexico Automotive, Industrial and Interface Manufacturing Leased 379,000 Santa Catarina Nuevo Léon, Mexico Automotive Manufacturing Leased 158,000
The following table provides details regarding our significant properties as of April 27, 2024: Location Segment(s) Use Owned/ Leased Approximate Square Footage Lontzen, Belgium Automotive Manufacturing and Warehousing Owned 108,500 Dongguan, China Automotive and Industrial Manufacturing Leased 197,000 Shanghai, China Automotive and Industrial Manufacturing Leased 85,000 Suzhou, China Automotive and Industrial Manufacturing Leased 358,000 Cairo, Egypt Automotive and Industrial Manufacturing Leased 277,000 Chicago, Illinois Other Corporate Headquarters Leased 24,000 Chicago, Illinois Interface Manufacturing Owned 118,000 McAllen, Texas Automotive, Industrial and Interface Manufacturing Leased 230,000 Mriehel, Malta Automotive and Industrial Manufacturing Leased 383,000 Monterrey, Mexico Automotive, Industrial and Interface Manufacturing Leased 379,000 Santa Catarina Nuevo Léon, Mexico Automotive Manufacturing Leased 158,000

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeWe are not currently aware of any legal proceedings or claims to which we are a party or to which our property is subject that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.
Biggest changeWe are not currently aware of any legal proceedings or claims to which we are a party or to which our property is subject that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations. 16 Table of Contents

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

5 edited+3 added−2 removed0 unchanged
Biggest changeVyverberg 54 General Counsel of the Company since June 2022 and previously Vice President Legal Affairs of the Company since February 2021; prior thereto, Of Counsel to the law firm Locke Lord LLP.
Biggest changeVyverberg 55 General Counsel of the Company since June 2022 and previously Vice President Legal Affairs of the Company since February 2021; prior thereto, Of Counsel to the law firm Locke Lord LLP. All executive officers are elected by the Board of Directors and serve a term of one year or until their successors are duly elected and qualified.
Martin 57 Vice President, North America since 2020; prior thereto, Vice President and General Manager, North America Automotive, from 2019 to 2020, General Manager, North America Automotive in 2018, and Director of Sales, North America Automotive from 2014 to 2017. Anil V.
Martin 58 Vice President, North America since 2020; prior thereto, Vice President and General Manager, North America Automotive, from 2019 to 2020, General Manager, North America Automotive in 2018, and Director of Sales, North America Automotive from 2014 to 2017. Anil V.
Tsoumas 62 Chief Financial Officer of the Company since 2018; prior thereto, served as Controller of the Company from 2007 to 2018. Andrea J. Barry 60 Chief Administrative Officer of the Company since January 2022 and Chief Human Resources Officer of the Company since 2017; served as CHRO for Wirtz Beverage Group from 2013 to 2016. Timothy R.
Tsoumas 63 Chief Financial Officer of the Company since 2018; prior thereto, served as Controller of the Company from 2007 to 2018. Andrea J. Barry 61 Chief Administrative Officer of the Company since January 2022 and Chief Human Resources Officer of the Company since 2017; served as CHRO for Wirtz Beverage Group from 2013 to 2016. Kevin M.
Shetty 57 President, Dabir Surfaces since 2018; prior thereto, Vice President and General Manager, Asia, from 2015, and Executive Managing Director, Asia from 2011 to 2015. Kerry A.
Shetty 58 Vice President of the Company since September 2023; prior thereto, President, Dabir Surfaces since 2018, Vice President and General Manager, Asia, from 2015 to 2018, and Executive Managing Director, Asia from 2011 to 2015. Kerry A.
Item 4. Mine Sa fety Disclosures Not applicable. Supplementary Item: Information about our Executive Officers Name Age Offices and Positions Held and Length of Service as Officer Donald W. Duda 67 Chief Executive Officer since 2004 and President and Director since 2001. Ronald L.G.
Item 4. Mine Sa fety Disclosures Not applicable. Supplementary Item: Information about our Executive Officers Name Age Offices and Positions Held and Length of Service as Officer Kevin Nystrom 64 Interim Chief Executive Officer since May 7, 2024. Partner and Managing Director of AlixPartners LLP, a business advisory firm, since 1999. Ronald L.G.
Removed
Glandon 59 Vice President since 2006; General Manager, North American Automotive, from 2006 to 2015. Joseph E. Khoury 59 Chief Operating Officer of the Company since 2018; prior thereto, served as Senior Vice President since 2015, and as Vice President and General Manager of European Operations from 2004 to 2015. Kevin M.
Added
As part of his regular employment, Mr. Nystrom has acted on assignment at a number of companies implementing restructuring plans, including through the United States bankruptcy laws, most recently Aero Group Holdings, an airline, from March 2022 through April 2024. We do not believe such events are material to an evaluation of the ability or integrity of Mr.
Removed
All executive officers are elected by the Board of Directors and serve a term of one year or until their successors are duly elected and qualified. 16 Table of Contents PART II
Added
Nystrom to serve as an interim executive officer of the Company. On June 25, 2024, we announced the appointment of Jon DeGaynor as our new President and Chief Executive Officer, beginning July 15, 2024. Mr. DeGaynor, age 58, currently serves as non-employee Executive Chairman of Racing and Performance, Inc., an automotive ‎performance systems supplier in the aftermarket space.
Added
He previously served as President and CEO of Stoneridge, ‎Inc., a publicly traded global designer and manufacturer of highly engineered electrical and electronic systems, ‎components, and modules for the automotive, commercial, off-highway and agricultural vehicle markets, from ‎‎2015 to 2023. ‎ 17 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−1 removed3 unchanged
Biggest changeThe following table provides information about our purchases of equity securities during the three months ended April 29, 2023: Fiscal Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of the publicly announced plan Approximate dollar value of shares that may yet be purchased under the program (in millions) January 29, 2023 through February 25, 2023 32,270 $ 48.40 32,270 $ 87.6 February 26, 2023 through April 1, 2023 100,491 $ 44.07 100,491 $ 83.2 April 2, 2023 through April 29, 2023 58,961 $ 42.63 58,961 $ 80.7 Total 191,722 191,722 Securities Authorized for Issuance Under Equity Compensation Plans See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this Annual Report for certain information relating to our equity compensation plans. 17 Table of Contents Stock Performance The following graph shows the cumulative total stockholder return on our common stock over the period spanning April 28, 2018 to April 29, 2023, as compared with that of the Russell 2000 Index, and our Fiscal 2023 Peer Group.
Biggest changeThe following table provides information about our purchases of equity securities during the three months ended April 27, 2024: Fiscal Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of the publicly announced plan Approximate dollar value of shares that may yet be purchased under the program (in millions) January 28, 2024 through February 24, 2024 68,000 $ 21.32 68,000 $ 68.5 February 25, 2024 through March 30, 2024 28,000 $ 21.44 28,000 $ 67.9 March 31, 2024 through April 27, 2024 78,215 $ 12.19 78,215 $ 66.9 Total 174,215 174,215 Securities Authorized for Issuance Under Equity Compensation Plans See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this Annual Report for certain information relating to our equity compensation plans. 18 Table of Contents Stock Performance The following graph shows the cumulative total stockholder return on our common stock over the period spanning April 27, 2019 to April 27, 2024, as compared with that of the Russell 2000 Index, and our Fiscal 2024 Peer Group.
We have assumed that dividends have been reinvested and that $100 was invested on April 28, 2018. The stock price performance included in this graph is historical and not necessarily indicative of future stock price performance.
We have assumed that dividends have been reinvested and that $100 was invested on April 27, 2019. The stock price performance included in this graph is historical and not necessarily indicative of future stock price performance.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange under the symbol “MEI”. As of June 15, 2023, we had 358 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange under the symbol “MEI”. As of July 8, 2024, we had 343 holders of record of our common stock.
Purchases under this program 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 April 29, 2023, we had purchased and retired $119.3 million of common stock since the commencement of the share buyback program.
Purchases under these programs 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 April 27, 2024, we had purchased and retired $133.1 million of common stock under the 2021 Buyback Program.
Issuer Purchases of Equity Securities On March 31, 2021, the Board of Directors authorized the purchase of up to $100.0 million of our outstanding common stock through March 31, 2023.
Issuer Purchases of Equity Securities On March 31, 2021, as subsequently amended on June 16, 2022, the Board of Directors authorized the purchase of up to $200.0 million of our outstanding common stock through June 14, 2024 (the “2021 Buyback Program”).
Company/Index April 28, 2018 April 27, 2019 May 2, 2020 May 1, 2021 April 30, 2022 April 29, 2023 Methode Electronics, Inc. $ 100.00 $ 73.39 $ 72.42 $ 115.48 $ 116.08 $ 108.17 Russell 2000 Index 100.00 103.68 83.35 151.58 126.01 121.42 Fiscal 2023 Peer Group 100.00 99.27 78.27 133.66 123.62 132.06 The Fiscal 2023 Peer Group consists of the following fifteen public companies: Belden Corporation Franklin Electric Company.
Company/Index April 27, 2019 May 2, 2020 May 1, 2021 April 30, 2022 April 29, 2023 April 27, 2024 Methode Electronics, Inc. $ 100.00 $ 98.67 $ 157.35 $ 158.18 $ 147.39 $ 45.17 Russell 2000 Index 100.00 80.39 146.20 121.54 117.11 134.58 Fiscal 2024 Peer Group 100.00 78.85 134.65 124.53 133.03 147.25 The Fiscal 2024 Peer Group consists of the following fifteen public companies: Belden Corporation Franklin Electric Company.
Removed
On June 16, 2022, the Board of Directors authorized an increase in the share buyback program of an additional $100.0 million, and extended the expiration of the program to June 14, 2024.
Added
On June 13, 2024, the Board of Directors authorized a new share buyback program, commencing on June 17, 2024, for the purchase of up to $200.0 million (the “2024 Buyback Program”) of our outstanding common stock through June 17, 2026.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

81 edited+62 added−41 removed6 unchanged
Biggest changeCash Flows Fiscal Year Ended (in millions) April 29, 2023 April 30, 2022 Operating activities: Net income $ 77.1 $ 102.2 Non-cash items 59.2 66.4 Changes in operating assets and liabilities (3.5 ) (69.8 ) Net cash provided by operating activities 132.8 98.8 Net cash used in investing activities (153.1 ) (37.4 ) Net cash provided by (used in) financing activities 3.2 (114.6 ) Effect of foreign currency exchange rate changes on cash and cash equivalents 2.1 (8.0 ) Decrease in cash and cash equivalents (15.0 ) (61.2 ) Cash and cash equivalents at beginning of the period 172.0 233.2 Cash and cash equivalents at end of the period $ 157.0 $ 172.0 Operating activities Net cash provided by operating activities increased $34.0 million to $132.8 million in fiscal 2023, compared to $98.8 million in fiscal 2022.
Biggest changeFactors that could increase our risk of future non-compliance include those identified in Item 1A, “Risk Factors” of this Annual Report. 26 Table of Contents Cash Flows Fiscal Year Ended (in millions) April 27, 2024 April 29, 2023 Operating activities: Net (loss) income $ (123.3 ) $ 77.1 Non-cash items 147.0 59.2 Changes in operating assets and liabilities 23.8 (3.5 ) Net cash provided by operating activities 47.5 132.8 Net cash used in investing activities (17.5 ) (153.1 ) Net cash (used in) provided by financing activities (18.9 ) 3.2 Effect of foreign currency exchange rate changes on cash and cash equivalents (6.6 ) 2.1 Increase (decrease) in cash and cash equivalents 4.5 (15.0 ) Cash and cash equivalents at beginning of the period 157.0 172.0 Cash and cash equivalents at end of the period $ 161.5 $ 157.0 Operating activities Net cash provided by operating activities decreased $85.3 million to $47.5 million in fiscal 2024, compared to $132.8 million in fiscal 2023.
Credit Agreement On October 31, 2022, we entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the Lenders and other parties named therein.
Amended Credit Agreement On October 31, 2022, we entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the Lenders and other parties named therein.
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 OEMs utilizing our broad range of technologies for user interface, LED lighting system, power distribution and sensor applications.
Overview Our Business 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 OEMs utilizing our broad range of technologies for user interface, LED lighting system, power distribution and sensor applications.
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 have filed 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.
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 filed 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.
Determining the fair value of assets acquired and liabilities assumed requires management's judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, and market multiples, among other items. We determine the fair values of intangible assets acquired generally in consultation with third-party valuation advisors.
Determining the fair value of assets acquired and liabilities assumed requires management's judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows and discount rates, among other items. We determine the fair values of intangible assets acquired generally in consultation with third-party valuation advisors.
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.
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.
The determination of discounted cash flows are based on management’s estimates of revenue growth rates and earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins, taking into consideration business and market conditions for the countries and markets in which the reporting unit operates.
The determination of discounted cash flows are based on management’s estimates of revenue growth rates and earnings before interest, taxes, depreciation and amortization (“EBITDA”) margin, taking into consideration business and market conditions for the countries and markets in which the reporting unit operates.
New Accounting Pronouncements For more information regarding new applicable accounting pronouncements, see Note 1, “Description of Business and Summary of Significant Accounting Policies” to the consolidated financial statements included in this Annual Report. 27 Table of Contents
New Accounting Pronouncements For more information regarding new applicable accounting pronouncements, see Note 1, “Description of Business and Summary of Significant Accounting Policies” to the consolidated financial statements included in this Annual Report. 30 Table of Contents
We opposed that petition. The Supreme Court requested the views of the Solicitor General on the petition for certiorari, and the Solicitor General recommended granting the petition. On November 4, 2022, the Supreme Court granted the petition. The Supreme Court heard arguments in this matter on March 21, 2023.
The Company opposed that petition. The Supreme Court requested the views of the Solicitor General on the petition for certiorari, and the Solicitor General recommended granting the petition. On November 4, 2022, the Supreme Court granted the petition. The Supreme Court heard arguments in this matter on March 21, 2023.
In addition, the Credit Agreement permits us to increase the revolving commitments and/or add one or more tranches of term loans under the Credit Agreement from time to time by up to an amount equal to (i) $250,000,000 plus (ii) an additional amount so long as the leverage ratio would not exceed 3.00:1.00 on a pro forma basis, subject to, among other things, the receipt of additional commitments from existing and/or new lenders.
In addition, the Amended Credit Agreement permits us to increase the revolving commitments and/or add one or more tranches of term loans under the Amended Credit Agreement from time to time by up to an amount equal to (i) $250 million plus (ii) an additional amount so long as the consolidated leverage ratio would not exceed 3.00:1.00 on a pro forma basis, subject to, among other things, the receipt of additional commitments from existing and/or new lenders.
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 our four segments being Automotive, Industrial, Interface and Medical.
Our solutions are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus and rail), cloud computing infrastructure, construction equipment and consumer appliance. Our business is managed on a segment basis, with those segments being Automotive, Industrial, Interface and Medical.
Consolidated Results of Operations A detailed comparison of our results of operations between fiscal 2022 and fiscal 2021 can be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our fiscal 2022 Annual Report on Form 10-K filed with the SEC on June 23, 2022.
Consolidated Results of Operations A detailed comparison of our results of operations between fiscal 2023 and fiscal 2022 can be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our fiscal 2023 Annual Report on Form 10-K filed with the SEC on June 27, 2023.
The Credit Agreement amends and restates the Amended and Restated Credit Agreement, dated September 12, 2018 and as previously amended (the “Prior Credit Agreement”), with Bank of America, N.A., as Administrative Agent, Swing Line Lender, and L/C Issuer, Wells Fargo Bank, National Association, as L/C Issuer, and the Lenders named therein.
The Credit Agreement amended and restated the Amended and Restated Credit Agreement, dated September 12, 2018 and as previously amended (the “Prior Credit Agreement”), with Bank of America, N.A., as Administrative Agent, Swing Line Lender, and L/C Issuer, Wells Fargo Bank, National Association, as L/C Issuer, and the Lenders and other parties named therein.
We calculate the discount rate based on a market-participant, risk-adjusted weighted average cost of capital, which considers industry specific rates of return on debt and equity capital for a target industry capital structure, adjusted for risks associated with business size, geography and other factors specific to the reporting unit. Long-range forecasting involves uncertainty which increases with each successive period.
We calculate the discount rate based on a market-participant, risk-adjusted weighted average cost of capital, which considers industry specific rates of return on debt and equity capital for a target industry capital structure, adjusted for risks associated with business size, geography and other factors specific to the reporting unit.
Among other things, the Credit Agreement (i) increased the multicurrency revolving credit commitments under the Prior Credit Agreement to $750,000,000, (ii) refinanced in full and terminated the term loan facility under the Prior Credit Agreement, and (iii) made certain other changes to the covenants, terms, and conditions under the Prior Credit Agreement.
Among other things, the Credit Agreement (i) increased the multicurrency revolving credit commitments under the Prior Credit Agreement to $750 million (which commitments were subsequently reduced, as discussed below), (ii) refinanced in full and terminated the term loan facility under the Prior Credit Agreement, and (iii) made certain other changes to the covenants, terms, and conditions under the Prior Credit Agreement.
We account for business combinations using the acquisition method of accounting whereby the identifiable assets and liabilities of the acquired business, as well as any noncontrolling interest in the acquired business, are recorded at their estimated fair values as of the date that we obtain control of the acquired business.
As described in Note 1 to the consolidated financial statements in this Annual Report, we account for business combinations using the acquisition method of accounting whereby the identifiable assets and liabilities of the acquired business, as well as any noncontrolling interest in the acquired business, are recorded at their estimated fair values as of the date that we obtain control of the acquired business.
We evaluate our ability to realize the tax benefits associated with deferred tax assets by assessing the adequacy of future expected taxable income, including the reversal of existing temporary differences, historical and projected operating results, and the availability of prudent and feasible tax planning strategies.
We evaluate our ability to realize the tax benefits associated with deferred tax assets by assessing the adequacy of future expected taxable income, including the reversal of existing temporary differences, historical and projected operating results, and the availability of prudent and feasible tax planning strategies. As of April 27, 2024, we had a valuation allowance of $5.8 million.
Qualitative factors include, but are not limited to, the results of prior year fair value calculations, the movement of our share price and market capitalization, the reporting unit and overall financial performance, and macroeconomic and industry conditions.
In qualitatively assessing impairment, the primary qualitative factors include, but are not limited to, the results of prior year fair value calculations, changes in our market capitalization, the reporting unit and overall financial performance, and macroeconomic and industry conditions.
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.
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.
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 April 29, 2023, a total of 2,790,375 shares had been purchased at a total cost of $119.3 million since the commencement of the share buyback program.
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 April 27, 2024, a total of 3,417,961 shares had been purchased under the 2021 Buyback Program at a total cost of $133.1 million since the commencement of that program.
Contractual Obligations The following table summarizes our significant known contractual cash obligations and commercial commitments as of April 29, 2023: Payments Due By Period (in millions) Total Less than 1 year 1-3 years 3-5 years More than 5 years Finance leases $ 0.6 $ 0.2 $ 0.3 $ 0.1 $ — Operating leases 33.1 7.8 11.2 8.3 5.8 Debt (1) 310.1 3.2 0.4 305.8 0.7 Estimated interest on debt (2) 73.4 15.1 33.3 25.0 — Deferred compensation 9.5 2.0 2.8 2.4 2.3 Total $ 426.7 $ 28.3 $ 48.0 $ 341.6 $ 8.8 (1) Assumes the outstanding borrowings under the revolving credit facility will be repaid upon maturity of the credit agreement in October 2027.
Contractual Obligations The following table summarizes our significant known contractual cash obligations and commercial commitments as of April 27, 2024: Payments Due By Period (in millions) Total Less than 1 year 1-3 years 3-5 years More than 5 years Finance leases $ 0.5 $ 0.2 $ 0.3 $ - $ — Operating leases 31.0 7.7 13.0 6.2 4.1 Debt (1) 334.5 0.2 0.4 333.5 0.4 Estimated interest on debt (2) 43.1 17.3 17.2 8.6 — Deferred compensation 9.7 2.3 5.4 1.4 0.6 Total $ 418.8 $ 27.7 $ 36.3 $ 349.7 $ 5.1 (1) Assumes the outstanding borrowings under the revolving credit facility will be repaid upon maturity of the credit agreement in October 2027.
The decrease was primarily due to lower gross profit and higher selling and administrative expenses. Selling and administrative expenses increased due to higher compensation expense, professional fees and travel expense.
The increase was due to higher gross profit and lower selling and administrative expenses, primarily professional fees.
Selling and administrative expenses in fiscal 2022 included restructuring costs of $2.2 million, compared to $0.4 million in fiscal 2023. 22 Table of Contents Interface Fiscal Year Ended (in millions) April 29, 2023 April 30, 2022 Net sales $ 54.9 $ 59.8 Gross profit $ 9.3 $ 12.6 As a percent of net sales 16.9 % 21.1 % Income from operations $ 5.5 $ 9.9 As a percent of net sales 10.0 % 16.6 % Customer cost recoveries $ 2.2 $ 1.3 Net sales Interface segment net sales decreased $4.9 million, or 8.2%, to $54.9 million in fiscal 2023, compared to $59.8 million in fiscal 2022.
Interface Fiscal Year Ended (in millions) April 27, 2024 April 29, 2023 Net sales $ 53.8 $ 54.9 Gross profit $ 10.3 $ 9.3 As a percent of net sales 19.1 % 16.9 % Income from operations $ 6.9 $ 5.5 As a percent of net sales 12.8 % 10.0 % Customer cost recoveries $ 0.4 $ 2.2 Net sales Interface segment net sales decreased $1.1 million, or 2.0%, to $53.8 million in fiscal 2024, compared to $54.9 million in fiscal 2023.
Industrial Fiscal Year Ended (in millions) April 29, 2023 April 30, 2022 Net sales $ 384.9 $ 318.1 Gross profit $ 127.8 $ 101.5 As a percent of net sales 33.2 % 31.9 % Income from operations $ 93.1 $ 67.1 As a percent of net sales 24.2 % 21.1 % Customer cost recoveries $ 4.7 $ 7.6 Net sales Industrial segment net sales increased $66.8 million, or 21.0%, to $384.9 million in fiscal 2023, compared to $318.1 million in fiscal 2022.
Industrial Fiscal Year Ended (in millions) April 27, 2024 April 29, 2023 Net sales $ 460.1 $ 384.9 Gross profit $ 137.7 $ 127.8 As a percent of net sales 29.9 % 33.2 % Income from operations $ 88.8 $ 93.1 As a percent of net sales 19.3 % 24.2 % Customer cost recoveries $ 0.8 $ 4.7 23 Table of Contents Net sales Industrial segment net sales increased $75.2 million, or 19.5%, to $460.1 million in fiscal 2024, compared to $384.9 million in fiscal 2023.
The table below compares our results of operations between fiscal 2023 and fiscal 2022: Fiscal Year Ended (in millions) April 29, 2023 April 30, 2022 Net sales $ 1,179.6 $ 1,163.6 Cost of products sold 915.5 898.7 Gross profit 264.1 264.9 Selling and administrative expenses 154.9 134.1 Amortization of intangibles 18.8 19.1 Interest expense, net 2.7 3.5 Other income, net (2.4 ) (10.3 ) Income tax expense 13.0 16.3 Net income $ 77.1 $ 102.2 Net sales Net sales increased $16.0 million, or 1.4%, to $1,179.6 million in fiscal 2023, compared to $1,163.6 million in fiscal 2022.
The table below compares our results of operations between fiscal 2024 and fiscal 2023: Fiscal Year Ended (in millions) April 27, 2024 April 29, 2023 Net sales $ 1,114.5 $ 1,179.6 Cost of products sold 935.7 915.5 Gross profit 178.8 264.1 Selling and administrative expenses 160.9 154.9 Goodwill impairment 105.9 — Amortization of intangibles 24.0 18.8 Interest expense, net 16.7 2.7 Other income, net (0.6 ) (2.4 ) Income tax (benefit) expense (4.8 ) 13.0 Net (loss) income (123.3 ) 77.1 Net income attributable to redeemable noncontrolling interest — — Net (loss) income attributable to Methode $ (123.3 ) $ 77.1 Net sales Net sales decreased $65.1 million, or 5.5%, to $1,114.5 million in fiscal 2024, compared to $1,179.6 million in fiscal 2023.
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.
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.
Net sales included customer cost recoveries from spot buys of materials and premium freight costs of $20.9 million in fiscal 2023, compared to $22.1 million in in fiscal 2022. Excluding the impact of foreign currency translation and customer cost recoveries, net sales increased $74.5 million, or 6.5%.
Net sales included customer cost recoveries from spot buys of materials and premium freight costs of $2.2 million in fiscal 2024, compared to $20.9 million in in fiscal 2023. Excluding the impact of Nordic Lights, foreign currency translation and customer cost recoveries, net sales decreased $135.8 million, or 11.7%.
We consider the qualitative factors and weight of the evidence obtained to determine if it is more likely than not that a reporting unit’s fair value is less than the carrying amount.
We consider the qualitative factors and weight of the evidence obtained to determine if it is more likely than not that a reporting unit’s fair value is less than the carrying amount. 28 Table of Contents For the quantitative assessment, we utilize either of, or a combination of, the income approach and market approach to estimate the fair value of the reporting unit.
In fiscal 2023, we paid $114.6 million of cash, net of cash acquired, for the acquisition of Nordic Lights. Capital expenditures in fiscal 2023 were $42.0 million, compared to $38.0 million in fiscal 2022.
Investing activities Net cash used in investing activities was $17.5 million in fiscal 2024, compared to $153.1 million in fiscal 2023. In fiscal 2023, we paid $114.6 million of cash, net of cash acquired, for the acquisition of Nordic Lights. Capital expenditures in fiscal 2024 were $50.2 million, compared to $42.0 million in fiscal 2023.
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.
Defendants appealed entry of the permanent injunction. On May 29, 2020, the District 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.
The increase was primarily due to $6.8 million of acquisition costs related to Nordic Lights, higher compensation expense, professional fees and travel expense, partially offset by lower restructuring costs. Restructuring costs included within selling and administrative expenses were $0.5 million in fiscal 2023, compared to $2.3 million in fiscal 2022.
The decrease was primarily due to lower acquisition costs related to Nordic Lights and lower stock-based compensation expense, partially offset by higher professional fees and restructuring and impairment charges. In fiscal 2024, acquisition costs for Nordic Lights were $0.5 million, compared to $6.8 million in fiscal 2023.
To the extent that there are differences between these estimates and actual results, our consolidated financial statements may be materially affected. Below are the estimates that we believe are critical to the understanding of our results of operations and financial condition.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. To the extent that there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.
Operating Segments Automotive Fiscal Year Ended (in millions) April 29, 2023 April 30, 2022 Net sales North America $ 349.0 $ 400.9 Europe, the Middle East & Africa ("EMEA") 231.2 216.5 Asia 156.0 164.1 Net sales 736.2 781.5 Gross profit $ 126.2 $ 150.0 As a percent of net sales 17.1 % 19.2 % Income from operations $ 67.0 $ 92.6 As a percent of net sales 9.1 % 11.8 % Customer cost recoveries: North America $ 9.7 $ 10.1 EMEA 3.7 2.6 Asia 0.6 0.5 Total $ 14.0 $ 13.2 21 Table of Contents Net sales Automotive segment net sales decreased $45.3 million, or 5.8%, to $736.2 million in fiscal 2023, compared to $781.5 million in fiscal 2022.
Excluding Nordic Lights and foreign currency translation, net income decreased $204.3 million as a result of the reasons described above. 22 Table of Contents Operating Segments Automotive Fiscal Year Ended (in millions) April 27, 2024 April 29, 2023 Net sales North America $ 265.6 $ 349.0 Europe, the Middle East & Africa (“EMEA”) 216.2 231.2 Asia 116.4 156.0 Net sales 598.2 736.2 Gross profit $ 30.4 $ 126.2 As a percent of net sales 5.1 % 17.1 % (Loss) income from operations $ (140.2 ) $ 67.0 As a percent of net sales (23.4 )% 9.1 % Customer cost recoveries: North America $ 0.1 $ 9.7 EMEA 0.9 3.7 Asia — 0.6 Total $ 1.0 $ 14.0 Net sales Automotive segment net sales decreased $138.0 million, or 18.7%, to $598.2 million in fiscal 2024, compared to $736.2 million in fiscal 2023.
Excluding the impact of foreign currency translation, income from operations increased $32.1 million. The increase was primarily due to higher gross profit, partially offset by an increase in selling and administrative expenses.
Excluding Nordic Lights and the impact of foreign currency translation, income from operations decreased $11.9 million. The decrease was primarily due to lower gross profit, partially offset by slightly lower selling and administrative expenses. The decrease in selling and administrative expenses was primarily due to lower legal fees.
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 decrease was due to lower net income adjusted for non-cash items, partially offset by higher cash inflows related to changes in operating assets and liabilities. The $23.8 million of cash inflows for operating assets and liabilities in fiscal 2024 was primarily due to lower accounts receivable, partially offset by higher inventory.
For the quantitative assessment, we utilize either, or a combination of, the income approach and market approach to estimate the fair value of the reporting unit. The income approach uses a discounted cash flow method and the market approach uses appropriate valuation multiples observed for the reporting unit’s guideline public companies.
The income approach uses a discounted cash flow method and the market approach uses valuation multiples observed for the reporting unit’s guideline public companies.
Gross profit Interface segment gross profit decreased $3.3 million, or 26.2%, to $9.3 million in fiscal 2023, compared to $12.6 million in fiscal 2022. Gross profit margin decreased to 16.9% in fiscal 2023, from 21.1% in fiscal 2022. The decrease in gross profit margins was primarily due to lower sales volumes of appliance products.
Gross profit margin increased to 19.1% in fiscal 2024, from 16.9% in fiscal 2023. The increase in gross profit margins was primarily due to higher sales volumes of appliance products. Income from operations Interface segment income from operations increased $1.4 million, or 25.5%, to $6.9 million in fiscal 2024, compared to $5.5 million in fiscal 2023.
Acquisition of Nordic Lights As noted in Part I, Item 1 of this Annual Report, we acquired 92.2% of the outstanding shares of Nordic Lights on April 20, 2023. The results of operations of Nordic Lights are reported within the Industrial segment from the date of acquisition and were immaterial for fiscal 2023.
We acquired the remaining 7.8% of the outstanding shares of Nordic Lights in fiscal 2024. Accordingly, as of April 27, 2024, we own 100% of Nordic Lights. The results of operations of Nordic Lights are reported within the Industrial segment from the date of acquisition and were immaterial for fiscal 2023.
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.
Geopolitical Conditions Russia’s invasion of Ukraine and the resulting economic sanctions imposed by the international community impacted the global economy and gave rise to potential global security issues that may adversely affect international business and economic conditions.
We incurred legal fees of $3.9 million, $3.3 million and $5.7 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively, related to the lawsuits.
We incurred legal fees of $2.5 million, $3.9 million and $3.3 million in fiscal 2024, fiscal 2023 and fiscal 2022, respectively, related to the lawsuits. These amounts are included in the selling and administrative expenses and as part of the Industrial segment.
Excluding customer cost recoveries, net sales decreased $51.5 million primarily due to lower sales volumes from a major program roll-off. Net sales in EMEA increased $14.7 million, or 6.8%, to $231.2 million in fiscal 2023, compared to $216.5 million in fiscal 2022. The weaker euro, relative to the U.S. dollar, decreased net sales in EMEA by $23.3 million.
Excluding customer cost recoveries, net sales decreased $73.8 million primarily due to lower sales volumes from program roll-offs, including a major center console program. Net sales in EMEA decreased $15.0 million, or 6.5%, to $216.2 million in fiscal 2024, compared to $231.2 million in fiscal 2023.
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.
Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements as defined under SEC rules. 27 Table of Contents 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.
These amounts are included in the selling and administrative expenses and as part of the Industrial segment. 25 Table of Contents Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires that we make estimates and assumptions that can affect amounts reported in the consolidated financial statements and notes.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires that we make estimates and assumptions that can affect amounts reported in the consolidated financial statements. In preparing our consolidated financial statements, we have made our best estimates and judgments of certain amounts included in the consolidated financial statements.
Net sales were unfavorably impacted by foreign currency translation of $21.9 million. Excluding the impact of foreign currency translation and customer cost recoveries, net sales increased $91.6 million, or 29.5%, primarily due to higher sales volumes of power distribution solutions for data centers and of commercial vehicle lighting solutions products.
Excluding the impact of Nordic Lights, foreign currency translation and customer cost recoveries, net sales decreased $7.6 million, or 2.0%, primarily due to lower demand for power distribution products in the electric vehicle and data center markets and lower sales volumes of commercial vehicle lighting solutions products.
For more information regarding the business and products of these segments, see Item 1. “Business” of this Annual Report.
For more information regarding the business and products of these segments, see Item 1, “Business” of this Annual Report. In the first quarter of fiscal 2024, we made the decision to initiate the discontinuation of the Dabir Surfaces business in the Medical segment.
In addition, net foreign exchange loss in fiscal 2023 included the recognition of $2.1 million of foreign exchange loss reclassified from accumulated other comprehensive income as the result of a reorganization of a foreign owned subsidiary. In fiscal 2023, we received $9.7 million of government grants at certain of our international locations, compared to $11.1 million in fiscal 2022.
Net foreign exchange losses were lower in fiscal 2024 due to higher efficiency in our foreign currency balance sheet remeasurement hedging program. In addition, net foreign exchange loss in fiscal 2023 included the recognition of $2.1 million of a foreign exchange loss reclassified from accumulated other comprehensive income as the result of a reorganization of a foreign owned subsidiary.
We use a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured and tax position taken or expected to be taken on our tax return.
We record a liability for the difference between the benefit recognized and measured and tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made.
Other accounting policies are described in Note 1, “Description of Business and Summary of Significant Accounting Policies” to the consolidated financial statements included in this Annual Report. Revenue recognition. Most of our revenue is recognized at a point in time.
We believe that of the significant accounting policies described in Note 1, “Description of Business and Summary of Significant Accounting Policies” to the consolidated financial statements in this Annual Report, the following involve a significant level of estimation uncertainty. Goodwill.
The decrease was due to higher interest income of $3.2 million, partially offset by higher interest expense of $2.4 million. Interest income and interest expense increased due to higher interest rates. Other income, net Other income, net decreased $7.9 million to $2.4 million in fiscal 2023, compared to $10.3 million in fiscal 2022.
The increase was due to higher borrowings and increased interest rates. Other income, net Other income, net was $0.6 million in fiscal 2024, compared to $2.4 million in fiscal 2023. The decrease was due to lower international government assistance, partially offset by net gains on sale of assets and lower foreign exchange losses.
Fiscal 2023 government grants include $6.3 million related to the COVID-19 pandemic and $3.4 million related to maintaining certain employment levels. Fiscal 2022 government grants primarily related to COVID-19 assistance. Income tax expense Income tax expense decreased $3.3 million, or 20.2%, to $13.0 million in fiscal 2023, compared to $16.3 million in fiscal 2022.
In fiscal 2024, we received $0.5 million of international government assistance, compared to $9.7 million in fiscal 2023. Fiscal 2023 international government assistance includes $6.3 million related to the COVID-19 pandemic and $3.4 million related to maintaining certain employment levels.
Our effective tax rate increased to 14.4% in fiscal 2023, compared to 13.8% in fiscal 2022.
Income tax (benefit) expense Income tax benefit was $4.8 million in fiscal 2024, compared to income tax expense of $13.0 million in fiscal 2023. Our effective tax rate decreased to 3.7% in fiscal 2024, compared to 14.4% in fiscal 2023.
Net sales were unfavorably impacted by foreign currency translation of $35.4 million and the roll-off of a major program in North America. Excluding foreign currency translation and customer cost recoveries, net sales decreased $10.7 million, or 1.4%. Net sales in North America decreased $51.9 million, or 12.9%, to $349.0 million in fiscal 2023, compared to $400.9 million in fiscal 2022.
Excluding foreign currency translation and customer cost recoveries, net sales decreased $127.7 million, or 17.7%. Net sales in North America decreased $83.4 million, or 23.9%, to $265.6 million in fiscal 2024, compared to $349.0 million in fiscal 2023.
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.
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 District Court entered a permanent injunction barring defendants from selling infringing products and ordering them to return Hetronic’s confidential information.
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 inflationary pressure, supply chain disruptions, the COVID-19 pandemic, or other geopolitical risks, including the Russia-Ukraine war, our liquidity position could be severely impacted.
However, if economic conditions remain impacted for longer than we expect due to supply chain disruptions, inflationary pressure or other geopolitical risks, or if we are unable to maintain compliance with our debt covenants, our liquidity position could be severely impacted.
The weaker Chinese renminbi, relative to the U.S. dollar, decreased net sales in Asia by $12.1 million. Excluding foreign currency translation and customer cost recoveries, net sales in Asia increased $3.9 million primarily due to higher electric vehicle product sales volumes, partially offset by lower overhead console sales volumes.
The stronger euro, relative to the U.S. dollar, increased net sales in EMEA by $7.6 million. Excluding foreign currency translation and customer cost recoveries, net sales in EMEA decreased $19.8 million primarily due to lower sales volumes of sensor products.
Gross profit Automotive segment gross profit decreased $23.8 million, or 15.9%, to $126.2 million in fiscal 2023, compared to $150.0 million in fiscal 2022. Excluding the impact of foreign currency translation, gross profit decreased $16.4 million. Gross profit margins decreased to 17.1% in fiscal 2023, from 19.2% in fiscal 2022.
Excluding the impact of foreign currency translation, gross profit decreased $96.7 million. Gross profit margins decreased to 5.1% in fiscal 2024, from 17.1% in fiscal 2023.
Excluding customer cost recoveries, net sales decreased $5.8 million, or 9.9%. The decrease was primarily due to lower sales volumes of appliance products which were negatively impacted by consumer demand, partially offset by higher sales volumes of digital data products.
Excluding customer cost recoveries, net sales increased $0.7 million, or 1.3%. The increase was primarily due to higher sales volumes of appliance products, partially offset by lower sales volumes of data solutions products. Gross profit Interface segment gross profit increased $1.0 million, or 10.8%, to $10.3 million in fiscal 2024, compared to $9.3 million in fiscal 2023.
Cost of products sold Cost of products sold increased $16.8 million, or 1.9%, to $915.5 million (77.6% of net sales) in fiscal 2023, compared to $898.7 million (77.2% of net sales) in fiscal 2022. Excluding foreign currency translation, cost of products sold increased $59.4 million.
Cost of products sold Cost of products sold increased $20.2 million, or 2.2%, to $935.7 million (84.0% of net sales) in fiscal 2024, compared to $915.5 million (77.6% of net sales) in fiscal 2023. The acquisition of Nordic Lights and foreign currency translation accounted for $62.6 million and $3.0 million, respectively, of the increase.
The increase was primarily due to higher sales in the Industrial segment, partially offset by lower sales in the Automotive segment. Net sales were unfavorably impacted by foreign currency translation of $57.3 million, primarily due to the strengthening of the U.S. dollar relative to the euro and Chinese renminbi.
The decrease was primarily due to lower sales in the Automotive segment, partially offset by the acquisition of Nordic Lights, which contributed $85.1 million of net sales to the Industrial segment, and favorable foreign currency translation of $4.3 million.
(2) Based on interest rates in effect as of April 29, 2023 (including the impact of interest rate swaps). Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements as defined under SEC rules.
(2) Based on interest rates in effect as of April 27, 2024 (including the impact of interest rate swaps).
Amortization of intangibles Amortization of intangibles decreased $0.3 million, or 1.6%, to $18.8 million in fiscal 2023, compared to $19.1 million in fiscal 2022. 20 Table of Contents Interest expense, net Interest expense, net was $2.7 million in fiscal 2023, compared to $3.5 million in fiscal 2022.
Amortization of intangibles Amortization of intangibles increased $5.2 million, or 27.7%, to $24.0 million in fiscal 2024, compared to $18.8 million in fiscal 2023. The increase was due to the recognition of amortization expense associated with the acquisition of Nordic Lights. Interest expense, net Interest expense, net was $16.7 million in fiscal 2024, compared to $2.7 million in fiscal 2023.
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. 23 Table of Contents Share Buyback Program On March 31, 2021, the Board of Directors authorized the purchase of up to $100.0 million of our common stock.
At April 27, 2024, we had $161.5 million of cash and cash equivalents, of which $53.4 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.
The increase was primarily due to higher material costs, as a result of an increase in sales volumes and material cost inflation, and higher salary and operating expenses, partially offset by lower restructuring costs. Restructuring costs included within cost of products sold were $0.4 million in fiscal 2023, compared to $1.3 million in fiscal 2022.
Excluding Nordic Lights and foreign currency translation, cost of products sold decreased $45.4 million. The decrease was primarily due to lower material costs as a result of a decrease in sales volumes, partially offset by higher wages, product launch costs, freight and restructuring and impairment charges.
Excluding foreign currency translation and customer cost recoveries, net sales in EMEA increased $36.9 million primarily due to higher sales volumes of user interface and switch products. Net sales in Asia decreased $8.1 million, or 4.9%, to $156.0 million in fiscal 2023, compared to $164.1 million in fiscal 2022.
Excluding foreign currency translation and customer cost recoveries, net sales in Asia decreased $34.1 million primarily due to a program roll-off and lower overhead console sales volumes. Gross profit Automotive segment gross profit decreased $95.8 million, or 75.9%, to $30.4 million in fiscal 2024, compared to $126.2 million in fiscal 2023.
At the conclusion of the hearing, the Supreme Court took the matter under advisement. Like any judgment, particularly a judgment involving defendants outside of the United States, there is no guarantee that we will be able to collect all or any portion of the judgment.
On May 17, 2024, the District Court held a status conference and requested further briefing from the parties about the appropriate remedies for the Lanham Act claims. Like any judgment, particularly a 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.
The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time.
Our estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We use a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.
Medical Fiscal Year Ended (in millions) April 29, 2023 April 30, 2022 Net sales $ 3.6 $ 4.2 Gross profit $ (0.5 ) $ (0.4 ) Loss from operations $ (6.1 ) $ (5.5 ) Net sales Medical segment net sales decreased $0.6 million, or 14.3%, to $3.6 million in fiscal 2023, compared to $4.2 million in fiscal 2022.
Medical Fiscal Year Ended (in millions) April 27, 2024 April 29, 2023 Net sales $ 2.4 $ 3.6 Gross profit $ (0.2 ) $ (0.5 ) Loss from operations $ (3.0 ) $ (6.1 ) In the first quarter of fiscal 2024, we made the decision to initiate the discontinuation of the Dabir Surfaces business (which accounts for all of the Medical segment’s financial results).
The decrease in gross profit margins was due to lower sales volumes and inflationary pressures on material and other manufacturing costs. Income from operations Automotive segment income from operations decreased $25.6 million, or 27.6%, to $67.0 million in fiscal 2023, compared to $92.6 million in fiscal 2022. Excluding the impact of foreign currency translation, income from operations decreased $21.2 million.
(Loss) income from operations Automotive segment loss from operations was $140.2 million in fiscal 2024, compared to income from operations of $67.0 million in fiscal 2023. Loss from operations in fiscal 2024 includes goodwill impairment of $105.9 million. Excluding goodwill impairment and the impact of foreign currency translation, income from operations decreased $101.0 million.
In addition, we have experienced, and may continue to experience, business interruptions, including customer shutdowns and increased material and logistics costs and labor shortages. 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.
In addition, we have experienced, and may continue to experience, business interruptions, including customer shutdowns and increased material and logistics costs and labor shortages. We continue to work closely with suppliers and customers to minimize the potential adverse impact from global supply chain disruptions.
Gross profit Industrial segment gross profit increased $26.3 million, or 25.9%, to $127.8 million in fiscal 2023, compared to $101.5 million in fiscal 2022. Excluding the impact of foreign currency translation, gross profit increased $33.6 million. Gross profit margin increased to 33.2% in fiscal 2023, from 31.9% in fiscal 2022.
Gross profit Industrial segment gross profit increased $9.9 million, or 7.7%, to $137.7 million in fiscal 2024, compared to $127.8 million in fiscal 2023. The increase was due to the acquisition of Nordic Lights, which contributed $22.5 million of gross profit, and $0.4 million of favorable foreign currency translation.
See Note 3, “Acquisition” to our consolidated financial statements in this Annual Report for further information. Restructuring Actions In fiscal 2023, we incurred restructuring costs of $1.0 million primarily related to asset impairment charges and severance.
Restructuring and impairment charges included within selling and administrative expenses were $2.0 million in fiscal 2024, compared to $0.5 million in fiscal 2023. Goodwill impairment In fiscal 2024, we recognized goodwill impairment of $105.9 million in the Automotive segment. For further information, see Note 6, “Goodwill and Other Intangible Assets” to the consolidated financial statements included in this Annual Report.
We received $3.5 million of cash from the sale of property, plant and equipment in fiscal 2023. 24 Table of Contents Financing activities Net cash provided by financing activities was $3.2 million in fiscal 2023, compared to net cash used in financing activities of $114.6 million in fiscal 2022.
Financing activities Net cash used in financing activities was $18.9 million in fiscal 2024, compared to net cash provided by financing activities of $3.2 million in fiscal 2023. In fiscal 2024, we paid $13.7 million of cash for share repurchases, compared to $48.1 million in fiscal 2023.
In fiscal 2022, the effective income tax rate was favorably impacted by the amount of income earned in foreign jurisdictions with lower tax rates, the release of a valuation allowance of approximately $2.0 million due to a tax law change, and less U.S. tax on foreign income of $1.7 million attributable to lower earnings in non-U.S. jurisdictions, partially offset with non-deductible compensation of $2.1 million.
In fiscal 2024, the effective tax rate was favorably impacted by pre-tax losses in operations, the amount of income earned in foreign jurisdictions with lower tax rates of $5.1 million and research and development expenditures of $1.5 million.
In fiscal 2023, we had net borrowings of $73.7 million primarily to fund the acquisition of Nordic Lights. In fiscal 2022, we had net repayments on our borrowings of $29.2 million. In connection with our Credit Agreement, we paid debt issuance costs of $3.2 million.
We paid cash dividends of $19.9 million in fiscal 2024, compared to $19.8 million in fiscal 2023. In fiscal 2024, we had net borrowings of $30.7 million, compared to $73.7 million in fiscal 2023. Fiscal 2023 net borrowings were primarily to fund the acquisition of Nordic Lights. In fiscal 2024, we paid $10.9 million to redeem a noncontrolling interest.
The Credit Agreement matures on October 31, 2027. As of April 29, 2023, $305.4 million was outstanding under the revolving credit facility. We were in compliance with all covenants under the Credit Agreement as of April 29, 2023. For further information, see Note 10, “Debt” to the consolidated financial statements included in this Annual Report.
For further information, see Note 10, “Debt” to the consolidated financial statements included in this Annual Report.
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.
Towards the end of the second quarter of fiscal 2024, we sold certain assets of the Dabir Surfaces business and have now exited this business, which accounts for the variances in the table above. 24 Table of Contents 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.
Income from operations Interface segment income from operations decreased $4.4 million, or 44.4%, to $5.5 million in fiscal 2023, compared to $9.9 million in fiscal 2022. The decrease was due to lower gross profit and higher selling and administrative expenses, primarily compensation expense and professional fees.
The decrease was primarily due to lower gross profit and slightly higher selling and administrative expenses. Selling and administrative expenses increased due to higher salary and incentive compensation expense, and outbound freight expense.
If impairment indicators exist, we perform an impairment analysis by comparing the undiscounted cash flows resulting from the use of the asset group to the carrying amount. If the carrying amount exceeds the undiscounted cash flows, an impairment loss is recognized based on the excess of the asset’s carrying amount over its fair value. 26 Table of Contents Income taxes.
Determination of recoverability of long-lived assets is based on the lowest level of identifiable estimated future undiscounted cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset group over its fair value.
Net income Net income decreased $25.1 million, or 24.6%, to $77.1 million in fiscal 2023, compared to $102.2 million in fiscal 2022. The impact of foreign currency translation decreased net income in fiscal 2023 by $10.3 million. Excluding foreign currency translation, net income decreased $14.8 million as a result of the reasons described above.
Net (loss) income Net loss was $123.3 million in fiscal 2024, compared to net income of $77.1 million in fiscal 2023. The acquisition of Nordic Lights contributed $3.9 million of net income and the impact of foreign currency translation increased net income by $0.3 million.
On June 16, 2022, the Board of Directors authorized an increase in the existing share buyback program of an additional $100.0 million, and extended the expiration of the program to June 14, 2024.
Share Buyback Programs On March 31, 2021, as subsequently amended on June 16, 2022, the Board of Directors authorized the purchase of up to $200.0 million of our outstanding common stock through June 14, 2024 (the “2021 Buyback Program”).

… 104 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+0 added−0 removed10 unchanged
Biggest changeBased on borrowings outstanding under our Credit Agreement at April 29, 2023, net of the interest rate swaps, we estimate that a 1% increase in interest rates would result in increased annual interest expense of $3.1 million. Commodity price risk We are exposed to commodity price risk primarily on our raw material purchases.
Biggest changeBased on borrowings outstanding under our Credit Agreement at April 27, 2024, net of the interest rate swaps, we estimate that a 1% increase in interest rates would result in increased annual interest expense of $1.5 million. Commodity price risk We are exposed to commodity price risk primarily on our raw material purchases.
The forward contracts have a maturity of less than three months and are not designated as hedging instruments. As of April 29, 2023, the notional value of these outstanding contracts was $59.9 million. These hedges are intended to reduce, but may not entirely eliminate, foreign currency exchange risk.
The forward contracts have a maturity of less than three months and are not designated as hedging instruments. As of April 27, 2024, the notional value of these outstanding contracts was $110.9 million. These hedges are intended to reduce, but may not entirely eliminate, foreign currency exchange risk.
Translation adjustments are not included in determining net income but are included in accumulated other comprehensive income (loss) within shareholders’ equity on the consolidated balance sheets until a sale or substantially complete liquidation of the net investment in the international subsidiary takes place. As of April 29, 2023, the cumulative net currency translation adjustments decreased shareholders’ equity by $19.8 million.
Translation adjustments are not included in determining net income but are included in accumulated other comprehensive income (loss) within shareholders’ equity on the consolidated balance sheets until a sale or substantially complete liquidation of the net investment in the international subsidiary takes place. As of April 27, 2024, the cumulative net currency translation adjustments decreased shareholders’ equity by $36.5 million.
As described in Note 8, "Derivative Financial Instruments and Hedging Activities" to our consolidated financial statements included in this Annual Report, in order to manage certain translational exposure to the euro, we have designated euro-denominated borrowings of $145.4 million as a net investment hedge in our euro-denominated subsidiaries.
As described in Note 8, “Derivative Financial Instruments and Hedging Activities” to our consolidated financial statements included in this Annual Report, in order to manage certain translational exposure to the euro, we have designated euro-denominated borrowings of $294.0 million as a net investment hedge in our euro-denominated subsidiaries.
We manage our interest rate exposures through the use of interest rate swaps to effectively convert a portion of our variable-rate debt to a fixed rate. The notional amount of our interest rate swaps was $100.0 million as of April 29, 2023.
We manage our interest rate exposures through the use of interest rate swaps to effectively convert a portion of our variable-rate debt to a fixed rate. The notional amount of our interest rate swaps was $141.3 million as of April 27, 2024.
Interest rate risk We are exposed to interest rate risk on borrowings under our Credit Agreement which are based on variable rates. As of April 29, 2023, we had $305.4 million of borrowings under our Credit Agreement.
Interest rate risk We are exposed to interest rate risk on borrowings under our Credit Agreement which are based on variable rates. As of April 27, 2024, we had $333.0 million of borrowings under our Credit Agreement.

Other MEI 10-K year-over-year comparisons