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What changed in METHODE ELECTRONICS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of METHODE ELECTRONICS INC's 2022 and 2023 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 2023 report.

+243 added−223 removedSource: 10-K (2023-06-27) vs 10-K (2022-06-23)

Top changes in METHODE ELECTRONICS INC's 2023 10-K

243 paragraphs added · 223 removed · 164 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

30 edited+8 added−5 removed15 unchanged
Biggest changeFiscal 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. Fiscal 2022 ended on April 30, 2022 and fiscal 2021 ended on May 1, 2021, which represented 52 weeks of results for each year.
Biggest changeWe 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.
Our field application engineers also help us identify emerging markets and new products. Our products are primarily sold through our in-house sales staff. We also utilize independent manufacturers’ representatives with offices throughout the world.
Our field application engineers also help us identify emerging markets and new products. Our products are primarily sold through our in-house sales staff. We also utilize independent manufacturers’ and sales representatives with offices throughout the world.
Fiscal Year Ended April 30, 2022 May 1, 2021 May 2, 2020 Automotive 67.2 % 69.4 % 69.5 % Industrial 27.3 % 24.6 % 24.6 % Interface 5.1 % 5.7 % 5.7 % Medical 0.4 % 0.3 % 0.2 % 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 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.
We seek patents in order to protect our interest in unique and critical products and technologies, including our field-effect touch technology, 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, medical devices and radio-type products.
The Industrial segment manufactures external lighting solutions, industrial safety radio remote controls, braided flexible cables, current-carrying laminated busbars and devices, custom power-product assemblies, such as our PowerRail® solution, high-current low-voltage flexible power cabling systems and powder-coated busbars that are used in various markets and applications, including aerospace, cloud computing, commercial vehicles, industrial, military, power conversion and transportation.
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.
Also posted on our website are our Corporate Governance Guidelines, Code of Business Conduct, Anti-Corruption Policy, Insider Trading Policy, Diversity & Inclusion Statement, Conflict Minerals Policy, Supplier Code of Conduct 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, Medical Products Committee, Nominating and Governance Committee and Technology Committee.
We embrace the diversity of our employees, including their unique backgrounds, experiences, thoughts, and talents. Employees are valued and appreciated for their distinct contributions to the growth and sustainability of our business. 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 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.
In general, the sales to GM were for component parts used in particular GM vehicle models. Typically, our GM supply arrangement for each component part includes a blanket purchase order and production releases. In general, a blanket purchase order is issued for each GM part as identified by the customer part number.
In general, these sales were for component parts used in particular vehicle models. Typically, our supply arrangement for each component part includes a blanket purchase order and production releases. In general, a blanket purchase order is issued for each part as identified by the customer part number. Each blanket purchase order includes standard terms and conditions, including price.
We provide compensation packages that include base salary/wages, and short and long-term incentives. 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 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.
Compliance with these laws, rules, and regulations has not had a material effect upon our capital expenditures, results of operations, or competitive position, and we do not currently anticipate material capital expenditures for environmental control facilities.
Government Regulations Our worldwide business activities are subject to various laws, rules, and regulations of the United States as well as of foreign governments. Compliance with these laws, rules, and regulations has not had a material effect upon our capital expenditures, results of operations, or competitive position, and we do not currently anticipate material capital expenditures for environmental control facilities.
Each blanket purchase order includes standard terms and conditions, including price. In certain circumstances, we supply GM the requirements for a particular customer vehicle model for the life of the model, which can vary from three to seven years. GM orders parts using production releases approved under the relevant blanket purchase order.
In certain circumstances, we supply the requirements for a particular customer vehicle model for the life of the model, which can vary from three to seven years. Our customers order parts using production releases approved under the relevant blanket purchase order. The production releases include information regarding part quantities and delivery specifications.
Intellectual Property We generally rely on patents, trade secrets, trademarks, licenses, and non-disclosure agreements to protect our intellectual property and proprietary products. 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 2022 and 2041.
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.
Research and Development We maintain a research and development program involving a number of professional employees who devote a majority of their time to the enhancement of existing products and to the development of new products and processes.
Price, service and product performance are significant elements of competition in the sale of our products. 3 Table of Contents Research and Development We maintain a research and development program involving a number of professional employees who devote a majority of their time to the enhancement of existing products and to the development of new products and processes.
We believe that diversity and inclusion will make us a more desirable workplace and will lead to improved business performance. Health and Safety The success of our business is fundamentally connected to the well-being of our employees. We maintain a work environment with a safety culture grounded on the premise of eliminating workplace incidents, risks, and hazards.
We believe that an increased focus on diversity and inclusion will make us a more desirable workplace and will lead to improved business performance. 4 Table of Contents Health and Safety The success of our business is connected to the well-being of our employees.
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.
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.
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.
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.
The Automotive segment supplies electronic and electro-mechanical devices and related products to automobile OEMs, either directly or through their tiered suppliers. Our products include integrated center consoles, hidden switches, ergonomic switches, transmission lead-frames, LED-based lighting, and sensors which incorporate magneto-elastic sensing and other technologies that monitor the operation or status of a component or system.
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.
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. In fiscal 2023, our human capital focus will be on employee health and safety, employee and leadership development, and communications.
“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 have created and implemented processes to help eliminate safety events and reduce their frequency and severity. The safety of our employees is a top priority and vital to our success. Our employees are regularly trained on safety-related topics and we monitor and measure our effectiveness at all our locations.
We strive to maintain a work environment with a safety culture grounded on the premise of eliminating workplace incidents, risks, and hazards. We have processes to help eliminate safety events and to reduce their frequency and severity. The safety of our employees is a top priority and vital to our success and our employees are trained on safety-related topics.
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 The markets in which we operate are highly competitive and characterized by rapid changes due to technological improvements and developments. 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.
Sales are made primarily to OEMs, either directly or through their tiered suppliers, as well as to selling partners and distributors. 2 Table of Contents Sources and Availability of Materials The principal materials that we purchase include application-specific integrated circuits, coil and bar stock, ferrous and copper alloy sheets, glass, LED displays, plastic molding resins, capacitors and resistors, precious metals, and silicon die castings.
Sources and Availability of Materials The principal materials that we purchase include application-specific integrated circuits, coil and bar stock, ferrous and copper alloy sheets, glass, LED displays, plastic molding resins, capacitors and resistors, precious metals, and silicon die castings. All of these items are available from several suppliers and we generally rely on more than one supplier for each item.
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 2022, our five largest customers accounted for approximately 50% of our consolidated net sales, with sales to General Motors Corporation (“GM”) and its tiered suppliers representing 23.3% of consolidated net sales.
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%.
For many of our OEM customers, especially in the automotive and commercial vehicle markets, we have long-term supply arrangements where there is an expectation that we will supply products in future periods. However, these arrangements do not necessarily constitute firm orders and these OEM customers are not required to purchase any minimum amount of products from us.
Backlog We manufacture products based on a combination of specific order requirements and forecasts of our customers’ demand. For many of our OEM customers, especially in the automotive and commercial vehicle markets, we have long-term supply arrangements where there is an expectation that we will supply products in future periods.
Diversity and Inclusion As highlighted in our Diversity & Inclusion Statement, available on our corporate website, we believe that diversity and inclusion are business imperatives that will enable us to build and empower our future workforce. We strive to maintain a diverse and inclusive workforce that reflects our global customer base and the communities that we serve.
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.
All of these items are available from several suppliers and we generally rely on more than one supplier for each item. Refer to Item 1A. “Risk Factors” in this Annual Report for risks related to the current supply chain issues, including the worldwide semiconductor supply shortage.
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.
Firm orders are generally limited to authorized customer purchase orders which are typically based on customer release schedules. We fulfill these purchase orders as promptly as possible. The dollar amount of such purchase order releases on hand and not processed at any point in time is not believed to be significant based upon the time frame involved.
We do not consider the dollar amount of such purchase order releases on hand and not processed at any point in time to be significant based upon the time frame involved. Accordingly, backlog at any given time might not be a meaningful indicator of future revenue.
Fiscal 2020 ended on May 2, 2020, which represented 53 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. See Note 15, “Segment Information and Geographic Area Information” to our consolidated financial statements in this Annual Report for further information.
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.
“Risk Factors” in this Annual Report for a discussion of these potential impacts. Human Capital As of April 30, 2022, we employed approximately 7,000 employees worldwide, substantially all of whom were employed full time with approximately 94% of these employees located outside the U.S.
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.
Our safety measures are aligned with the recommendations of U.S. and global health organizations and have continued into fiscal 2023. 4 Table of Contents Benefits and Compensation As part of our efforts to attract and motivate our employees, we offer competitive compensation and benefits that may vary by region and employee-type.
Our site EHS personnel are also involved in the development of global EHS procedures and standards. Benefits and Compensation As part of our efforts to attract and motivate our employees, we offer competitive compensation and benefits that may vary by region and employee-type. We provide compensation packages that include base salary/wages, and short and long-term incentives.
Talent Acquisition, Development and Succession Planning Our talent strategy is focused on attracting the best talent, recognizing, and rewarding their performance while continually developing, engaging, and retaining them. We focus significant attention on attracting and retaining talented and experienced individuals to manage and support our operations.
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.
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The production releases are submitted by the various GM plants and include information regarding part quantities and delivery specifications. Backlog We manufacture products based on a combination of specific order requirements and forecasts of our customers’ demand.
Added
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.
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Accordingly, backlog at any given time might not be a meaningful indicator of future revenue. Competition The markets in which we operate are highly competitive and characterized by rapid changes due to technological improvements and developments.
Added
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.
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Expenditures for such activities amounted to $35.7 million for fiscal 2022, $37.1 million for fiscal 2021 and $34.9 million for fiscal 2020. 3 Table of Contents Government Regulations Our worldwide business activities are subject to various laws, rules, and regulations of the United States as well as of foreign governments.
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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.
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It is always a top priority, but employee health and safety continue to be of paramount importance during the COVID-19 global pandemic.
Added
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.
Removed
In fiscal 2022, we continued to maintain extensive safety measures, including conducting temperature and health screenings and contract tracing, providing PPE, distanced workstations and plexiglass barriers, adopting enhanced cleaning and disinfection protocols, requiring employees to be vaccinated if legally permissible and instituting other measures aimed at minimizing the transmission of COVID-19 while sustaining production and related services.
Added
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.
Added
However, these arrangements do not necessarily constitute firm orders and these OEM customers are not required to purchase any minimum amount of products from us and can sunset a program at any time. Firm orders are generally limited to authorized customer purchase orders which are typically based on customer release schedules. We fulfill these purchase orders as promptly as possible.
Added
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. 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.
Added
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

49 edited+38 added−16 removed78 unchanged
Biggest changeA number of factors may increase our effective tax rate, which could reduce our net income, including: • the jurisdictions in which profits are determined to be earned and taxed; • changes in the valuation of our deferred tax assets and liabilities, and in deferred tax valuation allowances; • 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”).
Biggest changeA 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”).
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 and our customers’ personnel in order for the program launches of certain of our products to be successful.
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.
These regulations or standards could mandate more restrictive requirements, such as stricter limits on greenhouse gas emissions and production of single use plastics, and could increase costs relating to monitoring and reporting emissions data.
These requirements, regulations or standards could mandate more restrictive requirements, such as stricter limits on greenhouse gas emissions and production of single use plastics and could increase costs relating to monitoring and reporting emissions data.
War, terrorism, geopolitical uncertainties (including the 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 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.
EHS laws and regulations have generally become more stringent over time and could continue to do so in response to climate change concerns, imposing greater compliance costs and increasing risks and penalties associated with any violation, which also could materially adversely affect our business, financial condition and results of operations.
EHS laws and regulations have generally become more stringent over time and could continue to do so, particularly in response to climate change concerns, imposing greater compliance costs and increasing risks and penalties associated with any violation, which also could materially adversely affect our business, financial condition and results of operations.
If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon us, our operations or products, or our operations are disrupted due to physical impacts of climate change, our business, financial condition and results of operations could be materially adversely affected.
If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon us, our operations, our products or our customers, or if our operations are disrupted due to physical impacts of climate change, our business, financial condition and results of operations could be materially adversely affected.
The COVID-19 pandemic and the ongoing measures to reduce its spread may also impact many of our other risk factors discussed in this Annual Report, including customer demand, supply chain disruptions, availability of financing sources and risks of international operations.
The COVID-19 pandemic and measures to reduce its spread may also impact many of our other risk factors discussed in this Annual Report, including customer demand, supply chain disruptions, availability of financing sources and risks of international 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. 8 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. 9 Table of Contents Integration of acquisitions may take longer than we expect and may never be achieved to the extent originally anticipated.
The continuation of this 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. 9 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.
The 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.
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. 5 Table of Contents 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. The COVID-19 pandemic has adversely affected, and may continue to adversely affect, our business, financial condition and results of operations.
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. 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 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.
These events have caused additional disruption in the supply chains, which are already experiencing disruption due to the impacts of the COVID-19 pandemic and may continue to impact demand for our products.
These events have caused additional disruption in the supply chains, which were already experiencing disruption due to the impacts of the COVID-19 pandemic and may continue to impact demand for our products.
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. 7 Table of Contents 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. Our inability, or our customers’ inability, to effectively manage the timing, quality and cost of new program launches could adversely affect our financial performance.
The loss of certain patents and trade secrets could adversely affect our sales, margins or profitability. 10 Table of Contents 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 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.
Our senior unsecured credit agreement provides an option to increase the size of our revolving credit facility and term loan by an additional $200.0 million, subject to customary conditions and approval of the lenders providing the new commitments. There can be no assurance that lenders will approve additional commitments under current circumstances.
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.
At such time, we may be required to record compensation ‎expense relating to prior periods, and such ‎compensation expense adjustment could be ‎material to our results of operations.‎ 12 Table of Contents Restructuring activities may lead to additional costs and material adverse effects.
At such time, we may be required to record compensation ‎expense relating to prior periods, and such ‎compensation expense adjustment could be ‎material to our results of operations.‎ Restructuring activities may lead to additional costs and material adverse effects.
Any negative or unexpected outcomes of these examinations and audits could have a material adverse impact on our results of operations and financial condition. 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. 15 Table of Contents Item 1B. Unresolv ed Staff Comments None.
The loss of GM or any of our other major customers, or a decline in the production levels of these customers or particular models, could reduce our sales and thereby adversely affect our financial condition, operating results and cash flows.
The loss of our major customers, or a decline in the production levels of these customers or particular models, could reduce our sales and thereby adversely affect our financial condition, operating results and cash flows.
Our operations are regulated by a number of federal, state, local and international government regulations, including those pertaining to environmental, health, and safety (“EHS”) that govern, among other things, air and water emissions, worker protection, and the handling, storage and disposal of hazardous materials.
Our operations are regulated by a number of federal, state, local and international government regulations, including those pertaining to EHS that govern, among other things, air and water emissions, worker protection, and the handling, storage and disposal of hazardous materials.
The extent of the effects of the COVID-19 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 continues to have, a significant impact on our business, financial condition and results of operations.
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.
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, closing or selling of additional facilities.
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.
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 an ongoing significant shortage of 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 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.
The senior unsecured credit agreement provides for variable rates of interest based on the type of borrowing and our debt to EBITDA financial ratio and contains customary representations and warranties, financial covenants, restrictive covenants and events of default.
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.
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. Future price reductions and increased quality standards may reduce our profitability and have a material adverse effect on our business, financial condition and results of operations.
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 completed acquisitions and divestitures in the past and 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 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.
Climate change and climate change regulations could adversely impact our business and results of operations. Increased public awareness and concern regarding environmental risks, including global climate change, may result in more international, regional and/or federal requirements or industry standards to reduce or mitigate global warming and other environmental risks.
Increased public awareness and concern regarding environmental risks, including global climate change, may result in more international, regional and/or federal requirements, customer requirements, or industry standards to reduce or mitigate global warming and other environmental risks.
Future price reductions, increased quality standards and the cost of adding additional engineering capabilities may reduce our profitability and have a material adverse effect on our business, financial condition and results of operations.
We may be unable to generate sufficient production cost savings in the future to offset required price reductions. Future price reductions, increased quality standards and the cost of adding additional engineering capabilities may reduce our profitability and have a material adverse effect on our business, financial condition and results of operations.
The extent of the impact on our business will depend on a number of evolving factors, all of which remain uncertain, including the duration and spread of the pandemic, actions taken by governmental authorities to restrict business operations and social activity and impose travel restrictions, shifting consumer demand, the ability of our supply chain to deliver in a timely and cost-effective manner, the ability of our employees and manufacturing facilities to operate efficiently and effectively, the continued viability and financial stability of our customers and suppliers and future access to capital.
While much of our customer demand and shipments have recovered from the impact of the COVID-19 pandemic, the extent to which any resurgence of the pandemic or other public health emergencies in the future impact our business will depend on a number of evolving factors, all of which are highly uncertain and cannot be predicted, including actions taken by governmental authorities to restrict business operations and social activity and impose travel restrictions, shifting consumer demand, the ability of our supply chain to deliver in a timely and cost-effective manner, the ability of our employees and manufacturing facilities to operate efficiently and effectively, the continued viability and financial stability of our customers and suppliers and future access to capital.
We 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.
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 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. Factors negatively affecting these industries also negatively affect our business, financial condition and results of operations.
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.
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.
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.
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.
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.
Although vaccines have been introduced that are expected to reduce the effect of COVID-19, governmental authorities throughout the world continue to implement numerous measures aimed at containing and mitigating the effects of the COVID-19 pandemic, including renewed travel bans and restrictions, quarantines, social distancing orders, “lock-down” orders and shutdowns of non-essential activities.
In response, many governmental authorities throughout the world implemented numerous measures aimed at containing and mitigating the effects of the COVID-19 pandemic, including travel bans and restrictions, quarantines, social distancing orders, “lock-down” orders and shutdowns of non-essential activities.
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. 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.
The COVID-19 pandemic and the ongoing measures to reduce its spread have negatively impacted the global economy, disrupted consumer and customer demand and global supply chains, and created significant volatility and disruption of financial markets.
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.
Our supply arrangements with our customers typically require us to provide our products at predetermined prices. In some cases, these prices decline over the course of the arrangement and may require us to meet certain productivity and cost reduction targets. In addition, our customers may require us to share productivity savings in excess of our cost reduction targets.
In some cases, these prices decline over the course of the arrangement and may require us to meet certain productivity and cost reduction targets. In addition, our customers may require us to share productivity savings in excess of our cost reduction targets. The costs that we incur in fulfilling these orders may vary substantially from our initial estimates.
We expect our net sales in international markets to continue to represent a significant portion of our consolidated net sales. 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, India, Malta, Mexico, the Netherlands and the United Kingdom.
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.
The costs that we incur in fulfilling these orders may vary substantially from our initial estimates. Unanticipated cost increases or the inability to meet certain cost reduction targets may occur as a result of several factors, including increases in the costs of labor, components or materials.
Unanticipated cost increases or the inability to meet certain cost reduction targets may occur as a result of several factors, including increases in the costs of labor, components or materials. In some cases, we are permitted to pass on to our customers the cost increases associated with specific materials.
These global supply chains have been, and may continue to be, adversely impacted by events outside of our control, including macroeconomic events, trade restrictions, economic recessions, political crises, labor relations issues, liquidity constraints, or natural occurrences, such as the ongoing disruptions from the COVID-19 pandemic.
Similarly, many of our customers are dependent on an ever-greater number of global suppliers to manufacture their products. These global supply chains have been, and may continue to be, adversely impacted by events outside of our control, including macroeconomic events, trade restrictions, economic recessions, energy prices and availability, political crises, labor relations issues, liquidity constraints, or natural occurrences.
Such supply arrangements cover a period from one year to the life of the model, which is generally three to seven years.
The arrangements with our major customers generally provide for supplying their requirements for particular models, rather than for manufacturing a specific quantity of products. Such supply arrangements cover a period from one year to the life of the model, which is generally three to seven years.
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.
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.
As of April 30, 2022, we have not recorded any compensation expense for the RSAs or the Performance Units based on the probability assessment required under the accounting rules and regulations. Each quarter, we will assess the probability of vesting for the RSAs and the Performance Units and will adjust the compensation expense as necessary.
As of April 29, 2023, we have not recorded any compensation expense for the RSAs or the Performance Units based on the probability assessment required under the accounting rules and regulations. At the threshold level of performance, the unrecorded amortization expense was $20.1 million. At the target level of performance, the unrecorded amortization expense was $26.8 million.
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. We present our consolidated financial statements in U.S. dollars, but a portion of our revenues and expenditures are transacted in other currencies.
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.
Our five largest customers accounted for approximately 50% of our consolidated net sales in fiscal 2022, with sales to GM and its tiered suppliers representing 23.3% of our consolidated net sales. In certain cases, the sales to these customers are concentrated in a single product.
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 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. Our businesses and the markets in which we operate are highly competitive. If we are unable to compete effectively, our sales and profitability could decline.
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.
Any such product defects or product liability claims could materially adversely affect our business, financial condition and results of operations. 11 Table of Contents Financial Risks 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. 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.
Certain of our customers have exerted and continue to exert considerable pressure on us to reduce prices and costs, improve quality and provide additional design and engineering capabilities. We may be unable to generate sufficient production cost savings in the future to offset required price reductions.
However, cost overruns that we cannot pass on to our customers could adversely affect our business, financial condition and results of operations. Certain of our customers have exerted and continue to exert considerable pressure on us to reduce prices and costs, improve quality and provide additional design and engineering capabilities.
Our primary sources of liquidity are cash generated from operations and availability under our revolving credit facility. Our senior unsecured credit agreement consists of a $200.0 million revolving credit facility and a $250.0 million term loan.
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.
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. Sales to customers outside of the U.S. represented a substantial portion of our fiscal 2022 net sales.
Moreover, additional groups of currently non-unionized employees may seek union or works council representation in the future. 7 Table of Contents 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.
Removed
Similarly, many of our customers are dependent on an ever-greater number of global suppliers to manufacture their products.
Added
Although most of these measures have been lifted, they may be reinstated in the future in response to COVID-19 or future pandemics, endemics, or health emergencies. In fiscal 2023, COVID-19 outbreaks in China resulted in local or regional government-imposed lockdowns and restrictions, which impacted our manufacturing operations, customer production schedules and supply chains.
Removed
Most recently, the COVID-19 lock-downs in China have impacted our manufacturing operations, customer production schedules and supply chains.
Added
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.
Removed
We have implemented numerous actions in order to effectively manage the unprecedented challenges and uncertainties of the COVID-19 pandemic on a global basis, such as implementing new workplace hygiene and disinfection protocols, redesigning production processes, leveraging our global purchasing power to secure PPE for our entire workforce, adopting processes to continuously monitor and strengthen our supply chain and consolidating operations.
Added
We receive OEM purchase orders for specific components supplied for particular vehicles. In most instances our OEM customers agree to purchase their requirements for specific products but are not required to purchase any minimum amount of products from us.
Removed
We may be required to take additional actions in response to evolving conditions, such as renewed travel restrictions, quarantines and stay-at-home orders. A prolonged extension of the disruptions resulting directly or indirectly from the COVID-19 pandemic could have a material adverse impact on our business, financial condition and results of operations.
Added
The contracts we have entered into with most of our customers have terms ranging from one year to the life of the model (usually three to seven years), although customers often reserve the right to terminate for convenience.
Removed
The ultimate significance of the COVID-19 pandemic on our business will depend on events that are beyond our control and that we cannot predict. 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.
Added
Therefore, a significant decrease in demand for certain key models or group of related models sold by any of our major customers or the ability of a manufacturer to re-source and discontinue purchasing from us, for a particular model or group of models, could have a material adverse effect on us.
Removed
The COVID-19 pandemic has significantly disrupted, and may continue to significantly disrupt, the global automotive and commercial vehicle industries and customer sales, production volumes and purchases of vehicles by consumers. In addition, the spread of COVID-19 has created a significant disruption in the manufacturing operations, delivery systems and overall supply chains of automobile and commercial vehicle manufacturers and suppliers.
Added
For example, we expect a significant program for a major EV customer to sunset in fiscal 2024.
Removed
Further, the COVID-19 pandemic resulted in a temporary shutdown of substantially all of the major OEMs in our markets at various times in fiscal 2021 and fiscal 2022, which impacted our sales volumes.
Added
To the extent that we do not maintain our existing level of business with our largest customers because of a decline in their production requirements or because the contracts expire or are terminated for convenience, we will need to attract new customers or win new business with existing customers, or our results of operations and financial condition will be adversely affected.
Removed
The elevated COVID-19 rates in China have led to widespread lock-downs during the fourth quarter of fiscal 2022, and continued into the first quarter of fiscal 2023, negatively impacting OEMs in that region, along with creating further supply chain disruptions.
Added
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.
Removed
Although automotive and commercial vehicle production has resumed, customer sales and production volumes may significantly decrease or may be very volatile due to supply chain issues or other global economic impacts and uncertainties which could materially adversely affect our business, financial condition and results of operations.
Added
In addition, upon the expiration of existing collective bargaining agreements, we may not reach new agreements without union or works council action in certain jurisdictions, and any such new agreements may not be on terms satisfactory to us. If we are unable to negotiate acceptable collective bargaining agreements, we may become subject to union-initiated work stoppages, including strikes.
Removed
For GM, the sales primarily consisted of integrated center consoles produced for use in light trucks and SUV’s. The arrangements with GM and our other major customers generally provide for supplying its requirements for particular models, rather than for manufacturing a specific quantity of products.
Added
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.
Removed
As of April 30, 2022, approximately 94% of our employees were located outside of the U.S.
Added
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.
Removed
In some cases, we are permitted to pass on to our customers the cost increases associated with specific materials. However, cost overruns that we cannot pass on to our customers could adversely affect our business, financial condition and results of operations.
Added
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.
Removed
Further, the recent military conflict between Russia and Ukraine could result in cyberattacks that could directly or indirectly impact us, including the potential for retaliatory acts of cyberwarfare from Russia against U.S. companies in response to increasing sanctions on Russia.
Added
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.
Removed
The impact of any one or more of these or other factors could adversely affect our business, financial condition and results of operations.
Added
Failure to innovate and to develop or acquire new and compelling products that capitalize upon new technologies in response to these evolving consumer preferences and demands could adversely affect our financial condition, operating results and cash flows.
Removed
As of April 30, 2022, $206.3 million in principal was outstanding under these financing arrangements and we had $199.9 million of availability remaining under the revolving credit facility. The term loan matures in September 2023 and requires quarterly principal payments of $3.1 million over the five-year term, with the remaining balance due upon maturity.
Added
Future price reductions and increased quality standards may reduce our profitability and have a material adverse effect on our business, financial condition and results of operations. Our supply arrangements with our customers typically require us to provide our products at predetermined prices.
Removed
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. 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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table provides details regarding our significant properties as of April 30, 2022: Location Segment(s) Use Owned/ Leased Approximate Square Footage Lontzen, Belgium Automotive Manufacturing and Warehousing Owned 124,000 Dongguan, China Automotive and Industrial Manufacturing Leased 197,000 Shanghai, China Automotive and Industrial Manufacturing Leased 147,000 Suzhou, China Automotive and Industrial Manufacturing Leased 318,000 Cairo, Egypt Automotive and Industrial Manufacturing Leased 272,328 Mriehel, Malta Automotive and Industrial Manufacturing Leased 299,000 Monterrey, Mexico Automotive, Industrial and Interface Manufacturing Leased 292,000 Santa Catarina Nuevo Léon, Mexico Automotive Manufacturing Leased 158,000 13 Table of Contents
Biggest changeThe 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
Item 2. P roperties Our corporate headquarters is located in Chicago, Illinois. As of April 30, 2022, we leased or owned 32 operating facilities. We believe our space is in good condition and adequate to meet our current and reasonably anticipated future needs.
Item 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.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeShetty 56 President, Dabir Surfaces since 2018; prior thereto, Vice President and General Manager, Asia, from 2015, and Executive Managing Director, Asia from 2011 to 2015. 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. 14 Table of Contents PART II
Biggest changeAll 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
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 66 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 Donald W. Duda 67 Chief Executive Officer since 2004 and President and Director since 2001. Ronald L.G.
Glandon 58 Vice President since 2006; General Manager, North American Automotive, from 2006 to 2015. Joseph E. Khoury 58 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.
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.
Martin 56 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 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.
Tsoumas 61 Chief Financial Officer of the Company since 2018; prior thereto, served as Controller of the Company from 2007 to 2018. Andrea J. Barry 59 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 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.
Added
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.
Added
Vyverberg 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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities 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. 15 Table of Contents Stock Performance The following graph shows the cumulative total stockholder return on our common stock over the period spanning April 29, 2017 to April 30, 2022, as compared with that of the Dow Jones U.S.
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.
Gentherm Incorporated Rogers Corporation Cooper-Standard Holdings Inc LCI Industries Stoneridge, Inc. CTS Corporation Littelfuse, Inc. TTM Technologies, Inc. Fabrinet OSI Systems, Inc. Visteon Corporation The Compensation Committee of the Board of Directors reviews the peer group annually and from time to time changes the composition of the peer group where changes are appropriate.
Inc Patrick Industries, Inc. Benchmark Electronics, Inc. Gentherm Incorporated Rogers Corporation Cooper-Standard Holdings Inc LCI Industries Stoneridge, Inc. CTS Corporation Littelfuse, Inc. TTM Technologies, Inc. Fabrinet OSI Systems, Inc. Visteon Corporation The Compensation Committee of the Board of Directors reviews the peer group annually and from time to time changes the composition of the peer group where changes are appropriate.
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, 2022, we had 366 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 June 15, 2023, we had 358 holders of record of our common stock.
On June 16, 2022, the Board of Directors authorized an increase in our existing share buyback program under which we may purchase up to an additional $100.0 million of our outstanding common stock, and also extended the expiration from March 31, 2023 to June 14, 2024.
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.
Auto Parts Total Return Index, our Fiscal 2021 Peer Group and our Fiscal 2022 Peer Group. We have assumed that dividends have been reinvested and that $100 was invested on April 29, 2017. The stock price performance included in this graph is historical and not necessarily indicative of future stock price performance. The Dow Jones U.S.
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.
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. We did not purchase any shares of our common stock under this program during the quarter ended April 30, 2022.
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.
In the first quarter of fiscal 2022, we increased our quarterly dividend from $0.11 per share to $0.14 per share. Issuer Purchases of Equity Securities On March 31, 2021, the Board of Directors authorized the purchase of up to $100.0 million of our common stock, expiring on March 31, 2023.
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.
Removed
As of April 30, 2022, a total of 1,593,139 shares have been purchased at a cost of $71.2 million since the commencement of the share buyback program.
Added
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.
Removed
Auto Parts Total Return Index replaces the CRSP NYSE Stock Market (US Companies) Index in this analysis and going forward, as the CRSP Index data is no longer accessible. The CRSP index has been included with data through May 1, 2021.
Removed
Company/Index April 29, 2017 April 28, 2018 April 27, 2019 May 2, 2020 May 1, 2021 April 30, 2022 Methode Electronics, Inc. $ 100.00 $ 91.91 $ 67.45 $ 66.56 $ 106.14 $ 106.69 NYSE Stock Market (US Companies) 100.00 111.51 121.66 108.22 162.74 Dow Jones U.S.
Removed
Auto Parts Total Return Index 100.00 117.84 103.77 77.16 144.05 110.63 Fiscal 2022 Peer Group 100.00 104.81 104.05 82.04 140.09 129.57 Fiscal 2021 Peer Group 100.00 104.57 105.16 83.37 141.61 131.61 The Fiscal 2022 Peer Group consists of the following fifteen public companies: Belden Corporation Franklin Electric Company. Inc Patrick Industries, Inc. Benchmark Electronics, Inc.
Removed
In fiscal 2022, the Compensation Committee added Cooper-Standard Holdings Inc., Fabrinet and Patrick Industries, Inc. based on our revenue, market capitalization and industry criteria for the peer group. Delphi Technologies PLC, Kemet Corporation and MTS Systems Corporation were all acquired in fiscal 2021 and were excluded from the peer group.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOperating Segments Automotive Fiscal Year Ended (in millions) April 30, 2022 May 1, 2021 Net sales North America $ 400.9 $ 406.4 EMEA $ 216.5 $ 212.3 Asia $ 164.1 $ 137.0 Net sales $ 781.5 $ 755.7 Gross profit $ 150.0 $ 163.4 As a percent of net sales 19.2 % 21.6 % Income from operations $ 92.6 $ 107.6 As a percent of net sales 11.8 % 14.2 % 19 Table of Contents Net sales Automotive segment net sales increased $25.8 million, or 3.4%, to $781.5 million in fiscal 2022, compared to $755.7 million in fiscal 2021.
Biggest changeOperating 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.
Although we have no operations in Russia or Ukraine, certain of our customers and suppliers have been negatively impacted by these events, which in turn has impacted markets where we do business, including Europe and Asia. The economic sanctions imposed on Russia has further increased existing global supply chain, logistics, and inflationary challenges.
Although we have no operations in Russia or Ukraine, certain of our customers and suppliers have been negatively impacted by these events, which in turn has impacted markets where we do business, including Europe and Asia. The economic sanctions imposed on Russia have further increased existing global supply chain, logistics, and inflationary challenges.
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. 21 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.
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.
These amounts are included in the selling and administrative expenses and as part of the Industrial segment. 23 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.
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.
The semiconductor supply shortage is also impacting our supply chain and our ability to meet demand at some of our non-automotive customers. We expect this semiconductor shortage to have a continued impact on our operating results and financial condition in fiscal 2023.
The semiconductor supply shortage is also impacting our supply chain and our ability to meet demand at some of our non-automotive customers. We expect this semiconductor shortage to have a continued impact on our operating results and financial condition in fiscal 2024.
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. 25 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. 27 Table of Contents
Restructuring Actions In fiscal 2022, we initiated a restructuring plan to consolidate one of our operations within the Industrial segment in response to logistics issues and tariffs. This action resulted in a facility shutdown and consolidation of activities into an existing location. In fiscal 2022, we recognized $3.6 million of restructuring costs.
In fiscal 2022, we initiated a restructuring plan to consolidate one of our operations within the Industrial segment in response to logistics issues and tariffs. This action resulted in a facility shutdown and consolidation of activities into an existing location and the recognition of $3.6 million of restructuring costs.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP.
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. Income taxes.
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.
On April 20 and 21, 2022, the District Court held a hearing related to modifying the injunction pursuant to the Tenth Circuit’s opinion, and the parties currently are preparing post-hearing briefs. The defendants also filed a petition for certiorari with the United States Supreme Court seeking to further appeal the extraterritorial application of the Lanham Act in this case.
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.
(2) Based on interest rates in effect as of April 30, 2022 (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 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.
A detailed comparison of our results of operations between fiscal 2021 and fiscal 2020 can be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our fiscal 2021 Annual Report on Form 10-K filed with the SEC on June 24, 2021.
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.
We believe our liquidity position will be sufficient to fund our existing operations and current commitments for at least the next twelve months. However, if economic conditions remain impacted for longer than we expect due to the COVID-19 pandemic and other geopolitical risks, including the Russia-Ukraine war and the lockdowns in China, our liquidity position could be severely impacted.
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.
We incurred legal fees of $3.3 million, $5.7 million and $5.4 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively, related to the lawsuits.
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.
In addition, in February 2022, Russia invaded Ukraine resulting 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.
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.
Key assumptions, such as revenue growth rates and profitability, especially in the outer years, involve a greater degree of uncertainty. 24 Table of Contents Impairment of long-lived assets.
Revenue growth rates and profitability assumptions, especially in the outer years, involve a greater degree of uncertainty. Impairment of long-lived assets.
Medical Fiscal Year Ended (in millions) April 30, 2022 May 1, 2021 Net sales $ 4.2 $ 2.8 Gross profit $ (0.4 ) $ (0.3 ) Loss from operations $ (5.5 ) $ (4.6 ) Net sales Medical segment net sales increased $1.4 million, or 50.0%, to $4.2 million in fiscal 2022, compared to $2.8 million in fiscal 2021.
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.
Such purchases may be made on the open market, in private transactions or pursuant to purchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934. As of April 30, 2022, a total of 1,593,139 shares have been purchased at a total cost of $71.2 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 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.
Global Supply Chain Disruptions We continue to experience business interruptions, including customer shutdowns and increased material and logistics costs, labor shortages, and most significantly, impacts from the worldwide semiconductor supply shortage. The semiconductor supply shortage is due, in part, to increased demand across multiple industries, including the automotive industry, resulting in a slowdown in their production schedules.
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.
The table below compares our results of operations between fiscal 2022 and fiscal 2021: Fiscal Year Ended (in millions) April 30, 2022 May 1, 2021 Net sales $ 1,163.6 $ 1,088.0 Cost of products sold 898.7 813.9 Gross profit 264.9 274.1 Selling and administrative expenses 134.1 126.9 Amortization of intangibles 19.1 19.3 Interest expense, net 3.5 5.2 Other income, net (10.3 ) (12.2 ) Income tax expense 16.3 12.6 Net income $ 102.2 $ 122.3 Net sales Net sales increased $75.6 million, or 6.9%, to $1,163.6 million in fiscal 2022, compared to $1,088.0 million in fiscal 2021.
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.
Loss from operations Medical segment loss from operations increased $0.9 million, or 19.6%, to $5.5 million in fiscal 2022, compared to $4.6 million in fiscal 2021. The increase in the loss was due to higher selling and administrative expenses, primarily higher advertising expenses and professional fees.
Loss from operations Medical segment loss from operations increased $0.6 million, or 10.9%, to $6.1 million in fiscal 2023, compared to $5.5 million in fiscal 2022. The increase in the loss was due to higher selling and administrative expenses, primarily higher marketing expenses.
As of April 30, 2022, the dollar value of shares that remained available to be purchased under this share buyback program was approximately $28.8 million.
As of April 29, 2023, the dollar value of shares that remained available to be purchased under this share buyback program was approximately $80.7 million.
In fiscal 2021, we recognized $8.2 million of restructuring costs. 17 Table of Contents Impacts of Macroeconomic and Geopolitical Conditions Adverse macroeconomic conditions, including but not limited to inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, higher interest rates and currency fluctuations could adversely affect demand for our products.
Impacts of Macroeconomic and Geopolitical Conditions Adverse macroeconomic conditions, including but not limited to inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, wage and commodity inflation, currency fluctuations and new or increased tariffs, could adversely affect demand for our products.
Cash Flows Fiscal Year Ended (in millions) April 30, 2022 May 1, 2021 Operating activities: Net income $ 102.2 $ 122.3 Non-cash items 66.4 50.7 Changes in operating assets and liabilities (69.8 ) 6.8 Net cash provided by operating activities 98.8 179.8 Net cash used in investing activities (37.4 ) (24.8 ) Net cash used in financing activities (114.6 ) (142.9 ) Effect of foreign currency exchange rate changes on cash and cash equivalents (8.0 ) 3.8 (Decrease) increase in cash and cash equivalents (61.2 ) 15.9 Cash and cash equivalents at beginning of the period 233.2 217.3 Cash and cash equivalents at end of the period $ 172.0 $ 233.2 Operating activities Net cash provided by operating activities decreased $81.0 million to $98.8 million in fiscal 2022, compared to $179.8 million in fiscal 2021.
Cash 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.
Goodwill is evaluated at the reporting unit level by comparing the fair value of the reporting unit to its carrying amount including goodwill. An impairment of goodwill exists if the carrying amount of the reporting unit exceeds its fair value.
Goodwill. Goodwill is not amortized but is tested for impairment on at least an annual basis. Goodwill is evaluated at the reporting unit level by comparing the fair value of the reporting unit to its carrying amount including goodwill. An impairment of goodwill exists if the carrying amount of the reporting unit exceeds its fair value.
Contractual Obligations The following table summarizes our significant contractual obligations and commercial commitments as of April 30, 2022: Payments Due By Period (in millions) Total Less than 1 year 1-3 years 3-5 years More than 5 years Finance leases $ 0.8 $ 0.4 $ 0.3 $ 0.1 $ — Operating leases 24.0 6.5 7.3 3.2 7.0 Debt (1) 211.4 13.0 197.1 0.4 0.9 Estimated interest on debt (2) 5.6 3.7 1.7 0.1 0.1 Deferred compensation 8.0 1.6 1.9 1.8 2.7 Total $ 249.8 $ 25.2 $ 208.3 $ 5.6 $ 10.7 (1) Assumes the outstanding borrowings under the revolving credit facility will be repaid upon maturity of the credit agreement in September 2023.
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.
Gross profit Industrial segment gross profit increased $3.4 million, or 3.5%, to $101.5 million in fiscal 2022, compared to $98.1 million in fiscal 2021. Excluding the impact of foreign currency translation, gross profit increased $2.3 million. Gross profit margin decreased to 31.9% in fiscal 2022, from 36.6% in fiscal 2021.
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.
Selling and administrative expenses were higher primarily due to $2.2 million of restructuring costs in this segment in fiscal 2022, compared to $1.0 million in fiscal 2021. 20 Table of Contents Interface Fiscal Year Ended (in millions) April 30, 2022 May 1, 2021 Net sales $ 59.8 $ 61.6 Gross profit $ 12.6 $ 12.3 As a percent of net sales 21.1 % 20.0 % Income from operations $ 9.9 $ 8.9 As a percent of net sales 16.6 % 14.4 % Net sales Interface segment net sales decreased $1.8 million, or 2.9%, to $59.8 million in fiscal 2022, compared to $61.6 million in fiscal 2021.
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.
We received $0.6 million of cash from the sale of property, plant and equipment in fiscal 2022. 22 Table of Contents Financing activities Net cash used in financing activities was $114.6 million in fiscal 2022, compared to $142.9 million in fiscal 2021.
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.
At April 30, 2022, we had $172.0 million of cash and cash equivalents, of which $107.0 million was held in subsidiaries outside the U.S.
At April 29, 2023, we had $157.0 million of cash and cash equivalents, of which $146.3 million was held in subsidiaries outside the U.S.
In fiscal 2022, we used $64.5 million of cash for the purchase of shares under our share buyback program, compared to $6.7 million in fiscal 2021. We paid cash dividends of $20.4 million in fiscal 2022, compared to $17.4 million in fiscal 2021.
In fiscal 2023, we paid $48.1 million of cash for the repurchase of our shares under our share buyback program, compared to $64.5 million in fiscal 2022. We paid cash dividends of $19.8 million in fiscal 2023, compared to $20.4 million in fiscal 2022.
Net income Net income decreased $20.1 million, or 16.4%, to $102.2 million in fiscal 2022, compared to $122.3 million in fiscal 2021. The impact of foreign currency translation increased net income by $1.1 million. Excluding foreign currency translation, net income decreased $21.2 million as a result of the reasons described above.
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.
Industrial Fiscal Year Ended (in millions) April 30, 2022 May 1, 2021 Net sales $ 318.1 $ 267.9 Gross profit $ 101.5 $ 98.1 As a percent of net sales 31.9 % 36.6 % Income from operations $ 67.1 $ 64.3 As a percent of net sales 21.1 % 24.0 % Net sales Industrial segment net sales increased $50.2 million, or 18.7%, to $318.1 million in fiscal 2022, compared to $267.9 million in fiscal 2021.
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.
Gross profit Automotive segment gross profit decreased $13.4 million, or 8.2%, to $150.0 million in fiscal 2022, compared to $163.4 million in fiscal 2021. Excluding the impact of foreign currency translation, gross profit decreased $14.3 million. Gross profit margins decreased to 19.2% in fiscal 2022, from 21.6% in fiscal 2021.
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.
On June 16, 2022, the Board of Directors authorized an increase in our existing share buyback program under which we may purchase up to an additional $100.0 million of our outstanding common stock, and also extended the expiration from March 31, 2023 to June 14, 2024.
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.
Income from operations Industrial segment income from operations increased $2.8 million, or 4.4%, to $67.1 million in fiscal 2022, compared to $64.3 million in fiscal 2021. Excluding the impact of foreign currency translation, income from operations increased $2.0 million. The increase was primarily due to higher gross profit, partially offset by higher selling and administrative costs.
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.
We have no plans to dispose of any of our foreign subsidiaries and are not recording deferred taxes on outside basis differences in foreign subsidiaries for the sale of a foreign subsidiary. Contingencies. We are subject to various investigations, claims and legal and administrative proceedings covering a wide range of matters that arise in the ordinary course of business activities.
We have no plans to dispose of any of our foreign subsidiaries and are not recording deferred taxes on outside basis differences in foreign subsidiaries for the sale of a foreign subsidiary. Business combinations.
The stronger Chinese renminbi, relative to the U.S. dollar, increased net sales in Asia by $7.6 million. Excluding the impact of foreign currency translation, net sales in Asia increased $19.5 million primarily due to higher electric vehicle product sales volumes, partially offset by lower touchscreen sales volumes.
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.
Hetronic has opposed that petition. The Supreme Court has requested the views of the Solicitor General on the petition for certiorari. Like any judgment, particularly any judgment involving defendants outside of the United States, there is no guarantee that we will be able to collect all or any portion of the judgment.
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.
The increase was primarily due to higher sales in the Automotive and Industrial segments. The COVID-19 pandemic negatively impacted net sales in the first quarter of fiscal 2021. Net sales were favorably impacted by foreign currency translation of $5.5 million, primarily due to the strengthening of the Chinese renminbi relative to the U.S. dollar in fiscal 2022.
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.
Cost of products sold Cost of products sold increased $84.8 million, or 10.4%, to $898.7 million (77.2% of net sales) in fiscal 2022, compared to $813.9 million (74.8% of net sales) in fiscal 2021.
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.
The increase was due to higher product demand. Gross profit Medical segment gross profit was a loss of $0.4 million in fiscal 2022, compared to a loss of $0.3 million in fiscal 2021. Gross profit was impacted by higher material costs and unfavorable sales mix, which offset the increase in net sales.
The decrease was due to lower product demand. Gross profit Medical segment gross profit was a loss of $0.5 million in fiscal 2023, compared to a loss of $0.4 million in fiscal 2022. Gross profit decreased due to lower net sales.
Income from operations Automotive segment income from operations decreased $15.0 million, or 13.9%, to $92.6 million in fiscal 2022, compared to $107.6 million in fiscal 2021. Excluding the impact of foreign currency translation, income from operations decreased $16.2 million. The decrease was primarily due to lower gross profit and higher selling and administrative expenses.
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.
Sales volumes in fiscal 2021 were negatively impacted from the COVID-19 pandemic. Fiscal 2022 net sales benefitted from customer recoveries from spot buys of materials and premium freight costs of $13.2 million (primarily in North America). Excluding foreign currency translation and customer cost recoveries, net sales increased $9.4 million, or 1.2%.
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%.
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. The full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated for these key estimates and assumptions.
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.
Gross profit margin increased to 21.1% in fiscal 2022, from 20.0% in fiscal 2021. The increase was due to higher sales volumes of legacy data solutions products. Income from operations Interface segment income from operations increased $1.0 million, or 11.2%, to $9.9 million in fiscal 2022, compared to $8.9 million in fiscal 2021.
The increase in gross profit margins was due to higher sales volumes and lower restructuring costs. Gross profit in fiscal 2022 included restructuring costs of $1.2 million, compared to $0.1 million in fiscal 2023. Income from operations Industrial segment income from operations increased $26.0 million, or 38.7%, to $93.1 million in fiscal 2023, compared to $67.1 million in fiscal 2022.
Labor costs were higher in fiscal 2022 as fiscal 2021 included the impact of temporary salary reductions and four-day work weeks in response to the COVID-19 pandemic. This was partially offset by lower restructuring costs of $3.5 million. Restructuring costs included within cost of products sold were $1.3 million in fiscal 2022, compared to $4.8 million in fiscal 2021.
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.
Income tax expense Income tax expense increased $3.7 million, or 29.4%, to $16.3 million in fiscal 2022, compared to $12.6 million in fiscal 2021. Our effective tax rate increased to 13.8% in fiscal 2022, compared to 9.3% in fiscal 2021.
Our effective tax rate increased to 14.4% in fiscal 2023, compared to 13.8% in fiscal 2022.
The decrease was primarily due to lower sales volumes of appliance products which were negatively impacted by a shortage of semiconductor chips, partially offset by higher sales volumes of legacy data solutions products. Gross profit Interface segment gross profit increased $0.3 million, or 2.4%, to $12.6 million in fiscal 2022, compared to $12.3 million in fiscal 2021.
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.
Restructuring costs included within selling and administrative expenses were $2.3 million in fiscal 2022, compared to $3.4 million in fiscal 2021. Professional fees decreased $1.8 million mainly due to lower Hetronic-related legal fees. Amortization of intangibles Amortization of intangibles decreased $0.2 million, or 1.0%, to $19.1 million in fiscal 2022, compared to $19.3 million in fiscal 2021.
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 in gross profit margins was primarily due to higher material and other costs associated with supply chain disruptions and product mix, partially offset by higher sales volumes and lower restructuring costs. In fiscal 2022, we recognized $0.1 million of restructuring costs in this segment, compared to $4.8 million in fiscal 2021.
Gross profit margin Gross profit margin was 22.4% of net sales in fiscal 2023, compared to 22.8% of net sales in fiscal 2022. The decrease was due to inflationary pressures on material and other manufacturing costs, partially offset by higher sales volumes.
The weaker euro, relative to the U.S. dollar, decreased net sales in EMEA by $4.5 million. Excluding the impact of foreign currency translation, net sales in EMEA increased $8.7 million primarily due to higher sensor product sales. Net sales in Asia increased $27.1 million, or 19.8%, to $164.1 million in fiscal 2022, compared to $137.0 million in fiscal 2021.
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.
In fiscal 2021, the effective income tax rate was favorably impacted by the amount of income earned in foreign jurisdictions with lower tax rates, tax credits and various deductions allowed in foreign jurisdictions. In addition, the Company received a benefit of approximately $7.2 million related to a favorable tax ruling in a foreign jurisdiction.
In fiscal 2023, the effective income tax rate was favorably impacted by the amount of income earned in foreign jurisdictions with lower tax rates and a tax benefit of $7.3 million associated with the reorganization of a foreign owned subsidiary, partially offset by a reduction in foreign investment tax credits of $5.0 million and non-deductible acquisition costs of $1.4 million.
The decrease was due to higher cash outflows related to changes in operating assets and liabilities. The $69.8 million of cash outflows for operating assets and liabilities in fiscal 2022 was primarily due to higher inventory (as a result of global supply chain and logistics disruptions) and lower accounts payable and other liabilities.
The $3.5 million of cash outflows for operating assets and liabilities in fiscal 2023 was primarily due to higher accounts receivable, prepaid expenses and other assets, partially offset by lower inventory, and higher accounts payable and other liabilities. Investing activities Net cash used in investing activities was $153.1 million in fiscal 2023, compared to $37.4 million in fiscal 2022.
Net foreign exchange losses were $1.9 million in fiscal 2022, compared to $0.3 million in fiscal 2021. In fiscal 2022, we received $10.0 million of government assistance at certain of our international locations with respect to the COVID-19 pandemic, compared to $11.1 million in fiscal 2021. In addition, we received an international government grant of $1.1 million in fiscal 2022.
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.
Interest expense, net Interest expense, net was $3.5 million in fiscal 2022, compared to $5.2 million in fiscal 2021. The decrease was primarily due to lower average borrowings.
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.
For further information, see Note 10, “Debt” to the consolidated financial statements included in this Annual Report. On December 10, 2021, we entered into a First Amendment to the Credit Agreement (“First Amendment”).
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.
The increase was primarily due to higher gross profit and lower selling and administrative expenses. Selling and administrative expenses were lower due to restructuring costs of $0.7 million recognized in this segment in fiscal 2021.
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.
Fiscal 2022 net sales included $7.6 million of customer cost recoveries of premium freight costs. Excluding the impact of foreign currency translation and customer cost recoveries, net sales increased $40.3 million, or 15.0%, due to higher sales volumes of all product categories in the Industrial segment. Sales volumes in fiscal 2021 were negatively impacted by the COVID-19 pandemic.
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.
We may take additional restructuring actions in future periods based upon market conditions and industry trends. As a result of the COVID-19 pandemic, we initiated certain restructuring actions in fiscal 2021 to rationalize our operations, lower our costs and improve financial performance and long-term cash flow generation.
We may take additional restructuring actions in future periods based upon market conditions and industry trends. 19 Table of Contents Outlook Our current expectations for fiscal 2024 are for net sales to be relatively flat compared to fiscal 2023 and lower net income.
We expect that the global health crisis caused by the COVID-19 pandemic will continue to negatively impact our business and results of operations for the foreseeable future.
Update on the Impact of COVID-19 COVID-19 has continued to evolve since it was declared a global pandemic by the World Health Organization in March 2020. We continue to evaluate the nature and extent of the ongoing impacts of COVID-19 on our business, operations, and financial results.
Net sales in North America decreased $5.5 million, or 1.4%, to $400.9 million in fiscal 2022, compared to $406.4 million in fiscal 2021. The decrease was primarily due to lower lighting product sales volumes. Net sales in EMEA increased $4.2 million, or 2.0%, to $216.5 million in fiscal 2022, compared to $212.3 million in fiscal 2021.
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.
Removed
Impact of the COVID-19 Pandemic The COVID-19 pandemic and the ongoing measures to reduce its spread have negatively impacted the global economy, disrupted consumer and customer demand and global supply chains, and resulted in manufacturing inefficiencies and increased freight costs due to global capacity constraints.
Added
Beginning late in the fourth quarter of fiscal 2022 and continuing into fiscal 2023, various regions in China, including regions where we and our customers have operations, were subjected to lockdowns imposed by governmental authorities to mitigate the spread of COVID-19 in those areas. The resulting industry-wide production interruptions adversely impacted our results of operations in fiscal 2023.
Removed
The extent of the impact will depend on a number of evolving and uncertain factors, including the duration and spread of COVID-19 (and its variants), the rate of vaccinations, actions taken by governmental authorities to further restrict business operations and social activity and impose travel restrictions, shifting consumer demand, the ability of our supply chain to deliver in a timely and cost-effective manner, the ability of our employees and manufacturing facilities to operate efficiently and effectively, the continued viability and financial stability of our customers and suppliers and future access to capital.
Added
Global Supply Chain Disruptions Certain direct and indirect adverse impacts of the COVID-19 pandemic have continued to date and are expected to continue in fiscal 2024, including the worldwide semiconductor supply shortage and global supply chain disruptions.
Removed
We continue to focus on effectively managing the unprecedented challenges and uncertainties of the pandemic on a global basis. Management has prioritized the health and safety of our employees and their families. We adopted numerous safety procedures at our global facilities, including hygiene and disinfection protocols, testing and contact tracing, social distancing and wearing personal protective equipment.
Added
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.
Removed
We share best practices throughout our global facilities, resulting in effective and standardized safety guidelines and procedures, updated on a regular basis, promoting the health and safety of our employees.
Added
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.
Removed
These actions included plant consolidations and workforce reductions in the Automotive, Industrial and Interface segments.
Added
Fiscal 2024 sales estimates reflect the full-year inclusion of Nordic Lights and the roll-off of significant programs in the Automotive segment. We expect fiscal 2024 net income to be impacted by additional costs to support new program launches, market headwinds in the higher-margin Industrial segment, higher interest expense and less government assistance.
Removed
Consolidated Results of Operations We maintain our financial records on the basis of a 52 or 53-week fiscal year ending on the Saturday closest to April 30. Fiscal 2022 ended on April 30, 2022 and fiscal 2021 ended on May 1, 2021, which represented 52 weeks of results for each year.
Added
Selling and administrative expenses Selling and administrative expenses increased $20.8 million, or 15.5%, to $154.9 million (13.1% of net sales) in fiscal 2023, compared to $134.1 million (11.5% of net sales) in fiscal 2022. Excluding foreign currency translation, selling and administrative expenses increased $24.6 million.
Removed
Fiscal 2020 ended on May 2, 2020, which represented 53 weeks of results. The following discussions of comparative results among periods should be reviewed in this context.
Added
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.
Removed
Net sales were also favorably impacted by customer recoveries for spot buys of materials and premium freight costs of $22.1 million. Without the impact of foreign currency translation and customer cost recoveries, net sales increased $48.0 million, or 4.4%.
Added
Net foreign exchange losses were $7.1 million in fiscal 2023, compared to $1.9 million in fiscal 2022. Net foreign exchange losses were higher in fiscal 2023 due to lower efficiency in our foreign currency balance sheet remeasurement hedging program.
Removed
The increase was primarily due to higher material, logistics and other operating costs of $88.3 million as a result of higher sales volumes and the impact of global supply chain disruptions and factory inefficiencies. Excluding foreign currency translation, cost of products sold increased $81.4 million.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+3 added−2 removed4 unchanged
Biggest changeWe have outstanding a euro denominated cross-currency swap which is treated as a net investment hedge to reduce our exposure to translational exchange risk. As of April 30, 2022, we recorded a deferred gain, net of tax, of $1.5 million related to the cross-currency swap.
Biggest changeWe have also entered into a euro-denominated cross-currency swap which is designated as a net investment hedge in our euro-denominated subsidiaries.
We seek to manage our foreign exchange risk largely through operational means, including matching revenue with same-currency costs and assets with same-currency liabilities. We currently transact business in eight primary currencies worldwide, of which the most significant are the U.S. dollar, the euro, the Mexican peso, and the Chinese renminbi.
We seek to manage our foreign exchange risk largely through operational means, including matching revenue with same-currency costs and assets with same-currency liabilities. We currently transact business in eight primary currencies worldwide, of which the most significant are the U.S. dollar, the euro, the Chinese renminbi and the Mexican peso.
These raw materials are not rare or unique to our industry. The cost of copper, resins, and other commodities, such as fuel and energy, has fluctuated in recent years due to changes in global supply and demand. The cost of copper increased significantly in fiscal 2022. Our gross margins could be affected if these types of costs continue to fluctuate.
These raw materials are not rare or unique to our industry. The cost of copper, resins, and other commodities, such as fuel and energy, has fluctuated in recent years due to changes in global supply and demand. Our gross margins could be affected if these types of costs continue to fluctuate.
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 30, 2022, the cumulative net currency translation adjustments decreased shareholders’ equity by $30.5 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 29, 2023, the cumulative net currency translation adjustments decreased shareholders’ equity by $19.8 million.
Based on borrowings outstanding under our senior unsecured credit agreement at April 30, 2022, net of the interest rate swaps, we estimate that a 1% increase in interest rates would result in increased annual interest expense of $1.1 million. Commodity price risk We are exposed to commodity price risk primarily on our raw material purchases.
Based 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.
In April 2021, we began to 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 30, 2022.
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.
As of April 30, 2022, the notional value of these outstanding contracts was $38.6 million, and the net unrealized loss was $0.2 million. The impact of a change in the foreign currency exchange rates on our foreign currency forward contracts will generally be offset against the gain or loss from the re-measurement of the underlying balance sheet exposure.
The impact of a change in the foreign currency exchange rates on our foreign currency forward contracts will generally be offset against the gain or loss from the re-measurement of the underlying balance sheet exposure.
Interest rate risk We are exposed to interest rate risk on borrowings under our senior unsecured credit agreement which is based on LIBOR. As of April 30, 2022, we had $206.3 million of borrowings under our senior unsecured 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 29, 2023, we had $305.4 million of borrowings under our Credit Agreement.
A portion of our balance sheet is exposed to foreign currency exchange rate fluctuations, which may result in non-operating foreign currency exchange gains or losses upon remeasurement.
A portion of our balance sheet is exposed to foreign currency exchange rate fluctuations, which may result in non-operating foreign currency exchange gains or losses upon remeasurement. We use foreign currency forward contracts to provide an economic hedge against balance sheet exposure to certain monetary assets and liabilities denominated in currencies other than the functional currency of the subsidiary.
Removed
In fiscal 2022, we reported foreign currency exchange losses of approximately $1.9 million, which were primarily attributed to the remeasurement of net monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries.
Added
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.
Removed
In January 2021, we began to use foreign currency forward contracts to provide an economic hedge against balance sheet exposure to certain monetary assets and liabilities denominated in currencies other than the functional currency of the subsidiary. The forward contracts have a maturity of less than three months and are not designated as hedging instruments.
Added
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.
Added
The effective portion of the gains or losses designated as net investment hedges are recognized within the cumulative translation adjustment component in the consolidated statements of comprehensive income to offset changes in the value of the net investment in these foreign currency-denominated operations.

Other MEI 10-K year-over-year comparisons