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. You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes included in this Annual Report. This discussion and analysis of our financial condition and results of operations also contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements because of a variety of factors, including those set forth under Item 1A, “Risk Factors” of this Annual Report. We undertake no duty to update any such forward-looking statements to conform to actual results or changes in our expectations.
Executive Overview
Our Business
We are a leading global supplier of custom engineered solutions with sales, engineering, and manufacturing locations in North America, Europe, the Middle East, and Asia. We design, engineer, and manufacture mechatronic products for Original Equipment Manufacturers (“OEMs”) and tiered suppliers across mobility, industrial, and commercial markets. Our capabilities include power distribution, including busbars, smart connect systems, battery disconnect units, and integrated circuit boards; as well as user interface components, specialized light-emitting diode (“LED”) lighting solutions, and sensor applications.
Our products are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus and rail), cloud computing and data center infrastructure, and construction equipment. Our business is managed on a segment basis, with those segments being Automotive, Industrial and Interface. In the fourth quarter of fiscal 2026, we divested our dataMate business and the consumer appliance business is winding down as programs roll-off, both of which are included in our Interface segment. We reported a fourth segment, Medical, through fiscal 2024. For more information regarding the business and products of these segments, see Item 1, “Business” of this Annual Report.
Trends Affecting Our Business
The following trends have significantly affected and may continue to affect our business, financial condition and results of operations. See the risk factors identified under Item 1A, “Risk Factors” of this Annual Report for more information.
Trade Policy/Tariffs
We are exposed to market risk from duties assessed on raw materials, component parts, and finished goods imported into the U.S. Beginning in 2025, the U.S. implemented new tariffs across multiple jurisdictions in which we operate, including broad country-level measures and product-specific tariffs affecting light and commercial vehicles, component parts, steel and aluminum, and other key inputs we source to manufacture our parts. These actions prompted retaliatory measures by certain trading partners and the long-term state of global trade policy remains unsettled.
Given our manufacturing operations across multiple jurisdictions, including Canada, China, Egypt, Europe, and Mexico, the continuation or expansion of tariffs and other trade barriers could increase input costs, pressure margins or affect customer demand. During fiscal 2026, we mitigated these effects through a variety of strategies, including negotiated price adjustments and ongoing cost recovery arrangements with our customers, as well as supply chain optimization initiatives. To the extent similar mitigation efforts are insufficient, new or expanded tariffs could have a material adverse effect on our results of operations, financial position, and cash flows.
Macroeconomic Conditions
The global economy continues to experience volatile disruptions including to the commodity, labor and transportation markets, arising from a combination of geopolitical events and various economic and financial factors. These disruptions have affected our operations and may continue to affect our business, financial condition and results of operations. As a result of continued inflation, we have implemented measures to mitigate certain adverse effects of higher costs. However, we have been unable to fully mitigate or pass through the increases in our costs to our customers, which will likely continue in the future.
Electrification
Our business in the future will be affected by the broad trend of electrification. The adoption of EVs has been slower than anticipated, in light of recent U.S. government policy changes, including the termination of certain consumer tax incentives for EV purchases and certain of our customers have announced shifts to their EV strategies. As a result of these changes in EV consumer demand, we may experience production inefficiencies, including underutilized capacity and workforce disruptions, particularly if we are unable to redeploy excess capacity, which could affect our financial condition, results of operations, and cash flows in the future.
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Global Supply Chain Disruptions
Although we saw improvements in our supply chain in fiscal 2026, including easing of the worldwide semiconductor supply shortage, new supply chain disruptions may occur in the future. In addition, we have experienced, and may continue to experience, business interruptions, including customer shutdowns and increased material and logistics costs and labor shortages. Changes in government regulations in areas including, but not limited to, trade and tariff regulations as noted above, could also increase our costs.
The US-Israeli strikes in Iran and the Iranian retaliatory strikes in the Middle East have also affected the global economy and given rise to potential global security issues that may adversely affect international business and economic conditions. This conflict in the Middle East may cause additional disruption in the supply chains, including logistics issues and inflationary challenges, which may adversely affect our business and results of operations. Additionally, certain of our customers and suppliers may be negatively affected by these events, which in turn may negatively affect the markets where we do business.
We continue to work closely with suppliers and customers to minimize the potential adverse effects from global supply chain disruptions. However, if we are not able to mitigate any direct or indirect supply chain disruptions, this may have a material adverse effect on our financial condition, results of operations and cash flows.
Consolidated Results of Operations
Our fiscal year ends on the Saturday closest to April 30 of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. The fiscal year ended May 2, 2026 was a 52-week fiscal year. The fiscal year ended May 3, 2025 was a 53-week fiscal year. The fiscal year ended April 27, 2024 was a 52-week fiscal year. A detailed comparison of our results of operations between fiscal 2025 and fiscal 2024 can be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our fiscal 2025 Annual Report on Form 10-K filed with the SEC on July 9, 2025.
The table below compares our results of operations between fiscal 2026 and fiscal 2025:
Fiscal Year Ended
(in millions) (52 Weeks) (53 Weeks)
Selling and administrative expenses 170.3 163.9
Amortization of intangibles 23.1 23.4
Interest expense, net 23.3 22.0
Other expense (income), net (3.8 ) 4.2
Income tax expense (benefit) 25.0 12.5
Net income (loss) $ (35.7 ) $ (62.6 )
Net sales
Net sales decreased $28.9 million, or 2.8%, to $1,019.2 million in fiscal 2026, compared to $1,048.1 million in fiscal 2025. Foreign currency translation increased sales by $36.3 million. Excluding the effects of foreign currency translation, net sales decreased $65.2 million. The decrease was driven by program roll-offs in the Automotive and Interface segments, partially offset by customer recoveries of $22.5 million in the Automotive segment and higher sales volume in the Industrial segment. Additionally, there was one less week within fiscal 2026 as compared to fiscal 2025.
Cost of products sold
Cost of products sold decreased $67.7 million, or 7.7%, to $817.0 million (80.2% of net sales) in fiscal 2026, compared to $884.7 million (84.4% of net sales) in fiscal 2025. Foreign currency translation increased cost of products sold by $26.3 million. Excluding foreign currency translation, cost of products sold decreased $94.0 million. The decrease was primarily due to lower sales volume and product mix, improved operational efficiencies, including material, scrap, and freight, and lower inventory adjustments. Restructuring and impairment charges included within cost of products sold were $0.8 million in fiscal 2026, compared to $1.1 million in fiscal 2025.
Gross profit margin
Gross profit margin was 19.8% of net sales in fiscal 2026, compared to 15.6% of net sales in fiscal 2025. The increase in gross profit margin was primarily a result of customer recoveries and improved operational efficiencies in fiscal 2026.
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Selling and administrative expenses
Selling and administrative expenses increased $6.4 million, or 3.9%, to $170.3 million (16.7% of net sales) in fiscal 2026, compared to $163.9 million (15.6% of net sales) in fiscal 2025. Foreign currency translation increased selling and administrative expenses by $3.1 million. Excluding foreign currency translation, selling and administrative expenses increased $3.3 million. The increase was primarily the result of higher employee compensation costs and restructuring charges, partially offset by lower professional fees.
Restructuring and impairment charges included within selling and administrative expenses were $4.2 million in fiscal 2026, compared to $1.6 million in fiscal 2025. For fiscal 2026, restructuring and asset impairment charges included $1.1 million in asset impairments associated with the relocation of our corporate headquarters. Additionally, there was $2.8 million of expenses incurred for transaction costs and other strategic initiatives.
Professional fees in fiscal 2025 included $9.8 million for consulting and interim executive services provided by AlixPartners.
Amortization of intangibles
Amortization of intangibles decreased $0.3 million, or 1.3%, to $23.1 million in fiscal 2026, compared to $23.4 million in fiscal 2025. The decrease was a result of certain intangible assets being fully amortized in fiscal 2026.
Interest expense, net
Interest expense, net was $23.3 million in fiscal 2026, compared to $22.0 million in fiscal 2025. The increase was primarily due to the unfavorable effects of foreign exchange rates on the euro denominated interest.
Other expense (income), net
Other income, net was $3.8 million in fiscal 2026, compared to other expense, net of $4.2 million in fiscal 2025. In the fourth quarter of fiscal 2026, we divested our dataMate business and recognized a gain on the sale of $11.2 million. Net foreign exchange loss was $7.7 million in fiscal 2026, compared to $5.5 million in fiscal 2025. In addition, other income, net includes non-cash charges for unamortized debt issuance costs which were $0.6 million for fiscal 2026 compared to $1.2 million for fiscal 2025.
Income tax expense (benefit)
Income tax expense was $25.0 million in fiscal 2026, compared to an income tax expense of $12.5 million in fiscal 2025. The effective tax rate in fiscal 2026 differs from the U.S. federal statutory tax rate of 21% primarily due to an increase in a valuation allowance for deferred tax assets, an unfavorable effect from global intangible low-tax income, and Pillar 2 top-up tax. The effective tax rate in fiscal 2025 differs from the U.S. federal statutory tax rate of 21% primarily due to an increase in a valuation allowance for deferred tax assets and an unfavorable impact from global intangible low-tax income, partially offset by a decrease in tax reserves.
Net loss
Net loss was $35.7 million in fiscal 2026, compared to $62.6 million in fiscal 2025. The net loss was attributable to the aforementioned items.
Operating Segments
Automotive
Fiscal Year Ended
(in millions) (52 Weeks) (53 Weeks)
Net sales
Europe, the Middle East & Africa (“EMEA”) 246.5 239.5
As a percent of net sales 5.9 % 0.9 %
Income (loss) from operations $ (30.1 ) $ (47.7 )
As a percent of net sales (6.4 )% (9.4 )%
Net sales
Automotive segment net sales decreased $41.2 million, or 8.1%, to $467.7 million in fiscal 2026, compared to $508.9 million in fiscal 2025. Excluding foreign currency translation, net sales decreased $59.3 million. There was one less week within fiscal 2026 as compared to fiscal 2025.
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Net sales in North America decreased $49.0 million to $188.1 million in fiscal 2026, compared to $237.1 million in fiscal 2025. The decrease was due to program roll-offs, partially offset by customer recoveries of $22.5 million and new program launches. Net sales in EMEA increased $7.0 million to $246.5 million in fiscal 2026, compared to $239.5 million in fiscal 2025. Excluding foreign currency translation, net sales in EMEA decreased $10.4 million primarily due to lower sales volumes of sensor products. Net sales in Asia increased $0.8 million, or 2.5%, to $33.1 million in fiscal 2026, compared to $32.3 million in fiscal 2025. Excluding foreign currency translation, net sales in Asia increased $0.1 million.
Gross profit
Automotive segment gross profit increased $23.1 million to $27.8 million in fiscal 2026, compared to $4.7 million in fiscal 2025. Gross profit margins increased to 5.9% in fiscal 2026, from 0.9% in fiscal 2025. Excluding the effects of foreign currency translation, gross profit increased $18.9 million. The increase in gross profit was due to customer recoveries of $22.5 million, lower adjustments to inventory, and improved operational efficiencies, which was offset by program roll-offs.
Loss from operations
Automotive segment loss from operations was $30.1 million in fiscal 2026, compared to $47.7 million in fiscal 2025. Excluding the effects of foreign currency translation, loss from operations decreased $15.3 million. The increase was primarily due to higher gross profit and lower selling and administrative expenses.
Industrial
Fiscal Year Ended
(in millions) (52 Weeks) (53 Weeks)
As a percent of net sales 31.9 % 29.6 %
Income (loss) from operations $ 114.6 $ 90.0
As a percent of net sales 21.9 % 18.5 %
Net sales
Industrial segment net sales increased $36.9 million, or 7.6%, to $524.3 million in fiscal 2026, compared to $487.4 million in fiscal 2025. Excluding foreign currency translation, net sales increased $18.7 million. The increase was due to higher sales volumes for power distribution products and higher volumes for lighting products in the off-highway market, partially offset by lower sales volumes for lighting products in the commercial vehicle market.
Gross profit
Industrial segment gross profit increased $23.2 million to $167.4 million in fiscal 2026, compared to $144.2 million in fiscal 2025. Gross profit margins increased to 31.9% in fiscal 2026, compared to 29.6% in fiscal 2025. Excluding foreign currency translation, gross profit increased $17.3 million. Gross profit improved due to higher sales volumes and improved operational efficiencies, including material, scrap, and freight.
Income from operations
Industrial segment income from operations increased $24.6 million to $114.6 million in fiscal 2026, compared to $90.0 million in fiscal 2025. The increase was primarily due to higher gross profit and lower selling and administrative expenses.
Interface
Fiscal Year Ended
(in millions) (52 Weeks) (53 Weeks)
As a percent of net sales 23.9 % 24.5 %
Income (loss) from operations $ 5.0 $ 10.3
As a percent of net sales 18.4 % 19.9 %
Net sales
Interface segment net sales decreased $24.6 million, or 47.5%, to $27.2 million in fiscal 2026, compared to $51.8 million in fiscal 2025. The decrease in net sales was primarily due to lower sales volumes due from program roll-off as the consumer appliance business winds down. In the fourth quarter of fiscal 2026, we divested our dataMate business.
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Gross profit
Interface segment gross profit decreased $6.2 million to $6.5 million in fiscal 2026, compared to $12.7 million in fiscal 2025. Gross profit margin decreased to 23.9% in fiscal 2026, from 24.5% in fiscal 2025. The decrease in gross profit margins was primarily due to lower sales volumes and product mix.
Income from operations
Interface segment income from operations decreased $5.3 million, or 51.5%, to $5.0 million in fiscal 2026, compared to $10.3 million in fiscal 2025. The decrease was primarily due to lower gross profit.
Financial Condition, Liquidity and Capital Resources
Our liquidity requirements are primarily to fund our business operations, including capital expenditures and working capital requirements, as well as to fund debt service requirements and dividends approved by our board. We continue to evaluate opportunities to refine our portfolio and/or geographic footprint. Our primary sources of liquidity are cash flows from operations, existing cash balances and borrowings under our senior secured credit agreement. We believe our liquidity position will be sufficient to fund our existing operations and current commitments for at least the next twelve months. However, our ability to do so depends upon a number of operational and economic factors, many of which are beyond our control. If economic conditions remain affected for longer than we expect due to supply chain disruptions, inflationary pressure or other geopolitical risks, or if we are unable to maintain compliance with our debt covenants, our liquidity position could be severely affected.
Our revolving credit facility matures on October 31, 2027. While we currently intend to refinance or extend our obligations under this revolving credit agreement, there can be no assurance that we will be able to do so on favorable terms. Any refinancing or extension may result in higher interest expense, more restrictive covenants or the requirement to pledge additional collateral. If we are unable to refinance or extend these maturities, or if refinancing is only available on unfavorable terms, our liquidity position could be materially weakened, which could limit our ability to fund operations, execute our business strategy, or meet other obligations as they come due.
At May 2, 2026, we had $139.6 million of cash and cash equivalents, of which $56.6 million was held in subsidiaries outside the U.S. Cash held by these subsidiaries is used to fund operational activities and can be repatriated, primarily through the payment of dividends and the repayment of intercompany loans, without creating material additional income tax expense. Subsequent to May 2, 2026, we elected to make a non-mandatory prepayment of $20.0 million on our outstanding borrowings under the Amended Credit Agreement using cash on hand.
Repurchases of Common Stock
On March 31, 2021, as subsequently amended on June 16, 2022, the Board of Directors authorized the purchase of up to $200.0 million of our outstanding common stock through June 14, 2024 (the “2021 Buyback Authorization”). On June 13, 2024, the Board of Directors authorized a new share buyback authorization, commencing on June 17, 2024, for the purchase of up to $200.0 million (the “2024 Buyback Authorization”) of our outstanding common stock through June 17, 2026. Purchases could have been 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 May 2, 2026, a total of 3,553,961 shares had been purchased under the 2021 Buyback Authorization at a total cost of $134.6 million since the commencement of that authorization. As of May 2, 2026, $200.0 million remained available under the 2024 Buyback Authorization to repurchase shares. The 2024 Buyback Authorization expired on June 17, 2026.
Amended Credit Agreement
On October 31, 2022, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the Lenders and other parties named therein. On March 6, 2024, the Company entered into a First Amendment to Second Amended and Restated Credit Agreement (the “First Amendment”) and on July 9, 2024, the Company entered into a Second Amendment to Second Amended and Restated Credit Agreement and First Amendment to Second Amended and Restated Guaranty (the “Second Amendment”) among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and other parties thereto.
Among other things, the Second Amendment (i) reduced the revolving credit commitments from $750 million to $500 million (which commitments were subsequently further reduced, as discussed below), (ii) granted a security interest in substantially all of the personal property of the Company and its U.S. subsidiaries that are guarantors, including 100% of the equity interests of their respective U.S. subsidiaries and 65% of the equity interests of their respective foreign subsidiaries (or such greater amount to the extent such pledge could not reasonably cause adverse tax consequences), (iii) amended the consolidated interest coverage ratio covenant for each quarter in fiscal 2025 to relax that covenant to some extent for each of those quarters, (iv) amended the consolidated leverage ratio covenant for the quarter ending July 27, 2024 and each subsequent fiscal quarter to relax that covenant to some extent for each of those quarters, (v) amended certain interest rate provisions, (vi) added a requirement to provide monthly financial statements to the lenders through the period ending August 2, 2025, (vii) decreased the general basket exceptions to certain covenants
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restricting certain investments by, liens on and indebtedness of the Company and its subsidiaries for specified periods of time, (viii) increased, for fiscal 2025, the general basket exception to a covenant restricting certain dispositions of property by the Company and its subsidiaries, (ix) added an “anti-cash hoarding” requirement, applicable during the period from the effective date of the Second Amendment until the earlier to occur of (a) the delivery of financial statements and a compliance certificate for the fiscal quarter ending August 2, 2025 and (b) the delivery of compliance certificates for two consecutive fiscal quarters demonstrating that our consolidated leverage ratio as of the last day of such fiscal quarters was less than 3.00:1.00, that if we have cash on hand in the U.S. (subject to certain exceptions) of more than $65 million for 10 consecutive business days, we shall prepay the indebtedness under the credit facility by the amount of such excess and (x) made certain other changes to the investment, restricted payment and indebtedness baskets.
On July 7, 2025, the Company entered into a Third Amendment to Second Amended and Restated Credit Agreement (the “Third Amendment”) among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and other parties thereto. Among other things, the Third Amendment (i) reduced the revolving credit commitments from $500 million to $400 million, (ii) eliminated the Company’s option to increase the revolving credit commitments and/or add one or more tranches of term loans under the credit facility from time to time subject to certain limitations and conditions including approval of certain lenders, (iii) amended the consolidated interest coverage ratio covenant for the quarters ending August 2, 2025, November 1, 2025, January 31, 2026 and May 2, 2026 to relax that covenant to some extent for each of those quarters, (iv) amended the consolidated leverage ratio covenant for the quarters ending August 2, 2025, November 1, 2025, January 31, 2026, May 2, 2026 and August 1, 2026 to relax that covenant to some extent for each of those quarters, (v) amended the definition of “Consolidated EBITDA,” to include an add back for a portion of the inventory write-down taken in the fourth quarter of fiscal 2025, (vi) increased the interest rate during the period from July 7, 2025 to the date that financial statements and a compliance certificate are delivered for the fiscal quarter ending October 31, 2026 (such period, the “Third Amendment Period”), (vii) changed the commitment fee payment during the Third Amendment Period, (viii) extended, through the maturity date, the requirement to provide monthly financial statements to the lenders, (ix) restricted or decreased, during the Third Amendment Period, the amount of certain exceptions to covenants restricting liens on, investments by and indebtedness of the Company and its subsidiaries, (x) limited to $2.5 million, in any fiscal quarter during the Third Amendment Period, the general basket exception to a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries, while allowing under that general basket exceptions up to an aggregate of $25 million of restricted payments during any other period, (xi) extended, through the maturity date, an “anti-cash hoarding” requirement contained in the Second Amendment such that if we have cash on hand in the U.S. (subject to certain exceptions) of more than $65 million for 10 consecutive business days, we will be required to prepay the indebtedness under the credit facility by the amount of such excess, (xii) eliminated, during the Third Amendment Period, the investment, restricted payment and indebtedness baskets that had allowed for unlimited investments, restricted payments and indebtedness, as applicable, so long as (among other requirements) the Company met certain pro forma consolidated leverage ratio tests and (xiii) waived any default or event of default that may have occurred due to non-compliance with the consolidated interest coverage ratio covenant and the consolidated leverage ratio covenant for the fiscal year ended May 3, 2025 as calculated using the definition of “Consolidated EBITDA” that was in effect before giving effect to the Third Amendment.
As of August 2, 2025, the Company was not in compliance with a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries contained in the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) for the quarter ended August 2, 2025. On September 8, 2025, the Company entered into a Waiver Letter (the “Waiver Letter”) among the Company, Bank of America, N.A., as Administrative Agent, and the other Lenders party thereto. Among other things, the Waiver Letter (i) acknowledged that an event of default under the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) occurred as the result of the Company making approximately $2.8 million of restricted payments during the quarter ended August 2, 2025, which was in excess of the $2.5 million general basket exception to a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries during the quarter ended August 2, 2025, (ii) reduced, for the quarter ending November 1, 2025, the general basket exception to a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries by the amount of excess restricted payments made during the quarter ended August 2, 2025 (which change reduced such basket exception from $2.5 million to approximately $2.2 million for the quarter ending November 1, 2025), and (iii) waived the acknowledged event of default.
The Credit Agreement, as amended by the First Amendment, the Second Amendment, the Third Amendment and the Waiver Letter is referred to herein as the “Amended Credit Agreement.”
The Amended Credit Agreement provides for a secured multicurrency revolving credit facility of $400 million and matures on October 31, 2027.
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The Second Amendment was accounted for as a debt modification, which resulted in a non-cash loss of $1.2 million in fiscal 2025 related to the partial write-off of unamortized debt issuance costs as a result of the reduction in the credit facility size from $750 million to $500 million in the Second Amendment (subsequently reduced further in the Third Amendment). The non-cash loss was recognized in other expense, net in the Company’s consolidated statement of operations. Additionally, the Company incurred debt issuance costs of $1.8 million associated with the Second Amendment which were capitalized and, along with the current unamortized debt issuance costs, are being amortized to interest expense on a straight-line basis over remaining term of the Amended Credit Agreement.
The Third Amendment was accounted for as a debt modification, which resulted in a non-cash loss of $0.6 million in fiscal 2026 related to the partial write-off of unamortized debt issuance costs as a result of the reduction in the credit facility size. The non-cash loss was recognized in other expense, net in the Company’s consolidated statement of operations. Additionally, the Company incurred debt issuance costs of $1.6 million associated with the Third Amendment which were capitalized and, along with the current unamortized debt issuance costs, are being amortized to interest expense on a straight-line basis over remaining term of the Amended Credit Agreement.
Loans denominated in U.S. dollars under the Amended Credit Agreement bear interest at either (a) an adjusted base rate or (b) an adjusted term Secured Overnight Financing Rate (“SOFR”) rate or term SOFR daily floating rate (in each case, as determined in accordance with the provisions of the Amended Credit Agreement) in each case plus an additional applicable rate (the “Applicable Rate”) ranging (subject to the last sentence of this paragraph) between 0.375% and 2.00%, in the case of adjusted base rate loans, and between 1.375% and 3.00%, in the case of adjusted term SOFR rate loans and term SOFR daily floating rate loans. Loans denominated (a) in euros will bear interest at the Euro Interbank Offered Rate, (b) in pounds sterling will bear interest at the Sterling Overnight Index Average Reference Rate, (c) in Singapore dollars will bear interest at the Singapore Interbank Offered Rate, (d) in Canadian dollars will bear interest at the forward-looking term rate based on the Canadian Overnight Repo Rate Average and (e) in Hong Kong dollars will bear interest at the Hong Kong Interbank Offered Rate (in each case, as determined in accordance with the provisions of the Amended Credit Agreement), in each case plus an Applicable Rate ranging (subject to the last sentence of this paragraph) between 1.375% and 3.00%. The Applicable Rate is set based on the Company’s consolidated leverage ratio, except that during the Third Amendment Period, the Applicable Rate shall be (x) 3.50% in the case of adjusted term SOFR rate loans, term SOFR daily floating rate loans and any loans denominated in a foreign currency and (y) 2.50% in the case of adjusted base rate loans, in each case regardless of the Company’s consolidated leverage ratio.
As of May 2, 2026, the outstanding balance under the revolving credit facility was $326.4 million, which included $299.4 million (€255.3 million) of euro-denominated borrowings and $27 million of U.S. dollar denominated borrowings. The Amended Credit Agreement contains various representations and warranties, financial covenants (including covenants requiring us to maintain compliance with a minimum consolidated interest coverage ratio and a maximum consolidated leverage ratio, in each case as of the end of each fiscal quarter of the Company), restrictive and other covenants, and events of default. The covenants in the Amended Credit Agreement include an “anti-cash hoarding” requirement, as discussed above.
For further information about the Amended Credit Agreement, see Note 10, “Debt” to the consolidated financial statements included in this Annual Report. As of May 2, 2026, we were in compliance with all the covenants in the Amended Credit Agreement.
Although we currently anticipate, based on our current projections and analyses, that we will be in compliance with the amended financial covenants contained in the Amended Credit Agreement, no assurance can be given that we will be and remain in compliance with such covenants in the future. Factors that could increase our risk of future non-compliance include those identified in Item 1A, “Risk Factors” of this Annual Report.
Cash Flows
Fiscal Year Ended
(in millions) (52 Weeks) (53 Weeks)
Operating activities:
Changes in operating assets and liabilities 5.8 3.7
Net cash provided (used) by operating activities 38.0 26.4
Net cash provided (used) by investing activities 1.3 (32.9 )
Net cash provided (used) by financing activities (14.2 ) (58.9 )
Increase (decrease) in cash and cash equivalents 36.0 (57.9 )
Cash and cash equivalents at beginning of the period 103.6 161.5
Cash and cash equivalents at end of the period $ 139.6 $ 103.6
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Operating activities
Net cash provided by operating activities increased $11.6 million to $38.0 million in fiscal 2026, compared to $26.4 million in fiscal 2025. The increase was due to higher cash inflows related to changes in operating assets and liabilities and lower net loss adjusted for non-cash items.
Investing activities
Net cash provided by investing activities was $1.3 million in fiscal 2026, compared to net cash used by investing activities of $32.9 million in fiscal 2025. Capital expenditures in fiscal 2026 were $22.4 million, compared to $41.6 million in fiscal 2025. In the fourth quarter of fiscal 2026, we divested the dataMate business and received cash proceeds of $15.2 million. Additionally, we received $5.3 million of cash proceeds from the sale of non-core assets in fiscal 2026 compared to $5.6 million in fiscal 2025.
In fiscal 2025, we received proceeds of $3.1 million from the settlement of a net investment hedge.
Financing activities
Net cash used by financing activities was $14.2 million in fiscal 2026, compared to $58.9 million in fiscal 2025. Cash dividends of $8.3 million were paid in fiscal 2026, compared to $20.4 million in fiscal 2025. In fiscal 2026, there were net repayments of borrowings of $2.7 million, compared to net repayments of borrowings of $30.6 million in fiscal 2025. In fiscal 2026, taxes paid related to net share settlement of equity awards was $1.4 million, compared to $4.3 million in fiscal 2025. In fiscal 2026, debt issuance costs paid were $1.6 million, compared to $1.8 million in fiscal 2025.
In fiscal 2025, cash paid for share repurchases was $1.6 million.
Contractual Obligations
The following table summarizes our significant known contractual cash obligations and commercial commitments as of May 2, 2026:
Payments Due By Period
(in millions) Total Less than 1 year 1-3 years 3-5 years More than 5 years
Finance leases $ 0.4 $ 0.2 $ 0.1 $ 0.1 $ —
Deferred compensation 8.8 8.8 — — —
(1) Assumes the outstanding borrowings under the revolving credit facility will be repaid upon maturity of the credit agreement in October 2027.
(2) Based on interest rates in effect as of May 2, 2026 (including the interest rate swap).
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined under SEC rules.
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Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires that we make estimates and assumptions that can affect reported amounts and disclosures in the consolidated financial statements. In preparing our consolidated financial statements, we have made our best estimates and judgments of certain amounts included in the consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. Due to the inherent uncertainty involved in developing estimates, actual results in future periods could differ from the original estimates. We believe that of the significant accounting policies described in Note 1, “Description of Business and Summary of Significant Accounting Policies” to the consolidated financial statements in this Annual Report, the following involve a significant level of estimation uncertainty.
Goodwill. Goodwill is tested for impairment during the fourth quarter of each year, or more frequently if events and circumstances indicate goodwill might be impaired. The assessment of impairment may first consider qualitative factors including, but not limited to, the results of prior quantitative tests performed, changes in the carrying amount of the reporting unit, recent and projected financial performance, and macroeconomic and industry conditions. We consider the qualitative factors and weight of the evidence obtained to determine if it is more likely than not that a reporting unit’s fair value is less than the carrying amount.
For the quantitative assessment, we utilize either, or a combination of, the income approach and market approach to estimate the fair value of the reporting unit. The income approach uses a discounted cash flow method, and the market approach uses valuation multiples observed for the reporting unit’s guideline public companies. The most significant inputs in estimating the fair value of a reporting unit under the income approach are (i) earnings before interest, taxes, depreciation and amortization (“EBITDA”) margin, (ii) revenue growth rates, and (iii) the discount rate. Management’s estimates of EBITDA margins and revenue growth rates take into consideration business and market conditions for the countries and markets in which the reporting unit operates. The discount rate is based on a market-participant, risk-adjusted weighted average cost of capital, which considers industry specific rates of return on debt and equity capital for a target industry capital structure, adjusted for risks associated with business size, geography and other factors specific to the reporting unit. Projected EBITDA margins and revenue growth rates, especially in the outer years of a forecast, involve a greater degree of uncertainty. Further, a future change in the discount rate, as a result of a change in economic conditions or otherwise, could result in the carrying values of the reporting units exceeding their respective fair values.
While we believe the assumptions and estimates used to determine the estimated fair values are reasonable, due to the many variables inherent in estimating fair value and the relative size of the goodwill, differences in assumptions could have a material effect on the results of our analysis.
At the beginning of the fourth quarter of fiscal 2026, we performed a quantitative goodwill impairment analysis for our Grakon Industrial and Nordic Lights reporting units. Based on this analysis, we determined that the fair value of both of these reporting units was in excess of their carrying values. The fair value of the Nordic Lights reporting unit exceeded its carrying value by more than 10%, whereas the Grakon Industrial reporting unit exceeded its carrying value by less than 10%. Refer to Note 7, “Goodwill and Intangible Assets”, in our consolidated financial statements for additional information regarding our goodwill and other intangible assets.
Impairment of long-lived assets. We monitor our long-lived and definite-lived intangible assets for impairment indicators on an on-going basis. If an impairment indicator exists, we test the long-lived asset group for recoverability by comparing the undiscounted cash flows expected to be generated from the long-lived asset group to its net carrying value. If the net carrying value of the asset group exceeds the undiscounted cash flows, the asset group is written down to its fair value and an impairment loss is recognized. Even if an impairment charge is not recognized, a reassessment of the useful lives over which depreciation or amortization is being recognized may be appropriate based on our assessment of the recoverability of these assets.
The basis of a recoverability test is our annual budget and long-range plan. This includes a projection of future cash flows based on new products, awarded business, customer commitments, and independent market data, which requires us to make significant assumptions and estimates about the extent and timing of future cash flows and revenue growth rates. The key factors that affect our estimates are (i) future production estimates; (ii) customer preferences and decisions; (iii) product pricing; (iv) manufacturing and material cost estimates; and (v) product life / business retention. These estimates and assumptions are subject to a high degree of uncertainty affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts.
While we believe the projections of anticipated future cash flows and related assumptions are reasonable, differences in assumptions could have a material effect on the results of our analysis.
Income taxes. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. In calculating our effective income tax rate, we make judgments regarding certain tax positions, including the timing and amount of deductions and allocations of income among various tax jurisdictions. When determining whether we will be able to realize deferred tax assets, judgment is used to evaluate the positive and negative evidence, including forecasting taxable income using historical and future operating results.
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The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We use a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured and tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made.
We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We evaluate our ability to realize the tax benefits associated with deferred tax assets by assessing the adequacy of future expected taxable income, including the reversal of existing temporary differences, historical and projected operating results, and the availability of prudent and feasible tax planning strategies. As of May 2, 2026, we had a valuation allowance of $21.1 million. In the event our operating performance improves or deteriorates in a filing jurisdiction or entity, future assessments could conclude a smaller or larger valuation allowance will be needed. Due to the complexity of some of these uncertainties, the ultimate resolution may be materially different from the current estimate.
Some or all of management’s judgments are subject to review by the taxing authorities. If one or more of the taxing authorities were to successfully challenge our right to realize some or all of the tax benefit we have recorded, and we were unable to realize this benefit, it could have a material adverse effect on our financial results and cash flows. Further, if we are unable to generate sufficient future taxable income, there is a material change in the actual effective tax rates, a change to the time period within which the underlying temporary differences become taxable or deductible, or if the tax laws change unfavorably, then we could be required to increase the valuation allowance against deferred tax assets, resulting in an increase in income tax expense and the effective tax rate.
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.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks from foreign currency exchange, interest rates, and commodity prices, which could affect our operating results, financial position and cash flows. We manage a portion of these risks through use of derivative financial instruments in accordance with our policies. We do not enter into derivative financial instruments for speculative or trading purposes.
Foreign currency risk
We are exposed to foreign currency risk on sales, costs and assets and liabilities denominated in currencies other than the U.S. dollar. 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.
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. The forward contracts have a maturity of less than three months and are not designated as hedging instruments. As of May 2, 2026, the notional value of these outstanding contracts was $154.9 million. These hedges are intended to reduce, but may not entirely eliminate, foreign currency exchange risk. 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 translation of the assets and liabilities of our international subsidiaries is made using the foreign currency exchange rates as of the end of the reporting period. Translation adjustments are not included in determining net (loss) income but are included in accumulated other comprehensive 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 May 2, 2026, the cumulative net currency translation adjustments decreased shareholders’ equity by $10.3 million. As described in Note 8, “Derivative Financial Instruments and Hedging Activities” to our consolidated financial statements included in this Annual Report, in order to manage certain translational exposure to the euro, in the past we entered into cross-currency swaps or designated euro-denominated borrowings as a net investment hedge in our euro-denominated subsidiaries. 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 (loss) to offset changes in the value of the net investment in these foreign currency-denominated operations.
Interest rate risk
We are exposed to interest rate risk on borrowings under our Credit Agreement which are based on variable rates. As of May 2, 2026, we had $326.4 million of borrowings under our Credit Agreement. 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 $154.9 million as of May 2, 2026 and it matures on October 31, 2027. Based on borrowings outstanding under our Credit Agreement at May 2, 2026, net of the interest rate swaps, we estimate that a 1% increase in interest rates would result in increased annual interest expense of $1.7 million.
Commodity price risk
We are exposed to commodity price risk primarily on our raw material purchases. 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. We actively manage these raw material costs through global sourcing initiatives and price increases on our products where possible. However, in the short-term, further increases in raw material costs can be very difficult to fully offset with price increases because of contractual agreements with our customers, which would unfavorably affect our gross margins.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and supplementary data are filed within this Annual Report under Item 15, “Exhibits, Financial Statement Schedules.”
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of May 2, 2026. As defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, disclosure controls and procedures are controls and procedures designed to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s applicable rules and forms. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of May 2, 2026.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of May 2, 2026, based on the guidelines established in Internal Control — Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. Based on that evaluation, management concluded that our internal control over financial reporting was effective as of May 2, 2026.
Our independent registered public accounting firm, Ernst & Young LLP, has audited the Consolidated Financial Statements of the Company and the Company’s internal control over financial reporting and has included their reports herein.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by a management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information
Trading Arrangements
During our last fiscal quarter, no directors or officers of the Company, as defined in Rule 16a-1(f) of the Exchange Act, adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item regarding our directors and corporate governance matters, including without limitation information regarding our code of conduct and insider trading policies, is incorporated by reference herein to the definitive proxy statement for our 2026 annual meeting under the captions “Proposal One Election of Directors” and “Corporate Governance.” The information required by this item regarding our executive officers appears as a supplementary item following Item 4 under Part I of this Annual Report. The information required by this item regarding compliance with Section 16(a) of the Exchange Act and information regarding our Audit Committee is incorporated by reference herein to the definitive proxy statement for our 2026 annual meeting under the captions “Other Information - Delinquent Section 16(a) Reports” and “Audit Committee Matters,” respectively.
Item 11. Executive Compensation
The information required by this item is incorporated by reference herein to the definitive proxy statement for our 2026 annual meeting under the captions “Compensation Discussion and Analysis”, “Compensation Committee Report”, “Executive Compensation Tables”, “CEO Pay Ratio”, “Pay for Performance” and “Director Compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference herein to the definitive proxy statement for our 2026 annual meeting under the caption “Security Ownership” and “Equity Compensation Plan Information.”
Equity Compensation Plan Information
The following table provides information about our equity compensation plans as of May 2, 2026. All outstanding awards relate to our common stock. Shares issued under all of the following plans may be from our treasury, newly issued or both.
Equity compensation plans approved by security holders 2,407,798 $ — 865,990
Equity compensation plans not approved by security holders — — —
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference herein to the definitive proxy statement for our 2026 annual meeting under the captions “Corporate Governance” and “Transactions with Related Persons.”
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference herein to the definitive proxy statement for our 2026 annual meeting under the caption “Audit Committee Matters.”
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PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)
(1) Consolidated Financial Statements.
Reference is made to the Index to Consolidated Financial Statements on Page F-1.
(2) Consolidated Financial Statement Schedule.
Reference is made to the Index to Financial Statement Schedule on Page F-1.
(3) Exhibits.
EXHIBIT INDEX
ExhibitNumber Description
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19 Methode Electronics, Inc. Insider Trading Policy.
21 Subsidiaries of Methode Electronics, Inc.
23 Consent of Ernst & Young LLP.
31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.
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101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document
* Management Compensatory Plan
** Indicates that the exhibit is being furnished with this report and not filed as part of it.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
METHODE ELECTRONICS, INC.
(Registrant)
By: /s/ Laura Kowalchik
Laura Kowalchik
Chief Financial Officer
(Principal Financial Officer)
Dated: June 24, 2026
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Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ MARK D. SCHWABERO Chairman of the Board June 24, 2026
Mark D. Schwabero
/s/ JONATHAN DEGAYNOR Chief Executive Officer June 24, 2026
Jonathan DeGaynor (Principal Executive Officer)
/s/ LAURA KOWALCHIK Chief Financial Officer June 24, 2026
Laura Kowalchik (Principal Financial Officer)
/s/ STACIE SCHULZ Chief Accounting Officer June 24, 2026
Stacie Schulz (Principal Accounting Officer)
/s/ DAVID P. BLOM Director June 24, 2026
David P. Blom
/s/ THERESE M. BOBEK Director June 24, 2026
Therese M. Bobek
/s/ BRIAN J. CADWALLADER Director June 24, 2026
Brian J. Cadwallader
/s/ BRUCE K. CROWTHER Director June 24, 2026
Bruce K. Crowther
/s/ MARY A. LINDSEY Director June 24, 2026
Mary A. Lindsey
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Consolidated Financial Statements: Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) F-2
Consolidated Balance Sheets — May 2, 2026 and May 3, 2025 F-5
Notes to Consolidated Financial Statements F-10
Consolidated Financial Statement Schedule:
Schedule II — Valuation and Qualifying Accounts F-40
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are immaterial and, therefore, have been omitted.
F-1
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Methode Electronics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Methode Electronics, Inc. and subsidiaries (the Company) as of May 2, 2026 and May 3, 2025, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended May 2, 2026, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 2, 2026 and May 3, 2025, and the results of its operations and its cash flows for each of the three years in the period ended May 2, 2026, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of May 2, 2026, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated June 24, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill Impairment Assessment of the Grakon Industrial Reporting Unit
F-2
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/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1966.
Detroit, Michigan
June 24, 2026
F-3
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Methode Electronics, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Methode Electronics, Inc. and subsidiaries’ internal control over financial reporting as of May 2, 2026, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Methode Electronics, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of May 2, 2026, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of May 2, 2026 and May 3, 2025, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended May 2, 2026, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated June 24, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Detroit, Michigan
June 24, 2026
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 139.6 $ 103.6
Income tax receivable 3.2 4.1
Prepaid expenses and other current assets 21.2 17.1
Long-term assets:
Property, plant and equipment, net 209.3 221.6
Operating lease right-of-use assets, net 20.5 23.7
Other long-term assets 24.8 20.0
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued employee liabilities 49.1 32.0
Other accrued liabilities 45.6 50.2
Short-term operating lease liabilities 8.9 7.4
Short-term debt 0.2 0.2
Long-term liabilities:
Long-term operating lease liabilities 14.8 18.2
Other long-term liabilities 5.8 16.9
Deferred tax liabilities 29.7 26.8
Shareholders' equity:
Accumulated other comprehensive loss (8.8 ) (29.8 )
Total liabilities and shareholders' equity $ 1,306.1 $ 1,305.8
See notes to consolidated financial statements.
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
Fiscal Year Ended
(52 Weeks) (53 Weeks) (52 Weeks)
Goodwill impairment — — 105.9
Income (loss) from operations 8.8 (23.9 ) (112.0 )
Other expense (income), net (3.8 ) 4.2 (0.6 )
Income tax expense (benefit) 25.0 12.5 (4.8 )
Net income (loss) attributable to Methode $ (35.7 ) $ (62.6 ) $ (123.3 )
Income (loss) per share attributable to Methode:
See notes to consolidated financial statements.
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
Fiscal Year Ended
(52 Weeks) (53 Weeks) (52 Weeks)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 17.9 8.3 (16.7 )
Derivative financial instruments 3.1 (1.4 ) (1.0 )
Other comprehensive income (loss) 21.0 6.9 (17.7 )
See notes to consolidated financial statements.
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions, except share data)
Cancellation of restricted stock (144,000 ) (0.1 ) 0.1 — — — —
Stock-based compensation — — 2.6 — — — 2.6
Other comprehensive income (loss) — — — (17.7 ) — — (17.7 )
Net income (loss) — — — — — (123.3 ) (123.3 )
Dividends on common stock — — — — — (19.7 ) (19.7 )
Cancellation of restricted stock (79,325 ) — (0.2 ) — — — (0.2 )
Stock-based compensation — — 6.5 — — — 6.5
Purchases of common stock (136,000 ) (0.1 ) — — — (1.5 ) (1.6 )
Conversion of cash bonus to RSUs — — 2.1 — — — 2.1
Other comprehensive income (loss) — — — 6.9 — — 6.9
Net income (loss) — — — — — (62.6 ) (62.6 )
Dividends on common stock — — — — — (19.7 ) (19.7 )
Cancellation of restricted stock (710,349 ) (0.4 ) 0.4 — — — —
Stock-based compensation — — 8.1 — — — 8.1
Other comprehensive income (loss) — — — 21.0 — — 21.0
Net income (loss) — — — — — (35.7 ) (35.7 )
Dividends on common stock — — — — — (7.8 ) (7.8 )
See notes to consolidated financial statements.
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Fiscal Year Ended
(52 Weeks) (53 Weeks) (52 Weeks)
Operating activities:
Stock-based compensation expense 8.5 7.4 3.6
Amortization of debt issuance costs 1.6 1.1 0.8
Partial write-off of unamortized debt issuance costs 0.6 1.2 —
(Gain) loss on sale of property, plant and equipment (0.4 ) (0.5 ) (1.9 )
(Gain) loss on sale of business (11.2 ) — —
Impairment of long-lived assets 1.2 1.1 2.3
Goodwill impairment — — 105.9
Change in deferred income taxes 1.7 (5.8 ) (20.8 )
Changes in operating assets and liabilities:
Prepaid expenses and other assets 4.7 17.3 6.9
Accounts payable 7.4 (5.4 ) (4.7 )
Other liabilities (1.9 ) (5.2 ) 4.3
Net cash provided (used) by operating activities 38.0 26.4 47.5
Investing activities:
Purchases of property, plant and equipment (22.4 ) (41.6 ) (50.2 )
Proceeds from redemption of life insurance 3.2 — 10.8
Proceeds from settlement of net investment hedge — 3.1 0.6
Proceeds from disposition of assets 5.3 5.6 21.3
Proceeds from sale of business 15.2 — —
Net cash provided (used) by investing activities 1.3 (32.9 ) (17.5 )
Financing activities:
Taxes paid related to net share settlement of equity awards (1.4 ) (4.3 ) (3.8 )
Repayments of finance leases (0.2 ) (0.2 ) (0.2 )
Debt issuance costs (1.6 ) (1.8 ) (1.1 )
Purchases of common stock — (1.6 ) (13.7 )
Purchase of redeemable noncontrolling interest — — (10.9 )
Net cash provided (used) by financing activities (14.2 ) (58.9 ) (18.9 )
Increase (decrease) in cash and cash equivalents 36.0 (57.9 ) 4.5
Cash and cash equivalents at beginning of the year 103.6 161.5 157.0
Cash and cash equivalents at end of the year $ 139.6 $ 103.6 $ 161.5
Supplemental cash flow information:
Cash paid during the period for:
Income taxes, net of refunds $ 24.6 $ 22.3 $ 15.0
See notes to consolidated financial statements.
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1.Description of Business and Summary of Significant Accounting Policies
Methode Electronics, Inc. (the “Company” or “Methode”) is a leading global supplier of custom engineered solutions with sales, engineering, and manufacturing locations in North America, Europe, the Middle East, and Asia. The Company designs, engineers, and manufactures mechatronic products for Original Equipment Manufacturers (“OEMs”) and tiered suppliers across mobility, industrial, and commercial markets. The Company’s capabilities include power distribution, including busbars, smart connect systems, battery disconnect units, and integrated circuit boards; as well as user interface components, specialized light-emitting diode (“LED”) lighting solutions, and sensor applications.
The Company’s products are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus and rail), cloud computing and data center infrastructure, construction equipment and consumer appliance.
Financial reporting periods. The Company’s fiscal year ends on the Saturday closest to April 30 of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. The fiscal year ended May 2, 2026 was a 52-week fiscal year. Fiscal 2025 ended on May 3, 2025 and was a 53-week fiscal year and fiscal 2024 ended on April 27, 2024 and was a 52-week fiscal year.
Basis of presentation. The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts and operations of the Company and its wholly and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Reclassifications. Certain prior period amounts have been reclassified to conform to the current year presentation.
Use of estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions are subject to an inherent degree of uncertainty and may change, as new events occur, and additional information is obtained. As a result, actual results may differ from previously estimated amounts, and such differences may be material to the consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.
Cash and cash equivalents. Cash and cash equivalents consist of cash and highly liquid investments with a maturity of three months or less. Highly liquid investments include money market funds which are classified within Level 1 of the fair value hierarchy. As of May 2, 2026 and May 3, 2025, the Company had a balance of $0.2 million and $0.2 million, respectively, in money market accounts.
Accounts receivable and allowance for doubtful accounts. Accounts receivable are customer obligations due under normal trade terms and are presented net of an allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts based on the current expected credit loss impairment model. The Company applies a historical loss rate based on historic write-offs to aging categories. The historical loss rate is adjusted for current conditions, and reasonable and supportable forecasts of future losses as necessary. The Company may also record a specific reserve for individual accounts when it becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer’s operating results or financial position. The allowance for doubtful accounts balance was $2.7 million and $3.0 million as of May 2, 2026 and May 3, 2025, respectively.
Concentration of credit risk. Financial assets that subject the Company to concentration of credit risk consist primarily of cash equivalents, derivative contracts, and accounts receivable. The Company’s counterparties for cash equivalents and derivative contracts are banks and financial institutions that meet the Company’s requirement of high credit standing. However, the balances with U.S. financial institutions often exceed the amount of insurance provided on such accounts by the Federal Deposit Insurance Corporation.
For accounts receivable, the Company is exposed to credit risk in the event of nonpayment by customers. The Company generally does not require collateral, but rather performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customers’ current credit worthiness. The following customers accounted for more than 10% of net sales:
Fiscal Year Ended
Customer A * * 14.6 %
Customer B 10.9 % * *
* less than 10%
At May 2, 2026 and May 3, 2025, no customer accounted for greater than 10% of the Company’s accounts receivable.
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories. Inventories are stated at the lower-of-cost or net realizable value. Cost is determined using the first-in, first-out method. Finished products and work-in-process inventories include direct material costs, and direct and indirect manufacturing costs. The Company records reserves for inventory that may be obsolete or in excess of current and future market demand. See Note 5, “Inventories” for additional information.
Property, plant and equipment. Property, plant and equipment are recorded at cost less accumulated depreciation, with the exception of assets acquired through acquisitions, which are initially recorded at fair value. Equipment acquired under a finance lease is recorded at the present value of the future minimum lease payments. Depreciation is computed using the straight-line method over the estimated useful lives of 5 to 40 years for buildings and building improvements, 7 to 15 years for machinery and equipment, and 3 years for computer equipment. Costs of additions and major improvements are capitalized, whereas maintenance and repairs that do not improve or extend the life of the asset are charged to expense as incurred. See Note 6, “Property, Plant and Equipment” for additional information.
Sale of assets and assets held for sale. The Company classifies long-lived assets to be sold as held for sale in the period in which all of the required criteria under Accounting Standards Codification (“ASC”) 360 “Impairment or disposal of long-lived assets” are met. The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held-for-sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. Upon determining that a long-lived asset meets the criteria to be classified as held for sale, the Company ceases depreciation and reports long-lived assets as “Assets held for sale” on the consolidated balance sheets. There were no assets held for sale for the year ended May 2, 2026 and May 3, 2025. See Note 3, “Acquisitions and Dispositions” for additional information.
Business combinations. The Company accounts for business combinations using the acquisition method. The purchase price of an acquired business is allocated to its identifiable assets and liabilities based on estimated fair values. Determining the fair values of assets acquired and liabilities assumed requires management’s judgment, the utilization of independent appraisal firms and often involves the use of significant estimates and assumptions with respect to the timing and amount of future cash flows, market rate assumptions, actuarial assumptions, and appropriate discount rates, among other items. Goodwill represents the excess of the purchase price over the fair value of net assets acquired, including the amount assigned to identifiable intangible assets. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.
Goodwill. Goodwill is not amortized but is tested for impairment on at least an annual basis as of the beginning of the fourth quarter each year, or more frequently if indicators of potential impairment exists. Goodwill is evaluated at the reporting unit level by comparing the fair value of the reporting unit with its carrying amount including goodwill. An impairment of goodwill exists if the carrying amount of the reporting unit exceeds its fair value. The impairment is the amount by which the carrying amount exceeds the reporting unit’s fair value, limited to the total amount of goodwill allocated to that reporting unit.
In performing the goodwill impairment test, the Company may first assess qualitative factors to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If it is more likely than not that a reporting unit’s fair value is less than its carrying amount, or if the Company elects not to perform a qualitative assessment of a reporting unit, the Company then compares the fair value of the reporting unit to the related net book value. See Note 7, “Goodwill and Other Intangible Assets” for additional information regarding the Company’s goodwill impairment assessment for fiscal 2026.
Amortizable intangible assets. Amortizable intangible assets consist primarily of fair values assigned to customer relationships and trade names. Amortization is recognized over the useful lives of the intangible assets, generally up to 20 years, using the straight-line method. See Note 7, “Goodwill and Other Intangible Assets” for additional information.
Impairment of long-lived assets. The Company evaluates whether events and circumstances have occurred which indicate that the remaining estimated useful lives of its intangible assets, excluding goodwill, and other long-lived assets, may warrant revision or that the remaining balance of such assets may not be recoverable. If impairment indicators exist, the Company performs 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. Fair value is determined using either the market approach, cost approach or anticipated cash flows discounted at a rate commensurate with the risk involved. See Note 4, “Restructuring and Asset Impairment Charges” for additional information.
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pre-production costs related to long-term supply arrangements. The Company incurs pre-production tooling costs related to products produced for its customers under long-term supply arrangements. Engineering, testing, and other costs incurred in the design and development of production parts are expensed as incurred, unless the costs are reimbursable by the customer. As of May 2, 2026 and May 3, 2025, the Company had $18.2 million and $31.7 million, respectively, of pre-production tooling costs related to customer-owned tools for which reimbursement is contractually guaranteed by the customer or for which the customer has provided a non-cancelable right to use the tooling.
Costs for molds, dies and other tools used in products produced for its customers under long-term supply arrangements for which the Company has title are capitalized in property, plant and equipment and depreciated over the shorter of the life of the arrangement or over the estimated useful life of the assets. Company owned tooling was $9.6 million and $12.9 million as of May 2, 2026 and May 3, 2025, respectively.
Leases. The Company determines if an arrangement is a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company estimates the incremental borrowing rate to discount the lease payments based on information available at lease commencement. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. The Company utilizes certain practical expedients, including the election not to reassess its prior conclusions about lease identification, lease classification, and initial direct costs, as well as the election not to separate lease and non-lease components for arrangements where the Company is a lessee. The Company elects to recognize a right-of-use asset and related lease liability for leases with a lease term of 12 months or less for all classes of underlying assets. Lease expense is recognized on a straight-line basis over the lease term. See Note 16, “Leases” for additional information.
Derivative financial instruments. The Company uses derivative financial instruments, including swaps and forward contracts, to manage exposures to changes in currency exchange rates and interest rates. The Company does not enter into or hold derivative financial instruments for trading or speculative purposes. See Note 8, “Derivative Financial Instruments and Hedging Activities” for additional information.
Income taxes. Income taxes are calculated using the asset and liability method, under which deferred tax assets and liabilities are determined based on temporary differences between the financial statement amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is primarily dependent upon the generation of future taxable income. In determining whether an uncertain tax position exists, the Company determines, based solely on its technical merits, whether the tax position is more likely than not to be sustained upon examination, and if so, a tax benefit is measured on a cumulative probability basis that is more likely than not to be realized upon the ultimate settlement. In determining the provision for income taxes for financial statement purposes, the Company makes certain estimates and judgments which affect its evaluation of the carrying value of its deferred tax assets, as well as its calculation of certain tax liabilities. The Company has made an accounting policy election to reflect the effect of global intangible low-tax income (“GILTI”) taxes, if any, as a current period tax expense when incurred. See Note 11, “Income Taxes” for additional information.
Revenue recognition. Revenue is recognized in accordance with ASC 606, “Revenue from Contracts with Customers.”Revenue ismeasured based on consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. From time to time, customers may negotiate annual price downs. Management has evaluated these price downs and determined that in some instances, these price downs give rise to a material right. In instances that a material right exists, a portion of the transaction price is allocated to the material right and recognized over the life of the contract.
Across all products, the amount of revenue recognized corresponds to the related purchase order and is adjusted for variable consideration (such as discounts). Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue.
The Company’s performance obligations are typically short-term in nature. As a result, the Company has elected the practical expedient that provides an exemption from the disclosure requirements regarding information about remaining performance obligations on contracts that have original expected durations of one year or less. See Note 2, “Revenue” for additional information.
Shipping and handling fees and costs. Shipping and handling fees billed to customers are included in net sales, and the related costs are included in selling and administrative expenses.
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restructuring expense. Restructuring expense includes costs directly associated with exit or disposal activities. Such costs include employee severance and termination benefits, asset impairment charges, contract termination fees, and other exit or disposal costs. Employee termination benefits are accrued upon the commitment to a termination plan and when the benefit arrangement is communicated to affected employees, or when liabilities are determined to be probable and estimable. Asset impairment charges relate to the impairment of ROU lease assets, and property, plant and equipment. Contract termination costs are recorded when notification of termination is given to the other party. See Note 4, “Restructuring and Asset Impairment Charges” for additional information.
Foreign currency translation. The functional currencies of the majority of the Company’s foreign subsidiaries are their local currencies. The results of operations of these foreign subsidiaries are translated into U.S. dollars using average monthly rates, while the assets and liabilities are translated using period-end exchange rates. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss) (“AOCI(L)”). Gains and losses arising from transactions denominated in a currency other than the functional currency, except certain long-term intercompany transactions, are included in the consolidated statements of operations in other expense (income), net. Net foreign exchange losses were $7.7 million, $5.5 million and $2.2 million in fiscal 2026, fiscal 2025, and fiscal 2024, respectively.
Government incentives and grants. From time to time, the Company receives government grants in the form of cash grants and other incentives in return for past or future compliance with certain conditions. The Company accounts for funds received from government grants by analogy to International Accounting Standards 20, “Accounting for Government Grants and Disclosure of Government Assistance.”Accordingly, the Company recognizes government grants in the consolidated statements of operations when there is reasonable assurance that it will comply with the conditions associated with the grant and the grants will be received.
Government grants are recorded in the consolidated financial statements in accordance with their purpose as a reduction of expenses, a reduction of asset costs, or other income. Incentives related to specific operating activities are offset against the related expense in the period the expense is incurred. The Company recorded $0.7 million, $2.2 million and $0.5 million of government grants as other income, net in fiscal 2026, fiscal 2025, and fiscal 2024, respectively. The Company recorded $0.1 million, $0.1 million and $0.3 million of government grants as a reduction of cost of goods sold and selling and administrative expense in fiscal 2026, fiscal 2025, and fiscal 2024, respectively.
Some government grants are paid over a period of years and are recorded at amortized cost on the consolidated balance sheets. As of May 2, 2026 and May 3, 2025, grant receivables outstanding were $9.1 million and $13.6 million, respectively. The short-term and long-term portion of grant receivables are recorded on the consolidated balance sheets within accounts receivable, net and other long-term assets, respectively.
Research and development costs. Costs associated with the enhancement of existing products and the development of new products are charged to expense when incurred. Research and development expenses primarily relate to product engineering, and design and development expenses and are classified as a component of cost of goods sold on the consolidated statements of operations. Research and development costs were $37.5 million, $41.8 million and $49.1 million for fiscal 2026, fiscal 2025 and fiscal 2024, respectively.
Stock-based compensation. The Company recognizes compensation expense for the cost of awards of equity compensation using a fair value method in accordance with ASC 718, “Stock-based Compensation.” See Note 13, “Shareholders’ Equity” for additional information.
Product warranty. The Company’s warranties are standard, assurance-type warranties only. The Company does not offer any additional service or extended term warranties to its customers. As such, warranty obligations are accrued when it’s probable that a liability has been incurred and the related amounts are reasonably estimable.
Related party transactions. The Company identifies related party transactions for disclosure in accordance with ASC 850, “Related Party Disclosures.” See Note 17, “Related Party Transactions” for additional information.
Fair value measurement. ASC 820, “Fair Value Measurement,” provides a framework for measuring fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy under ASC 820 requires an entity to maximize the use of observable inputs. The Company groups assets and liabilities at fair value in three levels as follows:
•
Level 1 - Quoted prices in active markets for identical assets or liabilities;
•
Level 2 - Observable inputs for similar assets or liabilities adjusted for terms specific to the asset or liability;
•
Level 3 - Unobservable inputs in which little or no market activity exists, requiring the Company to develop its own assumptions that market participants would use to value the asset or liability.
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes to the observability of valuation inputs may result in a reclassification of levels for certain assets and liabilities within the fair value hierarchy.
Recently Adopted Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU No. 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The Company adopted this ASU on May 2, 2026. See to Note 11, “Income Taxes” for the new required disclosures.
New Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures.” ASU 2024-03 requires public entities to disclose more detailed information about certain costs and expenses presented in the income statement, including inventory purchases, employee compensation, selling expenses and depreciation. ASU 2024-03 will become effective for the Company’s annual periods beginning in fiscal 2028. Early adoption is permitted. The Company is currently evaluating the effect of this ASU on its financial statement disclosures.
In November 2025, the FASB issued ASU 2025-09, “Derivatives and Hedging (Topic 815): Hedge Accounting Improvements”. The amendments clarify and enhance certain aspects of the hedge accounting guidance in ASC Topic 815. ASU No. 2025-09 will become effective for the Company’s annual periods beginning in fiscal 2028. The Company is currently evaluating the effects of this ASU on its financial statements and disclosures.
There have been no other newly issued or newly applicable accounting pronouncements that have had, or are expected to have, a material effect on the Company’s consolidated financial statements. Further, at May 2, 2026, there are no other pronouncements pending adoption that are expected to have a material effect on the Company’s consolidated financial statements.
Note 2.Revenue
The Company generates revenue from manufacturing products for its customers in diversified global markets under multi-year programs. Typically, these programs do not contain a firm commitment by the customer for volume or price and do not reach the level of a performance obligation until the Company receives either a purchase order and/or a materials release from the customer for a specific quantity at a specified price, at which point an enforceable contract exists. Contracts may also provide for annual price reductions over the production life of a program, and prices may be adjusted on an ongoing basis to reflect changes in product content/cost and other commercial factors.
The majority of the Company’s revenue is recognized at a point in time. The Company has determined that the most definitive demonstration that control has transferred to a customer is physical shipment or delivery, depending on the contractual shipping terms, except for consignment transactions. Consignment transactions are arrangements where the Company transfers product to a customer location but retains ownership and control of such product until it is used by the customer. Revenue for consignment arrangements is recognized upon the customer’s usage. The Company’s revenue also includes customer cost recoveries, which represent reimbursements the Company receives from customers for incremental costs associated with spot purchases of raw materials and premium freight incurred in fulfilling its performance obligation to the customer. Given these cost recoveries are generally negotiated after contract inception, the Company accounts for these cost recoveries as a modification to the existing contract. The Company recognizes cost recoveries as revenue when (or as) the remaining performance obligations per the contract are satisfied, or on the modification date if all performance obligations under the contract have been previously satisfied.
Revenue associated with products which the Company believes have no alternative use (such as highly customized parts), and where the Company has an enforceable right to payment, are recognized on an over time basis. Revenue is recognized based on progress to date, which is typically even over the production process through transfer of control to the customer. For fiscal 2026, fiscal 2025, and fiscal 2024, revenue recognized over time was $9.2 million, $10.7 million, and $14.8 million respectively.
The Company’s payment terms with its customers are typically 30-60 days from the time control transfers. As the Company’s standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606 to not assess whether a contract has a significant financing component.
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Costs to fulfill/obtain a contract
The Company incurs pre-production tooling costs related to products produced for customers under long-term supply arrangements. These costs are capitalized and recognized into income upon acceptance. The Company concluded that pre-production tooling and engineering costs do not represent a promised good or service under ASC 606, and as such, reimbursements received are accounted for as a reimbursement of the expense, not revenue.
The Company has not historically incurred material costs to obtain a contract. In the instances that costs to obtain contracts are incurred, the Company will capitalize the payment as an asset and amortize the asset as a reduction of revenue over the life of the contract.
Contract balances
The Company receives payment from customers based on the contractual billing schedule and specific performance requirements established in the contract. Billings are recorded as accounts receivable when an unconditional right to the contractual consideration exists. A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer. A contract liability exists when an entity has received consideration, or the amount is due from the customer in advance of revenue recognition. Contract assets and contract liabilities are recognized in other current assets and other accrued liabilities, respectively, in the consolidated balance sheets and were immaterial as of May 2, 2026 and May 3, 2025.
Disaggregated revenue information
The following table shows disaggregated revenue from contracts with customers by segment and geographical location. Net sales are attributed to regions based on the location of production. Though revenue recognition patterns and contracts are generally consistent, the amount, timing and uncertainty of revenue and cash flows may vary in each reportable segment due to geographic and economic factors.
Fiscal Year Ended May 2, 2026 (52 Weeks)
(in millions) Automotive Industrial Interface Medical Total
Geographic net sales:
Europe, the Middle East & Africa ("EMEA") 246.5 211.1 — — 457.6
Fiscal Year Ended May 3, 2025 (53 Weeks)
(in millions) Automotive Industrial Interface Medical Total
Geographic net sales:
Fiscal Year Ended April 27, 2024 (52 Weeks)
(in millions) Automotive Industrial Interface Medical Total
Geographic net sales:
Commercial Agreements
During the fiscal year ended May 2, 2026, the Company was engaged in commercial negotiations with certain customers for performance obligations completed in the ordinary course of business. After year-end, and prior to the issuance of these consolidated financial statements, the Company executed final settlement agreements with these customers resolving measurement uncertainty that existed at the balance sheet date. Under the terms of the agreements, the transaction price was allocated between past and future
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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
performance obligations. Accordingly, the Company adjusted the contract transaction price to reflect the finalized terms resulting in the recognition of $22.5 million in revenue for the fiscal year ended May 2, 2026, and $11.0 million in accounts receivable and $13.3 million in notes receivable as of May 2, 2026. The remaining $1.7 million has been recorded as a contract liability (deferred revenue), $0.2 million within other current liabilities and $1.5 million in other long-term liabilities as of May 2, 2026, which will be recognized as revenue in future periods as those remaining performance obligations are satisfied.
Note 3. Acquisitions and Dispositions
Dispositions
In the fourth quarter of fiscal 2026, the Company entered into and closed on an asset purchase agreement with a third-party pursuant to which the Company sold substantially all of the assets of its dataMate business (the “Transaction”). The aggregate consideration for the Transaction consists of a purchase price of $16.4 million, subject to customary working capital adjustments, and the Company recorded a gain on the sale of $11.2 million which was included in other expense (income), net on the Company’s consolidated statements of operations in the fourth quarter of fiscal 2026. The Company recorded transaction costs of $1.4 million which was included in selling and administrative expenses on the Company’s consolidated statements of operations in the fiscal year ended May 2, 2026. The sale of the dataMate business does not qualify as a discontinued operations as it does not represent a strategic shift that would have a major effect on the Company’s operations or financial results.
On April 30, 2026, the Company sold one of its locations to a third party pursuant to a purchase and sale agreement for a purchase price of $4.7 million. The Company recognized a gain on the transaction of $1.0 million in the fourth quarter of fiscal 2026, which was included in other expense (income), net on the consolidated statements of operations.
On the July 14, 2025, the Company sold a warehouse to a third party pursuant to a purchase and sale agreement for a purchase price of $1.3 million. The Company recognized a gain on the transaction of $0.5 million in the first quarter of fiscal 2026, which was included in other expense (income), net on the consolidated statements of operations.
In the first quarter of fiscal 2024, the Company made the decision to initiate the discontinuation of its Dabir Surfaces business in the Medical segment. On October 13, 2023, the Company sold certain assets and contracts of its Dabir Surfaces business to a third party for consideration of $1.5 million. In the second quarter of fiscal 2024, the Company recorded a loss on the sale, including transaction costs, of $0.6 million, which was included in other expense (income), net on the Company’s consolidated statements of operations. The discontinuation of the Dabir Surfaces business does not qualify as a discontinued operation as it does not represent a strategic shift that would have a major effect on the Company’s operations or financial results.
In fiscal 2024, the Company sold the company aircraft for a sales price of $19.4 million, generating a gain on sale of $2.4 million. The gain on sale was included in other expense (income), net on the consolidated statements of operations.
Note 4. Restructuring and Asset Impairment Charges
Restructuring and impairment charges includes costs related to restructuring actions taken by the Company as well as long-lived asset impairments.
The Company continually monitors market factors and industry trends and takes restructuring actions to reduce overall costs and improve operational profitability as appropriate. Restructuring actions generally result in charges for employee termination benefits, plant closures, asset impairments, and/or contract termination costs.
Components of restructuring and asset impairment charges were as follows:
Fiscal Year Ended
(in millions) (52 Weeks) (53 Weeks) (52 Weeks)
Employee termination benefits $ 3.8 $ 1.6 $ 1.3
Asset impairment charges 1.2 1.1 2.4
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The table below presents restructuring and asset impairment charges by reportable segment:
Fiscal Year Ended
(in millions) (52 Weeks) (53 Weeks) (52 Weeks)
Interface — — 0.1
Medical — — 1.1
Eliminations/Corporate 2.8 1.0 1.1
Recognized in:
Cost of products sold $ 0.8 $ 1.1 $ 1.7
Selling and administrative expenses 4.2 1.6 2.0
The Company’s restructuring liability was $1.0 million and $0.7 million as of May 2, 2026 and May 3, 2025, respectively. Estimates of restructuring costs are based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring costs, actual amounts paid for such activities may differ from amounts initially recorded. Accordingly, the Company may record revisions of previous estimates by adjusting previously established accruals. The Company may take additional restructuring actions in future periods based upon market conditions and industry trends.
In fiscal 2026, the Company entered into a sublease agreement to exit its corporate headquarters in Chicago, Illinois, resulting in a $0.5 million impairment charge associated with certain leasehold improvements and a $0.6 million impairment charge on the corresponding right of use operating lease asset; see Note 16, “Leases” for additional information.
Note 5. Inventories
A summary of inventories, net is shown below:
Finished products $ 52.9 $ 44.3
Inventory reserves (26.9 ) (28.9 )
Note 6.Property, Plant and Equipment
A summary of property, plant and equipment, net is shown below:
Buildings and building improvements 101.9 104.6
Construction in progress 35.5 47.9
Total property, plant and equipment, gross 593.8 580.0
Less: accumulated depreciation (384.5 ) (358.4 )
Property, plant and equipment, net $ 209.3 $ 221.6
Depreciation expense was $35.7 million, $35.1 million, and $33.9 million in fiscal 2026, fiscal 2025 and fiscal 2024, respectively. As of May 2, 2026, May 3, 2025 and April 27, 2024, capital expenditures recorded in accounts payable totaled $1.3 million, $3.3 million, and $6.1 million, respectively.