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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. 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.

Overview

We are a leading global supplier of custom engineered solutions with sales, engineering and manufacturing locations in North America, Europe, Middle East and Asia. We design, engineer and produce mechatronic products for OEMs utilizing our broad range of technologies for user interface, LED lighting system, power distribution and sensor applications.

Our solutions are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus and rail), cloud computing infrastructure, construction equipment, consumer appliance and medical devices. Our business is managed on a segment basis, with those segments being Automotive, Industrial, Interface and Medical. For more information regarding the business and products of these segments, see “Item 1. Business” of this Annual Report.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic and the ongoing measures to reduce its spread have negatively impacted the global economy, disrupted consumer and customer demand and global supply chains, and resulted in manufacturing efficiencies and increased freight costs due to global capacity constraints. We expect that the global health crisis caused by the COVID-19 pandemic will continue to negatively impact our business and results of operations for the foreseeable future. The extent of the impact will depend on a number of evolving and uncertain factors, including the duration and spread of COVID-19 (and its variants), the rate of vaccinations, actions taken by governmental authorities to further restrict business operations and social activity and impose travel restrictions, shifting consumer demand, the ability of our supply chain to deliver in a timely and cost-effective manner, the ability of our employees and manufacturing facilities to operate efficiently and effectively, the continued viability and financial stability of our customers and suppliers and future access to capital.

Restructuring actions

As a result of the COVID-19 pandemic, we initiated certain restructuring actions in fiscal 2021 to rationalize our operations, lower our costs and improve financial performance and long-term cash flow generation. These actions included plant consolidations and workforce reductions in the Automotive, Industrial and Interface segments. In fiscal 2021, we recognized $8.2 million of restructuring costs. We may take additional restructuring actions in future periods based upon market conditions and industry trends.

Results of Operations

We maintain our financial records on the basis of a 52- or 53-week fiscal year ending on the Saturday closest to April 30. For fiscal 2021 and fiscal 2019, our accounting period included 52 weeks and ended on May 1, 2021 and April 27, 2019, respectively. For fiscal 2020, our accounting period included 53 weeks and ended on May 2, 2020. The following discussions of comparative results among periods should be reviewed in this context.

A detailed comparison of our results of operations between fiscal 2020 and fiscal 2019 can be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our fiscal 2020 Annual Report on Form 10-K filed with the SEC on June 30, 2020.

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The table below comparesour results of operations between fiscal 2021 and fiscal 2020:

Fiscal Year Ended

(in millions) (52 Weeks) (53 Weeks) ($) (%)

Net sales. Net sales increased by $64.1 million, or 6.3%, to $1,088.0 million in fiscal 2021, compared to $1,023.9 million in fiscal 2020. The impact of foreign currency translation, primarily the euro and Chinese renminbi, increased net sales by $26.7 million. Excluding foreign currency translation, net sales increased by $37.4 million, primarily due to higher sales in the Automotive and Industrial segments.

Cost of products sold. Cost of products sold increased by $72.9 million, or 9.8%, to $813.9 million (74.8% of sales) in fiscal 2021, compared to $741.0 million (72.4% of sales) in fiscal 2020. The impact of foreign currency translation increased cost of products sold by $18.9 million. Excluding foreign currency translation, cost of products sold increased by $54.0 million, primarily due to higher material and operating costs and restructuring costs, partially offset by lower labor costs. Supply chain shortages and disruptions led to higher material and logistic costs. Material costs were also impacted by product sales mix. In fiscal 2021, we recognized $4.8 million of restructuring costs, compared to $0.6 million in fiscal 2020. Labor costs were lower as a result of actions taken in response to the COVID-19 pandemic.

Gross profit. Gross profit decreased by $8.8 million, or 3.1%, to $274.1 million (25.2% of sales) in fiscal 2021, compared to $282.9 million (27.6% of sales) in fiscal 2020. The impact of foreign currency translation increased gross profit by $7.8 million. Excluding foreign currency translation, gross profit decreased by $16.6 million. The decrease in gross profit margin was primarily due to higher material costs, product sales mix and restructuring costs, partially offset by lower labor costs.

Selling and administrative expenses. Selling and administrative expenses increased by $10.1 million, or 8.6%, to $126.9 million (11.7% of sales) in fiscal 2021, compared to $116.8 million (11.4% of sales) in fiscal 2020. The impact of foreign currency translation increased selling and administrative expenses by $1.7 million. Excluding foreign currency translation, selling and administrative expenses increased by $8.4 million. The increase was primarily due to higher stock-based and cash incentive compensation expenses and restructuring costs, partially offset by lower salary expense and travel expense. Cash incentive compensation expense increased by $7.1 million due to the increase in the amounts earned under our annual performance-based bonus program compared to fiscal 2020. Stock-based compensation expense increased by $6.5 million as fiscal 2020 included a $5.2 million reversal of stock-based compensation expense.For further information, see Note 13, “Shareholders Equity,” to the consolidated financial statements included in this Annual Report. In fiscal 2021, we recognized $3.4 million of restructuring costs, compared to $1.2 million in fiscal 2020. Salary expense was lower in fiscal 2021 as a result of the actions we took in response to the COVID-19 pandemic. As noted above, we implemented temporary salary reductions and four-day work weeks (which ended in the second quarter of fiscal 2021) and eliminated most business travel.

Amortization of intangibles. Amortization of intangibles increased by $0.3 million, or 1.6%, to $19.3 million in fiscal 2021, compared to $19.0 million in fiscal 2020.

Interest expense, net. Interest expense, net was $5.2 million in fiscal 2021, compared to $10.1 million in fiscal 2020. The decrease was due to a lower effective interest rate on outstanding borrowings, partially offset by higher average borrowings. Average borrowings were higher due to the precautionary $100.0 million draw-down under our revolving credit facility in March 2020, which was fully repaid in the third quarter of fiscal 2021.

Other income, net. Other income, net increased by $0.5 million to $12.2 million in fiscal 2021, compared to $11.7 million in fiscal 2020. In fiscal 2021, we received $11.1 million of government assistance at certain of our international locations with respect to the COVID-19 pandemic. In fiscal 2020, we received $11.6 million of international government assistance, of which approximately $1.7 million related to assistance provided with respect to the COVID-19 pandemic. The remaining $9.9 million of international government grants in fiscal 2020 related to maintaining certain employment levels. In fiscal 2020, we sold assets related to a previously closed business and recognized a gain on sale of $0.5 million. In addition, net foreign exchange losses were $0.3 million in fiscal 2021, compared to $3.1 million in fiscal 2020.

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Income tax expense.Income tax expensedecreasedby $12.7 million, or 50.2%, to $12.6 million in fiscal 2021, compared to $25.3 million in fiscal 2020.Our effective tax rate decreased to 9.3% in fiscal 2021, compared to 17.0% in fiscal 2020.The lower effective tax rate in fiscal 2021 was primarily due to discrete tax benefits recorded of $10.4 million. These discrete tax benefits included tax credits earned and research deductions claimed in foreign jurisdictions. The discrete tax benefits were partially offset by discrete tax expense of $1.6 million, resulting in a net discrete tax benefit of $8.8 million. Excluding the net discrete tax benefits, the effective tax rate would have been 15.9%. In fiscal 2020, income tax expense included discrete tax expenses of $1.5 million. Excluding the discrete tax expense, the effective tax rate would have been 15.5%.

Net income. Net income decreased by $1.1 million, or 0.9%, to $122.3 million in fiscal 2021, compared to $123.4 million in fiscal 2020. The impact of foreign currency translation increased net income by $5.4 million. Excluding foreign currency translation, net income decreased by $6.5 million as a result of the reasons described above.

Operating Segments

Automotive

Fiscal Year Ended

(in millions) (52 Weeks) (53 Weeks) ($) (%)

As a percent of net sales 21.6 % 25.0 %

As a percent of net sales 14.2 % 17.5 %

Net sales. Automotive segment net sales increased by $43.6 million, or 6.1%, to $755.7 million in fiscal 2021, compared to $712.1 million in fiscal 2020. The impact of foreign currency translation increased net sales by $20.7 million. Excluding foreign currency translation, net sales increased by $22.9 million. Net sales decreased in North America by $29.2 million, or 6.7%, to $406.4 million in fiscal 2021, compared to $435.6 million in fiscal 2020. The decrease was due to lower electric vehicle product sales which shifted from North America to Asia and lower lighting product sales volumes. Net sales in fiscal 2020 were negatively impacted by $28.7 million due to the UAW labor strike at GM. Net sales in Europe increased by $10.2 million, or 5.0%, to $212.3 million in fiscal 2021, compared to $202.1 million in fiscal 2020. The stronger euro, relative to the U.S. dollar, increased net sales in Europe by $14.0 million. Excluding the impact of foreign currency translation, net sales in Europe decreased by $3.8 million due to lower sales volumes, primarily in the first quarter of fiscal 2021, as a result of the COVID-19 pandemic. Net sales in Asia increased by $62.6 million, or 84.1%, to $137.0 million in fiscal 2021, compared to $74.4 million in fiscal 2020. The stronger Chinese renminbi, relative to the U.S. dollar, increased net sales in Asia by $6.7 million. Excluding foreign currency translation, net sales in Asia increased by $55.9 million primarily due to higher electric vehicle product sales volumes which were transferred from North America, and higher lead frame and touchscreen sales volumes.

Gross profit. Automotive segment gross profit decreased by $14.8 million, or 8.3%, to $163.4 million in fiscal 2021, compared to $178.2 million in fiscal 2020. The impact of foreign currency translation increased gross profit by $5.2 million. Excluding foreign currency translation, gross profit decreased by $20.0 million. Gross profit margin decreased to 21.6% in fiscal 2021, from 25.0% in fiscal 2020. The decrease in gross profit margin was primarily due to higher material costs and restructuring actions taken in fiscal 2021. In fiscal 2021, we recognized $4.9 million of restructuring costs, compared to $0.6 million in fiscal 2020.

Income from operations. Automotive segment income from operations decreased by $16.8 million, or 13.5%, to $107.6 million in fiscal 2021, compared to $124.4 million in fiscal 2020. The impact of foreign currency translation increased automotive segment income from operations by $3.6 million. Excluding foreign currency translation, automotive segment income from operations decreased by $20.4 million, primarily due to lower gross profit.

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Industrial

Fiscal Year Ended

(in millions) (52 Weeks) (53 Weeks) ($) (%)

As a percent of net sales 36.6 % 37.8 %

As a percent of net sales 24.0 % 23.6 %

Net sales. Industrial segment net sales increased by $16.5 million, or 6.6%, to $267.9 million in fiscal 2021, compared to $251.4 million in fiscal 2020. The impact of foreign currency translation increased net sales by $6.0 million. Excluding foreign currency translation, net sales increased by $10.5 million. The increase was primarily due to higher sales volumes of electric vehicle busbar products, partially offset by lower sales volumes of commercial vehicle lighting solutions which were adversely impacted from the COVID-19 pandemic.

Gross profit. Industrial segment gross profit increased by $3.1 million, or 3.3%, to $98.1 million in fiscal 2021, compared to $95.0 million in fiscal 2020. The majority of the increase was due to favorable foreign currency translation. Gross profit margin decreased to 36.6% in fiscal 2021, from 37.8% in fiscal 2020. The decrease in gross profit margin was primarily due to the impact of the COVID-19 pandemic on commercial vehicle lighting solutions product sales. This was partially offset by higher gross profit margins from electric vehicle busbar products.

Income from operations. Industrial segment income from operations increased by $4.9 million, or 8.2%, to $64.3 million in fiscal 2021, compared to $59.4 million in fiscal 2020. The impact of foreign currency translation increased income from operations by $2.4 million. Excluding foreign currency translation, income from operations increased by $2.5 million. The increase was primarily due to lower selling and administrative costs which benefited from actions to reduce headcount and related costs as a result of the COVID-19 pandemic. This was partially offset by the recognition of $1.0 million of restructuring costs in fiscal 2021.

Interface

Fiscal Year Ended

(in millions) (52 Weeks) (53 Weeks) ($) (%)

As a percent of net sales 20.0 % 17.0 %

Income from operations $ 8.9 $ 5.6 $ 3.3 58.9 %

As a percent of net sales 14.4 % 9.5 %

Net sales. Interface segment net sales increased by $2.8 million, or 4.8%, to $61.6 million in fiscal 2021, compared to $58.8 million in fiscal 2020. The increase was primarily due to higher sales volumes of appliance products, partially offset by lower sales volumes of legacy data solutions products.

Gross profit. Interface segment gross profit increased by $2.3 million, or 23.0%, to $12.3 million in fiscal 2021, compared to $10.0 million in fiscal 2020. Gross profit margin increased to 20.0% in fiscal 2021, from 17.0% in fiscal 2020. The increase relates to higher sales volumes of appliance products and lower operational costs.

Income from operations. Interface segment income from operations increased by $3.3 million, or 58.9%, to $8.9 million in fiscal 2021, compared to $5.6 million in fiscal 2020. The increase was primarily due to higher gross profit and lower selling and administrative expenses, partially offset by $0.7 million of restructuring costs recognized in the first quarter of fiscal 2021. Selling and administrative expenses in fiscal 2021 benefitted from restructuring actions taken in the first quarter of fiscal 2021.

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Medical

Fiscal Year Ended

(in millions) (52 Weeks) (53 Weeks) ($) (%)

Loss from operations $ (4.6 ) $ (6.0 ) $ 1.4 23.3 %

Net sales. The Medical segment had $2.8 million of net sales in fiscal 2021, compared to $1.6 million of net sales in fiscal 2020. Net sales increased due to higher product demand.

Gross profit. Medical segment gross profit was a loss of $0.3 million in fiscal 2021, compared to a loss of $1.5 million in fiscal 2020. The improvement was due to higher net sales.

Loss from operations. Medical segment loss from operations decreased by $1.4 million to $4.6 million in fiscal 2021, compared to $6.0 million in fiscal 2020. The improvement was due to higher net sales and lower selling and administrative costs.

Financial Condition, Liquidity and Capital Resources

Our liquidity requirements are primarily to fund our business operations, including capital expenditures and working capital requirements, as well as to fund debt service requirements, dividends and stock repurchases. Our primary sources of liquidity are cash flows from operations, existing cash balances and borrowings under our senior unsecured credit agreement. We believe our liquidity position will be sufficient to fund our existing operations and current commitments for at least the next twelve months. However, if economic conditions remain impacted for longer than we expect due to the COVID-19 pandemic, our liquidity position could be severely impacted.

At May 1, 2021, we had $233.2 million of cash and cash equivalents, of which $92.2 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.

Stock Repurchase Program

On March 31, 2021, the Board of Directors authorized the purchase of up to $100.0 million of our common stock. Such purchases may be made on the open market, in private transactions or pursuant to purchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934. As of May 1, 2021, we purchased and retired 167,949 shares of our common stock for $7.5 million.

Credit Agreement

Our senior unsecured credit agreement provides for a $200.0 million revolving credit facility and a $250.0 million term loan. In March 2020, as a precautionary measure in response to the COVID-19 pandemic, we drew down $100.0 million under our revolving credit facility, which we repaid in the third quarter of fiscal 2021. As of May 1, 2021, $9.9 million in principal was outstanding under the revolving credit facility and we have $190.1 million of availability under the revolving credit facility. As of May 1, 2021, $218.7 million in principal was outstanding under the term loan. The term loan matures in September 2023 and requires quarterly principal payments of $3.1 million over the five-year term, with the remaining balance due upon maturity. We were in compliance with all covenants under the senior unsecured credit agreement as of May 1, 2021. For further information, see Note 10, “Debt” to the consolidated financial statements included in this Annual Report.

Borrowings under our senior unsecured credit agreement bear interest at rates equal to LIBOR plus an applicable margin. LIBOR is expected to be phased out by the end of 2021, which is before the maturity of our senior unsecured credit agreement. At this time, there is no definitive information regarding the future utilization of LIBOR or of any particular replacement rate; however, we continue to monitor the efforts of various parties, including government agencies, seeking to identify an alternative rate to replace LIBOR. The consequences of the discontinuance of LIBOR cannot be entirely predicted but could result in an increase in our interest expense.

Our senior unsecured credit agreement provides an option to increase the size of our revolving credit facility and term loan by an additional $200.0 million, subject to customary conditions and approval of the lenders providing the new commitments. There can be no assurance that lenders will approve additional commitments under current circumstances. As a result of the impacts of the COVID-19 pandemic, we may be required to raise additional capital and our access to, and cost of, financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, and our future prospects.

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Cash Flows

Fiscal Year Ended

(in millions) (52 Weeks) (53 Weeks)

Operating activities:

Changes in operating assets and liabilities 6.8 (39.5 )

Net cash provided by operating activities 179.8 140.6

Net cash used in investing activities (24.8 ) (44.5 )

Net cash (used in) provided by financing activities (142.9 ) 41.7

Effect of exchange rate changes on cash and cash equivalents 3.8 (3.7 )

Net increase in cash and cash equivalents 15.9 134.1

Cash and cash equivalents at beginning of the year 217.3 83.2

Cash and cash equivalents at end of the year $ 233.2 $ 217.3

Operating activities

Net cash provided by operating activities increased by $39.2 million to $179.8 million in fiscal 2021, compared to $140.6 million in fiscal 2020. The increase was primarily due to cash generated from working capital. The changes in working capital was primarily due to lower inventories, prepaid expenses and other assets and higher accounts payable and other liabilities, partially offset by higher accounts receivable.

Investing activities

Net cash used in investing activities was $24.8 million in fiscal 2021, compared to $44.5 million in fiscal 2020. The activity primarily represents capital expenditures in both fiscal years.

Financing activities

Net cash used in financing activities was $142.9 million in fiscal 2021, compared to net cash provided by financing activities of $41.7 million in fiscal 2020. In fiscal 2021, we had net repayments on our borrowings of $115.2 million, which included the repayment of the $100.0 million precautionary draw-down on our revolving credit facility in March 2020. In fiscal 2020, we had net borrowings of $59.1 million. In fiscal 2021, we paid dividends of $17.4 million, compared to $16.3 million in fiscal 2020. We also initiated a stock repurchase program in fiscal 2021 and spent $6.7 million of cash for the purchase of shares.

Contractual Obligations

The following table summarizes our significant contractual obligations and commercial commitments as of May 1, 2021:

Payments Due By Period

(in millions) Total Less than 1 year 1-3 years 3-5 years More than 5 years

Finance leases $ 1.0 $ 0.5 $ 0.4 $ 0.1 $ —

Capital expenditure commitments 6.7 6.7 — — —

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined under SEC rules.

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Legal Matters

For several years, Hetronic Germany-GmbH and Hydronic-Steuersysteme-GmbH (the “Fuchs companies”) served as our distributors for Germany, Austria and other central and eastern European countries pursuant to their respective intellectual property licenses and distribution and assembly agreements. We became aware that the Fuchs companies and their managing director, Albert Fuchs, had materially violated those agreements. As a result, weterminated all of our agreements with the Fuchs companies. On June 20, 2014, we filed a lawsuit against the Fuchs companies in the Federal District Court for the Western District of Oklahoma alleging material breaches of the distribution and assembly agreements and seeking damages, as well as various forms of injunctive relief. The defendants filed counterclaims alleging breach of contract, interference with business relations and business slander. On April 2, 2015, we amended our complaint against the Fuchs companies to add additional unfair competition and Lanham Act claims and to add additional affiliated parties.

A trial with respect to the matter began in February 2020. During the trial, the defendants dismissed their one remaining counterclaim with prejudice. On March 2, 2020, the jury returned a verdict in our favor. The verdict included approximately $102 million in compensatory damages and $11 million in punitive damages. On April 22, 2020, the Court entered a permanent injunction barring defendants from selling infringing products and ordering them to return Hetronic’s confidential information. Defendants appealed entry of the permanent injunction. On May 29, 2020, the Court held defendants in contempt for violating the permanent injunction and entered the final judgment. Defendants appealed entry of the final monetary judgment as well. The appeal of the permanent injunction and the appeal of the final judgment have been consolidated into a single appeal. That appeal is fully briefed and was argued on March 8, 2021. There is no deadline for the Court to issue a decision. Like any judgment, particularly any judgment involving defendants outside of the United States, there is no guarantee that we will be able to collect the judgment.

We incurred legal fees of $5.7 million, $5.4 million and $3.5 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively, related to the lawsuits. These amounts are included in the selling and administrative expenses and as part of the Industrial segment.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires that we make estimates and assumptions that can affect amounts reported in the consolidated financial statements and notes. 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. To the extent that there are differences between these estimates and actual results, our consolidated financial statements may be materially affected. Below are the estimates that we believe are critical to the understanding of our results of operations and financial condition. Other accounting policies are described in Note 1, “Description of Business and Summary of Significant Accounting Policies” to the consolidated financial statements included in this Annual Report.

The full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated for these key estimates and assumptions. However, we made appropriate accounting estimates based on the facts and circumstances available as of the reporting date.

Revenue recognition. Most of our revenue is recognized at a point in time. We have 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 we transfer products to a customer location but retain ownership and control of such product until it is used by the customer. Revenue for consignment arrangements is recognized upon the customer’s usage.

Revenue associated with products which we believe have no alternative use, and where we have 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.

In addition, customers typically 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.

Allowance for excess and obsolete inventory. Inventories are valued at the lower of cost or net realizable value and have been reduced by allowances for excess and obsolete inventories. The estimated allowances are based on our review of inventories on hand compared to estimated future usage and sales, using assumptions about future product life cycles, product demand and market conditions. If actual product life cycles, product demand and market conditions are less favorable than those projected by us, inventory write-downs may be required.

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Goodwill.Goodwill is not amortized but is tested for impairment on at least an annual basis. Goodwill is evaluated at the reporting unit level by comparing the fair value of thereporting unit to its carrying amount including goodwill. An impairment of goodwill exists if the carrying amount of the reportingunit exceeds its fair value. The impairment loss 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, we have the option to first assess qualitative factors to determine whether the existence ofevents or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is lessthan its carrying amount.

Qualitative factors include, but are not limited to, the results of prior year fair value calculations, the movement of our share price and market capitalization, the reporting unit and overall financial performance, and macroeconomic and industry conditions. 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. If, after assessing the qualitative factors, we were to determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a quantitative assessment is performed. We may also elect to proceed directly to the quantitative assessment without considering such qualitative factors.

For the quantitative assessment, we utilize a combination of the income approach and market approach to estimate the fair value of the reporting unit. The income approach uses a discounted cash flow method and the market approach uses appropriate valuation multiples observed for the reporting unit’s guideline public companies. The determination of discounted cash flows is based on our long-range forecasts and requires assumptions related to revenue and operating income growth, asset-related expenditures, working capital levels, and other market participant assumptions. The revenue growth rates included in the forecasts are our best estimates based on current and anticipated market conditions, and the profitability assumptions are projected based on current and anticipated cost structures. Long-range forecasting involves uncertainty which increases with each successive period. Key assumptions, such as revenue growth rates and profitability, especially in the outer years, involve a greater degree of uncertainty.

Impairment of long-lived assets. We evaluate whether events and circumstances have occurred which indicate that the remaining estimated useful lives of our 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, we perform an impairment analysis by comparing the undiscounted cash flows resulting from the use of the asset group to the carrying amount. If the carrying amount exceeds the undiscounted cash flows, an impairment loss is recognized based on the excess of the asset’s carrying amount over its fair value.

Income taxes. Our income tax expense and deferred tax assets and liabilities reflect management’s best assessment of estimated current and future taxes to be paid. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax provision and in evaluating income tax uncertainties.

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 report tax-related interest and penalties as a component of income tax expense.

Our deferred tax assets and liabilities reflect temporary differences between the amount of assets and liabilities for financial and tax reporting purposes. We adjust these amounts to reflect changes in tax rates expected to be in effect when the temporary differences reverse. 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. The realization of tax benefits is evaluated by jurisdiction and the realizability of these assets can vary based on the character of the tax attribute and the carryforward periods specific to each jurisdiction. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would decrease income tax expense in the period a determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be recorded to income tax expense in the period such determination was made.

We provide for taxes that may be payable if undistributed earnings of overseas subsidiaries were to be remitted to the U.S., except for those earnings thatwe consider to be permanently reinvested. Future sales of foreign subsidiaries are not exempt from capital gains tax in the U.S. We have no plans to dispose of any of our foreign subsidiaries and are not recording deferred taxes on outside basis differences in foreign subsidiaries for the sale of a foreign subsidiary.

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Contingencies.We are subject to various investigations, claims and legal and administrative proceedings covering a wide range of matters that arise in the ordinary course of business activities.A significant amount of judgment and use of estimates is required to quantify our ultimate exposure in these matters. For those matters that we can estimate a range of loss, we have established reserves at levels within that range to provide for the most likely scenario based upon available information.The valuation of reserves for contingencies is reviewed on a quarterly basis to ensure that we are properly reserved. Reserve balances are adjusted to account for changes in circumstances for ongoing issues and the establishment of additional reserves for emerging issues. While we believe that the current level of reserves is adequate, changes in the future could impact these determinations.

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.

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 were the U.S. dollar, the euro, the Mexican peso, and the Chinese renminbi.

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. In fiscal 2021, we reported foreign currency exchange losses of approximately $0.3 million, which were primarily attributed to the remeasurement of net monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries. In January 2021, we began to use foreign currency forward contracts to provide an economic hedge against balance sheet exposure to certain monetary assets and liabilities denominated in currencies other than the functional currency of the subsidiary. The forward contracts have a maturity of less than three months and are not designated as hedging instruments. As of May 1, 2021, the notional value of these outstanding contracts was $14.8 million, and the net unrealized loss was $22 thousand. The impact of a change in the foreign currency exchange rates on our foreign currency forward contracts will generally be offset against the gain or loss from the re-measurement of the underlying balance sheet exposure.

The 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 income but are included in accumulated other comprehensive income (loss) within shareholders’ equity on the consolidated balance sheets until a sale or substantially complete liquidation of the net investment in the international subsidiary takes place. As of May 1, 2021, the cumulative net currency translation adjustments increased shareholders’ equity by $11.5 million. We have outstanding a euro denominated cross-currency swap which is treated as a net investment hedge to reduce our exposure to translational exchange risk. As of May 1, 2021, we recorded a deferred loss, net of tax, of $5.2 million related to the cross-currency swap.

Interest rate risk

We are exposed to interest rate risk on borrowings under our senior unsecured credit agreement which is based on LIBOR. As of May 1, 2021, we had $228.6 million of borrowings under our senior unsecured credit agreement. In April 2021, we began to manage our interest rate exposures through the use of interest rate swaps to effectively convert a portion of our variable-rate debt to a fixed rate. The notional amount of our interest rate swaps was $100.0 million as of May 1, 2021. Based on borrowings outstanding under our senior unsecured credit agreement at May 1, 2021, net of the interest rate swaps, we estimate that a 1% increase in interest rates would result in increased annual interest expense of $1.3 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. The cost of copper has increased significantly in fiscal 2021. 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. However, in the short-term, rapid increases in raw material costs can be very difficult to offset with price increases because of contractual agreements with our customers.

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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.

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 effectives of the design and operation of our disclosure controls and procedures as of May 1, 2021. As defined in Rules 13a-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 as of May 1, 2021.

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 1, 2021 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 U.S. GAAP.

Based upon this evaluation, our management concluded that our internal control over financial reporting was effective as of May 1, 2021. Management reviewed the results of its assessment with the Audit Committee. Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on our internal control over financial reporting. This report is included on page F-4 of this Annual Report.

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

None.

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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 is incorporated by reference herein to the definitive proxy statement for our 2021 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 2021 annual meeting under the captions “Delinquent Section 16(a) Reports” and “Audit Committee Matters,” respectively.

We have adopted a Code of Business Conduct (the “Code”) that applies to our directors, our principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions, as well as other employees. The Code is publicly available on our website at www.methode.com. If we make any substantive amendments to the Code or grant any waiver, including any implicit waiver, from a provision of the Code to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, we will disclose the nature of such amendment or waiver on our website or in a report on Form 8-K in accordance with applicable rules and regulations. The information contained on our website is not incorporated by reference into this Annual Report.

Item 11. Executive Compensation

The information required by this item is incorporated by reference herein to the definitive proxy statement for our 2021 annual meeting under the captions “Compensation Discussion and Analysis”, “Compensation Committee Report”, “CEO Pay Ratio”, “Executive Compensation Tables” and “Director Compensation.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Except as set forth herein, the information required by this item is incorporated by reference herein to the definitive proxy statement for our 2021 annual meeting under the caption “Security Ownership.”

Equity Compensation Plan Information

The following table provides information about our equity compensation plans as of May 1, 2021. 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 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 2021 annual meeting under the captions “Corporate Governance” and “Other Information.”

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 2021 annual meeting under the caption “Audit Committee Matters.”

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PART IV

Item 15. Exhibits, 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

Exhibit Number Description

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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.

101.SCH*** Inline XBRL Taxonomy Extension Schema Document

101.CAL*** Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*** Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*** Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*** Inline XBRL Taxonomy Extension Definition Linkbase Document

*Management Compensatory Plan

** As provided in Rule 406 of Regulation S-T, this information is deemed not filed as part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, and is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and is otherwise not subject to liability under those sections.

*** Submitted electronically with the Report

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/ RONALD L.G. TSOUMAS

Ronald L.G. Tsoumas

Chief Financial Officer

(Principal Financial Officer)

Dated: June 24, 2021

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report 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/ WALTER J. ASPATORE Chairman of the Board June 24, 2021

Walter J. Aspatore

/s/ LAWRENCE B. SKATOFF Vice Chairman of the Board June 24, 2021

Lawrence B. Skatoff

/s/ DONALD W. DUDA Chief Executive Officer, President & Director June 24, 2021

Donald W. Duda (Principal Executive Officer)

/s/ RONALD L.G. TSOUMAS Chief Financial Officer June 24, 2021

Ronald L.G. Tsoumas (Principal Financial Officer)

/s/ AMIT N. PATEL Chief Accounting Officer June 24, 2021

Amit N. Patel (Principal Accounting Officer)

/s/ DAVID P. BLOM Director June 24, 2021

David P. Blom

/s/ THERESE M. BOBEK Director June 24, 2021

Therese M. Bobek

/s/ BRIAN J. CADWALLADER Director June 24, 2021

Brian J. Cadwallader

/s/ BRUCE K. CROWTHER Director June 24, 2021

Bruce K. Crowther

/s/ DARREN M. DAWSON Director June 24, 2021

Darren M. Dawson

/s/ JANIE GODDARD Director June 24, 2021

Janie Goddard

/s/ MARY A. LINDSEY Director June 24, 2021

Mary A. Lindsey

/s/ ANGELO V. PANTALEO Director June 24, 2021

Angelo V. Pantaleo

/s/ MARK D. SCHWABERO Director June 24, 2021

Mark D. Schwabero

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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 F-2

Consolidated Balance Sheets — May 1, 2021 and May 2, 2020 F-5

Notes to Consolidated Financial Statements F-10

Consolidated Financial Statement Schedule:

Schedule II — Valuation and Qualifying Accounts F-36

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 1, 2021 and May 2, 2020, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended May 1, 2021, and the related notesand 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 1, 2021 and May 2, 2020, and the results of its operations and its cash flows for each of the three years in the period ended May 1, 2021, 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 1, 2021, 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, 2021 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 consolidated 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 consolidated 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 consolidatedfinancial 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 account or disclosure to which it relates.

Valuation of Grakon Industrial Reporting Unit Goodwill

F-2

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/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1966.

Chicago, Illinois

June 24, 2021

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 1, 2021, 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 1, 2021, 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 2021 consolidated financial statements of the Company and our report dated June 24, 2021 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

Chicago, Illinois

June 24, 2021

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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 $ 233.2 $ 217.3

Income taxes receivable 11.5 12.9

Prepaid expenses and other current assets 22.6 15.9

Long-term assets:

Property, plant and equipment, net 204.0 201.9

Operating lease right-of-use assets, net 22.3 23.5

Other long-term assets 35.5 34.7

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accrued employee liabilities 33.5 19.1

Other accrued liabilities 25.0 18.5

Short-term operating lease liabilities 6.1 5.5

Long-term liabilities:

Long-term operating lease liabilities 17.5 20.4

Long-term income taxes payable 24.8 29.3

Other long-term liabilities 20.5 15.3

Deferred tax liabilities 38.3 41.6

Shareholders' equity:

Accumulated other comprehensive income (loss) 6.1 (26.9 )

Total liabilities and shareholders' equity $ 1,467.0 $ 1,370.6

See notes to consolidated financial statements.

F-5

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data)

Fiscal Year Ended

(52 Weeks) (53 Weeks) (52 Weeks)

Basic and diluted income per share:

See notes to consolidated financial statements.

F-6

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

Fiscal Year Ended

(52 Weeks) (53 Weeks) (52 Weeks)

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 37.4 (12.3 ) (27.5 )

Derivative financial instruments (4.4 ) (1.0 ) —

See notes to consolidated financial statements.

F-7

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in millions, except share data)

Stock-based compensation expense — — 14.0 — — — 14.0

Other comprehensive loss — — — (27.5 ) — — (27.5 )

Dividends on common stock — — — — — (16.8 ) (16.8 )

Stock-based compensation expense — — 0.3 — — — 0.3

Other comprehensive loss — — — (13.3 ) — — (13.3 )

Dividends on common stock — — — — — (16.3 ) (16.3 )

Stock-based compensation expense — — 6.8 — — — 6.8

Exercise of stock options 24,500 — 0.8 — — — 0.8

Purchase of common stock (167,949 ) (0.1 ) — — — (7.4 ) (7.5 )

Other comprehensive income — — — 33.0 — — 33.0

Dividends on common stock — — — — — (16.9 ) (16.9 )

See notes to consolidated financial statements.

F-8

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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 6.8 0.3 14.0

Change in cash surrender value of life insurance (2.0 ) — (0.6 )

Amortization of debt issuance costs 0.7 0.7 0.5

Loss (gain) on sale of business/investment/property 1.3 (0.4 ) (0.4 )

Change in deferred income taxes (9.6 ) 8.0 (4.4 )

Changes in operating assets and liabilities:

Prepaid expenses and other assets 17.9 (3.6 ) (16.7 )

Accounts payable and other liabilities 59.5 (47.5 ) (23.1 )

Investing activities:

Purchases of property, plant and equipment (24.9 ) (45.1 ) (49.8 )

Acquisition of businesses, net of cash acquired — — (422.1 )

Sale of business/investment/property 0.1 0.6 1.1

Net cash used in investing activities (24.8 ) (44.5 ) (470.8 )

Financing activities:

Taxes paid related to net share settlement of equity awards (3.9 ) (0.4 ) (1.7 )

Repayments of finance leases (0.5 ) (0.7 ) —

Debt issuance costs — — (3.1 )

Proceeds from exercise of stock options 0.8 — —

Purchase of common stock (6.7 ) — —

Net cash (used in) provided by financing activities (142.9 ) 41.7 217.4

Increase (decrease) in cash and cash equivalents 15.9 134.1 (162.9 )

Cash and cash equivalents at beginning of the year 217.3 83.2 246.1

Cash and cash equivalents at end of the year $ 233.2 $ 217.3 $ 83.2

Supplemental cash flow information:

Cash paid during the period for:

Income taxes, net of refunds $ 16.0 $ 21.1 $ 27.8

See notes to consolidated financial statements.

F-9

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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, Middle East and Asia. The Company designs, engineers and produces mechatronic products for Original Equipment Manufacturers (“OEMs”) utilizing its broad range of technologies for user interface, light-emitting diode (“LED”) lighting system, power distribution and sensor applications.

The Company’s solutions are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus and rail), cloud computing infrastructure, construction equipment, consumer appliance and medical devices.

Impact of the COVID-19 pandemic. The COVID-19 pandemic has negatively affected the global economy, disrupted global supply chains, and created significant volatility and disruptions to capital and credit markets in the global financial markets. The Company began to see the impacts of the COVID-19 pandemic at the beginning of its fourth quarter of fiscal 2020 at its China manufacturing facilities, which were initially closed after the Chinese New Year. The Company’s manufacturing facilities in China resumed operations later in the fourth quarter of fiscal 2020, but at lower capacity utilization. However, the major impact to the Company’s business from the COVID-19 pandemic began in mid-March 2020, as the Company’s operations in North America and Europe were adversely impacted by many customers suspending their manufacturing operations due to the COVID-19 pandemic. In the first quarter of fiscal 2021, the Company’s operations in North America and Europe gradually resumed operations, however production levels were still significantly reduced, resulting in lower capacity utilization. In the second quarter of fiscal 2021, production levels returned to pre-COVID levels as a result of increased demand from customers, which continued through the fourth quarter of fiscal 2021. However, towards the end of the Company’s third quarter of fiscal 2021, many automotive companies announced a slowdown in their production schedules due to a worldwide semiconductor supply shortage. The semiconductor supply shortage is also impacting the Company’s supply chain and its ability to meet demand at some of its customers as well. The Company expects this semiconductor shortage will impact its operating results and financial condition in fiscal 2022.

Various government programs have been enacted to provide assistance to businesses impacted by the COVID-19 pandemic. The amount of assistance the Company received was $11.1 million and $1.7 million in fiscal 2021 and fiscal 2020, respectively, and has been reported in other income, net in the consolidated statements of income.

The Company assessed certain accounting matters that require consideration of forecasted financial information, including, but not limited to, its allowance for credit losses, the carrying value of the Company’s goodwill, identifiable intangible assets and other long-lived assets, and valuation allowances in context with the information reasonably available to the Company and the unknown future impacts of the COVID-19 pandemic as of May 1, 2021 and through the date of this report. As a result of these assessments, the Company concluded that there were no impairments or material increases in credit allowances or valuation allowances that impacted the Company’s consolidated financial statements as of May 1, 2021 and for the year ended May 1, 2021. However, the Company’s future assessment of the magnitude and duration of the COVID-19 pandemic, as well as other factors, could result in material impacts to its consolidated financial statements in future reporting periods.

At this time, the ultimate impact of the COVID-19 pandemic cannot be reasonably estimated due to the uncertainty about the extent and duration of the spread of the virus. Therefore, it is possible the COVID-19 pandemic could still have an adverse impact on the Company’s future business, operating results and financial condition.

Basis of presentation. The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).

Principles of consolidation. The consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Financial reporting periods. The Company maintains its financial records on the basis of a 52 or 53-week fiscal year ending on the Saturday closest to April 30. Fiscal 2021 and 2019 represented 52 weeks and ended on May 1, 2021 and April 27, 2019, respectively. Fiscal 2020 represented 53 weeks and ended on May 2, 2020. The following discussions of comparative results among periods should be reviewed in that context.

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. Actual results could differ from those estimates.

Cash and cash equivalents. Cash and cash equivalents include all highly liquid investments with a maturity of three months or less.

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 (“CECL”). The Company elected to apply 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 $0.7 million and $0.7 million as of May 1, 2021 and May 2, 2020, respectively.

Sales to General Motors Company (“GM”) and Ford Motor Company (“Ford”) in the Automotive segment, either directly or through their tiered suppliers, represented a significant portion of the Company's business. As of May 1, 2021 and May 2, 2020, combined accounts receivable from GM and Ford (including tiered suppliers) were approximately $79.4 million and $32.4 million, respectively.

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, “Inventory” 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 and 3 to 15 years for machinery and 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.

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. 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 loss 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 2021.

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.

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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 1, 2021 and May 2, 2020, the Company had $25.0 million and $37.1 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 amortized over the shorter of the life of the arrangement or over the estimated useful life of the assets. Company owned tooling was $17.0 million and $19.0 million as of May 1, 2021 and May 2, 2020, 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 3, “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. See Note 11, “Income Taxes” for additional information.

Revenue recognition. Revenue is recognized in accordance with Accounting Standards Codification (“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 further 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 cost of products sold.

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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 equipment. Contract termination costs are recorded when notification of termination is given to the other party. See Note 4, “Restructuring” 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”). 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 income in other income, net.

Government grants. The Company recognizes grant income in other income, net in the consolidated statements of income when it is considered that there is reasonable assurance that the grant will be received and the necessary qualifying conditions, as stated in the grant agreement, are met. The international government grants are generally paid over a period of years and are recorded at amortized cost on the Company’s consolidated balance sheets. As of May 1, 2021 and May 2, 2020, grant receivables outstanding were $18.6 million and $18.7 million, respectively. The short-term and long-term portion of grant receivables are recorded on the consolidated balance sheets within accounts receivable and other current assets and other long-term assets, respectively. Additionally, as of May 1, 2021 and May 2, 2020, the Company has no deferred grant income.

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 income. Research and development costs were $37.1 million, $34.9 million and $41.2 million for fiscal 2021, fiscal 2020 and fiscal 2019, 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 its probable that a liability has been incurred and the related amounts are reasonably estimable.

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;

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes to the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The carrying values of the Company’s short-term financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values because of the short maturity of these instruments.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” The guidance in ASU 2016-13 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. It replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses.The Company adopted this guidance as of May 3, 2020, and the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.”The guidance in ASU 2018-15 clarifies the accounting for implementation costs in cloud computing arrangements. The Company adopted this guidance prospectively as of May 3, 2020, and the impact was immaterial to its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” The guidance in ASU 2018-13 changes disclosure requirements related to fair value measurements as part of the disclosure framework project. The disclosure framework project aims to improve the effectiveness of disclosures in the notes to the financial statements by focusing on requirements that clearly communicate the most important information to users of the financial statements. The Company adopted this guidance as of May 3, 2020, and there was no impact on the consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships that reference LIBOR or another rate that is expected to be discontinued, subject to meeting certain criteria. ASU 2020-04 was effective upon issuance and generally can be applied prospectively through December 31, 2022. The Company does not expect a material effect from the adoption of this guidance on its consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740),” which simplifies the accounting for income taxes. The new guidance removes certain exceptions to the general principles in ASC 740, such as recognizing deferred taxes for equity investments, the incremental approach to performing intraperiod tax allocation and calculating income taxes in interim periods. The standard also simplifies accounting for income taxes under GAAP by clarifying and amending existing guidance, including the recognition of deferred taxes for goodwill, the allocation of taxes to members of a consolidated group and requiring that an entity reflect the effect of enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. This guidance is effective for the Company in the first quarter of fiscal 2022. The Company does not expect this guidance to have a material impact on its consolidated financial statements.

Note 2.Revenue

The Company generates revenue from the manufacturing of products for customers in diversified global markets. 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.

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.

Estimating total contract revenue may require judgment as certain contracts contain pricing discount structures, early payment discounts or other provisions that can impact the transaction price. The Company generally estimates variable consideration utilizing the most likely amount to which it expects to be entitled. When the contract provides the customer with the right to return eligible products, the Company reduces revenue at the point of sale using current facts and historical experience by using an estimate for expected product returns. The Company adjusts these estimates at the earlier of when the most likely amount of consideration that is expected to be received changes or when the consideration becomes fixed. Accordingly, an increase or decrease to revenue is recognized at that time. The Company’s payment terms with its customers are typically 30-45 days from the time control transfers. As the Company’s standard payments 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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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 and amortize those 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 the Company 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 liabilities, respectively, in the Company's consolidated balance sheets.

Unbilled receivables (contract assets) - Pursuant to the over-time revenue recognition model, revenue may be recognized prior to the customer being invoiced. An unbilled receivable is recorded to reflect revenue that is recognized over time. Unbilled receivables were $0.6 million and $0.5 million as of May 1, 2021 and May 2, 2020, respectively. During fiscal 2021, $0.5 million of previously unbilled receivables were recorded into accounts receivable. There were no impairments of contract assets as of May 1, 2021.

Deferred revenue (contract liabilities) - For certain of the price reductions offered by the Company, the amount of the reduction cannot be attributed entirely to production efficiencies gained. In these cases, the annual price-downs are considered to be material rights as the customer, as part of their current contract, are purchasing an option that they would not have received without the contract to purchase future product. When a contract contains a material right, a portion of the transaction price is allocated to the material right for which revenue recognition is deferred until the customer exercises its option. Deferred revenue was $0.3 million as of both May 1, 2021 and May 2, 2020, respectively. Previously deferred revenue of $0.1 million was recorded into revenue during fiscal 2021.

Disaggregated revenue information

The following table represents a disaggregation of revenue from contracts with customers by segment and geographical location. Net sales are attributed to regions based on the location of production. Though revenue recognition patterns and contracts are generally consistent, the amount, timing and uncertainty of revenue and cash flows may vary in each reportable segment due to geographic and economic factors.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Year Ended May 1, 2021 (52 Weeks)

(in millions) Auto Industrial Interface Medical Total

Geographic net sales:

Timing of revenue recognition:

Goods transferred over time 33.6 — — — 33.6

Fiscal Year Ended May 2, 2020 (53 Weeks)

(in millions) Auto Industrial Interface Medical Total

Geographic net sales:

Timing of revenue recognition:

Goods transferred over time 36.7 — — — 36.7

Customer Concentration

Sales to GM and Ford in the Automotive segment, either directly or through their tiered suppliers, are shown below.

Fiscal Year Ended

Percentage of Net Sales:

Note 3.Leases

The Company leases real estate, automobiles and certain equipment under both operating and finance leases. The Company does not have any significant arrangements where it is the lessor. The majority of the Company's global lease portfolio represents leases of real estate, such as manufacturing facilities, warehouses and buildings. As of May 1, 2021, the Company's leases have remaining lease terms of up to 10.3 years, some of which include optional renewals or terminations, which are considered in the Company’s assessments when such options are reasonably certain to be exercised. Any variable payments related to the lease will be recorded as lease expense when and as incurred. The Company’s lease payments are largely fixed. As of May 1, 2021, the operating leases that the Company has signed but have not yet commenced are immaterial.

In addition to the operating lease assets presented on the consolidated balance sheets, assets under finance leases of $0.7 million and $1.0 million are included in property, plant and equipment, net on the consolidated balance sheets as of May 1, 2021 and May 2, 2020, respectively. Finance lease obligations were $1.0 million and $1.4 million as of May 1, 2021 and May 2, 2020, respectively, and are split between other accrued expenses for the short-term portion and other long-term liabilities for the long-term portion on the consolidated balance sheets. The Company had an immaterial amount of finance lease expense in the years ended May 1, 2021 and May 2, 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of lease expense were as follows:

Fiscal Year Ended

(in millions) (52 Weeks) (53 Weeks)

Lease cost:

Operating lease cost $ 8.4 $ 9.0

Variable lease cost 1.6 1.3

Supplemental cash flow and other information related to operating leases was as follows:

Fiscal Year Ended

(in millions) (52 Weeks) (53 Weeks)

Operating cash flows:

Cash paid related to operating lease obligations $ 9.3 $ 8.7

Non-cash activity:

Right-of-use assets obtained in exchange for lease obligations $ 5.7 $ 5.5

Weighted-average remaining lease term 5.0 years 5.7 years

Weighted-average discount rate 4.6 % 4.7 %

Maturities of operating lease liabilities as of May 1, 2021, are shown below:

(in millions)

Fiscal Year:

Thereafter 3.9

Total lease payments 26.6

Less: imputed interest (3.0 )

Present value of lease liabilities $ 23.6

Note 4. Restructuring

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company continually monitors market factors and industry trends and takes necessary actions to reduce overall costs and improve operational profitability. Infiscal 2021, the Company initiated certain restructuring actions in response to the adverse impacts from the COVID-19 pandemic. These actions included plant consolidations and workforce reductions in the Automotive, Industrial and Interface segments. In fiscal 2021, the Company recognized $8.2 million of restructuring costs. These charges consisted of $4.8 million recorded in cost of products sold and $3.4 million recorded in selling and administrative expenses.

The table below presents restructuring costs by reportable segment:

Fiscal Year Ended

(in millions) (52 Weeks) (53 Weeks)

Automotive $ 6.2 $ 0.8

Interface 0.7 —

Medical — 0.1

Eliminations/Corporate 0.3 0.4

Total restructuring costs $ 8.2 $ 1.8

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.

The following is a rollforward of the Company’s restructuring activity in fiscal 2021:

Utilization

Employee termination benefits $ 0.2 $ 7.1 $ (6.6 ) $ — $ 0.7

Asset impairment charges — 0.6 — (0.6 ) —

Contract termination costs — 0.5 — — 0.5

Note 5. Inventory

A summary of inventories is shown below:

Finished products $ 24.8 $ 45.7

Note 6.Property, Plant and Equipment

A summary of property, plant and equipment is shown below:

Buildings and building improvements 88.9 87.3

Construction in progress 24.8 45.2

Total property, plant and equipment, gross 525.0 502.9

Less: accumulated depreciation (321.0 ) (301.0 )

Property, plant and equipment, net $ 204.0 $ 201.9

Depreciation expense was $32.2 million, $29.3 million and $27.2 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively. As of May 1, 2021 and May 2, 2020, capital expenditures recorded in accounts payable totaled $5.5 million and $5.8 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, plant and equipment with a net book value of $6.2 million was disposed subsequent to May 1, 2021.

Note 7. Goodwill and Other Intangible Assets

Goodwill

The Company tests goodwill for impairment on an annual basis as of the beginning of the fourth quarter each year, or more frequently if indicators of potential impairment exist. Goodwill impairment testing is conducted at the reporting unit level, which is generally defined as an operating segment or one level below an operating segment (also known as a reporting unit), for which discrete financial information is available and segment management regularly reviews the operating results of that reporting unit.

At the beginning of the fourth quarter of fiscal 2021, the annual goodwill impairment assessment was completed. The Company performed a qualitative assessment for each reporting unit except for one within the Industrial segment where a quantitative assessment was performed. The qualitative assessments indicated that it was more likely than not that the fair value of each reporting unit exceeded its respective carrying value.

For the quantitative assessment, the Company utilized a combination of the income approach and market approach to estimate the fair value of the reporting unit. Cash flow projections were based on management’s estimates of revenue growth rates and earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins, taking into consideration business and market conditions for the countries and markets in which the reporting unit operates. The Company calculates the discount rate based on a market-participant, risk-adjusted weighted average cost of capital, which considers industry specific rates of return on debt and equity capital for a target industry capital structure, adjusted for risks associated with business size, geography and other factors specific to the reporting unit. The market approach is based on appropriate valuation multiples observed for the reporting unit’s guideline public companies.

The quantitative assessment of the reporting unit indicated that the fair value exceeded the carrying value. The Company does not believe that any of its reporting units are at risk for impairment. While the Company considered the impact from the COVID-19 pandemic may have on its future cash flows when preparing its annual goodwill impairment test, the full extent of the impact that the COVID-19 pandemic or the semiconductor supply shortage will have on the Company’s business, operations and financial condition is currently unknown. The Company will continue to assess its goodwill for impairment as events and circumstances change. Any deterioration in the Company’s forecasted revenue and EBITDA margins, could result in an impairment of a portion or all of its goodwill. The amount of such impairment would be recognized as an expense in the period the goodwill is impaired.

A summary of the changes in goodwill by reportable segment is as follows:

(in millions) Automotive Industrial Total

Foreign currency translation (0.6 ) (0.6 ) (1.2 )

Acquisitions — (0.2 ) (0.2 )

Foreign currency translation (0.1 ) (1.4 ) (1.5 )

Foreign currency translation 0.5 3.5 4.0

A summary of goodwill by reporting unit is as follows:

North American Automotive 99.8 99.8

European Automotive 6.9 6.4

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other intangible assets, net

The following tables present details of the Company’s identifiable intangible assets:

Amortized intangible assets:

Trade names, patents and technology licenses 58.7 (23.7 ) 35.0 7.0

Unamortized trade name 1.8 — 1.8

Amortized intangible assets:

Trade names, patents and technology licenses 75.3 (35.0 ) 40.3 7.8

Unamortized trade name 1.8 — 1.8

The Company performed an impairment test for its indefinite-lived trade name intangible asset and determined that no impairment existed as of May 1, 2021. Based on the current amount of intangible assets subject to amortization, the estimated aggregate amortization expense for each of the five succeeding fiscal years and thereafter is as follows:

(in millions)

Fiscal Year:

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Note 8. Derivative Financial Instruments and Hedging Activities

The Company is exposed to various market risks including, but not limited to, foreign currency exchange rates and market interest rates. The Company strives to control its exposure to these risks through our normal operating activities and, where appropriate, through the use of derivative financial instruments. Derivative financial instruments are measured at fair value on a recurring basis.

For a designated cash flow hedge, the effective portion of the change in the fair value of the derivative financial instrument is recorded in AOCI in the consolidated balance sheets. When the underlying hedged transaction is realized, the gain or loss previously included in AOCI is recorded in earnings and reflected in the consolidated statements of income on the same line as the gain or loss on the hedged item attributable to the hedged risk. The gain or loss associated with changes in the fair value of derivatives not designated as hedges are recorded immediately in the consolidated statements of income on the same line as the associated risk. For a designated net investment hedge, the effective portion of the change in the fair value of the derivative financial instrument is recorded as a cumulative translation adjustment in AOCI in the consolidated balance sheets.

Net investment hedges

In April 2020, the Company entered into a variable-rate, cross-currency swap, maturing on August 31, 2023, with a notional value of $60.0 million (€54.8 million). The Company entered into the cross-currency swap to mitigate changes in net assets due to changes in U.S. dollar-Euro spot exchange rates. The cross-currency swap is designated as a hedge of the Company’s net investment in a euro-based subsidiary.

The fair value of the cross-currency swap is classified within Level 2 of the fair value hierarchy. Hedge effectiveness is assessed at the inception of the hedging relationship and quarterly thereafter, under the spot-to-spot method. The Company amortizes the impact of all other changes in fair value of the derivative through interest expense, which was not material in either fiscal 2021 or fiscal 2020. As of May 1, 2021 and May 2, 2020, the cross-currency swap was in a net liability position with an aggregate fair value of $6.8 million and $1.3 million, respectively, and is recorded within other long-term liabilities in the consolidated balance sheets.