Debt, litigation and divestiture shape Methode Electronics (NYSE: MEI)
Rhea-AI Filing Summary
Methode Electronics reported another quarterly loss while restructuring its balance sheet and portfolio. For the quarter ended January 31, 2026, net sales were $233.7 million, down from $239.9 million, and the company posted a net loss of $15.9 million, versus a $14.4 million loss a year earlier.
Over nine months, revenue declined to $721.1 million from $791.0 million, with a net loss of $36.1 million. Despite losses, operating cash flow improved to $33.1 million from $(9.0) million, helping lift cash to $133.7 million. Total debt rose to $340.9 million, largely under a revised revolving credit facility.
The credit agreement was amended and covenant waivers obtained after a restricted payment breach, and now includes tighter limitations, higher interest during a defined period, and an ongoing anti‑cash‑hoarding clause. The company also faces consolidated stockholder litigation and an SEC investigation. After quarter‑end, it sold its dataMate business for about $16.4 million, expecting a gain of $9.0–$10.5 million, and plans to use proceeds for debt reduction and working capital.
Positive
- None.
Negative
- None.
Insights
Leverage, tighter covenants and legal probes increase financial risk despite better cash flow.
Methode Electronics remains loss‑making, with nine‑month net sales of $721.1 million and a net loss of $36.1 million. Yet operating cash flow swung to a positive $33.1 million from $(9.0) million, helped by working capital movements, lifting cash to $133.7 million.
Total debt climbed to $340.9 million, mostly under a $400 million secured revolving credit facility maturing on October 31, 2027. Through the Third Amendment, lenders relaxed interest coverage and leverage covenants temporarily but raised interest margins, tightened baskets for restricted payments and investments, and extended an anti‑cash‑hoarding requirement above $65 million of U.S. cash.
The company previously breached a restricted‑payments basket and obtained a waiver, indicating limited flexibility while it remains within the amendment period. Concurrent stockholder class and derivative actions, plus an SEC investigation, may create additional costs, though outcomes are not specified. A $16.4 million dataMate sale and expected $9.0–$10.5 million gain should modestly support deleveraging and liquidity once fully recognized.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the quarterly period ended
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the transition period from ______ to ______
Commission file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
(Registrant’s telephone number, including area code) (
8750 West Bryn Mawr Avenue, Suite 1000, Chicago, Illinois
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
At March 2, 2026, the registrant had
Table of Contents
METHODE ELECTRONICS, INC.
INDEX
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
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Condensed Consolidated Statements of Operations (Unaudited) - Three and Nine Months Ended January 31, 2026 and February 1, 2025 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Three and Nine Months Ended January 31, 2026 and February 1, 2025 |
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Condensed Consolidated Balance Sheets as of January 31, 2026 (Unaudited) and May 3, 2025 |
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Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) - Three and Nine Months Ended January 31, 2026 and February 1, 2025 |
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Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended January 31, 2026 and February 1, 2025 |
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Notes to Condensed Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. |
Controls and Procedures |
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PART II. |
OTHER INFORMATION |
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Item 1 |
Legal Proceedings |
37 |
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Item 1A. |
Risk Factors |
37 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 5. |
Other Information |
37 |
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Item 6. |
Exhibits |
38 |
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SIGNATURES |
39 |
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Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share data)
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January 31, 2026 |
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February 1, 2025 |
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January 31, 2026 |
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February 1, 2025 |
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(13 Weeks) |
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(39 Weeks) |
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(40 Weeks) |
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Net sales |
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Cost of products sold |
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Gross profit |
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Selling and administrative expenses |
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Amortization of intangibles |
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Income (loss) from operations |
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Interest expense, net |
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Other expense, net |
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Pre-tax income (loss) |
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Income tax expense (benefit) |
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Net income (loss) |
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Income (loss) per share: |
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Basic |
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Diluted |
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Cash dividends per share |
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$ |
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See notes to condensed consolidated financial statements.
2
Table of Contents
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(in millions)
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Three Months Ended |
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Nine Months Ended |
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January 31, 2026 |
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February 1, 2025 |
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January 31, 2026 |
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February 1, 2025 |
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(13 Weeks) |
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(13 Weeks) |
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(39 Weeks) |
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(40 Weeks) |
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Net income (loss) |
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Other comprehensive income (loss), net of tax: |
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Foreign currency translation adjustments |
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Derivative financial instruments |
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Other comprehensive income (loss) |
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Comprehensive income (loss) |
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$ |
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$ |
( |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
3
Table of Contents
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
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January 31, 2026 |
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May 3, 2025 |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories, net |
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Income tax receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Long-term assets: |
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Property, plant and equipment, net |
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Goodwill |
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Other intangible assets, net |
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Operating lease right-of-use assets, net |
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Deferred tax assets |
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Pre-production costs |
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Other long-term assets |
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Total long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued employee liabilities |
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Other accrued liabilities |
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Short-term operating lease liabilities |
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Short-term debt |
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Income tax payable |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt |
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Long-term operating lease liabilities |
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Other long-term liabilities |
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Deferred tax liabilities |
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Total long-term liabilities |
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Total liabilities |
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Shareholders' equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Treasury stock, |
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Retained earnings |
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
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$ |
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See notes to condensed consolidated financial statements
4
Table of Contents
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(in millions, except share data)
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Three Months Ended January 31, 2026 (13 Weeks) |
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Common |
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Common |
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Additional |
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Accumulated |
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Treasury |
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Retained |
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Total |
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Balance as of November 1, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of restricted stock, net of tax withholding |
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— |
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— |
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— |
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— |
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( |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income (loss) |
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— |
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— |
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— |
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— |
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— |
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Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Dividends on common stock |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance as of January 31, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Three Months Ended February 1, 2025 (13 Weeks) |
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Common |
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Common |
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Additional |
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Accumulated |
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Treasury |
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Retained |
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Total |
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Balance as of November 2, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Issuance of restricted stock, net of tax withholding |
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( |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income (loss) |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Dividends on common stock |
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— |
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— |
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— |
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— |
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— |
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( |
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Balance as of February 1, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
5
Table of Contents
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) (continued)
(in millions, except share data)
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Nine Months Ended January 31, 2026 (39 Weeks) |
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Common |
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Common |
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Additional |
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Accumulated |
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Treasury |
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Retained |
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Total |
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Balance as of May 3, 2025 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Issuance of restricted stock, net of tax withholding |
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( |
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— |
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— |
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( |
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( |
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Cancellation of restricted stock |
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( |
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( |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income (loss) |
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— |
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— |
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— |
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— |
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— |
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Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Dividends on common stock |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of January 31, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Nine Months Ended February 1, 2025 (40 Weeks) |
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Common |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Treasury |
|
|
Retained |
|
|
Total |
|
|||||||
Balance as of April 27, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Issuance of restricted stock, net of tax withholding |
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
||
Cancellation of restricted stock |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Conversion of cash bonus to RSUs |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Purchases of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Dividends on common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of February 1, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
See notes to condensed consolidated financial statements.
6
Table of Contents
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
|
|
Nine Months Ended |
|
|||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||
|
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided (used) by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Amortization of debt issuance costs |
|
|
|
|
|
|
||
Partial write-off of unamortized debt issuance costs |
|
|
|
|
|
|
||
Gain on sale of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Impairment of long-lived assets |
|
|
|
|
|
|
||
Inventory obsolescence |
|
|
|
|
|
|
||
Change in deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Inventories, net |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
|
|
|
( |
) |
|
Other liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided (used) by operating activities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Investing activities: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from settlement of net investment hedge |
|
|
|
|
|
|
||
Proceeds from sale of property, plant and equipment |
|
|
|
|
|
|
||
Proceeds from redemption of life insurance |
|
|
|
|
|
|
||
Net cash provided (used) by investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Financing activities: |
|
|
|
|
|
|
||
Taxes paid related to net share settlement of equity awards |
|
|
( |
) |
|
|
( |
) |
Repayments of finance leases |
|
|
( |
) |
|
|
( |
) |
Debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Purchases of common stock |
|
|
|
|
|
( |
) |
|
Cash dividends |
|
|
( |
) |
|
|
( |
) |
Proceeds from borrowings |
|
|
|
|
|
|
||
Repayments of borrowings |
|
|
( |
) |
|
|
( |
) |
Net cash provided (used) by financing activities |
|
|
|
|
|
( |
) |
|
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Increase (decrease) in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents at beginning of the period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of the period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes, net of refunds |
|
$ |
|
|
$ |
|
||
Operating lease obligations |
|
$ |
|
|
$ |
|
||
See notes to condensed consolidated financial statements.
7
Table of Contents
METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Description of Business and Summary of Significant Accounting Policies
Description of business
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, and consumer appliances.
Basis of presentation
The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. These interim condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments, except as otherwise disclosed) that management believes are necessary for a fair presentation of the results of operations, financial position and cash flows of the Company for the interim periods presented. These financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Form 10-K for the year ended May 3, 2025, filed with the SEC on July 9, 2025. Results may vary from quarter to quarter for reasons other than seasonality.
Financial reporting periods
The Company’s fiscal year ends on the Saturday closest to April 30, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. The current fiscal year ending May 2, 2026 is a 52-week fiscal year. The prior fiscal year ended May 3, 2025 was a 53-week fiscal year, with the additional week being included in the second fiscal quarter. The three months ended January 31, 2026 and February 1, 2025 were
Use of estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. These estimates and assumptions are subject to an inherent degree of uncertainty and may change, as new events occur, and additional information is obtained. As a result, actual results may differ from previously estimated amounts, and such differences may be material to the condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.
Accounting pronouncements not yet adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU No. 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The Company will include the disclosures required under ASU No. 2023-09 in its Annual Report on Form 10-K for the fiscal year ending May 2, 2026. The Company expects the adoption to only affect its financial statement disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures.” ASU No. 2024-03 requires public entities to disclose more detailed information about certain costs and expenses presented in the income statement, including inventory purchases, employee compensation, selling expenses and depreciation. ASU No. 2024-03 will become effective for the Company’s annual periods beginning in fiscal 2028. Early adoption is permitted. The Company is currently evaluating the effects of this ASU on its financial statement disclosures.
In November 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. The amendments clarify and enhance certain aspects of the hedge accounting guidance in ASC Topic 815. ASU No. 2025-09 will become effective for the Company’s annual periods beginning in fiscal 2028. The Company is currently evaluating the effects of this ASU on its financial statements and disclosures.
8
Table of Contents
Summary of significant accounting policies
The Company’s significant accounting policies are described in Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the consolidated financial statements included in the Company’s Form 10-K for the year ended May 3, 2025. There have been no material changes to the significant accounting policies in the nine months ended January 31, 2026.
Foreign currency translation.
The functional currencies of the majority of the Company’s foreign subsidiaries are their local currencies. The results of operations of these foreign subsidiaries are translated into U.S. dollars using average monthly rates, while the assets and liabilities are translated using period-end exchange rates. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss) (“AOCI(L)”). Gains and losses arising from transactions denominated in a currency other than the functional currency, except certain long-term intercompany transactions, are included in the condensed consolidated statements of operations in other expense, net. Net foreign exchange loss was $
Note 2. Revenue
The Company generates revenue from manufacturing products for customers in diversified global markets under multi-year programs. Typically, these programs do not contain a firm commitment by the customer for volume or price and do not reach the level of a performance obligation until the Company receives either a purchase order and/or a materials release from the customer for a specific quantity at a specified price, at which point an enforceable contract exists. Contracts may also provide for annual price reductions over the production life of a program, and prices may be adjusted on an ongoing basis to reflect changes in product content/cost and other commercial factors.
The majority of the Company’s revenue is recognized at a point in time. The Company has determined that the most definitive demonstration that control has transferred to a customer is physical shipment or delivery, depending on the contractual shipping terms, except for consignment transactions. Consignment transactions are arrangements where the Company transfers product to a customer location but retains ownership and control of such product until it is used by the customer. Revenue for consignment arrangements is recognized upon the customer’s usage. The Company’s revenue also includes customer cost recoveries, which represent reimbursements the Company receives from customers for incremental costs incurred in fulfilling its performance obligation to the customer. Given these cost recoveries are generally negotiated after contract inception, the Company accounts for these cost recoveries as a modification to the existing contract. The Company recognizes cost recoveries as revenue when (or as) the remaining performance obligations per the contract are satisfied, or on the modification date if all performance obligations under the contract have been previously satisfied.
Revenue associated with products which the Company believes have no alternative use (such as highly customized parts), and where the Company has an enforceable right to payment, are recognized on an over time basis. Revenue is recognized based on progress to date, which is typically even over the production process through transfer of control to the customer. For the three months ended January 31, 2026 and February 1, 2025, revenue recognized over time was $
The Company’s payment terms with its customers are typically
Contract balances
The Company receives payment from customers based on the contractual billing schedule and specific performance requirements established in the contract. Billings are recorded as accounts receivable when an unconditional right to the contractual consideration exists. A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer. A contract liability exists when an entity has received consideration, or the amount is due from the customer in advance of revenue recognition. Contract assets and contract liabilities are recognized in other current assets or other accrued liabilities in the condensed consolidated balance sheets and were immaterial as of January 31, 2026 and May 3, 2025.
9
Table of Contents
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.
|
|
Three Months Ended January 31, 2026 (13 Weeks) |
|
|||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Total |
|
||||
Geographic net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Europe, the Middle East & Africa ("EMEA") |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Three Months Ended February 1, 2025 (13 Weeks) |
|
|||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Total |
|
||||
Geographic net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Nine Months Ended January 31, 2026 (39 Weeks) |
|
|||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Total |
|
||||
Geographic net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Nine Months Ended February 1, 2025 (40 Weeks) |
|
|||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Total |
|
||||
Geographic net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
10
Table of Contents
Note 3. Restructuring and Asset Impairment Charges
Restructuring and asset impairment charges include costs related to restructuring actions taken by the Company as well as long-lived asset impairments.
The Company continually monitors market factors and industry trends and may take restructuring actions to reduce overall costs and improve operational profitability as appropriate. Restructuring actions generally result in charges for employee termination benefits, plant closures, asset impairments, and contract termination costs.
Components of restructuring and asset impairment charges were as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||||
Employee termination benefits |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Asset impairment charges |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The table below presents restructuring and asset impairment charges by reportable segment.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||||
Automotive |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interface |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Eliminations/Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Recognized in: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of products sold |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company’s restructuring liability was $
Note 4. Income Taxes
For the three and nine months ended January 31, 2026, the Company utilized the discrete effective tax rate method, treating the year-to-date period as if it was the annual period to calculate its interim income tax provision. The Company concluded it could not use the estimated annual effective tax rate method as it could not calculate a reliable estimate of the annual effective tax rate due to it being highly sensitive to minor changes in the forecasted amounts, thus generating significant variability in the estimated annual effective tax rate and distorting the customary relationship between income tax expense and pre-tax loss in interim periods.
The Company’s income tax expense and effective tax rate for the three and nine months ended January 31, 2026 and February 1, 2025 were as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||||
($ in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||||
Pre-tax income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effective tax rate |
|
|
( |
)% |
|
|
( |
)% |
|
|
( |
)% |
|
|
( |
)% |
The effective tax rate for the three and nine months ended January 31, 2026 differs from the U.S. federal statutory tax rate of
11
Table of Contents
of income derived from foreign operations with lower statutory tax rates. The effective tax rate for the three and nine months ended February 1, 2025 differs from the U.S. federal statutory tax rate of
The Organization for Economic Cooperation and Development’s (“OECD”) Pillar II Initiative introduced a
The Company’s gross unrecognized income tax benefits were $
On July 4, 2025, the United States Congress passed the budget reconciliation bill H.R. 1, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA makes permanent many of the provisions previously enacted as part of the 2017 Tax Cut and Jobs Act that were set to expire at the end of 2025 and includes other changes to certain U.S. corporate tax provisions. The changes to U.S. tax law that were enacted under the OBBBA include modifications to capitalization of research and development expenses, changes to interest expense limitations and accelerated fixed asset depreciation. Based on the Company’s current U.S. tax position, the changes did not have a significant effect to the effective tax rate.
Note 5. Balance Sheet Components
Cash and cash equivalents
Cash and cash equivalents consist of cash and highly liquid investments with maturities of three months or less. Highly liquid investments include money market funds which are classified within Level 1 of the fair value hierarchy.
Accounts receivable and allowance for doubtful accounts
Accounts receivable are customer obligations due under normal trade terms and are presented net of an allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts based on the current expected credit loss impairment model. The Company applies a historical loss rate based on historic write-offs to aging categories. The historical loss rate is adjusted for current conditions, and reasonable and supportable forecasts of future losses as necessary. The Company may also record a specific reserve for individual accounts when it becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer’s operating results or financial position. The allowance for doubtful accounts balance was $
Inventories, net
(in millions) |
|
January 31, 2026 |
|
|
May 3, 2025 |
|
||
Finished products |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Raw materials |
|
|
|
|
|
|
||
Gross inventories |
|
|
|
|
|
|
||
Inventory reserves |
|
|
( |
) |
|
|
( |
) |
Total inventories, net |
|
$ |
|
|
$ |
|
||
12
Table of Contents
Property, plant and equipment
(in millions) |
|
January 31, 2026 |
|
|
May 3, 2025 |
|
||
Land |
|
$ |
|
|
$ |
|
||
Buildings and building improvements |
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Total property, plant and equipment, gross |
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense was $
Pre-production tooling 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 January 31, 2026 and May 3, 2025, the Company had $
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 the estimated useful life of the assets. As of January 31, 2026 and May 3, 2025, Company-owned tooling was $
Note 6. Goodwill and Other Intangible Assets
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination.
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Total |
|
|||
Net Goodwill Balance as of May 3, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Gross Goodwill Balance as of May 3, 2025 |
|
|
|
|
|
|
|
|
|
|||
Foreign Currency Translation |
|
|
|
|
|
|
|
|
|
|||
Gross Goodwill Balance as of January 31, 2026 |
|
|
|
|
|
|
|
|
|
|||
Accumulated impairment |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net Goodwill Balance as of January 31, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
A summary of goodwill by reporting unit is as follows:
(in millions) |
|
January 31, 2026 |
|
|
May 3, 2025 |
|
||
Grakon Industrial |
|
$ |
|
|
$ |
|
||
Nordic Lights |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
13
Table of Contents
The Company tests goodwill and indefinite-lived intangible assets for impairment on an annual basis as of the beginning of the fourth quarter each fiscal year. In addition, the Company continuously monitors for events and circumstances that could negatively affect the key assumptions used in determining fair value and therefore require interim goodwill impairment testing, including long-term revenue growth projections, profitability, discount rates, volatility in the Company's market capitalization, and general industry, market and macroeconomic conditions. No impairment indicators were identified in the third quarter of fiscal 2026.
Other intangible assets, net
Details of identifiable intangible assets are shown below:
|
|
January 31, 2026 |
|
|||||||||||||
(in millions) |
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Weighted average remaining useful life (years) |
|
||||
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer relationships and agreements |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
Trade names, patents and technology licenses |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Total amortized intangible assets |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Unamortized trade name |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total other intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
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: |
|
|
|
|
Remainder of fiscal 2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Note 7. Derivative 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 its 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 using various pricing models that incorporate observable market parameters, such as interest rate yield curves and foreign currency rates and are classified as Level 2 within the fair value hierarchy.
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(L) in the condensed consolidated balance sheets. When the underlying hedged transaction is realized, the gain or loss previously included in AOCI(L) is recorded in earnings and reflected in the condensed consolidated statements of operations 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 condensed consolidated statements of operations 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(L) in the condensed consolidated balance sheets.
Net investment hedges
The Company is exposed to the risk that adverse changes in foreign currency exchange rates could affect its net investment in non-U.S. subsidiaries. To manage this risk, the Company designates certain qualifying derivative and non-derivative instruments, including cross-currency swaps and foreign currency-denominated debt, as net investment hedges of certain non-U.S. subsidiaries.
The Company had a fixed-rate, cross-currency swap, with a notional value of $
14
Table of Contents
Hedge effectiveness is assessed at the inception of the hedging relationship and quarterly thereafter, under the spot-to-spot method. The Company recognizes the effect of all other changes in fair value of the derivative, which represents the interest rate differential of the cross-currency swap, through interest expense. For the three and nine months ended February 1, 2025, the Company recorded a loss of $
As of August 2, 2025, the Company designated €
Interest rate swaps
The Company utilizes interest rate swaps to limit its exposure to market fluctuations on its variable-rate borrowings. The interest rate swaps effectively convert a portion of the Company's variable rate borrowings to a fixed rate based upon a determined notional amount. The Company has an interest rate swap, maturing on
Hedge effectiveness is assessed at the inception of the hedging relationship and quarterly thereafter. The effective portion of the periodic changes in fair value is recognized in AOCI(L) in the condensed consolidated balance sheets. Subsequently, the accumulated gains and losses recorded in AOCI(L) are reclassified to income in the period during which the hedged cash flow affects earnings, which are expected to be immaterial over the next 12 months. No ineffectiveness was recognized in the three or nine months ended January 31, 2026 and February 1, 2025.
Derivatives not designated as hedges
The Company uses short-term foreign currency forward contracts to mitigate the effect on earnings that exchange rate fluctuations have on non-functional currency balance sheet exposures. These forward contracts are not designated as hedging instruments. Gains and losses on these forward contracts are recognized in other expense, net, along with the foreign currency gains and losses on monetary assets and liabilities, in the condensed consolidated statements of operations.
As of January 31, 2026 and May 3, 2025, the Company held foreign currency forward contracts with a notional value of $
Effect of derivative instruments on comprehensive income (loss)
The pre-tax effects of derivative financial instruments recorded in other comprehensive income (loss) were as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||||
Cross-currency swap |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
15
Table of Contents
Fair value of derivative instruments on the balance sheet
The fair value of derivative instruments is classified as Level 2 within the fair value hierarchy and recorded in the condensed consolidated balance sheets as follows:
|
|
|
|
Asset/(Liability) |
|
|||||
(in millions) |
|
Financial Statement Caption |
|
January 31, 2026 |
|
|
May 3, 2025 |
|
||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
||
Interest rate swaps |
|
Other long-term liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
||
Foreign currency forward contracts |
|
Prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Foreign currency forward contracts |
|
Other accrued liabilities |
|
$ |
( |
) |
|
$ |
|
|
Note 8. Debt
A summary of debt is shown below:
(in millions) |
|
January 31, 2026 |
|
|
May 3, 2025 |
|
||
Revolving credit facility |
|
$ |
|
|
$ |
|
||
Other debt |
|
|
|
|
|
|
||
Unamortized debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Total debt |
|
|
|
|
|
|
||
Less: current maturities |
|
|
( |
) |
|
|
( |
) |
Total long-term debt |
|
$ |
|
|
$ |
|
||
Revolving credit facility
On October 31, 2022, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the Lenders and other parties named therein. On March 6, 2024, the Company entered into a First Amendment to Second Amended and Restated Credit Agreement (the “First Amendment”) and on July 9, 2024, the Company entered into a Second Amendment to Second Amended and Restated Credit Agreement and First Amendment to Second Amended and Restated Guaranty (the “Second Amendment”) among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and other parties thereto.
On July 7, 2025, the Company entered into a Third Amendment to Second Amended and Restated Credit Agreement (the “Third Amendment”) among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and other parties thereto. Among other things, the Third Amendment (i) reduced the revolving credit commitments from $
16
Table of Contents
consolidated leverage ratio covenant for the quarter ended May 3, 2025 as calculated using the definition of “Consolidated EBITDA” that was in effect before giving effect to the Third Amendment.
As of August 2, 2025, the Company was not in compliance with a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries contained in the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) for the quarter ended August 2, 2025. On September 8, 2025, the Company entered into a Waiver Letter (the “Waiver Letter”) among the Company, Bank of America, N.A., as Administrative Agent, and the other Lenders party thereto. Among other things, the Waiver Letter (i) acknowledged that an event of default under the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) occurred as the result of the Company making approximately $
The Credit Agreement, as amended by the First Amendment, the Second Amendment, the Third Amendment and the Waiver Letter is referred to herein as the “Amended Credit Agreement.”
The Amended Credit Agreement provides for a secured multicurrency revolving credit facility of $
The Third Amendment was accounted for as a debt modification, which resulted in a non-cash loss of $
The Second Amendment was accounted for as a debt modification, which resulted in a non-cash loss of $
Loans denominated in U.S. dollars under the Amended Credit Agreement bear interest at either (a) an adjusted base rate or (b) an adjusted term Secured Overnight Financing Rate (“SOFR”) rate or term SOFR daily floating rate (in each case, as determined in accordance with the provisions of the Amended Credit Agreement) in each case plus an additional applicable rate (the “Applicable Rate”) ranging (subject to the last sentence of this paragraph) between
As of January 31, 2026, the outstanding balance under the revolving credit facility consisted of $
The Amended Credit Agreement contains various representations and warranties, financial covenants (including covenants requiring the Company to maintain compliance with a minimum consolidated interest coverage ratio and a maximum consolidated leverage ratio, in each case as of the end of each fiscal quarter), restrictive and other covenants, and events of default. The covenants
17
Table of Contents
in the Amended Credit Agreement include an “anti-cash hoarding” requirement, as discussed above. As of January 31, 2026, the Company was in compliance with all the covenants in the Amended Credit Agreement.
Other debt
One of the Company’s European subsidiaries has debt that consists of
Note 9. Shareholders’ Equity
Share buyback programs
On June 13, 2024, the Board of Directors approved a share buyback authorization, commencing on June 17, 2024, for the purchase of up to $
Dividends
The Company paid dividends totaling $
Accumulated other comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
(in millions) |
|
Currency translation adjustments |
|
|
Derivative instruments |
|
|
Total |
|
|
Currency translation adjustments |
|
|
Derivative instruments |
|
|
Total |
|
||||||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Tax (expense) benefit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at the end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
(in millions) |
|
Currency translation adjustments |
|
|
Derivative instruments |
|
|
Total |
|
|
Currency translation adjustments |
|
|
Derivative instruments |
|
|
Total |
|
||||||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Tax (expense) benefit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at the end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Stock-based compensation
The Company has granted restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance stock units (“PSUs”) and stock awards to employees and non-employee directors under its long-term incentive compensation plans.
Performance stock units
During the nine months ended January 31, 2026, the Company granted
18
Table of Contents
stockholder return (“TSR”) measures, in each case through the end of the Company’s fiscal year ending April 29, 2028, with
The fair value of the PSUs based on an ROIC measure (“ROIC PSUs”) is based on the closing stock price on the date of grant. Compensation expense is recognized when it is probable that the target performance criteria will be achieved. The Company assesses the probability of vesting at each balance sheet date and adjusts compensation expense based on the probability assessment. Based on the Company’s current projections, no compensation expense has been recognized for the ROIC PSUs to date, as the performance conditions are not probable of being met.
The Company estimated the grant date fair value of its PSUs based on a TSR performance measure using a Monte Carlo simulation model, as the TSR metric and changes in stock price are considered market conditions under ASC 718, “Compensation - Stock Compensation.” Compensation expense is recognized ratably over the performance period based on the awards grant date fair value.
The following table summarizes PSU activity:
|
|
Performance |
|
|
Weighted |
|
||
Non-vested at May 3, 2025 |
|
|
|
|
$ |
|
||
Awarded |
|
|
|
|
$ |
|
||
Vested |
|
|
|
|
$ |
|
||
Forfeited |
|
|
( |
) |
|
$ |
|
|
Non-vested at January 31, 2026 |
|
|
|
|
$ |
|
||
As of January 31, 2026, unrecognized share-based compensation expense for the PSUs was $
Restricted stock units
RSUs granted vest over a pre-determined period of time, up to
|
|
Restricted |
|
|
Weighted |
|
||
Non-vested at May 3, 2025 |
|
|
|
|
$ |
|
||
Awarded |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Non-vested at January 31, 2026 |
|
|
|
|
$ |
|
||
As of January 31, 2026, unrecognized share-based compensation expense for RSUs was $
Non-employee director stock awards
The Company grants stock awards to its non-employee directors as a component of their compensation. The stock awards vest immediately upon grant. Prior to December 2025, non-employee directors could have elected to defer receipt of their shares under the Company’s non-qualified deferred compensation plan. During the third quarter of fiscal year 2026, the Company terminated its deferred compensation plan and it is expected to be fully liquidated by January 2027.
19
Table of Contents
The following table summarizes awards granted to non-employee directors:
|
|
Non-employee director awards |
|
|
Deferred non-employee director awards |
|
|
Total |
|
|
Weighted |
|
||||
Outstanding at May 3, 2025 |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Awarded |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Issued |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
$ |
|
|
Non-vested at January 31, 2026 |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Restricted stock awards
As of May 3, 2025, the Company had
Stock-based compensation expense
All stock-based awards to employees and non-employee directors are recognized in selling and administrative expenses on the condensed consolidated statements of operations.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||||
RSUs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
PSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred non-employee director awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-employee director awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 10. Loss per Share
Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding for the applicable period, but excludes any contingently issued shares where the contingency has not been resolved. The weighted average number of common shares used in the diluted loss per share calculation is determined using the treasury stock method which includes the effect of all potential dilutive common shares outstanding during the period.
The following table sets forth the computation of basic and diluted loss per share:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||||
|
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||||
Net loss (in millions) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of common stock equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
In the three and nine months ended January 31, 2026 and February 1, 2025, all potential common shares issuable for PSUs and RSUs were excluded from the calculation of diluted loss per share, as the effect of including them would have been anti-dilutive. The dilutive effect of potential common shares issuable for PSUs and RSUs on the weighted-average number of common shares outstanding would have been approximately
20
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February 1, 2025, respectively. The dilutive effect of potential common shares issuable for PSUs and RSUs on the weighted-average number of common shares outstanding would have been approximately
Note 11. Segment Information
An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, and about which separate financial information is regularly evaluated by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources. The CODM is the Company’s (“CEO”).
The Automotive segment supplies electronic and electro-mechanical devices and related products to automobile OEMs, either directly or through their tiered suppliers. Products include integrated overhead and center consoles, hidden and ergonomic switches, transmission lead-frames, insert molded components, LED-based lighting and sensors, which incorporate magneto-elastic sensing and other sensing technologies that monitor the operation or status of a component or system.
The Industrial segment manufactures exterior and interior lighting solutions, industrial safety radio remote controls, braided flexible cables, current-carrying laminated busbars and devices, custom power-product assemblies, such as our PowerRail® solution, high-current high-voltage flexible power cabling systems and powder-coated busbars that are used in various markets and applications, including aerospace, commercial vehicles, data centers, industrial equipment, power conversion, military, telecommunications, and transportation.
The Interface segment provides a variety of high-speed digital communication over copper media solutions for the data center and broadband markets, and interface panel solutions for the appliance market. Solutions include copper transceivers, distribution point units, and solid-state field-effect consumer touch panels.
Corporate and intersegment eliminations do not meet the requirements for being classified as an operating segment. Corporate costs include various support functions, such as accounting/finance, executive administration, human resources, information technology and legal.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1, “Description of Business and Summary of Significant Accounting Policies.”
The tables below present information about the Company’s reportable segments:
|
|
Three Months Ended January 31, 2026 (13 Weeks) |
|
|||||||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Eliminations/ |
|
|
Consolidated |
|
|||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Transfers between segments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Net sales to unaffiliated customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of products sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Selling and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Amortization of intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) from operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Pre-tax income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||
21
Table of Contents
|
|
Three Months Ended February 1, 2025 (13 Weeks) |
|
|||||||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Transfers between segments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Net sales to unaffiliated customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of products sold |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Selling and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Amortization of intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) from operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Pre-tax income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||
|
|
Nine Months Ended January 31, 2026 (39 Weeks) |
|
|||||||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Eliminations/ |
|
|
Consolidated |
|
|||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Transfers between segments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Net sales to unaffiliated customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of products sold |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Selling and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Amortization of intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) from operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Pre-tax income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Nine Months Ended February 1, 2025 (40 Weeks) |
|
|||||||||||||||||
(in millions) |
|
Automotive |
|
|
Industrial |
|
|
Interface |
|
|
Eliminations |
|
|
Consolidated |
|
|||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Transfers between segments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Net sales to unaffiliated customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of products sold |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Selling and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Amortization of intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) from operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Pre-tax income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
||||
(in millions) |
|
January 31, 2026 |
|
|
May 3, 2025 |
|
||
Identifiable assets: |
|
|
|
|
|
|
||
Automotive |
|
$ |
|
|
$ |
|
||
Industrial |
|
|
|
|
|
|
||
Interface |
|
|
|
|
|
|
||
Eliminations/Corporate |
|
|
|
|
|
|
||
Total identifiable assets |
|
$ |
|
|
$ |
|
||
Note 12. Contingencies
Certain litigation arising in the normal course of business is pending against us. The Company is, from time-to-time, subject to various legal actions and claims incidental to our business, including those arising out of alleged defects, breach of contracts,
22
Table of Contents
employment-related matters, environmental matters and intellectual property matters. The Company has established loss provisions for matters in which losses are deemed probable and reasonably estimable. The Company considers insurance coverage and third-party indemnification, among other things, when determining required accruals for pending litigation and claims. Although the outcome of potential legal actions and claims cannot be predicted with certainty, it is the Company's opinion, based on the information available, that it has adequate reserves for these liabilities. However, the ultimate outcome of any matter could require payment in excess of any amount that the Company may have accrued.
Stockholder Litigation
On August 26, 2024, a putative class action lawsuit on behalf of purchasers of Company common stock between June 23, 2022 and March 6, 2024, inclusive, entitled Marie Salem v. Methode Electronics, Inc. et al. was filed in the U.S. District Court for the Northern District of Illinois against the Company, a former Chief Executive Officer, President and director of the Company and a former Chief Financial Officer of the Company. The complaint alleges, among other things, that the defendants made false and/or misleading statements relating to the Company’s business, operations and prospects, including in respect of the Company’s transition to production of more specialized components for manufacturers of electric vehicles and the Company’s operations at its facility in Monterrey, Mexico, in violation of Sections 10(b) and 20 of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint seeks, among other things, unspecified money damages along with equitable relief and costs and expenses, including counsel fees and expert fees. Another purported shareholder filed a substantially similar action in the U.S. District Court for the Northern District of Illinois on October 7, 2024 against the same defendants and a former Chief Operating Officer of the Company, in a case entitled City of Cape Coral Municipal General Employees Retirement Plan v. Methode Electronics, Inc., et al. The second securities class action was filed on behalf of a broader putative class of purchasers of Company common stock between December 2, 2021 and March 6, 2024. After the cases were consolidated and a lead plaintiff appointed, Defendants moved to dismiss the consolidated complaint in its entirety for failure to state a claim. On February 3, 2026, the judge presiding over the case granted Defendants’ motion to dismiss but allowed Plaintiff an opportunity to file an amended complaint and set a schedule for briefing on any motion to dismiss that amended complaint.
In addition, two purported shareholders filed derivative lawsuits on November 26, 2024 and February 4, 2025, respectively. The derivative lawsuits were filed on behalf of the Company in the U.S. District Court for the Northern District of Illinois against the current members of the Company’s Board of Directors, as well as certain former directors and executives, alleging that the defendants breached their fiduciary duties by allowing the Company to issue various statements that are alleged to have been false or misleading for the same reasons alleged in the securities class action complaints. The derivative lawsuits are entitled Ray Homsi v. Donald Duda, et al. and Kevin D. Murphy v. Mark D. Schwabero, et al. (collectively with the Salem and City of Cape Coral matters, the “Stockholder Actions”).
The Company disagrees with and intends to vigorously defend against the Stockholder Actions. The Stockholder Actions could result in costs and losses to the Company, including potential costs associated with the indemnification of the other defendants. At this time, given the current status of the Stockholder Actions, the Company is unable to reasonably estimate an amount or range of reasonably possible loss, if any, that may result from the Stockholder Actions.
SEC Investigation
The Company received subpoenas from the SEC dated November 1, 2024 and March 12, 2025 seeking documents and information relating to, among other things, the Company’s operations in certain foreign countries, certain financial and accounting matters relating thereto, compliance with the Foreign Corrupt Practices Act and other anti-corruption laws, material weaknesses in the Company’s internal control over financial reporting previously reported in its public filings, deficiencies and significant deficiencies in the Company’s internal control over financial reporting, accounting and finance policies and procedures and other accounting and finance matters including new business bookings, certain financial metrics and performance indicators, performance relative to targets and guidance for certain periods, executive compensation policies and amounts, hotline tips and complaints, and terminations or resignations of company executives. The Company is cooperating with the SEC. The subpoenas and related investigation or other future requests for information have resulted and could result in future costs to the Company, including the expenditure of financial and managerial resources. In addition, this request may lead to the assertion of claims or the commencement of legal proceedings against the Company, which in turn may lead to material fines, penalties or other liabilities. However, at this time, the Company is unable to reasonably estimate an amount or range of reasonably possible loss, if any, that may result from these matters.
Note 13. Related Party Transactions
The Company’s former Interim Chief Financial Officer, David Rawden, was a director of AlixPartners, LLP (“AlixPartners”), a business advisory firm that provided a number of consulting services to the Company. The Company’s former Interim Chief Executive Officer, Kevin Nystrom, was a partner and managing director of AlixPartners. In the nine months ended January 31, 2026, the Company recognized
23
Table of Contents
2025, the Company recognized $
Note 14. Subsequent Events
Sale of a Business
On March 5, 2026, the Company entered into and closed on an asset purchase agreement with a third party (the “Buyer”) pursuant to which the Company sold substantially all of the assets of its dataMate business (the “Transaction”). The aggregate consideration for the Transaction consists of a purchase price of approximately $
Sale of Assets
The Company finalized a purchase and sale agreement to sell one of its locations to a third party for a purchase price of $
24
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
As used herein, “we,” “us,” “our,” the “Company” or “Methode” means Methode Electronics, Inc. and its subsidiaries.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect, when made, our current views with respect to current events and financial performance. Such forward-looking statements are subject to many risks, uncertainties and factors relating to our operations and business environment, which may cause our actual results to be materially different from any future results, express or implied, by such forward-looking statements. All statements that address future operating, financial or business performance or our strategies or expectations are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “outlook” or “continue,” and other comparable terminology. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following:
• Dependence on the automotive, commercial vehicle, and construction industries;
• Timing, quality and cost of new program launches;
• Changes in electric vehicle (“EV”) demand;
• Investment in programs prior to the recognition of revenue;
• Production delays or cancelled orders;
• Changes in global trade policies, including tariffs;
• Failure to attract and retain qualified personnel;
• Inflation;
• Dependence on the availability and price of materials;
• Dependence on a small number of large customers;
• Dependence on our supply chain;
• Risks related to conducting global operations;
• Effects of potential catastrophic events or other business interruptions;
• Ability to withstand pricing pressures, including price reductions;
• Ability to compete effectively;
• Our lengthy sales cycle;
• Risks relating to our use of requirements contracts;
• Potential work stoppages;
• Ability to successfully benefit from acquisitions and divestitures;
• Ability to manage our debt levels;
• Ability to comply with restrictions and covenants under our credit agreement;
• Interest rate changes and variable rate instruments;
• Timing and magnitude of costs associated with restructuring activities;
• Recognition of goodwill and other intangible asset impairment charges;
• Risks associated with inventory;
• Ability to remediate a material weakness in our internal control over financial reporting;
• Currency fluctuations;
• Income tax rate fluctuations;
• Judgments related to accounting for tax positions;
• Risks associated with litigation and government inquiries;
• Risks associated with warranty claims;
• Changing government regulations;
• Changing requirements by stakeholders on environmental or social matters;
• Effects of IT disruptions or cybersecurity incidents;
• Ability to innovate and keep pace with technological changes; and
• Ability to protect our intellectual property.
Additional details and factors are discussed under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended May 3, 2025 and in Part II, Item 1A of this Quarterly Report. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Any forward-looking statements made by us speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.
25
Table of Contents
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 Original Equipment Manufacturers (“OEMs”) utilizing our broad range of technologies for user interface, light-emitting diode (“LED”) lighting system, power distribution, and sensor applications.
Our solutions are found in the end markets of transportation (including automotive, commercial vehicle, e-bike, aerospace, bus and rail), cloud computing infrastructure, construction equipment, and consumer appliances.
Macroeconomic Conditions
There is continued uncertainty about the future relationship between the U.S. and various other countries with respect to tariffs, trade policies, government regulations, treaties and trade agreements. We are exposed to market risk with respect to increased and volatile duties assessed on raw materials (including copper, steel and aluminum), component parts (including semiconductors), and finished goods we import into the U.S. from our various manufacturing sites, including those in Mexico, China, Egypt, Europe and Canada. Should any of these tariffs or other trade barriers expand, raw materials and finished goods that we import will face higher prices, which could lead to reduced margins or increased prices that could, in turn, cause decreased customer demand. To the extent that we are unable to obtain price increases or there is a significant decrease in customer demand, new or higher tariffs could have a material effect on our results of operations.
The US-Israeli strikes in Iran and the Iranian retaliatory strikes in the Middle East have affected the global economy and given rise to potential global security issues that may adversely affect international business and economic conditions. This conflict in the Middle East may cause additional disruption in the supply chains, including logistics issues and inflationary challenges, which may adversely affect our business and results of operations. Additionally, certain of our customers and suppliers may be negatively affect by these events, which in turn may negatively affect the markets where we do business.
The global economy continues to experience volatile disruptions including to the commodity, labor, and transportation markets, arising from a combination of geopolitical events and various economic and financial factors. These disruptions have affected our operations and may continue to affect our business, financial condition, and results of operations. As a result of continued inflation, we have implemented measures to mitigate certain adverse effects of higher costs. However, we have been unable to fully mitigate or pass through the increases in our costs to our customers, which will likely continue in the future.
Our business in the future will be affected by the broad trend of electrification. The adoption of EVs has been slower than anticipated, which may affect our financial condition, results of operations, and cash flows. Certain of our customers have recently announced shifts to their EV strategies and we are pursuing these customers for price adjustments and other commercial recoveries. If we are not successful in obtaining these recoveries, we may experience production inefficiencies, including underutilized capacity and workforce disruptions, which could affect our profitability and estimates of future cash flows.
Global Supply Chain Disruptions
We continue to face a variety of supply chain challenges in fiscal 2026, including the procurement of automotive-grade semiconductors. In addition, we have experienced, and may continue to experience, business interruptions, including customer shutdowns and increased material and logistics costs and labor shortages. Changes in government regulations in areas including, but not limited to, trade and tariff regulations as noted above, could also increase our costs. We continue to work closely with suppliers and customers to mitigate and minimize the potential adverse effect from global supply chain disruptions. However, if we are not able to mitigate any direct or indirect supply chain disruptions, this may have a material adverse effect on our financial condition, results of operations, and cash flows.
Recent Events
Sale of a Business
On March 5, 2026, we entered into and closed on an asset purchase agreement with a third party (the “Buyer”) pursuant to which we sold substantially all of the assets of our dataMate business (the “Transaction”). The aggregate consideration for the Transaction consists of a purchase price of approximately $16.4 million, subject to customary working capital adjustments. The Transaction also includes customary representations, warranties, covenants, and indemnification provisions. Due to the proximity of the closing date of the Transaction with the date of the filing of this Quarterly Report on Form 10-Q, the initial accounting for the Transaction, including the determination of the final purchase price adjustment and the allocation of the consideration, is not yet completed. Based on preliminary estimates, we expect to record a gain on the sale in the range of $9.0 million to $10.5 million. Proceeds from the transaction are expected to be used for general corporate purposes, including debt reduction and working capital needs.
The dataMate business is included in the Interface segment, and represents less than 2% of our consolidated net sales for both the nine months ended January 31, 2026 and fiscal year ended May 3, 2025.
26
Table of Contents
Sale of Assets
We finalized a purchase and sale agreement to sell one of our locations to a third party for a purchase price of $4.7 million, which is subject to satisfaction of customary closing conditions and the relocation of the dataMate business. Accordingly, the property has not been classified as held for sale as of January 31, 2026. The net book value of this location as of January 31, 2026 was $3.5 million. The Buyer is expected to relocate the dataMate business on or before April 19, 2026, and the sale of assets is expected to close no later than May 10, 2026. Proceeds from the sale of assets are expected to be used for general corporate purposes, including debt reduction and working capital needs.
27
Table of Contents
Consolidated Results of Operations
We maintain our financial records on the basis of a 52 or 53-week fiscal year ending on the Saturday closest to April 30. Fiscal 2026 is a 52-week year and fiscal 2025 was a 53-week year. The three months ended January 31, 2026 and February 1, 2025 were each 13-week periods, while the nine months ended January 31, 2026 and February 1, 2025, were 39 and 40-week periods, respectively. The following discussions of comparative results among periods should be reviewed in this context.
The table below compares our results of operations between the three and nine months ended January 31, 2026 and the three and nine months ended February 1, 2025:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||||
(in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||||
Net sales |
|
$ |
233.7 |
|
|
$ |
239.9 |
|
|
$ |
721.1 |
|
|
$ |
791.0 |
|
Cost of products sold |
|
|
194.9 |
|
|
|
198.6 |
|
|
|
591.1 |
|
|
|
647.2 |
|
Gross profit |
|
|
38.8 |
|
|
|
41.3 |
|
|
|
130.0 |
|
|
|
143.8 |
|
Selling and administrative expenses |
|
|
39.1 |
|
|
|
37.7 |
|
|
|
114.7 |
|
|
|
126.5 |
|
Amortization of intangibles |
|
|
5.8 |
|
|
|
5.8 |
|
|
|
17.4 |
|
|
|
17.6 |
|
Interest expense, net |
|
|
5.4 |
|
|
|
5.5 |
|
|
|
17.0 |
|
|
|
16.5 |
|
Other expense, net |
|
|
1.6 |
|
|
|
0.5 |
|
|
|
4.3 |
|
|
|
2.9 |
|
Income tax expense (benefit) |
|
|
2.8 |
|
|
|
6.2 |
|
|
|
12.7 |
|
|
|
14.6 |
|
Net income (loss) |
|
$ |
(15.9 |
) |
|
$ |
(14.4 |
) |
|
$ |
(36.1 |
) |
|
$ |
(34.3 |
) |
Net sales
Net sales decreased $6.2 million, or 2.6%, to $233.7 million in the three months ended January 31, 2026, compared to $239.9 million in the three months ended February 1, 2025. Foreign currency translation increased net sales by $11.7 million. Excluding foreign currency translation, net sales decreased $17.9 million. The decrease was primarily due to lower sales volumes in the Automotive segment and Interface segment, partially offset by higher sales volumes in the Industrial segment.
Net sales decreased $69.9 million, or 8.8%, to $721.1 million in the nine months ended January 31, 2026, compared to $791.0 million in the nine months ended February 1, 2025. Foreign currency translation increased net sales by $25.0 million. Excluding foreign currency translation, net sales decreased $94.9 million. The decrease was primarily due to lower sales volumes in the Automotive segment and Interface segment, partially offset by higher sales volumes in the Industrial segment.
Cost of products sold
Cost of products sold decreased $3.7 million, or 1.9%, to $194.9 million (83.4% of net sales) in the three months ended January 31, 2026, compared to $198.6 million (82.8% of net sales) in the three months ended February 1, 2025. Foreign currency translation increased cost of products sold by $8.8 million. Excluding foreign currency translation, cost of products sold decreased $12.5 million. The decrease was primarily due to lower material costs as a result of lower sales volumes.
Cost of products sold decreased $56.1 million, or 8.7%, to $591.1 million (82.0% of net sales) in the nine months ended January 31, 2026, compared to $647.2 million (81.8% of net sales) in the nine months ended February 1, 2025. Foreign currency translation increased cost of products sold by $19.2 million. Excluding foreign currency translation, cost of products sold decreased $75.3 million. The decrease was primarily due to lower material costs as a result of lower sales volumes. Restructuring and asset impairment charges included within cost of products sold were $0.1 in the nine months ended January 31, 2026, compared to $0.4 million in the nine months ended February 1, 2025.
Gross profit margin
Gross profit margin was 16.6% of net sales in the three months ended January 31, 2026, compared to 17.2% of net sales in the three months ended February 1, 2025. The decrease in gross profit margin was primarily a result of lower sales volume and product mix in the Automotive segment and Interface segment.
Gross profit margin was 18.0% of net sales in the nine months ended January 31, 2026, remaining relatively consistent compared to 18.2% of net sales in the nine months ended February 1, 2025.
28
Table of Contents
Selling and administrative expenses
Selling and administrative expenses increased $1.4 million, or 3.7%, to $39.1 million (16.7% of net sales) in the three months ended January 31, 2026, compared to $37.7 million (15.7% of net sales) in the three months ended February 1, 2025. Excluding foreign currency translation, selling and administrative expenses increased $0.4 million. Restructuring and asset impairment charges included within selling and administrative expenses were $0.4 million in the three months ended January 31, 2026, primarily related to employee termination benefits.
Selling and administrative expenses decreased $11.8 million, or 9.3%, to $114.7 million (15.9% of net sales) in the nine months ended January 31, 2026, compared to $126.5 million (16.0% of net sales) in the nine months ended February 1, 2025. Excluding foreign currency translation, selling and administrative expenses decreased $13.9 million. The decrease was primarily due to lower professional fees. Restructuring and asset impairment charges included within selling and administrative expenses were $2.3 million in the nine months ended January 31, 2026, compared to $0.3 million in the nine months ended February 1, 2025, primarily related to employee termination benefits.
Amortization of intangibles
Amortization of intangibles was $5.8 million in the three months ended January 31, 2026, compared to $5.8 million in the three months ended February 1, 2025. Amortization of intangibles was $17.4 million in the nine months ended January 31, 2026, compared to $17.6 million in the nine months ended February 1, 2025.
Interest expense, net
Interest expense, net was $5.4 million in the three months ended January 31, 2026, compared to $5.5 million in the three months ended February 1, 2025. The decrease was due to a lower level of borrowings and lower interest rates, partially offset by the unfavorable effects of foreign exchange rates on the euro denominated interest.
Interest expense, net was $17.0 million in the nine months ended January 31, 2026, compared to $16.5 million in the nine months ended February 1, 2025. The increase was due to the unfavorable effects of foreign exchange rates on the euro denominated interest and higher amortization of debt issuance costs, partially offset by a lower interest rates and a lower level of borrowings. Additionally, in the nine months ended months ended February 1, 2025, there was a gain of $0.4 million recognized on a cross-currency swap that was settled in December 2024.
Other expense, net
Other expense, net was $1.6 million in the three months ended January 31, 2026, compared to $0.5 million in the three months ended February 1, 2025. Net foreign exchange loss was $2.6 million in the three months ended January 31, 2026, compared to $1.3 million in the three months ended February 1, 2025.
Other expense, net was $4.3 million in the nine months ended January 31, 2026, compared to $2.9 million in the nine months ended February 1, 2025. Net foreign exchange loss was $5.7 million in the nine months ended January 31, 2026, compared to $3.6 million in the nine months ended February 1, 2025. Other expense, net in the nine months ended January 31, 2026 includes a non-cash write-off of $0.6 million of unamortized debt issuance costs, compared to $1.2 million in the nine months ended February 1, 2025. In addition, other expense, net includes $0.5 million of a net gain on sale of assets in the nine months ended January 31, 2026, compared to $0.3 million in the nine months ended February 1, 2025.
Income tax expense
Income tax expense was $2.8 million (-21.4% effective tax rate) in the three months ended January 31, 2026, compared to $6.2 million (-75.6% effective tax rate) in the three months ended February 1, 2025. Income tax expense was $12.7 million (-54.3% effective tax rate) in the nine months ended January 31, 2026, compared to $14.6 million (-74.1% effective tax rate) in the nine months ended February 1, 2025.
The effective tax rate for the three and nine months ended January 31, 2026 differs from the U.S. federal statutory tax rate of 21% primarily due to an increase in a valuation allowance for U.S. deferred tax assets, an unfavorable effect from global intangible low-tax income, and non-deductible interest, partially offset by the effect of income derived from foreign operations with lower statutory tax rates. The effective tax rate for the three and nine months ended February 1, 2025 differs from the U.S. federal statutory tax rate of 21% primarily due to an increase in a valuation allowance for U.S. deferred tax assets and global intangible low-tax income, partially offset by income derived from foreign operations with lower statutory tax rates and research deductions claimed in foreign jurisdictions and foreign exchange loss.
29
Table of Contents
Net loss
Net loss was $15.9 million in the three months ended January 31, 2026, compared to $14.4 million in the three months ended February 1, 2025. Net loss was $36.1 million in the nine months ended January 31, 2026, compared to $34.3 million in the nine months ended February 1, 2025. The increase in net loss for both periods was attributable to the aforementioned items.
30
Table of Contents
Reportable Operating Segments
Automotive
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||||
($ in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
40.3 |
|
|
$ |
51.8 |
|
|
$ |
117.1 |
|
|
$ |
187.8 |
|
Europe, the Middle East & Africa ("EMEA") |
|
|
58.0 |
|
|
|
55.9 |
|
|
|
180.2 |
|
|
|
181.7 |
|
Asia |
|
|
7.9 |
|
|
|
8.0 |
|
|
|
25.5 |
|
|
|
26.5 |
|
Net sales |
|
|
106.2 |
|
|
|
115.7 |
|
|
|
322.8 |
|
|
|
396.0 |
|
Gross profit |
|
$ |
1.9 |
|
|
$ |
3.0 |
|
|
$ |
4.2 |
|
|
$ |
25.8 |
|
As a percent of net sales |
|
|
1.8 |
% |
|
|
2.6 |
% |
|
|
1.3 |
% |
|
|
6.5 |
% |
Income (loss) from operations |
|
$ |
(12.7 |
) |
|
$ |
(9.0 |
) |
|
$ |
(36.1 |
) |
|
$ |
(14.0 |
) |
As a percent of net sales |
|
|
(12.0 |
)% |
|
|
(7.8 |
)% |
|
|
(11.2 |
)% |
|
|
(3.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales
Automotive segment net sales decreased $9.5 million, or 8.2%, to $106.2 million in the three months ended January 31, 2026, compared to $115.7 million in the three months ended February 1, 2025. Excluding foreign currency translation, net sales decreased $15.3 million. The change is attributable to the following:
Automotive segment net sales decreased $73.2 million, or 18.5%, to $322.8 million in the nine months ended January 31, 2026, compared to $396.0 million in the nine months ended February 1, 2025. Excluding foreign currency translation, net sales decreased $86.1 million. The change is attributable to the following:
Gross profit
Automotive segment gross profit decreased $1.1 million, or 36.7%, to $1.9 million in the three months ended January 31, 2026, compared to $3.0 million in the three months ended February 1, 2025. Excluding foreign currency translation, gross profit decreased $2.0 million. Gross profit margins decreased to 1.8% in the three months ended January 31, 2026, compared to 2.6% in the three months ended February 1, 2025. The decrease in gross profit margins was primarily due to lower sales volumes and mix in North America.
Automotive segment gross profit decreased $21.6 million, or 83.7%, to $4.2 million in the nine months ended January 31, 2026, compared to $25.8 million in the nine months ended February 1, 2025. Gross profit margins decreased to 1.3% in the nine months ended January 31, 2026, compared to 6.5% in the nine months ended February 1, 2025. The decrease in gross profit was primarily due to lower sales volumes and mix and higher operating expenses in North America.
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Table of Contents
Loss from operations
Automotive segment loss from operations was $12.7 million in the three months ended January 31, 2026, compared to $9.0 million in the three months ended February 1, 2025. The loss from operations was primarily due to higher selling and administrative expenses and lower gross profit.
Automotive segment loss from operations was $36.1 million in the nine months ended January 31, 2026, compared to $14.0 million in the nine months ended February 1, 2025. The decrease was primarily due to lower gross profit.
Industrial
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||||
($ in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||||
Net sales |
|
$ |
122.5 |
|
|
$ |
111.9 |
|
|
$ |
372.9 |
|
|
$ |
354.8 |
|
Gross profit |
|
$ |
36.8 |
|
|
$ |
35.2 |
|
|
$ |
118.9 |
|
|
$ |
106.0 |
|
As a percent of net sales |
|
|
30.0 |
% |
|
|
31.5 |
% |
|
|
31.9 |
% |
|
|
29.9 |
% |
Income (loss) from operations |
|
$ |
25.2 |
|
|
$ |
22.6 |
|
|
$ |
81.0 |
|
|
$ |
63.8 |
|
As a percent of net sales |
|
|
20.6 |
% |
|
|
20.2 |
% |
|
|
21.7 |
% |
|
|
18.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales
Industrial segment net sales increased $10.6 million, or 9.5%, to $122.5 million in the three months ended January 31, 2026, compared to $111.9 million in the three months ended February 1, 2025. Excluding foreign currency translation, net sales increased $4.7 million. The increase was due to higher sales volumes for lighting products for off-road equipment markets and power products, partially offset by lower sales volumes for lighting products for commercial vehicles.
Industrial segment net sales increased $18.1 million, or 5.1%, to $372.9 million in the nine months ended January 31, 2026, compared to $354.8 million in the nine months ended February 1, 2025. Excluding foreign currency translation, net sales increased $6.0 million. The increase was due to higher sales volumes of power products and lighting products for off-road equipment markets, partially offset by lower sales volumes for lighting products for commercial vehicles and radio remote control devices.
Gross profit
Industrial segment gross profit increased $1.6 million, or 4.5%, to $36.8 million in the three months ended January 31, 2026, compared to $35.2 million in the three months ended February 1, 2025. Excluding foreign currency translation, gross profit decreased $0.4 million. Gross profit margins decreased to 30.0% in the three months ended January 31, 2026, compared to 31.5% in the three months ended February 1, 2025. Gross profit margins decreased due to higher material costs.
Industrial segment gross profit increased $12.9 million, or 12.2%, to $118.9 million in the nine months ended January 31, 2026, compared to $106.0 million in the nine months ended February 1, 2025. Excluding foreign currency translation, gross profit increased $8.9 million. Gross profit margins increased to 31.9% in the nine months ended January 31, 2026, compared to 29.9% in the nine months ended February 1, 2025. Gross profit margins improved due to higher sales volumes and lower freight costs.
Income from operations
Industrial segment income from operations increased $2.6 million, or 11.5%, to $25.2 million in the three months ended January 31, 2026, compared to $22.6 million in the three months ended February 1, 2025. Excluding foreign currency translation, income from operations increased $1.3 million. The increase was primarily due to higher gross profit and lower selling and administrative expenses.
Industrial segment income from operations increased $17.2 million, or 27.0%, to $81.0 million in the nine months ended January 31, 2026, compared to $63.8 million in the nine months ended February 1, 2025. Excluding foreign currency translation, income from operations increased $14.5 million. The increase was primarily due to higher gross profit and lower selling and administrative expenses. The decrease in selling and administrative expenses was primarily due to lower professional fees.
32
Table of Contents
Interface
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||||
($ in millions) |
|
(13 Weeks) |
|
|
(13 Weeks) |
|
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||||
Net sales |
|
$ |
5.0 |
|
|
$ |
12.3 |
|
|
$ |
25.4 |
|
|
$ |
40.2 |
|
Gross profit |
|
$ |
0.5 |
|
|
$ |
2.9 |
|
|
$ |
6.7 |
|
|
$ |
10.7 |
|
As a percent of net sales |
|
|
10.0 |
% |
|
|
23.6 |
% |
|
|
26.4 |
% |
|
|
26.6 |
% |
Income (loss) from operations |
|
$ |
0.1 |
|
|
$ |
2.2 |
|
|
$ |
5.4 |
|
|
$ |
8.8 |
|
As a percent of net sales |
|
|
2.0 |
% |
|
|
17.9 |
% |
|
|
21.3 |
% |
|
|
21.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales
Interface segment net sales decreased $7.3 million, or 59.3% to $5.0 million in the three months ended January 31, 2026, compared to $12.3 million in the three months ended February 1, 2025.
Interface segment net sales decreased $14.8 million, or 36.8%, to $25.4 million in the nine months ended January 31, 2026, compared to $40.2 million in the nine months ended February 1, 2025.
The decrease in both periods was primarily due to lower sales volumes of touch panels for appliances.
Gross profit
Interface segment gross profit decreased $2.4 million, or 82.8%, to $0.5 million in the three months ended January 31, 2026, compared to $2.9 million in the three months ended February 1, 2025. Gross profit margins decreased to 10.0% in the three months ended January 31, 2026, compared to 23.6% in the three months ended February 1, 2025.
Interface segment gross profit decreased $4.0 million, or 37.4%, to $6.7 million in the nine months ended January 31, 2026, compared to $10.7 million in the nine months ended February 1, 2025. Gross profit margins decreased to 26.4% in the nine months ended January 31, 2026, compared to 26.6% in the nine months ended February 1, 2025.
The decrease in gross profit margins in both periods was primarily due to lower sales volumes and product mix.
Income from operations
Interface segment income from operations decreased $2.1 million, or 95.5%, to $0.1 million in the three months ended January 31, 2026, compared to $2.2 million in the three months ended February 1, 2025.
Interface segment income from operations decreased $3.4 million, or 38.6%, to $5.4 million in the nine months ended January 31, 2026, compared to $8.8 million in the nine months ended February 1, 2025.
The decrease in both periods was primarily due to lower gross profit.
33
Table of Contents
Financial Condition, Liquidity and Capital Resources
Our liquidity requirements are primarily to fund our business operations, including capital expenditures and working capital requirements, as well as to fund debt service requirements, dividends and stock repurchases. Our primary sources of liquidity are cash flows from operations, existing cash balances and borrowings under our senior secured credit agreement. We believe our liquidity position will be sufficient to fund our existing operations and current commitments for at least the next twelve months. However, if economic conditions remain for longer than we expect due to supply chain disruptions, inflationary pressure or other geopolitical risks, or if we are unable to maintain compliance with our debt covenants, our liquidity position could be severely affected. Additionally, we may consider other options to enhance our financial and operating position. Such options may include refinancing or restructuring initiatives, sales of assets, and reductions or delays in capital spending.
As of January 31, 2026, we had $133.7 million of cash and cash equivalents, of which $71.3 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.
Repurchases of Common Stock
On June 13, 2024, the Board of Directors approved a new share buyback authorization, commencing on June 17, 2024, for the purchase of up to $200.0 million of our outstanding common stock through June 17, 2026 (the “2024 Buyback Authorization”). No shares have been purchased under the 2024 Buyback Authorization. As of January 31, 2026, the dollar value of shares that remained available to be purchased under 2024 Buyback Authorization was $200.0 million.
Amended Credit Agreement
On October 31, 2022, we entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the Lenders and other parties named therein. On March 6, 2024, we entered into a First Amendment to Second Amended and Restated Credit Agreement (the “First Amendment”) and on July 9, 2024, we entered into a Second Amendment to Second Amended and Restated Credit Agreement and First Amendment to Second Amended and Restated Guaranty (the “Second Amendment”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and other parties thereto. On July 7, 2025, we entered into a Third Amendment to Second Amended and Restated Credit Agreement (the “Third Amendment”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and other parties thereto.
Among other things, the Third Amendment (i) reduced the revolving credit commitments from $500 million to $400 million, (ii) eliminated our option to increase the revolving credit commitments and/or add one or more tranches of term loans under the credit facility from time to time subject to certain limitations and conditions including approval of certain lenders, (iii) amended the consolidated interest coverage ratio covenant for the quarters ending August 2, 2025, November 1, 2025, January 31, 2026 and May 2, 2026 to relax that covenant to some extent for each of those quarters, (iv) amended the consolidated leverage ratio covenant for the quarters ending August 2, 2025, November 1, 2025, January 31, 2026, May 2, 2026 and August 1, 2026 to relax that covenant to some extent for each of those quarters, (v) amended the definition of “Consolidated EBITDA,” to include an add back for a portion of the inventory write-down taken in the fourth quarter of fiscal 2025, (vi) increased the interest rate during the period from July 7, 2025 to the date that financial statements and a compliance certificate are delivered for the fiscal quarter ending October 31, 2026 (such period, the “Third Amendment Period”), (vii) changed the commitment fee payment during the Third Amendment Period, (viii) extended, through the maturity date, the requirement to provide monthly financial statements to the lenders, (ix) restricted or decreased, during the Third Amendment Period, the amount of certain exceptions to covenants restricting liens on, investments by and indebtedness of the Company and its subsidiaries, (x) limited to $2.5 million, in any fiscal quarter during the Third Amendment Period, the general basket exception to a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries, while allowing under that general basket exceptions up to an aggregate of $25 million of restricted payments during any other period, (xi) extended, through the maturity date, an “anti-cash hoarding” requirement contained in the Second Amendment such that if we have cash on hand in the U.S. (subject to certain exceptions) of more than $65 million for 10 consecutive business days, we will be required to prepay the indebtedness under the credit facility by the amount of such excess, and (xii) eliminated, during the Third Amendment Period, the investment, restricted payment and indebtedness baskets that had allowed for unlimited investments, restricted payments and indebtedness, as applicable, so long as (among other requirements) we met certain pro forma consolidated leverage ratio tests.
As of August 2, 2025, we were not in compliance with a covenant restricting certain restricted payments (including dividends) by us and our subsidiaries contained in the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) for the quarter ended August 2, 2025. On September 8, 2025, we entered into a Waiver Letter (the “Waiver Letter”) with Bank of America, N.A., as Administrative Agent, and the other Lenders party thereto. Among other things, the Waiver Letter (i) acknowledged that an event of default under the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) occurred as the result of us making approximately $2.8 million of restricted payments during the quarter ended August 2, 2025, which was in excess of the $2.5 million general basket exception to a covenant restricting certain
34
Table of Contents
restricted payments (including dividends) by us and our subsidiaries during the quarter ended August 2, 2025, (ii) reduced, for the quarter ending November 1, 2025, the general basket exception to a covenant restricting certain restricted payments (including dividends) by us and our subsidiaries by the amount of excess restricted payments made during the quarter ended August 2, 2025 (which change reduced such basket exception from $2.5 million to approximately $2.2 million for the quarter ending November 1, 2025), and (iii) waived the acknowledged event of default.
The Credit Agreement, as amended by the First Amendment, the Second Amendment, the Third Amendment and the Waiver Letter, is referred to herein as the “Amended Credit Agreement.”
The Amended Credit Agreement provides for a secured multicurrency revolving credit facility of $400 million and matures on October 31, 2027.
As of January 31, 2026, the outstanding balance under the revolving credit facility consisted of $302.6 million (€255.3 million) of euro-denominated borrowings and $40.0 million of US denominated borrowings. The Amended Credit Agreement contains various representations and warranties, financial covenants (including covenants requiring us to maintain compliance with a minimum consolidated interest coverage ratio and a maximum consolidated leverage ratio, in each case as of the end of each fiscal quarter), restrictive and other covenants, and events of default. The covenants in the Amended Credit Agreement include an “anti-cash hoarding” requirement, as discussed above. As of January 31, 2026, we were in compliance with all the covenants in the Amended Credit Agreement. For further information, see Note 8, “Debt” to the condensed consolidated financial statements included in this Quarterly Report.
Although we currently anticipate, based on our current projections and analyses, that we will be in compliance with the financial covenants contained in the Amended Credit Agreement, no assurance can be given that we will be or will remain in compliance with such covenants in the future. Factors that could increase our risk of future non-compliance include those identified in Part I – Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended May 3, 2025, as supplemented by subsequent filings with the Securities and Exchange Commission, including under Part II – Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended August 2, 2025.
Cash Flows
|
|
Nine Months Ended |
|
|||||
|
|
January 31, 2026 |
|
|
February 1, 2025 |
|
||
(in millions) |
|
(39 Weeks) |
|
|
(40 Weeks) |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
(36.1 |
) |
|
$ |
(34.3 |
) |
Non-cash items |
|
|
50.3 |
|
|
|
58.4 |
|
Changes in operating assets and liabilities |
|
|
18.9 |
|
|
|
(33.1 |
) |
Net cash provided (used) by operating activities |
|
|
33.1 |
|
|
|
(9.0 |
) |
Net cash provided (used) by investing activities |
|
|
(13.6 |
) |
|
|
(26.7 |
) |
Net cash provided (used) by financing activities |
|
|
1.0 |
|
|
|
(16.6 |
) |
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
9.6 |
|
|
|
(5.4 |
) |
Increase (decrease) in cash and cash equivalents |
|
|
30.1 |
|
|
|
(57.7 |
) |
Cash and cash equivalents at beginning of the period |
|
|
103.6 |
|
|
|
161.5 |
|
Cash and cash equivalents at end of the period |
|
$ |
133.7 |
|
|
$ |
103.8 |
|
Operating activities
Net cash provided by operating activities was $33.1 million in the nine months ended January 31, 2026, compared to net cash used by operating activities of $9.0 million in the nine months ended February 1, 2025. The increase was due to higher cash inflows from operating assets and liabilities of $18.9 million in the nine months ended January 31, 2026 primarily due to a lower investment in working capital items.
Investing activities
Net cash used by investing activities was $13.6 million in the nine months ended January 31, 2026, compared to $26.7 million in the nine months ended February 1, 2025. Capital expenditures were $16.6 million in the nine months ended January 31, 2026, compared to $32.5 million in the nine months ended February 1, 2025. In the nine months ended January 31, 2026, we received proceeds of $1.3 million from the sale of assets, compared to $2.7 million in the nine months ended February 1, 2025. In the nine months ended January 31, 2026, we received proceeds of $1.7 million from the redemption of certain life insurance policies.
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Financing activities
Net cash provided by financing activities was $1.0 million in the nine months ended January 31, 2026, compared to net cash used by financing activities of $16.6 million in the nine months ended February 1, 2025. In the nine months ended January 31, 2026, we had net proceeds from borrowings of $10.3 million, compared to net proceeds from borrowings of $5.8 million in the nine months ended February 1, 2025. In the nine months ended January 31, 2026, we paid $1.6 million of debt issuance costs associated with the Third Amendment, compared to $1.8 million of debt issuance costs associated with the Second Amendment. In the nine months ended February 1, 2025, we used $1.6 million of cash for the purchase of shares under the board-authorized share repurchase program in place at the time.
We paid cash dividends of $6.5 million in the nine months ended January 31, 2026, compared to $15.3 million in the nine months ended February 1, 2025.
Recent Accounting Pronouncements
See Note 1, “Description of Business and Summary of Significant Accounting Policies” to the condensed consolidated financial statements included in Item 1.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined under SEC rules.
Item 3. 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.
There has been no significant change in our exposure to market risk during the nine months ended January 31, 2026. For a discussion of our exposure to market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in our Annual Report on Form 10-K for the year ended May 3, 2025.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report, we performed an evaluation under the supervision and with the participation of the Company’s management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Our disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Company in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s applicable rules and forms. As a result of this evaluation, our CEO and CFO concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the three months ended January 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 12, “Contingencies” to the condensed consolidated financial statements included in this Quarterly Report for a description of certain of our pending legal proceedings.
Item 1A. Risk Factors
Our business, financial condition, results of operations and cash flows are subject to various risks which could cause actual results to vary from recent results or from anticipated future results. Please refer to Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended May 3, 2025 and Part II, Other Information, Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended August 2, 2025, for a description of certain material risks and uncertainties to which our business, financial condition and results of operations are subject. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On June 13, 2024, the Board of Directors approved a share buyback authorization, commencing on June 17, 2024, for the purchase of up to $200.0 million of our outstanding common stock through June 17, 2026 (the “2024 Buyback Authorization”). Purchases under the 2024 Buyback Authorization may be made on the open market, including pursuant to purchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, or in private transactions. We have not made any purchases under the 2024 Buyback Authorization.
The following table provides information about our purchases of equity securities during the three months ended January 31, 2026.
Period |
|
Total number of shares purchased1 |
|
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Average price paid per share |
|
|
Total number of shares purchased as part of publicly announced plan |
|
|
Approximate dollar value of shares that may yet be purchased under the program (in millions) |
|
||||
November 2, 2025 through November 29, 2025 |
|
|
1,745 |
|
|
$ |
6.97 |
|
|
|
— |
|
|
$ |
200.0 |
|
November 30, 2025 to January 3, 2026 |
|
|
3,929 |
|
|
$ |
7.79 |
|
|
|
— |
|
|
$ |
200.0 |
|
January 4, 2026 through January 31, 2026 |
|
|
142 |
|
|
$ |
7.42 |
|
|
|
— |
|
|
$ |
200.0 |
|
|
|
|
|
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|
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(1) Represents 5,816 shares of common stock that were surrendered by employees to satisfy tax withholding obligations in connection with the vesting of restricted stock units. |
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Item 5. Other Information
During our last fiscal quarter,
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Item 6. Exhibits
Exhibit Number |
|
Description |
10.1** |
|
Form of Amendment to Change of Control Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 18, 2025) |
31.1 |
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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. |
32* |
|
Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350. |
101.INS |
|
Inline XBRL Instance Document |
101.SCH |
|
Inline XBRL Taxonomy Schema With Embedded Linkbase Document |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
|
|
* |
|
Indicates that the exhibit is being furnished with this report and not filed as part of it. |
** |
|
Management compensatory plan. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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METHODE ELECTRONICS, INC. |
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By: |
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/s/ Laura Kowalchik |
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Laura Kowalchik |
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Chief Financial Officer |
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(Principal Financial Officer) |
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Dated: |
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March 5, 2026 |
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