SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

~~__________________________________~~

x~~Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

~~__________________________________~~

Commission file number ~~0-2816~~

001-33731

METHODE ELECTRONICS, INC.

(Exact name of registrant as specified in its charter)

~~(Do not check if a smaller reporting company)~~

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 ~~7(a)(2)(B)~~13(a) of the Securities Act. o

~~January 27, 2018~~

~~TABLE OF CONTENTS~~

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

METHODE ELECTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME (Unaudited)

(~~Dollars~~ in millions, except per share data)


	Three Months Ended
	July 30, 2022			July 31, 2021
Net sales	$	282.4		$	287.8

Cost of products sold		220.6			216.1

Gross profit		61.8			71.7

Selling and administrative expenses		35.3			32.8
Amortization of intangibles		4.7			4.8

Income from operations		21.8			34.1

Interest expense, net		—			1.1
Other income, net		(4.1	)		(1.8	)

Income before income taxes		25.9			34.8

Income tax expense		4.4			5.7

Net income	$	21.5		$	29.1

Basic and diluted income per share:
Basic	$	0.59		$	0.77
Diluted	$	0.58		$	0.76

Cash dividends per share	$	0.14		$	0.14

See notes to condensed consolidated financial statements.

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(~~Dollars~~ in millions)

~~See notes to consolidated financial statements.~~

~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(Dollars in millions, except per share amounts)~~


	Three Months Ended
	July 30, 2022			July 31, 2021
Net income	$	21.5		$	29.1

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(10.9	)		(4.1	)
Derivative financial instruments		1.5			0.9
Total comprehensive income	$	12.1		$	25.9

See notes to condensed consolidated financial statements.

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per-share data)


	July 30, 2022			April 30, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	152.4		$	172.0
Accounts receivable, net		282.0			273.3
Inventories		173.9			158.5
Income taxes receivable		7.7			8.3
Prepaid expenses and other current assets		23.1			16.9
Total current assets		639.1			629.0
Long-term assets:
Property, plant and equipment, net		194.6			197.0
Goodwill		232.7			233.0
Other intangible assets, net		202.6			207.7
Operating lease right-of-use assets, net		18.2			20.0
Deferred tax assets		36.2			36.8
Pre-production costs		26.5			27.2
Other long-term assets		40.0			38.4
Total long-term assets		750.8			760.1
Total assets	$	1,389.9		$	1,389.1

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	116.4		$	108.5
Accrued employee liabilities		26.8			30.0
Other accrued liabilities		27.6			24.5
Short-term operating lease liabilities		5.6			6.0
Short-term debt		13.0			13.0
Income tax payable		6.4			6.6
Total current liabilities		195.8			188.6
Long-term liabilities:
Long-term debt		194.2			197.5
Long-term operating lease liabilities		13.5			14.8
Long-term income taxes payable		22.1			22.1
Other long-term liabilities		15.6			14.0
Deferred tax liabilities		37.3			38.3
Total long-term liabilities		282.7			286.7
Total liabilities		478.5			475.3
Shareholders' equity:
Common stock, $0.50 par value, 100,000,000 shares authorized, 38,001,714 shares and 38,276,968 shares issued as of July 30, 2022 and April 30, 2022, respectively		19.0			19.2
Additional paid-in capital		172.0			169.0
Accumulated other comprehensive loss		(36.2	)		(26.8	)
Treasury stock, 1,346,624 shares as of July 30, 2022 and April 30, 2022		(11.5	)		(11.5	)
Retained earnings		768.1			763.9
Total shareholders' equity		911.4			913.8
Total liabilities and shareholders' equity	$	1,389.9		$	1,389.1

See notes to condensed consolidated financial statements.

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

(in millions, except share data)


	Three Months Ended July 30, 2022
	Common stock shares			Common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)			Treasury stock			Retained earnings			Total shareholders' equity
Balance as of April 30, 2022		38,276,968		$	19.2		$	169.0	$	(26.8	)	$	(11.5	)	$	763.9		$	913.8
Issuance of restricted stock, net of tax withholding		42,381			—			—		—			—			(0.4	)		(0.4	)
Purchases of common stock		(317,635	)		(0.2	)		—		—			—			(11.7	)		(11.9	)
Stock-based compensation expense		—			—			3.0		—			—			—			3.0
Other comprehensive loss		—			—			—		(9.4	)		—			—			(9.4	)
Net income		—			—			—		—			—			21.5			21.5
Dividends on common stock		—			—			—		—			—			(5.2	)		(5.2	)
Balance as of July 30, 2022		38,001,714		$	19.0		$	172.0	$	(36.2	)	$	(11.5	)	$	768.1		$	911.4


	Three Months Ended July 31, 2021
	Common stock shares			Common stock			Additional paid-in capital			Accumulated other comprehensive income (loss)			Treasury stock			Retained earnings			Total shareholders' equity
Balance as of May 1, 2021		39,644,913		$	19.8		$	157.6		$	6.1		$	(11.5	)	$	746.0		$	918.0
Issuance of restricted stock, net of tax withholding		44,245			0.1			(0.1	)		—			—			(0.3	)		(0.3	)
Exercise of stock options		13,000			—			0.5			—			—			—			0.5
Purchases of common stock		(157,513	)		(0.1	)		—			—			—			(7.5	)		(7.6	)
Stock-based compensation expense		—			—			3.2			—			—			—			3.2
Other comprehensive income		—			—			—			(3.2	)		—			—			(3.2	)
Net income		—			—			—			—			—			29.1			29.1
Dividends on common stock		—			—			—			—			—			(5.4	)		(5.4	)
Balance as of July 31, 2021		39,544,645		$	19.8		$	161.2		$	2.9		$	(11.5	)	$	761.9		$	934.3

See notes to condensed consolidated financial statements.

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(~~Dollars~~ in millions)


	Three Months Ended
	July 30, 2022			July 31, 2021
Operating activities:
Net income	$	21.5		$	29.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		12.3			12.6
Stock-based compensation expense		4.0			4.0
Change in cash surrender value of life insurance		0.2			(0.4	)
Amortization of debt issuance costs		0.2			0.2
Gain on sale of property, plant and equipment		—			(0.4	)
Change in deferred income taxes		(1.8	)		(0.1	)
Other		—			0.1
Changes in operating assets and liabilities:
Accounts receivable		(11.9	)		4.7
Inventories		(17.4	)		(18.5	)
Prepaid expenses and other assets		(4.3	)		(5.0	)
Accounts payable		10.5			(8.1	)
Other liabilities		(0.6	)		(8.5	)
Net cash provided by operating activities		12.7			9.7

Investing activities:
Purchases of property, plant and equipment		(9.6	)		(15.9	)
Sale of property, plant and equipment		—			0.5
Net cash used in investing activities		(9.6	)		(15.4	)

Financing activities:
Taxes paid related to net share settlement of equity awards		(0.5	)		(0.3	)
Repayments of finance leases		(0.1	)		(0.2	)
Proceeds from exercise of stock options		—			0.5
Purchases of common stock		(11.9	)		(8.4	)
Cash dividends		(5.0	)		(5.2	)
Repayments of borrowings		(3.3	)		(4.7	)
Net cash used in financing activities		(20.8	)		(18.3	)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(1.9	)		(1.3	)
Decrease in cash and cash equivalents		(19.6	)		(25.3	)
Cash and cash equivalents at beginning of the period		172.0			233.2
Cash and cash equivalents at end of the period	$	152.4		$	207.9

Supplemental cash flow information:
Cash paid during the period for:
Interest	$	0.8		$	0.9
Income taxes, net of refunds	$	5.6		$	7.3
Operating lease obligations	$	1.9		$	1.9

See notes to condensed consolidated financial statements.

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~(Dollar amounts in millions, except per share data)~~

Note 1.~~BASIS OF PRESENTATION~~

Description of Business and Summary of Significant Accounting Policies

Description of business

Methode Electronics, Inc. ~~was incorporated in 1946 as an Illinois corporation and reincorporated in Delaware in 1966. As used herein, “we,” “us,” “our,” the~~(the “Company” or “Methode” ~~means Methode Electronics, Inc.~~) is a leading global supplier of custom engineered solutions with sales, engineering and manufacturing locations in North America, Europe, Middle East and Asia. The Company designs, engineers and produces mechatronic products for Original Equipment Manufacturers (“OEMs”) utilizing its broad range of technologies for user interface, light-emitting diode (“LED”) lighting system, power distribution and sensor applications.

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

Impact of the COVID-19 pandemic and supply chain disruptions

The COVID-19 pandemic and the ongoing measures to reduce its spread have negatively impacted the global economy, disrupted consumer and customer demand and global supply chains, and resulted in manufacturing inefficiencies and increased freight costs due to global capacity constraints. As a result of a resurgence of the virus in China and corresponding government lock-down orders, the COVID-19 pandemic had a negative impact on the Company's China operations in the three months ended July 30, 2022. Further resurgences of the COVID-19 virus or its variants in other regions, including corresponding lock-downs or similar government orders, could also impact the Company's results of operations.

Various government programs have been enacted to provide assistance to businesses impacted by the COVID-19 pandemic. The amount of assistance the Company received was $4.1 million and $1.9 million in the three months ended July 30, 2022 and July 31, 2021, respectively. Government assistance has been reported as other income.

The Company continues to experience increased material and logistics costs, labor shortages, and most significantly, impacts from the worldwide semiconductor supply shortage. The semiconductor supply shortage is due, in part, to increased demand across multiple industries, including the automotive industry, resulting in a slowdown in their production schedules. The semiconductor supply shortage is also impacting the Company’s supply chain and its ~~subsidiaries. Our business is managed,~~ability to meet demand at some of its non-automotive customers.

The Russia-Ukraine military conflict has negatively impacted the Company's European customers and ~~our financial results are reported, on a segment basis, with those segments being Automotive, Interface, Power Products~~suppliers. Although the Company does not have any operations in Russia, economic sanctions imposed by the international community has further increased existing supply chain, logistics, and ~~Other.~~ inflationary challenges.

Basis of presentation

The unaudited condensed consolidated financial statements ~~and related disclosures as~~ of ~~January 27, 2018 and results of operations for~~ the ~~three and nine months ended January 27, 2018 and January 28, 2017 are unaudited, pursuant to~~Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). ~~The April 29, 2017 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted~~All intercompany balances and transactions have been eliminated in ~~the United States of America (“U.S. GAAP”).~~consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with ~~U.S. GAAP~~accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. ~~In our opinion, these~~These interim condensed consolidated financial statements include all adjustments (consisting ~~only~~ of normal recurring ~~adjustments)~~adjustments, except as otherwise disclosed) that management believes are necessary for ~~the~~a fair ~~statement~~presentation of the results of operations, financial position and cash flows of the Company for the interim ~~periods.~~periods presented. These financial statements should be read in conjunction with the consolidated financial statements included in ~~our~~the Company’s Form 10-K for the year ended April ~~29, 2017,~~30, 2022, filed with the SEC on June ~~22, 2017.~~23, 2022. Results may vary from ~~quarter-to-quarter~~quarter to quarter for reasons other than seasonality.

Financial reporting periods

The Company maintains its financial records on the basis of a 52- or 53-week fiscal year ending on the Saturday closest to April 30. The three months ended July 30, 2022 and July 31, 2021 were both 13-week periods.

2.~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~

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. Actual results could differ from these estimates.

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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 April 30, 2022. There have been no material changes to the significant accounting policies in the three months ended July 30, 2022.

New accounting pronouncements not yet adopted

In ~~February 2018,~~November 2021, the Financial Accounting Standards Board ~~("FASB")~~ issued Accounting Standards Update ~~("ASU"~~(“ASU”) ~~No. 2018-02, "Income Statement—Reporting Comprehensive Income~~2021-10, “Government Assistance (Topic ~~220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." The amendments in this update are~~832),” which requires annual disclosures when an entity has received government assistance. This guidance is intended to ~~address a specific consequence~~improve the transparency of government assistance received by requiring disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the ~~Tax Cuts~~assistance on the registrant’s financial statements. The Company will adopt this standard effective April 29, 2023 and ~~Jobs Act (“U.S. Tax Reform”) by allowing a reclassification~~expects the standard to only impact annual financial statement footnote disclosures.

~~In May 2017,~~

Note 4. 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 ~~FASB issued ASU No. 2017-09, "Compensation—Stock Compensation (Topic 718): Scope~~fair value hierarchy. As of ~~Modification Accounting."~~July 30, 2022 and April 30, 2022, the Company had a balance of $40.1 million and $40.0 million, respectively, in money market accounts.

Accounts receivable and allowance for doubtful accounts

Accounts receivable are customer obligations due under normal trade terms and are presented net of an allowance for doubtful accounts. The ~~amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require~~Company establishes an ~~entity to apply modification accounting in Topic 718. The amendments are effective~~allowance for annual periods beginning after December 15, 2017, including interim periods within those periods. The standard will be effective for us in fiscal years beginning April 29, 2018. This ASU is not expected to have a material effect on the Company's financial statements. If, in the future, Methode makes modifications to its existing share-based payment awards, those modifications will need to be evaluateddoubtful accounts based on the ~~criteria detailed~~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 ~~this ASU~~the case of a bankruptcy filing or deterioration in the customer’s operating results or financial position. The allowance for doubtful accounts balance was $1.0 million as of both July 30, 2022 and ~~accounted~~April 30, 2022.

Inventories

Inventories are stated at the lower-of-cost or net realizable value. Cost is determined using the first-in, first-out method. Finished products and work-in-process inventories include direct material costs and direct and indirect manufacturing costs. The Company records reserves for ~~accordingly.~~inventory that may be obsolete or in excess of current and future market demand. A summary of inventories is shown below:


(in millions)	July 30, 2022		April 30, 2022
Finished products	$	38.0	$	31.8
Work in process		13.0		12.9
Raw materials		122.9		113.8
Total inventories	$	173.9	$	158.5

~~In August 2016,~~

Property, plant and equipment

Property, plant and equipment is stated at cost. Maintenance and repair costs are expensed as incurred. Depreciation is calculated using the ~~FASB issued ASU No. 2016-15, “Statement~~straight-line method using estimated useful lives of ~~Cash Flows (Topic 230) - Classification~~5 to 40 years for buildings and building improvements and 3 to 15 years for machinery and equipment.A summary of ~~Certain Cash Receipts~~property, plant and ~~Cash Payments.”~~ equipment is shown below:


(in millions)	July 30, 2022			April 30, 2022
Land	$	3.1		$	3.3
Buildings and building improvements		89.5			89.2
Machinery and equipment		402.5			407.5
Construction in progress		27.1			21.5
Total property, plant and equipment, gross		522.2			521.5
Less: accumulated depreciation		(327.6	)		(324.5	)
Property, plant and equipment, net	$	194.6		$	197.0

Depreciation expense was $7.6 million and $7.8 million in the three months ended July 30, 2022 and July 31, 2021, respectively. As of July 30, 2022 and April 30, 2022, capital expenditures recorded in accounts payable totaled $3.4 million and $4.4 million, respectively.

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Pre-production tooling costs related to long-term supply arrangements

The ~~amendments~~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 ~~this update provide guidance on eight specific cash flow presentation issues that have developed due~~the design and development of production parts are expensed as incurred, unless the costs are reimbursable by the customer. As of July 30, 2022 and April 30, 2022, the Company had $26.5 million and $27.2 million, respectively, of pre-production tooling costs related to ~~diversity in practice. The issues include, but are not limited to, debt prepayment~~customer-owned tools for which reimbursement is contractually guaranteed by the customer or extinguishment costs, contingent consideration payments made after a business combination, and proceeds from the settlement of insurance claims. The amendments in this ASU, where practicable, are to be applied retrospectively. The standard will be effective for ~~us in fiscal years beginning April 29, 2018. Earlier adoption is permitted. We do not believe this pronouncement will have a material impact on our consolidated financial statements.~~

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The core principle is that a company should recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting revenue gross versus net)," which clarifies gross versus net revenue reporting when another party is involved in the transaction. In April 2016, the FASB issued ASU No. 2016-10, "Identifying Performance Obligations and Licensing," which amends the revenue guidance on identifying performance obligations and accounting for licenses of intellectual property. The standard will be effective for us in the fiscal years beginning April 29, 2018. Earlier adoption is permitted.

We are currently evaluating the impact this guidance will have on our consolidated financial statements. We continue to progress with our evaluation utilizing third-party consultants who are assisting in the process. We have establishedcustomer has provided a project management team to analyze the impact of this standard by reviewing our current accounting policies and practices and our customer contracts and arrangements to identify potential differences that would result from the application of this standard.

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~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except per share data)~~

The main types of provisions currently being evaluated which could impact the allocation and timing of revenue include contractually guaranteed price reductions and over-time recognition of revenue. The contractually guaranteed price reductions could result in revenue being deferred as it relates to those material rights, which is a change from current practice. Also, the over-time recognition of revenue could result in accelerated revenue recognition for products where revenue is currently being recognized upon shipment. There are two transition methods available under the new standard, either full retrospective or modified retrospective. We expect to adopt the standard utilizing the modified retrospective method and expect enhanced disclosure requirements post-adoption.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (ASC 842)," which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASC 842 supersedes the previous leases standard, ASC 840 Leases. The amendments in this update are effective for fiscal years beginning after December 15, 2018, which is our fiscal 2020, beginning on April 28, 2019. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities." The new standard requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entitiesnon-cancelable right to use the ~~exit price notion when measuring~~tooling.

Costs for molds, dies and other tools used in products produced for its customers under long-term supply arrangements for which the ~~fair value~~Company has title are capitalized in property, plant and equipment and amortized over the shorter of ~~financial instruments for disclosure purposes, requires separate presentation~~the life of ~~financial assets~~the arrangement or over the estimated useful life of the assets. As of July 30, 2022 and ~~financial liabilities by measurement category~~April 30, 2022, Company-owned tooling was $13.2 million and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this update are effective for fiscal years beginning after December 15, 2017, which is our fiscal 2019, beginning on April 29, 2018. We are currently evaluating the impact this guidance will have on our consolidated financial statements. $14.6 million, respectively.

~~RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS~~

~~In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill~~

Note 5.Goodwill and Other ~~(Topic 350).” The amendments in this ASU simplify goodwill impairment testing by removing~~Intangible Assets

Goodwill

Goodwill represents the ~~requirement of Step 2 to determine the implied fair value~~excess of the goodwill of a business which fails Step 1. The effects of this update result in the amount by which a carrying amount exceeds the business' fair value to be recognized as an impairment charge in the period identified. The standard is effective for us for annual and interim goodwill impairment tests in fiscal years beginning May 3, 2020, with early adoption permitted. The Company has adopted this ASU on a prospective basis effective as of April 30, 2017 and has concluded that this pronouncement has no material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The amendments in this update clarify the definition of a business, with the objective of assisting entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The clarified definition requires that when substantially all ofpurchase price over the fair value of the ~~gross~~net tangible and identifiable intangible assets acquired ~~(or disposed of) is concentrated~~ in a ~~single identifiable asset or a group~~business combination. A summary of ~~similar identifiable assets,~~ the ~~set~~changes in the carrying amount of goodwill, by segment, is not a business. To be considered a business, an asset must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. The amendments are effective for us in fiscal years beginning April 29, 2018, with early adoption permitted. shown below:


(in millions)	Automotive			Industrial			Total
Balance as of April 30, 2022	$	105.9		$	127.1		$	233.0
Foreign currency translation		(0.2	)		(0.1	)		(0.3	)
Balance as of July 30, 2022	$	105.7		$	127.0		$	232.7

The Company ~~has adopted this ASU effective as of April 30, 2017~~tests goodwill and indefinite-lived intangible assets for impairment on ~~a prospective~~an annual basis ~~and has concluded that this pronouncement has no material impact on our consolidated financial statements.~~

In March 2016, the FASB issued ASU No. 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 impacts the timing of when excess tax benefits are recognized by eliminating the delay in the recognition of a tax benefit until the tax benefit is realized through a reduction to income taxes

~~Table of Contents~~

~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except per share data)~~

payable. The amendments in this update are effective for annual periods beginning after December 15, 2016, which is our fiscal 2018, which began on April 30, 2017. The Company applied the modified retrospective transition method and recognized an increase to deferred tax assets and retained earnings of $2.7 million as of April 30, 2017 to recognize excess tax benefits that had been previously delayed. On a prospective basis, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the statement of operations. As a result of applying the modified retrospective transition method, prior periods were not adjusted. Further, the Company will continue to estimate the number of awards that are expected to vest.

In September 2015, the FASB issued ASU No. 2015-16, "Business Combinations Simplifying the Accounting for Measurement-Period Adjustments." The standard requires that an acquirer recognize measurement-period adjustments in the period in which the adjustments are determined. The income effects of such measurement-period adjustments are to be recorded in the same period’s financial statements but calculated as if the accounting had been completed as of the acquisition date. The impact of measurement-period adjustments to earnings that relate to prior period financial statements are to be presented separately on the income statement or disclosed by line item. The Company has adopted this ASU effective April 30, 2017 on a prospective basis. The adoption of this standard did not have a material impact on our consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory." This ASU requires an entity to measure inventory at the lower of cost or net realizable value, rather than at the lower of cost or market. The Company has adopted this ASU effective April 30, 2017 on a prospective basis. The adoption of this standard did not have a material impact on our consolidated financial statements.

~~Table of Contents~~

~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except per share data)~~

~~3. ACQUISITIONS~~

~~Fiscal 2018 Acquisitions~~

~~Procoplast S.A.~~

~~On July 27, 2017, we acquired 100%~~beginning of the ~~stock of Procoplast S.A. ("Procoplast")~~fourth quarter each fiscal year. In addition, the Company continuously monitors for ~~$22.2 million~~events and circumstances that could negatively impact the key assumptions used in ~~cash, net of cash acquired. The business, located near the Belgian-German border, is an independent manufacturer of automotive assemblies. The accounts~~determining fair value and ~~transactions of Procoplast have been included in the Automotive segment in the consolidated financial statements from the effective date of the acquisition. For~~therefore require interim goodwill impairment testing, ~~purposes, Procoplast will be included~~including long-term revenue growth projections, profitability, discount rates, volatility in the Company's ~~European Automotive reporting unit.~~market capitalization, and general industry, market and macroeconomic conditions. No impairment indicators were identified in the first quarter of fiscal 2023.

Other intangible assets, net

Details of identifiable intangible assets are shown below:


	As of July 30, 2022
(in millions)	Gross		Accumulated amortization			Net		Weighted average useful life (years)
Amortized intangible assets:
Customer relationships and agreements	$	231.8	$	(58.1	)	$	173.7		14.5
Trade names, patents and technology licenses		57.9		(30.8	)		27.1		6.0
Total amortized intangible assets		289.7		(88.9	)		200.8
Unamortized trade name		1.8		—			1.8
Total other intangible assets	$	291.5	$	(88.9	)	$	202.6


	As of April 30, 2022
(in millions)	Gross		Accumulated amortization			Net		Weighted average useful life (years)
Amortized intangible assets:
Customer relationships and agreements	$	232.3	$	(55.1	)	$	177.2		14.7
Trade names, patents and technology licenses		58.0		(29.3	)		28.7		6.2
Total amortized intangible assets		290.3		(84.4	)		205.9
Unamortized trade name		1.8		—			1.8
Total other intangible assets	$	292.1	$	(84.4	)	$	207.7

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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 2023	$	14.1
2024		18.5
2025		17.9
2026		17.0
2027		16.4
Thereafter		116.9
Total	$	200.8

Note 6.Derivative Instruments and Hedging Activities

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

For a designated cash flow hedge, the effective portion of the change in the fair value of the Procoplast assets acquired and liabilities assumed. Accordingly, the Company's preliminary estimates and the allocation of the purchase price to the assets acquired and liabilities assumed may change as the Company completes the process, which would likely impact the Company's allocation of the purchase price to goodwill. Based on the Company's preliminary allocation of the purchase price, revised as of January 27, 2018, goodwill decreased $7.3 million from the preliminary amount reportedderivative financial instrument is recorded in accumulated other comprehensive income (“AOCI”) in the ~~Company's~~ condensed consolidated ~~financial statements at October 28, 2017. The revised preliminary allocation of~~balance sheets. When the ~~purchase price to~~underlying hedged transaction is realized, the ~~fair values of~~gain or loss previously included in AOCI is recorded in earnings and reflected in the ~~assets acquired and liabilities assumed were:~~

(Dollars in Millions)
Cash $ 1.3
Accounts Receivable 10.8
Inventory 3.5
Intangible Assets 19.2
Goodwill 8.1
Other Assets 0.1
Property, Plant and Equipment 23.8
Accounts Payable (4.9 )
Salaries, Wages and Payroll Taxes (0.8 )
Other Accrued Expenses (4.7 )
Income Taxes Payable (0.6 )
Short-term Debt (1.7 )
Other Liabilities (5.6 )
Long-term Debt (17.1 )
Deferred Income Tax Liability (7.9 )
Total Purchase Price $ 23.5

~~The Company's~~ condensed consolidated statements of income ~~for~~on the ~~three and six months ended October 28, 2017 were prepared based~~same line as the gain or loss on ~~provisional amounts for cost~~the hedged item attributable to the hedged risk. The gain or loss associated with changes in the fair value of ~~products sold, amortization of intangibles and income tax expense. During~~derivatives not designated as hedges are recorded immediately in the third quarter of fiscal 2018, the Company recognized measurement period adjustments to these provisional amounts. These adjustments were included in earnings for the three months ended January 27, 2018. If the Company had completed the purchase price allocation as of the acquisition date and recognized these measurement period adjustments in its condensed consolidated statements of income ~~for~~on the ~~three and six months ended October 28, 2017, cost of products sold for both~~same line as the ~~three and six months ended October 28, 2017 would have been $0.6 million lower, amortization of intangibles for both~~associated risk. For a designated net investment hedge, the ~~three and six months ended October 28, 2017 would have been $0.4 million higher, and income tax expense for both the three and six months ended October 28, 2017 would have been $0.1 million lower.~~

~~Table of Contents~~

~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except per share data)~~

~~The following table presents details~~effective portion of the ~~intangible~~change in the fair value of the derivative financial instrument is recorded as a cumulative translation adjustment in AOCI in the condensed consolidated balance sheets.

Net investment hedges

The Company has a variable-rate, cross-currency swap, maturing on August 31, 2023, with a notional value of $60.0 million (€54.8 million). The Company entered into the cross-currency swap to mitigate changes in net assets ~~acquired:~~

(Dollars in Millions) Fair Value at Date of Acquisition Amortization Period
Customer Relationships and Agreements - Significant Customer $ 12.3
17.0 years
Customer Relationships and Agreements - All Other Customers 2.8
11.5 years
Technology Licenses 2.1
8.5 years
Trade Names 2.0
8.5 years
Total $ 19.2

~~No acquisition-related costs were incurred~~due to changes in ~~relation to~~U.S. dollar-euro spot exchange rates. The cross-currency swap is designated as a hedge of the ~~acquisition~~Company’s net investment in a euro-based subsidiary.

Hedge effectiveness is assessed at the inception of ~~Procoplast for~~the hedging relationship and quarterly thereafter, under the spot-to-spot method. The Company recognizes the impact 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 months ended ~~January 27, 2018. Acquisition-related costs~~July 30, 2022 and July 31, 2021, the Company recorded gains of ~~$1.3~~$0.3 million and $0.1 million, respectively, in interest expense, net in the condensed consolidated statements of income.

Interest rate swaps

The Company has interest rate swaps, maturing on August 31, 2023, with a notional value of $100.0 million, to manage its exposure and to mitigate the impact of interest rate variability. The interest rate swaps are designated as cash flow hedges.

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. Subsequently, the accumulated gains and losses recorded in AOCI are reclassified to income in the period during which the hedged cash flow impacts earnings, which are expected to be immaterial over the next 12 months. No ineffectiveness was recognized in the three months ended July 30, 2022 or July 31, 2021.

Derivatives not designated as hedges

The Company uses short-term foreign currency forward contracts to reduce the earnings impact 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 income, net, along with the foreign currency gains and losses on monetary assets and liabilities in the condensed consolidated statements of income.

As of July 30, 2022 and April 30, 2022, the Company held foreign currency forward contracts with a notional value of $44.1 million and $38.6 million, respectively. During the three months ended July 30, 2022, the Company recognized a loss of $0.4 million related to foreign currency forward contracts in the condensed consolidated statements of income. During the three months ended July 31, 2021, an immaterial gain was recognized in the condensed consolidated statements of income.

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Fair value of derivative instruments on the balance sheet

The fair value of derivative instruments are classified as Level 2 within the fair value hierarchy and are recorded in the balance sheets as follows:


		Asset/(Liability)
(in millions)	Financial Statement Caption	July 30, 2022			April 30, 2022
Derivatives designated as hedging instruments:
Net investment hedges	Other long-term assets	$	3.9		$	1.9
Interest rate swaps	Other long-term assets	$	3.0		$	3.0
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Prepaid expenses and other current assets	$	0.1		$	—
Foreign currency forward contracts	Other accrued liabilities	$	(0.1	)	$	(0.2	)

Effect of derivative instruments on comprehensive income (loss)

Gross amounts recorded in other comprehensive income (loss) were ~~incurred~~as follows:


	Three Months Ended
(in millions)	July 30, 2022		July 31, 2021
Net investment hedges	$	2.0	$	1.1
Interest rate swaps		—		—
Total	$	2.0	$	1.1

Note 7. Debt

A summary of debt is shown below:


(in millions)	July 30, 2022			April 30, 2022
Term loan	$	203.1		$	206.3
Other debt		4.8			5.1
Unamortized debt issuance costs		(0.7	)		(0.9	)
Total debt		207.2			210.5
Less: current maturities		(13.0	)		(13.0	)
Total long-term debt	$	194.2		$	197.5

Revolving credit facility/term loan

The Company is a party to an Amended and Restated Credit Agreement (“Credit Agreement”) with Bank of America, N.A., as Administrative Agent, and Wells Fargo Bank, N.A. The Credit Agreement terminates in ~~relation~~September 2023 and consists of a senior unsecured revolving credit facility (“Revolving Credit Facility”) of $200.0 million and a senior unsecured term loan (“Term Loan”) of $250.0 million. In addition, the Company has an option to increase the size of the Revolving Credit Facility and Term Loan by up to an additional $200.0 million, subject to customary conditions and approval of the lenders providing new commitments. The Credit Agreement is guaranteed by the Company’s wholly-owned U.S. subsidiaries. For the Term Loan, the Company is required to make quarterly principal payments of 1.25% of the original Term Loan ($3.1 million) through maturity, with the remaining balance due on September 12, 2023.

On December 10, 2021, the Company entered into a First Amendment to the ~~acquisition~~Credit Agreement (“First Amendment”). The First Amendment amended and restated the Credit Agreement to provide, among other things, that upon the occurrence of ~~Procoplast~~certain events, the interest rate calculation method will generally transition from the London Interbank Offered Rate (“LIBOR”) to an alternate reference rate, including the Secured Overnight Financing Rate (“SOFR”) for U.S. dollar denominated borrowings.

Outstanding borrowings under the Credit Agreement bear interest at variable rates based on the type of borrowing and the Company’s debt to EBITDA financial ratio, as defined in the Credit Agreement. The weighted-average interest rate on outstanding borrowings under the Credit Agreement was approximately 3.6% as of July 30, 2022. The Credit Agreement contains customary representations and warranties, financial covenants, restrictive covenants and events of default. As of July 30, 2022, the Company was in compliance with all the covenants in the Credit Agreement.

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Other debt

One of the Company’s European subsidiaries has debt that consists of three notes with maturities ranging from 2023 to 2031. The weighted-average interest rate on this debt was approximately 1.4% at July 30, 2022 and $0.5 million of the debt was classified as short-term.

Note 8.Shareholders’ Equity

Share buyback program

On March 31, 2021, the Board of Directors authorized the purchase of up to $100.0 million of the Company’s outstanding common stock through March 31, 2023. On June 16, 2022, the Board of Directors authorized an increase in the share buyback program of an additional $100.0 million, and also extended the expiration from March 31, 2023 to June 14, 2024. Such purchases may be made on the open market, in private transactions or pursuant to purchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934.

The following table summarizes the Company’s stock buyback activity under this share buyback program:


	Three Months Ended
(in millions, except share and per share data)	July 30, 2022		July 31, 2021
Shares purchased		317,635		157,513
Average price per share	$	37.43	$	48.35
Total cost	$	11.9	$	7.6

As of July 30, 2022, a total of 1,910,774 shares have been purchased at a total cost of $83.1 million since the commencement of the share buyback program. All purchased shares were retired and are reflected as a reduction of common stock for the ~~nine~~par value of shares, with the excess applied as a reduction to retained earnings. As of July 30, 2022, the dollar value of shares that remained available to be purchased by the Company under this share buyback program was $116.9 million.

Dividends

The Company paid dividends totaling $5.0 million and $5.2 million in the three months ended ~~January 27, 2018,~~July 30, 2022 and July 31, 2021, respectively.

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. A summary of changes in AOCI, net of tax is shown below:


	Three Months Ended July 30, 2022
(in millions)	Currency Translation Adjustments			Derivative Instruments			Total
Balance at beginning of period	$	(30.5	)	$	3.7		$	(26.8	)
Other comprehensive income (loss)		(10.9	)		2.0			(8.9	)
Tax (expense) benefit		-			(0.5	)		(0.5	)
Net other comprehensive income (loss)		(10.9	)		1.5			(9.4	)
Balance at the end of period	$	(41.4	)	$	5.2		$	(36.2	)


	Three Months Ended July 31, 2021
(in millions)	Currency Translation Adjustments			Derivative Instruments			Total
Balance at beginning of period	$	11.5		$	(5.4	)	$	6.1
Other comprehensive income (loss)		(3.9	)		1.1			(2.8	)
Tax (expense) benefit		(0.2	)		(0.2	)		(0.4	)
Net other comprehensive income (loss)		(4.1	)		0.9			(3.2	)
Balance at the end of period	$	7.4		$	(4.5	)	$	2.9

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Stock-based compensation

On June 16, 2022, the Company's Board of Directors, on the recommendation of the Compensation Committee, adopted the Methode Electronics, Inc. 2022 Omnibus Incentive Plan (the “2022 Incentive Plan”), subject to the approval of the Company's stockholders. The 2022 Incentive Plan provides for discretionary grants of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units and performance grants to employees and directors.

The 2022 Incentive Plan provides that upon approval of the 2022 Incentive Plan by the Company's stockholders, no further awards shall be granted under the Methode Electronics, Inc. 2014 Omnibus Incentive Plan (“2014 Plan”). If the 2022 Incentive Plan is approved, subject to adjustment as provided in the 2022 Incentive Plan and the 2022 Incentive Plan’s share counting provisions, the number of shares of the Company's common stock that will initially be available for all awards under the 2022 Incentive Plan is 5,550,000, less one share for every one share of common stock subject to an option or SAR award granted after April 30, 2022 under the 2014 Plan and 2.28 shares for every one share that was subject to an award other than an option or SAR granted after April 30, 2022 under the 2014 Plan.

The Company has granted stock options, restricted stock awards (“RSAs”), performance units (“PUs”), restricted stock units (“RSUs”) and stock awards to employees and non-employee directors under 2014 Plan, the Methode Electronics, Inc. 2010 Stock Plan (“2010 Plan”), the Methode Electronics, Inc. 2007 Stock Plan (“2007 Plan”) and the Methode Electronics, Inc. 2004 Stock Plan (“2004 Plan”). The Company can no longer make grants under the 2010 Plan, 2007 Plan and 2004 Plan. The number of shares of common stock originally authorized under the 2014 Plan is 3,000,000. As of July 30, 2022, there were 17,269 shares available for award under the 2014 Plan.

Restricted stock awards and performance units

As of July 30, 2022, the Company had 928,412 RSAs outstanding which will be earned based on the achievement of an earnings before net interest, taxes, fixed asset depreciation and intangible asset amortization (“EBITDA”) measure for fiscal 2025. The RSAs will vest ranging from 0% (for performance below threshold) to 100% (target performance) based on the achievement of the EBITDA performance measure and continued employment. In addition, if the target performance is exceeded, an additional 464,206 PUs can be earned that will be settled in cash. At the discretion of the Compensation Committee, the PUs may be settled in shares of common stock.

The fair value of the RSAs was based on the closing stock price on the date of grant and the RSAs earn dividend equivalents during the vesting period, which are forfeitable if the RSAs do not vest. Compensation expense for the RSAs is recognized when it is probable the minimum threshold performance criteria will be achieved. Compensation expense for the PUs is recognized when it is probable that the target performance criteria will be exceeded. The Company assesses the probability of vesting at each balance sheet date and adjusts compensation costs based on the probability assessment. The cash-settled PUs represent a non-equity unit with a conversion value equal to the fair market value of a share of the Company’s common stock on the vesting date. The PUs are classified as liability awards due to the cash settlement feature and are re-measured at each balance sheet date. In accordance with Accounting Standards Codification 718, based on projections of the Company’s current business portfolio, no compensation expense has not been recognized for the RSAs or PUs to-date, as the performance conditions are not probable of being met. Unrecognized stock-based compensation expense at target level of performance is $26.5 million as of July 30, 2022, which, subject to the performance conditions being met, will be recognized through fiscal 2025.

Restricted stock units

RSUs granted under the 2014 Plan vest over a pre-determined period of time, up to five years from the date of grant. The fair value of the RSUs granted are based on the closing stock price on the date of grant and earn dividend equivalents during the vesting periods, which are forfeitable if the RSUs don’t vest.

The following table summarizes RSU activity under the 2014 Plan:


	Restricted Stock Units			Weighted average grant date fair value
Non-vested at April 30, 2022		936,391		$	29.16
Awarded		52,832		$	39.44
Vested		—		$	—
Forfeited		(734	)	$	48.41
Non-vested at July 30, 2022		988,489		$	29.70

Under the various stock plans, common stock underlying vested RSUs held by certain executives will not be delivered until termination of employment or a change of control of the Company. As of July 30, 2022, common stock to be delivered to these executives totaled 577,055 shares.

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Director awards

The Company grants stock awards to its non-employee directors as a component of their compensation. The stock awards vest immediately upon grant. Non-employee directors may elect to defer receipt of their shares under the Company’s non-qualified deferred compensation plan. In the three months ended July 30, 2022, the Company granted 42,735 shares, of which ~~$1.1 million~~27,195 shares were deferred. All dividends on deferred shares are reinvested into additional deferred shares based on the closing price of the Company’s common stock on the dividend payment date. Deferred shares will be settled with shares of common stock upon each director’s retirement from the Company’s Board of Directors. As of July 30, 2022, there were 45,304 deferred shares outstanding.

Stock options

The following table summarizes combined stock option activity under the 2010 Plan:


	Shares		Weighted average exercise price		Weighted- average life (years)		Aggregate intrinsic value (in millions)
Outstanding and exercisable at April 30, 2022		60,000	$	37.01		2.2	$	0.5
Exercised		—	$	—
Forfeited		—	$	—
Outstanding and exercisable at July 30, 2022		60,000	$	37.01		1.9	$	0.3

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been ~~reported~~received by the option holders had all option holders exercised their options on that date.

Stock-based compensation expense

All stock-based awards to employees and non-employee directors are recognized in selling and administrative expenses ~~and $0.2 million have been reported in costs of products sold~~ on the condensed consolidated statements of ~~operations.~~

~~Pacific Insight Electronics Corp.~~

On October 3, 2017, we acquired 100% of the outstanding common shares of Pacific Insight Electronics Corp. ("Pacific Insight") in a cash transaction for $107.7 million, net of cash acquired. Pacific Insight, headquartered in Vancouver, British Columbia, Canada, is a global solutions provider offering design, development, manufacturing and delivery of lighting and electronic products and full-service solutions to the automotive and commercial vehicle markets, and has manufacturing facilities in both Canada and Mexico. Its technology in LED-based ambient and direct lighting will expand our presence within the automotive interior, as well as augment our efforts in overhead console and other areas. The accounts and transactions of Pacific Insight have been included in the Automotive segment in the consolidated financial statements from the effective date of the acquisition. For goodwill impairment testing purposes, Pacific Insight will be included in the Company's North American Automotive reporting unit.

The Company has not yet completed the process of estimating the fair value of the Pacific Insight assets acquired and liabilities assumed. Accordingly, the Company's preliminary estimates and the allocation of the purchase price to the assets acquired and liabilities assumed may change as the Company completes the process, which would likely impact the Company's allocation of the purchase price to goodwill. Based on the Company's preliminary allocation of the purchase price, revised as of January 27, 2018, goodwill decreased $2.7 million from the preliminary amount reported in the Company's condensed consolidated financial statements at October 28, 2017. The revised preliminary allocation of the purchase price to the fair values of the assets acquired and liabilities assumed were:

~~Table of Contents~~

~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except per share data)~~

(Dollars in Millions)
Cash $ 4.9
Accounts Receivable 18.3
Inventory 12.7
Prepaid Expenses and Other Current Assets 0.3
Income Taxes Receivable 1.2
Intangible Assets 41.8
Goodwill 48.5
Pre-production Costs 0.8
Property, Plant and Equipment 13.8
Accounts Payable (7.9 )
Salaries, Wages and Payroll Taxes (0.8 )
Other Accrued Expenses (3.9 )
Short-term Debt (0.8 )
Long-term Debt (3.4 )
Deferred Income Tax Liability (12.9 )
Total Purchase Price $ 112.6

The Company's condensed consolidated statements of income for the three and six months ended October 28, 2017 were prepared based on provisional amounts for cost of products sold, amortization of intangibles and income tax expense. During the third quarter of fiscal 2018, the Company recognized measurement period adjustments to these provisional amounts. These adjustments were included in earnings for the three months ended January 27, 2018. If the Company had completed the purchase price allocation as of the acquisition date and recognized these measurement period adjustments in its condensed consolidated statements of income for the three and six months ended October 28, 2017, the impact would have been insignificant.

~~The following table presents details of the intangible assets acquired:~~

(Dollars in Millions) Fair Value at Date of Acquisition Amortization Period
Customer Relationships and Agreements - Automotive $ 23.7
11.5 years
Customer Relationships and Agreements - Commercial 10.1
14.0 years
Trade Names 6.4
7.5 years
Technology Licenses 1.6
6.0 years
Total $ 41.8

The Company's results of operations for the three months ended January 27, 2018 included the operating results of Pacific Insight, which was comprised of revenues of $22.0 million and net income of $0.4 million. The Company's results of operations for the nine months ended January 27, 2018 included approximately four months of the operating results of Pacific Insight, which were comprised of revenues of $29.0 million and net income of $0.2 million.

The following table presents the unaudited pro forma results for the three and nine months ended January 27, 2018 and January 28, 2017. The unaudited pro forma financial information combines the results of operations of Methode and Pacific Insight as though the companies had been combined as of the beginning of fiscal 2017, and the pro forma information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at such time. The unaudited pro forma results presented below primarily include amortization charges for acquired intangible assets, depreciation adjustments for property, plant and equipment that has been revalued, adjustments for certain acquisition-related charges, and related tax effects.

~~Table of Contents~~

~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except per share data)~~

(Unaudited)
Three Months Ended Nine Months Ended
(Dollars in Millions) January 27,
2018 January 28,
2017 January 27,
2018 January 28,
2017
Revenues $ 227.8
$ 217.8
$ 698.3
$ 666.0
Net Income (Loss) $ (24.4 ) $ 24.9
$ 25.3
$ 72.6

No acquisition-related costs were incurred in relation to the acquisition of Pacific Insight for the three months ended January 27, 2018. Acquisition-related costs of $5.5 million were incurred in relation to the acquisition of Pacific Insight for the nine months ended January 27, 2018, of which $4.9 million have been reported in selling and administrative expenses and $0.6 million have been reported in costs of products sold on the condensed consolidated statements of operations.

4.~~GOODWILL AND INTANGIBLE ASSETS~~

We review our goodwill and other intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable, and at least annually in accordance with ASC No. 350, "Intangibles — Goodwill and Others." The values assigned to goodwill and intangible assets are normally based on estimates and judgments regarding expectations for the success and life cycle of products and technologies acquired. A severe decline in expectations could result in significant impairment charges, which could have a material adverse effect on our financial condition and results of operations.

As part of the acquisitions of Procoplast and Pacific Insight in fiscal 2018, the Company recorded estimated goodwill of $8.1 million and $48.5 million, respectively, of which none is expected to be deductible for income taxes. As the valuation process is still ongoing for both Procoplast and Pacific Insight, these amounts are to be considered preliminary andincome. Awards subject to ~~change.~~ graded vesting are recognized using the accelerated recognition method over the requisite service period. The ~~following~~ table ~~shows~~below summarizes the ~~roll-forward of goodwill in the financial statements as of January 27, 2018.~~

Automotive Interface
Power
Products
Total
Balance as of April 29, 2017 $ —
$ 0.6
$ 1.0
$ 1.6
Goodwill Acquired 56.6
—
—
56.6
Foreign Currency Translation 1.3
0.1
—
1.4
Balance as of January 27, 2018 $ 57.9
$ 0.7
$ 1.0
$ 59.6

As part of the acquisitions of Procoplast and Pacific Insight in fiscal 2018, the Company acquired estimated intangible assets of $19.2 million and $41.8 million, respectively. The following tables present details of the Company’s intangible assets.

As of January 27, 2018
Gross Accumulated Amortization Net Wtd. Avg. Remaining Amortization Periods (Years)
Customer Relationships and Agreements $ 66.5
$ 17.2
$ 49.3
13.0
Trade Names, Patents and Technology Licenses 38.3
22.0
16.3
5.5
Total $ 104.8
$ 39.2
$ 65.6

As of April 29, 2017
Gross Accumulated Amortization Net Wtd. Avg. Remaining Amortization Periods (Years)
Customer Relationships and Agreements $ 16.3
$ 15.6
$ 0.7
6.8
Trade Names, Patents and Technology Licenses 25.8
19.9
5.9
1.4
Covenants Not to Compete 0.1
0.1
—
0.4
Total $ 42.2
$ 35.6
$ 6.6

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~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except per share data)~~

~~The estimated aggregate amortization expense for the current fiscal year and each of the four succeeding fiscal years is as follows:~~

2018 $ 5.7
2019 $ 7.7
2020 $ 5.7
2021 $ 5.6
2022 $ 5.6

~~As of January 27, 2018 and April 29, 2017, the trade names, patents and technology licenses include $1.8 million of trade names that are not subject to amortization.~~

5.~~INCOME TAXES~~

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“U.S. Tax Reform”) which incorporates significant changes to U.S. corporate income tax laws. This included a reduction in the statutory federal corporate income tax rate from 35% to 21%, an exemption for dividends received from certain foreign subsidiaries, a one-time repatriation tax on deemed repatriated earnings from foreign subsidiaries, immediate expensing of certain depreciable tangible assets, and limiting the deductibility of certain executive compensation.

Under ASC Topic 740 ("ASC 740"), a company is generally required to recognize the effect of changes in tax laws in its financial statements in the period in which the legislation is enacted. The U.S. Tax Reform legislation was signed into law on December 22, 2017. As such, the Company is required to recognize the related impacts to the financial statements in the quarter ended January 27, 2018.

The SEC staff issued Staff Accounting Bulletin ("SAB") 118 to provide certain guidance in determining the accounting for income tax effects of the legislation in the accounting period of enactment as well as provide a one-year measurement period to finalize the effects associated with U.S. Tax Reform. The Company has recognized a discrete estimated net income tax charge with respect to U.S. Tax Reform for the third quarter of fiscal 2018 of $56.8 million. This net income tax charge includes $52.6 million associated with the one-time repatriation tax from the earnings of the Company’s foreign subsidiaries, which is payable over 8 years, and a re-measurement of the Company’s net U.S. deferred tax assets of $4.2 million.

Due to the Company’s fiscal year-end of April 28, 2018 and the timing of the various technical provisions provided for under U.S. Tax Reform, the financial statement impacts recorded in the third quarter of fiscal 2018 relating to U.S. Tax Reform are not deemed to be complete but rather are deemed to be reasonable, provisional estimates based upon the current available information. For example, the re-measurement of the net U.S. deferred tax assets cannot be complete until the underlying timing differences are known, and such timing differences cannot be known until April 28, 2018. Similarly, the Company was required to use certain estimated annual amounts in conjunction with determining the impact of the one-time repatriation tax. Although the Company believes the net income tax expense recognized in the third quarter of fiscal 2018, as outlined above, is a reasonable provisional estimate based upon the available information and analysis completed, these related amounts may change based upon actual results. As such, the Company will update and finalize the accounting for the tax effect of the enactment of U.S. Tax Reform in future quarters in accordance with the guidance as outlined in SAB 118, as deemed necessary.

U.S. Tax Reform includes a new global intangible low-taxed income (“GILTI”) provision which requires the Company to include foreign subsidiary earnings in its U.S. tax return starting in fiscal year 2019. The FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse in future years or provide for the tax expense in the year the tax is incurred. The Company has elected to recognize the tax on GILTI as a period expense in the period the tax is incurred and therefore has not included any deferred tax impacts of GILTI in its consolidated financial statements for its fiscal year ending 2018.

The provision for income taxes for all periods presented is based on an estimated effective income tax rate for the respective full fiscal years. As a result of enacted U.S. Tax Reform, the Company's estimated effective income tax rate includes the reduced federal statutory income tax rate of 30%, resulting in an income tax benefit of approximately $0.9 million for the first nine months of fiscal 2018. The estimated annual effective income tax rate is determined excluding the

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~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except per share data)~~

effect of significant discrete items or items that are reported net of their related tax effects. The tax effect of significant discrete items is reflected in the period in which they occur. The Company's income tax provision is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are generally lower than the U.S. federal statutory rate, the effects of tax rate changes, and the Company's ability to utilize various tax credits.

Income tax expense was $63.4 million in the third quarter of fiscal 2018 compared to an income tax expense of $6.6 million in the third quarter of fiscal 2017. The effective income tax rate for the third quarter of fiscal 2018 was 162.1% versus 21.9% in the third quarter of fiscal 2017. The income tax expense recorded on income before income taxes for the third quarter of fiscal 2018 was primarily due to the one-time repatriation tax from the earnings of the Company’s foreign subsidiaries and the re-measurement of deferred tax assets at the new US tax rate.

The income tax expense recorded in the first nine months of fiscal 2018 was $72.6 million compared to an income tax expense of $18.3 million in the first nine months of fiscal 2017. The effective income tax rate for the first nine months of fiscal 2018 was 78.1% versus 20.8% in the first nine months of fiscal 2017. The income tax benefit recorded on income before income taxes for the first nine months of fiscal 2018 was primarily due to the one-time repatriation tax from the earnings of the Company’s foreign subsidiaries and the re-measurement of deferred tax assets.

6.~~COMMON STOCK AND STOCK-BASED COMPENSATION~~

~~Restricted Stock Awards ("RSAs")~~

In fiscal 2016, the Compensation Committee of the Board of Directors authorized a new long-term incentive program (the “LTIP”) for key employees consisting of performance-based restricted stock awards (“RSAs”) and time-based restricted stock units (“RSUs”). Additionally, in the first quarter of fiscal 2018, the Compensation Committee awarded a maximum of 117,113 RSAs to additional key members of management under the LTIP.

In the aggregate, the number of RSAs earned will vary based on performance relative to established goals for fiscal 2020 EBITDA, with 50% of the target shares earned for threshold performance (representing 410,538 shares), 100% of the target shares earned for target performance (representing 821,075 shares) and 150% of the target shares earned for maximum performance (representing 1,231,613 shares). In prior periods, the Company has been recording the RSA compensation expense based on target performance.

Per ASC 718 accounting guidance, management is required in each reporting period to determine the fiscal 2020 EBITDA level that is "probable" (70% confidence) for which a performance condition will be achieved. During the third quarter of fiscal 2018, management determined that, mainly due to lower projections for our Dabir business, it is currently not probable that the Company will meet the fiscal 2020 target consolidated EBITDA performance level of $221.0 million. The adverse timing of revenue is a result of hospital adoption patterns (initial care setting penetration and expansion) being slower and more gradual than originally planned for our Dabir Surfaces business. On January 27, 2018, the Company recorded RSA compensation expense based on the threshold EBITDA performance level of $198.9 million. As a result, the Company recorded a $6.0 million compensation expense reversal in the third quarter of fiscal 2018 related to prior periods for these performance-based RSAs.

At the threshold level of performance, the expected expense for the RSAs is $12.9 million through fiscal 2020. In the three and nine months ended January 27, 2018, the Company recorded a net reversal of expense of $5.4 million and $2.2 million, respectively, instock-based compensation expense related to the RSAs based on threshold levels. These amounts are inclusive of the $6.0 million compensation expense reversal discussed above. During the three and nine months ended January 28, 2017, the Company recorded $1.4 million and $4.4 million, respectively, in compensation expense related to the RSAs, based on target levels.

equity awards:

In future reporting periods, if management makes a determination that exceeding the threshold level is probable for fiscal 2020, an appropriate adjustment to compensation expense will be recorded in that period. In addition, if management makes a determination that it is not probable the Company will meet the threshold level for fiscal 2020, a reversal of compensation expense will be recorded in that period. The adjustments could be material to the financial statements.


	Three Months Ended
(in millions)	July 30, 2022		July 31, 2021
RSUs	$	2.4	$	2.5
Deferred director awards		1.0		0.8
Director awards		0.6		0.7
Total stock-based compensation expense	$	4.0	$	4.0

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~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except~~

Note 9. Income per ~~share data)~~

~~Restricted Stock Units ("RSUs")~~

In the first quarter of fiscal 2018, the Compensation Committee awarded 23,175 RSUs to Methode management. In the aggregate, the Company has granted 631,175 RSUs to key employees, of which 567,175 are still outstanding. The RSUs are subject to a vesting period, with 30% vesting on April 28, 2018, 30% vesting on April 27, 2019 and 40% vesting on May 2, 2020. The total expense for the RSUs is expected to be $19.5 million through fiscal 2020. During the three and nine months ended January 27, 2018, the Company recorded $1.5 million and $4.5 million, respectively, of compensation expense related to the RSUs. During the three and nine months ended January 28, 2017, the Company recorded $1.4 million and $4.2 million, respectively, in compensation expense related to the RSUs.

~~Director Awards~~

During the first quarter of fiscal 2018, the Company issued 24,000 shares of common stock to our independent directors, all of which vested immediately upon grant. We recorded $1.0 million of compensation expense related to these shares during the nine months ended January 27, 2018.

7.~~NET INCOME (LOSS) PER SHARE~~

Basic ~~net~~ income ~~(loss)~~ per share is calculated by dividing net income ~~(loss)~~ by the weighted average number of common shares outstanding for the applicable ~~period. Diluted net~~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 income ~~(loss) per share is calculated after adjusting the denominator of the basic net income (loss)~~ per share calculation ~~for~~is determined using the treasury stock method which includes the effect of all ~~potentially~~potential dilutive ~~stock compensation awards~~common shares outstanding during the period.

The following table sets forth the computation of basic and diluted ~~net~~ income ~~(loss)~~ per share:


	Three Months Ended
	July 30, 2022		July 31, 2021
Numerator:
Net income (in millions)	$	21.5	$	29.1

Denominator:
Denominator for basic income per share - weighted average shares outstanding and vested/unissued restricted stock units		36,565,975		37,939,488
Dilutive potential common shares		649,825		518,470
Denominator for diluted income per share		37,215,800		38,457,958

Basic and diluted income per share:
Basic income per share	$	0.59	$	0.77
Diluted income per share	$	0.58	$	0.76

Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding		928,534		928,412

Three Months Ended Nine Months Ended
January 27,
2018 January 28,
2017 January 27,
2018 January 28,
2017
Numerator - Net Income (Loss) $ (24.3 ) $ 23.7
$ 20.4
$ 69.7
Denominator:
Denominator for Basic Net Income (Loss) per Share-Weighted Average Shares Outstanding and Vested/Unissued Restricted Stock Awards 37,292,934
37,217,302
37,275,041
37,297,757
Dilutive Potential Common Shares-Employee Stock Options, Restricted Stock Awards and Restricted Stock Units —
253,351
385,979
180,210
Denominator for Diluted Net Income (Loss) per Share 37,292,934
37,470,653
37,661,020
37,477,967

Net Income (Loss) per Share:

Basic $ (0.65 ) $ 0.64
$ 0.54
$ 1.87
Diluted $ (0.65 ) $ 0.63
$ 0.54
$ 1.86

For the three months ended January 27, 2018, potential dilutive shares have been excluded in the computation of diluted net loss per share, as the effect would have been anti-dilutive. For the nine months ended January 27, 2018, no options have been excluded in the computation of diluted net income per share because the average market price was greater than the exercise price for those periods. RSAs for 423,038 shares have been excluded in the computation of diluted net income per share for the nine months ended January 27, 2018, as these awards are contingent on the Company's full-year performance in fiscal 2020.

For the three and nine months ended January 28, 2017, options to purchase 115,836 shares have been excluded in the computation of diluted net income per share because the exercise price was greater than the average market price for those periods, and therefore, would have been anti-dilutive. RSAs for 822,000 shares have been excluded in the computation of diluted net income per share for the three and nine months ended January 28, 2017, as these awards are contingent on the Company's full-year performance in fiscal 2020.

8.~~SEGMENT INFORMATION~~

We are a global manufacturer of component and subsystem devices. We design, manufacture and market devices employing electrical, electronic, wireless, sensing and optical technologies. Our components are found in the primary end-markets of the automotive, appliance, communications (including information processing and storage, networking equipment and wireless and terrestrial voice/data systems), consumer and industrial equipment, aerospace, rail and other transportation industries.

ASC No. 280, “Segment Reporting” establishes annual and interim reporting standards for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers.

Note 10. 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 ~~as defined by ASC No. 280,~~ is the Company’s President and Chief Executive Officer (“CEO”).

~~We have multiple operating~~ The Company has four reporting segments ~~that are aggregated into four reportable segments. Those segments are Automotive, Interface, Power Products and Other.~~

as described below.

The Automotive segment supplies electronic and electro-mechanical devices and related products to automobile OEMs, either directly or through their tiered suppliers. ~~Our products~~Products include integrated center consoles, hidden switches, ergonomic switches, transmission lead-frames, LED-based lighting and sensors, which incorporate magneto-elastic sensing and other technologies that monitor the operation or status of a component or system.

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~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except per share data)~~

The ~~Interface~~Industrial segment ~~provides a variety of copper and fiber-optic interface and interface~~manufactures external lighting solutions, for the aerospace, appliance, commercial food service, construction, consumer, material handling, medical, military, mining, point-of-sale and telecommunications markets. Solutions include conductive polymers, industrial safety radio remote controls, optical and copper transceivers and solid-state field-effect consumer touch panels. Services include the design and installation of fiber-optic and copper infrastructure systems and manufacturing active and passive optical components. Through fiscal 2017, the Interface segment included our Connectivity business, which provided solutions for computer and networking markets, including connectors and custom cable assemblies. This business was shuttered at the end of fiscal 2017 due to market conditions.

~~The Power Products segment manufactures~~ braided flexible cables, current-carrying laminated busbars and devices, custom power-product assemblies, such as our PowerRail® solution, high-current low-voltage flexible power cabling systems and powder-coated busbars that are used in various markets and applications, including aerospace, computers, industrial, power conversion, military, telecommunications and transportation.

The ~~Other~~Interface segment provides a variety of copper and fiber-optic interface and interface solutions for the appliance, commercial food service, construction, consumer, material handling, point-of-sale and telecommunications markets. Solutions include copper transceivers and solid-state field-effect consumer touch panels.

The Medical segment is ~~primarily~~ made up of ~~our~~the Company’s medical device business, Dabir Surfaces, ~~our~~with its surface support technology aimed at pressure injury prevention. Methode ~~is developing~~has developed the technology for use by patients who are immobilized or otherwise at risk for pressure injuries, including patients undergoing long-duration surgical procedures. Through fiscal 2017, the Other segment included our Active Energy Solutions business, which provided inverters, battery systems and insulated-gate bipolar transistor solutions. Due to market conditions, this business was shuttered at the end

Table of ~~fiscal 2017.~~

Contents

The accounting policies of the segments are the same as those described in the summary of significant accounting policies in our Form 10-K for the fiscal year ended April 29, 2017. We allocate resources to segments based on operating income. Transfers between segments are recorded using internal transfer prices set by us.

The tables below present information about ~~our~~the Company’s reportable ~~segments.~~

segments:


	Three Months Ended July 30, 2022
(in millions)	Automotive			Industrial			Interface		Medical			Eliminations /Corporate			Consolidated
Net sales	$	177.3		$	93.7		$	13.0	$	0.7		$	(2.3	)	$	282.4
Transfers between segments		(0.7	)		(1.6	)		—		—			2.3			—
Net sales to unaffiliated customers	$	176.6		$	92.1		$	13.0	$	0.7		$	—		$	282.4

Income (loss) from operations	$	14.7		$	22.4		$	1.6	$	(1.5	)	$	(15.4	)	$	21.8
Interest expense, net																—
Other income, net																(4.1	)
Income before income taxes															$	25.9


	Three Months Ended July 31, 2021
(in millions)	Automotive			Industrial			Interface		Medical			Eliminations /Corporate			Consolidated
Net sales	$	197.0		$	81.2		$	12.7	$	0.8		$	(3.9	)	$	287.8
Transfers between segments		(1.2	)		(2.7	)		—		—			3.9			—
Net sales to unaffiliated customers	$	195.8		$	78.5		$	12.7	$	0.8		$	—		$	287.8

Income (loss) from operations	$	27.3		$	20.2		$	1.1	$	(1.2	)	$	(13.3	)	$	34.1
Interest expense, net																1.1
Other income, net																(1.8	)
Income before income taxes															$	34.8


(in millions)	July 30, 2022		April 30, 2022
Identifiable assets:
Automotive	$	700.8	$	689.8
Industrial		460.5		455.3
Interface		107.9		108.1
Medical		7.3		7.9
Eliminations/Corporate		113.4		128.0
Total identifiable assets	$	1,389.9	$	1,389.1

Three Months Ended January 27, 2018
Automotive Interface
Power
Products
Other Eliminations/Corporate Consolidated
Net Sales $ 187.7
$ 28.0
$ 15.2
$ 0.1
$ (3.0 ) $ 228.0
Transfers between Segments (2.8 ) (0.1 ) —
—
2.9
—
Net Sales to Unaffiliated Customers $ 184.9
$ 27.9
$ 15.2
$ 0.1
$ (0.1 ) $ 228.0

Income (Loss) from Operations $ 39.4
$ 1.8
$ 3.0
$ (2.3 ) $ (6.3 ) $ 35.6
Interest Expense, Net 0.3
Other Income, Net (3.8 )
Income before Income Taxes $ 39.1

Three Months Ended January 28, 2017
Automotive Interface
Power
Products
Other Eliminations/Corporate Consolidated
Net Sales $ 152.7
$ 29.8
$ 15.4
$ 0.1
$ (2.4 ) $ 195.6
Transfers between Segments (2.3 ) —
—
—
2.3
—
Net Sales to Unaffiliated Customers $ 150.4
$ 29.8
$ 15.4
$ 0.1
$ (0.1 ) $ 195.6

Income (Loss) from Operations $ 36.9
$ 1.3
$ 3.2
$ (3.3 ) $ (9.0 ) $ 29.1
Interest Income, Net (0.2 )
Other Income, Net (1.0 )
Income before Income Taxes $ 30.3

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~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

Note 11. Contingencies

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except per share data)~~

Nine Months Ended January 27, 2018
Automotive Interface
Power
Products
Other Eliminations/Corporate Consolidated
Net Sales $ 535.4
$ 86.4
$ 44.9
$ 0.2
$ (7.6 ) $ 659.3
Transfers between Segments (7.3 ) (0.1 ) (0.1 ) —
7.5
—
Net Sales to Unaffiliated Customers $ 528.1
$ 86.3
$ 44.8
$ 0.2
$ (0.1 ) $ 659.3

Income (Loss) from Operations $ 118.1
$ 4.0
$ 9.3
$ (8.1 ) $ (32.6 ) $ 90.7
Interest Expense, Net 0.3
Other Income, Net (2.6 )
Income before Income Taxes $ 93.0

Nine Months Ended January 28, 2017
Automotive Interface
Power
Products
Other Eliminations/Corporate Consolidated
Net Sales $ 467.9
$ 95.6
$ 40.0
$ 2.1
$ (8.9 ) $ 596.7
Transfers between Segments (6.3 ) (0.7 ) (0.1 ) (1.9 ) 9.0
—
Net Sales to Unaffiliated Customers $ 461.6
$ 94.9
$ 39.9
$ 0.2
$ 0.1
$ 596.7

Income (Loss) from Operations $ 111.2
$ (0.1 ) $ 7.7
$ (8.0 ) $ (26.0 ) $ 84.8
Interest Income, Net (0.3 )
Other Income, Net (2.9 )
Income before Income Taxes $ 88.0

~~9. CONTINGENCIES~~

Certain litigation arising in the normal course of business is pending against us. ~~We are,~~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, employment-related matters, environmental matters and intellectual property matters. ~~We consider~~The Company considers insurance coverage and third-party indemnification when determining required accruals for pending litigation and claims. Although the outcome of potential legal actions and claims cannot be determined, it is ~~our~~the Company's opinion, based on the information available, that ~~we have~~it has adequate reserves for these liabilities.

Hetronic Germany-GmbH Matters

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

A trial with respect to the matter began in February 2020. During the trial, the defendants dismissed their one remaining counterclaim with prejudice. On March 2, 2020, the jury returned a verdict in favor of the Company. The verdict included approximately $102 million in compensatory damages and $11 million in punitive damages. On April 22, 2020, the Court entered a permanent injunction barring defendants from selling infringing products and ordering them to return Hetronic’s confidential information. Defendants appealed entry of the permanent injunction. On May 29, 2020, the Court held defendants in contempt for violating the permanent injunction and entered the final judgment. Defendants appealed entry of the final monetary judgment as well. The appeal of the permanent injunction and the appeal of the final judgment were consolidated into a single appeal before the U.S. Court of Appeals for the Tenth Circuit. On August 24, 2021, the Tenth Circuit issued a decision affirming the lower court’s ruling with the exception that it instructed the District Court to modify the injunction from the entire world to all of the countries in which Hetronic sells its products. On April 20 and 21, 2022, the District Court held a hearing related to modifying the injunction pursuant to the Tenth Circuit’s opinion, and the parties currently are preparing post-hearing briefs. The defendants also filed a petition for certiorari with the United States Supreme Court seeking to further appeal the extraterritorial application of the Lanham Act in this case. Hetronic has opposed that petition. The Supreme Court has requested the views of the Solicitor General on the petition for certiorari. Like any judgment, particularly any judgment involving defendants outside of the United States, there is no guarantee that the Company will be able to collect all or any portion of the judgment.

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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 our supply chain, including semiconductor suppliers;

•

Impact from pandemics, such as the COVID-19 pandemic;

•

Dependence on the automotive and commercial vehicle industries;

•

Impact from inflation;

•

Dependence on a small number of large customers, including one large automotive customer;

•

Dependence on the availability and price of materials;

•

Risks related to conducting global operations;

•

Ability to withstand pricing pressures, including price reductions;

•

Currency fluctuations;

•

Timing and magnitude of costs associated with restructuring activities;

•

Failure to attract and retain qualified personnel;

•

Recognition of goodwill and other intangible asset impairment charges;

•

Timing, quality and cost of new program launches;

•

International trade disputes resulting in tariffs and our ability to mitigate tariffs;

•

Adjustments to compensation expense for performance-based awards;

•

Investment in programs prior to the recognition of revenue;

•

Ability to compete effectively;

•

Impact from production delays or cancelled orders;

•

Ability to withstand business interruptions;

•

Ability to keep pace with rapid technological changes;

•

Breaches to our information technology systems;

•

Ability to avoid design or manufacturing defects;

•

Ability to manage our debt levels and any restrictions thereunder;

•

Income tax rate fluctuations;

•

Ability to protect our intellectual property;

•

Ability to successfully benefit from acquisitions and divestitures;

•

Impact from climate change and related regulations;

•

Judgments related to accounting for tax positions; and

•

Costs associated with environmental, health and safety regulations.

Additional details and factors are discussed under the caption “Risk Factors” in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended April 30, 2022. 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.

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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, consumer appliance and medical devices. Our business is managed on a segment basis, with those segments being Automotive, Industrial, Interface and Medical.

COVID-19 Pandemic Impact

The COVID-19 pandemic and the ongoing measures to reduce its spread have negatively impacted the global economy, disrupted consumer and customer demand and global supply chains, and resulted in manufacturing inefficiencies and increased freight costs due to global capacity constraints. Beginning late in the fourth quarter of fiscal 2022 and continuing into the first quarter of fiscal 2023, various regions in China, including regions where we and our customers have operations, were subjected to lock-downs imposed by governmental authorities to mitigate the spread of COVID-19 in those areas. The resulting industry-wide production interruptions adversely impacted our results of operations in the three months ended July 30, 2022.

Any future resurgence of COVID-19, and its related impacts, could negatively impact our business and future results of operations. The extent of the impact will depend on a number of evolving and uncertain factors, including the duration and spread of COVID-19 (and its variants), the rate of vaccinations, actions taken by governmental authorities to further restrict business operations and social activity and impose travel restrictions, shifting consumer demand, the ability of our supply chain to deliver in a timely and cost-effective manner, the ability of our employees and manufacturing facilities to operate efficiently and effectively, the continued viability and financial stability of our customers and suppliers and future access to capital. We continue to focus on effectively managing the unprecedented challenges and uncertainties of the pandemic on a global basis.

Global Supply Chain Disruptions

We continue to experience business interruptions, including customer shutdowns and increased material and logistics costs, labor shortages, and most significantly, impacts from the worldwide semiconductor supply shortage. The semiconductor supply shortage is due, in part, to increased demand across multiple industries, including the automotive industry, resulting in a slowdown in their production schedules. The semiconductor supply shortage is also impacting our supply chain and our ability to meet demand at some of our non-automotive customers. We expect this semiconductor shortage to have a continued impact on our operating results and financial condition for the remainder of fiscal 2023.

Impacts of Macroeconomic and Geopolitical Conditions

Adverse macroeconomic conditions, including but not limited to inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, higher interest rates, wage and commodity inflation and currency fluctuations could adversely affect demand for our products. In addition, the Russia/Ukraine conflict has resulted in, among other things, economic sanctions imposed by the international community which have impacted the global economy and given rise to potential global security issues that may adversely affect international business and economic conditions. Although we have no operations in Russia or Ukraine, certain of our customers and suppliers have been negatively impacted by these events, which in turn has impacted markets where we do business, including Europe and Asia. The economic sanctions imposed on Russia has further increased existing global supply chain, logistics, and inflationary challenges. For example, in response to the sanctions imposed on Russia by Western countries, Russia has reduced the volume of natural gas it sends to European countries, which has resulted in, and could continue to result in increased energy costs for our EMEA operations. If Russia further reduces or turns off energy supplies to Europe, our EMEA operations could be adversely affected.

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Consolidated Results of Operations

The table below compares our results of operations between the three months ended July 30, 2022 and the three months ended July 31, 2021:


	Three Months Ended
(in millions)	July 30, 2022			July 31, 2021
Net sales	$	282.4		$	287.8
Cost of products sold		220.6			216.1
Gross profit		61.8			71.7
Selling and administrative expenses		35.3			32.8
Amortization of intangibles		4.7			4.8
Interest expense, net		-			1.1
Other income, net		(4.1	)		(1.8	)
Income tax expense		4.4			5.7
Net income	$	21.5		$	29.1

Net sales

Net sales decreased $5.4 million, or 1.9%, to $282.4 million in the three months ended July 30, 2022, compared to $287.8 million in the three months ended July 31, 2021. The decrease was primarily due to lower sales in the Automotive segment, partially offset by higher sales in the Industrial segment. Net sales were unfavorably impacted by foreign currency translation of $14.2 million, primarily due to the strengthening of the U.S. dollar relative to the euro and Chinese renminbi. This was partially offset by customer cost recoveries for spot buys of materials and premium freight costs of $11.1 million. Excluding the impact of foreign currency translation and customer cost recoveries, net sales decreased $2.3 million, or 0.8%.

Cost of products sold

Cost of products sold increased $4.5 million, or 2.1%, to $220.6 million (78.1% of net sales) in the three months ended July 30, 2022, compared to $216.1 million (75.1% of net sales) in the three months ended July 31, 2021. Excluding foreign currency translation, cost of products sold increased $14.8 million. The increase was primarily due to higher material costs of $13.3 million as a result of inflationary pressures and costs related to spot buys of materials.

Gross profit margin

Gross profit margin was 21.9% of net sales in the three months ended July 30, 2022, compared to 24.9% of net sales in the three months ended July 31, 2021. The decrease was due to higher material and other costs associated with supply chain disruptions and lower sales volumes.

Selling and administrative expenses

Selling and administrative expenses increased $2.5 million, or 7.6%, to $35.3 million (12.5% of net sales) in the three months ended July 30, 2022, compared to $32.8 million (11.4% of net sales) in the three months ended July 31, 2021. Excluding foreign currency translation, selling and administrative expenses increased $3.6 million. The increase was primarily due to higher salary expense, travel expense and other general administrative expenses.

Amortization of intangibles

Amortization of intangibles was $4.7 million in the three months ended July 30, 2022, compared to $4.8 million in the three months ended July 31, 2021, respectively.

Interest expense, net

Interest expense, net was zero in the three months ended July 30, 2022, compared to $1.1 million in the three months ended July 31, 2021.

The decrease was due to higher interest income of $0.7 million and lower interest expense of $0.4 million recognized during the period. The increase in interest income was primarily from our cash holdings as a result of increasing interest rates. The decrease in interest expense was due to lower average borrowings.

Other income, net

Other income, net was $4.1 million in the three months ended July 30, 2022, compared to $1.8 million in the three months ended July 31, 2021. In the three months ended July 30, 2022, we received $4.1 million of international government assistance with respect to the COVID-19 pandemic, compared to $1.9 million in the three months ended July 31, 2021.

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Income tax expense

Income tax expense was $4.4 million (17.0% effective tax rate) in the three months ended July 30, 2022, compared to $5.7 million (16.4% effective tax rate) in the three months ended July 31, 2021. The effective tax rate for the three months ended July 30, 2022 was lower than the U.S. statutory tax rate primarily due income derived from foreign operations with lower statutory tax rates partially offset by non-deductible expenses. The effective tax rate for the three months ended July 31, 2021 was lower than the U.S. statutory tax rate primarily due to income derived from foreign operations with lower statutory tax rates.

Net income

Net income decreased $7.6 million, or 26.1%, to $21.5 million in three months ended July 30, 2022, compared to $29.1 million in three months ended July 31, 2021. Net income was unfavorably impacted by foreign currency translation of $2.9 million. Excluding foreign currency translation, net income decreased $4.7 million as a result of the reasons described above.

Operating Segments

Automotive


	Three Months Ended
($ in millions)	July 30, 2022			July 31, 2021
Net sales
North America	$	94.7		$	99.1
EMEA	$	52.1		$	57.8
Asia	$	29.8		$	38.9
Net sales	$	176.6		$	195.8
Gross profit	$	29.4		$	41.7
As a percent of net sales		16.6	%		21.3	%
Income from operations	$	14.7		$	27.3
As a percent of net sales		8.3	%		13.9	%

Net sales

Automotive segment net sales decreased $19.2 million, or 9.8%, to $176.6 million in the three months ended July 30, 2022, compared to $195.8 million in the three months ended July 31, 2021. Net sales were unfavorably impacted by foreign currency translation of $8.9 million. This was partially offset by customer cost recoveries from spot buys of materials and premium freight costs of $9.1 million (primarily in North America). Excluding foreign currency translation and customer cost recoveries, net sales decreased $19.4 million, or 9.9%.

Net sales in North America decreased $4.4 million to $94.7 million in the three months ended July 30, 2022, compared to $99.1 million in the three months ended July 31, 2021. Net sales in North America benefitted from customer cost recoveries from spot buys of materials and premium freight costs of $7.9 million. Excluding customer cost recoveries, net sales decreased $12.3 million primarily due to a major program roll-off, partially offset by higher vehicle lighting product sales. Net sales in EMEA decreased $5.7 million to $52.1 million in the three months ended July 30, 2022, compared to $57.8 million in the three months ended July 31, 2021. Net sales in EMEA benefitted from customer cost recoveries from spot buys of materials and premium freight costs of $1.2 million. However, the weaker euro, relative to the U.S. dollar, decreased net sales in EMEA by $7.7 million. Excluding customer cost recoveries and the impact of foreign currency translation, net sales in EMEA increased by $0.8 million. Net sales in Asia decreased $9.1 million to $29.8 million in the three months ended July 30, 2022, compared to $38.9 million in the three months ended July 31, 2021. The weaker Chinese renminbi, relative to the U.S. dollar, decreased net sales in Asia by $1.3 million. Excluding the impact of foreign currency translation, Asia net sales decreased $7.8 million primarily due to COVID-19 lockdowns in China.

Gross profit

Automotive segment gross profit decreased $12.3 million, or 29.5%, to $29.4 million in the three months ended July 30, 2022, compared to $41.7 million in the three months ended July 31, 2021. Excluding the impact of foreign currency translation, gross profit decreased $10.2 million. Gross profit margins decreased to 16.6% in the three months ended July 30, 2022, compared to 21.3% in the three months ended July 31, 2021. The decrease in gross profit margins was due to lower sales volumes, the result of inflationary pressures and costs related to spot buys of materials and the impact from product mix.

Income from operations

Automotive segment income from operations decreased $12.6 million, or 46.2%, to $14.7 million in the three months ended July 30, 2022, compared to $27.3 million in the three months ended July 31, 2021. Excluding the impact of foreign currency translation, income from operations decreased $11.4 million. The decrease was primarily due to lower gross profit and higher selling and administrative expenses. Selling and administrative expenses increased due to higher salary expense as a result of wage inflation.

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Industrial


	Three Months Ended
($ in millions)	July 30, 2022			July 31, 2021
Net sales	$	92.1		$	78.5
Gross profit	$	30.4		$	28.5
As a percent of net sales		33.0	%		36.3	%
Income from operations	$	22.4		$	20.2
As a percent of net sales		24.3	%		25.7	%

Net sales

Industrial segment net sales increased $13.6 million, or 17.3%, to $92.1 million in the three months ended July 30, 2022, compared to $78.5 million in the three months ended July 31, 2021. Net sales were unfavorably impacted by foreign currency translation of $5.2 million. This was partially offset by customer cost recoveries from spot buys of materials and premium freight costs of $1.4 million. Excluding the impact of foreign currency translation and customer cost recoveries, net sales increased $17.4 million, or 22.2%, primarily due to higher sales volumes of all product categories in the Industrial segment.

Gross profit

Industrial segment gross profit increased $1.9 million, or 6.7%, to $30.4 million in the three months ended July 30, 2022, compared to $28.5 million in the three months ended July 31, 2021. Excluding the impact of foreign currency translation, gross profit increased $3.7 million. Gross profit margins decreased to 33.0% in the three months ended July 30, 2022, compared to 36.3% in the three months ended July 31, 2021. The decrease in gross profit margins was due to higher material costs as a result of supply chain disruptions.

Income from operations

Industrial segment income from operations increased $2.2 million, or 10.9%, to $22.4 million in the three months ended July 30, 2022, compared to $20.2 million in the three months ended July 31, 2021. Excluding the impact of foreign currency translation, income from operations increased $3.7 million. The increase was primarily due to higher gross profit. Selling and administrative expenses were relatively unchanged.

Interface


	Three Months Ended
($ in millions)	July 30, 2022			July 31, 2021
Net sales	$	13.0		$	12.7
Gross profit	$	2.2		$	1.7
As a percent of net sales		16.9	%		13.4	%
Income from operations	$	1.6		$	1.1
As a percent of net sales		12.3	%		8.7	%

Net sales

Interface segment net sales increased $0.3 million, or 2.4%, to $13.0 million in the three months ended July 30, 2022, compared to $12.7 million in the three months ended July 31, 2021. The increase was primarily due to higher sales of data solutions products as a result of customer cost recoveries of spot buys of materials. This was partially offset by lower sales volumes of appliance products, which were negatively impacted by a shortage of semiconductor chips.

Gross profit

Interface segment gross profit increased $0.5 million, or 29.4%, to $2.2 million in the three months ended July 30, 2022, compared to $1.7 million in the three months ended July 31, 2021. Gross profit margins increased to 16.9% in the three months ended July 30, 2022, compared to 13.4% in the three months ended July 31, 2021. The increase in gross profit margins was primarily due to product mix.

Income from operations

Interface segment income from operations increased $0.5 million, or 45.5%, to $1.6 million in the three months ended July 30, 2022, compared to $1.1 million in the three months ended July 31, 2021. The increase was due to higher gross profit.

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Medical


	Three Months Ended
(in millions)	July 30, 2022			July 31, 2021
Net sales	$	0.7		$	0.8
Gross profit	$	(0.2	)	$	—
Loss from operations	$	(1.5	)	$	(1.2	)

Net sales

Medical segment net sales decreased $0.1 million to $0.7 million in the three months ended July 30, 2022, compared to $0.8 million in the three months ended July 31, 2021.

Gross profit

Medical segment gross profit was a loss of $0.2 million in the three months ended July 30, 2022 compared to break-even in the three months ended July 31, 2021. Gross profit was impacted by higher operating costs and lower net sales in the three months ended July 30, 2022.

Loss from operations

Medical segment loss from operations increased $0.3 million to $1.5 million in the three months ended July 30, 2022, compared to $1.2 million in the three months ended July 31, 2021. The increase in the loss was primarily due to lower gross profit.

Financial Condition, Liquidity and Capital Resources

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

As of July 30, 2022, we had $152.4 million of cash and cash equivalents, of which $104.7 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.

Share Buyback Program

On March 31, 2021, the Board of Directors authorized the purchase of up to $100.0 million of our common stock. On June 16, 2022, the Board of Directors authorized an increase in the existing share buyback program of an additional $100.0 million, and also extended the expiration from March 31, 2023 to June 14, 2024. Such purchases may be made on the open market, in private transactions or pursuant to purchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934. As of July 30, 2022, a total of 1,910,774 shares have been purchased at a total cost of $83.1 million since the commencement of the share buyback program. As of July 30, 2022, the dollar value of shares that remained available to be purchased under this share buyback program was $116.9 million.

Credit Agreement

Our senior unsecured credit agreement provides for a $200.0 million revolving credit facility and a $250.0 million term loan. As of July 30, 2022, no principal was outstanding under the revolving credit facility and we have $199.9 million of availability under the revolving credit facility. As of July 30, 2022, $203.1 million in principal was outstanding under the term loan. The term loan matures in September 2023 and requires quarterly principal payments of $3.1 million over the five-year term, with the remaining balance due upon maturity. We were in compliance with all covenants under the senior unsecured credit agreement as of July 30, 2022. For further information, see Note 7, “Debt” to the condensed consolidated financial statements included in this Quarterly Report.

On December 10, 2021, we entered into an amendment to the senior unsecured credit agreement to provide, among other things, that upon the occurrence of certain events, the interest rate calculation method will generally transition from the London Interbank Offered Rate (“LIBOR”) to an alternate reference rate, including the Secured Overnight Financing Rate (“SOFR”) for U.S. dollar denominated borrowings. The consequences of the discontinuance of LIBOR cannot be entirely predicted but could result in an increase in our cost of borrowing.

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

Cash Flows


	Three Months Ended
(in millions)	July 30, 2022			July 31, 2021
Operating activities:
Net income	$	21.5		$	29.1
Non-cash items		14.9			16.0
Changes in operating assets and liabilities		(23.7	)		(35.4	)
Net cash provided by operating activities		12.7			9.7
Net cash used in investing activities		(9.6	)		(15.4	)
Net cash used in financing activities		(20.8	)		(18.3	)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(1.9	)		(1.3	)
Decrease in cash and cash equivalents		(19.6	)		(25.3	)
Cash and cash equivalents at beginning of the period		172.0			233.2
Cash and cash equivalents at end of the period	$	152.4		$	207.9

Operating activities

Net cash provided by operating activities increased $3.0 million to $12.7 million in the three months ended July 30, 2022, compared to $9.7 million in the three months ended July 31, 2021. The increase was due to lower cash outflows related to changes in operating assets and liabilities, partially offset by lower net income adjusted for non-cash items. The $23.7 million of cash outflows for operating assets and liabilities in the three months ended July 30, 2022 was primarily due to higher accounts receivable and inventory (as a result of global supply chain and logistics disruptions), partially offset by higher accounts payable.

Investing activities

Net cash used in investing activities was $9.6 million in the three months ended July 30, 2022, compared to $15.4 million in the three months ended July 31, 2021. Capital expenditures were $9.6 million and $15.9 million in the three months ended July 30, 2022 and July 31, 2021, respectively. We received $0.5 million of cash from the sale of property, plant and equipment in the three months ended July 31, 2021.

Financing activities

Net cash used in financing activities was $20.8 million in the three months ended July 30, 2022, compared to $18.3 million in the three months ended July 31, 2021. In the three months ended July 30, 2022, we used $11.9 million of cash for the purchase of shares under our share buyback program, compared to $8.4 million in the three months ended July 31, 2021. We paid cash dividends of $5.0 million in the three months ended July 30, 2022, compared to $5.2 million in the three months ended July 31, 2021. In the three months ended July 30, 2022, we paid $0.5 million in taxes related to the net share settlement of equity awards compared to $0.3 million in the three months ended July 31, 2021. In the three months ended July 30, 2022, we had repayments on our borrowings of $3.3 million, compared to $4.7 million in the three months ended July 31, 2021.

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.

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Legal Matters

For several years, Hetronic Germany-GmbH and Hydronic-Steuersysteme-GmbH (the “Fuchs companies”) served as our distributors for Germany, Austria and other central and eastern European countries pursuant to their respective intellectual property licenses and distribution and assembly agreements. We became aware that the Fuchs companies and their managing director, Albert Fuchs, had materially violated those agreements. As a result, weterminated all of our agreements with the Fuchs companies. On June 20, 2014, we filed a lawsuit against the Fuchs companies in the Federal District Court for the Western District of Oklahoma alleging material breaches of the distribution and assembly agreements and seeking damages, as well as various forms of injunctive relief. The defendants ~~have~~ filed counterclaims alleging breach of contract, interference with business relations and business slander. On April 2, 2015, we amended our complaint against the Fuchs companies to add additional unfair competition and Lanham Act claims and to add additional affiliated parties. ~~As of January 27, 2018,~~

A trial with respect to the matter ~~remains~~began in February 2020. During the ~~pre-trial stage.~~

~~10. PRE-PRODUCTION COSTS RELATED TO LONG-TERM SUPPLY ARRANGEMENTS~~

~~We incur pre-production tooling costs~~trial, the defendants dismissed their one remaining counterclaim with prejudice. On March 2, 2020, the jury returned a verdict in favor of the Company. The verdict included approximately $102 million in compensatory damages and $11 million in punitive damages. On April 22, 2020, the Court entered a permanent injunction barring defendants from selling infringing products and ordering them to return Hetronic’s confidential information. Defendants appealed entry of the permanent injunction. On May 29, 2020, the Court held defendants in contempt for violating the permanent injunction and entered the final judgment. Defendants appealed entry of the final monetary judgment as well. The appeal of the permanent injunction and the appeal of the final judgment were consolidated into a single appeal before the U.S. Court of Appeals for the Tenth Circuit. On August 24, 2021, the Tenth Circuit issued a decision affirming the lower court’s ruling with the exception that it instructed the District Court to modify the injunction from the entire world to all of the countries in which Hetronic sells its products. On April 20 and 21, 2022, the District Court held a hearing related to certain products produced for our customers under long-term supply agreements. We had $18.0 million and $15.5 million as of January 27, 2018 and April 29, 2017, respectively, of pre-production tooling costs relatedmodifying the injunction pursuant to ~~customer-owned tools for which reimbursement is contractually guaranteed by~~ the customer or for which the customer has provided a non-cancelable right to use the tooling. Engineering, testing and other costs incurred in the design and development of production parts are expensed as incurred, unless the costs are reimbursable, as specified in a

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~~METHODE ELECTRONICS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollar amounts in millions, except per share data)~~

customer contract. We had $7.6 million and $7.1 million at January 27, 2018 and April 29, 2017, respectively, of Company owned pre-production tooling, which is capitalized within property, plant and equipment.

~~We are party to a Credit Agreement with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association, as L/C Issuer,~~Tenth Circuit’s opinion, and the ~~Lenders named therein (the “Credit Agreement”).~~parties currently are preparing post-hearing briefs. The ~~Credit Agreement has~~defendants also filed a ~~maturity date of November 18, 2021. The credit facility is in~~petition for certiorari with the ~~maximum principal amount of $150.0 million, with an option~~United States Supreme Court seeking to ~~increase~~further appeal the ~~principal amount by up to an additional $100.0 million, subject to customary conditions and approval~~extraterritorial application of the ~~lender(s) providing new commitment(s).~~Lanham Act in this case. Hetronic has opposed that petition. The ~~credit facility is available for general corporate purposes, including working capital and acquisitions. The credit facility provides for variable rates~~Supreme Court has requested the views of ~~interest based~~the Solicitor General on the type of borrowing and the Company's debt to EBITDA financial ratio. The Credit Agreement is guaranteed by the Company’s wholly-owned U.S. subsidiaries. The Credit Agreement contains customary representations and warranties, financial covenants, restrictive covenants and events of default. At January 27, 2018, the interest rate on the credit facility was 1.25% plus LIBOR and we were in compliance with the covenantspetition for certiorari. Like any judgment, particularly any judgment involving defendants outside of the agreement. During the nine months ended January 27, 2018, we had $70.0 million of borrowings and payments of $3.2 million, which includes interest of $1.2 million, under this credit facility. As of January 27, 2018, there were outstanding balances against the credit facility of $95.0 million. We believe the fair value approximates the carrying amount as of January 27, 2018.

Methode's newly acquired subsidiary, Pacific Insight, is party to two separate credit agreements, one with the Bank of Montreal and one with Roynat. The credit agreement with the Bank of Montreal has a maturity date of December 21, 2019 and provides a credit facility in the maximum principal amount of C$10.0 million, with an option to increase the principal amount by up to an additional C$5.0 million. Availability under the facility is determined based upon a percentage of eligible accounts receivable and finished goods inventory balances and funds are available in either Canadian or U.S. currency. Interest is calculated at either the Canadian Dollar Offered Rate plus 1.25%, the Federal Funds Rate plus 1.25% or LIBOR plus 1.75%. As of January 27, 2018, there were no outstanding balances against this credit facility and Pacific Insight was in compliance with the covenants of the agreement.

~~The credit agreement between Pacific Insight and Roynat has a maturity date of May 24, 2020~~ ~~and provides a credit facility in the maximum principal amount of$10.0 million, with an option to increase the principal amount by up to an additional~~ $3.5 million. The interest rate on the credit facility is 2.25% plus LIBOR. During the four-month period that Methode has owned Pacific Insight, we have had no borrowings and repayments of $0.2 million under this credit facility. As of January 27, 2018, there were outstanding balances against the credit facility of $3.8 million, of which $0.7 million is due within the next twelve months, and Pacific Insight was in compliance with the covenants of the agreement. We believe the fair value approximates the carrying amount as of January 27, 2018.

Excluding credit facilities, the Company also holds debt that was assumed in the acquisitions of Procoplast and Pacific Insight. As of January 27, 2018, Procoplast holds short-term debt totaling $2.1 million, with a weighted average interest rate of 1.09%. As of January 27, 2018, Procoplast holds long-term debt that consists of twelve notes totaling $17.8 million, with a weighted-average interest rate of 1.32% and maturities ranging from 2019 to 2031. Pacific Insight holds debt in the form of an interest-free loan from the Canadian government that matures in 2019. As of January 27, 2018, $0.1 million is classified as short-term and $0.1 million is classified as long-term.

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~Cautionary Statement~~

Certain statements in this report are forward-looking statements that are subject to certain risks and uncertainties. We undertake no duty to update any such forward-looking statements to conform to actual results or changes in our expectations. Our business is highly dependent upon two large automotive customers and specific makes and models of vehicles. Our results will be subject to many of the same risks that apply to the automotive, appliance, computer and communications industries, such as general economic conditions, interest rate fluctuations, consumer spending patterns and technological changes. Other factors which may result in materially different results for future periods include the following risk factors. Additional risks and uncertainties not presently known or that our management currently believe to be insignificant may also adversely affect our financial condition or results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this report because these factors could cause our actual results and condition to differ materially from those projected in forward-looking statements. The forward-looking statements in this report are subject to the safe harbor protection provided under the securities laws and are made as of the date of this report. Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following:

Any such forward-looking statements are not guarantees of future performance and actual results, developments and business decisions may differ materially from those foreseen in such forward-looking statements. These forward-looking statements speak only as of the date of the report, press release, statement, document, webcast or oral discussion in which they are made. We do not intend to update any forward-looking statements, all of which are expressly qualified by the foregoing. See Part I — Item 1A, Risk Factors of our Form 10-K for the fiscal year ended April 29, 2017 and Part II — Item 1A, Risk Factors of this Form 10-Q for further discussions regarding some of the reasons that actual results may be materially different from those we anticipate.

We are a global manufacturer of component and subsystem devices with manufacturing, design and testing facilities in Belgium, Canada, China, Egypt, Germany, India, Italy, Lebanon, Malta, Mexico, Singapore, Switzerland, the United Kingdom and the United States. Our primary manufacturing facilities are located in Shanghai, China; Cairo, Egypt; Mriehel, Malta; Monterrey and Fresnilla, Mexico; and Nelson, British Columbia, Canada. We design, manufacture and market devices employing electrical, radio remote control, electronic, wireless, sensing and optical technologies. Our business is managed on a segment basis, with those segments being Automotive, Interface, Power Products and Other. For more information regarding the business and products of these segments, see “Item 1. Business.” of our Form 10-K for the fiscal year ended April 29, 2017, and the descriptions below regarding the business and products of our newly-acquired Procoplast and Pacific Insight subsidiaries.

Our components are found in the primary end-markets of the aerospace, appliance, automotive, construction, consumer and industrial equipment, communications (including information processing and storage, networking equipment and wireless and terrestrial voice/data systems), medical, rail and other transportation industries.

~~Recent Transactions~~

On July 27, 2017, we acquired 100% of the stock of Procoplast for $22.2 million in cash, net of cash acquired. The business, located near the Belgian-German border, is an independent manufacturer of automotive assemblies. The accounts and

~~transactions of Procoplast have been included in the Automotive segment in the consolidated financial statements from the effective date of the acquisition.~~

On October 3, 2017, Methode acquired 100% of the outstanding common shares of Pacific Insight in a cash transaction for $107.7 million, net of cash acquired. Pacific Insight, headquartered in Vancouver, British Columbia, Canada, is a global solutions provider offering design, development, manufacturing and delivery of lighting and electronic products and full-service solutions to the automotive and commercial vehicle markets. Its technology in LED-based ambient and direct lighting will expand our presence within the automotive interior, as well as augment our efforts in overhead console and other areas. The accounts and transactions of Pacific Insight have been included in the Automotive segment in the consolidated financial statements from the effective date of the acquisition.

~~Plan to Repurchase Common Stock~~

judgment.

In September 2015, the Board of Directors authorized the repurchase of up to $100 million of the Company's outstanding common stock through September 1, 2017. The Company purchased no outstanding common stock during the three and nine months ended January 27, 2018, which leaves the total repurchased under the plan at 2,277,466 shares of outstanding common stock for $71.9 million. The plan expired on September 1, 2017.

~~Hetronic Germany-GmbH Matters~~

For several years, Hetronic Germany-GmbH and Hydronic-Steuersysteme-GmbH (the “Fuchs companies”) served as our distributors for Germany, Austria and other central and eastern European countries pursuant to their respective intellectual property licenses and distribution and assembly agreements. We became aware that the Fuchs companies and their managing director, Albert Fuchs, had materially violated those agreements. As a result, weterminated all of our agreements with the Fuchs companies. On June 20, 2014, we filed a lawsuit against the Fuchs companies in the Federal District Court for the Western District of Oklahoma alleging material breaches of the distribution and assembly agreements seeking damages, as well as various forms of injunctive relief. The defendants have filed counterclaims alleging breach of contract, interference with business relations and business slander. On April 2, 2015, we amended our complaint against the Fuchs companies to add additional unfair competition and Lanham Act claims and to add additional affiliated parties. As of January 27, 2018, the matter remains in the pre-trial stage.

~~We incurred Hetronic-related legal fees of $1.5 million and $1.6 million during~~ the three months ended ~~January 27, 2018~~July 30, 2022 and ~~January 28, 2017, respectively. For the nine months ended January 27, 2018 and January 28, 2017,~~July 31, 2021, we incurred Hetronic-related legal fees of ~~$6.0~~$0.8 million and ~~$8.2~~$0.7 million, respectively.

~~Long-Term Incentive Program (LTIP)~~

To date, our Compensation Committee has awarded 1,231,613 shares of common stock subject to performance-based restricted stock awards (“RSAs”) under our Long-Term Incentive Program (“LTIP”). The RSAs These amounts are earned based on the Company's earnings before net interest, taxes, fixed asset depreciation and intangible asset amortization (“EBITDA”) during the fiscal year ending May 2, 2020 (“fiscal 2020”). RSAs of 410,538 may be earned if threshold fiscal 2020 EBITDA of $198.9 million is achieved, 821,075 RSAs may be earned if target fiscal 2020 EBITDA of $221.0 million is achieved, and the full 1,231,613 RSAs may be earned if the maximum fiscal 2020 EBITDA of $243.1 million is achieved. If the fiscal 2020 EBITDA achieved is less than threshold fiscal 2020 EBITDA, then no shares will vest. If the fiscal 2020 EBITDA achieved falls between either threshold performance and target performance levels, or target performance and maximum performance levels, then shares will be issued on a prorated basis. Fiscal 2020 EBITDA will be adjusted to (i) exclude any EBITDA from acquisitions that close during the five-year period ending with fiscal 2020 that are not accretive in fiscal 2020, (ii) exclude the positive impact of EBITDA from acquisitions that close during fiscal 2019 or fiscal 2020 that are accretive in fiscal 2020 for purposes of determining fiscal 2020 EBITDA above the target level, and (iii) include the final four quarters of EBITDA from reporting unit divestitures that were approved by the Company's Board of Directors and close during the five-year period ending with fiscal 2020.

Per ASC 718 accounting guidance, management is required in each reporting period to determine the fiscal 2020 EBITDA level that is "probable" (70% confidence level) for which a performance condition will be achieved. Prior to the third quarter of fiscal 2018, the Company was recording the RSA compensation expense based on target performance. Given recent changes in our current expectations regarding our fiscal 2020 EBITDA estimates, management determined that it is not probable that the Company will meet the target level of performance for fiscal 2020. This is primarily due to the adverse timing of revenue as a result of hospital adoption patterns (initial care setting penetration and expansion) being slower and mo

re gradual than originally planned for our Dabir Surfaces business. Based on the new expectations, the Company believes it is now probable that we will achieve the threshold level for our fiscal 2020 EBITDA. As a result, the Company recorded a reversal of RSA compensation expense relating to prior periods in both the three and nine months ended January 27, 2018 of $6.0 million, reflectedincluded in the selling and administrative expenses ~~section~~in the Industrial segment.

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 ~~statements of operations.~~

~~In future periods, if management makes a determination that exceeding the threshold level is probable~~policies. We do not enter into derivative financial instruments for ~~fiscal 2020, a catch-up adjustment to compensation expense will be recorded in that period. Such determination could be based on a number of factors, including an accretive acquisition~~speculative or ~~a favorable~~trading purposes.

There has been no significant change in expectations regarding Dabir Surfaces’ fiscal 2020 revenues and resultant EBITDA. If management makes a determination that it is not probable the Company will meet the threshold level for fiscal 2020, a reversal of compensation expense will be recorded in that period.

~~Results of Operations for the Three Months Ended January 27, 2018 as Compared~~our exposure to ~~the Three Months Ended January 28, 2017~~

~~Consolidated Results~~

~~Below is a table summarizing results for the three months ended:~~

~~Net Sales~~. Consolidated net sales increased $32.4 million, or 16.6%, to $228.0 million for the three months ended January 27, 2018, from $195.6 million for the three months ended January 28, 2017. The Automotive segment net sales increased $34.5 million, or 22.9%, to $184.9 million for the third quarter of fiscal 2018, from $150.4 million for the third quarter of fiscal 2017. The Interface segment net sales decreased $1.9 million, or 6.4%, to $27.9 million for the third quarter of fiscal 2018, from $29.8 million for the third quarter of fiscal 2017. The Power Products segment net sales decreased $0.2 million, or 1.3%, to $15.2 million for the third quarter of fiscal 2018, compared to $15.4 million for the third quarter of fiscal 2017. Translation of foreign operations' net sales for the three months ended January 27, 2018 increased reported net sales by $4.4 million, or 1.9%, due to average currency rate fluctuations in the third quarter of fiscal 2018, compared to the third quarter of fiscal 2017, primarily due to the strengthening of the euro compared to the U.S. dollar.

~~Cost of Products Sold~~. Consolidated cost of products sold increased $25.7 million, or 18.1%, to $167.9 million for the three months ended January 27, 2018, compared to $142.2 million for the three months ended January 28, 2017. Consolidated cost of products sold as a percentage of net sales was 73.6% for the third quarter of fiscal 2018, compared to 72.7% for the third quarter of fiscal 2017. The Automotive segment cost of products sold as a percentage of net sales increased primarily due to the unfavorable currency impact due to the strengthening of the Mexican peso during the period as compared to the U.S. dollar, warranty expense of $1.0 million, and pricing reductions on certain products. The Interface segment cost of products sold as a percentage of net sales was favorably impacted in the third quarter of fiscal 2018 by increased sales volumes of radio remote control products. This was partially offset by an unfavorable currency impact for appliance products due to the strengthening of

the Mexican peso as compared to the U.S. dollar. The Power Products segment cost of products sold as a percentage of net sales increased primarily due to increased copper prices. The Other segment cost of products sold decreased primarily due to the battery systems business that closed at the end of fiscal 2017, partially offset with higher research and development initiatives for the medical devices business.

~~Gross Profit.~~ Consolidated gross profit increased $6.7 million, or 12.5%, to $60.1 million for the three months ended January 27, 2018, as compared to $53.4 million for the three months ended January 28, 2017. Gross margins as a percentage of net sales decreased to 26.4% for the three months ended January 27, 2018, compared to 27.3% for the three months ended January 28, 2017. The Automotive segment gross margins as a percentage of net sales were negatively impacted by sales mix related to our newly acquired businesses, warranty expense of $1.0 million, unfavorable currency impact and pricing reductions. The Interface segment gross margins were unfavorably impacted in the third quarter of fiscal 2018 by pricing reductions on certain data solution products and an unfavorable currency impact for appliance products due to the strengthening of the Mexican peso as compared to the U.S. dollar. This was partially offset by increased sales volumes of radio remote control products. The Power Product segment gross margins as a percentage of sales decreased primarily due the increased cost of copper. The Other segment gross profit was positively impacted due to the battery systems business that closed at the end of fiscal 2017, partially offset by increased research and development cost initiatives in our medical devices business.

~~Selling and Administrative Expenses~~. Selling and administrative expenses decreased by $1.2 million, or 5.1%, to $22.5 million for the three months ended January 27, 2018, compared to $23.7 million for the three months ended January 28, 2017. Selling and administrative expenses as a percentage of net sales decreased to 9.9% for the three months ended January 27, 2018 from 12.1% for the three months ended January 28, 2017. The stock award amortization for the three months ended January 27, 2018, was a net reversal of expense of $3.8 million, which includes a reversal of expense of $6.0 million relating to prior periods (See Footnote 6 for more information). The stock award amortization expense for the three months ended January 28, 2017 was $2.7 million. The third quarter of fiscal 2017 included $0.8 million of selling and administrative expenses from businesses that were closed at the end of fiscal 2017. Aside from the discrete items mentioned above, the third quarter of fiscal 2018 also includes $3.7 million of selling and administrative expenses from our newly acquired businesses, as well as higher wages and travel expenses of $1.6 million and $0.4 million, respectively.

~~Amortization of Intangibles~~. Amortization of intangibles increased $1.4 million, or 233.3%, to $2.0 million for the three months ended January 27, 2018, compared to $0.6 million for the three months ended January 28, 2017. The increase is due to the amortization expense related to our newly acquired businesses.

~~Interest (Income) Expense, Net.~~ Interest (income) expense, net was an expense of $0.3 million for the three months ended January 27, 2018, as compared to income of $0.2 million for the three months ended January 28, 2017. The increase in expense primarily relates to increased debt levels in the third quarter of fiscal 2018, compared to the third quarter of fiscal 2017.

~~Other Income, Net.~~ Other income, net was $3.8 million for the three months ended January 27, 2018, as compared to $1.0 million for the three months ended January 28, 2017. In the third quarter of fiscal 2018, the Company recorded a gain of $1.6 million related to the sale of exclusive rights for a licensing agreement. The third quarter of fiscal 2018 and the third quarter of fiscal 2017 includes $3.6 million and $1.5 million, respectively, for an international government grant for maintaining certain employment levels during those periods. All other amounts for both the third quarter of fiscal 2018 and the third quarter of fiscal 2017 relate to currency rate fluctuations. The functional currencies of our operations are the British pound, Canadian dollar, Chinese yuan, euro, Indian rupee, Mexican peso, Singapore dollar and Swiss franc. Some foreign operations have transactions denominated in currencies other than their functional currencies, primarily sales in U.S. dollars, euros and Chinese yuan, creating exchange rate sensitivities.

~~Income Tax Expense.~~ Income tax expense increased $56.8 million, or 860.6%, to $63.4 million for the three months ended January 27, 2018, compared to $6.6 million for the three months ended January 28, 2017. The Company's effective tax rate increased to 162.1% in the third quarter of fiscal 2018, compared to 21.9% in the third quarter of fiscal 2017. The change in the effective tax rate was primarily due to the enactment of U.S. Tax Reform. Of the total income tax expense of $63.4 million recordedmarket risk during the three months ended ~~January 27, 2018, $56.8 million relates to U.S. Tax Reform. This can be further broken down into~~July 30, 2022. For a provisional estimate of $52.6 million for a one-time repatriation tax and $4.2 million for the re-measurement of U.S. deferred tax assets in the consolidated financial statement. In addition, there were favorable discrete tax impacts primarily related to tax rate changes through the third quarter of fiscal 2018. For further details regarding the impacts of U.S. Tax Reform during the three months ended January 27, 2018, refer to Note 5, “Income Taxes.”

~~Net Income (Loss).~~ Net income (loss) was a loss of $24.3 million for the three months ended January 27, 2018, compared to income of $23.7 million for the three months ended January 28, 2017. Net income was unfavorably impacted by increased tax expense due to the enactment of U.S. Tax Reform, higher intangible asset amortization, higher warranty expense,

customer pricing reductions, higher wages and higher interest expenses. These were partially offset with the reversal of expense for stock award amortization related to our long-term incentive program, increased government grants, increased sales volumes and net income from our new acquisitions and the gain on the sale of a licensing agreement.

~~Operating Segments~~

~~Automotive Segment Results~~

~~Below is a table summarizing results for the three months ended:~~

~~Net Sales~~. Automotive segment net sales increased $34.5 million, or 22.9%, to $184.9 million for the three months ended January 27, 2018, from $150.4 million for the three months ended January 28, 2017. Net sales increased in North America by $18.2 million, or 21.6%, to $102.6 million in the third quarter of fiscal 2018, compared to $84.4 million in the third quarter of fiscal 2017. North American Automotive sales in the third quarter of fiscal 2018 include $22.0 million from Pacific Insight, which was acquired in the second quarter of fiscal 2018. Other North American sales decreased for our integrated center stack products due primarily to pricing reductions. Sales for our transmission lead-frame assemblies decreased due to pricing reductions and lower sales volumes in the third quarter of fiscal 2018, compared to the third quarter of fiscal 2017. Salesdiscussion of our user interface assemblies products increased primarily due to new program launches in fiscal 2018. Net sales in Europe increased $19.0 million, or 53.1%, to $54.8 million in the third quarter of fiscal 2018, compared to $35.8 million in the third quarter of fiscal 2017. The increase in European sales includes $8.5 million from our newly acquired business, Procoplast, which was acquired in the first quarter of fiscal 2018. Other European sales increased primarily due to increased customer funded tooling and design fees, favorable currency rate fluctuations and higher sales volumes of hidden switches and sensor products. Net sales in Asia decreased $2.7 million, or 8.9%, to $27.5 million in the third quarter of fiscal 2018, compared to $30.2 million in the third quarter of fiscal 2017, primarily due to lower sales of our transmission lead-frame assemblies due to a combination of pricing reductions and lower sales volumes. In addition, sales volumes for steering angle sensor products were lower, as the products approach end of production. Translation of foreign operations' net sales for the three months ended January 27, 2018 increased reported net sales by $4.4 million, or 2.4%, due to average currency rates in the third quarter of fiscal 2018, compared to the average currency rates in the third quarter of fiscal 2017, primarily due to the strengthening of the euro and Chinese yuan as compared to the U.S. dollar.

~~Cost of Products Sold~~. Automotive segment cost of products sold increased $27.8 million, or 26.3%, to $133.4 million for the three months ended January 27, 2018, compared to $105.6 million for the three months ended January 28, 2017. The Automotive segment cost of products sold as a percentage of net sales increased to 72.1% in the third quarter of fiscal 2018, compared to 70.2% in the third quarter of fiscal 2017. The cost of products sold as a percentage of net sales increased primarily due to the strengthening of the Mexican peso during the period as compared to the U.S. dollar, warranty expense of $1.0 million and pricing reductions on certain products.

~~Gross Profit.~~ Automotive segment gross profit increased $6.7 million, or 15.0%, to $51.5 million for the three months ended January 27, 2018, as compared to $44.8 million for the three months ended January 28, 2017. The Automotive segment gross margins as a percentage of net sales decreased to 27.9% for the three months ended January 27, 2018, as compared to 29.8% for the three months ended January 28, 2017. Gross margins as a percentage of net sales were negatively impacted by sales mix related to our newly acquired businesses, warranty expense of $1.0 million and pricing reductions.

~~Selling and Administrative Expenses~~. Selling and administrative expenses increased $4.2 million, or 53.2%, to $12.1 million for the three months ended January 27, 2018, as compared to $7.9 million for the three months ended January 28, 2017. Selling and administrative expenses as a percentage of net sales increased to 6.5% for the three months ended January 27, 2018, from 5.3% for the three months ended January 28, 2017. The amounts for the third quarter of fiscal 2018 include $5.1 million related to our newly acquired businesses. The $5.1 million includes $1.4 million of intangible asset amortization expense. Excluding the activity from our newly acquired businesses, expenses decreased $1.2 million due to the reduction in stock award amortization expense for our long-term incentive program, partially offset with increased wages of $0.3 million.

~~Income from Operations.~~ Automotive segment income from operations increased $2.5 million, or 6.8%, to $39.4 million for the three months ended January 27, 2018, compared to $36.9 million for the three months ended January 28, 2017. Income from operations for the third quarter of fiscal 2018 increased due to sales and income from operations from our newly acquired businesses and the reversal of the long-term incentive expense, partially offset with increased intangible asset amortization expense, increased warranty expense, pricing reductions and the strengthening of the Mexican peso as compared to the U.S. dollar.

~~Interface Segment Results~~

~~Below is a table summarizing results for the three months ended:~~

~~Net Sales~~. Interface segment net sales decreased $1.9 million, or 6.4%, to $27.9 million for the three months ended January 27, 2018, from $29.8 million for the three months ended January 28, 2017. Net sales decreased in North America by $1.5 million, or 6.7%, to $21.0 million in the third quarter of fiscal 2018, compared to $22.5 million in the third quarter of fiscal 2017. North American net sales decreased by $3.1 million due to our Connectivity business. The Company exited this business at the end of fiscal 2017 due to adverse business conditions. Excluding the $3.1 million of lower net sales for Connectivity, North American sales increased by $1.6 million due to increased sales volumes of radio remote control and data solutions products. Sales of North American appliance products were flat in the third quarter of fiscal 2018, compared to the third quarter of fiscal 2017. Net sales in Europe were flat at $6.3 million in the third quarter of fiscal 2018 and the third quarter of fiscal 2017. Sales of radio remote control products increased, however, the increase was offset with lower data solution products. Net sales in Asia decreased $0.4 million, or 40.0%, to $0.6 million in the third quarter of fiscal 2018, compared to $1.0 million in the third quarter of fiscal 2017, primarily due to lower sales volumes of legacy products.

~~Cost of Products Sold~~. Interface segment cost of products sold decreased $1.2 million, or 5.2%, to $21.8 million for the three months ended January 27, 2018, compared to $23.0 million for the three months ended January 28, 2017. Interface segment cost of products sold as a percentage of net sales increased to 78.1% for the three months ended January 27, 2018, compared to 77.2% for the three months ended January 28, 2017. Cost of products sold as a percentage of net sales was unfavorably impacted in the third quarter of fiscal 2018 by an unfavorable currency impact for appliance products due to the strengthening of the Mexican peso as compared to the U.S. dollar. This was partially offset by increased sales volumes of radio remote control products.

~~Gross Profit.~~ Interface segment gross profit decreased $0.7 million, or 10.3%, to $6.1 million for the three months ended January 27, 2018, compared to $6.8 million for the three months ended January 28, 2017. Gross margins as a percentage of net sales decreased to 21.9% for the three months ended January 27, 2018, compared to 22.8% for the three months ended January 28, 2017. Gross margins were negatively impacted in the third quarter of fiscal 2018 by pricing reductions on certain data solution products and an unfavorable currency impact for appliance products due to the strengthening of the Mexican peso as compared to the U.S. dollar. This was partially offset by increased sales volumes of radio remote control products.

~~Selling and Administrative Expenses~~. Selling and administrative expenses decreased $1.2 million, or 21.8%, to $4.3 million for the three months ended January 27, 2018, compared to $5.5 million for the three months ended January 28, 2017. Selling and administrative expenses as a percentage of net sales decreased to 15.4% for the three months ended January 27, 2018, from 18.5% for the three months ended January 28, 2017. The third quarter of fiscal 2017 included $0.8 million of selling and administrative expenses for our Connectivity business that was shut down at the end of fiscal 2017 due to adverse business conditions. The third quarter of fiscal 2018 benefitted from the reversal of stock award amortization expense for our long-term incentive program and lower legal fees.

~~Income from Operations.~~ Interface segment income from operations increased $0.5 million, or 38.5%, to $1.8 million for the three months ended January 27, 2018, compared to $1.3 million for the three months ended January 28, 2017. Income from operations increased due primarily to lower legal fees and the reversal of long-term incentive expense, partially offset by lower sales volumes and an unfavorable currency impact on certain appliance products.

~~Power Products Segment Results~~

~~Below is a table summarizing results for the three months ended:~~

~~Net Sales~~. Power Products segment net sales decreased $0.2 million, or 1.3%, to $15.2 million for the three months ended January 27, 2018, compared to $15.4 million for the three months ended January 28, 2017. Net sales decreased in North America by $0.5 million, or 8.8%, to $5.2 million in the third quarter of fiscal 2018, compared to $5.7 million in the third quarter of fiscal 2017, primarily due to lower sales volumes of PowerRail® ~~and other busbar products. Net sales in Europe~~

increased by $0.2 million, or 10.5%, to $2.1 million in the third quarter of fiscal 2018, compared to $1.9 million in the third quarter of fiscal 2017, primarily due to increased sales of our EPS connector program, partially offset by lower sales volumes of bypass switches. Net sales in Asia remained constant at $7.8 million in the third quarter of fiscal 2018 and the third quarter of fiscal 2017.

~~Cost of Products Sold~~. Power Products segment cost of products sold increased $0.3 million, or 2.7%, to $11.6 million for the three months ended January 27, 2018, compared to $11.3 million for the three months ended January 28, 2017. The Power Products segment cost of products sold as a percentage of net sales increased to 76.3% for the three months ended January 27, 2018, from 73.4% for the three months ended January 28, 2017. The increase primarily relates to higher copper prices during the period.

~~Gross Profit.~~ Power Products segment gross profit decreased $0.5 million, or 12.2%, to $3.6 million in the third quarter of fiscal 2018, compared to $4.1 million in the third quarter of fiscal 2017. Gross margins as a percentage of net sales decreased to 23.7% for the three months ended January 27, 2018, from 26.6% for the three months ended January 28, 2017. The decrease primarily relates to higher copper prices during the period.

~~Selling and Administrative Expenses~~. Selling and administrative expenses decreased $0.3 million, or 33.3%, to $0.6 million for the three months ended January 27, 2018, compared to $0.9 million for the three months ended January 28, 2017. Selling and administrative expenses as a percentage of net sales decreased to 3.9% for the three months ended January 27, 2018, from 5.8% for the three months ended January 28, 2017. Selling and administrative expenses decreased primarily due to the reversal of stock award amortization expense related to our long-term incentive program and lower bad debt expense.

~~Income From Operations.~~ Power Products segment income from operations decreased $0.2 million, or 6.3%, to $3.0 million for the three months ended January 27, 2018, compared to $3.2 million for the three months ended January 28, 2017. Income from operations decreased due primarily to lower sales volumes and unfavorable sales mix, partially offset with the reversal of the long-term incentive accrual and lower bad debt expense.

~~Other Segment Results~~

~~Below is a table summarizing results for the three months ended:~~

~~Net Sales~~. The businesses in this segment, medical devices and inverters and battery systems, had minimal net sales in the third quarter of fiscal 2018 and the third quarter of fiscal 2017 due to newly launched products. The inverter and battery system business was closed at the end of fiscal 2017 due to adverse business conditions.

~~Cost of Products Sold~~. Other segment cost of products sold was $0.8 million for the three months ended January 27, 2018, compared to $1.7 million for the three months ended January 28, 2017. The decrease primarily relates to the inverter and battery system business that was closed at the end of fiscal 2017. The decrease was partially offset by the vertical manufacturing integration of some key components in medical device products, and research efforts to expand the product offerings.

~~Gross Profit.~~ The Other segment gross profit was a loss of $0.7 million and $1.6 million for the three months ended January 27, 2018 and January 28, 2017, respectively. The decreased loss primarily relates to the inverter and battery system business that was closed at the end of fiscal 2017. The decrease was partially offset by the vertical manufacturing integration of some key components in medical device products and research efforts to expand the product offerings.

~~Selling and Administrative Expenses~~. Selling and administrative expenses decreased $0.1 million, to $1.6 million for the three months ended January 27, 2018, compared to $1.7 million for the three months ended January 28, 2017. The third quarter of fiscal 2017 includes $0.2 million of selling and administrative expenses for our inverter and battery systems business, which was closed at the end of fiscal 2017. The increase in selling and administrative expenses for the third quarter of fiscal 2018 primarily relates to higher outside professional fees and marketing expenses related to new product introductions, partially offset by the reversal of stock award amortization expense for our long-term incentive program.

~~Loss From Operations~~ The Other segment loss from operations decreased $1.0 million, to $2.3 million for the three months ended January 27, 2018, compared to $3.3 million for the three months ended January 28, 2017. The decreased loss relates to lower selling and administrative expenses for the inverter and battery system business closed at the end of fiscal 2017, partially offset by higher outside professional fees, research and development and marketing expenses in the third quarter of fiscal 2018.

~~Results of Operations for the Nine Months Ended January 27, 2018 as Compared to the Nine Months Ended January 28, 2017~~

~~Consolidated Results~~

~~Below is a table summarizing results for the nine months ended:~~

~~Net Sales~~. Consolidated net sales increased by $62.6 million, or 10.5%, to $659.3 million for the nine months ended January 27, 2018, from $596.7 million for the nine months ended January 28, 2017. The Automotive segment net sales increased $66.5 million, or 14.4%, to $528.1 million for the nine months ended January 27, 2018, from $461.6 million for the nine months ended January 28, 2017. The Interface segment net sales decreased $8.6 million, or 9.1%, to $86.3 million for the nine months ended January 27, 2018, compared to $94.9 million for the nine months ended January 28, 2017. The Power Products segment net sales increased $4.9 million, or 12.3%, to $44.8 million for the nine months ended January 27, 2018, compared to $39.9 million for the nine months ended January 28, 2017. Translation of foreign operations' net sales for the nine months ended January 27, 2018 increased net sales by $6.5 million, or 1.0%, compared to the average currency rates in the nine months ended January 28, 2017, primarily due to the strengthening of the euro and Chinese yuan as compared to the U.S. dollar.

~~Cost of Products Sold~~. Consolidated cost of products sold increased $47.9 million, or 11.0%, to $481.6 million for the nine months ended January 27, 2018, compared to $433.7 million for the nine months ended January 28, 2017. Consolidated cost of products sold as a percentage of net sales were consistent at 73.0% for both the nine months ended January 27, 2018 and January 28, 2017. The Automotive segment cost of products sold for the first nine months of fiscal 2017 included $1.0 million of commodity pricing adjustments and the reversal of accruals of $1.0 million related to resolved customer commercial issues. The Automotive segment costs of products sold as a percentage of net sales for the first nine months of fiscal 2018 increased primarily due to unfavorable sales mix related to our newly acquired businesses, warranty expense of $1.0 million, the inclusion

of $0.8 million of purchase accounting adjustments related to our new acquisitions, pricing reductions on certain products and the unfavorable currency impact due to the strengthening of the Mexican peso during the period as compared to the U.S. dollar. The Interface segment cost of products sold as a percentage of net sales decreased, primarily due to favorable sales mix, partially offset with lower sales volumes. The Power Products segment cost of products sold as a percentage of net sales increase primarily due to the higher cost of copper, partially offset by higher sales volumes. The Other segment experienced lower costs of products sold primarily due to a shuttered business which was closed at the end of fiscal 2017, partially offset with increased research and development initiatives for the medical devices business.

~~Gross Profit.~~ Consolidated gross profit increased $14.7 million, or 9.0%, to $177.7 million for the nine months ended January 27, 2018, as compared to $163.0 million for the nine months ended January 28, 2017. Gross margins as a percentage of net sales decreased to 27.0% for nine months ended January 27, 2018, compared to 27.3% for the nine months ended January 28, 2017. The Automotive segment gross margins as a percentage of net sales for the first nine months of fiscal 2017 were favorably impacted by $1.0 million of commodity pricing adjustments and the reversal of accruals of $1.0 million related to resolved customer commercial issues. The gross margins as a percentage of net sales for the first nine months of fiscal 2018 were unfavorably impacted by unfavorable sales mix related to our new acquisitions, warranty expense of $1.0 million, $0.8 million of one-time purchase accounting adjustments and the unfavorable currency impact due to the strengthening of the Mexican peso during the period as compared to the U.S. dollar. The Interface segment gross margins as a percentage of net sales for the first nine months of fiscal 2018 increased primarily due to favorable sales mix, partially offset with lower sales volumes and price reductions on certain products. The Power Products segment gross margins as a percentage of net sales decreased primarily due to the higher cost of copper, partially offset by higher sales volumes.

~~Selling and Administrative Expenses~~. Selling and administrative expenses increased $6.9 million, or 9.0%, to $83.3 million for the nine months ended January 27, 2018, compared to $76.4 million for the nine months ended January 28, 2017. Selling and administrative expenses as a percentage of net sales decreased to 12.6% for the nine months ended January 27, 2018 from 12.8% for the nine months ended January 28, 2017. The first nine months of fiscal 2017 included $2.8 million of selling and administrative expenses from businesses that were closed at the end of fiscal 2017. The first nine months of fiscal 2018 includes $5.5 million of selling and administrative expenses from our newly acquired businesses. In addition, the first nine months of fiscal 2018 includes $6.0 million of fees related to the acquisitions. Selling and administrative expenses for the nine months ended January 27, 2018 also increased due to higher wages of $2.1 million and higher travel expense of $1.0 million. The stock award amortization for the nine months ended January 27, 2018, was an expense of $3.3 million, which includes a reversal of expense of $6.0 million relating to prior periods (See Note 6, "Common Stock and Stock-based Compensation"). The stock award amortization expense for the nine months ended January 28, 2017 was $9.5 million.

~~Amortization of Intangibles~~. Amortization of intangibles increased $1.9 million, or 105.6%, to $3.7 million for the nine months ended January 27, 2018, compared to $1.8 million for the nine months ended January 28, 2017. The increase is due to the amortization expense related to our newly acquired businesses.

~~Interest (Income) Expense, Net.~~ Interest (income) expense, net was an expense of $0.3 million for the nine months ended January 27, 2018, compared to interest income of $0.3 million for the nine months ended January 28, 2017. This change is due to the increased debt levels during the period.

~~Other Income, Net.~~ Other income, net decreased 0.3 million to $2.6 million for the nine months ended January 27, 2018, compared to $2.9 million for the nine months ended January 28, 2017. During the nine months ended January 27, 2018, the Company recorded a gain of $1.6 million related to the sale of exclusive rights for a licensing agreement.The first nine months of fiscal 2018 and the first nine months of fiscal 2017 include $3.6 million and $3.0 million, respectively, for an international government grant for maintaining certain employment levels during those periods. All other amounts for both the first nine months of fiscal 2018 and the first nine months of fiscal 2017 relate to currency rate fluctuations. The functional currencies of our operations are the British pound, Canadian dollar, Chinese yuan, euro, Indian rupee, Mexican peso, Singapore dollar and Swiss franc. Some foreign operations have transactions denominated in currencies other than their functional currencies, primarily sales in U.S. dollars and euros, creating exchange rate sensitivities.

~~Income Tax Expense.~~ Income tax expense increased $54.3 million, or 296.7%, to $72.6 million for the nine months ended January 27, 2018, compared to $18.3 million for the nine months ended January 28, 2017. The Company's effective tax rate increased to 78.1% for the nine months ended January 27, 2018, compared to 20.8% for the nine months ended January 28, 2017. The change in the effective tax rate was primarily due to the enactment of U.S. Tax Reform. Of the total income tax expense of $72.6 million recorded during the nine months ended January 27, 2018, $56.8 million relates to U.S. Tax Reform. This can be further broken down into a provisional estimate of $52.6 million for a one-time repatriation tax and $4.2 million for the re-measurement of U.S. deferred tax assets in the consolidated financial statement. In addition, there were favorable

discrete tax impacts primarily related to tax rate changes through the first nine months of fiscal 2018. For further details, regarding the impacts of U.S. Tax Reform during the nine months ended January 27, 2018, refer to Note 5, “Income Taxes.”

~~Net Income.~~ Net income decreased $49.3 million, or 70.7%, to $20.4 million for the nine months ended January 27, 2018, compared to $69.7 million for the nine months ended January 28, 2017. Net income for the nine months ended January 27, 2018 was unfavorably impacted by increased tax expense due to the enactment of U.S. Tax Reform, higher intangible asset amortization, customer pricing reductions, acquisition fees and purchase accounting adjustments, increased research and development initiatives for the medical devices business, higher wages and higher interest expenses. These were partially offset by the reversal of expense for stock award amortization related to our long-term incentive program, increased government grants, increased sales volumes from our new acquisitions and the gain on the sale of a licensing agreement. Net income for the nine months ended January 28, 2017 was favorably impacted due to adjustments for commodity pricing and the reversal of accruals related to resolved customer commercial issues.

~~Operating Segments~~

~~Automotive Segment Results~~

~~Below is a table summarizing results for the nine months ended:~~

~~Net Sales~~. Automotive segment net sales increased $66.5 million, or 14.4%, to $528.1 million for the nine months ended January 27, 2018, from $461.6 million for the nine months ended January 28, 2017. Net sales increased in North America by $28.5 million, or 10.5%, to $299.0 million for the nine months ended January 27, 2018, compared to $270.5 million for the nine months ended January 28, 2017. North American Automotive sales included $29.0 million from our newly acquired business, Pacific Insight, which was acquired in the second quarter of fiscal 2018. Other North American sales increased for our user interface assemblies due to new program launches in fiscal 2018. Sales declined for our integrated center stack products primarily due to pricing reductions, partially offset by higher sales volumes. Sales for our transmission lead-frame assemblies decreased due to a combination of pricing reductions and lower sales volumes in the first nine months of fiscal 2018, compared to the first nine months of fiscal 2017. Net sales increased in Europe by $45.3 million, or 41.6%, to $154.1 million for the nine months ended January 27, 2018, compared to $108.8 million for the nine months ended January 28, 2017. The increase in the European sales includes $17.6 million from our newly acquired business, Procoplast, which was acquired in the first quarter of fiscal 2018. Other European sales increased primarily due to increased customer funded tooling and design fees, favorable currency rate fluctuations and higher sales volumes of hidden switches and sensor products. Net sales in Asia decreased $7.3 million, or 8.9%, to $75.0 million for the nine months ended January 27, 2018, compared to $82.3 million for the nine months ended January 28, 2017, primarily due to lower sales of our transmission lead-frame assemblies due to a combination of pricing reductions and lower sales volumes. We also experienced lower sales volumes for our steering angle sensor products, as the products approach end of production. Translation of foreign operations' net sales increased

reported net sales by $6.5 million, or 1.2%, for the nine months ended January 27, 2018, compared to the average currency rates for the nine months ended January 28, 2017, primarily due to the strengthening of the euro and Chinese yuan as compared to the U.S. dollar.

~~Cost of Products Sold~~. Automotive segment cost of products sold increased $52.4 million, or 16.1%, to $377.9 million for the nine months ended January 27, 2018, from $325.5 million for the nine months ended January 28, 2017. The Automotive segment cost of products sold as a percentage of net sales increased to 71.6% for the nine months ended January 27, 2018, compared to 70.5% for the nine months ended January 28, 2017. The cost of products sold as a percentage of sales increased primarily due to unfavorable sales mix related to our newly acquired businesses, warranty expense of $1.0 million, the inclusion of $0.8 million of purchase accounting adjustments related to our new acquisitions, pricing reductions on certain products and the strengthening of the Mexican peso during the period as compared to the U.S. dollar. The results for the first nine months of fiscal 2017 include a favorable $1.0 million of commodity pricing adjustments and the reversal of accruals of $1.0 million related to resolved customer commercial issues.

~~Gross Profit.~~ Automotive segment gross profit increased $14.1 million, or 10.4%, to $150.2 million for the nine months ended January 27, 2018, as compared to $136.1 million for the nine months ended January 28, 2017. The Automotive segment gross margins as a percentage of net sales decreased to 28.4% for the nine months ended January 27, 2018, as compared to 29.5% for the nine months ended January 28, 2017. Gross margins as a percentage of net sales decreased primarily due to unfavorable sales mix related to our newly acquired businesses, warranty expense of $1.0 million, the inclusion of $0.8 million of purchase accounting adjustments related to our new acquisitions, pricing reductions on certain products and the strengthening of the Mexican peso during the period as compared to the U.S. dollar. The results for the first nine months of fiscal 2017 include a favorable $1.0 million of commodity pricing adjustments and the reversal of accruals of $1.0 million related to resolved customer commercial issues.

~~Selling and Administrative Expenses~~. Selling and administrative expenses increased $7.2 million, or 28.9%, to $32.1 million for the nine months ended January 27, 2018, compared to $24.9 million for the nine months ended January 28, 2017. Selling and administrative expenses as a percentage of net sales were 6.1% for the nine months ended January 27, 2018, compared to 5.4% for the nine months ended January 28, 2017. The amounts for the first nine months of fiscal 2018 include $7.5 million related to our newly acquired businesses. The $7.5 million includes $2.0 million of intangible asset amortization expense. Excluding the activity from our newly acquired businesses, selling and administrative expenses decreased $0.3 million due to the reversal of stock award amortization expense for our long-term incentive program, partially offset with increased severance and travel expense.

~~Income from Operations.~~ Automotive segment income from operations increased $6.9 million, or 6.2%, to $118.1 million for the nine months ended January 27, 2018, compared to $111.2 million for the nine months ended January 28, 2017. Income from operations for the first nine months of fiscal 2018 increased due to sales and income from operations from our newly acquired businesses and the reversal of the stock award amortization expense, partially offset with increased warranty expense, pricing reductions, the strengthening of the Mexican peso as compared to the U.S. dollar, higher intangible asset amortization expense and higher severance and travel expenses. Net income for the nine months ended January 28, 2017 was favorably impacted due to adjustments for commodity pricing and the reversal of accruals related to resolved customer commercial issues.

~~Interface Segment Results~~

~~Below is a table summarizing results for the nine months ended:~~

~~Net Sales~~. Interface segment net sales decreased $8.6 million, or 9.1%, to $86.3 million for the nine months ended January 27, 2018, from $94.9 million for the nine months ended January 28, 2017. Net sales decreased in North America by $9.3 million, or 12.7%, to $64.2 million for the nine months ended January 27, 2018, compared to $73.5 million for the nine months ended January 28, 2017. North American net sales decreased by $11.5 million due to our Connectivity business. The Company exited this business at the end of fiscal 2017 due to adverse business conditions. Excluding the $11.5 million of lower sales for Connectivity, North American sales increased by $2.2 million due to increased sales volumes of radio remote control and data solutions products. Net sales in Europe increased $1.9 million, or 10.3%, to $20.4 million for the nine months ended January 27, 2018 compared to $18.5 million for the nine months ended January 28, 2017, primarily due to higher sales volumes of radio remote control products, partially offset with lower sales volumes and price reductions on certain of our data solutions products. Net sales in Asia decreased $1.2 million, or 41.4%, to $1.7 million for the nine months ended January 27, 2018, compared to $2.9 million for the nine months ended January 28, 2017, primarily due to lower sales volumes of legacy products.

~~Cost of Products Sold~~. Interface segment cost of products sold decreased $7.0 million, or 9.4%, to $67.4 million for the nine months ended January 27, 2018, compared to $74.4 million for the nine months ended January 28, 2017. Interface segment cost of products sold as a percentage of net sales decreased to 78.1% for the nine months ended January 27, 2018, compared to 78.4% for the nine months ended January 28, 2017. The decrease is primarily due to favorable sales mix, partially offset with lower sales volumes. The lower sales volumes are primarily from our Connectivity business unit, which was closed at the end of fiscal 2017.

~~Gross Profit.~~ Interface segment gross profit decreased $1.6 million, or 7.8%, to $18.9 million for the nine months ended January 27, 2018, compared to $20.5 million for the nine months ended January 28, 2017. Gross margins as a percentage of net sales increased to 21.9% for the nine months ended January 27, 2018, from 21.6% for the nine months ended January 28, 2017. The increase is primarily due to favorable sales mix, partially offset with lower sales volumes and price reductions on certain products. The lower sales volumes are primarily from our Connectivity business unit that was closed at the end of fiscal 2017.

~~Selling and Administrative Expenses~~. Selling and administrative expenses decreased $5.7 million, or 27.7%, to $14.9 million for the nine months ended January 27, 2018, compared to $20.6 million for the nine months ended January 28, 2017.

Selling and administrative expenses as a percentage of net sales decreased to 17.3% for the nine months ended January 27, 2018, from 21.7% for the nine months ended January 28, 2017. The first nine months of fiscal 2017 included $2.7 million of selling and administrative expenses for our Connectivity business. Excluding the lower expenses related to the Connectivity business, the first nine months of fiscal 2018 benefitted from lower legal expenses and the reversal of stock award amortization expense for our long-term incentive program.

~~Income (Loss) from Operations.~~ Interface segment income (loss) from operations was income of $4.0 million for the nine months ended January 27, 2018, compared to a loss of $0.1 million for the nine months ended January 28, 2017, primarily due to lower expenses related to the Connectivity business, lower legal expenses, the reversal of stock award amortization expense for our long-term incentive program and a favorable sales mix, partially offset with lower sales volumes.

~~Power Products Segment Results~~

~~Below is a table summarizing results for the nine months ended:~~

~~Net Sales~~. Power Products segment net sales increased $4.9 million, or 12.3%, to $44.8 million for the nine months ended January 27, 2018, compared to $39.9 million for the nine months ended January 28, 2017. Net sales decreased in North America by $0.5 million, or 2.9%, to $16.8 million for the nine months of fiscal 2018, compared to $18.3 million for first nine months of fiscal 2017. Net sales in Europe increased $4.0 million, or 93.0%, to $8.3 million for the nine months ended January 27, 2018, compared to $4.3 million for the nine months ended January 28, 2017, primarily due to higher sales volumes of bypass switches. Net sales in Asia increased $1.3 million, or 7.1%, to $19.6 million for the nine months ended January 27, 2018, compared to $18.3 million for the nine months ended January 28, 2017, due to higher sales volumes of busbar products.

~~Cost of Products Sold~~. Power Products segment cost of products sold increased $3.8 million, or 12.9%, to $33.2 million for the nine months ended January 27, 2018, compared to $29.4 million for the nine months ended January 28, 2017. The Power Products segment cost of products sold as a percentage of net sales increased to 74.1% for the nine months ended January 27, 2018, from 73.7% for the nine months ended January 28, 2017. The increase primarily relates to the higher cost of copper, partially offset by higher sales volumes.

~~Gross Profit.~~ Power Products segment gross profit increased $1.1 million, or 10.5%, to $11.6 million for the nine months ended January 27, 2018, compared to $10.5 million for the nine months ended January 28, 2017. Gross margins as a percentage of net sales decreased to 25.9% for the nine months ended January 27, 2018 from 26.3% for the nine months ended January 28, 2017. The decrease primarily relates to the higher cost of copper, partially offset by higher sales volumes.

~~Selling and Administrative Expenses~~. Selling and administrative expenses decreased $0.5 million, or 17.9%, to $2.3 million for the nine months ended January 27, 2018, compared to $2.8 million for the six months ended January 28, 2017.

Selling and administrative expenses as a percentage of net sales decreased to 5.1% for the nine months ended January 27, 2018 from 7.0% for the nine months ended January 28, 2017, due to the reversal of stock award amortization expense for our long-term incentive program and lower legal expenses.

~~Income From Operations.~~ Power Products segment income from operations increased $1.6 million, or 20.8%, to $9.3 million for the nine months ended January 27, 2018, compared to $7.7 million for the nine months ended January 28, 2017, due primarily to increased sales volumes, the reversal of stock award amortization expense for our long-term incentive program and lower legal expenses, partially offset with the higher cost of copper.

~~Other Segment Results~~

~~Below is a table summarizing results for the nine months ended:~~

~~Net Sales~~. The businesses in this segment were medical devices and inverters and battery systems. The inverters and battery systems business was shuttered at the end of fiscal 2017 due to adverse business conditions. Both businesses had minimal net sales in the nine months ended January 27, 2018 and January 28, 2017, respectively, due to newly launched products.

~~Cost of Products Sold~~. Other segment cost of products sold was $2.4 million for the nine months ended January 27, 2018, compared to $3.8 million for the nine months ended January 28, 2017. The decrease primarily relates to the shuttered business that was closed at the end of fiscal 2017. The decrease was partially offset by the vertical manufacturing integration of some key components in medical device products and research efforts to expand the product offerings.

~~Gross Profit.~~ The Other segment gross profit was a loss of $2.2 million and $3.6 million for the nine months ended January 27, 2018 and January 28, 2017, respectively. The decreased loss primarily relates to the shuttered business, partially offset with increased research and development initiatives for medical devices.

~~Selling and Administrative Expenses~~. Selling and administrative expenses increased $1.5 million, or 34.1%, to $5.9 million for the nine months ended January 27, 2018, compared to $4.4 million for the nine months ended January 28, 2017. The first nine months fiscal 2017 includes $0.3 million of selling and administrative expenses for our inverter and battery systems business, which was closed at the end of fiscal 2017. The increase in the first nine months of fiscal 2018 is primarily due to higher investment in sales and marketing, clinical resources and professional services in our medical device business, partially offset with lower selling and administrative expenses related to the shuttered business.

~~Loss From Operations~~ The Other segment loss from operations increased $0.1 million to $8.1 million for the nine months ended January 27, 2018, compared to $8.0 million for the nine months ended January 28, 2017. The increased loss relates to higher outside professional fees, research and development and marketing expenses in the first nine months of fiscal 2018, partially offset by lower selling and administrative expenses for the inverter and battery system business closed at the end of fiscal 2017.

~~Liquidity and Capital Resources~~

We believe our current world-wide cash balances together with expected future cash flows to be generated from operations and our committed credit facility will be sufficient to support current operations. A significant amount of cash and expected future cash flows are located outside of the U.S. Of the $304.0 million of cash and cash equivalents as of January 27, 2018, $299.9 million was held in subsidiaries outside the U.S. and all of this amount is deemed to be permanently reinvested.

We are party to a Credit Agreement with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association, as L/C Issuer, and the Lenders named therein (the “Credit Agreement”). The Credit Agreement has a maturity date of November 18, 2021. The credit facility is in the maximum principal amount of $150.0 million, with an option to increase the principal amount by up to an additional $100.0 million, subject to customary conditions and approval of the lender(s) providing new commitment(s). The credit facility is available for general corporate purposes, including working capital and acquisitions. The credit facility provides for variable rates of interest based on the type of borrowing and the Company's debt to EBITDA financial ratio. The Credit Agreement is guaranteed by the Company’s wholly-owned U.S. subsidiaries. The Credit Agreement contains customary representations and warranties, financial covenants, restrictive covenants and events of default. At January 27, 2018, the interest rate on the credit facility was 1.25% plus LIBOR and we were in compliance with the covenants of the agreement. During the nine months ended January 27, 2018, we had $70.0 million of borrowings and payments of $3.2 million, which includes interest of $1.2 million, under this credit facility. As of January 27, 2018, there were outstanding balances against the credit facility of $95.0 million.

The credit agreement between Pacific Insight and Roynat has a maturity date of May 24, 2020 and provides a credit facility in the maximum principal amount of $10.0 million, with an option to increase the principal amount by up to an additional $3.5 million. The interest rate on the credit facility is 2.25% plus LIBOR. During the four-month period that Methode has owned Pacific Insight, we have had no borrowings and repayments of $0.2 million under this credit facility. As of January 27, 2018, there were outstanding balances against the credit facility of $3.8 million, of which $0.7 million is due within the next twelve months, and Pacific Insight was in compliance with the covenants of the agreement. We believe the fair value approximates the carrying amount as of January 27, 2018.

~~Cash Flow - Operating Activities~~

Net cash provided by operating activities decreased $19.6 million to $87.1 million for the nine months ended January 27, 2018, compared to $106.7 million for the nine months ended January 28, 2017, primarily due to a decrease in our net income, adjusted for depreciation, amortization, deferred tax expense, stock-based compensation and the provision for bad debt, partially offset by the changes in operating assets and liabilities. The change in deferred tax expense resulted from the re-measurement of deferred tax assets due to the enactment of U.S. Tax Reform. For the nine months ended January 27, 2018, net changes in operating assets and liabilities resulted in cash provided of $55.5 million, primarily due to an increase in accounts payable and other expenses, a decrease in prepaid expenses and other assets and the timing of receivable collections, partially offset by an increase in inventory levels. The change in accounts payable and other expenses was driven by the enactment of U.S. Tax Reform, specifically from the deemed repatriation of foreign earnings. Any taxes stemming from the deemed repatriation of foreign earnings are payable over an eight-year period. For the nine months ended January 28, 2017, net changes in operating assets and liabilities resulted in cash provided of $9.6 million, primarily due to the timing of receivable collections and a decrease in inventory levels, partially offset by an increase in prepaid expenses and a decrease in accounts payable.

~~Cash Flow - Investing Activities~~

Net cash used in investing activities was $165.0 million for the nine months ended January 27, 2018, compared to $13.2 million for the nine months ended January 28, 2017, due primarily to the acquisition of Pacific Insight for $107.7 million, net of cash received, the purchase of property, plant and equipment for $34.7 million and the acquisition of Procoplast for $22.2 million, net of cash received.

~~Cash Flow - Financing Activities~~

Net cash provided by financing activities increased $95.6 million to $57.6 million for the nine months ended January 27, 2018, compared to net cash used of $38.0 million for the nine months ended January 28, 2017. During the nine months ended January 27, 2018, the Company had borrowings against credit facilities of $70.0 million, compared to no borrowings during the nine months ended January 28, 2017. During the nine months ended January 27, 2018, the Company had repayments of borrowings against credit facilities of $2.2 million, compared to $20.0 million during the nine months ended January 28, 2017. We paid dividends of $10.6 million and $10.3 million in the nine months ended January 27, 2018 and January 28, 2017, respectively. The Company had no repurchases of common stock during the nine months ended January 27, 2018, compared to paying $9.8 million for the repurchase of common stock during the nine months ended January 28, 2017. The first nine months of fiscal 2018 included $0.3 million of taxes paid related to net share settlement of equity awards, compared to $1.1 million during the first nine months of fiscal 2017. There were $0.2 million of proceeds from the exercise of stock options in the first nine months of fiscal 2018 and $2.7 million in the first nine months of fiscal 2017. The first nine months of fiscal 2017 included $0.5 million of excess tax benefit on equity shares issued and on stock options exercised during that period. Pursuant to the adoption of ASU No. 2016-09 on April 30, 2017, going forward the Company will no longer separately report the tax benefit on equity shares issued and stock option exercises as a separate line item in the financing activities section of the condensed consolidated statements of cash flows. That activity will now run through the operating activities section of the condensed consolidated statements of cash flows as a change in operating assets and liabilities.

~~Off-Balance Sheet Arrangements~~

~~We do not have any off-balance sheet arrangements, other than operating leases and purchase obligations entered into in the normal course of business.~~

~~Item 3. Quantitative And Qualitative Disclosures About Market Risk~~

Certain of our foreign operations enter into transactions in currencies other than their functional currency, primarily the U.S. dollar and the euro. A 10% change in foreign currency exchange rates from balance sheet date levels could impact our income before income taxes by $5.1 million as of January 27, 2018 and $13.1 million as of April 29, 2017. We also have foreign currency exposure arising from the translation of our net equity investment in our foreign operations to U.S. dollars. We generally view our investments in foreign operations with functional currencies other than the U.S. dollar as long-term. The currencies to which we are exposed are the British pound, Canadian dollar, Chinese yuan, euro, Indian rupee, Mexican peso, Singapore dollar and Swiss franc. A 10% change in foreign currency exchange rates from balance sheet date levels could impact our net foreign investments by $61.9 million at January 27, 2018 and $41.1 million at April 29, 2017.

~~We are exposed~~ to market risk, ~~from changes~~refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in ~~interest rates. The interest rate risk~~our Annual Report on Form 10-K for our credit agreements, under which we had $98.8 million of net borrowings at January 27, 2018, is variable and is determined based on LIBOR. We estimate that a one percentage point change in interest rates would not have a material impact on our results of operations for fiscal 2018 based upon our current and expected levels of debt.

the year ended April 30, 2022.

Item 4. Controls ~~And~~and Procedures

As of the end of the period covered by this quarterly report on Form 10-Q, we performed an evaluation under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and our Chief Financial Officer, of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). The Company’s 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 Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

There have been no changes in our internal control over financial reporting during the quarter ended ~~January 27, 2018~~July 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

Item 1A. Risk Factors

~~Other than the supplemental risk factors set forth below, there~~

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. There have ~~been~~‎been no material changes to the risk factors previously disclosed in Part I - Item 1A, ~~Risk Factors~~“Risk Factors” of our Form 10-K for the ~~fiscal year~~‎year ended April ~~29, 2017.~~

~~We cannot guarantee that~~30, 2022.‎

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On March 31, 2021, the ~~newly acquired Pacific Insight or Procoplast businesses will be successful or that we can implement and profit from any new applications~~Board of Directors authorized the purchase of up to $100.0 million of the ~~acquired technology.~~

~~We acquired Pacific Insight on October 3, 2017 and Procoplast on July 27, 2017. As a result~~Company’s outstanding common stock through March 31, 2023. On June 16, 2022, the Board of ~~these acquisitions, we now manufacture LED-based lighting in North America and automotive assemblies on mainland Europe, which are expected to aid in our expansion~~Directors authorized an increase in the ~~automotive sector. The markets for~~share buyback program of an additional $100.0 million, and also extended the ~~products these companies produce are competitive and rapidly changing. If we do not keep pace with technological innovations in the industry, our products~~expiration from March 31, 2023 to June 14, 2024. Such purchases may ~~not~~ be competitive and our revenue and operating results may suffer. Furthermore, while we intend to expand these businesses by integrating the acquired technologies into additional automotive and other applications, we can make no guarantee that such ventures will be successful or profitable.

~~Our long-term incentive plan could require significant adjustments to compensation expense in our condensed consolidated statements of operations if management changes its determinations~~made on the ~~probability~~open market, in private transactions or pursuant to purchase plans designed to comply with Rule 10b5-1 of ~~meeting certain performance levels.~~ the Securities Exchange Act of 1934. As of July 30, 2022, we purchased and retired $83.1 million of common stock since the commencement of the share buyback program.

The ~~adjustments could be material to~~following table provides information about our purchases of equity securities during the ~~financial statements.~~

In the third quarter of fiscal 2018, management determined that it is not probable that the Company will meet the target level of performance for fiscal 2020 under its long-term incentive plan. Based on the new expectations, the Company believes it is now probable that it will achieve the threshold level for our fiscal 2020 EBITDA. As a result, the Company recorded a reversal of RSA compensation expense relating to prior periods of $6.0 million.

In future periods, if management makes a determination that exceeding the threshold level is probable for fiscal 2020, a catch-up adjustment to compensation expense will be recorded in that period, which could be material to the financial statements. Such determination could be based on a number of factors, including an accretive acquisition or a favorable change in expectations regarding Dabir Surfaces’ fiscal 2020 revenues and resultant EBITDA.

three months ended July 30, 2022:


Period	Total number of shares purchased		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)
May 1, 2022 through May 28, 2022 (1)		10,679	$	44.61		-	$	28.8
May 29, 2022 through July 2, 2022		134,991	$	37.84		134,991	$	123.7
July 3, 2022 through July 30, 2022		182,644	$	37.13		182,644	$	116.9
(1) Represents shares of common stock that were surrendered by employees to satisfy tax withholding obligations in connection with the vesting of restricted stock units.

Item 6. Exhibits

Table of Contents

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.



Delaware		36-2090085
(State or other jurisdiction of		~~(I.R.S. Employer~~
incorporation or organization)		(I.R.S. Employer Identification No.)


8750 West Bryn Mawr Avenue, Suite 1000, Chicago, Illinois		60631-3518
~~7401 West Wilson Avenue, Chicago, Illinois~~		~~60706-4548~~
(Address of principal executive offices)		(Zip Code)


Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.50 Par Value	MEI	New York Stock Exchange



Large accelerated filerx	☒	Accelerated filero	☐

Non-accelerated filero	☐	Smaller reporting companyo	☐

Emerging ~~Growth Company~~ ogrowth company	☐



		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Statements of ~~Operations~~Income (unaudited) - Three ~~and Nine~~ Months Ended ~~January 27, 2018~~July 30, 2022 and ~~January 28, 2017~~July 31, 2021	2

	Condensed Consolidated Statements of Comprehensive Income (unaudited) - Three ~~and Nine~~ Months Ended ~~January 27, 2018~~July 30, 2022 and ~~January 28, 2017~~July 31, 2021	3

	Condensed Consolidated Balance Sheets as of ~~January 27, 2018~~July 30, 2022 (unaudited) and April ~~29, 2017~~30, 2022	4

	Condensed Consolidated Statements of Shareholders’ Equity (unaudited) - Three Months Ended July 30, 2022 and July 31, 2021	5

	Condensed Consolidated Statements of Cash Flows (unaudited) - ~~Nine~~Three Months Ended ~~January 27, 2018~~July 30, 2022 and ~~January 28, 2017~~July 31, 2021	5 6

	Notes to Condensed Consolidated Financial Statements	6 7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19 20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38 27

Item 4.	Controls and Procedures	38 27

PART II.	OTHER INFORMATION

Item 1A.	Risk Factors	40 28

Item 6. 2.	~~Exhibits~~Unregistered Sales of Equity Securities and Use of Proceeds	40 28

~~SIGNATURES~~ Item 6.	41Exhibits	28

SIGNATURES		29


☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



	Three Months Ended						Nine Months Ended
	January 27, 2018			January 28, 2017			January 27, 2018			January 28, 2017
Net Sales	$	228.0		$	195.6		$	659.3		$	596.7

Cost of Products Sold	167.9			142.2			481.6			433.7

Gross Profit	60.1			53.4			177.7			163.0

Selling and Administrative Expenses	22.5			23.7			83.3			76.4
Amortization of Intangibles	2.0			0.6			3.7			1.8

Income from Operations	35.6			29.1			90.7			84.8

Interest Expense (Income), Net	0.3			(0.2		)	0.3			(0.3		)
Other Income, Net	(3.8		)	(1.0		)	(2.6		)	(2.9		)

Income before Income Taxes	39.1			30.3			93.0			88.0

Income Tax Expense	63.4			6.6			72.6			18.3

Net Income (Loss)	$	(24.3	)	$	23.7		$	20.4		$	69.7

Basic and Diluted Income (Loss) per Share:
Basic	$	(0.65	)	$	0.64		$	0.54		$	1.87
Diluted	$	(0.65	)	$	0.63		$	0.54		$	1.86

Cash Dividends:
Common Stock	$	0.11		$	0.09		$	0.29		$	0.27

Weighted Average Number of Common Shares Outstanding:
Basic	37,292,934			37,217,302			37,275,041			37,297,757
Diluted	37,292,934			37,470,653			37,661,020			37,477,967



	January 27, 2018			April 29, 2017
	(Unaudited)
Assets:
Current Assets:
Cash and Cash Equivalents	$	304.0		$	294.0
Accounts Receivable, Net	201.4			165.3
Inventories:
Finished Products	14.6			10.9
Work in Process	15.6			8.7
Materials	53.4			38.3
Total Inventories	83.6			57.9
Prepaid and Refundable Income Taxes	0.6			0.6
Prepaid Expenses and Other Current Assets	15.7			12.5
Total Current Assets	605.3			530.3
Property Plan and Equipment:
Land	0.8			0.6
Buildings and Building Improvements	64.3			48.2
Machinery and Equipment	364.6			287.9
Property, Plant and Equipment, Gross	429.7			336.7
Less: Allowances for Depreciation	276.0			246.1
Property, Plant and Equipment, Net	153.7			90.6
Other Assets:
Goodwill	59.6			1.6
Other Intangible Assets, Net	65.6			6.6
Cash Surrender Value of Life Insurance	8.2			7.8
Deferred Income Taxes	35.9			40.4
Pre-production Costs	18.0			15.5
Other	13.5			11.2
Total Other Assets	200.8			83.1
Total Assets	$	959.8		$	704.0
Liabilities and Shareholders' Equity:
Current Liabilities:
Accounts Payable	$	87.9		$	75.3
Salaries, Wages and Payroll Taxes	20.1			18.7
Other Accrued Expenses	27.0			17.7
Short-term Debt	2.9			—
Income Tax Payable	12.4			12.7
Total Current Liabilities	150.3			124.4
Long-term Debt	116.0			27.0
Long-term Income Taxes Payable	48.3			—
Other Liabilities	8.2			2.6
Deferred Income Taxes	19.6			—
Deferred Compensation	10.2			8.9
Total Liabilities	352.6			162.9
Shareholders' Equity:
Common Stock, $0.50 par value, 100,000,000 shares authorized, 38,193,353 and 38,133,925 shares issued as of January 27, 2018 and April 29, 2017, respectively	19.1			19.1
Additional Paid-in Capital	135.8			132.2
Accumulated Other Comprehensive Income (Loss)	24.6			(25.7		)
Treasury Stock, 1,346,624 shares as of January 27, 2018 and April 29, 2017	(11.5		)	(11.5		)
Retained Earnings	439.2			427.0
Total Shareholders' Equity	607.2			541.1
Total Liabilities and Shareholders' Equity	$	959.8		$	704.0



(Dollars in Millions)
Cash	$	1.3
Accounts Receivable	10.8
Inventory	3.5
Intangible Assets	19.2
Goodwill	8.1
Other Assets	0.1
Property, Plant and Equipment	23.8
Accounts Payable	(4.9		)
Salaries, Wages and Payroll Taxes	(0.8		)
Other Accrued Expenses	(4.7		)
Income Taxes Payable	(0.6		)
Short-term Debt	(1.7		)
Other Liabilities	(5.6		)
Long-term Debt	(17.1		)
Deferred Income Tax Liability	(7.9		)
Total Purchase Price	$	23.5



(Dollars in Millions)	Fair Value at Date of Acquisition		Amortization Period
Customer Relationships and Agreements - Significant Customer	$	12.3	17.0 years
Customer Relationships and Agreements - All Other Customers	2.8		11.5 years
Technology Licenses	2.1		8.5 years
Trade Names	2.0		8.5 years
Total	$	19.2



	Automotive		Interface		Power Products		Total
Balance as of April 29, 2017	$	—	$	0.6	$	1.0	$	1.6
Goodwill Acquired	56.6		—		—		56.6
Foreign Currency Translation	1.3		0.1		—		1.4
Balance as of January 27, 2018	$	57.9	$	0.7	$	1.0	$	59.6



	As of January 27, 2018
	Gross		Accumulated Amortization		Net		Wtd. Avg. Remaining Amortization Periods (Years)
Customer Relationships and Agreements	$	66.5	$	17.2	$	49.3	13.0
Trade Names, Patents and Technology Licenses	38.3		22.0		16.3		5.5
Total	$	104.8	$	39.2	$	65.6



	As of April 29, 2017
	Gross		Accumulated Amortization		Net		Wtd. Avg. Remaining Amortization Periods (Years)
Customer Relationships and Agreements	$	16.3	$	15.6	$	0.7	6.8
Trade Names, Patents and Technology Licenses	25.8		19.9		5.9		1.4
Covenants Not to Compete	0.1		0.1		—		0.4
Total	$	42.2	$	35.6	$	6.6



	Three Months Ended January 27, 2018
	Automotive			Interface			Power Products		Other			Eliminations/Corporate			Consolidated
Net Sales	$	187.7		$	28.0		$	15.2	$	0.1		$	(3.0	)	$	228.0
Transfers between Segments	(2.8		)	(0.1		)	—		—			2.9			—
Net Sales to Unaffiliated Customers	$	184.9		$	27.9		$	15.2	$	0.1		$	(0.1	)	$	228.0

Income (Loss) from Operations	$	39.4		$	1.8		$	3.0	$	(2.3	)	$	(6.3	)	$	35.6
Interest Expense, Net															0.3
Other Income, Net															(3.8		)
Income before Income Taxes															$	39.1



	Three Months Ended January 28, 2017
	Automotive			Interface		Power Products		Other			Eliminations/Corporate			Consolidated
Net Sales	$	152.7		$	29.8	$	15.4	$	0.1		$	(2.4	)	$	195.6
Transfers between Segments	(2.3		)	—		—		—			2.3			—
Net Sales to Unaffiliated Customers	$	150.4		$	29.8	$	15.4	$	0.1		$	(0.1	)	$	195.6

Income (Loss) from Operations	$	36.9		$	1.3	$	3.2	$	(3.3	)	$	(9.0	)	$	29.1
Interest Income, Net														(0.2		)
Other Income, Net														(1.0		)
Income before Income Taxes														$	30.3



	Nine Months Ended January 27, 2018
	Automotive			Interface			Power Products			Other			Eliminations/Corporate			Consolidated
Net Sales	$	535.4		$	86.4		$	44.9		$	0.2		$	(7.6	)	$	659.3
Transfers between Segments	(7.3		)	(0.1		)	(0.1		)	—			7.5			—
Net Sales to Unaffiliated Customers	$	528.1		$	86.3		$	44.8		$	0.2		$	(0.1	)	$	659.3

Income (Loss) from Operations	$	118.1		$	4.0		$	9.3		$	(8.1	)	$	(32.6	)	$	90.7
Interest Expense, Net																0.3
Other Income, Net																(2.6		)
Income before Income Taxes																$	93.0



	Nine Months Ended January 28, 2017
	Automotive			Interface			Power Products			Other			Eliminations/Corporate			Consolidated
Net Sales	$	467.9		$	95.6		$	40.0		$	2.1		$	(8.9	)	$	596.7
Transfers between Segments	(6.3		)	(0.7		)	(0.1		)	(1.9		)	9.0			—
Net Sales to Unaffiliated Customers	$	461.6		$	94.9		$	39.9		$	0.2		$	0.1		$	596.7

Income (Loss) from Operations	$	111.2		$	(0.1	)	$	7.7		$	(8.0	)	$	(26.0	)	$	84.8
Interest Income, Net																(0.3		)
Other Income, Net																(2.9		)
Income before Income Taxes																$	88.0



Exhibit Number		Description
~~31.1~~
31.1		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
32 32*		Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350
~~101.1~~ 101.INS		Inline XBRL Instance Document
~~101.2~~ 101.SCH		Inline XBRL Taxonomy Extension Schema Document
~~101.3~~ 101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
~~101.4~~ 101.DEF		Inline XBRL Taxonomy Extension Definition Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
~~101.5~~ 101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
~~101.6~~ 104		Cover Page Interactive Data File (formatted as Inline XBRL ~~Taxonomy Extension Definition Linkbase Document~~and contained in Exhibit 101)


*		Indicates that the exhibit is being furnished with this report and not filed as part of it.



				METHODE ELECTRONICS, INC.

			~~By:~~	By:	/s/ ~~John R. Hrudicka~~Ronald L.G. Tsoumas
				~~John R. Hrudicka~~	Ronald L.G. Tsoumas
					Chief Financial Officer
					(~~principal financial officer)~~Principal Financial Officer)

Dated:	~~March~~	September 1, ~~2018~~2022