COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis describes the key elementscomponents of our executive compensation program, including an analysis of compensation awarded to, earned by or paid to our named executive officers in fiscal 2020.2022. Our fiscal 20202022 named executive officers included Donald W. Duda, President and Chief Executive Officer; Ronald L.G. Tsoumas, Chief Financial Officer; Joseph E. Khoury, Chief Operating Officer; Michael Brotherton, formerAndrea J. Barry, Chief Administrative Officer and Chief Human Resources Officer; and Kevin M. Martin, Vice President, and former President of Grakon; and Anil Shetty, Vice President and President of Dabir Surfaces.North America. Ms. Barry was promoted to Chief Administrative Officer in January 2022.
Executive Summary
Our Business. Methode isWe are a leading global developersupplier of custom engineered and application specific products andcustom-engineered solutions with sales, engineering and manufacturing designlocations in North America, Europe, Middle East, and testing facilities in Belgium, Canada, China, Egypt, Germany, India, Italy, Lebanon, Malta, Mexico, the Netherlands, Singapore, Switzerland, the United Kingdom and the United States.Asia. We design, manufactureengineer, and market devices employing electrical, radio remote control, electronic,produce mechatronic products for OEMs utilizing our broad range of technologies for user interface, LED lighting system, power distribution and sensing technologies.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. Our components are found in the primary end-markets of the aerospace, appliance, construction, consumer and industrial equipment, communications (including information processing and storage, networking equipment, wireless and terrestrial voice/data systems), medical, rail, consumer automotive, commercial vehicle, and other transportation industries.
We design and engineer solutions that incorporate our broad range of field-proven technologies and utilize our best-in-class global manufacturing capabilities to provide differentiated value for our customers. We strive to create a company with a diverse customer base, high and consistent cash flow, and a strong balance sheet. We are committed to world class manufacturing quality, and our global footprint puts us in close proximity to key markets and customers.
In fiscal 2022, we continued to capitalize on key market trends, such as new business focused on electric and hybrid vehicles (EVs) and LED lighting solutions. In the EV market, our combination of user interface, LED lighting and power distribution solutions positions us well for continued growth. In fiscal 2022, EV product applications comprised approximately 17% of our net sales..
We employ a balanced and growth-focused capital allocation strategy. We maintain a strong balance sheet and earnings growing consistently yearpay down indebtedness when appropriate to reduce leverage. We return capital to our stockholders through dividends and our stock buyback program. As of April 30, 2022, we had executed over year.$70 million of our $100 million stock buyback authorization. In June 2022, our Board authorized the purchase of an additional $100 million of the Company’s common stock, bringing the total program authorization to $200 million. We invest in organic growth through R&D and capital expenditures. We actively seek accretive acquisitions to enhance and grow our businesses.
Our strong commitment to financial management focuses on, among other things, margin expansion through improved product mixes and operational efficiencies, leverage of SG&A on sales volume growth, and reduction of working capital deployment strategy is focused on value creation. Over $1.05 billionpercentage of capital was deployed duringsales through lean manufacturing.
COVID-19 Pandemic. The COVID-19 pandemic and the five year period from fiscal 2016ongoing measures to fiscal 2020reduce its spread have negatively impacted the global economy, disrupted consumer and customer demand and global supply chains, and resulted in furtherance of this strategy, as follows:
| Fund the Business
| |
| Acquisitions
| | | $553M
| | | 52%
| |
| Capital Expenditures
| | | $188M
| | | 18%
| |
| Product Development
| | | $170M
| | | 16%
| |
| Returnmanufacturing inefficiencies and increased freight costs due to global capacity constraints. We continue to Shareholders
| |
| Share Repurchases
| | | $72M
| | | 7%
| |
| Dividends
| | | $74M
| | | 7%
| |
We focus on effectively managing the following key areasunprecedented challenges and uncertainties of growththe pandemic on a global basis.
Global Supply Chain Disruptions. In fiscal 2022 we experienced significant business interruptions, including government lockdowns in China, customer shutdowns, increased material and financial management:
Grow Organicallylogistics costs, labor shortages, and Inorganically
Leverage our technology “toolbox”ongoing challenges related to create differentiated productsthe worldwide semiconductor supply shortage. Management worked diligently to minimize production and solutions for OEM customers.
Invest organically in new technologiescustomer issues. The Company strengthened processes to be leveraged across business units.
Seek acquisitions incontinuously monitor the industrial and medical device spaces; while being opportunistic in the automotive space.
Strong Financial Management
Optimize capital allocation.
Improve ROIC through the vertical integration of purchased processes neededsupply chain to support growth.
Strive to maintain an efficient tax rate via leverage of global manufacturing footprint.
Focus on debt repayment and capacity.proactively mitigate potential disruptions.
Fiscal 2020 Business2022 Financial Highlights. Despite the impact from the COVID-19 pandemic and the United Auto Workers labor strike at General Motors, Methodeglobal supply chain disruptions, we reported record fiscal 20202022 net sales of $1.02almost $1.2 billion, and fiscal 2020reported net income of $123.4$102.2 million. For fiscal 2020,2022, our quarterly dividend rate was $0.11$0.14 per share, and we distributed dividends of $16.3$20.6 million to our stockholders. In addition, we purchased 1,425,244 shares of our common stock in fiscal 2022 through our stock buyback program, for an aggregate purchase price of $63.9 million.