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. 2023.
Our fiscal 20202023 named executive officers includedwere 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 Kerry A. Vyverberg, General Counsel. Ms. Vyverberg joined Methode in February 2021 as Vice President of Legal Affairs. She was promoted to General Counsel in June 2022 and former Presidentappointed an executive officer in September 2022. Mr. Khoury was placed on leave from his position as Chief Operating Officer the Company as of Grakon; and Anil Shetty, Vice President and President of Dabir Surfaces.July 10, 2023.
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 2023, 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 2023, EV product applications comprised approximately 21% 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 29, 2023, we had executed over year.$119 million of our $200 million stock buyback authorization. We invest in organic growth through R&D and capital expenditures.
We actively seek accretive acquisitions to enhance and grow our businesses. In February 2023, we announced an offer to the shareholders of Nordic Lights Group Corporation to acquire all outstanding shares of the company. Nordic Lights aligns well with Methode’s inorganic growth framework given its focus on engineered solutions for OEMs, its industrial and non-auto transportation market exposure, and its customer and geographic diversity. We have acquired approximately 99% of the Nordic Lights share capital and intend to acquire all of the remaining outstanding shares by way of compulsory redemption proceedings under Finnish law as soon as practicable.
Our capital deployment strategy is focusedstrong commitment to financial management focuses on, value creation. Over $1.05 billionamong other things, margin expansion through improved product mixes and operational efficiencies, leverage of capital was deployed during the five year period from fiscal 2016 to fiscal 2020 in furtherance of this strategy, as follows:
| Fund the Business
| |
| Acquisitions
| | | $553M
| | | 52%
| |
| Capital Expenditures
| | | $188M
| | | 18%
| |
| Product Development
| | | $170M
| | | 16%
| |
| Return to Shareholders
| |
| Share Repurchases
| | | $72M
| | | 7%
| |
| Dividends
| | | $74M
| | | 7%
| |
We focusSG&A on the following key areas ofsales volume growth, and financial management:
Grow Organically and Inorganically
Leverage our technology “toolbox” to create differentiated products and solutions for OEM customers.
Invest organically in new technologies to be leveraged across business units.
Seek acquisitions in the industrial and medical device spaces; while being opportunistic in the automotive space.
Strong Financial Management
Optimizereduction of working capital allocation.
Improve ROICpercentage of sales through the vertical integration of purchased processes needed to support growth.
Strive to maintain an efficient tax rate via leverage of global manufacturing footprint.
Focus on debt repayment and capacity.lean manufacturing.
Fiscal 2020 Business2023 Financial Highlights. Despite the impact from the COVID-19 pandemic and the United Auto Workers labor strike at General Motors, MethodeWe reported record fiscal 20202023 net sales of $1.02$1.2 billion, and fiscal 2020reported net income of $123.4$77.1 million. For fiscal 2020,2023, our quarterly dividend rate was $0.11$0.14 per share, and we distributed dividends of $16.3$20.3 million to our stockholders. In addition, we purchased 1,197,236 shares of our common stock in fiscal 2023 through our stock buyback program, for an aggregate purchase price of $48.1 million.