# Methode Electronics Inc: Form 10-Q for the period ended Jul 27, 2024

- Company: [Methode Electronics Inc](/companies/mei.md) (CIK 65270)
- Form: 10-Q
- Filed: 2024-09-05
- Accepted by EDGAR: Sep 5, 2024, 11:30 ET
- Period: 2024-07-27
- Accession: 0000950170-24-103735
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/65270/000095017024103735/mei-20240727.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/65270/000095017024103735/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-07-27.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-28 to 2024-07-27 | $258.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-28 to 2024-07-27 | $213.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-04-28 to 2024-07-27 | $44.6m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-04-28 to 2024-07-27 | $46.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-28 to 2024-07-27 | −$7.5m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-04-28 to 2024-07-27 | $5.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-28 to 2024-07-27 | −$18.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-28 to 2024-07-27 | −$0.52 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-28 to 2024-07-27 | −$0.52 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-28 to 2024-07-27 | 35,423,886 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-04-28 to 2024-07-27 | $10.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-04-28 to 2024-07-27 | $13.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-04-28 to 2024-07-27 | $5.1m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2024-04-28 to 2024-07-27 | $1.6m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-07-27 | $111.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-07-27 | $611.8m | us-gaap:AssetsCurrent |
| Total assets | at 2024-07-27 | $1.38bn | us-gaap:Assets |
| Current liabilities | at 2024-07-27 | $260.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-07-27 | $633.5m | us-gaap:Liabilities |
| Long-term debt | at 2024-07-27 | $295.8m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-07-27 | $200.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-07-27 | $744.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 28,445 characters.

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,” “upcoming,” or “continue,” and other comparable terminology. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following:

- Dependence on the automotive, commercial vehicle, and construction industries;
- Timing, quality and cost of new program launches;
- Changes in electric vehicle (“EV”) demand;
- Investment in programs prior to the recognition of revenue;
- Failure to attract and retain qualified personnel;
- Impact from production delays or cancelled orders;
- Impact from inflation;
- Dependence on the availability and price of materials;
- Dependence on a small number of large customers, including one large automotive customer;
- Dependence on our supply chain;
- Risks related to conducting global operations;
- Effects of potential catastrophic events or other business interruptions;
- Ability to withstand pricing pressures, including price reductions;
- Potential impact of securities class action and other litigation;
- Ability to compete effectively;
- Our lengthy sales cycle;
- Risks relating to our use of requirements contracts;
- Potential work stoppages;
- Ability to successfully benefit from acquisitions and divestitures;
- Ability to manage our debt levels and comply with restrictions and covenants under our credit agreement;
- Interest rate changes and variable rate instruments;
- Timing and magnitude of costs associated with restructuring activities;
- Recognition of goodwill and other intangible asset impairment charges;
- Ability to remediate material weaknesses in our internal control over financial reporting;
- Currency fluctuations;
- Income tax rate fluctuations;
- Judgments related to accounting for tax positions;
- Ability to withstand business interruptions;
- Potential IT security threats or breaches;
- Ability to protect our intellectual property;
- Costs associated with environmental, health and safety regulations;
- International trade disputes resulting in tariffs and our ability to mitigate tariffs;
- Impact from climate change and related regulations; and
- Ability to avoid design or manufacturing defects.

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 27, 2024. 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.

### Overview

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

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

### Macroeconomic Conditions

The global economy continues to experience volatile disruptions including to the commodity, labor and transportation markets, arising from a combination of geopolitical events and various economic and financial factors. These disruptions have affected our operations and may continue to affect our business, financial condition and results of operations. As a result of continued inflation, we have implemented measures to mitigate certain adverse effects of higher costs. However, we have been unable to fully mitigate or pass through the increases in our costs to our customers, which will likely continue in the future.

### Geopolitical Conditions

Russia’s invasion of Ukraine and the resulting economic sanctions imposed by the international community impacted the global economy and gave rise to potential global security issues that may adversely affect international business and economic conditions. Given our manufacturing operations in the Middle East and Asia, the continuation of the military conflict between Russia and Ukraine, the escalation or expansion of the Israel-Hamas war, or renewed terrorist attacks on Red Sea shipping, such as those by the Houthi, could lead to other supply chain disruptions, increased inflationary pressures, higher freight costs and volatility in global markets and industries that could negatively impact our operations. The full impact of the conflicts on our business operations and financial performance remains uncertain and will depend on future developments, including the severity and duration of the conflicts and their impact on regional and global economic conditions. We will continue to monitor the conflicts and assess the related restrictions and other effects on our employees, customers, suppliers and business.

### Global Supply Chain Disruptions

Although we saw improvements in our supply chain in fiscal 2024, including easing of the worldwide semiconductor supply shortage, new supply chain disruptions may occur in the future. In addition, we have experienced, and may continue to experience, business interruptions, including customer shutdowns and increased material and logistics costs and labor shortages. We continue to work closely with suppliers and customers to minimize the potential adverse impact from global supply chain disruptions. However, if we are not able to mitigate any direct or indirect supply chain disruptions, this may have a material adverse impact on our financial condition, results of operations and cash flows.

### Consolidated Results of Operations

The table below compares our results of operations between the three months ended July 27, 2024 and the three months ended July 29, 2023:

*(in millions)*

|  | Three Months Ended July 27, 2024 | July 29, 2023 |
| --- | ---: | ---: |
| Net sales | $258.5 | $289.7 |
| Cost of products sold | 213.9 | 235.7 |
| Gross profit | 44.6 | 54.0 |
| Selling and administrative expenses | 46.2 | 44.5 |
| Amortization of intangibles | 5.9 | 5.7 |
| Interest expense, net | 4.8 | 2.8 |
| Other expense, net | 0.8 | — |
| Income tax expense | 5.2 | 0.1 |
| Net (loss) income | $(18.3) | $0.9 |

### Net sales

Net sales decreased $31.2 million, or 10.8%, to $258.5 million in the three months ended July 27, 2024, compared to $289.7 million in the three months ended July 29, 2023. The decrease was primarily due to lower sales across all segments and unfavorable foreign currency translation of $1.6 million.

### Cost of products sold

Cost of products sold decreased $21.8 million, or 9.2%, to $213.9 million (82.7% of net sales) in the three months ended July 27, 2024, compared to $235.7 million (81.4% of net sales) in the three months ended July 29, 2023. Foreign currency translation decreased cost of products sold by $1.4 million. Excluding foreign currency translation, cost of products sold decreased $20.4 million. The decrease was primarily due to lower material costs as a result of a decrease in sales volumes, partially offset by higher salary expense and higher costs due to program launches. Restructuring and asset impairment charges included within cost of products sold were $0.3 million in the three months ended July 27, 2024, compared to $0.6 million in the three months ended July 29, 2023.

### Gross profit margin

Gross profit margin was 17.3% of net sales in the three months ended July 27, 2024, compared to 18.6% of net sales in the three months ended July 29, 2023. The decrease in gross profit margin was primarily a result of lower sales.

### Selling and administrative expenses

Selling and administrative expenses increased $1.7 million, or 3.8%, to $46.2 million (17.9% of net sales) in the three months ended July 27, 2024, compared to $44.5 million (15.4% of net sales) in the three months ended July 29, 2023. The increase was primarily due to higher professional fees, partially offset by lower outbound freight expense, salary expense and stock-based compensation expense. Professional fees include $3.5 million for consulting and interim executive services provided by AlixPartners.

### Amortization of intangibles

Amortization of intangibles was $5.9 million in the three months ended July 27, 2024, compared to $5.7 million in the three months ended July 29, 2023.

### Interest expense, net

Interest expense, net was $4.8 million in the three months ended July 27, 2024, compared to $2.8 million in the three months ended July 29, 2023. The increase was due to a higher level of borrowings and increased interest rates.

### Other expense (income), net

Other expense, net was $0.8 million in the three months ended July 27, 2024, compared to other expense, net of zero in the three months ended July 29, 2023. Other expense, net in the three months ended July 27, 2024 includes a non-cash write-off of $1.2 million of unamortized debt issuance costs. Net foreign exchange loss was $0.6 million in the three months ended July 27, 2024, compared to net foreign exchange loss of zero in the three months ended July 29, 2023. In the three months ended July 27, 2024, we received $0.9 million of international government assistance.

### Income tax expense

Income tax expense was $5.2 million (-39.7% effective tax rate) in the three months ended July 27, 2024, compared to $0.1 million (10.0% effective tax rate) in the three months ended July 29, 2023.

The effective tax rate for the three months ended July 27, 2024 was higher than the U.S. federal statutory tax rate of 21% primarily due to an increase in a valuation allowance for U.S. deferred tax assets and global intangible low-tax income, partially offset by the impact of income derived from foreign operations with lower statutory tax rates and research deductions claimed in foreign jurisdictions. The effective tax rate for the three months ended July 29, 2023 was lower than the U.S. federal statutory tax rate of 21% primarily due to income derived from foreign operations with lower statutory tax rates and research deductions claimed in foreign jurisdictions, partially offset by global intangible low-tax income and non-deductible expenses.

### Net (loss) income

Net loss was $18.3 million in the three months ended July 27, 2024, compared to net income of $0.9 million in the three months ended July 29, 2023. The net loss was a result of the reasons described above.

### Reportable Operating Segments

### Automotive

*($ in millions)*

| Net sales | Three Months Ended July 27, 2024 | July 29, 2023 |
| --- | ---: | ---: |
| North America | $66.3 | $66.8 |
| Europe, the Middle East & Africa ("EMEA") | 59.3 | 52.2 |
| Asia | 9.2 | 39.3 |
| Net sales | 134.8 | 158.3 |
| Gross profit | $8.6 | $15.3 |
| As a percent of net sales | 6.4% | 9.7% |
| Loss from operations | $(5.7) | $(2.8) |
| As a percent of net sales | (4.2)% | (1.8)% |

#### Net sales

Automotive segment net sales decreased $23.5 million, or 14.8%, to $134.8 million in the three months ended July 27, 2024, compared to $158.3 million in the three months ended July 29, 2023. Excluding foreign currency translation, net sales decreased $22.6 million, or 14.3%.

Net sales in North America decreased $0.5 million to $66.3 million in the three months ended July 27, 2024, compared to $66.8 million in the three months ended July 29, 2023. The decrease was due to the roll off of legacy programs offset by new program launches. Net sales in EMEA increased $7.1 million to $59.3 million in the three months ended July 27, 2024, compared to $52.2 million in the three months ended July 29, 2023. The weaker euro, relative to the U.S. dollar, decreased net sales in EMEA by $0.7 million. Excluding foreign currency translation, net sales in EMEA increased $7.8 million due to increased demand for user interface and switch products, partially offset by lower sales volumes of sensor products. Net sales in Asia decreased $30.1 million to $9.2 million in the three months ended July 27, 2024, compared to $39.3 million in the three months ended July 29, 2023. The decrease was primarily due to a program roll-off and lower sales volumes of lead frame products.

#### Gross profit

Automotive segment gross profit decreased $6.7 million, or 43.8%, to $8.6 million in the three months ended July 27, 2024, compared to $15.3 million in the three months ended July 29, 2023. Gross profit margins decreased to 6.4% in the three months ended July 27, 2024, compared to 9.7% in the three months ended July 29, 2023. The decrease in gross profit margins was due to lower sales volumes in Asia, higher costs due to program launches and product mix.

#### Loss from operations

Automotive segment loss from operations was $5.7 million in the three months ended July 27, 2024, compared to $2.8 million in the three months ended July 29, 2023. The higher loss from operations was primarily due to lower gross profit, partially offset by lower selling and administrative expenses. Selling and administrative expenses decreased due to lower outbound freight expense.

### Industrial

*($ in millions)*

|  | Three Months Ended July 27, 2024 | July 29, 2023 |
| --- | ---: | ---: |
| Net sales | $111.5 | $115.4 |
| Gross profit | $32.8 | $35.6 |
| As a percent of net sales | 29.4% | 30.8% |
| Income from operations | $16.9 | $24.2 |
| As a percent of net sales | 15.2% | 21.0% |

#### Net sales

Industrial segment net sales decreased $3.9 million, or 3.4%, to $111.5 million in the three months ended July 27, 2024, compared to $115.4 million in the three months ended July 29, 2023. Excluding foreign currency translation, net sales decreased $3.2 million. The decrease was primarily due to lower sales volumes for lighting products in the commercial vehicle and off-road equipment markets, partially offset by higher sales volumes of power distribution products for electric vehicle and data centers.

#### Gross profit

Industrial segment gross profit decreased $2.8 million, or 7.9%, to $32.8 million in the three months ended July 27, 2024, compared to $35.6 million in the three months ended July 29, 2023. Excluding foreign currency translation, gross profit decreased $2.6 million. Gross profit margins decreased to 29.4% in the three months ended July 27, 2024, compared to 30.8% in the three months ended July 29, 2023. Gross profit margins were impacted by product mix.

#### Income from operations

Industrial segment income from operations decreased $7.3 million, or 30.2%, to $16.9 million in the three months ended July 27, 2024, compared to $24.2 million in the three months ended July 29, 2023. The decrease was primarily due to lower gross profit and higher selling and administrative expenses. The increase in selling and administrative expenses was primarily due to higher professional fees and an increase in bad debt expense.

### Interface

*($ in millions)*

|  | Three Months Ended July 27, 2024 | July 29, 2023 |
| --- | ---: | ---: |
| Net sales | $12.2 | $15.2 |
| Gross profit | $2.6 | $3.6 |
| As a percent of net sales | 21.3% | 23.7% |
| Income from operations | $1.9 | $2.9 |
| As a percent of net sales | 15.6% | 19.1% |

#### Net sales

Interface segment net sales decreased $3.0 million, or 19.7%, to $12.2 million in the three months ended July 27, 2024, compared to $15.2 million in the three months ended July 29, 2023. The decrease was due to lower sales volumes of touch panels for appliances and transceivers for servers.

#### Gross profit

Interface segment gross profit decreased $1.0 million, or 27.8%, to $2.6 million in the three months ended July 27, 2024, compared to $3.6 million in the three months ended July 29, 2023. Gross profit margins decreased to 21.3% in the three months ended July 27, 2024, compared to 23.7% in the three months ended July 29, 2023. The decrease in gross profit margins was primarily due to lower sales volumes.

#### Income from operations

Interface segment income from operations decreased $1.0 million, or 34.5%, to $1.9 million in the three months ended July 27, 2024, compared to $2.9 million in the three months ended July 29, 2023. The decrease was primarily due to lower gross profit and slightly higher selling and administrative expenses.

### Medical

*(in millions)*

|  | Three Months Ended July 27, 2024 | July 29, 2023 |
| --- | ---: | ---: |
| Net sales | $— | $0.8 |
| Gross profit | $— | $(0.7) |
| Loss from operations | $— | $(2.2) |

In the first quarter of fiscal 2024, we made the decision to initiate the discontinuation of the Dabir business (which accounts for all of the Medical segment's financial results). Towards the end of the second quarter of fiscal 2024, we sold certain assets of the Dabir business and have now exited this business, which accounts for the variances in the table above.

### Financial Condition, Liquidity and Capital Resources

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

As of July 27, 2024, we had $111.3 million of cash and cash equivalents, of which $57.4 million was held in subsidiaries outside the U.S. Cash held by these subsidiaries is used to fund operational activities and can be repatriated, primarily through the payment of dividends and the repayment of intercompany loans, without creating material additional income tax expense.

### Repurchases of Common Stock

On March 31, 2021, as subsequently amended on June 16, 2022, the Board of Directors authorized the purchase of up to $200.0 million of our outstanding common stock through June 14, 2024 (the “2021 Buyback Authorization”). On June 13, 2024, the Board of Directors approved a new share buyback authorization, commencing on June 17, 2024, for the purchase of up to $200.0 million of our outstanding common stock through June 17, 2026 (the “2024 Buyback Authorization”). Purchases may be made on the open market, including pursuant to purchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, or in private transactions. Prior to its expiration, a total of 3,553,961 shares were purchased under the 2021 Buyback Authorization at a total cost of $134.6 million. No further shares can be purchased under the 2021 Buyback Authorization. In the three months ended July 27, 2024, we did not purchase any shares under the 2024 Buyback Authorization. As of July 27, 2024, the dollar value of shares that remained available to be purchased under 2024 Buyback Authorization was $200.0 million.

### Amended Credit Agreement

On October 31, 2022, we entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and the Lenders and other parties named therein. On March 6, 2024, we entered into a First Amendment to Second Amended and Restated Credit Agreement (the “First Amendment”) and on July 9, 2024, we entered into a Second Amendment to Second Amended and Restated Credit Agreement and First Amendment to Second Amended and Restated Guaranty (the “Second Amendment”) with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, the other Lenders party thereto and other parties thereto.

Among other things, the Second Amendment (i) reduced the revolving credit commitments under the Credit Agreement from $750 million to $500 million, (ii) granted a security interest in substantially all of the personal property of the Company and our U.S. subsidiaries that are guarantors, including 100% of the equity interests of their respective U.S. subsidiaries and 65% of the equity interests of their respective foreign subsidiaries (or such greater amount to the extent such pledge could not reasonably cause adverse tax consequences), (iii) amended the consolidated interest coverage ratio covenant for the quarters ending July 27, 2024, November 2, 2024, January 25, 2025 and May 3, 2025, (iv) amended the consolidated leverage ratio covenant for the quarter ending July 27, 2024 and each subsequent fiscal quarter, (v) amended certain interest rate provisions, (vi) added a requirement to provide monthly financial statements to the lenders through the period ending July 25, 2025, (vii) decreased the general basket exceptions to certain covenants restricting certain Company investments, liens and indebtedness for specified periods of time, (viii) increased, for fiscal year 2025, the general basket exception to a covenant restricting certain Company dispositions of property, (ix) added an “anti-cash hoarding” requirement, applicable during the period from the effective date of the Second Amendment until the earlier to occur of (a) the delivery of financial statements and a compliance certificate for the fiscal quarter ending July 25, 2025 and (b) the delivery of compliance certificates for two consecutive fiscal quarters demonstrating that the our consolidated leverage ratio as of the last day of such fiscal quarters was less than 3.00:1.00, that if we have cash on hand (subject to certain exceptions) of more than $65 million for 10 consecutive business days, we shall prepay the indebtedness under the credit facility by the amount of such excess and (x) made certain other changes to the investment, restricted payment and indebtedness baskets. The Credit Agreement, as amended by the First Amendment and the Second Amendment, is referred to herein as the “Amended Credit Agreement.”

The Amended Credit Agreement provides for a secured multicurrency revolving credit facility of $500 million. In addition, the Amended Credit Agreement permits us to increase the revolving commitments and/or add one or more tranches of term loans under the Amended Credit Agreement from time to time by up to an amount equal to (i) $250 million plus (ii) an additional amount so long as the consolidated leverage ratio would not exceed 3.00:1.00 on a pro forma basis, subject to, among other things, the receipt of additional commitments from existing and/or new lenders. The Amended Credit Agreement matures on October 31, 2027.

As of July 27, 2024, the outstanding balance under the revolving credit facility consisted of $298.6 million (€275.0 million) of euro-denominated borrowings. The Amended Credit Agreement contains various representations and warranties, financial covenants (including covenants requiring us to maintain compliance with a minimum consolidated interest coverage ratio and a maximum consolidated leverage ratio, in each case as of the end of each fiscal quarter of the Company), restrictive and other covenants, and events of default. The covenants in the Amended Credit Agreement include an “anti-cash hoarding” requirement, as discussed above. As of July 27, 2024, we were in compliance with all the covenants in the Amended Credit Agreement. For further information, see Note 8, “Debt” to the condensed consolidated financial statements included in this Report.

Although we currently anticipate, based on our current projections and analyses, that we will be in compliance with the financial covenants contained in the Amended Credit Agreement, no assurance can be given that we will be and remain in compliance with such covenants in the future. Factors that could increase our risk of future non-compliance include those identified in Part I – Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended April 27, 2024.

### Cash Flows

*(in millions)*

| Operating activities: | Three Months Ended July 27, 2024 | July 29, 2023 |
| --- | ---: | ---: |
| Net (loss) income | $(18.3) | $0.9 |
| Non-cash items | 17.8 | 17.5 |
| Changes in operating assets and liabilities | 11.4 | (24.0) |
| Net cash provided by (used in) operating activities | 10.9 | (5.6) |
| Net cash used in investing activities | (13.6) | (13.8) |
| Net cash (used in) provided by financing activities | (48.2) | 12.5 |
| Effect of foreign currency exchange rate changes on cash and cash equivalents | 0.7 | (2.2) |
| Decrease in cash and cash equivalents | (50.2) | (9.1) |
| Cash and cash equivalents at beginning of the period | 161.5 | 157.0 |
| Cash and cash equivalents at end of the period | $111.3 | $147.9 |

#### Operating activities

Net cash provided by operating activities was $10.9 million in the three months ended July 27, 2024, compared to net cash used in operating activities of $5.6 million in the three months ended July 29, 2023. The improvement was due to higher cash inflows from operating assets and liabilities. The $11.4 million of cash inflows for operating assets and liabilities in the three months ended July 27, 2024 was primarily due to lower accounts receivable and higher accounts payable, partially offset by higher inventory, prepaid expenses and lower other liabilities.

#### Investing activities

Net cash used in investing activities was $13.6 million in the three months ended July 27, 2024, compared to $13.8 million in the three months ended July 29, 2023. The activity in both periods represented capital expenditures.

#### Financing activities

Net cash used in financing activities was $48.2 million in the three months ended July 27, 2024, compared to net cash provided by financing activities of $12.5 million in the three months ended July 29, 2023. In the three months ended July 27, 2024, we used $1.6 million of cash for the purchase of shares under the 2021 Buyback Authorization, compared to no share repurchases in the three months ended July 29, 2023. We paid cash dividends of $5.1 million in the three months ended July 27, 2024, compared to $5.3 million in the three months ended July 29, 2023. In the three months ended July 27, 2024, we had net repayments of borrowings of $39.1 million, compared to net proceeds from borrowings of $31.9 million in the three months ended July 29, 2023. In the three months ended July 27, 2024, we paid $1.8 million of debt issuance costs associated with the Second Amendment. In the three months ended July 29, 2023, we paid $10.2 million for the purchase of redeemable noncontrolling interests related to Nordic Lights.

### 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.

## Market risk

As filed, 706 characters.

We are exposed to market risks from foreign currency exchange, interest rates, and commodity prices, which could affect our operating results, financial position and cash flows. We manage a portion of these risks through use of derivative financial instruments in accordance with our policies. We do not enter into derivative financial instruments for speculative or trading purposes.

There has been no significant change in our exposure to market risk during the three months ended July 27, 2024. For a discussion of our exposure to market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in our Annual Report on Form 10-K for the year ended April 27, 2024.

## Controls and procedures

As filed, 5,576 characters.

#### Evaluation of Disclosure Controls 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 (“CEO”) and our Interim Chief Financial Officer (“CFO”), of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Our disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Company in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s applicable rules and forms. As a result of this evaluation, our CEO and Interim CFO concluded that our disclosure controls and procedures were not effective as of July 27, 2024 due to the material weaknesses that were previously reported in our Annual Report on Form 10-K for the year ended April 27, 2024.

Notwithstanding the ineffectiveness of our disclosure controls and procedures due to the material weaknesses in our internal control over financial reporting as of April 27, 2024, we believe there are no material inaccuracies or omissions of material fact in this this Quarterly Report, and, to the best of our knowledge, we believe that the condensed consolidated financial statements in this Form 10-Q fairly present in all material aspects our financial condition, results of operations and cash flows in conformity with GAAP.

#### Previously Disclosed Material Weaknesses

As previously disclosed in our Annual Report on Form 10-K for the year ended April 27, 2024, our management concluded that our internal controls over financial reporting were not effective due to a material weakness associated with ineffective information technology general controls (ITGCs) over one of its information technology (IT) systems that is relevant to the preparation of the financial information at a substantial portion of the Company’s subsidiaries throughout the year ended April 27, 2024, which resulted in ineffective business process controls (automated and IT-dependent manual controls) that could result in misstatements potentially impacting significant financial statement accounts and disclosures. Specifically, management did not design and execute program change management controls to provide reasonable assurance that IT program changes affecting financial applications are authorized, tested, and implemented appropriately. As a result, business process controls (automated and IT-dependent manual controls) that are reliant on the affected ITGCs, or that use data produced from the affected systems, were deemed ineffective at April 27, 2024.

Management also identified a material weakness associated with ineffective controls over its impairment analyses for goodwill. Specifically, management did not retain sufficient contemporaneous documentation to demonstrate the operation of sufficiently precise review controls over certain significant assumptions used in the determination of fair value of its reporting units.

Management also identified a material weakness associated with ineffective controls related to the application of GAAP to non-routine events and conditions. Specifically, we did not design and maintain controls to properly evaluate all of the events and conditions relevant to the Company’s going concern evaluation, including the assessment and disclosure of management’s plans in accordance with GAAP.

We are committed to maintaining a strong internal control environment. We and our Board of Directors treat the controls surrounding, and the integrity of, our financial statements with the utmost priority. Management is committed to the planning and implementation of remediation efforts to address control deficiencies and any other identified areas of risk. These remediation efforts are intended to both address the identified material weaknesses and to enhance our overall financial control environment.

Our remediation efforts include, among other items, (1) enhancing the design and operating effectiveness of internal controls over IT change management, review of significant assumptions used in goodwill impairment analyses, and the application of GAAP to non-routine events and conditions; and (2) developing and deploying additional training programs around the operation and importance of these controls.

As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to strengthen controls or to modify the remediation plan described above. When fully implemented and operational, we believe the controls we have designed or plan to design will remediate the control deficiencies that led to the material weaknesses we have identified and strengthen our internal controls over financial reporting. The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

#### Changes in Internal Control over Financial Reporting

Except as described above, there have been no changes in our internal control over financial reporting during the three months ended July 27, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 3,015 characters.

Our business, financial condition, results of operations and cash flows are subject to various ‎risks which could cause actual results to vary from recent results or from anticipated future results. ‎Please refer to Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended April 27, 2024, for a description of certain material risks and uncertainties to which our business, financial condition and results of operations are subject. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially ‎and adversely affect our business, financial condition and/or operating results.‎

Except as updated below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended April 27, 2024:

***We are, and in the future may be, subject to securities class action and other litigation, which may harm our business and results of operations.***

We are involved in legal proceedings related to various matters, including securities litigation, and may become involved in other legal proceedings that arise from time to time in the future. For example, as discussed further in Note 12, “Contingencies” to the unaudited interim condensed consolidated financial statements contained in this Report, on August 26, 2024, a purported shareholder of the Company filed a putative class action lawsuit alleging that the Company, its former Chief Executive Officer, and its former Chief Financial Officer violated the federal securities laws by making false and/or misleading statements relating to our business, operations and prospects, including in respect of our transition to production of more specialized components for manufacturers of electric vehicles and our operations at our facility in Monterrey, Mexico. The complaint seeks unspecified money damages along with equitable relief and costs and expenses, including counsel fees and expert fees. The Company intends to vigorously defend itself against the allegations but there can be no assurance as to outcome. An unfavorable outcome in this litigation and other legal proceedings may have a material effect on the consolidated financial position, results of operations, cash flows or liquidity of the Company. This type of litigation can also result in substantial costs, and a diversion of management’s attention and resources, which could adversely affect our business, operating results, or financial condition. Additionally, the dramatic increase in the cost of directors’ and officers’ liability insurance may cause us to opt for lower overall policy limits or to forgo insurance that we may otherwise rely on to cover any significant defense costs, settlements, and damages awarded to plaintiffs, or incur substantially higher costs to maintain the same or similar coverage. These factors may make it more difficult to attract and retain qualified executive officers and members of our board of directors.

Filed Sep 5, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-103735. Last ingested by Listed: Oct 24, 2026, 14:53 ET. No prices; not investment advice.