Company Quick10K Filing
Methode Electronics
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 38 $1,384
10-Q 2020-03-05 Quarter: 2020-02-01
10-Q 2019-12-05 Quarter: 2019-10-26
10-Q 2019-08-29 Quarter: 2019-07-27
10-K 2019-06-20 Annual: 2019-04-27
10-Q 2019-03-07 Quarter: 2019-01-26
10-Q 2018-12-06 Quarter: 2018-10-27
10-Q 2018-08-30 Quarter: 2018-07-28
10-K 2018-06-21 Annual: 2018-04-28
10-Q 2018-03-01 Quarter: 2018-01-27
10-Q 2017-12-07 Quarter: 2017-10-28
10-Q 2017-08-31 Quarter: 2017-07-29
10-K 2017-06-22 Annual: 2017-04-29
10-Q 2017-03-02 Quarter: 2017-01-28
10-Q 2016-12-08 Quarter: 2016-10-29
10-Q 2016-09-01 Quarter: 2016-07-30
10-K 2016-06-23 Annual: 2016-04-30
10-Q 2016-03-03 Quarter: 2016-01-30
10-Q 2015-12-10 Quarter: 2015-10-31
10-Q 2015-09-03 Quarter: 2015-08-01
10-K 2015-06-25 Annual: 2015-05-02
10-Q 2015-03-05 Quarter: 2015-01-31
10-Q 2014-12-11 Quarter: 2014-11-01
10-Q 2014-09-04 Quarter: 2014-08-02
10-K 2014-06-26 Annual: 2014-05-03
10-Q 2014-03-13 Quarter: 2014-02-01
10-Q 2013-12-05 Quarter: 2013-10-26
10-K 2013-06-20 Annual: 2013-04-27
10-Q 2013-02-28 Quarter: 2013-01-26
10-Q 2012-12-06 Quarter: 2012-10-27
10-Q 2012-08-30 Quarter: 2012-07-28
10-K 2012-06-28 Annual: 2012-04-28
10-Q 2012-03-01 Quarter: 2012-01-28
10-Q 2011-12-08 Quarter: 2011-10-29
10-Q 2011-09-01 Quarter: 2011-07-30
10-K 2011-06-30 Annual: 2011-04-30
10-Q 2011-03-03 Quarter: 2011-01-29
10-Q 2010-12-09 Quarter: 2010-10-30
10-Q 2010-09-02 Quarter: 2010-07-31
10-K 2010-07-01 Annual: 2010-05-01
10-Q 2010-03-04 Quarter: 2010-01-30
8-K 2020-03-06 Officers, Exhibits
8-K 2020-03-05 Earnings, Exhibits
8-K 2019-12-11 Officers, Exhibits
8-K 2019-12-05 Earnings, Exhibits
8-K 2019-09-12 Shareholder Vote
8-K 2019-08-29 Earnings, Exhibits
8-K 2019-06-20 Earnings, Exhibits
8-K 2019-06-12 Officers, Exhibits
8-K 2019-05-30 Officers
8-K 2019-03-07 Earnings, Exhibits
8-K 2018-12-06 Earnings, Exhibits
8-K 2018-09-13 Shareholder Vote
8-K 2018-09-12 Enter Agreement, M&A, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-08-30 Earnings, Exhibits
8-K 2018-08-20 Enter Agreement, Other Events, Exhibits
8-K 2018-07-17 Officers
8-K 2018-06-21 Earnings, Exhibits
8-K 2018-05-09 Officers, Exhibits
8-K 2018-04-07 Officers, Exhibits
8-K 2018-03-12 Officers, Exhibits
8-K 2018-03-01 Earnings, Exhibits
8-K 2018-02-13 Officers, Exhibits
MEI 2020-02-01
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 meiexhibit31102012020.htm
EX-31.2 meiexhibit31202012020.htm
EX-32 meiexhibit3202012020.htm

Methode Electronics Earnings 2020-02-01

MEI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
SANM 2,107 4,020 2,392 8,218 571 123 349 2,078 7% 5.9 3%
ITRI 1,843 2,706 1,960 2,433 752 64 264 2,321 31% 8.8 2%
PLXS 1,781 2,016 1,155 3,227 287 145 177 1,902 9% 10.8 7%
MEI 1,384 1,269 555 1,047 282 96 158 1,594 27% 10.1 8%
KEM 1,097 1,391 714 1,400 248 212 255 1,189 18% 4.7 15%
TTMI 1,074 3,440 2,211 2,720 426 80 398 2,290 16% 5.8 2%
BHE 969 1,828 783 2,562 215 65 165 715 8% 4.3 4%
CTS 912 581 185 477 167 51 90 806 35% 9.0 9%
COHU 642 1,104 589 555 193 -94 -24 847 35% -35.4 -9%
VPG 469 342 108 301 123 25 48 395 41% 8.3 7%

Document
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549
__________________________________ 
FORM 10-Q
 (Mark One)
 
      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
for the quarterly period ended February 1, 2020
or 
         Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from ______ to ______
 __________________________________ 
Commission file number 0-2816
 
METHODE ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)

methodelog080115a17.gif
Delaware
 
36-2090085
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
8750 West Bryn Mawr Avenue,
Suite 1000,
Chicago,
Illinois
 
60631-3518
(Address of principal executive offices)
 
(Zip Code)
 (Registrant’s telephone number, including area code) (708) 867-6777
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: 
 
 
Name of each exchange
Title of each Class
Trading Symbol(s)
on which registered
Common Stock, $0.50 Par Value
MEI
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer.” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
Accelerated filer 
Non-accelerated filer 
 
Smaller reporting company 
Emerging Growth Company  
 
 
 



Table of Contents

 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes 
  No 
At March 3, 2020, the registrant had 37,091,487 shares of common stock outstanding.


Table of Contents

METHODE ELECTRONICS, INC.
FORM 10-Q
February 1, 2020

TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents

PART I.        FINANCIAL INFORMATION
 
Item 1. Financial Statements
 

METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in millions, except per share data)
 
 
Three Months Ended
 
Nine Months Ended
 
 
February 1,
2020
 
January 26,
2019
 
February 1,
2020
 
January 26,
2019
 
 
(14 Weeks)
 
(13 Weeks)
 
(40 Weeks)
 
(39 Weeks)
Net Sales
 
$
285.9

 
$
246.9

 
$
813.3

 
$
734.3

 
 
 
 
 
 
 
 
 
Cost of Products Sold
 
206.6

 
182.6

 
589.6

 
539.1

 
 
 
 
 
 
 
 
 
Gross Profit
 
79.3

 
64.3

 
223.7

 
195.2

 
 
 
 
 
 
 
 
 
Selling and Administrative Expenses
 
33.0

 
32.8

 
98.6

 
110.3

Amortization of Intangibles
 
4.8

 
5.5

 
14.3

 
11.1

 
 
 
 
 
 
 
 
 
Income from Operations
 
41.5

 
26.0

 
110.8

 
73.8

 
 
 
 
 
 
 
 
 
Interest Expense, Net
 
2.4

 
3.2

 
8.0

 
5.0

Other Income, Net
 
(4.9
)
 
(4.9
)
 
(5.8
)
 
(4.7
)
 
 
 
 
 
 
 
 
 
Income before Income Taxes
 
44.0

 
27.7

 
108.6

 
73.5

 
 
 
 
 
 
 
 
 
Income Tax Expense (Benefit)
 
2.8

 
(3.0
)
 
15.3

 
4.5

 
 
 
 
 
 
 
 
 
Net Income
 
$
41.2

 
$
30.7

 
$
93.3

 
$
69.0

 
 
 
 
 
 
 
 
 
Basic and Diluted Income per Share:
 
 

 
 

 
 
 
 
Basic
 
$
1.10

 
$
0.82

 
$
2.48

 
$
1.84

Diluted
 
$
1.09

 
$
0.82

 
$
2.47

 
$
1.83

 
 
 
 
 
 
 
 
 
Cash Dividends per Share
 
$
0.11

 
$
0.11

 
$
0.33

 
$
0.33

See notes to condensed consolidated financial statements.


2

Table of Contents

METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in millions)
 
 
Three Months Ended
 
Nine Months Ended
 
 
February 1,
2020
 
January 26,
2019
 
February 1,
2020
 
January 26,
2019
 
 
(14 Weeks)
 
(13 Weeks)
 
(40 Weeks)
 
(39 Weeks)
Net Income
 
$
41.2

 
$
30.7

 
$
93.3

 
$
69.0

 
 
 
 
 
 
 
 
 
Foreign Currency Translation Adjustments
 
1.6

 
3.2

 
(2.8
)
 
(22.4
)
Total Comprehensive Income
 
$
42.8

 
$
33.9

 
$
90.5

 
$
46.6

See notes to condensed consolidated financial statements.

3

Table of Contents

METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per-share data)
 
 
February 1,
2020
 
April 27,
2019
 
 
(Unaudited)
 
 
ASSETS
 
 

 
 

CURRENT ASSETS
 
 

 
 

Cash and Cash Equivalents
 
$
79.9

 
$
83.2

Accounts Receivable, Net
 
227.9

 
219.3

Inventories
 
126.1

 
116.7

Income Tax Receivable
 
9.7

 
14.3

Prepaid Expenses and Other Current Assets
 
20.3

 
20.0

TOTAL CURRENT ASSETS
 
463.9

 
453.5

LONG-TERM ASSETS
 
 
 
 
Property, Plant and Equipment, Net
 
199.0

 
191.9

Goodwill
 
233.2

 
233.3

Other Intangible Assets, Net
 
251.0

 
264.9

Operating Lease Assets, Net
 
27.3

 

Deferred Tax Assets
 
34.3

 
34.3

Pre-production Costs
 
39.9

 
32.8

Other Long-term Assets
 
33.7

 
21.0

TOTAL LONG-TERM ASSETS
 
818.4

 
778.2

TOTAL ASSETS
 
$
1,282.3

 
$
1,231.7

 
 
 
 
 
LIABILITIES & SHAREHOLDERS' EQUITY
 
 

 
 

CURRENT LIABILITIES
 
 

 
 

Accounts Payable
 
$
88.8

 
$
91.9

Accrued Employee Liabilities
 
19.7

 
20.1

Other Accrued Expenses
 
22.6

 
33.9

Short-term Operating Lease Liability
 
6.0

 

Short-term Debt
 
15.1

 
15.7

Income Tax Payable
 
11.4

 
19.3

TOTAL CURRENT LIABILITIES
 
163.6

 
180.9

LONG-TERM LIABILITIES
 
 
 
 
Long-term Debt
 
241.9

 
276.9

Long-term Operating Lease Liability
 
21.9

 

Long-term Income Tax Payable
 
29.3

 
33.0

Other Long-term Liabilities
 
16.9

 
14.8

Deferred Tax Liabilities
 
35.8

 
36.4

TOTAL LONG-TERM LIABILITIES
 
345.8

 
361.1

TOTAL LIABILITIES
 
509.4

 
542.0

SHAREHOLDERS' EQUITY
 
 

 
 

Common Stock, $0.50 par value, 100,000,000 shares authorized, 38,438,111 shares and 38,333,576 shares issued as of February 1, 2020 and April 27, 2019, respectively
 
19.2

 
19.2

Additional Paid-in Capital
 
156.0

 
150.4

Accumulated Other Comprehensive Loss
 
(16.4
)
 
(13.6
)
Treasury Stock, 1,346,624 shares as of February 1, 2020 and April 27, 2019
 
(11.5
)
 
(11.5
)
Retained Earnings
 
625.6

 
545.2

TOTAL SHAREHOLDERS' EQUITY
 
772.9

 
689.7

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
 
$
1,282.3

 
$
1,231.7

See notes to condensed consolidated financial statements.

4

Table of Contents

METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(in millions, except share data)
Three Months Ended February 1, 2020 (14 Weeks)
 
Common
Stock
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other Comprehensive
Loss
 
Treasury
Stock
 
Retained Earnings
 
Total
Equity
Balance as of October 26, 2019
38,438,111

 
$
19.2

 
$
154.4

 
$
(18.0
)
 
$
(11.5
)
 
$
588.5

 
$
732.6

Stock-based Compensation Expense

 

 
1.6

 

 

 

 
1.6

Foreign Currency Translation Adjustments

 

 

 
1.6

 

 

 
1.6

Net Income

 

 

 

 

 
41.2

 
41.2

Cash Dividends on Common Stock

 

 

 

 

 
(4.1
)
 
(4.1
)
Balance as of February 1, 2020
38,438,111

 
$
19.2

 
$
156.0

 
$
(16.4
)
 
$
(11.5
)
 
$
625.6

 
$
772.9

Three Months Ended January 26, 2019 (13 Weeks)
 
Common
Stock
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other Comprehensive
Income (Loss)
 
Treasury
Stock
 
Retained Earnings
 
Total
Equity
Balance as of October 27, 2018
38,333,576

 
$
19.2

 
$
147.3

 
$
(11.7
)
 
$
(11.5
)
 
$
500.0

 
$
643.3

Stock-based Compensation Expense

 

 
0.9

 

 

 

 
0.9

Foreign Currency Translation Adjustments

 

 

 
3.2

 

 

 
3.2

Net Income

 

 

 

 

 
30.7

 
30.7

Cash Dividends on Common Stock

 

 

 

 

 
(4.0
)
 
(4.0
)
Balance as of January 26, 2019
38,333,576

 
$
19.2

 
$
148.2

 
$
(8.5
)
 
$
(11.5
)
 
$
526.7

 
$
674.1


5

Table of Contents

Nine Months Ended February 1, 2020 (40 Weeks)
 
Common
Stock
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other Comprehensive
Loss
 
Treasury
Stock
 
Retained Earnings
 
Total
Equity
Balance as of April 27, 2019
38,333,576

 
$
19.2

 
$
150.4

 
$
(13.6
)
 
$
(11.5
)
 
$
545.2

 
$
689.7

Earned Portion of Restricted Stock, Net of Tax Withholding
104,535

 

 

 

 

 
(0.4
)
 
(0.4
)
Stock-based Compensation Expense

 

 
5.6

 

 

 

 
5.6

Foreign Currency Translation Adjustments

 

 

 
(2.8
)
 

 

 
(2.8
)
Net Income

 

 

 

 

 
93.3

 
93.3

Dividends on Common Stock

 

 

 

 

 
(12.5
)
 
(12.5
)
Balance as of February 1, 2020
38,438,111

 
$
19.2

 
$
156.0

 
$
(16.4
)
 
$
(11.5
)
 
$
625.6

 
$
772.9

Nine Months Ended January 26, 2019 (39 Weeks)
 
Common
Stock
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other Comprehensive
Loss
 
Treasury
Stock
 
Retained Earnings
 
Total
Equity
Balance as of April 28, 2018
38,198,353

 
$
19.1

 
$
136.5

 
$
13.9

 
$
(11.5
)
 
$
472.0

 
$
630.0

Earned Portion of Restricted Stock, Net of Tax Withholding
135,223

 
0.1

 
(0.1
)
 

 

 
(1.7
)
 
(1.7
)
Stock-based Compensation Expense

 

 
11.8

 

 

 

 
11.8

Adoption of ASU 2014-09

 

 

 

 

 
0.1

 
0.1

Foreign Currency Translation Adjustments

 

 

 
(22.4
)
 

 

 
(22.4
)
Net Income

 

 

 

 

 
69.0

 
69.0

Dividends on Common Stock

 

 

 

 

 
(12.7
)
 
(12.7
)
Balance as of January 26, 2019
38,333,576

 
$
19.2

 
$
148.2

 
$
(8.5
)
 
$
(11.5
)
 
$
526.7

 
$
674.1


See notes to condensed consolidated financial statements.

6

Table of Contents

METHODE ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
 
 
Nine Months Ended
 
 
February 1,
2020
 
January 26,
2019
 
 
(40 Weeks)
 
(39 Weeks)
OPERATING ACTIVITIES
 
 

 
 

Net Income
 
$
93.3

 
$
69.0

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
 
 

 
 

Depreciation and Amortization
 
36.0

 
30.6

Stock-based Compensation Expense
 
5.6

 
11.7

Change in Cash Surrender Value of Life Insurance
 
(0.6
)
 
(0.2
)
Amortization of Debt Issuance Costs
 
0.5

 
0.3

Gain on Sale of Business/Investment/Property
 
(0.4
)
 
(0.6
)
Other
 
0.3

 
(0.4
)
Changes in Operating Assets and Liabilities:
 
 
 
 
Accounts Receivable
 
(10.5
)
 
12.2

Inventories
 
(9.9
)
 
(10.9
)
Prepaid Expenses and Other Assets
 
(12.8
)
 
(16.5
)
Accounts Payable and Other Liabilities
 
(18.9
)
 
(30.9
)
NET CASH PROVIDED BY OPERATING ACTIVITIES
 
82.6

 
64.3

 
 
 
 
 
INVESTING ACTIVITIES
 
 

 
 

Purchases of Property, Plant and Equipment
 
(34.9
)
 
(37.0
)
Acquisitions of Businesses, Net of Cash Acquired
 

 
(421.6
)
Sale of Business/Investment/Property
 
0.5

 
0.3

NET CASH USED IN INVESTING ACTIVITIES
 
(34.4
)
 
(458.3
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 

 
 

Taxes Paid Related to Net Share Settlement of Equity Awards
 
(0.4
)
 
(1.7
)
Repayments of Finance Leases
 
(0.5
)
 

Cash Dividends
 
(12.2
)
 
(12.7
)
Proceeds from Borrowings
 
57.3

 
350.0

Repayments of Borrowings
 
(93.9
)
 
(103.3
)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
 
(49.7
)
 
232.3

Effect of Foreign Currency Exchange Rate Changes on Cash and Cash Equivalents
 
(1.8
)
 
(10.7
)
DECREASE IN CASH AND CASH EQUIVALENTS
 
(3.3
)
 
(172.4
)
Cash and Cash Equivalents at Beginning of the Year
 
83.2

 
246.1

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD
 
$
79.9

 
$
73.7

 
 
 
 
 
SUPPLEMENTAL CASH FLOW INFORMATION
 
 
 
 
Cash Paid During the Period For:
 
 
 
 
Interest
 
$
7.6

 
$
5.6

Income Taxes, Net of Refunds
 
$
16.2

 
$
18.7

See notes to condensed consolidated financial statements.

7

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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


1.    Description of Business and Summary of Significant Accounting Policies
Description of Business

Methode Electronics, Inc. (the "Company" or "Methode") is a global developer of custom engineered and application specific products and solutions with manufacturing, design 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. The Company's primary manufacturing facilities are located in Dongguan and Shanghai, China; Cairo, Egypt; Mriehel, Malta; and Fresnillo and Monterrey, Mexico. The Company designs, manufactures and markets devices employing electrical, radio remote control, electronic, LED lighting, wireless and sensing technologies.

Basis of Presentation

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). All intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been condensed or omitted pursuant to such rules and regulations. These interim condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments, except as otherwise disclosed) that management believes are necessary for a fair presentation of the results of operations, financial position and cash flows of the Company for the interim periods presented. These financial statements should be read in conjunction with the consolidated financial statements included in the Company's Form 10-K for the year ended April 27, 2019, filed with the SEC on June 20, 2019. Results may vary from 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. For the three months ended February 1, 2020, the Company's accounting period included 14 weeks compared to 13 weeks for the three months ended January 26, 2019. For the nine months ended February 1, 2020, the Company's accounting period included 40 weeks compared to 39 weeks for the nine months ended January 26, 2019. The following discussions of comparative results among periods should be reviewed in this context.
Reclassifications

The Company has reclassified certain prior period amounts in the condensed consolidated financial statements and in the accompanying notes to conform with current year presentation.

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.

Change in Presentation

During the second quarter of fiscal 2019, the Company changed its reportable segments. Refer to Note 11 “Segment Information,” for further discussion on the impact of the change.

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 27, 2019. There have been no material changes to the significant accounting policies in the nine months ended February 1, 2020 other than those noted below.



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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, “Leases,” which amended authoritative guidance on leases and is codified in Accounting Standards Codification ("ASC") 842. The amended guidance requires entities to record most leased assets and liabilities on the balance sheet, and also retains a dual model approach for assessing lease classification and recognizing expense. The FASB subsequently issued updates to provide clarification on specific topics, including adoption guidance, practical expedients and interim transition disclosure requirements.

The Company adopted the standard on April 28, 2019, by applying the modified retrospective method without restatement of comparative periods' financial information, as permitted by the transition guidance. Accordingly, the Company has provided disclosures required by prior lease guidance for comparative periods. The adoption of this standard resulted in the recognition of right-of-use assets of $27.6 million and related lease obligations of $28.1 million as of April 28, 2019. The standard did not have a significant impact on the Company's operating results or cash flows.

The Company elected certain practical expedients, including the election not to reassess its prior conclusions about lease identification, lease classification and initial direct costs, as well as the election not to separate lease and non-lease components for arrangements where the Company is a lessee. Lastly, the Company elected to recognize a right-of-use asset and related lease liability for leases with a lease term of 12 months or less for all classes of underlying assets. The Company determines if an arrangement contains a lease at inception. Operating lease expense is recognized on a straight-line basis over the lease term.

For purposes of calculating operating lease obligations under the standard, the Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such option. The Company's leases do not contain material residual value guarantees or material restrictive covenants. The discount rate used to measure a lease obligation should be the rate implicit in the lease; however, the Company’s operating leases generally do not provide an implicit rate. Accordingly, the Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate is an entity-specific rate which represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar term with similar payments. Refer to Note 3, "Leases," for additional information.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from U.S. Tax Reform’s reduction of the U.S. federal corporate income tax rate. The Company adopted ASU 2018-02 as of April 28, 2019 and the adoption had no impact on the Company’s consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” The guidance in ASU 2016-13 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. It replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. This guidance is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Management is currently assessing the impact of the new standard, but does not anticipate that the adoption of this standard will have a material impact on the way it estimates the allowance for doubtful accounts on its trade accounts receivable.

In August 2018, the FASB issued ASU 2018-15, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The guidance in ASU 2018-15 clarifies the accounting for implementation costs in cloud computing arrangements. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

    


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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) – Disclosure
Framework – Changes to the Disclosure Requirements for Fair Value Measurement." The guidance in ASU 2018-13 changes disclosure requirements related to fair value measurements as part of the disclosure framework project. The disclosure framework project aims to improve the effectiveness of disclosures in the notes to the financial statements by focusing on requirements that clearly communicate the most important information to users of the financial statements. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the provisions of the updated guidance and assessing the impact on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, "Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740)," which simplifies the accounting for income taxes. The new guidance removes certain exceptions to the general principles in ASC 740, such as recognizing deferred taxes for equity investments, the incremental approach to performing intra-period tax allocation and calculating income taxes in interim periods. The standard also simplifies accounting for income taxes under GAAP by clarifying and amending existing guidance, including the recognition of deferred taxes for goodwill, the allocation of taxes to members of a consolidated group and requiring that an entity reflect the effect of enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. This guidance is effective for annual periods beginning after December 15, 2020, and interim periods thereafter; however, early adoption is permitted. The Company is evaluating the provisions of the updated guidance and assessing the impact on its consolidated financial statements.

2.    Revenue
The majority of the Company's revenue is recognized at a point in time. The Company has determined that the most definitive demonstration that control has transferred to a customer is physical shipment or delivery, depending on the contractual shipping terms, except for consignment transactions. Consignment transactions are arrangements where the Company transfers product to a customer location but retains ownership and control of such product until it is used by the customer. Revenue for consignment arrangements is recognized upon the customer’s usage.

Revenues associated with products which the Company believes have no alternative use, and where the Company has an enforceable right to payment, are recognized on an over time basis. The Company believes the most faithful depiction of the transfer of goods to the customer is based on progress to date, which is typically smooth throughout the production process. As such, the Company recognizes revenue evenly over the production process through transfer of control to the customer.

Customers typically negotiate annual price downs. Management has evaluated these price downs and determined that in some instances, these price downs give rise to a material right. In instances that a material right exists, a portion of the transaction price is allocated to the material right and recognized over the life of the contract.

The Company treats shipping and handling costs as an activity necessary to fulfill the performance obligation to transfer product to the customer and not as a separate performance obligation. Shipping and handling costs are estimated at quarter-end in proportion to revenue recognized for transactions where actual costs are not yet known.

Across all products, the amount of revenue recognized corresponds to the related purchase order. Revenue is adjusted for variable consideration (such as discounts) as described further below. Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue.

Contract Balances
    
The Company receives payment from customers based on the contractual billing schedule and specific performance requirements established in the contract. Billings are recorded as accounts receivable when an unconditional right to the contractual consideration exists. A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer. A contract liability exists when the Company has received consideration or the amount is due from the customer in advance of revenue recognition. Contract assets and contract liabilities are recognized in prepaid expenses and other current assets and other long-term liabilities, respectively, in the Company's condensed consolidated balance sheets.


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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Unbilled Receivables (Contract Assets) - Unbilled receivables were $0.9 million as of February 1, 2020 and $0.8 million as of April 27, 2019. In the nine months ended February 1, 2020, $0.8 million of previously unbilled receivables were recorded into accounts receivable. There were no impairments of contract assets as of February 1, 2020.

Deferred Revenue (Contract Liabilities) - Deferred revenue was $0.3 million as of both February 1, 2020 and April 27, 2019. In the nine months ended February 1, 2020, $0.1 million of previously deferred revenue was recorded into revenue.

Disaggregated Revenue Information

The Company views the following disaggregated disclosures as useful to understanding the composition of revenue recognized during the respective reporting periods. Geographic net sales are determined based on sales from the Company's various operational locations. Though revenue recognition patterns and contracts are generally consistent, the amount, timing and uncertainty of revenue and cash flows may vary in each reportable segment due to geographic and economic factors.
 
 
Three Months Ended February 1, 2020 (14 Weeks)
(Dollars in Millions)
 
Auto
 
Industrial
 
Interface
 
Medical
 
Total
Geographic Net Sales:
 
 
 
 
 
 
 
 
 
 
U.S.
 
$
111.0

 
$
34.2

 
$
14.6

 
$
0.6

 
$
160.4

Malta
 
33.7

 
7.7

 

 

 
41.4

China
 
22.8

 
9.5

 
0.1

 

 
32.4

Canada
 
19.3

 
4.2

 

 

 
23.5

Other
 
23.5

 
4.5

 
0.2

 

 
28.2

Total Net Sales
 
$
210.3

 
$
60.1

 
$
14.9

 
$
0.6

 
$
285.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Timing of Revenue Recognition:
 
 
 
 
 
 
 
 
 
 
Goods Transferred at a Point in Time
 
$
198.6

 
$
60.1

 
$
14.9

 
$
0.6

 
$
274.2

Goods Transferred Over Time
 
11.7

 

 

 

 
11.7

Total Net Sales
 
$
210.3

 
$
60.1

 
$
14.9

 
$
0.6

 
$
285.9

 
 
Three Months Ended January 26, 2019 (13 Weeks)
(Dollars in Millions)
 
Auto
 
Industrial
 
Interface
 
Medical
 
Total
Geographic Net Sales:
 
 
 
 
 
 
 
 
 
 
U.S.
 
$
80.7

 
$
33.8

 
$
13.3

 
$
0.1

 
$
127.9

Malta
 
26.7

 
7.0

 
0.1

 

 
33.8

China
 
20.5

 
9.6

 

 

 
30.1

Canada
 
21.1

 
5.5

 

 

 
26.6

Other
 
23.9

 
4.3

 
0.3

 

 
28.5

Total Net Sales
 
$
172.9

 
$
60.2

 
$
13.7

 
$
0.1

 
$
246.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Timing of Revenue Recognition:
 
 
 
 
 
 
 
 
 
 
Goods Transferred at a Point in Time
 
$
165.7

 
$
60.2

 
$
13.7

 
$
0.1

 
$
239.7

Goods Transferred Over Time
 
7.2

 

 

 

 
7.2

Total Net Sales
 
$
172.9

 
$
60.2

 
$
13.7

 
$
0.1

 
$
246.9


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METHODE ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

 
 
Nine Months Ended February 1, 2020 (40 Weeks)
(Dollars in Millions)
 
Auto
 
Industrial
 
Interface
 
Medical