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Shareholders' Equity | 3 Months Ended
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Jul. 27, 2024
Share-Based Payment Arrangement [Abstract] |
Shareholders' Equity | Note 9. Shareholders’ Equity 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 the Company’s 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 the Company’s 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. The following table summarizes activity under the 2021 Buyback Authorization:
|  | Three Months Ended |
(in millions, except share and per share data) |  | July 27, 2024 |  |  | July 29, 2023 |
Shares purchased |  |  | 136,000 |  |  |  | — |
Average price per share |  | $ | 11.55 |  |  | $ | — |
Total cost |  | $ | 1.6 |  |  | $ | — |
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. All purchased shares were retired and are reflected as a reduction of common stock for the par value of shares, with the excess applied as a reduction to retained earnings. No further shares can be purchased under the 2021 Buyback Authorization. In the three months ended July 27, 2024, there were no shares purchased under the 2024 Buyback Authorization. As of July 27, 2024, the dollar value of shares that remained available to be purchased by the Company under 2024 Buyback Authorization was $200.0 million. Dividends The Company paid dividends totaling $5.1 million and $5.3 million in the three months ended July 27, 2024 and July 29, 2023, respectively. Dividends paid in the three months ended July 27, 2024 and July 29, 2023, include $0.2 million and $0.4 million of dividend equivalent payments for restricted stock units that vested. 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 27, 2024 |
(in millions) |  | Currency translation adjustments |  |  | Derivative instruments |  |  | Total |
Balance at beginning of period |  | $ | (36.5 | ) |  | $ | (0.2 | ) |  | $ | (36.7 | )
Other comprehensive income (loss) |  |  | 1.1 |  |  |  | (2.2 | ) |  |  | (1.1 | )
Tax benefit |  |  | 1.0 |  |  |  | 0.5 |  |  |  | 1.5 |
Net other comprehensive income (loss) |  |  | 2.1 |  |  |  | (1.7 | ) |  |  | 0.4 |
Balance at the end of period |  | $ | (34.4 | ) |  | $ | (1.9 | ) |  | $ | (36.3 | )
|  | Three Months Ended July 29, 2023 |
(in millions) |  | Currency translation adjustments |  |  | Derivative instruments |  |  | Total |
Balance at beginning of period |  | $ | (19.8 | ) |  | $ | 0.8 |  |  | $ | (19.0 | )
Other comprehensive loss |  |  | (2.7 | ) |  |  | (2.2 | ) |  |  | (4.9 | )
Tax benefit |  |  | 0.2 |  |  |  | 0.6 |  |  |  | 0.8 |
Net other comprehensive loss |  |  | (2.5 | ) |  |  | (1.6 | ) |  |  | (4.1 | )
Balance at the end of period |  | $ | (22.3 | ) |  | $ | (0.8 | ) |  | $ | (23.1 | )
Stock-based compensation The Company has granted stock options, restricted stock awards (“RSAs”), performance units (“PUs”), restricted stock units (“RSUs”), performance stock units (“PSUs”) and stock awards to employees and non-employee directors under the Methode Electronics, Inc. 2022 Omnibus Incentive Plan (“2022 Plan”), the Methode Electronics, Inc. 2014 Omnibus Incentive Plan (“2014 Plan”), the Methode Electronics, Inc. 2010 Stock Plan (“2010 Plan”), and the Methode Electronics, Inc. 2004 Stock Plan (“2004 Plan”). The Company can no longer make grants under the 2014 Plan, 2010 Plan and 2004 Plan. Subject to adjustment as provided in the 2022 Plan and the 2022 Plan’s share counting provisions, the number of shares of the Company's common stock that will be available for all awards under the 2022 Plan is 5,550,000, less an amount to reflect shares, options or other awards granted under prior plans after April 30, 2022. As of July 27, 2024, there were approximately 4.2 million shares available for award under the 2022 Plan. Restricted stock awards and performance units As of July 27, 2024, the Company had 710,349 RSAs outstanding which may 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, up to an additional 355,175 PUs can be earned that will be settled in cash. 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 ASC 718, “Compensation - Stock Compensation,” based on projections of the Company’s current business portfolio, no compensation expense has 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 $20.5 million as of July 27, 2024, which, subject to the performance conditions being met, will be recognized through fiscal 2025. The following table summarizes RSA activity:
|  | Restricted stock awards |  |  | Weighted average grant date fair value |
Non-vested at April 27, 2024 |  |  | 789,674 |  |  | $ | 28.81 |
Awarded |  |  | — |  |  | $ | — |
Vested |  |  | — |  |  | $ | — |
Forfeited |  |  | (79,325 | ) |  | $ | 28.28 |
Non-vested at July 27, 2024 |  |  | 710,349 |  |  | $ | 28.87 |
Performance stock units In the three months ended July 27, 2024, the Company granted 138,758 PSUs which will vest upon the achievement of a total stockholder return (“TSR”) measured based on the growth in the Company’s stock price over a three-year performance period that ends April 30, 2027. The number of shares to be issued may range from 0% to a maximum of 200% of the PSUs granted. The Company estimated the grant date fair value of the PSUs using the Monte Carlo simulation model, as the TSR metric and changes in stock price are considered market conditions under ASC 718. The following table provides a summary of the assumptions for the PSUs:
|  | Assumptions |
Expected volatility |  |  | 51.28 | %
Risk free interest rate |  |  | 4.23 | %
Expected term (in years) |  |  | 2.79 |
Grant date fair value |  | $ | 16.38 |
The PSUs earn dividend equivalents during the vesting periods, which are forfeitable if the PSUs do not vest. Unrecognized compensation expense for the PSUs was $2.2 million, which is expected to be recognized over a weighted average period of approximately three years. The following table summarizes PSU activity:
|  | Performance stock units |  |  | Weighted average grant date fair value |
Non-vested at April 27, 2024 |  |  | — |  |  | $ | — |
Awarded |  |  | 138,758 |  |  | $ | 16.38 |
Vested |  |  | — |  |  | $ | — |
Forfeited |  |  | — |  |  | $ | — |
Non-vested at July 27, 2024 |  |  | 138,758 |  |  | $ | 16.38 |
Restricted stock units RSUs granted 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 do not vest. The following table summarizes RSU activity:
|  | Restricted stock units |  |  | Weighted average grant date fair value |
Non-vested at April 27, 2024 |  |  | 941,640 |  |  | $ | 26.43 |
Awarded |  |  | 129,136 |  |  | $ | 13.65 |
Conversion of cash bonus to RSUs |  |  | 153,376 |  |  | $ | 12.98 |
Vested |  |  | (385,898 | ) |  | $ | 28.44 |
Forfeited |  |  | (165,402 | ) |  | $ | 22.40 |
Non-vested at July 27, 2024 |  |  | 672,852 |  |  | $ | 20.75 |
In the three months ended July 27, 2024, 153,376 RSUs were awarded in exchange for cash bonuses earned by certain employees. These RSUs vest on March 7, 2025. As the expense associated with the cash bonuses was previously recognized in fiscal 2024, there is no incremental expense to be recognized for the RSUs. The Company reclassified $2.0 million from accrued employee liabilities to additional paid-in capital on its condensed consolidated balance sheets related to the conversion of the cash bonuses to RSUs. Under the various stock plans, RSUs that have vested for certain executives, including Donald W. Duda, the Company’s former CEO, and Ronald L.G. Tsoumas, the Company’s former CFO, will not be delivered in common stock until the first day of the seventh month following the executive’s termination from the Company or upon a change of control. As of July 27, 2024, common stock to be delivered to these executives totaled 793,108 shares. The vested deferred RSUs are considered outstanding for earnings per share calculations. 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. The following table summarizes awards granted to non-employee directors:
|  | Non-employee director awards |  |  | Deferred non-employee director awards |  |  | Total |  |  | Weighted average grant date fair value |
Outstanding at April 27, 2024 |  |  | — |  |  |  | 77,319 |  |  |  | 77,319 |  |  | $ | 37.23 |
Awarded |  |  | 56,680 |  |  |  | 86,786 |  |  |  | 143,466 |  |  | $ | 9.92 |
Issued |  |  | (56,680 | ) |  |  | — |  |  |  | (56,680 | ) |  | $ | 9.88 |
Outstanding at July 27, 2024 |  |  | — |  |  |  | 164,105 |  |  |  | 164,105 |  |  | $ | 22.80 |
Stock options The following table summarizes stock option activity:
|  | Stock options |  |  | Weighted average exercise price |  |  | Weighted- average life (years) |  |  | Aggregate intrinsic value (in millions) |
Outstanding and exercisable at April 27, 2024 |  |  | 8,000 |  |  | $ | 37.01 |  |  |  | 0.2 |  |  | $ | 0.0 |
Exercised |  |  | — |  |  | $ | — |  |  |  |  |  |  |
Forfeited |  |  | (8,000 | ) |  | $ | 37.01 |  |  |  |  |  |  |
Outstanding and exercisable at July 27, 2024 |  |  | — |  |  | $ | — |  |  |  | 0.0 |  |  | $ | 0.0 |
Stock-based compensation expense All stock-based awards to employees and non-employee directors are recognized in selling and administrative expenses on the condensed consolidated statements of operations. Awards subject to graded vesting are recognized using the accelerated recognition method over the requisite service period. The table below summarizes the stock-based compensation expense related to the equity awards:
|  | Three Months Ended |
(in millions) |  | July 27, 2024 |  |  | July 29, 2023 |
RSUs |  | $ | 0.7 |  |  | $ | 1.0 |
Deferred non-employee director awards |  |  | 0.9 |  |  |  | 1.0 |
Non-employee director awards |  |  | 0.6 |  |  |  | 0.6 |
Total stock-based compensation expense |  | $ | 2.2 |  |  | $ | 2.6 |

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