COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis describes the key
components of our executive compensation program, including an analysis of compensation awarded to, earned by or paid to our named executive officers in fiscal 2023.
Our fiscal 2023 named executive officers were Donald W. Duda,
President and Chief Executive Officer; Ronald L.G. Tsoumas, Chief Financial Officer; Joseph E. Khoury, Chief Operating Officer; Andrea 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 appointed an executive officer in September 2022. Mr. Khoury was placed on leave from his position as
Chief Operating Officer the Company as of July 10, 2023.
Executive Summary
Our Business.
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 OEMs utilizing our
broad range of technologies for user interface, 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, consumer appliance, and medical devices. Our business is managed on a segment basis, with those segments being
Automotive, Industrial, Interface and Medical.
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 pay 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 $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 strong commitment to financial management focuses on, among
other things, margin expansion through improved product mixes and operational efficiencies, leverage of SG&A on sales volume growth, and reduction of working capital percentage of sales through lean manufacturing.
Fiscal 2023 Financial Highlights. We reported fiscal 2023 net sales of $1.2 billion, and reported net income of $77.1 million. For fiscal 2023, our quarterly dividend rate was $0.14 per share, and we distributed dividends of $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.
Key Compensation Decisions and Highlights. Our Compensation Committee strives to provide compensation programs that align our executives’ interests with those of our stockholders and appropriately reward our executives for performance against annual and
long-term objectives. The key components of the fiscal 2023 compensation program for our named executive officers were salary, an annual performance-based cash bonus, the final payment