What changed in this filing

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Item 1. Financial Statements

2021-12-02 compared with 2021-09-02 · 231 added, 96 removed, 461 unchanged (41% of the section changed)

5 unchanged sentences

Three Months Ended

July 31, 2021

August 1, 2020

Six Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Cost of products sold

5 unchanged sentences

Income before income taxes

Income tax expense (benefit)

Income tax expense

Basic and diluted income per share:

6 unchanged sentences

Three Months Ended

July 31, 2021

August 1, 2020

Six Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Other comprehensive income (loss), net of tax:

7 unchanged sentences

(in millions, except share and per-share data)

July 31, 2021

October 30, 2021

Current assets:

30 unchanged sentences

Shareholders' equity:

Common stock, $ 0.50 par value, 100,000,000 shares authorized, 39,544,645 shares and 39,644,913 shares issued as of July 31, 2021 and May 1, 2021, respectively

Common stock, $ 0.50 par value, 100,000,000 shares authorized, 38,737,129 shares and 39,644,913 shares issued as of October 30, 2021 and May 1, 2021, respectively

Additional paid-in capital

Accumulated other comprehensive income

Treasury stock, 1,346,624 shares as of July 31, 2021 and May 1, 2021

Accumulated other comprehensive (loss) income

Treasury stock, 1,346,624 shares as of October 30, 2021 and May 1, 2021

Retained earnings

6 unchanged sentences

(in millions, except share data)

Three Months Ended July 31, 2021

Three Months Ended October 30, 2021

comprehensive

1 unchanged sentence

shareholders'

Balance as of July 31, 2021

Purchases of common stock

Stock-based compensation expense

Other comprehensive loss

Dividends on common stock

Balance as of October 30, 2021

Three Months Ended October 31, 2020

comprehensive

income (loss)

shareholders'

Balance as of August 1, 2020

Stock-based compensation expense

Other comprehensive income

Dividends on common stock

Balance as of October 31, 2020

See notes to condensed consolidated financial statements.

METHODE ELECTRONICS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued) (Unaudited)

(in millions, except share data)

Six Months Ended October 30, 2021

comprehensive

income (loss)

shareholders'

Balance as of May 1, 2021

5 unchanged sentences

Dividends on common stock

Balance as of July 31, 2021

Three Months Ended August 1, 2020

Balance as of October 30, 2021

Six Months Ended October 31, 2020

comprehensive

7 unchanged sentences

Dividends on common stock

Balance as of August 1, 2020

Balance as of October 31, 2020

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in millions)

Three Months Ended

July 31, 2021

August 1, 2020

Six Months Ended

October 30, 2021

October 31, 2020

Operating activities:

22 unchanged sentences

Cash dividends

Proceeds from borrowings

Repayments of borrowings

1 unchanged sentence

Effect of foreign currency exchange rate changes on cash and cash equivalents

Decrease in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of the period

23 unchanged sentences

Various government programs have been enacted to provide assistance to businesses impacted by the COVID-19 pandemic.

The amount of assistance the Company received was $ 1.9 million and $ 2.9 million in the three months ended July 31, 2021 and August 1, 2020, respectively, and has been reported as other income.

The Company assessed certain accounting matters that require consideration of forecasted financial information, including, but not limited to, its allowance for credit losses, the carrying value of the Company’s goodwill, identifiable intangible assets, and other long-lived assets, and its valuation allowances in context with the information reasonably available to the Company and the unknown future impacts of the COVID-19 pandemic as of July 31, 2021 and through the date of this report.

As a result of these assessments, the Company concluded that there were no impairments or material increases in credit allowances or valuation allowances that impacted the Company’s condensed consolidated financial statements as of July 31, 2021 and for the three months then ended.

The amount of assistance the Company received was $ 2.1 million and $ 3.3 million in the three months ended October 30, 2021 and October 31, 2020, respectively.

The Company received $ 4.0 million and $ 6.2 million in the six months ended October 30, 2021 and October 31, 2020, respectively.

Government assistance has been reported as other income.

However, the Company’s future assessment of the magnitude and duration of the COVID-19 pandemic, as well as other factors, could result in material impacts to its consolidated financial statements in future reporting periods.

11 unchanged sentences

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.

The three months ended July 31, 2021 and August 1, 2020 were both 13 week periods.

The three months ended October 30, 2021 and October 31, 2020 were both 13-week periods, and the six months ended October 30, 2021 and October 31, 2020 were both 26-week periods.

Use of estimates

3 unchanged sentences

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 May 1, 2021.

There have been no material changes to the significant accounting policies in the three months ended July 31, 2021 other than those noted below.

There have been no material changes to the significant accounting policies in the six months ended October 30, 2021 other than those noted below.

Recently adopted accounting pronouncements

3 unchanged sentences

The Company adopted this guidance as of May 2, 2021, and the impact on its condensed consolidated financial statements was not material.

New accounting pronouncements not yet adopted

In November 2021, the FASB issued ASU 2021-10, “ Government Assistance (Topic 832) ,” which requires business entities to disclose information about transactions with a government that are accounted for by applying a grant or contribution model by analogy (for example, IFRS guidance in IAS 20 or guidance on contributions for not-for-profit entities in ASC 958-605).

For transactions in the scope of the new standard, business entities will need to provide information about the nature of the transaction, including significant terms and conditions, as well as the amounts and specific financial statement line items affected by the transaction.

The new guidance is effective for all entities for annual reporting periods beginning after December 15, 2021;

however, early adoption is permitted.

The Company does not expect that the adoption of this standard will have an impact on its condensed consolidated financial statements;

however the Company expects to increase its disclosures with respect to government assistance beginning in fiscal 2023.

The Company generates revenue from the manufacturing of products for customers in diversified global markets.

15 unchanged sentences

A contract liability exists when an entity has received consideration, or the amount is due from the customer in advance of revenue recognition.

The net changes in the contract asset and contract liability balances for the three months ended July 31, 2021 and August 1, 2020 were not material.

Disaggregated r evenue i nformation

The net changes in the contract asset and contract liability balances for the three and six months ended October 30, 2021 and October 31, 2020 were not material.

Disaggregated revenue information

The following table represents a disaggregation of revenue from contracts with customers by segment and geographical location.

1 unchanged sentence

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 July 31, 2021

Three Months Ended October 30, 2021

(in millions)

1 unchanged sentence

North America

Europe & Africa

Total net sales

3 unchanged sentences

Total net sales

Three Months Ended August 1, 2020

Three Months Ended October 31, 2020

(in millions)

1 unchanged sentence

North America

Europe & Africa

Total net sales

3 unchanged sentences

Total net sales

Six Months Ended October 30, 2021

(in millions)

Geographic net sales:

North America

Total net sales

Timing of revenue recognition:

Goods transferred at a point in time

Goods transferred over time

Total net sales

Six Months Ended October 31, 2020

(in millions)

Geographic net sales:

North America

Total net sales

Timing of Revenue Recognition:

Goods transferred at a point in time

Goods transferred over time

Total net sales

Restructuring

2 unchanged sentences

These actions included plant consolidations and workforce reductions in the Automotive, Industrial and Interface segments.

In the three months ended August 1, 2020, the Company recognized $ 3.4 million of restructuring costs, of which $ 1.9 million was recorded in cost of products sold and $ 1.5 million was recorded in selling and administrative expenses.

In the three months ended October 31, 2020, the Company recognized $ 4.2 million of restructuring costs, of which $ 2.7 million was recorded in cost of products sold and $ 1.5 million was recorded in selling and administrative expenses.

In the six months ended October 31, 2020, the Company recognized $ 7.6 million of restructuring costs, of which $ 4.6 million was recorded in cost of products sold and $ 3.0 million was recorded in selling and administrative expenses.

Employee termination benefits are accrued upon the commitment to a termination plan and when the benefit arrangement is communicated to affected employees, or when liabilities are determined to be probable and estimable.

2 unchanged sentences

The table below presents restructuring costs by reportable segment:

Three Months Ended August 1, 2020

Three Months Ended October 31, 2020

(in millions)

2 unchanged sentences

Contract termination costs

The Company’s restructuring liability was $ 0.2 million and $ 1.2 million as of July 31, 2021 and May 1, 2021, respectively.

Six Months Ended October 31, 2020

(in millions)

Employee termination benefits

Asset impairment charges

Contract termination costs

The Company’s restructuring liability was $ 0.2 million and $ 1.2 million as of October 30, 2021 and May 1, 2021, respectively.

Estimates of restructuring costs are based on information available at the time such charges are recorded.

6 unchanged sentences

The estimates used to compute the provision or benefit for income taxes may change as new events occur, additional information is obtained or as the Company’s tax environment changes.

The Company’s income tax expense and effective tax rate for the three months ended July 31, 2021 and August 1, 2020 were as follows:

The Company’s income tax expense and effective tax rate for the three and six months ended October 30, 2021 and October 31, 2020 were as follows:

Three Months Ended

Six Months Ended

($ in millions)

July 31, 2021

August 1, 2020

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Income before income taxes

Income tax expense (benefit)

Income tax expense

Effective tax rate

The income tax provision for the three months ended July 31, 2021 was lower than the U.S.

statutory tax rate primarily due to foreign operations with lower statutory tax rates.

The income tax provision for the three months ended August 1, 2020 was lower than the U.S.

statutory tax rate primarily due to a benefit from tax credits claimed in a foreign jurisdiction of $ 6.6 million, additional beneficial tax attributes claimed of $ 1.2 million and income derived from foreign operations with lower statutory rates.

The Company’s unrecognized income tax benefits were $ 5.3 million as of both July 31, 2021 and May 1, 2021.

The effective tax rate for the three and six months ended October 30, 2021 and three months ended October 31, 2020 was lower than the U.S.

statutory tax rate primarily due to income derived from foreign operations with lower statutory tax rates.

The effective tax rate for the six months ended October 31, 2020 was lower than the U.S.

statutory tax rate primarily due to a benefit from tax credits earned and research deductions claimed in foreign jurisdictions and income derived from foreign operations with lower statutory tax rates.

The Company’s gross unrecognized income tax benefits were $ 5.3 million as of both October 30, 2021 and May 1, 2021.

If any portion of the Company’s unrecognized tax benefits is recognized, it would impact the Company’s effective tax rate.

The unrecognized tax benefits are reviewed periodically and adjusted for changing facts and circumstances, such as tax audits, lapse of applicable statutes of limitations and changes in tax law.

The Company recognizes interest and penalties related to income tax uncertainties in income tax expense.

Accrued interest and penalties were $ 0.2 million as of both October 30, 2021 and May 1, 2021.

Balance Sheet Components

Cash and cash equivalents

Cash and cash equivalents consist of cash and highly liquid investments with maturities of three months or less.

Highly liquid investments include money market funds which are classified within Level 1 of the fair value hierarchy.

As of October 30, 2021, the Company had a balance of $ 30.0 million in money market accounts.

The Company did not have any money market accounts as of May 1, 2021.

Accounts receivable and allowance for doubtful accounts

Accounts receivable are customer obligations due under normal trade terms and are presented net of an allowance for doubtful accounts.

The Company establishes an allowance for doubtful accounts based on the current expected credit loss impairment model (“CECL”).

The Company establishes an allowance for doubtful accounts based on the current expected credit loss impairment model.

The Company applies a historical loss rate based on historic write-offs to aging categories.

1 unchanged sentence

The Company may also record a specific reserve for individual accounts when it becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer’s operating results or financial position.

The allowance for doubtful accounts balance was $ 0.8 million and $ 0.7 million as of July 31, 2021 and May 1, 2021, respectively.

The allowance for doubtful accounts balance was $ 0.8 million and $ 0.7 million as of October 30, 2021 and May 1, 2021, respectively.

Inventories are stated at the lower-of-cost or net realizable value.

4 unchanged sentences

(in millions)

July 31, 2021

October 30, 2021

Finished products

8 unchanged sentences

(in millions)

July 31, 2021

October 30, 2021

Buildings and building improvements

4 unchanged sentences

Property, plant and equipment, net

Depreciation expense was $ 7.8 million and $ 7.4 million in the three months ended July 31, 2021 and August 1, 2020, respectively.

As of July 31, 2021 and May 1, 2021, capital expenditures recorded in accounts payable totaled $ 2.5 million and $ 5.5 million, respectively.

Depreciation expense was $ 8.5 million and $ 7.6 million in the three months ended October 30, 2021 and October 31, 2020, respectively.

Depreciation expense was $ 16.3 million and $ 15.0 million in the six months ended October 30, 2021 and October 31, 2020, respectively.

As of October 30, 2021 and May 1, 2021, capital expenditures recorded in accounts payable totaled $ 2.9 million and $ 5.5 million, respectively.

Pre-production tooling costs related to long-term supply arrangements

1 unchanged sentence

Engineering, testing and other costs incurred in the design and development of production parts are expensed as incurred, unless the costs are reimbursable by the customer.

As of July 31, 2021 and May 1, 2021, the Company had $ 27.8 million and $ 25.0 million, respectively, of pre-production tooling costs related to customer-owned tools for which reimbursement is contractually guaranteed by the customer or for which the customer has provided a non-cancelable right to use the tooling.

As of October 30, 2021 and May 1, 2021, the Company had $ 30.1 million and $ 25.0 million, respectively, of pre-production tooling costs related to customer-owned tools for which reimbursement is contractually guaranteed by the customer or for which the customer has provided a non-cancelable right to use the tooling.

Costs for molds, dies and other tools used in products produced for its customers under long-term supply arrangements for which the Company has title are capitalized in property, plant and equipment and amortized over the shorter of the life of the arrangement or over the estimated useful life of the assets.

As of July 31, 2021 and May 1, 2021, Company-owned tooling was $ 16.7 million and $ 17.0 million, respectively.

As of October 30, 2021 and May 1, 2021, Company-owned tooling was $ 13.5 million and $ 17.0 million, respectively.

Goodwill and Other Intangible Assets

3 unchanged sentences

Foreign currency translation

Balance as of July 31, 2021

Balance as of October 30, 2021

The Company tests indefinite-lived intangible assets and goodwill for impairment by either performing a qualitative evaluation or a quantitative test at least annually, or more frequently if an indication of impairment arises.

The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit or asset is less than its carrying amount.

No impairment indicators were identified in the first quarter of fiscal 2022.

No impairment indicators were identified in the second quarter of fiscal 2022.

Other i ntangible a ssets, n et

Details of identifiable intangible assets are shown below:

As of July 31, 2021

As of October 30, 2021

(in millions)

31 unchanged sentences

The cross-currency swap is designated as a hedge of the Company’s net investment in a euro-based subsidiary.

The fair value of the cross-currency swap is classified within Level 2 of the fair value hierarchy.

Hedge effectiveness is assessed at the inception of the hedging relationship and quarterly thereafter, under the spot-to-spot method.

The Company recognizes the impact of all other changes in fair value of the derivative through interest expense, which was not material in either the three months ended July 31, 2021 or August 1, 2020.

As of July 31, 2021 and May 1, 2021, the cross-currency swap was in a net liability position with an aggregate fair value of $ 5.7 million and $ 6.8 million, respectively, and is recorded within other long-term liabilities in the condensed consolidated balance sheets.

The Company recognizes the impact of all other changes in fair value of the derivative through interest expense, which was not material in either the three or six months ended October 30, 2021 or October 31, 2020.

Interest rate swaps

1 unchanged sentence

The interest rate swaps are designated as cash flow hedges.

The fair value of the interest rate swap is classified within Level 2 of the fair value hierarchy.

Hedge effectiveness is assessed at the inception of the hedging relationship and quarterly thereafter.

1 unchanged sentence

Subsequently, the accumulated gains and losses recorded in AOCI are reclassified to income in the period during which the hedged cash flow impacts earnings, which are expected to be immaterial over the next 12 months.

As of July 31, 2021 and May 1, 2021, the interest rate swap was in a net liability position with an aggregate fair value of $ 0.3 million and $ 0.2 million, respectively, and is recorded within other long-term liabilities in the condensed consolidated balance sheets.

No ineffectiveness was recognized in the three months ended July 31, 2021.

No ineffectiveness was recognized in the three or six months ended October 30, 2021.

Derivatives not designated as hedges

2 unchanged sentences

Gains and losses on these forward contracts are recognized in other income, net, along with the foreign currency gains and losses on monetary assets and liabilities in the condensed consolidated statements of income.

As of July 31, 2021 and May 1, 2021, the Company held foreign currency forward contracts with a notional value of $ 19.3 million and $ 14.8 million, respectively.

The forward contracts were in a net liability position with an aggregate fair value of $ 36 thousand and $ 22 thousand as of July 31, 2021, and May 1, 2021, respectively, and are recorded within other accrued liabilities in the condensed consolidated balance sheets.

During the three months ended July 31, 2021, an immaterial gain was recognized in the condensed consolidated statements of income.

As of October 30, 2021 and May 1, 2021, the Company held foreign currency forward contracts with a notional value of $ 27.5 million and $ 14.8 million, respectively.

During the three and six months ended October 30, 2021, an immaterial gain was recognized in the condensed consolidated statements of income.

Fair value of derivative instruments on the balance sheet

The fair value of derivative instruments are classified as Level 2 within the fair value hierarchy and are recorded in the balance sheets as follows:

Asset/(Liability)

(in millions)

Financial Statement Caption

October 30, 2021

Derivatives designated as hedging instruments:

Net investment hedges

Other long-term liabilities

Interest rate swaps

Other long-term liabilities

Interest rate swaps

Other long-term assets

Derivatives not designated as hedging instruments:

Foreign currency forward contracts

Other current assets

Effect of derivative instruments on comprehensive income (loss)

Gross amounts recorded in other comprehensive income (loss) were as follows:

Three Months Ended

Six Months Ended

(in millions)

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Net investment hedges

Interest rate swaps

A summary of debt is shown below:

(in millions)

July 31, 2021

October 30, 2021

Revolving credit facility

10 unchanged sentences

Outstanding borrowings under the Credit Agreement bear interest at variable rates based on the type of borrowing and the Company’s debt to EBITDA financial ratio, as defined in the Credit Agreement.

The weighted-average interest rate on outstanding borrowings under the Credit Agreement was approximately 1.3 % as of July 31, 2021.

The weighted-average interest rate on outstanding borrowings under the Credit Agreement was approximately 1.3 % as of October 30, 2021.

The Credit Agreement contains customary representations and warranties, financial covenants, restrictive covenants and events of default.

As of July 31, 2021, the Company was in compliance with all the covenants in the Credit Agreement.

As of October 30, 2021, the Company was in compliance with all the covenants in the Credit Agreement.

One of the Company’s European subsidiaries has debt that consists of 11 notes with maturities ranging from 2021 to 2031.

The weighted-average interest rate on this debt was approximately 1.5 % at July 31, 2021 and $ 2.3 million of the debt was classified as short-term.

The weighted-average interest rate on this debt was approximately 1.5 % at October 30, 2021 and $ 2.2 million of the debt was classified as short-term.

Shareholders’ Equity

2 unchanged sentences

Such purchases may be made on the open market, in private transactions or pursuant to purchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934.

In the three months ended July 31, 2021, the Company purchased 157,513 shares at a cost of $ 7.6 million.

As of July 31, 2021, a total of 325,462 shares have been purchased at a total cost of $ 15.1 million since the commencement of the share buyback program.

All purchased shares were retired and are reflected as a reduction of common stock for the par value of the shares, with the excess applied as a reduction to retained earnings.

As of July 31, 2021, the dollar value of shares that remained available to be purchased by the Company under this share buyback program was approximately $ 84.9 million.

The Company paid dividends totaling $ 5.2 million and $ 5.0 million in the three months ended July 31, 2021 and August 1, 2020, respectively.

Dividends paid in the three months ended August 1, 2020 include $ 0.9 million of dividends on restricted stock that vested during the period.

The Company increased its quarterly dividend from $0.11 per share to $0.14 per share in the three months ended July 31, 2021.

The following table summarizes the Company’s stock buyback activity under this share buyback program:

Three Months Ended

Six Months Ended

(in millions, except share and per share data)

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Shares purchased

Average price per share

As of October 30, 2021, a total of 1,132,978 shares have been purchased at a total cost of $ 49.9 million since the commencement of the share buyback program.

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.

As of October 30, 2021, the dollar value of shares that remained available to be purchased by the Company under this share buyback program was approximately $ 50.1 million.

The Company paid dividends totaling $ 5.1 million and $ 4.1 million in the three months ended October 30, 2021 and October 31, 2020, respectively.

The Company paid dividends totaling $ 10.3 million and $ 9.1 million in the six months ended October 30, 2021 and October 31, 2020, respectively.

Dividends paid in the six months ended October 31, 2020 include $ 0.9 million of dividends on restricted stock that vested during the period.

The Company increased its quarterly dividend from $0.11 per share to $0.14 per share beginning in the three months ended July 31, 2021.

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 accumulated other comprehensive income (loss), net of tax is shown below:

A summary of changes in AOCI, net of tax is shown below:

Three Months Ended

Six Months Ended

(in millions)

July 31, 2021

August 1, 2020

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Currency Translation Adjustments:

2 unchanged sentences

$( 0.1 ) million;

$ 0.3 million

Balance at end of period

Derivative Instruments:

Derivative Financial Instruments:

Balance at beginning of period

1 unchanged sentence

$( 0.2 ) million;

$( 0.8 ) million;

$ 0.8 million

Balance at end of period

Accumulated other comprehensive income (loss), end of period

Total accumulated other comprehensive loss

Stock-based compensation

6 unchanged sentences

The number of shares of common stock originally authorized under the 2014 Plan is 3,000,000 .

As of July 31, 2021, there were 101,750 shares available for award under the 2014 Plan.

As of October 30, 2021, there were 101,691 shares available for award under the 2014 Plan.

Restricted stock awards and performance units

As of July 31, 2021, the Company had 928,412 RSAs outstanding which will 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.

As of October 30, 2021, the Company had 928,412 RSAs outstanding which will 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.

2 unchanged sentences

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 RSAs is recognized when it is probable the minimum threshold performance criteria will be achieved.

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 achieved.

2 unchanged sentences

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, based on projections of the Company’s current business portfolio, compensation expense has not been recognized for the RSAs or PUs in the three months ended July 31, 2021, as the performance conditions are not probable of being met.

Unrecognized stock-based compensation expense at target level of performance is $ 26.5 million as of July 31, 2021.

In accordance with ASC 718, based on projections of the Company’s current business portfolio, compensation expense has not been recognized for the RSAs or PUs in the three or six months ended October 30, 2021 and October 31, 2020, as the performance conditions are not probable of being met.

Unrecognized stock-based compensation expense at target level of performance is $ 26.5 million as of October 30, 2021.

Restricted stock units

6 unchanged sentences

Non-vested at May 1, 2021

Non-vested at July 31, 2021

Non-vested at October 30, 2021

Under the various stock plans, common stock underlying vested RSUs held by certain executives will not be delivered until termination of employment or a change of control of the Company.

As of July 31, 2021, common stock to be delivered to these executives totaled 577,055 shares.

As of October 30, 2021, common stock to be delivered to these executives totaled 577,055 shares.

Director awards

In the three months ended July 31, 2021 and August 1, 2020, the Company granted 32,505 shares and 33,000 shares, respectively, of common stock to its non-employee directors under the 2014 Plan.

In the six months ended October 30, 2021 and October 31, 2020, the Company granted 32,505 shares and 33,000 shares, respectively, of common stock to its non-employee directors under the 2014 Plan.

The shares vested immediately upon grant.

Non-employee directors may elect to defer receipt of their shares under the Company’s non-qualified deferred compensation plan.

In the three months ended July 31, 2021, a total of 17,730 shares were deferred.

In the six months ended October 30, 2021, a total of 17,730 shares were deferred.

The fair value of shares granted was determined based on the closing price of the Company’s stock on the date of grant.

5 unchanged sentences

Outstanding and exercisable at May 1, 2021

Outstanding and exercisable at July 31, 2021

Outstanding and exercisable at October 30, 2021

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on that date.

The total intrinsic value of options exercised in the three months ended July 31, 2021 was $ 0.2 million.

The total intrinsic value of options exercised in the six months ended October 30, 2021 was $ 0.2 million.

Stock-based compensation expense

3 unchanged sentences

Three Months Ended

Six Months Ended

(in millions)

July 31, 2021

August 1, 2020

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Phantom director awards

Director awards

5 unchanged sentences

Three Months Ended

July 31, 2021

August 1, 2020

Six Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Net income (in millions)

18 unchanged sentences

The tables below present information about the Company’s reportable segments:

Three Months Ended July 31, 2021

Three Months Ended October 30, 2021

(in millions)

5 unchanged sentences

Income before income taxes

Three Months Ended August 1, 2020

Three Months Ended October 31, 2020

(in millions)

5 unchanged sentences

Income before income taxes

Six Months Ended October 30, 2021

(in millions)

July 31, 2021

Transfers between segments

Net sales to unaffiliated customers

Income (loss) from operations

Interest expense, net

Other income, net

Income before income taxes

Six Months Ended October 31, 2020

(in millions)

Transfers between segments

Net sales to unaffiliated customers

Income (loss) from operations

Interest expense, net

Other income, net

Income before income taxes

(in millions)

October 30, 2021

Identifiable assets:

23 unchanged sentences

Court of Appeals for the Tenth Circuit.

On August 24, 2021, the Tenth Circuit issued a decision affirming the lower court’s ruling with the exception that it modified the injunction from the entire world to all of the countries in which Hetronic sells its products.

It is possible that the defendants may seek to further appeal this decision and these matters.

On August 24, 2021, the Tenth Circuit issued a decision affirming the lower court’s ruling with the exception that it instructed the District Court to modify the injunction from the entire world to all of the countries in which Hetronic sells its products.

The District Court has indicated that it will set a hearing related to modifying the injunction pursuant to the Tenth Circuit’s opinion.

The defendants have filed a motion with the United States Supreme Court seeking a 60-day extension to late January 2022 to determine if they will seek certiorari and, if so, to file their petition.

Like any judgment, particularly any judgment involving defendants outside of the United States, there is no guarantee that the Company will be able to collect the judgment.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements