Quarterly Report for Quarter Ending January 31, 2026 (Form 10-Q)

Management's Discussion and Analysis ofFinancial Condition and Results of Operations

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" 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;

• Production delays or cancelled orders;

• Changes in global trade policies, including tariffs;

• Failure to attract and retain qualified personnel;

• Inflation;

• Dependence on the availability and price of materials;

• Dependence on a small number of large customers;

• 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;

• 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;

• Ability to 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;

• Risks associated with inventory;

• Ability to remediate a material weakness in our internal control over financial reporting;

• Currency fluctuations;

• Income tax rate fluctuations;

• Judgments related to accounting for tax positions;

• Risks associated with litigation and government inquiries;

• Risks associated with warranty claims;

• Changing government regulations;

• Changing requirements by stakeholders on environmental or social matters;

• Effects of IT disruptions or cybersecurity incidents;

• Ability to innovate and keep pace with technological changes; and

• Ability to protect our intellectual property.

Additional details and factors are discussed under the caption "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended May 3, 2025 and in Part II, Item 1A of this Quarterly Report. 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 appliances.

Macroeconomic Conditions

There is continued uncertainty about the future relationship between the U.S. and various other countries with respect to tariffs, trade policies, government regulations, treaties and trade agreements. We are exposed to market risk with respect to increased and volatile duties assessed on raw materials (including copper, steel and aluminum), component parts (including semiconductors), and finished goods we import into the U.S. from our various manufacturing sites, including those in Mexico, China, Egypt, Europe and Canada. Should any of these tariffs or other trade barriers expand, raw materials and finished goods that we import will face higher prices, which could lead to reduced margins or increased prices that could, in turn, cause decreased customer demand. To the extent that we are unable to obtain price increases or there is a significant decrease in customer demand, new or higher tariffs could have a material effect on our results of operations.

The US-Israeli strikes in Iran and the Iranian retaliatory strikes in the Middle East have affected the global economy and given rise to potential global security issues that may adversely affect international business and economic conditions. This conflict in the Middle East may cause additional disruption in the supply chains, including logistics issues and inflationary challenges, which may adversely affect our business and results of operations. Additionally, certain of our customers and suppliers may be negatively affect by these events, which in turn may negatively affect the markets where we do business.

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.

Our business in the future will be affected by the broad trend of electrification. The adoption of EVs has been slower than anticipated, which may affect our financial condition, results of operations, and cash flows. Certain of our customers have recently announced shifts to their EV strategies and we are pursuing these customers for price adjustments and other commercial recoveries. If we are not successful in obtaining these recoveries, we may experience production inefficiencies, including underutilized capacity and workforce disruptions, which could affect our profitability and estimates of future cash flows.

Global Supply Chain Disruptions

We continue to face a variety of supply chain challenges in fiscal 2026, including the procurement of automotive-grade semiconductors. In addition, we have experienced, and may continue to experience, business interruptions, including customer shutdowns and increased material and logistics costs and labor shortages. Changes in government regulations in areas including, but not limited to, trade and tariff regulations as noted above, could also increase our costs. We continue to work closely with suppliers and customers to mitigate and minimize the potential adverse effect 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 effect on our financial condition, results of operations, and cash flows.

Recent Events

Sale of a Business

On March 5, 2026, we entered into and closed on an asset purchase agreement with a third party (the "Buyer") pursuant to which we sold substantially all of the assets of our dataMate business (the "Transaction"). The aggregate consideration for the Transaction consists of a purchase price of approximately $16.4 million, subject to customary working capital adjustments. The Transaction also includes customary representations, warranties, covenants, and indemnification provisions. Due to the proximity of the closing date of the Transaction with the date of the filing of this Quarterly Report on Form 10-Q, the initial accounting for the Transaction, including the determination of the final purchase price adjustment and the allocation of the consideration, is not yet completed. Based on preliminary estimates, we expect to record a gain on the sale in the range of $9.0 million to $10.5 million. Proceeds from the transaction are expected to be used for general corporate purposes, including debt reduction and working capital needs.

The dataMate business is included in the Interface segment, and represents less than 2% of our consolidated net sales for both the nine months ended January 31, 2026 and fiscal year ended May 3, 2025.

Sale of Assets

We finalized a purchase and sale agreement to sell one of our locations to a third party for a purchase price of $4.7 million, which is subject to satisfaction of customary closing conditions and the relocation of the dataMate business. Accordingly, the property has not been classified as held for sale as of January 31, 2026. The net book value of this location as of January 31, 2026 was $3.5 million. The Buyer is expected to relocate the dataMate business on or before April 19, 2026, and the sale of assets is expected to close no later than May 10, 2026. Proceeds from the sale of assets are expected to be used for general corporate purposes, including debt reduction and working capital needs.

Consolidated Results of Operations

We maintain our financial records on the basis of a 52 or 53-week fiscal year ending on the Saturday closest to April 30. Fiscal 2026 is a 52-week year and fiscal 2025 was a 53-week year. The three months ended January 31, 2026 and February 1, 2025 were each 13-week periods, while the nine months ended January 31, 2026 and February 1, 2025, were 39 and 40-week periods, respectively. The following discussions of comparative results among periods should be reviewed in this context.

The table below compares our results of operations between the three and nine months ended January 31, 2026 and the three and nine months ended February 1, 2025:

Net sales

Net sales decreased $6.2 million, or 2.6%, to $233.7 million in the three months ended January 31, 2026, compared to $239.9 million in the three months ended February 1, 2025. Foreign currency translation increased net sales by $11.7 million. Excluding foreign currency translation, net sales decreased $17.9 million. The decrease was primarily due to lower sales volumes in the Automotive segment and Interface segment, partially offset by higher sales volumes in the Industrial segment.

Net sales decreased $69.9 million, or 8.8%, to $721.1 million in the nine months ended January 31, 2026, compared to $791.0 million in the nine months ended February 1, 2025. Foreign currency translation increased net sales by $25.0 million. Excluding foreign currency translation, net sales decreased $94.9 million. The decrease was primarily due to lower sales volumes in the Automotive segment and Interface segment, partially offset by higher sales volumes in the Industrial segment.

Cost of products sold

Cost of products sold decreased $3.7 million, or 1.9%, to $194.9 million (83.4% of net sales) in the three months ended January 31, 2026, compared to $198.6 million (82.8% of net sales) in the three months ended February 1, 2025. Foreign currency translation increased cost of products sold by $8.8 million. Excluding foreign currency translation, cost of products sold decreased $12.5 million. The decrease was primarily due to lower material costs as a result of lower sales volumes.

Cost of products sold decreased $56.1 million, or 8.7%, to $591.1 million (82.0% of net sales) in the nine months ended January 31, 2026, compared to $647.2 million (81.8% of net sales) in the nine months ended February 1, 2025. Foreign currency translation increased cost of products sold by $19.2 million. Excluding foreign currency translation, cost of products sold decreased $75.3 million. The decrease was primarily due to lower material costs as a result of lower sales volumes. Restructuring and asset impairment charges included within cost of products sold were $0.1 in the nine months ended January 31, 2026, compared to $0.4 million in the nine months ended February 1, 2025.

Gross profit margin

Gross profit margin was 16.6% of net sales in the three months ended January 31, 2026, compared to 17.2% of net sales in the three months ended February 1, 2025. The decrease in gross profit margin was primarily a result of lower sales volume and product mix in the Automotive segment and Interface segment.

Gross profit margin was 18.0% of net sales in the nine months ended January 31, 2026, remaining relatively consistent compared to 18.2% of net sales in the nine months ended February 1, 2025.

Selling and administrative expenses

Selling and administrative expenses increased $1.4 million, or 3.7%, to $39.1 million (16.7% of net sales) in the three months ended January 31, 2026, compared to $37.7 million (15.7% of net sales) in the three months ended February 1, 2025. Excluding foreign currency translation, selling and administrative expenses increased $0.4 million. Restructuring and asset impairment charges included within selling and administrative expenses were $0.4 million in the three months ended January 31, 2026, primarily related to employee termination benefits.

Selling and administrative expenses decreased $11.8 million, or 9.3%, to $114.7 million (15.9% of net sales) in the nine months ended January 31, 2026, compared to $126.5 million (16.0% of net sales) in the nine months ended February 1, 2025. Excluding foreign currency translation, selling and administrative expenses decreased $13.9 million. The decrease was primarily due to lower professional fees. Restructuring and asset impairment charges included within selling and administrative expenses were $2.3 million in the nine months ended January 31, 2026, compared to $0.3 million in the nine months ended February 1, 2025, primarily related to employee termination benefits.

Amortization of intangibles

Amortization of intangibles was $5.8 million in the three months ended January 31, 2026, compared to $5.8 million in the three months ended February 1, 2025. Amortization of intangibles was $17.4 million in the nine months ended January 31, 2026, compared to $17.6 million in the nine months ended February 1, 2025.

Interest expense, net

Interest expense, net was $5.4 million in the three months ended January 31, 2026, compared to $5.5 million in the three months ended February 1, 2025. The decrease was due to a lower level of borrowings and lower interest rates, partially offset by the unfavorable effects of foreign exchange rates on the euro denominated interest.

Interest expense, net was $17.0 million in the nine months ended January 31, 2026, compared to $16.5 million in the nine months ended February 1, 2025. The increase was due to the unfavorable effects of foreign exchange rates on the euro denominated interest and higher amortization of debt issuance costs, partially offset by a lower interest rates and a lower level of borrowings. Additionally, in the nine months ended months ended February 1, 2025, there was a gain of $0.4 million recognized on a cross-currency swap that was settled in December 2024.

Other expense, net

Other expense, net was $1.6 million in the three months ended January 31, 2026, compared to $0.5 million in the three months ended February 1, 2025. Net foreign exchange loss was $2.6 million in the three months ended January 31, 2026, compared to $1.3 million in the three months ended February 1, 2025.

Other expense, net was $4.3 million in the nine months ended January 31, 2026, compared to $2.9 million in the nine months ended February 1, 2025. Net foreign exchange loss was $5.7 million in the nine months ended January 31, 2026, compared to $3.6 million in the nine months ended February 1, 2025. Other expense, net in the nine months ended January 31, 2026 includes a non-cash write-off of $0.6 million of unamortized debt issuance costs, compared to $1.2 million in the nine months ended February 1, 2025. In addition, other expense, net includes $0.5 million of a net gain on sale of assets in the nine months ended January 31, 2026, compared to $0.3 million in the nine months ended February 1, 2025.

Income tax expense

Income tax expense was $2.8 million (-21.4% effective tax rate) in the three months ended January 31, 2026, compared to $6.2 million (-75.6% effective tax rate) in the three months ended February 1, 2025. Income tax expense was $12.7 million (-54.3% effective tax rate) in the nine months ended January 31, 2026, compared to $14.6 million (-74.1% effective tax rate) in the nine months ended February 1, 2025.

The effective tax rate for the three and nine months ended January 31, 2026 differs from the U.S. federal statutory tax rate of 21% primarily due to an increase in a valuation allowance for U.S. deferred tax assets, an unfavorable effect from global intangible low-tax income, and non-deductible interest, partially offset by the effect of income derived from foreign operations with lower statutory tax rates. The effective tax rate for the three and nine months ended February 1, 2025 differs from 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 income derived from foreign operations with lower statutory tax rates and research deductions claimed in foreign jurisdictions and foreign exchange loss.

Net loss

Net loss was $15.9 million in the three months ended January 31, 2026, compared to $14.4 million in the three months ended February 1, 2025. Net loss was $36.1 million in the nine months ended January 31, 2026, compared to $34.3 million in the nine months ended February 1, 2025. The increase in net loss for both periods was attributable to the aforementioned items.

Reportable Operating Segments

Automotive

Net sales

Automotive segment net sales decreased $9.5 million, or 8.2%, to $106.2 million in the three months ended January 31, 2026, compared to $115.7 million in the three months ended February 1, 2025. Excluding foreign currency translation, net sales decreased $15.3 million. The change is attributable to the following:

Automotive segment net sales decreased $73.2 million, or 18.5%, to $322.8 million in the nine months ended January 31, 2026, compared to $396.0 million in the nine months ended February 1, 2025. Excluding foreign currency translation, net sales decreased $86.1 million. The change is attributable to the following:

Gross profit

Automotive segment gross profit decreased $1.1 million, or 36.7%, to $1.9 million in the three months ended January 31, 2026, compared to $3.0 million in the three months ended February 1, 2025. Excluding foreign currency translation, gross profit decreased $2.0 million. Gross profit margins decreased to 1.8% in the three months ended January 31, 2026, compared to 2.6% in the three months ended February 1, 2025. The decrease in gross profit margins was primarily due to lower sales volumes and mix in North America.

Automotive segment gross profit decreased $21.6 million, or 83.7%, to $4.2 million in the nine months ended January 31, 2026, compared to $25.8 million in the nine months ended February 1, 2025. Gross profit margins decreased to 1.3% in the nine months ended January 31, 2026, compared to 6.5% in the nine months ended February 1, 2025. The decrease in gross profit was primarily due to lower sales volumes and mix and higher operating expenses in North America.

Loss from operations

Automotive segment loss from operations was $12.7 million in the three months ended January 31, 2026, compared to $9.0 million in the three months ended February 1, 2025. The loss from operations was primarily due to higher selling and administrative expenses and lower gross profit.

Automotive segment loss from operations was $36.1 million in the nine months ended January 31, 2026, compared to $14.0 million in the nine months ended February 1, 2025. The decrease was primarily due to lower gross profit.

Industrial

Net sales

Industrial segment net sales increased $10.6 million, or 9.5%, to $122.5 million in the three months ended January 31, 2026, compared to $111.9 million in the three months ended February 1, 2025. Excluding foreign currency translation, net sales increased $4.7 million. The increase was due to higher sales volumes for lighting products for off-road equipment markets and power products, partially offset by lower sales volumes for lighting products for commercial vehicles.

Industrial segment net sales increased $18.1 million, or 5.1%, to $372.9 million in the nine months ended January 31, 2026, compared to $354.8 million in the nine months ended February 1, 2025. Excluding foreign currency translation, net sales increased $6.0 million. The increase was due to higher sales volumes of power products and lighting products for off-road equipment markets, partially offset by lower sales volumes for lighting products for commercial vehicles and radio remote control devices.

Gross profit

Industrial segment gross profit increased $1.6 million, or 4.5%, to $36.8 million in the three months ended January 31, 2026, compared to $35.2 million in the three months ended February 1, 2025. Excluding foreign currency translation, gross profit decreased $0.4 million. Gross profit margins decreased to 30.0% in the three months ended January 31, 2026, compared to 31.5% in the three months ended February 1, 2025. Gross profit margins decreased due to higher material costs.

Industrial segment gross profit increased $12.9 million, or 12.2%, to $118.9 million in the nine months ended January 31, 2026, compared to $106.0 million in the nine months ended February 1, 2025. Excluding foreign currency translation, gross profit increased $8.9 million. Gross profit margins increased to 31.9% in the nine months ended January 31, 2026, compared to 29.9% in the nine months ended February 1, 2025. Gross profit margins improved due to higher sales volumes and lower freight costs.

Income from operations

Industrial segment income from operations increased $2.6 million, or 11.5%, to $25.2 million in the three months ended January 31, 2026, compared to $22.6 million in the three months ended February 1, 2025. Excluding foreign currency translation, income from operations increased $1.3 million. The increase was primarily due to higher gross profit and lower selling and administrative expenses.

Industrial segment income from operations increased $17.2 million, or 27.0%, to $81.0 million in the nine months ended January 31, 2026, compared to $63.8 million in the nine months ended February 1, 2025. Excluding foreign currency translation, income from operations increased $14.5 million. The increase was primarily due to higher gross profit and lower selling and administrative expenses. The decrease in selling and administrative expenses was primarily due to lower professional fees.

Interface

Net sales

Interface segment net sales decreased $7.3 million, or 59.3% to $5.0 million in the three months ended January 31, 2026, compared to $12.3 million in the three months ended February 1, 2025.

Interface segment net sales decreased $14.8 million, or 36.8%, to $25.4 million in the nine months ended January 31, 2026, compared to $40.2 million in the nine months ended February 1, 2025.

The decrease in both periods was primarily due to lower sales volumes of touch panels for appliances.

Gross profit

Interface segment gross profit decreased $2.4 million, or 82.8%, to $0.5 million in the three months ended January 31, 2026, compared to $2.9 million in the three months ended February 1, 2025. Gross profit margins decreased to 10.0% in the three months ended January 31, 2026, compared to 23.6% in the three months ended February 1, 2025.

Interface segment gross profit decreased $4.0 million, or 37.4%, to $6.7 million in the nine months ended January 31, 2026, compared to $10.7 million in the nine months ended February 1, 2025. Gross profit margins decreased to 26.4% in the nine months ended January 31, 2026, compared to 26.6% in the nine months ended February 1, 2025.

The decrease in gross profit margins in both periods was primarily due to lower sales volumes and product mix.

Income from operations

Interface segment income from operations decreased $2.1 million, or 95.5%, to $0.1 million in the three months ended January 31, 2026, compared to $2.2 million in the three months ended February 1, 2025.

Interface segment income from operations decreased $3.4 million, or 38.6%, to $5.4 million in the nine months ended January 31, 2026, compared to $8.8 million in the nine months ended February 1, 2025.

The decrease in both periods was primarily due to lower gross profit.

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 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 affected. Additionally, we may consider other options to enhance our financial and operating position. Such options may include refinancing or restructuring initiatives, sales of assets, and reductions or delays in capital spending.

As of January 31, 2026, we had $133.7 million of cash and cash equivalents, of which $71.3 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 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"). No shares have been purchased under the 2024 Buyback Authorization. As of January 31, 2026, 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. On July 7, 2025, we entered into a Third Amendment to Second Amended and Restated Credit Agreement (the "Third 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 Third Amendment (i) reduced the revolving credit commitments from $500 million to $400 million, (ii) eliminated our option to increase the revolving credit commitments and/or add one or more tranches of term loans under the credit facility from time to time subject to certain limitations and conditions including approval of certain lenders, (iii) amended the consolidated interest coverage ratio covenant for the quarters ending August 2, 2025, November 1, 2025, January 31, 2026 and May 2, 2026 to relax that covenant to some extent for each of those quarters, (iv) amended the consolidated leverage ratio covenant for the quarters ending August 2, 2025, November 1, 2025, January 31, 2026, May 2, 2026 and August 1, 2026 to relax that covenant to some extent for each of those quarters, (v) amended the definition of "Consolidated EBITDA," to include an add back for a portion of the inventory write-down taken in the fourth quarter of fiscal 2025, (vi) increased the interest rate during the period from July 7, 2025 to the date that financial statements and a compliance certificate are delivered for the fiscal quarter ending October 31, 2026 (such period, the "Third Amendment Period"), (vii) changed the commitment fee payment during the Third Amendment Period, (viii) extended, through the maturity date, the requirement to provide monthly financial statements to the lenders, (ix) restricted or decreased, during the Third Amendment Period, the amount of certain exceptions to covenants restricting liens on, investments by and indebtedness of the Company and its subsidiaries, (x) limited to $2.5 million, in any fiscal quarter during the Third Amendment Period, the general basket exception to a covenant restricting certain restricted payments (including dividends) by the Company and its subsidiaries, while allowing under that general basket exceptions up to an aggregate of $25 million of restricted payments during any other period, (xi) extended, through the maturity date, an "anti-cash hoarding" requirement contained in the Second Amendment such that if we have cash on hand in the U.S. (subject to certain exceptions) of more than $65 million for 10 consecutive business days, we will be required to prepay the indebtedness under the credit facility by the amount of such excess, and (xii) eliminated, during the Third Amendment Period, the investment, restricted payment and indebtedness baskets that had allowed for unlimited investments, restricted payments and indebtedness, as applicable, so long as (among other requirements) we met certain pro forma consolidated leverage ratio tests.

As of August 2, 2025, we were not in compliance with a covenant restricting certain restricted payments (including dividends) by us and our subsidiaries contained in the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) for the quarter ended August 2, 2025. On September 8, 2025, we entered into a Waiver Letter (the "Waiver Letter") with Bank of America, N.A., as Administrative Agent, and the other Lenders party thereto. Among other things, the Waiver Letter (i) acknowledged that an event of default under the Credit Agreement (as amended by the First Amendment, the Second Amendment and the Third Amendment) occurred as the result of us making approximately $2.8 million of restricted payments during the quarter ended August 2, 2025, which was in excess of the $2.5 million general basket exception to a covenant restricting certain

restricted payments (including dividends) by us and our subsidiaries during the quarter ended August 2, 2025, (ii) reduced, for the quarter ending November 1, 2025, the general basket exception to a covenant restricting certain restricted payments (including dividends) by us and our subsidiaries by the amount of excess restricted payments made during the quarter ended August 2, 2025 (which change reduced such basket exception from $2.5 million to approximately $2.2 million for the quarter ending November 1, 2025), and (iii) waived the acknowledged event of default.

The Credit Agreement, as amended by the First Amendment, the Second Amendment, the Third Amendment and the Waiver Letter, is referred to herein as the "Amended Credit Agreement."

The Amended Credit Agreement provides for a secured multicurrency revolving credit facility of $400 million and matures on October 31, 2027.

As of January 31, 2026, the outstanding balance under the revolving credit facility consisted of $302.6 million (€255.3 million) of euro-denominated borrowings and $40.0 million of US 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), 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 January 31, 2026, 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 Quarterly 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 or will 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 May 3, 2025, as supplemented by subsequent filings with the Securities and Exchange Commission, including under Part II - Item 1A, "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended August 2, 2025.

Cash Flows

Operating activities

Net cash provided by operating activities was $33.1 million in the nine months ended January 31, 2026, compared to net cash used by operating activities of $9.0 million in the nine months ended February 1, 2025. The increase was due to higher cash inflows from operating assets and liabilities of $18.9 million in the nine months ended January 31, 2026 primarily due to a lower investment in working capital items.

Investing activities

Net cash used by investing activities was $13.6 million in the nine months ended January 31, 2026, compared to $26.7 million in the nine months ended February 1, 2025. Capital expenditures were $16.6 million in the nine months ended January 31, 2026, compared to $32.5 million in the nine months ended February 1, 2025. In the nine months ended January 31, 2026, we received proceeds of $1.3 million from the sale of assets, compared to $2.7 million in the nine months ended February 1, 2025. In the nine months ended January 31, 2026, we received proceeds of $1.7 million from the redemption of certain life insurance policies.

Financing activities

Net cash provided by financing activities was $1.0 million in the nine months ended January 31, 2026, compared to net cash used by financing activities of $16.6 million in the nine months ended February 1, 2025. In the nine months ended January 31, 2026, we had net proceeds from borrowings of $10.3 million, compared to net proceeds from borrowings of $5.8 million in the nine months ended February 1, 2025. In the nine months ended January 31, 2026, we paid $1.6 million of debt issuance costs associated with the Third Amendment, compared to $1.8 million of debt issuance costs associated with the Second Amendment. In the nine months ended February 1, 2025, we used $1.6 million of cash for the purchase of shares under the board-authorized share repurchase program in place at the time.

We paid cash dividends of $6.5 million in the nine months ended January 31, 2026, compared to $15.3 million in the nine months ended February 1, 2025.

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.