Methode Electronics (MEI) risk factors, FY2025 10-K

Operational and Industry Risks

1. 01We are susceptible to trends and factors affecting the automotive, commercial vehicle and construction industries
2. 02Our inability, or our customers’ inability, to effectively manage the timing, quality and cost of new program launches could adversely affect our financial performance
3. 03Changes in EV demand could affect our business
4. 04We manage our business based on projected future sales volume, which is highly dependent on information received from customers and general market data, and any inaccuracies or changes in such information could adversely affect our business, results of operations and financial condition
5. 05Our customers may cancel their orders, change production quantities (take rates) or locations or delay production
6. 06We operate our business on a global basis and changes to trade policy, including tariffs and customs regulations, could have a material and adverse effect on our business
7. 07Our inability to attract or retain key employees and a highly skilled workforce may have an adverse effect on our business, financial condition and results of operations
8. 08Our business, financial condition and results of operations may be adversely impacted by the effects of inflation
9. 09We are dependent on the availability and price of raw materials
10. 10The loss or insolvency of our major customers, or a significant decline in the volume of products purchased by these customers, would adversely affect our future results
11. 11The inability of our supply chain, or the supply chain of our customers, to deliver key components could materially adversely affect our business, financial condition and results of operations and cause us to incur significant cost increases
12. 12The global nature of our operations subjects us to political, economic and social risks that could adversely affect our business, financial condition and results of operations
13. 13risk of governmental expropriation of our property
14. 14A catastrophic event or other significant business interruption at any of our facilities could adversely affect our business, financial condition and results of operations
15. 15Future price reductions and increased quality standards may reduce our profitability and have a material adverse effect on our business, financial condition and results of operations
16. 16Our businesses and the markets in which we operate are highly competitive and constantly evolving. If we are unable to compete effectively, our sales and profitability could decline
17. 17Our ability to market our automotive and commercial vehicle products is subject to a lengthy sales cycle, which requires significant investment prior to reporting significant sales revenues, and there is no assurance that our products will be implemented in any particular vehicle
18. 18Our supply agreements with our OEM customers are generally requirements contracts, and a decline in the production requirements of any of our customers, and in particular our largest customers, could adversely impact our revenues and profitability
19. 19Part of our workforce is unionized which could subject us to work stoppages
20. 20Our inability to capitalize on prior or future acquisitions or any decision to strategically divest one or more current businesses may adversely affect our business, financial condition and results of operations
21. 21further penetrate new and existing markets with the product capabilities we may acquire
22. 22unduly burden other resources in our company

Financial Risks

1. 23We have incurred indebtedness, and our level of indebtedness and restrictions under our indebtedness could adversely affect our operations and liquidity and impair our ability to respond to changing business and economic conditions
2. 24Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase
3. 25Restructuring activities may lead to additional costs and material adverse effects
4. 26We have recognized significant impairment charges for our goodwill and may be required to recognize additional impairment charges in the future for goodwill and other intangible assets. Future impairment of these assets could have a material adverse impact on our financial condition and results of operations
5. 27We have risks associated with inventory
6. 28If we fail to maintain proper and effective internal controls over financial reporting, our financial results may not be accurately reported
7. 29A significant fluctuation between the U.S. dollar and other currencies could adversely impact our business, results of operations and financial condition
8. 30Changes in our effective tax rate may adversely impact our results of operations
9. 31Our judgments regarding the accounting for tax positions and the resolution of tax disputes may impact our results of operations and financial condition

Legal, Regulatory and Compliance Risks

1. 32We are, and in the future may be, subject to securities class action and other litigation, as well as government investigations and inquiries, which may harm our business and results of operations
2. 33Products we manufacture may contain design or manufacturing defects that could result in reduced demand for our products or services and warranty liability claims against us
3. 34We are subject to government regulations, including EHS laws and regulations, that expose us to potential financial liability
4. 35An emphasis on environmental matters by various stakeholders could adversely impact our business and results of operations

Technology and Intellectual Property Risks

1. 36Our operations could be negatively impacted by IT service interruptions, data corruption or misuse, cyber-based attacks, or network security breaches
2. 37We may be unable to keep pace with rapid technological changes, which could adversely affect our business, financial condition and results of operations
3. 38If we are unable to protect our intellectual property or we infringe, or are alleged to infringe, on another person’s intellectual property, our competitive position and results of operations may be adversely impacted