Edgar Filing: METHODE ELECTRONICS INC

Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 11-K

ý ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2015

o TRANSITION REPORT PURSUANT TO 15 (d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the transition period from to

Commission File Number: 0-2816

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

Methode Electronics, Inc. 401(k) Savings Plan

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

Methode Electronics, Inc.

7401 West Wilson Avenue

Chicago, IL 60706-4548

FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE

Methode Electronics, Inc. 401(k) Savings Plan

Years Ended December 31, 2015 and 2014

Methode Electronics, Inc.

401(k) Savings Plan

Financial Statements and

Supplemental Schedule

Years Ended December 31, 2015 and 2014

Contents



Report of Independent Registered Public Accounting Firm	1

Financial Statements

Statements of Net Assets Available for Benefits	2
Statements of Changes in Net Assets Available for Benefits	3
Notes to Financial Statements	4

Supplemental Schedule

Schedule H, Line 4i - Schedule of Assets (Held at End of Year)	12

Signatures	13

Report of Independent Registered Public Accounting Firm

The Administration Committee

Methode Electronics, Inc.

401(k) Savings Plan

We have audited the accompanying statements of net assets available for benefits of Methode Electronics, Inc. 401(k) Savings Plan as of December 31, 2015 and 2014, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2015 and 2014, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The supplemental Schedule H, Part IV, Line 4i - Schedule of Assets (Held at End of Year) as of December 31, 2015 has been subjected to audit procedures performed in conjunction with the audit of Methode Electronics, Inc. 401(k) Savings Plan’s financial statements. The supplemental schedule is presented for the purpose of additional analysis and is not a required part of the financial statements but includes supplemental information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan's management. Our audit procedures included determining whether the information presented in the supplemental schedule reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedule. In forming our opinion on the supplemental schedule, we evaluated whether the supplemental schedule, including its form and content, is presented in conformity with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental schedule is fairly stated in all material respects in relation to the financial statements as a whole.

/s/ Sassetti LLC

June 27, 2016

Oak Park, Illinois

Methode Electronics, Inc.

401(k) Savings Plan

Statements of Net Assets Available for Benefits



	December 31,
	2015		2014
Assets
Investments, at fair value:
Mutual funds	$	43,093,845	$	44,142,136
Methode common stock fund	4,495,042		7,436,009
Total investments, at fair value	47,588,887		51,578,145
Investments, at contract value	13,882,490		12,650,656
Total Investments	61,471,377		64,228,801

Receivables:
Participant loans	747,183		925,543

Total assets	62,218,560		65,154,344

Liabilities

Total liabilities	—		—

Net assets available for benefits	$	62,218,560	$	65,154,344

See accompanying notes

Methode Electronics, Inc.

401(k) Savings Plan

Statements of Changes in Net Assets Available for Benefits



	December 31,
	2015			2014
Additions:
Additions to net assets attributed to:
Investment Income:
Interest and dividends	$	2,578,415		$	2,774,978
Net appreciation / (depreciation) in fair value of investments	(2,393,321		)	1,802,069
Total investment gain	185,094			4,577,047

Contributions:
Participants	2,289,802			2,280,310
Employer	1,327,814			1,341,286
Rollovers	194,187			410,418
	3,811,803			4,032,014
Total additions, net	3,996,897			8,609,061

Deductions:
Deductions from net assets attributed to:
Benefits paid to participants	6,930,811			4,297,221
Administrative expenses	1,870			27,538
Total deductions	6,932,681			4,324,759

Net increase (decrease)	(2,935,784		)	4,284,302
Net assets available for benefits:
Beginning of year	65,154,344			60,870,042
End of year	$	62,218,560		$	65,154,344

See accompanying notes.

Methode Electronics, Inc.

401(k) Savings Plan

Notes to Financial Statements

1. Description of the Plan

The following description of the Methode Electronics, Inc. 401(k) Savings Plan (Plan) provides only general information. Participants should refer to the Plan agreement or Summary Plan Description (SPD) for a more complete description of the Plan’s provisions. Copies of the SPD are available from Methode Electronics, Inc.

General

The Plan is a defined-contribution plan established to provide additional retirement and other benefits for eligible employees, to enable eligible employees, through systematic savings, to accumulate funds on a tax-advantageous basis, and to provide a vehicle through which the plan sponsor, Methode Electronics, Inc. and its subsidiaries (the Company), can attract and retain qualified employees.

Participation

Employees who are employed by the Company for three full calendar months are eligible to participate in the Plan on the first day of the following calendar month.

Contributions

Participants may elect to contribute a minimum of 2% of their annual compensation (as defined in the Plan) pre-tax, after tax Roth 401(k) or any combination, up to the maximum annual dollar limit allowable by the Internal Revenue Service (IRS).

The Company contributes to the Plan, on behalf of each participant, a “safe-harbor” non-elective contribution of 3% of each participant’s eligible compensation (as defined by the Plan), subject to the IRS maximum amount, for the portion of the Plan year in which the employee was a participant in the Plan.

Participants may direct contributions into various investment options offered by the Plan.

Methode Electronics, Inc.

401(k) Savings Plan

Notes to Financial Statements

1. Description of Plan (continued)

Participant Withdrawals

Withdrawals are permitted in the event of termination of employment, disability, death, retirement, attainment of age 59 1/2, or financial hardship. A financial hardship withdrawal is currently permitted by the IRS for certain authorized purposes with the approval by the 401(k) Hardship Committee. Such withdrawals must be approved by the 401(k) Hardship Committee. Withdrawals prior to the attainment of age 59 1/2 may be subject to an additional 10% tax penalty.

Vesting

Participants are immediately vested in Company contributions, their contributions, and actual earnings (losses) thereon.

Participant Loans

Participants may borrow a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their account balance from their fund accounts. Loan terms range from 1 to 5 years or up to 15 years for the purchase of a primary residence. The loans are secured by the balance in the participant’s account and bear interest at the prime rate plus 1%. Principal and interest are paid ratably through payroll deductions.

Participant loans are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are reclassified as distributions based upon the terms of the Plan.

Participant Accounts

Each participant’s account is credited with the participant’s contributions and allocations of Company contributions and Plan earnings (losses). Allocations are based on participant earnings or account balances as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.

Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of the Employee Retirement Income Security Act of 1974.

Methode Electronics, Inc.

401(k) Savings Plan

Notes to Financial Statements

2. Significant Accounting Policies

Basis of Accounting

The financial statements have been prepared on the accrual basis of accounting.

Recent Accounting Pronouncements

In May 2015, the Financial Account Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-07, Fair Value Measurement (Topic - 820) - Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (“ASU 2015-07”). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value (“NAV”) per share practical expedient. ASU 2015-07 also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the NAV per share practical expedient. Investments that calculate NAV per share (or its equivalent), but for which the practical expedient is not applied will continue to be included in the fair value hierarchy along with the related required disclosures. ASU 2015-07 is effective for fiscal years beginning after December 15, 2015, and is to be applied retrospectively, with early adoption permitted.

In July 2015, the FASB released ASU No. 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960) Defined Contribution Pension Plans (Topic 962) Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient (“ASU 2015-12”). This amendment removes the requirement to report fully benefit-responsive investment contracts at fair value with an adjustment to contract value. Under the amendment, fully benefit-responsive investment contracts are measured, presented, and disclosed only at contract value. In addition, this amendment simplifies the investment disclosures required for employee benefit plans, including eliminating the requirements to disclose: (a) individual investments that represent 5% or more of net assets available for benefit plans, (b) net appreciation (depreciation) by individual investment type, and (c) investment information disaggregated based on the nature, characteristics and risks. The requirement to disaggregate participant-directed investments within a self directed brokerage account has also been eliminated. Self-directed brokerage accounts should be reported as a single type of investment. The amendment also allows plans to measure investments and investment-related accounts as of a month-end date that is closest to the plan’s fiscal year-end, when the fiscal period does not coincide with a month-end. ASU 2015-12 is effective for fiscal years beginning after December 15, 2015, with early adoption permitted. Parts I and II should be applied retrospectively, while Part III should be applied prospectively.

The Plan elected to early adopt ASU 2015-07 and the applicable parts of ASU 2015-12.

An adjustment has been made to the 2014 balances to remove the reconciliation from fair value to contract value and show these investments at contract value on the statement of net assets.

Methode Electronics, Inc.

401(k) Savings Plan

Notes to Financial Statements

2. Significant Accounting Policies (continued)

Valuation of Investments

The shares of mutual funds and the Methode Electronics Common Stock Fund are reported at fair value. See note 4 for discussion of fair value measurements.

Purchases and sales are recorded on a trade-date basis. Interest is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

Under the newly adapted generally accepted accounting principles, the following fixed income investments qualify as fully benefit responsive investments and are reported at contract value.

The Hartford group annuity contract value is determined by MassMutual Financial Services. The contract value represents contributions made, plus interest at the contract rate, less funds used to pay participants’ benefits. The Plan does not allow for new investment in this contract. There are significant penalties if the entire contract were prematurely terminated. The interest guarantee is based on Hartford’s ability to meet its financial obligations from its general assets.

The Hartford group annuity contract had an average yield (annualized) and a crediting interest rate of 3.00% for each of the years ended December 31, 2015 and 2014. The crediting interest rate is set at the beginning of the calendar year and is periodically reviewed for adjustment. The balance in the Hartford group annuity contract was $638,803 and $639,584 as of December 31, 2015 and 2014, respectively.

The Lincoln Stable Value Account is a fixed group annuity issued by The Lincoln National Life Insurance Company. Contract value is the relevant measure attributed to that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the contract.

The Lincoln contract had an average yield of 1.73% and 1.74% (annualized) for the years ended December 31, 2015 and 2014, respectively with a guaranteed minimum interest rate of 1.00%. At December 31, 2015 and 2014 the crediting interest rate was 1.78% and 1.70%, respectively. The crediting interest rate is set at the beginning of each calendar quarter and is based upon the three-year average of the Barclays Capital Intermediate U.S. Government Credit Index plus 35 basis points. The guarantee is based on Lincoln’s ability to meet its financial obligations from its general assets. The balance in the Lincoln stable value account was $13,243,687 and $12,011,072 as of December 31, 2015 and 2014, respectively.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Methode Electronics, Inc.

401(k) Savings Plan

Notes to Financial Statements

2. Significant Accounting Policies (continued)

Risks and Uncertainties

The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

Administrative Expenses

Generally, expenses of the Plan are paid by the Company.

Payment of Benefits

Benefits are recorded when paid.

3. Investments

The Plan’s investments (including investments purchased, sold, as well as held during the year) appreciated / (depreciated) in fair value were determined by the following quoted market prices:



	Years Ended December 31
	2015			2014
Mutual funds	$	(1,941,658	)	$	766,840
Common stock fund	(451,663		)	1,035,229
	$	(2,393,321	)	$	1,802,069

4. Fair Value Measurements

Accounting Standards Codification Topic 820 (ASC 820) defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities they are required to be recorded at their fair value, the Plan considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

ASC 820 also establishes a fair value hierarchy which requires the Plan to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Methode Electronics, Inc.

401(k) Savings Plan

Notes to Financial Statements

4. Fair Value Measurements (continued)

A financial instrument’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The standard establishes three levels of inputs that may be used to measure fair value:


•	Level 1: quoted prices in active markets for identical assets or liabilities;

•

Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities ; or


•	Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Plan’s valuation methodologies used for measuring the fair values are as follows:

Mutual funds: valued at quoted market price, which represent the estimated fair value of the shares held in such funds.

Methode Electronics, Inc. Common Stock Fund: the fund invests primarily in Methode Electronics, Inc. common stock, which is traded on the New York Stock Exchange (NYSE) under the ticker symbol (MEI) and is valued at its quoted market price at the daily close of the NYSE. A small portion of the fund is invested in short-term money market instruments. The money market portion of the fund provides liquidity, which enables the Plan participants to transfer money daily among all investment choices.

There have been no changes in these methodologies used at December 31, 2015 or 2014.

Methode Electronics, Inc.

401(k) Savings Plan

Notes to Financial Statements

4. Fair Value Measurements (continued)

The following summarizes the classification of Investments by classification and method of valuation for the years ended December 31, 2015:



	2015 Fair Value Measurements Using Input Type
	Level 1		Level 2		Level 3		Total

Mutual Funds	$	43,093,845	$	—	$	—	$	43,093,845

Methode Common Stock Fund	$	4,495,042	$	—	$	—	$	4,495,042

Total Investments, at fair value	$	47,588,887	$	—	$	—	$	47,588,887

The following summarizes the classification of Investments by classification and method of valuation for the years ended December 31, 2014:



	2014 Fair Value Measurements Using Input Type
	Level 1		Level 2		Level 3		Total

Mutual Funds	$	44,142,136	$	—	$	—	$	44,142,136

Methode Common Stock Fund	$	7,436,009	$	—	$	—	$	7,436,009

Total Investments, at fair value	$	51,578,145	$	—	$	—	$	51,578,145

Methode Electronics, Inc.

401(k) Savings Plan

Notes to Financial Statements

5. Income Tax Status

The Plan has received a determination letter from the IRS dated October 28, 2011, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended.

Generally accepted accounting principles require plan management to evaluate tax positions taken by the plan and recognize a tax liability if the plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS or DOL. The plan administrator has analyzed the tax positions taken by the plan, and has concluded that as of December 31, 2015, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examinations for years prior to 2012.

6. Related Party Transactions

Lincoln Financial Group, the Plan’s record keeper, is an affiliate of the Lincoln National Life Insurance Company, which the Plan has an insurance investment contract. The Plan also invests in Methode Electronics, Inc. Common Stock. These transactions qualify as related party and party-in-interest transactions.

Effective October 1, 2014, Lincoln Financial Group provides certain administrative services to the Plan pursuant to a Recordkeeping Services Agreement (RSA) between the Company and Lincoln. Lincoln Financial Group receives revenue from certain mutual fund service providers for services Lincoln provides to the funds. This revenue may be used to offset certain amounts owed to Lincoln for its administrative services to the Plan.

If the revenue received by Lincoln Financial Group from such mutual fund service providers exceeds the amount owed under the RSA, Lincoln remits the excess to the Plan's trust on a quarterly basis. Such amounts may be applied to pay Plan administrative expenses or allocated to the accounts of the participants. During 2015, $37,829 was received by the Plan as part of the revenue sharing agreement and $28,687 of that was allocated to participants’ accounts.

Supplemental Schedule

Methode Electronics, Inc.

401(k) Savings Plan

Schedule H, Line 4i - Schedule of Assets

(Held at End of Year)

EIN #36-2090085 Plan #002

December 31, 2015



(a.)	(b.)	(c.)		(d.)	(e.)
			Shares
		Description of	or		Current
	Identity of Issue	Investment	Units	Cost	Value
	Mutual funds

	The American Funds Group	American Balanced Fund	517,047	**	$	12,305,721
		American Mutual Fund	169,063	**	$	5,705,866
		Europacific Growth Fund	74,672	**	$	3,323,629
		Growth Fund of America	177,929	**	$	7,289,743
		New Economy Fund	66,223	**	$	2,360,180

	Delaware Investments	Delaware Diversified Income	324,415	**	$	2,780,237

	Ivy	Ivy Mid Cap Growth I	89,359	**	$	1,812,204

	Vanguard	Total Stock Market Index	37,646	**	$	1,911,676
		FTSE All-World ex US Index Inv	21,037	**	$	360,571

	Goldman Sachs	Small Cap Value Inst	31,284	**	$	1,560,735

	T Rowe Price Dividend Growth Adv	Dividend Growth Adv	107,353	**	$	3,683,283

	Common stock fund
*	Methode Electronics, Inc.	Methode Electronics, Inc.
		Common Stock	145,267	**	$	4,495,042
	Total investments at fair value				$	47,588,887

	Investments at contract value
	Hartford Life Insurance Company	Group Annunity Contract	N/A	**	$	638,803
*	Lincoln Financial Group	Lincoln Stable Value Fund	12,146,597		$	13,243,687

	Total investments at contract value				$	13,882,490

	Total investments				$	61,471,377

*	Participant loans	Interest rate - 4.25%		**	$	747,183
					$	62,218,560

* Party in interest

** Cost information is not required for participant directed investments and participant

loans and, therefore, is not included.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

METHODE ELECTRONICS, INC.

Date: June 27, 2016 By: /s/Douglas A. Koman

Douglas A. Koman

Chief Financial Officer