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United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2023
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___ to ___
Commission file number 0-20388
LITTELFUSE, INC.
(Exact name of registrant as specified in its charter)
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| Delaware |
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36-3795742 |
| (State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
| 8755 West Higgins Road |
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| Suite 500 |
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| Chicago |
Illinois |
60631 |
| (Address of principal executive offices) |
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(ZIP Code) |
Registrant’s telephone number, including area code: 773-628-1000
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
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Trading Symbol |
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Name of exchange on which registered |
| Common Stock, $0.01 par value |
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LFUS |
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NASDAQ |
Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes [ ] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No [X]
As of October 27, 2023, the registrant had outstanding 24,902,916 shares of Common Stock, net of Treasury Shares.
TABLE OF CONTENTS
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Page |
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| PART I |
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| Item 1. |
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Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 |
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Condensed Consolidated Statements of Net Income for the three and nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited) |
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Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited) |
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Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited) |
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Condensed Consolidated Statements of Stockholders' Equity for the nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited) |
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| Item 2. |
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| Item 3. |
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| Item 4. |
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PART II |
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| Item 1. |
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| Item 1A. |
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| Item 2. |
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| Item 3. |
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| Item 4. |
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| Item 5. |
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| Item 6. |
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ITEM 1. FINANCIAL STATEMENTS
LITTELFUSE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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(Unaudited) |
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September 30,
2023 |
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December 31,
2022 |
| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
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$ |
560,056 |
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$ |
562,588 |
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| Short-term investments |
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229 |
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84 |
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Trade receivables, less allowances of $88,440 and $83,562 at September 30, 2023 and December 31, 2022, respectively |
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327,500 |
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306,578 |
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| Inventories |
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483,075 |
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547,690 |
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| Prepaid income taxes and income taxes receivable |
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3,776 |
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7,215 |
|
| Prepaid expenses and other current assets |
|
83,684 |
|
|
87,641 |
|
| Total current assets |
|
1,458,320 |
|
|
1,511,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net property, plant, and equipment |
|
478,906 |
|
|
481,110 |
|
| Intangible assets, net of amortization |
|
612,366 |
|
|
593,970 |
|
| Goodwill |
|
1,284,343 |
|
|
1,186,922 |
|
| Investments |
|
23,371 |
|
|
24,121 |
|
| Deferred income taxes |
|
13,598 |
|
|
14,367 |
|
| Right of use lease assets, net |
|
51,755 |
|
|
57,382 |
|
| Other long-term assets |
|
80,267 |
|
|
34,066 |
|
| Total assets |
|
$ |
4,002,926 |
|
|
$ |
3,903,734 |
|
| LIABILITIES AND EQUITY |
|
|
|
|
| Current liabilities: |
|
|
|
|
| Accounts payable |
|
$ |
166,725 |
|
|
$ |
208,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accrued liabilities |
|
143,540 |
|
|
187,057 |
|
| Accrued income taxes |
|
35,762 |
|
|
41,793 |
|
| Current portion of long-term debt |
|
135,619 |
|
|
134,874 |
|
| Total current liabilities |
|
481,646 |
|
|
572,295 |
|
| Long-term debt, less current portion |
|
857,006 |
|
|
866,623 |
|
| Deferred income taxes |
|
106,656 |
|
|
100,230 |
|
| Accrued post-retirement benefits |
|
29,445 |
|
|
28,037 |
|
| Non-current operating lease liabilities |
|
39,818 |
|
|
45,661 |
|
| Other long-term liabilities |
|
83,496 |
|
|
79,510 |
|
| Shareholders’ equity: |
|
|
|
|
Common stock, par value $0.01 per share: 34,000,000 shares authorized; shares issued, September 30, 2023–26,613,883; December 31, 2022–26,445,618 |
|
262 |
|
|
261 |
|
| Additional paid-in capital |
|
1,007,033 |
|
|
974,097 |
|
Treasury stock, at cost: 1,711,033 and 1,685,357 shares, respectively |
|
(259,191) |
|
|
(252,866) |
|
| Accumulated other comprehensive loss |
|
(99,526) |
|
|
(95,764) |
|
| Retained earnings |
|
1,755,936 |
|
|
1,585,466 |
|
| Littelfuse, Inc. shareholders’ equity |
|
2,404,514 |
|
|
2,211,194 |
|
| Non-controlling interest |
|
345 |
|
|
184 |
|
| Total equity |
|
2,404,859 |
|
|
2,211,378 |
|
| Total liabilities and equity |
|
$ |
4,002,926 |
|
|
$ |
3,903,734 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Nine Months Ended |
| (in thousands, except per share data) |
|
September 30,
2023 |
|
October 1,
2022 |
|
September 30,
2023 |
|
October 1,
2022 |
| Net sales |
|
$ |
607,071 |
|
|
$ |
658,880 |
|
|
$ |
1,828,850 |
|
|
$ |
1,900,646 |
|
| Cost of sales |
|
380,200 |
|
|
402,059 |
|
|
1,122,190 |
|
|
1,122,258 |
|
| Gross profit |
|
226,871 |
|
|
256,821 |
|
|
706,660 |
|
|
778,388 |
|
|
|
|
|
|
|
|
|
|
| Selling, general, and administrative expenses |
|
87,204 |
|
|
90,219 |
|
|
270,057 |
|
|
258,820 |
|
|
|
|
|
|
|
|
|
|
| Research and development expenses |
|
25,484 |
|
|
25,752 |
|
|
77,270 |
|
|
68,796 |
|
| Amortization of intangibles |
|
16,022 |
|
|
15,567 |
|
|
49,773 |
|
|
39,883 |
|
| Restructuring, impairment, and other charges |
|
4,516 |
|
|
3,413 |
|
|
13,221 |
|
|
4,265 |
|
| Total operating expenses |
|
133,226 |
|
|
134,951 |
|
|
410,321 |
|
|
371,764 |
|
| Operating income |
|
93,645 |
|
|
121,870 |
|
|
296,339 |
|
|
406,624 |
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
10,101 |
|
|
8,399 |
|
|
29,803 |
|
|
17,069 |
|
| Foreign exchange loss |
|
11,776 |
|
|
18,191 |
|
|
8,697 |
|
|
40,051 |
|
| Other (income) expense, net |
|
(3,527) |
|
|
(698) |
|
|
(11,810) |
|
|
9,789 |
|
| Income before income taxes |
|
75,295 |
|
|
95,978 |
|
|
269,649 |
|
|
339,715 |
|
| Income taxes |
|
17,507 |
|
|
20,510 |
|
|
53,045 |
|
|
59,713 |
|
| Net income |
|
$ |
57,788 |
|
|
$ |
75,468 |
|
|
$ |
216,604 |
|
|
$ |
280,002 |
|
|
|
|
|
|
|
|
|
|
| Earnings per share: |
|
|
|
|
|
|
|
|
| Basic |
|
$ |
2.32 |
|
|
$ |
3.05 |
|
|
$ |
8.72 |
|
|
$ |
11.32 |
|
| Diluted |
|
$ |
2.30 |
|
|
$ |
3.02 |
|
|
$ |
8.63 |
|
|
$ |
11.21 |
|
|
|
|
|
|
|
|
|
|
| Weighted-average shares and equivalent shares outstanding: |
|
|
|
|
|
|
|
|
| Basic |
|
24,893 |
|
|
24,755 |
|
|
24,838 |
|
|
24,726 |
|
| Diluted |
|
25,143 |
|
|
24,988 |
|
|
25,100 |
|
|
24,986 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Nine Months Ended |
| (in thousands) |
|
September 30,
2023 |
|
October 1,
2022 |
|
September 30,
2023 |
|
October 1,
2022 |
| Net income |
|
$ |
57,788 |
|
|
$ |
75,468 |
|
|
$ |
216,604 |
|
|
$ |
280,002 |
|
| Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
| Pension and postemployment adjustment, net of tax |
|
(3) |
|
|
599 |
|
|
(156) |
|
|
1,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flow hedge, net of tax |
|
1,546 |
|
|
7,609 |
|
|
2,141 |
|
|
7,068 |
|
| Foreign currency translation adjustments |
|
(3,677) |
|
|
(36,396) |
|
|
(5,747) |
|
|
(70,356) |
|
| Comprehensive income |
|
$ |
55,654 |
|
|
$ |
47,280 |
|
|
$ |
212,842 |
|
|
$ |
218,262 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended |
| (in thousands) |
|
September 30, 2023 |
|
October 1, 2022 |
| OPERATING ACTIVITIES |
|
|
|
|
| Net income |
|
$ |
216,604 |
|
|
$ |
280,002 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| Depreciation |
|
53,510 |
|
|
48,326 |
|
| Amortization of intangibles |
|
49,773 |
|
|
39,883 |
|
|
|
|
|
|
| Deferred revenue |
|
1,769 |
|
|
(377) |
|
| Non-cash inventory charges |
|
— |
|
|
11,534 |
|
| Impairment charges |
|
4,742 |
|
|
90 |
|
|
|
|
|
|
| Stock-based compensation |
|
20,132 |
|
|
19,732 |
|
| Loss on investments and other assets |
|
922 |
|
|
13,740 |
|
|
|
|
|
|
| Deferred income taxes |
|
(689) |
|
|
(4,320) |
|
| Other |
|
7,829 |
|
|
55,334 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
| Trade receivables |
|
(21,752) |
|
|
(56,431) |
|
| Inventories |
|
66,456 |
|
|
(83,803) |
|
| Accounts payable |
|
(38,475) |
|
|
(3,838) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accrued liabilities and income taxes |
|
(61,359) |
|
|
(4,399) |
|
| Prepaid expenses and other assets |
|
13,678 |
|
|
(2,034) |
|
| Net cash provided by operating activities |
|
313,140 |
|
|
313,439 |
|
| INVESTING ACTIVITIES |
|
|
|
|
| Acquisitions of businesses, net of cash acquired |
|
(198,810) |
|
|
(532,772) |
|
|
|
|
|
|
| Purchases of property, plant, and equipment |
|
(63,166) |
|
|
(77,773) |
|
| Net proceeds from sale of property, plant and equipment, and other |
|
597 |
|
|
565 |
|
| Net cash used in investing activities |
|
(261,379) |
|
|
(609,980) |
|
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
| Proceeds of term loan |
|
— |
|
|
300,000 |
|
| Proceeds of senior notes |
|
— |
|
|
100,000 |
|
| Payments of senior notes payable |
|
— |
|
|
(25,000) |
|
| Repayments of other debts |
|
(2,027) |
|
|
(5,979) |
|
| Payments of term loan |
|
(5,625) |
|
|
(1,875) |
|
|
|
|
|
|
| Net proceeds related to stock-based award activities |
|
6,481 |
|
|
(1,568) |
|
|
|
|
|
|
| Debt issuance costs |
|
— |
|
|
(2,600) |
|
| Cash dividends paid |
|
(45,973) |
|
|
(41,055) |
|
| Net cash (used in) provided by financing activities |
|
(47,144) |
|
|
321,923 |
|
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
|
(7,965) |
|
|
(31,963) |
|
| Decrease in cash, cash equivalents, and restricted cash |
|
(3,348) |
|
|
(6,581) |
|
| Cash, cash equivalents, and restricted cash at beginning of period |
|
564,939 |
|
|
482,836 |
|
| Cash, cash equivalents, and restricted cash at end of period |
|
$ |
561,591 |
|
|
$ |
476,255 |
|
| Supplementary Cash Flow Information |
|
|
|
|
| Reconciliation of cash and cash equivalents: |
|
|
|
|
| Cash and cash equivalents |
|
$ |
560,056 |
|
|
$ |
474,003 |
|
| Restricted cash included in prepaid expenses and other current assets |
|
$ |
— |
|
|
$ |
824 |
|
| Restricted cash included in other long-term assets |
|
$ |
1,535 |
|
|
$ |
1,428 |
|
| Cash paid during the period for interest |
|
$ |
33,177 |
|
|
$ |
16,888 |
|
|
|
|
|
|
| Capital expenditures, not yet paid |
|
$ |
9,780 |
|
|
$ |
9,111 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Condensed Consolidated Financial Statements.
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Littelfuse, Inc. Shareholders’ Equity |
| (in thousands, except share and per share data) |
Common Stock |
|
Addl. Paid in Capital |
|
Treasury Stock |
|
Accum. Other Comp. Inc. (Loss) |
|
Retained Earnings |
|
Non-controlling Interest |
|
Total |
| Balance at December 31, 2022 |
$ |
261 |
|
|
$ |
974,097 |
|
|
$ |
(252,866) |
|
|
$ |
(95,764) |
|
|
$ |
1,585,466 |
|
|
$ |
184 |
|
|
$ |
2,211,378 |
|
| Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
88,745 |
|
|
— |
|
|
88,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income, net of tax |
— |
|
|
— |
|
|
— |
|
|
13,283 |
|
|
— |
|
|
— |
|
|
13,283 |
|
| Stock-based compensation |
— |
|
|
3,730 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,730 |
|
| Non-controlling interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(66) |
|
|
66 |
|
|
— |
|
| Withheld shares on restricted share units for withholding taxes |
— |
|
|
— |
|
|
(18) |
|
|
— |
|
|
— |
|
|
— |
|
|
(18) |
|
| Stock options exercised |
— |
|
|
5,238 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid ($0.60 per share) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(14,880) |
|
|
— |
|
|
(14,880) |
|
| Balance at April 1, 2023 |
$ |
261 |
|
|
$ |
983,065 |
|
|
$ |
(252,884) |
|
|
$ |
(82,481) |
|
|
$ |
1,659,265 |
|
|
$ |
250 |
|
|
$ |
2,307,476 |
|
| Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
70,071 |
|
|
— |
|
|
70,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive loss, net of tax |
— |
|
|
— |
|
|
— |
|
|
(14,911) |
|
|
— |
|
|
— |
|
|
(14,911) |
|
| Stock-based compensation |
— |
|
|
12,545 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
12,545 |
|
| Non-controlling interest |
|
|
|
|
|
|
|
|
(45) |
|
|
$ |
45 |
|
|
— |
|
| Withheld shares on restricted share units for withholding taxes |
— |
|
|
— |
|
|
(5,999) |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,999) |
|
| Stock options exercised |
— |
|
|
2,979 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid ($0.60 per share) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(14,910) |
|
|
— |
|
|
(14,910) |
|
| Balance at July 1, 2023 |
$ |
261 |
|
|
$ |
998,589 |
|
|
$ |
(258,883) |
|
|
$ |
(97,392) |
|
|
$ |
1,714,381 |
|
|
$ |
295 |
|
|
$ |
2,357,251 |
|
| Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
57,788 |
|
|
— |
|
|
57,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive loss, net of tax |
— |
|
|
— |
|
|
— |
|
|
(2,134) |
|
|
— |
|
|
— |
|
|
(2,134) |
|
| Stock-based compensation |
— |
|
|
3,857 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,857 |
|
| Non-controlling interest |
|
|
|
|
|
|
|
|
(50) |
|
|
50 |
|
|
— |
|
| Withheld shares on restricted share units for withholding taxes |
— |
|
|
— |
|
|
(308) |
|
|
— |
|
|
— |
|
|
— |
|
|
(308) |
|
| Stock options exercised |
1 |
|
|
4,587 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid ($0.65 per share) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(16,183) |
|
|
— |
|
|
(16,183) |
|
| Balance at September 30, 2023 |
$ |
262 |
|
|
$ |
1,007,033 |
|
|
$ |
(259,191) |
|
|
$ |
(99,526) |
|
|
$ |
1,755,936 |
|
|
$ |
345 |
|
|
$ |
2,404,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Littelfuse, Inc. Shareholders’ Equity |
| (in thousands, except share and per share data) |
Common Stock |
|
Addl. Paid in Capital |
|
Treasury Stock |
|
Accum. Other Comp. (Loss) |
|
Retained Earnings |
|
Non-controlling Interest |
|
Total |
| Balance at January 1, 2022 |
$ |
260 |
|
|
$ |
946,588 |
|
|
$ |
(248,120) |
|
|
$ |
(73,463) |
|
|
$ |
1,268,124 |
|
|
$ |
131 |
|
|
$ |
1,893,520 |
|
| Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
117,518 |
|
|
— |
|
|
117,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive loss, net of tax |
— |
|
|
— |
|
|
— |
|
|
(2,203) |
|
|
— |
|
|
— |
|
|
(2,203) |
|
| Stock-based compensation |
— |
|
|
3,886 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Withheld shares on restricted share units for withholding taxes |
— |
|
|
— |
|
|
(4) |
|
|
— |
|
|
— |
|
|
— |
|
|
(4) |
|
| Stock options exercised |
— |
|
|
1,021 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid ($0.53 per share) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(13,086) |
|
|
— |
|
|
(13,086) |
|
| Balance at April 2, 2022 |
$ |
260 |
|
|
$ |
951,495 |
|
|
$ |
(248,124) |
|
|
$ |
(75,666) |
|
|
$ |
1,372,556 |
|
|
$ |
131 |
|
|
$ |
2,000,652 |
|
| Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
87,016 |
|
|
— |
|
|
87,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive loss, net of tax |
— |
|
|
— |
|
|
— |
|
|
(31,349) |
|
|
— |
|
|
— |
|
|
(31,349) |
|
| Stock-based compensation |
— |
|
|
11,382 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Withheld shares on restricted share units for withholding taxes |
— |
|
|
— |
|
|
(4,704) |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,704) |
|
| Stock options exercised |
1 |
|
|
2,060 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid ($0.53 per share) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(13,115) |
|
|
— |
|
|
(13,115) |
|
| Balance at July 2, 2022 |
$ |
261 |
|
|
$ |
964,937 |
|
|
$ |
(252,828) |
|
|
$ |
(107,015) |
|
|
$ |
1,446,457 |
|
|
$ |
131 |
|
|
$ |
2,051,943 |
|
| Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
75,468 |
|
|
— |
|
|
75,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive loss, net of tax |
— |
|
|
— |
|
|
— |
|
|
(28,188) |
|
|
— |
|
|
— |
|
|
(28,188) |
|
| Stock-based compensation |
— |
|
|
4,464 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,464 |
|
| Non-controlling interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(36) |
|
|
36 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock options exercised |
— |
|
|
58 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid ($0.60 per share) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(14,854) |
|
|
— |
|
|
(14,854) |
|
| Balance at October 1, 2022 |
$ |
261 |
|
|
$ |
969,459 |
|
|
$ |
(252,828) |
|
|
$ |
(135,203) |
|
|
$ |
1,507,035 |
|
|
$ |
167 |
|
|
$ |
2,088,891 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
Notes to Condensed Consolidated Financial Statements
1. Summary of Significant Accounting Policies and Other Information
Nature of Operations
Founded in 1927, Littelfuse is a diversified, industrial technology manufacturing company empowering a sustainable, connected, and safer world. Across more than 20 countries, and with approximately 17,000 global associates, the Company partners with customers to design and deliver innovative, reliable solutions. Serving over 100,000 end customers, the Company’s products are found in a variety of industrial, transportation and electronics end markets – everywhere, every day.
Basis of Presentation
The Company’s accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures normally included in the consolidated balance sheets, statements of net income and comprehensive income, statements of cash flows, and statements of stockholders' equity prepared in conformity with U.S. GAAP have been condensed or omitted as permitted by such rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. They have been prepared in accordance with accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which should be read in conjunction with the disclosures therein. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. Operating results for interim periods are not necessarily indicative of annual operating results.
Revenue Recognition
Revenue Disaggregation
The following tables disaggregate the Company’s revenue by primary business units for the three and nine months ended September 30, 2023 and October 1, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, 2023 |
|
Nine Months Ended September 30, 2023 |
| (in thousands) |
|
Electronics
Segment |
|
Transportation
Segment |
|
Industrial
Segment |
|
Total |
|
Electronics
Segment |
|
Transportation
Segment |
|
Industrial
Segment |
|
Total |
| Electronics – Passive Products and Sensors |
|
$ |
152,410 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
152,410 |
|
|
$ |
453,860 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
453,860 |
|
| Electronics – Semiconductor |
|
191,523 |
|
|
— |
|
|
— |
|
|
191,523 |
|
|
598,813 |
|
|
— |
|
|
— |
|
|
598,813 |
|
| Passenger Car Products |
|
— |
|
|
72,524 |
|
|
— |
|
|
72,524 |
|
|
— |
|
|
200,104 |
|
|
— |
|
|
200,104 |
|
| Automotive Sensors |
|
— |
|
|
23,205 |
|
|
— |
|
|
23,205 |
|
|
— |
|
|
66,839 |
|
|
— |
|
|
66,839 |
|
| Commercial Vehicle Products |
|
— |
|
|
81,290 |
|
|
— |
|
|
81,290 |
|
|
— |
|
|
248,765 |
|
|
— |
|
|
248,765 |
|
| Industrial Products |
|
— |
|
|
— |
|
|
86,119 |
|
|
86,119 |
|
|
— |
|
|
— |
|
|
260,469 |
|
|
260,469 |
|
| Total |
|
$ |
343,933 |
|
|
$ |
177,019 |
|
|
$ |
86,119 |
|
|
$ |
607,071 |
|
|
$ |
1,052,673 |
|
|
$ |
515,708 |
|
|
$ |
260,469 |
|
|
$ |
1,828,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended October 1, 2022 |
|
Nine Months Ended October 1, 2022 |
| (in thousands) |
|
Electronics
Segment |
|
Transportation
Segment |
|
Industrial
Segment |
|
Total
|
|
Electronics
Segment |
|
Transportation
Segment |
|
Industrial
Segment |
|
Total
|
| Electronics – Passive Products and Sensors |
|
$ |
188,916 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
188,916 |
|
|
$ |
521,172 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
521,172 |
|
| Electronics – Semiconductor |
|
208,713 |
|
|
— |
|
|
— |
|
|
208,713 |
|
|
600,454 |
|
|
— |
|
|
— |
|
|
600,454 |
|
| Passenger Car Products |
|
— |
|
|
62,280 |
|
|
— |
|
|
62,280 |
|
|
— |
|
|
186,552 |
|
|
— |
|
|
186,552 |
|
| Automotive Sensors |
|
— |
|
|
22,998 |
|
|
— |
|
|
22,998 |
|
|
— |
|
|
72,336 |
|
|
— |
|
|
72,336 |
|
| Commercial Vehicle Products |
|
— |
|
|
96,457 |
|
|
— |
|
|
96,457 |
|
|
— |
|
|
289,378 |
|
|
— |
|
|
289,378 |
|
| Industrial Products |
|
— |
|
|
— |
|
|
79,516 |
|
|
79,516 |
|
|
|
|
|
|
230,754 |
|
|
230,754 |
|
| Total |
|
$ |
397,629 |
|
|
$ |
181,735 |
|
|
$ |
79,516 |
|
|
$ |
658,880 |
|
|
$ |
1,121,626 |
|
|
$ |
548,266 |
|
|
$ |
230,754 |
|
|
$ |
1,900,646 |
|
See Note 15, Segment Information for net sales by segment and countries.
Revenue Recognition
The Company recognizes revenue on product sales in the period in which the Company satisfies its performance obligation and control of the product is transferred to the customer. The Company’s sales arrangements with customers are predominately short term in nature and generally provide for transfer of control at the time of shipment as this is the point at which title and risk of loss of the product transfers to the customer. At the end of each period, for those shipments where title to the products and the risk of loss and rewards of ownership do not transfer until the product has been received by the customer, the Company adjusts revenues and cost of sales for the delay between the time that the products are shipped and when they are received by the customer. The amount of revenue recorded reflects the consideration to which the Company expects to be entitled in exchange for goods and may include adjustments for customer allowance, rebates and price adjustments. The Company’s distribution channels are primarily through direct sales and independent third-party distributors.
The Company elected the practical expedient under Accounting Standards Codification ("ASC") 340-40-25-4 to expense commissions when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less than one year.
Revenue and Billing
The Company generally accepts orders from customers through receipt of purchase orders or electronic data interchange based on written sales agreements and purchasing contracts. Contract pricing and selling agreement terms are based on market factors, costs, and competition. Pricing is often negotiated as an adjustment (premium or discount) from the Company’s published price lists. The customer is invoiced when the Company’s products are shipped to them in accordance with the terms of the sales agreement. As the Company’s standard payment terms are less than one year, the Company elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company also elected the practical expedient provided in ASC 606-10-25-18B to treat all product shipping and handling activities as fulfillment activities, and therefore recognize the gross revenue associated with the contract, inclusive of any shipping and handling revenue.
Ship and Debit Program
Some of the terms of the Company’s sales agreements and normal business conditions provide customers (distributors) the ability to receive price adjustments on products previously shipped and invoiced. This practice is common in the industry and is referred to as a “ship and debit” program. This program allows the distributor to debit the Company for the difference between the distributors’ contracted price and a lower price for specific transactions. Under certain circumstances (usually in a competitive situation or large volume opportunity), a distributor will request authorization for pricing allowances to reduce its price.
When the Company approves such a reduction, the distributor is authorized to “debit” its account for the difference between the contracted price and the lower approved price. The Company establishes reserves for this program based on historical activity, distributor inventory levels and actual authorizations for the debit and recognizes these debits as a reduction of revenue.
Return to Stock
The Company has a return to stock policy whereby certain customers, with prior authorization from Littelfuse management, can return previously purchased goods for full or partial credit. The Company establishes an estimated allowance for these returns based on historical activity. Sales revenue and cost of sales are reduced to anticipate estimated returns.
Volume Rebates
The Company offers volume based sales incentives to certain customers to encourage greater product sales. If customers achieve their specific quarterly or annual sales targets, they are entitled to rebates. The Company estimates the projected amount of rebates that will be achieved by the customer and recognizes this estimated cost as a reduction to revenue as products are sold.
Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash at September 30, 2023 and December 31, 2022 reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statement of Cash Flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
September 30, 2023 |
|
December 31, 2022 |
| Cash and cash equivalents |
|
$ |
560,056 |
|
|
$ |
562,588 |
|
| Restricted cash included in prepaid expenses and other current assets |
|
— |
|
|
802 |
|
| Restricted cash included in other long-term assets |
|
1,535 |
|
|
1,549 |
|
| Total cash, cash equivalents, and restricted cash |
|
$ |
561,591 |
|
|
$ |
564,939 |
|
Recently Issued Accounting Standards
In October 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-06, "Disclosure Improvements". The amendments in this update represent changes to clarify or improve the disclosure or presentation requirements of a variety of Topics in the ASC. The Company may be affected by one or more of those amendments. The amendments in this ASU should be applied prospectively and will not be effective until June 30, 2027. The company is currently evaluating the potential effects of these amendments on its Condensed Consolidated Financial Statements.
In March 2023, the FASB issued ASU No. 2023-01, "Leases (Topic 842): Common Control Arrangements". The standard requires that leasehold improvements associated with common control leases be: 1) Amortized by the lessee over the useful life of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease. However, if the lessor obtained the right to control the use of the underlying asset through a lease with another entity not within the same common control group, the amortization period may not exceed the amortization period of the common control group. 2) Accounted for as a transfer between entities under common control through an adjustment to equity (or net assets for not-for-profit entities) if, and when, the lessee no longer controls the use of the underlying asset. Additionally, those leasehold improvements are subject to the impairment guidance in Topic 360, Property, Plant, and Equipment. This standard is effective on January 1, 2024. The Company does not expect any material effect on the Company's Condensed Consolidated Financial Statements.
2. Acquisitions
The Company accounts for acquisitions using the acquisition method in accordance with ASC 805, “Business Combinations,” in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results of the acquired business are included in the Company’s Condensed Consolidated Financial Statements from the date of the acquisition.
Dortmund Fab
On June 28, 2023, the Company entered into a definitive purchase agreement to acquire a 200mm wafer fab located in Dortmund, Germany (“Dortmund Fab”) from Elmos Semiconductor SE. The acquisition of the Dortmund Fab is expected to close in early fiscal year 2025. The total purchase price for the fab is approximately 93 million Euro, of which 37.2 million Euro down payment (approximately $40.5 million) recorded in Other long-term assets in the Condensed Consolidated Balance Sheets was paid in the third quarter after regulatory approvals and approximately 56 million Euro will be paid at closing. The transaction is not expected to have a material impact on the Company’s fiscal year 2023 or 2024 financial results and will be reported in the Electronics-Semiconductor business within the Company’s Electronics segment.
Western Automation
On February 3, 2023, the Company completed the acquisition of Western Automation Research and Development Limited (“Western Automation”) for approximately $162 million in cash. Headquartered in Galway, Ireland, Western Automation is a designer and manufacturer of electrical shock protection devices used across a broad range of high-growth end markets, including e-Mobility off-board charging infrastructure, industrial safety and renewables. At the time the Company and Western Automation entered into the definitive agreement, Western Automation had annualized sales of approximately $25 million. The business is reported within the Company’s Industrial segment.
The acquisition was funded with cash on hand. The total purchase consideration of $158.3 million, net of cash, has been allocated, on a preliminary basis, to assets acquired and liabilities assumed, as of the completion of the acquisition, based on preliminary estimated fair values. The purchase price allocation is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process. The primary area not yet finalized relates to the completion of the valuation of certain acquired income tax assets and liabilities. As a result, these allocations are subject to change during the purchase price allocation period as the valuations are finalized.
The following table summarizes the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed in the Western Automation acquisition:
|
|
|
|
|
|
| (in thousands) |
Purchase Price
Allocation |
| Total purchase consideration: |
|
| Cash, net of cash acquired |
$ |
158,260 |
|
| Allocation of consideration to assets acquired and liabilities assumed: |
|
| Trade receivables, net |
3,389 |
|
| Inventories |
3,678 |
|
| Other current assets |
718 |
|
| Property, plant, and equipment |
1,328 |
|
| Intangible assets |
68,000 |
|
| Goodwill |
94,823 |
|
| Other non-current assets |
573 |
|
| Current liabilities |
(5,251) |
|
|
|
| Other non-current liabilities |
(8,998) |
|
| |
$ |
158,260 |
|
|
|
All Western Automation assets and liabilities were recorded in the Industrial segment and are primarily reflected in the Europe geographic area. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining Western Automation’s products and technology with the Company’s existing Industrial products portfolio. Goodwill resulting from the Western Automation acquisition is not expected to be deductible for tax purposes.
Included in the Company’s Condensed Consolidated Statements of Net Income for the three and nine months ended September 30, 2023 are net sales of $2.7 million and $10.2 million respectively, and a loss before income taxes of $1.0 million and $0.8 million, respectively, since the February 3, 2023 acquisition of Western Automation.
During the nine months ended September 30, 2023, the Company incurred approximately $1.2 million of legal and professional fees related to the Western Automation acquisition recognized as Selling, general, and administrative expenses. These costs were reflected as other non-segment costs.
C&K Switches
On July 19, 2022, the Company completed the previously announced acquisition of C&K Switches (“C&K”) for $540 million in cash. Founded in 1928, C&K is a leading designer and manufacturer of high-performance electromechanical switches and interconnect solutions with a strong global presence across a broad range of end markets, including industrial, transportation, datacom, and aerospace. At the time the Company and C&K entered into the definitive agreement, C&K had annualized sales of over $200 million. The business is reported as part of the electronics-passive products and sensors business within the Company's Electronics segment.
The acquisition was funded through a combination of cash on hand and debt. The total purchase consideration of $523.0 million, net of cash acquired, has been allocated to assets acquired and liabilities assumed, as of the completion of the acquisition, based on estimated fair values.
The following table summarizes the final purchase price allocation of the fair value of assets acquired and liabilities assumed in the C&K acquisition:
|
|
|
|
|
|
| (in thousands) |
Purchase Price
Allocation |
| Total purchase consideration: |
|
| Cash, net of cash acquired |
$ |
523,014 |
|
| Allocation of consideration to assets acquired and liabilities assumed: |
|
| Trade receivables, net |
20,967 |
|
| Inventories |
42,968 |
|
| Other current assets |
2,932 |
|
| Property, plant, and equipment |
32,791 |
|
| Intangible assets |
254,700 |
|
| Goodwill |
274,124 |
|
| Other non-current assets |
14,797 |
|
| Current liabilities |
(47,687) |
|
| Long-term debt |
(9,626) |
|
| Other non-current liabilities |
(62,952) |
|
| |
$ |
523,014 |
|
All C&K goodwill, other assets and liabilities were recorded in the Electronics segment and are reflected in the Americas, Europe and Asia-Pacific geographic areas. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining C&K’s products and technology with the Company’s existing Electronics products portfolio. Goodwill resulting from the C&K acquisition is not expected to be deductible for tax purposes.
During the nine months ended September 30, 2023, the Company recorded measurement period adjustments to increase other non-current liabilities of $4.2 million associated with uncertain tax positions, income taxes payable of $0.2 million, and reduce accrued liabilities of $0.3 million and deferred tax liabilities of $0.2 million. As a result of these adjustments, goodwill was increased by $3.9 million.
As required by purchase accounting rules, the Company recorded a $10.8 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of sales during the third and fourth quarter of 2022 as the acquired inventory was sold and reflected as other non-segment costs.
Embed
On April 12, 2022, the Company acquired Embed Ltd. (“Embed”). Founded in 2005, Embed is a proven provider of embedded software and firmware developed for a broad range of applications serving transportation end markets, primarily including commercial vehicle electrification and eMobility. The business is included in the commercial vehicle business within the Company's Transportation segment. The acquisition was funded with the Company’s cash on hand. The total purchase consideration was $9.2 million, net of cash.
Pro Forma Results
The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company and Western Automation as though the acquisition had occurred as of January 2, 2022, and C&K as though the acquisition had occurred as of December 27, 2020, and Carling business acquired on November 30, 2021 as though the acquisition had occurred as of December 29, 2019. The Company has not included pro forma results of operations for Embed as its operations were not material to the Company. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the Western Automation acquisition occurred as of January 2, 2022, and had the C&K acquisition occurred as of December 27, 2020 and had Carling acquisition occurred as of December 29, 2019 or of future consolidated operating results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the Three Months Ended |
|
For the Nine Months Ended |
| (in thousands, except per share amounts) |
|
September 30, 2023 |
|
October 1, 2022 |
|
September 30, 2023 |
|
October 1, 2022 |
| Net sales |
|
$ |
607,071 |
|
|
$ |
669,956 |
|
|
$ |
1,830,736 |
|
|
$ |
1,376,586 |
|
| Income before income taxes |
|
75,071 |
|
|
107,585 |
|
|
271,165 |
|
|
271,474 |
|
| Net income |
|
57,591 |
|
|
83,713 |
|
|
217,930 |
|
|
222,514 |
|
| Net income per share — basic |
|
2.31 |
|
|
3.38 |
|
|
8.77 |
|
|
12.38 |
|
| Net income per share — diluted |
|
2.29 |
|
|
3.35 |
|
|
8.68 |
|
|
12.26 |
|
Pro forma results presented above primarily reflect the following adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the Three Months Ended |
|
For the Nine Months Ended |
| (in thousands) |
|
September 30, 2023 |
|
October 1, 2022 |
|
September 30, 2023 |
|
October 1, 2022 |
| Amortization (a) |
|
$ |
— |
|
|
$ |
(1,512) |
|
|
$ |
(479) |
|
|
$ |
(8,951) |
|
| Depreciation |
|
— |
|
|
451 |
|
|
— |
|
|
1,979 |
|
| Transaction costs (b) |
|
(224) |
|
|
3,772 |
|
|
1,203 |
|
|
8,015 |
|
| Amortization of inventory step-up (c) |
|
— |
|
|
6,765 |
|
|
— |
|
|
11,534 |
|
| Interest expense (d) |
|
— |
|
|
497 |
|
|
— |
|
|
815 |
|
| Income tax benefit (expense) of above items |
|
28 |
|
|
(2,644) |
|
|
(91) |
|
|
(3,893) |
|
(a) The amortization adjustment for the nine months ended September 30, 2023 and three and nine months ended October 1, 2022 primarily reflects incremental amortization resulting from the measurement of intangibles at their fair values.
(b) The transaction cost adjustments reflect the reversal of certain legal and professional fees from the three and nine months ended September 30, 2023 and three and nine months ended October 1, 2022, and recognition of those fees during the three and nine months ended September 30, 2023.
(c) The amortization of inventory step-up adjustment reflects the reversal of the amount recognized related to the Carling acquisition during the three months ended April 2, 2022. The inventory step-up was amortized over four months as the inventory was sold.
(d) The interest expense adjustment reflects incremental interest expense related to the financing of the C&K acquisition.
3. Inventories
The components of inventories at September 30, 2023 and December 31, 2022 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
September 30, 2023 |
|
December 31, 2022 |
| Raw materials |
|
$ |
214,588 |
|
|
$ |
231,043 |
|
| Work in process |
|
134,657 |
|
|
134,792 |
|
| Finished goods |
|
192,365 |
|
|
226,215 |
|
| Inventory reserves |
|
(58,535) |
|
|
(44,360) |
|
| Total |
|
$ |
483,075 |
|
|
$ |
547,690 |
|
4. Property, Plant, and Equipment
The components of net property, plant, and equipment at September 30, 2023 and December 31, 2022 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
September 30, 2023 |
|
December 31, 2022 |
| Land and land improvements |
|
$ |
21,579 |
|
|
$ |
22,089 |
|
| Building and building improvements |
|
194,322 |
|
|
191,733 |
|
| Machinery and equipment |
|
846,065 |
|
|
812,540 |
|
|
|
|
|
|
| Accumulated depreciation |
|
(583,060) |
|
|
(545,252) |
|
| Total |
|
$ |
478,906 |
|
|
$ |
481,110 |
|
The Company recorded depreciation expense of $17.9 million and $17.0 million for the three months ended September 30, 2023 and October 1, 2022, respectively, and $53.5 million and $48.3 million for the nine months ended September 30, 2023 and October 1, 2022, respectively.
5. Goodwill and Other Intangible Assets
Changes in the carrying value of goodwill by segment for the nine months ended September 30, 2023 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
Electronics |
|
Transportation |
|
Industrial |
|
Total |
Net book value of goodwill as of December 31, 2022 |
|
|
|
|
|
|
|
|
Gross goodwill as of December 31, 2022 |
|
$ |
909,167 |
|
|
$ |
234,793 |
|
|
$ |
84,889 |
|
|
$ |
1,228,849 |
|
Accumulated impairment losses as of December 31, 2022 |
|
— |
|
|
(33,401) |
|
|
(8,526) |
|
|
(41,927) |
|
| Total |
|
909,167 |
|
|
201,392 |
|
|
76,363 |
|
|
1,186,922 |
|
Changes during 2023: |
|
|
|
|
|
|
|
|
Additions (a) |
|
3,879 |
|
|
— |
|
|
94,823 |
|
|
98,702 |
|
|
|
|
|
|
|
|
|
|
| Currency translation |
|
676 |
|
|
(1,616) |
|
|
(341) |
|
|
(1,281) |
|
Net book value of goodwill as of September 30, 2023 |
|
|
|
|
|
|
|
|
Gross goodwill as of September 30, 2023 |
|
913,722 |
|
|
232,668 |
|
|
179,401 |
|
|
1,325,791 |
|
Accumulated impairment losses as of September 30, 2023 |
|
— |
|
|
(32,892) |
|
|
$ |
(8,556) |
|
|
(41,448) |
|
| Total |
|
$ |
913,722 |
|
|
$ |
199,776 |
|
|
$ |
170,845 |
|
|
$ |
1,284,343 |
|
(a) The additions resulted from the acquisitions of Western Automation and measurement period adjustment related to the C&K acquisition.
The components of other intangible assets as of September 30, 2023 and December 31, 2022 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2023 |
| (in thousands) |
|
|
Gross
Carrying
Value |
|
Accumulated Amortization
|
|
Net Book
Value
|
| Land use rights |
|
|
$ |
17,133 |
|
|
$ |
2,579 |
|
|
$ |
14,554 |
|
| Patents, licenses, and software |
|
|
269,219 |
|
|
154,983 |
|
|
114,236 |
|
| Distribution network |
|
|
42,888 |
|
|
42,888 |
|
|
— |
|
| Customer relationships, trademarks, and tradenames |
|
|
679,246 |
|
|
195,670 |
|
|
483,576 |
|
|
|
|
|
|
|
|
|
| Total |
|
|
$ |
1,008,486 |
|
|
$ |
396,120 |
|
|
$ |
612,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
December 31, 2022 |
| (in thousands) |
Gross
Carrying
Value |
|
Accumulated
Amortization
|
|
Net Book
Value
|
| Land use rights |
$ |
17,938 |
|
|
$ |
2,299 |
|
|
$ |
15,639 |
|
| Patents, licenses, and software |
259,603 |
|
|
140,208 |
|
|
119,395 |
|
| Distribution network |
41,733 |
|
|
40,955 |
|
|
778 |
|
| Customer relationships, trademarks, and tradenames |
623,721 |
|
|
165,563 |
|
|
458,158 |
|
| Total |
$ |
942,995 |
|
|
$ |
349,025 |
|
|
$ |
593,970 |
|
During the three months ended September 30, 2023 and October 1, 2022, the Company recorded amortization expense of $16.0 million and $15.6 million, respectively. During the nine months ended September 30, 2023 and October 1, 2022, the Company recorded amortization expense of $49.8 million and $39.9 million, respectively.
During the nine months ended September 30, 2023, the Company recorded additions to intangible assets of $68.0 million, related to the Western Automation acquisition, the components of which were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
Weighted Average Useful Life |
|
Amount |
| Patents, licenses, and software |
6.7 |
|
$ |
11,500 |
|
| Customer relationships, trademarks, and tradenames |
14.7 |
|
56,500 |
|
| Total |
|
|
$ |
68,000 |
|
Estimated annual amortization expense related to intangible assets with definite lives as of September 30, 2023 is as follows:
|
|
|
|
|
|
|
(in thousands)
|
Amount |
| 2023 |
$ |
65,693 |
|
| 2024 |
62,578 |
|
| 2025 |
62,258 |
|
| 2026 |
51,475 |
|
| 2027 |
49,470 |
|
| 2028 and thereafter |
370,665 |
|
| Total |
$ |
662,139 |
|
6. Accrued Liabilities
The components of accrued liabilities as of September 30, 2023 and December 31, 2022 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
September 30, 2023 |
|
December 31, 2022 |
| Employee-related liabilities |
|
$ |
68,367 |
|
|
$ |
99,089 |
|
| Current lease liability |
|
11,839 |
|
|
12,841 |
|
| Other non-income taxes |
|
8,639 |
|
|
10,594 |
|
| Professional services |
|
6,159 |
|
|
7,160 |
|
| Other customer reserves |
|
4,804 |
|
|
5,064 |
|
| Interest |
|
3,687 |
|
|
4,449 |
|
| Deferred revenue |
|
2,126 |
|
|
2,593 |
|
| Restructuring liability |
|
2,075 |
|
|
2,434 |
|
| Current benefit liability |
|
1,318 |
|
|
1,318 |
|
| Other |
|
34,526 |
|
|
41,515 |
|
| Total |
|
$ |
143,540 |
|
|
$ |
187,057 |
|
Employee-related liabilities consist primarily of payroll, sales commissions, bonus, employee benefit accruals and workers’ compensation. Bonus accruals include amounts earned pursuant to the Company’s primary employee incentive compensation plans. Other accrued liabilities include miscellaneous operating accruals and other client-related liabilities.
7. Restructuring, Impairment, and Other Charges
The Company recorded restructuring, impairment, and other charges for the three and nine months ended September 30, 2023 and October 1, 2022 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2023 |
|
Nine months ended September 30, 2023 |
| (in thousands) |
Electronics |
|
Transportation |
|
Industrial |
|
Total |
|
Electronics |
|
Transportation |
|
Industrial |
|
Total |
| Employee terminations |
$ |
1,174 |
|
|
$ |
1,665 |
|
|
$ |
293 |
|
|
$ |
3,132 |
|
|
$ |
2,833 |
|
|
$ |
2,598 |
|
|
$ |
887 |
|
|
$ |
6,318 |
|
| Other restructuring charges |
64 |
|
|
138 |
|
|
364 |
|
|
566 |
|
|
321 |
|
|
822 |
|
|
1,018 |
|
|
2,161 |
|
| Total restructuring charges |
1,238 |
|
|
1,803 |
|
|
657 |
|
|
3,698 |
|
|
3,154 |
|
|
3,420 |
|
|
1,905 |
|
|
8,479 |
|
| Impairment |
— |
|
|
— |
|
|
818 |
|
|
818 |
|
|
— |
|
|
3,870 |
|
|
872 |
|
|
4,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
1,238 |
|
|
$ |
1,803 |
|
|
$ |
1,475 |
|
|
$ |
4,516 |
|
|
$ |
3,154 |
|
|
$ |
7,290 |
|
|
$ |
2,777 |
|
|
$ |
13,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 1, 2022 |
|
Nine months ended October 1, 2022 |
| (in thousands) |
Electronics |
|
Transportation |
|
Industrial |
|
Total |
|
Electronics |
|
Transportation |
|
Industrial |
|
Total |
| Employee terminations |
$ |
1,401 |
|
|
$ |
1,574 |
|
|
$ |
— |
|
|
$ |
2,975 |
|
|
$ |
1,807 |
|
|
$ |
1,997 |
|
|
$ |
— |
|
|
$ |
3,804 |
|
| Other restructuring charges |
73 |
|
|
365 |
|
|
— |
|
|
438 |
|
|
76 |
|
|
385 |
|
|
— |
|
|
461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
1,474 |
|
|
$ |
1,939 |
|
|
$ |
— |
|
|
$ |
3,413 |
|
|
$ |
1,883 |
|
|
$ |
2,382 |
|
|
$ |
— |
|
|
$ |
4,265 |
|
2023
For the three and nine months ended September 30, 2023, the Company recorded total restructuring charges of $3.7 million and $8.5 million, respectively, primarily for employee termination costs. These charges primarily related to the reorganization of certain manufacturing, selling and administrative functions within the Transportation segment’s commercial vehicle business, and the reorganization of certain selling and administrative functions within the Electronics segment due to the C&K acquisition. During the third quarter of 2023, the Company recognized a $0.8 million impairment charge substantially related to certain patents in a business within the Industrial segment. In addition, during the second quarter of 2023, the Company recognized a $3.9 million impairment charge related to the land and building of a property in the commercial vehicle business within the Transportation segment that the Company made the decision to donate.
2022
For the three and nine months ended October 1, 2022, the Company recorded total restructuring charges of $3.4 million and $4.3 million, respectively. primarily for employee termination costs. These charges are primarily related to the reorganization of certain manufacturing, selling and administrative functions within the passenger vehicle and automotive sensor businesses in the Transportation segment and the reorganization of selling and administrative functions due to the C&K acquisition within the Electronics segment.
The restructuring liability as of September 30, 2023 and December 31, 2022 is $2.1 million and $2.4 million, respectively. The restructuring liability is included within accrued liabilities in the Condensed Consolidated Balance Sheets. The Company anticipates the remaining payments associated with employee terminations will primarily be completed in the third quarter fiscal year 2024.
8. Debt
The carrying amounts of debt at September 30, 2023 and December 31, 2022 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
September 30, 2023 |
|
December 31, 2022 |
| Revolving Credit Facility |
|
$ |
100,000 |
|
|
$ |
100,000 |
|
| Term Loan |
|
290,625 |
|
|
296,250 |
|
| Euro Senior Notes, Series A due 2023 |
|
123,605 |
|
|
124,716 |
|
| Euro Senior Notes, Series B due 2028 |
|
100,363 |
|
|
101,265 |
|
|
|
|
|
|
| U.S. Senior Notes, Series B due 2027 |
|
100,000 |
|
|
100,000 |
|
| U.S. Senior Notes, Series A due 2025 |
|
50,000 |
|
|
50,000 |
|
| U.S. Senior Notes, Series B due 2030 |
|
125,000 |
|
|
125,000 |
|
| U.S. Senior Notes, due 2032 |
|
100,000 |
|
|
100,000 |
|
| Other |
|
7,056 |
|
|
9,113 |
|
| Unamortized debt issuance costs |
|
(4,024) |
|
|
(4,847) |
|
| Total debt |
|
992,625 |
|
|
1,001,497 |
|
| Less: Current maturities |
|
(135,619) |
|
|
(134,874) |
|
| Total long-term debt |
|
$ |
857,006 |
|
|
$ |
866,623 |
|
Revolving Credit Facility and Term Loan
On June 30, 2022, the Company amended and restated its Credit Agreement, dated as of April 3, 2020 (the “Credit Agreement”) to effect certain changes, including, among other changes: (i) adding a $300 million unsecured term loan credit facility; (ii) making certain financial and non-financial covenants less restrictive on the Company and its subsidiaries; (iii) replacing LIBOR-based interest rate benchmarks and modifying performance-based interest rate margins; and (iv) extending the maturity date to June 30, 2027 (the “Maturity Date”). Pursuant to the Credit Agreement, the Company may, from time to time, increase the size of the revolving credit facility or enter into one or more tranches of term loans in minimum increments of $25 million if there is no event of default and the Company is in compliance with certain financial covenants.
Loans made under the available credit facility pursuant to the Credit Agreement ("the Credit Facility") bear interest at the Company’s option, at either Secured Overnight Financing Rate ("SOFR"), fixed for interest periods of one, two, three or six-month periods, plus 1.00% to 1.75%, plus a SOFR adjustment of 0.10% or at the bank’s Base Rate, as defined in the Credit Agreement, plus —% to 0.75%, based upon the Company’s Consolidated Leverage Ratio, as defined in the Credit Agreement. The Company is also required to pay commitment fees on unused portions of the Credit Facility ranging from 0.10% to 0.175%, based on the Consolidated Leverage Ratio, as defined in the Credit Agreement.
The Credit Agreement includes representations, covenants and events of default that are customary for financing transactions of this nature.
Under the Credit Agreement, revolving loans may be borrowed, repaid and reborrowed until the Maturity Date, at which time all amounts borrowed must be repaid. The Company borrowed $300.0 million under a term loan on June 30, 2022. The principal balance of the term loans must be repaid in quarterly installments on the last day of each calendar quarter in the amount of $1.9 million commencing September 30, 2022, through June 30, 2024, and in the amount of $3.8 million commencing September 30, 2024, through March 31, 2027, with the remaining outstanding principal balance payable in full on the Maturity Date. Accrued interest on the loans is payable in arrears on each interest payment date applicable thereto and at such other times as may be specified in the Credit Agreement. Subject to certain conditions, (i) the Company may terminate or reduce the Aggregate Revolving Commitments, as defined in the Credit Agreement, in whole or in part, and (ii) the Company may prepay the revolving loans or the term loans at any time, without premium or penalty. During the three and nine months ended September 30, 2023, the Company made payments of $1.9 million and $5.6 million on its term loan, respectively. The revolving loan and term loan balance under the Credit Facility was $100.0 million and $290.6 million, respectively, as of September 30, 2023.
On May 12, 2022, the Company entered into an interest rate swap agreement to manage interest rate risk exposure, effectively converting the interest rate on the Company's SOFR based floating-rate loans to a fixed-rate. The interest rate swap, with a notional value of $200 million, was designated as a cash flow hedge against the variability of cash flows associated with the Company's SOFR based loans scheduled to mature on June 30, 2027.
As of September 30, 2023, the effective interest rate on revolving loan and term loan outstanding borrowings was 6.67%.
As of September 30, 2023, the Company had $0.2 million outstanding letters of credit under the Credit Facility and had $599.8 million of borrowing capacity available under the revolving Credit Facility. As of September 30, 2023, the Company was in compliance with all covenants under the Credit Agreement.
Senior Notes
On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold €212 million aggregate principal amount of senior notes in two series. The funding date for the Euro denominated senior notes occurred on December 8, 2016 for €117 million in aggregate amount of 1.14% Senior Notes, Series A, due December 8, 2023 (“Euro Senior Notes, Series A due 2023”), and €95 million in aggregate amount of 1.83% Senior Notes, Series B due December 8, 2028 (“Euro Senior Notes, Series B due 2028”) (together, the “Euro Senior Notes”). Interest on the Euro Senior Notes is payable semiannually on June 8 and December 8, commencing June 8, 2017.
On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold $125 million aggregate principal amount of senior notes in two series. On February 15, 2017, $25 million in aggregate principal amount of 3.03% Senior Notes, Series A, due February 15, 2022 (“U.S. Senior Notes, Series A due 2022”), and $100 million in aggregate principal amount of 3.74% Senior Notes, Series B, due February 15, 2027 (“U.S. Senior Notes, Series B due 2027”) were funded. During the first quarter of 2022, the Company paid off $25 million of U.S. Senior Notes, Series A due on February 15, 2022. Interest on the U.S. Senior Notes due 2027 is payable semiannually on February 15 and August 15, commencing August 15, 2017.
On November 15, 2017, the Company entered into a Note Purchase Agreement pursuant to which the Company issued and sold $175 million in aggregate principal amount of senior notes in two series. On January 16, 2018, $50 million aggregate principal amount of 3.48% Senior Notes, Series A, due February 15, 2025 (“U.S. Senior Notes, Series A due 2025”) and $125 million in aggregate principal amount of 3.78% Senior Notes, Series B, due February 15, 2030 (“U.S. Senior Notes, Series B due 2030”) (together, the “U.S. Senior Notes due 2025 and 2030”) were funded. Interest on the U.S. Senior Notes due 2025 and 2030 is payable semiannually on February 15 and August 15, commencing on August 15, 2018.
On May 18, 2022, the above note purchase agreements were amended to, among other things, update certain terms, including financial covenants to be consistent with the terms of the restated Credit Agreement and the 2022 Purchase Agreement, as defined below.
On May 18, 2022, the Company entered into a Note Purchase Agreement (“2022 Purchase Agreement”) pursuant to which the Company issued and funded on July 18, 2022 $100 million in aggregate principal amount of 4.33% Senior Notes, due June 30, 2032 (“U.S. Senior Notes, due 2032”) (together with the U.S. Senior Notes due 2025 and 2030, the Euro Senior Notes and the U.S. Senior Notes due 2022 and 2027, the “Senior Notes”). Interest on the U.S. Senior Notes due 2032 is payable semiannually on June 30 and December 30, commencing on December 30, 2022.
The Senior Notes have not been registered under the Securities Act, or applicable state securities laws. The Senior Notes are general unsecured senior obligations and rank equal in right of payment with all existing and future unsecured unsubordinated indebtedness of the Company.
The Senior Notes are subject to certain customary covenants, including limitations on the Company’s ability, with certain exceptions, to engage in mergers, consolidations, asset sales and transactions with affiliates, to engage in any business that would substantially change the general business of the Company, and to incur liens. In addition, the Company is required to satisfy certain financial covenants and tests relating to, among other matters, interest coverage and leverage. At September 30, 2023, the Company was in compliance with all covenants under the Senior Notes.
The Company may redeem the Senior Notes upon the satisfaction of certain conditions and the payment of a make-whole amount to noteholders and are required to offer to repurchase the Senior Notes at par following certain events, including a change of control.
Interest paid on all Company debt was $11.9 million and $8.5 million for the three months ended September 30, 2023 and October 1, 2022, respectively, and $33.2 million and $16.9 million for the nine months ended September 30, 2023 and October 1, 2022, respectively.
9. Fair Value of Assets and Liabilities
For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each fair value measurement as follows:
Level 1—Valuations based on unadjusted quoted prices for identical assets or liabilities in active markets;
Level 2—Valuations based upon quoted prices for similar instruments, prices for identical or similar instruments in markets that are not active, or model-derived valuations, all of whose significant inputs are observable, and
Level 3—Valuations based upon one or more significant unobservable inputs
.
There were no transfers in or out of Level 1, Level 2 and Level 3 during the period.
Following is a description of the valuation methodologies used for instruments measured at fair value and their classification in the valuation hierarchy.
Cash Equivalents
Cash equivalents primarily consist of money market funds, certificates of deposit, and short-term time deposits, which are held with institutions with sound credit ratings and are highly liquid. The Company classified cash equivalents as Level 1 and are valued at cost which approximates fair value.
Investments in Equity Securities
Investments in equity securities listed on a national market or exchange are valued at the last sales price and classified within Level 1 of the valuation hierarchy and recorded in Investments and Other long-term assets.
Derivatives Designated as Hedging Instruments
On May 12, 2022, the Company entered into an interest rate swap agreement to manage interest rate risk exposure, effectively converting the interest rate on the Company's SOFR based floating-rate loans to a fixed-rate. The interest rate swap, with a notional value of $200 million, was designated as a cash flow hedge against the variability of cash flows associated with the Company's SOFR based loans scheduled to mature on June 30, 2027. The fair value of the interest rate swap was valued using an independent third-party valuation model. Pursuant to this model, changes in fair value of derivatives that are designated as cash flow hedges are deferred in accumulated other comprehensive loss until the underlying transactions are recognized in earnings.
The primary inputs into the valuation of the interest rate swap are interest yield curves, interest rate volatility, credit risk, credit spreads and other market information. The interest rate swap is classified within Level 2 of the fair value hierarchy, since all significant inputs are corroborated by market observable data.
The use of derivatives creates exposure to credit risk relating to potential losses that could be recognized in the event that the counterparties to these instruments fail to perform their obligations under the contracts. The Company seeks to minimize this risk by limiting our counterparties to major financial institutions with acceptable credit ratings and monitoring the total value of positions with individual counterparties. In the event of a default by one of our counterparties, the Company may not receive payments provided for under the terms of our derivatives.
Derivatives Not Designated as Hedging Instruments
On July 14, 2022, the Company entered into a foreign currency exchange forward contract to mitigate the currency fluctuation risk between the Euro and U.S. dollar on its Euro denominated Senior Notes, Series A due 2023. The notional value of the forward contract at July 14, 2022 was €117.0 million and expires on December 7, 2023. The foreign currency contract was not designated as a hedge instrument and is marked to market on a monthly basis. As a result, changes in fair value are reported in Foreign exchange loss in the Condensed Consolidated Statements of Operations. The fair value of the foreign currency forward contract was valued using market exchange rates by a third party and classified as a Level 2 input under the fair value hierarchy.
As of September 30, 2023 and December 31, 2022, the fair values of our derivative financial instrument and their classifications on the Condensed Consolidated Balance Sheets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
Consolidated Balance Sheet Classification |
|
September 30, 2023 |
|
December 31, 2022 |
|
|
| Derivatives Designated as Hedging Instruments |
|
|
|
|
|
|
|
| Interest rate swap agreement: |
|
|
|
|
|
|
|
| Designated as cash flow hedge |
Prepaid expenses and other current assets |
|
$ |
4,963 |
|
|
$ |
3,939 |
|
|
|
|
Other long-term assets |
|
$ |
6,533 |
|
|
$ |
4,740 |
|
|
|
| Derivatives Not Designated as Hedging Instruments |
|
|
|
|
|
|
|
| Foreign exchange forward contract |
Prepaid expenses and other current assets |
|
$ |
2,862 |
|
|
$ |
6,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The pre-tax (gains) losses recognized on derivative financial instruments in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and October 1, 2022 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
| (in thousands) |
|
Classification of (Gain) Loss Recognized in the
Condensed Consolidated Statements of Operations |
|
September 30, 2023 |
|
October 1, 2022 |
|
September 30, 2023 |
|
October 1, 2022 |
| Derivatives designated as cash flow hedges |
|
|
|
|
|
|
|
|
|
|
| Interest rate swap agreement |
|
Interest expense, net |
|
$ |
(1,252) |
|
|
$ |
314 |
|
|
$ |
(3,246) |
|
|
$ |
335 |
|
| Derivatives Not Designated as Hedging Instruments |
|
|
|
|
|
|
|
|
|
|
| Foreign exchange forward contract |
|
Foreign exchange loss |
|
$ |
4,310 |
|
|
$ |
3,209 |
|
|
$ |
3,226 |
|
|
$ |
3,209 |
|
The pre-tax gains recognized on derivative financial instruments in the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and October 1, 2022 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Nine Months Ended |
| (in thousands) |
|
September 30, 2023 |
|
October 1, 2022 |
|
September 30, 2023 |
|
October 1, 2022 |
| Derivatives designated as cash flow hedges |
|
|
|
|
|
|
|
|
| Interest rate swap agreement |
|
$ |
(2,034) |
|
|
$ |
(10,012) |
|
|
$ |
(2,817) |
|
|
$ |
(9,300) |
|
The pre-tax gain of $5.0 million from accumulated other comprehensive loss to earnings is expected to be recognized during the next twelve months.
Mutual Funds
The Company has a non-qualified Supplemental Retirement and Savings Plan which provides additional retirement benefits for certain management employees and named executive officers by allowing participants to defer a portion of their annual compensation. The Company maintains accounts for participants through which participants make investment elections. The marketable securities are classified as Level 1 under the fair value hierarchy as they are maintained in mutual funds with readily determinable fair value and recorded in Other long-term assets.
There were no changes during the quarter ended September 30, 2023 to the Company’s valuation techniques used to measure asset and liability fair values on a recurring basis. As of September 30, 2023 and December 31, 2022, the Company did not hold any non-financial assets or liabilities that are required to be measured at fair value on a recurring basis.
The following table presents assets measured at fair value by classification within the fair value hierarchy as of September 30, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fair Value Measurements Using |
|
|
| (in thousands) |
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1) |
|
Significant
Other
Observable
Inputs
(Level 2) |
|
Significant
Unobservable
Inputs
(Level 3) |
|
Total |
| Cash equivalents |
|
$ |
427,671 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
427,671 |
|
| Investments in equity securities |
|
9,703 |
|
|
— |
|
|
— |
|
|
9,703 |
|
| Mutual funds |
|
18,192 |
|
|
— |
|
|
— |
|
|
18,192 |
|
| Total |
|
$ |
455,566 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
455,566 |
|
The following table presents assets measured at fair value by classification within the fair value hierarchy as of December 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fair Value Measurements Using |
|
|
| (in thousands) |
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1) |
|
Significant
Other
Observable
Inputs
(Level 2) |
|
Significant
Unobservable
Inputs
(Level 3) |
|
Total |
| Cash equivalents |
|
$ |
304,101 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
304,101 |
|
| Investments in equity securities |
|
10,653 |
|
|
— |
|
|
— |
|
|
10,653 |
|
| Mutual funds |
|
14,094 |
|
|
— |
|
|
— |
|
|
14,094 |
|
| Total |
|
$ |
328,848 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
328,848 |
|
In addition to the methods and assumptions used for the financial instruments recorded at fair value as discussed above, the following methods and assumptions are used to estimate the fair value of other financial instruments that are not marked to market on a recurring basis. The Company’s other financial instruments include cash and cash equivalents, short-term investments, accounts receivable and its long-term debt. Due to their short-term maturity, the carrying amounts of cash and cash equivalents, short-term investments and accounts receivable approximate their fair values. The Company’s revolving and term loan debt facilities' fair values approximate book value at September 30, 2023 and December 31, 2022, as the rates on these borrowings are variable in nature.
The carrying value and estimated fair values of the Company’s Euro Senior Notes, Series A and Series B and USD Senior Notes, Series A and Series B, as of September 30, 2023 and December 31, 2022 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
September 30, 2023 |
|
December 31, 2022 |
| (in thousands) |
|
Carrying
Value |
|
Estimated
Fair Value |
|
Carrying
Value |
|
Estimated
Fair Value |
| Euro Senior Notes, Series A due 2023 |
|
$ |
123,605 |
|
|
$ |
122,830 |
|
|
$ |
124,716 |
|
|
$ |
122,270 |
|
| Euro Senior Notes, Series B due 2028 |
|
100,363 |
|
|
87,722 |
|
|
101,265 |
|
|
87,119 |
|
|
|
|
|
|
|
|
|
|
| USD Senior Notes, Series B due 2027 |
|
100,000 |
|
|
92,866 |
|
|
100,000 |
|
|
93,764 |
|
| USD Senior Notes, Series A due 2025 |
|
50,000 |
|
|
48,338 |
|
|
50,000 |
|
|
48,145 |
|
| USD Senior Notes, Series B due 2030 |
|
125,000 |
|
|
109,188 |
|
|
125,000 |
|
|
112,028 |
|
| USD Senior Notes, due 2032 |
|
100,000 |
|
|
86,977 |
|
|
100,000 |
|
|
90,131 |
|
10. Benefit Plans
The Company has Company-sponsored and mandatory defined benefit pension plans covering employees in the United Kingdom ("U.K."), Germany, the Philippines, China, Japan, Mexico, Italy and France. The amount of the retirement benefits provided under the plans is generally based on years of service and final average pay.
The Company recognizes interest cost, expected return on plan assets, and amortization of prior service, net within Other (income) expense, net in the Condensed Consolidated Statements of Net Income. The components of net periodic benefit cost for the three and nine months ended September 30, 2023 and October 1, 2022 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the Three Months Ended |
|
For the Nine Months Ended |
| (in thousands) |
|
September 30, 2023 |
|
October 1, 2022 |
|
September 30, 2023 |
|
October 1, 2022 |
| Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
| Service cost |
|
$ |
700 |
|
|
$ |
725 |
|
|
$ |
2,087 |
|
|
$ |
2,243 |
|
| Interest cost |
|
961 |
|
|
607 |
|
|
2,850 |
|
|
1,879 |
|
| Expected return on plan assets |
|
(470) |
|
|
(361) |
|
|
(1,409) |
|
|
(1,144) |
|
| Amortization of prior service and net actuarial loss |
|
12 |
|
|
92 |
|
|
34 |
|
|
289 |
|
| Net periodic benefit cost |
|
$ |
1,203 |
|
|
$ |
1,063 |
|
|
$ |
3,562 |
|
|
$ |
3,267 |
|
The Company expects to make approximately $2.0 million of contributions to the plans and pay $1.9 million of benefits directly in 2023.
The Company also sponsors certain post-employment plans in foreign countries and other statutory benefit plans. The Company recorded expense of $0.4 million and $0.5 million for the three months ended September 30, 2023 and October 1, 2022, respectively, and $1.1 million and $1.5 million for the nine months ended September 30, 2023 and October 1, 2022, respectively, in Cost of Sales and Other (income) expense, net within the Condensed Consolidated Statements of Net Income. The pre-tax (gains) losses amount recognized in other comprehensive (loss) income as components of net periodic benefit costs for these plans were nominal and $0.1 million for the three months ended September 30, 2023 and October 1, 2022, respectively, and $(0.1) million and $0.3 million for the nine months ended September 30, 2023 and October 1, 2022, respectively.
11. Other Comprehensive (Loss) Income
Changes in other comprehensive (loss) income by component were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
Three Months Ended
September 30, 2023 |
|
Three Months Ended
October 1, 2022 |
|
|
Pre-tax |
|
Tax |
|
Net of Tax |
|
Pre-tax |
|
Tax |
|
Net of Tax |
| Defined benefit pension plan and other adjustments |
|
$ |
(3) |
|
|
$ |
— |
|
|
$ |
(3) |
|
|
$ |
673 |
|
|
$ |
(74) |
|
|
$ |
599 |
|
| Cash flow hedge |
|
2,034 |
|
|
(488) |
|
|
1,546 |
|
|
10,012 |
|
|
(2,403) |
|
|
7,609 |
|
| Foreign currency translation adjustments (a) |
|
(4,301) |
|
|
624 |
|
|
(3,677) |
|
|
(37,289) |
|
|
893 |
|
|
(36,396) |
|
| Total change in other comprehensive (loss) income |
|
$ |
(2,270) |
|
|
$ |
136 |
|
|
$ |
(2,134) |
|
|
$ |
(26,604) |
|
|
$ |
(1,584) |
|
|
$ |
(28,188) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
Nine Months Ended
September 30, 2023 |
|
Nine Months Ended
October 1, 2022 |
|
|
Pre-tax |
|
Tax |
|
Net of Tax |
|
Pre-tax |
|
Tax |
|
Net of Tax |
| Defined benefit pension plan and other adjustments |
|
$ |
(125) |
|
|
$ |
(31) |
|
|
$ |
(156) |
|
|
$ |
1,718 |
|
|
$ |
(170) |
|
|
$ |
1,548 |
|
| Cash flow hedge |
|
2,817 |
|
|
(676) |
|
|
2,141 |
|
|
9,300 |
|
|
(2,232) |
|
|
7,068 |
|
| Foreign currency translation adjustments (a) |
|
(6,098) |
|
|
351 |
|
|
(5,747) |
|
|
(72,671) |
|
|
2,315 |
|
|
(70,356) |
|
| Total change in other comprehensive loss |
|
$ |
(3,406) |
|
|
$ |
(356) |
|
|
$ |
(3,762) |
|
|
$ |
(61,653) |
|
|
$ |
(87) |
|
|
$ |
(61,740) |
|
(a) The tax shown above within the foreign currency translation adjustments is the U.S. tax associated with the foreign currency translation adjustments of earnings of non-U.S. subsidiaries which have been previously taxed in the U.S. and are not permanently reinvested.
The following tables set forth the changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2023 and October 1, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
Defined benefit pension plan and other adjustments |
|
Cash flow hedge |
|
Foreign currency
translation adjustment |
|
Accumulated other
comprehensive loss |
| Balance at December 31, 2022 |
|
$ |
(2,193) |
|
|
$ |
6,596 |
|
|
$ |
(100,167) |
|
|
$ |
(95,764) |
|
|
|
|
|
|
|
|
|
|
| Activity in the period |
|
(156) |
|
|
2,141 |
|
|
(5,747) |
|
|
(3,762) |
|
| Balance at September 30, 2023 |
|
$ |
(2,349) |
|
|
$ |
8,737 |
|
|
$ |
(105,914) |
|
|
$ |
(99,526) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
Defined benefit pension plan and other adjustments |
|
Cash flow hedge |
|
Foreign currency translation adjustment |
|
Accumulated other comprehensive loss |
| Balance at January 1, 2022 |
|
$ |
(11,928) |
|
|
$ |
— |
|
|
$ |
(61,535) |
|
|
$ |
(73,463) |
|
|
|
|
|
|
|
|
|
|
| Activity in the period |
|
1,548 |
|
|
7,068 |
|
|
(70,356) |
|
|
(61,740) |
|
| Balance at October 1, 2022 |
|
$ |
(10,380) |
|
|
$ |
7,068 |
|
|
$ |
(131,891) |
|
|
$ |
(135,203) |
|
Amounts reclassified from accumulated other comprehensive loss to earnings for the three and nine months ended September 30, 2023 and October 1, 2022 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Nine Months Ended |
| (in thousands) |
|
September 30, 2023 |
|
October 1, 2022 |
|
September 30, 2023 |
|
October 1, 2022 |
| Pension and Postemployment plans: |
|
|
|
|
|
|
|
|
| Amortization of prior service and net actuarial (gain) loss |
|
$ |
(11) |
|
|
$ |
193 |
|
|
$ |
(33) |
|
|
$ |
588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recognizes the amortization of prior service costs in Other (income) expense, net within the Condensed Consolidated Statements of Net Income.
12. Income Taxes
The effective tax rate for the three and nine months ended September 30, 2023 was 23.3% and 19.7%, respectively, compared to the effective tax rate for the three and nine months ended October 1, 2022 of 21.4% and 17.6%, respectively. The effective tax rate for the third quarter of 2023 is higher than the effective tax rate for the comparable 2022 period, primarily due to less income earned in lower tax jurisdictions in the 2023 period, as compared to the 2022 period. The effective tax rates for both periods are higher than the statutory tax rate due to the impact of foreign exchange losses with no related tax benefit.
The effective tax rate for the first nine months of 2023 is higher than the effective tax rate for the comparable 2022 period, primarily due to the impact of a one-time deduction in the first quarter of 2022 that resulted in a net benefit of $7.2 million from the dissolution of one of the Company’s affiliates. The effective tax rates for both periods were lower than the applicable U.S. statutory tax rate primarily due to income earned in lower tax jurisdictions, while for the 2022 period, the effective tax rate was also lower due to the impact of the one-time deduction previously noted.
13. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Nine Months Ended |
| (in thousands, except per share amounts) |
|
September 30, 2023 |
|
October 1, 2022 |
|
September 30, 2023 |
|
October 1, 2022 |
| Numerator: |
|
|
|
|
|
|
|
|
| Net income as reported |
|
$ |
57,788 |
|
|
$ |
75,468 |
|
|
$ |
216,604 |
|
|
$ |
280,002 |
|
|
|
|
|
|
|
|
|
|
| Denominator: |
|
|
|
|
|
|
|
|
| Weighted average shares outstanding |
|
|
|
|
|
|
|
|
| Basic |
|
24,893 |
|
|
24,755 |
|
|
24,838 |
|
|
24,726 |
|
| Effect of dilutive securities |
|
250 |
|
|
233 |
|
|
262 |
|
|
260 |
|
| Diluted |
|
25,143 |
|
|
24,988 |
|
|
25,100 |
|
|
24,986 |
|
|
|
|
|
|
|
|
|
|
| Earnings Per Share: |
|
|
|
|
|
|
|
|
| Basic earnings per share |
|
$ |
2.32 |
|
|
$ |
3.05 |
|
|
$ |
8.72 |
|
|
$ |
11.32 |
|
| Diluted earnings per share |
|
$ |
2.30 |
|
|
$ |
3.02 |
|
|
$ |
8.63 |
|
|
$ |
11.21 |
|
Potential shares of common stock relating to stock options and restricted share units excluded from the earnings per share calculation because their effect would be anti-dilutive were 80,828 and 92,052 for the three months ended September 30, 2023 and October 1, 2022, respectively, and 106,156 and 84,027 for the nine months ended September 30, 2023 and October 1, 2022, respectively.
Share Repurchase Program
On April 28, 2021, the Company announced that the Board of Directors authorized a new three year program to repurchase up to $300.0 million in the aggregate of shares of the Company’s common stock for the period May 1, 2021 to April 30, 2024 to replace its previous 2020 program.
The Company did not repurchase shares of its common stock for the three and nine months ended September 30, 2023, and October 1, 2022.
14. Related Party Transactions
The Company has equity ownership in various investments that are accounted for under the equity method. The following is a description of the investments and related party transactions.
Powersem GmbH: The Company owns 45% of the outstanding equity of Powersem GmbH (“Powersem”), a module manufacturer based in Germany.
EB-Tech Co., Ltd.: The Company owns approximately 19% of the outstanding equity of EB Tech Co., Ltd. (“EB Tech”), a company with expertise in radiation technology based in South Korea.
Automated Technology (Phil), Inc.: The Company owns approximately 24% of the outstanding common shares of Automated Technology (Phil), Inc. (“ATEC”), a supplier located in the Philippines that provides assembly and test services. One member of the Company's Board of Directors serves on the Board of Directors of ATEC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, 2023 |
|
Three Months Ended October 1, 2022 |
| (in millions) |
|
Powersem |
EB-Tech |
ATEC |
|
Powersem |
EB Tech |
ATEC |
| Sales to related party |
|
$ |
0.5 |
|
$ |
— |
|
$ |
— |
|
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
| Purchase material/service from related party |
|
1.2 |
|
0.1 |
|
2.0 |
|
|
— |
|
0.1 |
|
2.9 |
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2023 |
|
Nine Months Ended October 1, 2022 |
| (in millions) |
|
Powersem |
EB-Tech |
ATEC |
|
Powersem |
EB Tech |
ATEC |
| Sales to related party |
|
$ |
1.7 |
|
$ |
— |
|
$ |
— |
|
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
| Purchase material/service from related party |
|
3.3 |
|
0.3 |
|
7.6 |
|
|
0.3 |
|
0.3 |
|
8.8 |
|
|
|
|
|
|
|
|
|
|
| |
|
September 30, 2023 |
|
December 31, 2022 |
| (in millions) |
|
Powersem |
EB Tech |
ATEC |
|
Powersem |
EB Tech |
ATEC |
|
|
|
|
|
|
|
|
|
| Accounts payable balance |
|
$ |
0.8 |
|
$ |
— |
|
$ |
1.6 |
|
|
$ |
— |
|
$ |
— |
|
$ |
1.8 |
|
15. Segment Information
The Company and its subsidiaries design, manufacture and sell component, modules and subassemblies to empower the long-term structural themes of sustainability, connectivity and safety. The Company reports its operations by the following segments: Electronics, Transportation, and Industrial. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, and about which separate financial information is regularly evaluated by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources. The CODM is the Company’s President and Chief Executive Officer (“CEO”). The CODM allocates resources to and assesses the performance of each operating segment using information about its revenue and operating income (loss) before interest and taxes, but does not evaluate the operating segments using discrete balance sheet information.
Sales, marketing, and research and development expenses are charged directly into each operating segment. Purchasing, logistics, customer service, finance, information technology, and human resources are shared functions that are allocated back to the three operating segments. The Company does not report inter-segment revenue because the operating segments do not record it. Certain expenses, determined by the CODM to be strategic in nature and not directly related to segments current results, are not allocated but identified as “Other”. Additionally, the Company does not allocate interest and other income, interest expense, or taxes to operating segments. These costs are not allocated to the segments, as management excludes such costs when assessing the performance of the segments. Although the CODM uses operating income (loss) to evaluate the segments, operating costs included in one segment may benefit other segments. Except as discussed above, the accounting policies for segment reporting are the same as for the Company as a whole.
•Electronics Segment: Consists of one of the broadest product offerings in the industry, including fuses and fuse accessories, positive temperature coefficient (“PTC”) resettable fuses, electromechanical switches and interconnect solutions, polymer electrostatic discharge (“ESD”) suppressors, varistors, reed switch based magnetic sensing, gas discharge tubes; semiconductor products such as discrete transient voltage suppressor (“TVS”) diodes, TVS diode arrays, protection and switching thyristors, silicon and silicon carbide metal-oxide-semiconductor field effect transistors (“MOSFETs”) and diodes; and insulated gate bipolar transistors (“IGBT”) technologies. The segment covers a broad range of end markets, including industrial motor drives and power conversion, automotive electronics, electric vehicle and related charging infrastructure, aerospace, power supplies, data centers and telecommunications, medical devices, alternative energy and energy storage, building and home automation, appliances, and mobile electronics.
•Transportation Segment: Consists of a wide range of circuit protection, power control and sensing technologies for global original equipment manufacturers (“OEMs”), Tier-one suppliers and parts and aftermarket distributors in passenger vehicle, heavy-duty truck and bus, off-road and recreational vehicles, material handling equipment, agricultural machinery, construction equipment and other commercial vehicle end markets. Passenger vehicle products are used in internal combustion engine, hybrid and electric vehicles including blade fuses, battery cable protectors, resettable fuses, high-current fuses, high-voltage fuses, and sensor products designed to monitor the occupant’s safety and environment as well as the vehicle’s powertrain. Commercial vehicle products include fuses, switches, circuit breakers, relays, and power distribution modules and units used in applications serving a number of end markets, including heavy-duty truck and bus, construction, agriculture, material handling and marine.
•Industrial Segment: Consists of industrial circuit protection (industrial fuses), industrial controls (protection relays, contactors, transformers, residual current devices, ground fault circuit interrupters, residual current monitors, and arc fault detection devices) and temperature sensors for use in various applications such as renewable energy and energy storage systems, industrial safety, factory automation, electric vehicle infrastructure, HVAC systems, non-residential construction, MRO, and mining.
Segment information is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Nine Months Ended |
| (in thousands) |
|
September 30, 2023 |
|
October 1, 2022 |
|
September 30, 2023 |
|
October 1, 2022 |
| Net sales |
|
|
|
|
|
|
|
|
| Electronics |
|
$ |
343,933 |
|
|
$ |
397,629 |
|
|
$ |
1,052,673 |
|
|
$ |
1,121,626 |
|
| Transportation |
|
177,019 |
|
|
181,735 |
|
|
515,708 |
|
|
548,266 |
|
| Industrial |
|
86,119 |
|
|
79,516 |
|
|
260,469 |
|
|
230,754 |
|
| Total net sales |
|
$ |
607,071 |
|
|
$ |
658,880 |
|
|
$ |
1,828,850 |
|
|
$ |
1,900,646 |
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
|
|
|
|
|
|
| Electronics |
|
$ |
19,623 |
|
|
$ |
19,080 |
|
|
$ |
59,219 |
|
|
48,984 |
|
| Transportation |
|
10,193 |
|
|
11,331 |
|
|
32,547 |
|
|
32,703 |
|
| Industrial |
|
4,093 |
|
|
2,180 |
|
|
11,517 |
|
|
6,522 |
|
|
|
|
|
|
|
|
|
|
| Total depreciation and amortization |
|
$ |
33,909 |
|
|
$ |
32,591 |
|
|
$ |
103,283 |
|
|
$ |
88,209 |
|
|
|
|
|
|
|
|
|
|
| Operating income |
|
|
|
|
|
|
|
|
| Electronics |
|
$ |
77,022 |
|
|
$ |
113,140 |
|
|
$ |
247,028 |
|
|
$ |
339,675 |
|
| Transportation |
|
9,694 |
|
|
12,987 |
|
|
26,015 |
|
|
57,604 |
|
| Industrial |
|
13,201 |
|
|
12,178 |
|
|
45,450 |
|
|
39,968 |
|
Other (a) |
|
(6,272) |
|
|
(16,435) |
|
|
(22,154) |
|
|
(30,623) |
|
| Total operating income |
|
93,645 |
|
|
121,870 |
|
|
296,339 |
|
|
406,624 |
|
| Interest expense |
|
10,101 |
|
|
8,399 |
|
|
29,803 |
|
|
17,069 |
|
| Foreign exchange loss |
|
11,776 |
|
|
18,191 |
|
|
8,697 |
|
|
40,051 |
|
| Other (income) expense, net |
|
(3,527) |
|
|
(698) |
|
|
(11,810) |
|
|
9,789 |
|
| Income before income taxes |
|
$ |
75,295 |
|
|
$ |
95,978 |
|
|
$ |
269,649 |
|
|
$ |
339,715 |
|
(a) Included in “Other” Operating income for the third quarter of 2023 was $3.7 million ($8.5 million year-to-date) of restructuring charges, primarily related to employee termination costs, and $1.8 million ($9.0 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions. During the third quarter of 2023, the Company recognized a $0.8 million impairment charge substantially related to certain patents in a business within the Industrial segment. In addition, during the second quarter of 2023, the Company recognized a $3.9 million impairment charge related to the land and building in the commercial vehicle business within the Transportation segment. See Note 7, Restructuring, Impairment, and Other Charges, for further discussion.
Included in “Other” Operating income for the third quarter of 2022 was $6.8 million ($11.6 million year-to-date) of purchase accounting inventory step-up charges, $6.2 million ($14.8 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions, and $3.4 million ($4.3 million year-to-date) of restructuring, impairment and other charges, primarily related to employee termination costs. See Note 7, Restructuring, Impairment, and Other Charges, for further discussion.
The Company’s net sales by country were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Nine Months Ended |
| (in thousands) |
|
September 30, 2023 |
|
October 1, 2022 |
|
September 30, 2023 |
|
October 1, 2022 |
| Net sales |
|
|
|
|
|
|
|
|
| United States |
|
$ |
217,904 |
|
|
$ |
244,907 |
|
|
$ |
635,892 |
|
|
$ |
689,888 |
|
| China |
|
138,393 |
|
|
165,091 |
|
|
415,430 |
|
|
492,195 |
|
Other countries (a) |
|
250,774 |
|
|
248,882 |
|
|
777,528 |
|
|
718,563 |
|
| Total net sales |
|
$ |
607,071 |
|
|
$ |
658,880 |
|
|
$ |
1,828,850 |
|
|
$ |
1,900,646 |
|
The Company’s long-lived assets by country were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
September 30, 2023 |
|
December 31, 2022 |
| Long-lived assets |
|
|
|
|
| United States |
|
$ |
73,902 |
|
|
$ |
76,325 |
|
| China |
|
131,438 |
|
|
129,094 |
|
| Mexico |
|
102,896 |
|
|
107,119 |
|
| Germany |
|
42,712 |
|
|
39,635 |
|
| Philippines |
|
74,004 |
|
|
77,240 |
|
| Other countries |
|
53,954 |
|
|
51,697 |
|
| Total long-lived assets |
|
$ |
478,906 |
|
|
$ |
481,110 |
|
The Company’s additions to long-lived assets by country were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended |
| (in thousands) |
|
September 30, 2023 |
|
October 1, 2022 |
| Additions to long-lived assets |
|
|
|
|
| United States |
|
$ |
7,407 |
|
|
$ |
9,761 |
|
| China |
|
22,558 |
|
|
23,449 |
|
| Mexico |
|
11,339 |
|
|
21,169 |
|
| Germany |
|
6,534 |
|
|
3,246 |
|
| Philippines |
|
5,245 |
|
|
13,118 |
|
| Other countries |
|
8,138 |
|
|
4,269 |
|
| Total additions to long-lived assets |
|
$ |
61,221 |
|
|
$ |
75,012 |
|
(a)Each country included in other countries is less than 10% of net sales.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Statements Under the Private Securities Litigation Reform Act of 1995 (“PSLRA”).
Certain statements in this section and other parts of this Quarterly Report on Form 10-Q may constitute "forward-looking statements" within the meaning of the federal securities laws and are entitled to the safe-harbor provisions of the PSLRA. These statements include statements regarding the Company’s future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future. Such statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "estimates," "will," "should," "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy, although not all forward-looking statements contain such terms. The Company cautions that forward-looking statements, which speak only as of the date they are made, are subject to risks, uncertainties and other factors, and actual results and outcomes may differ materially from those indicated or implied by the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, risks and uncertainties relating to general economic conditions; product demand and market acceptance; economic conditions; the impact of competitive products and pricing; product quality problems or product recalls; capacity and supply difficulties or constraints; coal mining exposures reserves; cybersecurity matters; failure of an indemnification for environmental liability; exchange rate fluctuations; commodity price fluctuations; the effect of the Company's accounting policies; labor disputes; restructuring costs in excess of expectations; pension plan asset returns less than assumed; uncertainties related to political or regulatory changes; integration of acquisitions may not be achieved in a timely manner, or at all; and other risks that may be detailed in Item 1A. "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, and the Company's other filings and submissions with the Securities and Exchange Commission. The Company does not undertake any obligation to update or revise any forward-looking statements to reflect future events or circumstances, new information or otherwise.
This report, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, should be read in conjunction with information provided in the consolidated financial statements and the related Notes thereto appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide information that is supplemental to, and should be read together with, the consolidated financial statements and the accompanying notes. Information in MD&A is intended to assist the reader in obtaining an understanding of (i) the consolidated financial statements, (ii) the changes in certain key items within those financial statements from year-to-year, (iii) the primary factors that contributed to those changes, and (iv) any changes in known trends or uncertainties that the Company is aware of and that may have a material effect on future performance. In addition, MD&A provides information about the Company’s segments and how the results of those segments impact the results of operations and financial condition as a whole.
Executive Overview
Founded in 1927, Littelfuse is a diversified, industrial technology manufacturing company empowering a sustainable, connected, and safer world. Across more than 20 countries, and with approximately 17,000 global associates, we partner with customers to design and deliver innovative, reliable solutions. Serving over 100,000 end customers, our products are found in a variety of industrial, transportation and electronics end markets – everywhere, every day.
The Company maintains a network of global laboratories and engineering centers that develop new products and product enhancements, provide customer application support and test products for safety, reliability, and regulatory compliance. The Company conducts its business through three reportable segments: Electronics, Transportation, and Industrial. Within these segments, the Company designs, manufactures and sells components and modules empowering a sustainable, connected, and safer world. Our products protect against electrostatic discharge, power surges, short circuits, voltage spikes and other harmful occurrences, safely and efficiently control power and improve productivity and are used to identify and detect temperature, proximity, flow speed and fluid level in various applications.
Executive Summary
For the third quarter of 2023, the Company recognized net sales of $607.1 million, a decrease of $51.8 million, or 7.9% as compared to $658.9 million in the third quarter of 2022 including $7.3 million or 1.1% of favorable changes in foreign exchange rates. The decrease in net sales was primarily due to lower volume in the Electronics segment and the commercial vehicle business within the Transportation segment that more than offset higher volume in the passenger car products business within the Transportation segment, and higher volume in the Industrial segment. The Company recognized net income of $57.8 million, or $2.30 per diluted share, in the third quarter of 2023 compared to $75.5 million, or $3.02 per diluted share in the third quarter of 2022. The decrease in net income was primarily due to lower operating income of $36.1 million in the Electronics segment driven by a reduction in volume.
On June 28, 2023, the Company entered into a definitive purchase agreement to acquire a 200mm wafer fab located in Dortmund, Germany (“Dortmund Fab”) from Elmos Semiconductor SE. The acquisition of the Dortmund Fab is expected to close in early fiscal year 2025. The total purchase price for the fab is approximately 93 million Euro, of which 37.2 million Euro down payment (approximately $40.5 million) recorded in Other long-term assets in the Condensed Consolidated Balance Sheets was paid in the third quarter after regulatory approvals and approximately 56 million Euro will be paid at closing. The transaction is not expected to have a material impact on the Company’s fiscal year 2023 or 2024 financial results and will be reported in the Electronics-Semiconductor business within the Company’s Electronics segment.
On February 3, 2023, the Company acquired Western Automation Research and Development Limited (“Western Automation”) for approximately $162 million in cash. Headquartered in Galway, Ireland, Western Automation is a designer and manufacturer of electrical shock protection devices used across a broad range of high-growth end markets, including e-Mobility off-board charging infrastructure, industrial safety and renewables. At the time the Company and Western Automation entered into the definitive agreement, Western Automation had annualized sales of approximately $25 million and will be reported within the company’s Industrial segment. The Company financed the transaction with cash on hand.
Net cash provided by operating activities was $313.1 million for the nine months ended September 30, 2023 compared to $313.4 million for the nine months ended October 1, 2022 as lower cash earnings were offset by reductions in working capital.
Risks Related to Market Conditions
The Company continues to operate in a challenging macro environment, including but not limited to, supply chain disruptions, varying regional dynamics, and some pockets of end market softness. The ongoing war in Ukraine has had a modest impact on the Company, as the Company suspended sales into and purchases from Russia. The Company does not have any direct operations in Ukraine or Russia.
Results of Operations
The following table summarizes the Company’s unaudited condensed consolidated results of operations for the periods presented. The third quarter of 2023 includes $3.7 million ($8.5 million year-to-date) of restructuring charges, primarily related to employee termination costs, and $1.8 million ($9.0 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions. During the third quarter of 2023, the Company recognized a $0.8 million impairment charge substantially related to certain patents in a business within the Industrial segment. In addition, during the second quarter of 2023, the Company recognized a $3.9 million impairment charge related to the land and building in the commercial vehicle business within the Transportation segment. See Note 7, Restructuring, Impairment, and Other Charges, for further discussion.
The third quarter of 2022 includes $6.8 million ($11.6 million year-to-date) of purchase accounting inventory step-up charges, $6.2 million ($14.8 million year-to-date) of legal and professional fees primarily related to completed and contemplated acquisitions, and $3.4 million ($4.3 million year-to-date) of restructuring, impairment and other charges, primarily related to employee termination costs. See Note 7, Restructuring, Impairment, and Other Charges, for further discussion.
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| |
|
Third Quarter |
|
First Nine Months |
| (in thousands) |
|
2023 |
|
2022 |
|
Change |
|
%
Change |
|
2023 |
|
2022 |
|
Change |
|
%
Change |
| Net sales |
|
$ |
607,071 |
|
|
$ |
658,880 |
|
|
$ |
(51,809) |
|
|
(7.9) |
% |
|
$ |
1,828,850 |
|
|
$ |
1,900,646 |
|
|
$ |
(71,796) |
|
|
(3.8) |
% |
| Cost of sales |
|
380,200 |
|
|
402,059 |
|
|
(21,859) |
|
|
(5.4) |
% |
|
1,122,190 |
|
|
1,122,258 |
|
|
(68) |
|
|
— |
% |
| Gross profit |
|
226,871 |
|
|
256,821 |
|
|
(29,950) |
|
|
(11.7) |
% |
|
706,660 |
|
|
778,388 |
|
|
(71,728) |
|
|
(9.2) |
% |
| Operating expenses |
|
133,226 |
|
|
134,951 |
|
|
(1,725) |
|
|
(1.3) |
% |
|
410,321 |
|
|
371,764 |
|
|
38,557 |
|
|
10.4 |
% |
| Operating income |
|
93,645 |
|
|
121,870 |
|
|
(28,225) |
|
|
(23.2) |
% |
|
296,339 |
|
|
406,624 |
|
|
(110,285) |
|
|
(27.1) |
% |
| Income before income taxes |
|
75,295 |
|
|
95,978 |
|
|
(20,683) |
|
|
(21.5) |
% |
|
269,649 |
|
|
339,715 |
|
|
(70,066) |
|
|
(20.6) |
% |
| Income taxes |
|
17,507 |
|
|
20,510 |
|
|
(3,003) |
|
|
(14.6) |
% |
|
53,045 |
|
|
59,713 |
|
|
(6,668) |
|
|
(11.2) |
% |
| Net income |
|
$ |
57,788 |
|
|
$ |
75,468 |
|
|
$ |
(17,680) |
|
|
(23.4) |
% |
|
$ |
216,604 |
|
|
$ |
280,002 |
|
|
$ |
(63,398) |
|
|
(22.6) |
% |
Net Sales
Net sales decreased $51.8 million, or 7.9%, for the third quarter of 2023 compared to the third quarter of 2022 including $7.3 million or 1.1% of favorable changes in foreign exchange rates. The decrease in net sales was due to lower volume in the Electronics segment and the commercial vehicle business within the Transportation segment that more than offset higher volume in passenger car products business within the Transportation segment, and higher volume in the Industrial segment.
Net sales decreased $71.8 million, or 3.8%, for the first nine months of 2023 compared to the first nine months of 2022, including $3.1 million or 0.2% of unfavorable changes in foreign exchange rates. The sales decrease was primarily due to lower volume in the Electronics segment and the commercial vehicle business within the Transportation segment that more than offset $102.0 million or 5.4% incremental net sales associated with the C&K and Western Automation acquisitions and higher volume from the Industrial segment.
Cost of Sales
Cost of sales was $380.2 million, or 62.6% of net sales, in the third quarter of 2023, compared to $402.1 million, or 61.0% of net sales, in the third quarter of 2022. As a percent of net sales, cost of sales increased 1.6% driven by lower volume in the Electronics segment.
Cost of sales was $1,122.2 million, or 61.4% of net sales, in the first nine months of 2023, compared to $1,122.3 million, or 59.0% of net sales, in the first nine months of 2022. As a percent of net sales, cost of sales increased 2.3% driven by lower volume in the Electronics segment and the commercial vehicle business within the Transportation segment, partially offset by volume leverage, and favorable product mix from the Industrial segment.
Gross Profit
Gross profit was $226.9 million, or 37.4% of net sales, in the third quarter of 2023 compared to $256.8 million, or 39.0% of net sales, for the third quarter of 2022. The $30.0 million decrease in gross profit was primarily due to lower volume in the Electronics segment and the commercial vehicle business within the Transportation segment, partially offset by higher volume in passenger car products business within the Transportation segment, and higher volume in the Industrial segment.
Gross profit was $706.7 million, or 38.6% of net sales, in the first nine months of 2023 compared to $778.4 million, or 41.0% of net sales, for the first nine months of 2022. The $71.7 million decrease in gross profit was primarily due to lower volume in the Electronics segment and the commercial vehicle business within the Transportation segment, partially offset by the acquisition of C&K within the Electronics segment, and volume leverage and favorable product mix from the Industrial segment and $11.5 million or 0.6% of purchase accounting inventory charges recorded during the first nine months of 2022.
Operating Expenses
Operating expenses were $133.2 million, or 21.9% of net sales, for the third quarter of 2023 compared to $135.0 million, or 20.5% of net sales, for the third quarter of 2022. The decrease in operating expenses of $1.7 million was primarily due to lower selling, general, and administrative expenses of $3.0 million, partially offset by higher restructuring, impairment, and other charges of $1.1 million, including a $0.8 million impairment charge related to related to certain patents in a business within the Industrial segment.
Operating expenses were $410.3 million, or 22.4% of net sales, for the first nine months of 2023 compared to $371.8 million, or 19.6%of net sales, for the first nine months of 2022. The increase in operating expenses of $38.6 million was primarily due to higher selling, general, and administrative expenses of $11.2 million, higher amortization expense of $9.9 million and research and development expenses of $8.5 million mainly due to the C&K and Western Automation acquisitions. Additionally, the Company incurred an increase in restructuring, impairment, and other charges of $9.0 million, including a $3.9 million impairment charge related to the land and building in the commercial vehicle business within the Transportation segment and $0.8 million impairment charge related to related to certain patents in a business within the Industrial segment. This increase in operating expenses was partially offset by lower variable incentive compensation expense.
Operating Income
Operating income was $93.6 million, representing a decrease of $28.3 million, or 23.2%, for the third quarter of 2023 compared to $121.9 million for the third quarter of 2022. The decrease in operating income was due to lower gross profit from the Electronics segment. Operating margins decreased from 18.5% in the third quarter of 2022 to 15.4% in the third quarter of 2023 driven by lower volume in the Electronics segment.
Operating income was $296.3 million, representing a decrease of $110.3 million, or 27.1%, for the first nine months of 2023 compared to $406.6 million for the first nine months of 2022. The decrease in operating income was due to lower gross profit from the Electronics and Transportation segments and higher operating expenses as noted above. Operating margins decreased from 21.4% in the first nine months of 2022 to 16.2% in the first nine months of 2023 driven by lower volume in the Electronics and Transportation segments and the higher operating expenses mentioned above.
Income Before Income Taxes
Income before income taxes was $75.3 million, or 12.4% of net sales, for the third quarter of 2023 compared to $96.0 million, or 14.6% of net sales, for the third quarter of 2022. In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was primarily favorably impacted by lower foreign exchange losses of $6.4 million in the third quarter of 2023 compared to the third quarter of 2022.
Income before income taxes was $269.6 million, or 14.7% of net sales, for the first nine months of 2023 compared to $339.7 million, or 17.9% of net sales, for the first nine months of 2022. In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was primarily benefited by lower foreign exchange losses of $31.4 million and lower unrealized losses of $12.8 million related to one of the Company's equity investments during the nine months ended September 30, 2023 compared to the nine months ended October 1, 2022.
Income Taxes
Income tax expense for the third quarter of 2023 was $17.5 million, or an effective tax rate of 23.3%, compared to $20.5 million, or an effective tax rate of 21.4%, for the third quarter of 2022. The effective tax rate for the third quarter of 2023 is higher than the effective tax rate for the comparable 2022 period, primarily due to less income earned in lower tax jurisdictions in the 2023 period, as compared to the 2022 period. The effective tax rates for both periods are higher than the statutory tax rate due to the impact of foreign exchange losses with no related tax benefit.
Income tax expense for the first nine months of 2023 was $53.0 million, or an effective tax rate of 19.7%, compared to $59.7 million, or an effective tax rate of 17.6%, for the first nine months of 2022. The effective tax rate for the first nine months of 2023 is higher than the effective tax rate for the comparable 2022 period, primarily due to the impact of a one-time deduction in the first quarter of 2022 that resulted in a net benefit of $7.2 million from the dissolution of one of the Company’s affiliates. The effective tax rates for both periods were lower than the applicable U.S. statutory tax rate primarily due to income earned in lower tax jurisdictions, while for the 2022 period, the effective tax rate was also lower due to the impact of the one-time deduction previously noted.
Segment Results of Operations
The Company reports its operations by the following segments: Electronics, Transportation and Industrial. Segment information is described more fully in Note 15, Segment Information, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.
The following table is a summary of the Company’s net sales and operating income by segment:
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|
|
| Net Sales |
|
Third Quarter |
|
First Nine Months |
| (in thousands) |
|
2023 |
|
2022 |
|
Change |
|
%
Change |
|
2023 |
|
2022 |
|
Change |
|
%
Change |
| Electronics |
|
$ |
343,933 |
|
|
$ |
397,629 |
|
|
$ |
(53,696) |
|
|
(13.5) |
% |
|
$ |
1,052,673 |
|
|
$ |
1,121,626 |
|
|
$ |
(68,953) |
|
|
(6.1) |
% |
| Transportation |
|
177,019 |
|
|
181,735 |
|
|
(4,716) |
|
|
(2.6) |
% |
|
515,708 |
|
|
548,266 |
|
|
(32,558) |
|
|
(5.9) |
% |
| Industrial |
|
86,119 |
|
|
79,516 |
|
|
6,603 |
|
|
8.3 |
% |
|
260,469 |
|
|
230,754 |
|
|
29,715 |
|
|
12.9 |
% |
| Total |
|
$ |
607,071 |
|
|
$ |
658,880 |
|
|
$ |
(51,809) |
|
|
(7.9) |
% |
|
$ |
1,828,850 |
|
|
$ |
1,900,646 |
|
|
$ |
(71,796) |
|
|
(3.8) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income |
|
Third Quarter |
|
First Nine Months |
| (in thousands) |
|
2023 |
|
2022 |
|
Change |
|
%
Change |
|
2023 |
|
2022 |
|
Change |
|
%
Change |
| Electronics |
|
$ |
77,022 |
|
|
$ |
113,140 |
|
|
$ |
(36,118) |
|
|
(31.9) |
% |
|
$ |
247,028 |
|
|
$ |
339,675 |
|
|
$ |
(92,647) |
|
|
(27.3) |
% |
| Transportation |
|
9,694 |
|
|
12,987 |
|
|
(3,293) |
|
|
(25.4) |
% |
|
26,015 |
|
|
57,604 |
|
|
(31,589) |
|
|
(54.8) |
% |
| Industrial |
|
13,201 |
|
|
12,178 |
|
|
1,023 |
|
|
8.4 |
% |
|
45,450 |
|
|
39,968 |
|
|
5,482 |
|
|
13.7 |
% |
Other (a) |
|
(6,272) |
|
|
(16,435) |
|
|
10,163 |
|
|
|
|
(22,154) |
|
|
(30,623) |
|
|
8,469 |
|
|
|
| Total |
|
$ |
93,645 |
|
|
$ |
121,870 |
|
|
$ |
(28,225) |
|
|
(23.2) |
% |
|
$ |
296,339 |
|
|
$ |
406,624 |
|
|
$ |
(110,285) |
|
|
(27.1) |
% |
(a) Included in “Other” Operating income for the third quarter of 2023 was $3.7 million ($8.5 million year-to-date) of restructuring charges, primarily related to employee termination costs, and $1.8 million ($9.0 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions. During the third quarter of 2023, the Company recognized a $0.8 million impairment charge substantially related to certain patents in a business within the Industrial segment. In addition, during the second quarter of 2023, the Company recognized a $3.9 million impairment charge related to the land and building in the commercial vehicle business within the Transportation segment.
Included in “Other” Operating income for the third quarter of 2022 was $6.8 million ($11.6 million year-to-date) of purchase accounting inventory step-up charges, $6.2 million ($14.8 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions, and $3.4 million ($4.3 million year-to-date) of restructuring, impairment and other charges, primarily related to employee termination costs. See Note 7, Restructuring, Impairment, and Other Charges, for further discussion.
Electronics Segment
Net Sales
Net sales decreased $53.7 million, or 13.5%, in the third quarter of 2023 compared to the third quarter of 2022 and included favorable changes in foreign exchange rates of $4.4 million. The sales decrease was mainly due to lower volume across all businesses driven by inventory rebalancing at certain distributors and reduced demand across certain electronics markets, including consumer facing and personal electronics.
Net sales decreased $69.0 million, or 6.1%, in the first nine months of 2023 compared to the first nine months quarter of 2022 and included unfavorable changes in foreign exchange rates of $0.4 million. The sales decrease was mainly due to lower volume from the Electronics products business driven by inventory rebalancing at certain distributors and reduced demand across certain electronics markets, including consumer facing and personal electronics, and telecom, which more than offset the incremental net sales of $91.9 million from the C&K acquisition.
Operating Income
Operating income was $77.0 million, representing a decrease of $36.1 million, or 31.9%, for the third quarter of 2023 compared to $113.1 million for the third quarter of 2022. The decrease in operating income was primarily due to lower volume leverage from the Electronics products businesses and unfavorable mix that were partially offset by cost control initiatives. Operating margins decreased from 28.5% in the third quarter of 2022 to 22.4% in the third quarter of 2023 primarily due to the lower volume.
Operating income was $247.0 million, representing a decrease of $92.6 million, or 27.3%, for the first nine months of 2023 compared to $339.7 million for the first nine months of 2022. The decrease in operating income was primarily due to lower volume mainly driven from the Electronics products business, which more than offset the incremental volume from the C&K acquisition. Operating margins decreased from 30.3% in the first nine months of 2022 to 23.5% in the first nine months of 2023 primarily due to the lower volume.
Transportation Segment
Net Sales
Net sales decreased $4.7 million, or 2.6%, in the third quarter of 2023 compared to the third quarter of 2022 and included favorable changes in foreign exchange rates of $2.8 million. The sales decrease was mainly from the commercial vehicle business which had a net sales decline of $15.2 million driven by reduced demand largely due to inventory rebalancing at certain distributors and customers, and demand reduction in Asia end markets, partially offset by an increase of $10.2 million from the passenger car products business driven by global car build growth, new vehicle launches, as well as the ongoing electronification and electrification of vehicles.
Net sales decreased $32.6 million, or 5.9%, in the first nine months of 2023 compared to the first nine months of 2022 and included unfavorable changes in foreign exchange rates of $2.2 million. The commercial vehicle business net sales declined $40.6 million driven by reduced demand largely due to inventory rebalancing at certain distributors and customers, and some demand reduction in commercial vehicle end markets, partially offset by an increase of $13.6 million from the passenger car products business driven by the ongoing electronification and electrification of vehicles. The automotive sensors business had net sales declines of $5.5 million primarily due to lower demand in the United States and China.
Operating Income
Operating income was $9.7 million, representing a decrease of $3.3 million, or 25.4%, for the third quarter of 2023 compared to $13.0 million for the third quarter of 2022. The decrease in operating income was primarily due to lower volume driven by the decrease from the commercial vehicle business partially offset by higher volume and price realization in the passenger car business. Operating margins decreased from 7.1% in the third quarter of 2022 to 5.5% in the third quarter of 2023 primarily driven by lower commercial vehicle volume.
Operating income was $26.0 million, representing a decrease of $31.6 million, or 54.8%, for the first nine months of 2023 compared to $57.6 million for the first nine months of 2022. Operating margins declined from 10.5% to 5.0% primarily due to lower volume from the commercial vehicle business.
Industrial Segment
Net Sales
Net sales increased by $6.6 million, or 8.3%, in the third quarter of 2023 compared to the third quarter of 2022, which included favorable changes in foreign exchange rates of $0.1 million. The sales increase was primarily due to continued growth in construction/MRO, price realization and the acquisition of Western Automation.
Net sales increased by $29.7 million, or 12.9%, in the first nine months of 2023 compared to the first nine months of 2022, which included unfavorable changes in foreign exchange rates of $0.5 million. The sales increase was primarily due to higher volume in the construction/MRO, renewables, and industrial OEM end markets, and the acquisition of Western Automation.
Operating Income
Operating income was $13.2 million, representing an increase of $1.0 million, or 8.4%, for the third quarter of 2023 compared to $12.2 million for the third quarter of 2022. The increase in operating income was driven by price realization and higher volume, partially offset by higher amortization expense from the acquisition of Western Automation. Operating margin was 15.3% for both the third quarter of 2023 and 2022.
Operating income was $45.5 million, representing an increase of $5.5 million, or 13.7%, for the first nine months of 2023 compared to $40.0 million for the first nine months of 2022. The increase in operating income was due to price realization and higher volume, partially offset by higher amortization expenses from the acquisition of Western Automation.
Operating margins were 17.4% in the first nine months of 2023 compared to 17.3% in the first nine months of 2022.
Geographic Net Sales Information
Net sales by geography represent net sales to customer or distributor locations. The following table is a summary of the Company’s net sales by geography:
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|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Third Quarter |
|
First Nine Months |
| (in thousands) |
|
2023 |
|
2022 |
|
Change |
|
%
Change |
|
2023 |
|
2022 |
|
Change |
|
%
Change |
| Americas |
|
$ |
236,706 |
|
|
$ |
264,894 |
|
|
$ |
(28,188) |
|
|
(10.6) |
% |
|
$ |
698,456 |
|
|
$ |
749,715 |
|
|
$ |
(51,259) |
|
|
(6.8) |
% |
| Asia-Pacific |
|
235,908 |
|
|
263,963 |
|
|
(28,055) |
|
|
(10.6) |
% |
|
693,611 |
|
|
776,990 |
|
|
(83,379) |
|
|
(10.7) |
% |
| Europe |
|
134,457 |
|
|
130,023 |
|
|
4,434 |
|
|
3.4 |
% |
|
436,783 |
|
|
373,941 |
|
|
62,842 |
|
|
16.8 |
% |
| Total |
|
$ |
607,071 |
|
|
$ |
658,880 |
|
|
$ |
(51,809) |
|
|
(7.9) |
% |
|
$ |
1,828,850 |
|
|
$ |
1,900,646 |
|
|
$ |
(71,796) |
|
|
(3.8) |
% |
Americas
Net sales decreased $28.2 million, or 10.6%, in the third quarter of 2023 compared to the third quarter of 2022 and included favorable changes in foreign exchange rates of $0.1 million. The decrease in net sales was primarily due to lower volume from the Electronics segment and lower sales from the commercial vehicle business within the Transportation segment, partially offset by higher sales from the passenger car products business within the Transportation segment and growth across various markets in the Industrial segment compared to the third quarter of 2022.
Net sales decreased $51.3 million, or 6.8%, in the first nine months of 2023 compared to the first nine months of 2022 and included unfavorable changes in foreign exchange rates of $0.3 million. The decrease in net sales was primarily due to lower volume from the electronics products business within the Electronics segment and lower sales from the commercial vehicle business within the Transportation segment, partially offset by incremental sales from C&K acquisition within the Electronics segment and higher sales within the Industrial segment compared to the first nine months of 2022.
Asia-Pacific
Net sales decreased $28.1 million, or 10.6%, in the third quarter of 2023 compared to the third quarter of 2022 and included unfavorable changes in foreign exchange rates of $1.8 million. The decrease in net sales was primarily due to lower net sales from the Electronics segment and lower net sales from the commercial vehicle business within the Transportation segment, partially offset by higher net sales from passenger car products business within the Transportation segment compared to the third quarter of 2022.
Net sales decreased $83.4 million, or 10.7%, in the first nine months of 2023 compared to the first nine months of 2022 and included unfavorable changes in foreign exchange rates of $8.4 million. The decrease in net sales was primarily due to lower net sales from electronics products business within the Electronics segment and lower net sales from the commercial vehicle and automotive sensors businesses within the Transportation segment, partially offset by incremental sales from the acquisition of C&K.
Europe
Net sales increased $4.4 million, or 3.4%, in the third quarter of 2023 compared to the third quarter of 2022 and included favorable changes in foreign exchange rates of $9.0 million. The increase in net sales was primarily due to favorable changes in foreign exchange rates, increased volume across all businesses within the Transportation segment, and incremental sales from the Western Automation acquisition included within the Industrial segment, partially offset by lower net sales from the Electronics segment.
Net sales increased $62.8 million, or 16.8%, in the first nine months of 2023 compared to the first nine months of 2022 and included favorable changes in foreign exchange rates of $5.6 million. The increase in net sales was primarily due to the incremental sales from the acquisition of C&K, increased volume from the semiconductor business within the Electronics segment, and the incremental sales from the Western Automation acquisition included within the Industrial segment, partially offset by lower net sales from the electronics products business within the Electronics segment.
Liquidity and Capital Resources
The Company has historically supported its liquidity needs through cash flows from operations. Management expects that the Company’s (i) current level of cash, cash equivalents, and marketable securities, (ii) current and forecasted cash flows from operations, (iii) availability under existing funding arrangements, and (iv) access to capital in the capital markets will provide sufficient funds to support the Company’s operations, capital expenditures, investments, and debt obligations on both a short-term and long-term basis.
Cash and cash equivalents were $560.1 million as of September 30, 2023, a decrease of $2.5 million as compared to December 31, 2022. As of September 30, 2023, $155.6 million of the Company's $560.1 million cash and cash equivalents was held by U.S. subsidiaries.
Revolving Credit Facility and Term Loan
On June 30, 2022, the Company amended and restated its Credit Agreement, dated as of April 3, 2020 (the “Credit Agreement”) to effect certain changes, including, among other changes: (i) adding a $300 million unsecured term loan credit facility; (ii) making certain financial and non-financial covenants less restrictive on the Company and its subsidiaries; (iii) replacing LIBOR-based interest rate benchmarks and modifying performance-based interest rate margins; and (iv) extending the maturity date to June 30, 2027 (the “Maturity Date”). Pursuant to the Credit Agreement, the Company may, from time to time, increase the size of the revolving credit facility or enter into one or more tranches of term loans in minimum increments of $25 million if there is no event of default and the Company is in compliance with certain financial covenants.
Loans made under the available credit facility pursuant to the Credit Agreement ("the Credit Facility") bear interest at the Company’s option, at either Secured Overnight Financing Rate ("SOFR"), fixed for interest periods of one, two, three or six-month periods, plus 1.00% to 1.75%, plus a SOFR adjustment of 0.10% or at the bank’s Base Rate, as defined in the Credit Agreement, plus 0.00% to 0.75%, based upon the Company’s Consolidated Leverage Ratio, as defined in the Credit Agreement. The Company is also required to pay commitment fees on unused portions of the Credit Facility ranging from 0.10% to 0.175%, based on the Consolidated Leverage Ratio, as defined in the Credit Agreement. The Credit Agreement includes representations, covenants and events of default that are customary for financing transactions of this nature.
Under the Credit Agreement, revolving loans may be borrowed, repaid and reborrowed until the Maturity Date, at which time all amounts borrowed must be repaid. The Company borrowed $300.0 million under a term loan on June 30, 2022. The principal balance of the term loans must be repaid in quarterly installments on the last day of each calendar quarter in the amount of $1.9 million commencing September 30, 2022, through June 30, 2024, and in the amount of $3.8 million commencing September 30, 2024, through March 31, 2027, with the remaining outstanding principal balance payable in full on the Maturity Date. Accrued interest on the loans is payable in arrears on each interest payment date applicable thereto and at such other times as may be specified in the Credit Agreement. Subject to certain conditions, (i) the Company may terminate or reduce the Aggregate Revolving Commitments, as defined in the Credit Agreement, in whole or in part, and (ii) the Company may prepay the revolving loans or the term loans at any time, without premium or penalty. During the three and nine months ended September 30, 2023, the Company made payments of $1.9 million and $5.6 million on its term loan, respectively. The revolving loan and term loan balance under the Credit Facility was $100.0 million and $290.6 million, respectively, as of September 30, 2023.
On May 12, 2022, the Company entered into an interest rate swap agreement to manage interest rate risk exposure, effectively converting the interest rate on the Company's SOFR based floating-rate loans to a fixed-rate. The interest rate swap, with a notional value of $200 million, was designated as a cash flow hedge against the variability of cash flows associated with the Company's SOFR based loans scheduled to mature on June 30, 2027.
As of September 30, 2023, the effective interest rate on revolving loan and term loan outstanding borrowings was 6.67%.
As of September 30, 2023, the Company had $0.2 million outstanding letters of credit under the Credit Facility and had $599.8 million of borrowing capacity available under the revolving Credit Facility. As of September 30, 2023, the Company was in compliance with all covenants under the Credit Agreement.
Senior Notes
On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold €212 million aggregate principal amount of senior notes in two series. The funding date for the Euro denominated senior notes occurred on December 8, 2016 for €117 million in aggregate amount of 1.14% Senior Notes, Series A, due December 8, 2023 (“Euro Senior Notes, Series A due 2023”), and €95 million in aggregate amount of 1.83% Senior Notes, Series B due December 8, 2028 (“Euro Senior Notes, Series B due 2028”) (together, the “Euro Senior Notes”).
Interest on the Euro Senior Notes is payable semiannually on June 8 and December 8, commencing June 8, 2017.
On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold $125 million aggregate principal amount of senior notes in two series. On February 15, 2017, $25 million in aggregate principal amount of 3.03% Senior Notes, Series A, due February 15, 2022 (“U.S. Senior Notes, Series A due 2022”), and $100 million in aggregate principal amount of 3.74% Senior Notes, Series B, due February 15, 2027 (“U.S. Senior Notes, Series B due 2027”) were funded. During the first quarter of 2022, the Company paid off $25 million of U.S. Senior Notes, Series A due on February 15, 2022. Interest on the U.S. Senior Notes due 2027 is payable semiannually on February 15 and August 15, commencing August 15, 2017.
On November 15, 2017, the Company entered into a Note Purchase Agreement pursuant to which the Company issued and sold $175 million in aggregate principal amount of senior notes in two series. On January 16, 2018, $50 million aggregate principal amount of 3.48% Senior Notes, Series A, due February 15, 2025 (“U.S. Senior Notes, Series A due 2025”) and $125 million in aggregate principal amount of 3.78% Senior Notes, Series B, due February 15, 2030 (“U.S. Senior Notes, Series B due 2030”) (together, the “U.S. Senior Notes due 2025 and 2030”) were funded. Interest on the U.S. Senior Notes due 2025 and 2030 is payable semiannually on February 15 and August 15, commencing on August 15, 2018.
On May 18, 2022, the above note purchase agreements were amended to, among other things, update certain terms, including financial covenants to be consistent with the terms of the restated Credit Agreement and the 2022 Purchase Agreement, as defined below.
On May 18, 2022, the Company entered into a Note Purchase Agreement (“2022 Purchase Agreement”) pursuant to which the Company issued and funded on July 18, 2022 $100 million in aggregate principal amount of 4.33% Senior Notes, due June 30, 2032 (“U.S. Senior Notes, due 2032”) (together with the U.S. Senior Notes due 2025 and 2030, the Euro Senior Notes and the U.S. Senior Notes due 2022 and 2027, the “Senior Notes”). Interest on the U.S. Senior Notes due 2032 is payable semiannually on June 30 and December 30, commencing on December 30, 2022.
Debt Covenants
The Company was in compliance with all covenants under the Credit Agreement and Senior Notes as of September 30, 2023 and currently expects to remain in compliance based on management’s estimates of operating and financial results for 2023. As of September 30, 2023, the Company met all the conditions required to borrow under the Credit Agreement and management expects the Company to continue to meet the applicable borrowing conditions.
Acquisitions
On June 28, 2023, the Company entered into a definitive purchase agreement to acquire a 200mm wafer fab located in Dortmund, Germany (“Dortmund Fab”) from Elmos Semiconductor SE. The acquisition of the Dortmund Fab is expected to close in early fiscal year 2025. The total purchase price for the fab is approximately 93 million Euro, of which 37.2 million Euro down payment (approximately $40.5 million) recorded in Other long-term assets in the Condensed Consolidated Balance Sheets was paid in the third quarter after regulatory approvals and approximately 56 million Euro will be paid at closing. The transaction is not expected to have a material impact on the Company’s fiscal year 2023 or 2024 financial results and will be reported in the Electronics-Semiconductor business within the Company’s Electronics segment.
On February 3, 2023, the Company acquired Western Automation for approximately $162 million in cash. Headquartered in Galway, Ireland, Western Automation is a designer and manufacturer of electrical shock protection devices used across a broad range of high-growth end markets, including e-Mobility off-board charging infrastructure, industrial safety and renewables. At the time the Company and Western Automation entered into the definitive agreement, Western Automation had annualized sales of approximately $25 million. The business is reported within the Company’s Industrial segment. The Company financed the transaction with cash on hand.
Dividends
During the third quarter of 2023 the Company paid quarterly dividends of $16.2 million to the shareholders. On October 31, 2023, the Company announced the declaration of a quarterly cash dividend of $0.65 per share payable on December 7, 2023 to stockholders of record as of November 23, 2023.
Cash Flow Overview
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|
First Nine Months |
| (in thousands) |
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2023 |
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2022 |
| Net cash provided by operating activities |
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$ |
313,140 |
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$ |
313,439 |
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| Net cash used in investing activities |
|
(261,379) |
|
|
(609,980) |
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| Net cash (used in) provided by financing activities |
|
(47,144) |
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|
321,923 |
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| Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
|
(7,965) |
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(31,963) |
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| Decrease in cash, cash equivalents, and restricted cash |
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(3,348) |
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(6,581) |
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| Cash, cash equivalents, and restricted cash at beginning of period |
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564,939 |
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482,836 |
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| Cash, cash equivalents, and restricted cash at end of period |
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$ |
561,591 |
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|
$ |
476,255 |
|
Cash Flow from Operating Activities
Operating cash inflows are largely attributable to sales of the Company’s products. Operating cash outflows are largely attributable to recurring expenditures for raw materials, labor, rent, interest, taxes and other operating activities.
Net cash provided by operating activities was $313.1 million for the nine months ended September 30, 2023 compared to $313.4 million for the nine months ended October 1, 2022 as lower cash earnings were offset by reductions in working capital.
Cash Flow from Investing Activities
Net cash used in investing activities was $261.4 million for the nine months ended September 30, 2023 compared to $610.0 million during the nine months ended October 1, 2022. Net cash paid for acquisitions was $198.8 million and $532.8 million during the nine months ended September 30, 2023 and October 1, 2022, respectively. Capital expenditures were $63.2 million, representing a decrease of $14.6 million compared to nine months ended October 1, 2022. During the nine months ended September 30, 2023 and October 1, 2022, the Company received proceeds of $0.7 million from the sale of a property within the Electronics segment and $0.6 million from the sale of a property within the Transportation segment, respectively.
Cash Flow from Financing Activities
Net cash used in financing activities was $47.1 million for the nine months ended September 30, 2023 compared to net cash provided by financing activities of $321.9 million for the nine months ended October 1, 2022. On June 30, 2022, the Company amended its Credit Agreement and borrowed $300.0 million through a term loan. During the nine months ended September 30, 2023, the Company made payments of $5.6 million on the term loan. During the nine months ended October 1, 2022, the Company paid $25.0 million of U.S. Senior Notes, Series A due on February 15, 2022 and $1.9 million on the term loan. Additionally, the Company paid dividends of $46.0 million and $41.1 million in the nine months ended September 30, 2023 and October 1, 2022, respectively.
Share Repurchase Program
On April 28, 2021, the Company announced that the Board of Directors authorized a new three-year program to repurchase up to $300 million in the aggregate of shares of the Company’s common stock for the period May 1, 2021 to April 30, 2024 to replace its previous 2020 program.
The Company did not repurchase shares of its common stock for the three and nine months ended September 30, 2023, and October 1, 2022.
Off-Balance Sheet Arrangements
As of September 30, 2023, the Company did not have any off-balance sheet arrangements, as defined under SEC rules. Specifically, the Company was not liable for guarantees of indebtedness owed by third parties, the Company was not directly liable for the debt of any unconsolidated entity and the Company did not have any retained or contingent interest in assets. The Company does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.
Critical Accounting Policies and Estimates
The Company’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP. In connection with the preparation of the Condensed Consolidated Financial Statements, the Company uses estimates and makes judgments and assumptions about future events that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures. The assumptions, estimates, and judgments are based on historical experience, current trends, and other factors the Company believes are relevant at the time it prepares the Condensed Consolidated Financial Statements.
The significant accounting policies and critical accounting estimates are consistent with those discussed in Note 1, Summary of Significant Accounting Policies and Other Information, to the consolidated financial statements and the MD&A section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. During the nine months ended September 30, 2023, there were no significant changes in the application of critical accounting policies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of the Company's Annual Report on Form 10-K for the year ended December 31, 2022. During the nine months ended September 30, 2023, there have been no material changes in the Company's exposure to market risk.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(b) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
In connection with the preparation of this report, management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of September 30, 2023. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the quarter ended September 30, 2023, the Company's disclosure controls and procedures were effective.
(b) Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(f) and 15d-15(f) under the Exchange Act that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes in the Company's risk factors from those disclosed in the Company's Annual Report on Form 10-K for its year ended December 31, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities
On April 28, 2021, the Company announced that the Board of Directors authorized a new three year program to repurchase up to $300.0 million in the aggregate of shares of the Company’s common stock for the period May 1, 2021 to April 30, 2024 to replace its previous 2020 program.
The Company did not repurchase shares of its common stock for the three months ended September 30, 2023 and October 1, 2022.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None of the Company’s directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended September 30, 2023.
ITEM 6. EXHIBITS
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| Exhibit |
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Description |
| 31.1* |
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| 31.2* |
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| 32.1** |
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| 101 |
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The following financial information from LITTELFUSE, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Net Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Stockholders' Equity , (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements. |
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| 104 |
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The cover page from this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL. |
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| * |
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Filed herewith. |
| ** |
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Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, to be signed on its behalf by the undersigned thereunto duly authorized.
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Littelfuse, Inc. |
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By: |
/s/ Meenal A. Sethna |
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Meenal A. Sethna |
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Executive Vice President and Chief Financial Officer |
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Date: November 1, 2023 |
By: |
/s/ Jeffrey G. Gorski |
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Jeffrey G. Gorski |
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Senior Vice President and Chief Accounting Officer |
EX-31.1
2
ex311q22023.htm
EX-31.1
Document
EXHIBIT 31.1
SECTION 302 CERTIFICATION
I, David W. Heinzmann, certify that:
1I have reviewed this Quarterly Report on Form 10-Q of Littelfuse Inc.;
2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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| Dated: November 1, 2023 |
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/s/ David W. Heinzmann |
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David W. Heinzmann
President and Chief Executive Officer |
EX-31.2
3
ex312q22023.htm
EX-31.2
Document
EXHIBIT 31.2
SECTION 302 CERTIFICATION
I, Meenal A. Sethna, certify that:
1I have reviewed this Quarterly Report on Form 10-Q of Littelfuse Inc.;
2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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| Dated: November 1, 2023 |
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/s/ Meenal A. Sethna |
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Meenal A. Sethna
Executive Vice President and Chief Financial Officer |
EX-32.1
4
ex321q22023.htm
EX-32.1
Document
EXHIBIT 32.1
LITTELFUSE, INC.
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of title 18, United States Code), each of the undersigned officers of Littelfuse, Inc. (“the Company”) does hereby certify that to his knowledge:
The Quarterly Report of the Company on Form 10-Q for the fiscal quarter ended September 30, 2023 (“the Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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| /s/ David W. Heinzmann |
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/s/ Meenal A. Sethna |
| David W. Heinzmann |
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Meenal A. Sethna |
| President and Chief Executive Officer |
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Executive Vice President and Chief Financial Officer |
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| Dated: November 1, 2023 |
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Dated: November 1, 2023 |
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