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 JuneMarch 27, 20202021
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)
| | | | | | | | |
Delaware | | 36-3795742 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
8755 West Higgins Road | | |
Suite 500 | | |
Chicago | Illinois | 60631 |
(Address of principal executive offices) | | (ZIP Code) |
Registrant’s telephone number, including area code: 773-628-1000
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | | | | |
Title of Each Class | | Trading Symbol | | Name of exchange on which registered | |
Common Stock, $0.01 par value | | LFUS | | 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 ☒ 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 July 24, 2020,April 23, 2021, the registrant had outstanding 24,341,58424,555,229 shares of Common Stock, net of Treasury Shares.
TABLE OF CONTENTS
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PART I | | |
Item 1. | | |
| Condensed Consolidated Balance Sheets as of JuneMarch 27, 20202021 (unaudited) and December 28, 201926, 2020 | |
| Condensed Consolidated Statements of Net (Loss) Income for the three and six months ended JuneMarch 27, 20202021 (unaudited) and June 29, 2019March 28, 2020 (unaudited) | |
| Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended JuneMarch 27, 20202021 (unaudited) and June 29, 2019March 28, 2020 (unaudited) | |
| Condensed Consolidated Statements of Cash Flows for the sixthree months ended JuneMarch 27, 20202021 (unaudited) and June 29, 2019March 28, 2020 (unaudited) | |
| Condensed Consolidated Statements of Stockholders' Equity for the sixthree months ended JuneMarch 27, 20202021 (unaudited) and June 29, 2019March 28, 2020 (unaudited) | |
| | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
PART II | | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
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LITTELFUSE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | (Unaudited) | | | (Unaudited) | |
(in thousands) | (in thousands) | | June 27, 2020 | | December 28, 2019 | (in thousands) | | March 27, 2021 | | December 26, 2020 |
ASSETS | ASSETS | | | | | ASSETS | | | | |
Current assets: | Current assets: | | | | | Current assets: | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 651,867 | | | $ | 531,139 | | Cash and cash equivalents | | $ | 572,771 | | | $ | 687,525 | |
Short-term investments | Short-term investments | | 44 | | | 44 | | Short-term investments | | 53 | | | 54 | |
Trade receivables, less allowances of $39,970 and $42,043 at June 27, 2020 and December 28, 2019, respectively | | 185,806 | | | 202,309 | | |
Trade receivables, less allowances of $42,624 and $45,237 at March 27, 2021 and December 26, 2020, respectively | | Trade receivables, less allowances of $42,624 and $45,237 at March 27, 2021 and December 26, 2020, respectively | | 276,687 | | | 232,760 | |
Inventories | Inventories | | 248,020 | | | 237,507 | | Inventories | | 295,057 | | | 258,002 | |
Prepaid income taxes and income taxes receivable | Prepaid income taxes and income taxes receivable | | 1,529 | | | 4,831 | | Prepaid income taxes and income taxes receivable | | 4,146 | | | 3,029 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | | 31,899 | | | 28,564 | | Prepaid expenses and other current assets | | 43,698 | | | 35,939 | |
Total current assets | Total current assets | | 1,119,165 | | | 1,004,394 | | Total current assets | | 1,192,412 | | | 1,217,309 | |
| Net property, plant, and equipment | Net property, plant, and equipment | | 334,677 | | | 344,617 | | Net property, plant, and equipment | | 344,914 | | | 344,178 | |
Intangible assets, net of amortization | Intangible assets, net of amortization | | 301,661 | | | 321,247 | | Intangible assets, net of amortization | | 317,294 | | | 291,887 | |
Goodwill | Goodwill | | 787,601 | | | 820,589 | | Goodwill | | 845,586 | | | 816,812 | |
Investments | Investments | | 23,678 | | | 24,099 | | Investments | | 37,285 | | | 30,547 | |
Deferred income taxes | Deferred income taxes | | 7,555 | | | 8,069 | | Deferred income taxes | | 9,854 | | | 11,224 | |
Right of use lease assets, net | Right of use lease assets, net | | 19,621 | | | 21,918 | | Right of use lease assets, net | | 19,560 | | | 17,615 | |
Other assets | Other assets | | 17,100 | | | 14,965 | | Other assets | | 19,965 | | | 18,021 | |
Total assets | Total assets | | $ | 2,611,058 | | | $ | 2,559,898 | | Total assets | | $ | 2,786,870 | | | $ | 2,747,593 | |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | | | | | LIABILITIES AND EQUITY | | | | |
Current liabilities: | Current liabilities: | | | | | Current liabilities: | | | | |
Accounts payable | Accounts payable | | $ | 113,767 | | | $ | 117,320 | | Accounts payable | | $ | 179,723 | | | $ | 145,984 | |
| Accrued liabilities | Accrued liabilities | | 85,356 | | | 84,120 | | Accrued liabilities | | 98,354 | | | 110,478 | |
Accrued income taxes | Accrued income taxes | | 10,034 | | | 14,122 | | Accrued income taxes | | 23,468 | | | 19,186 | |
Current portion of long-term debt | Current portion of long-term debt | | — | | | 10,000 | | Current portion of long-term debt | | 25,000 | | | 0 | |
Total current liabilities | Total current liabilities | | 209,157 | | | 225,562 | | Total current liabilities | | 326,545 | | | 275,648 | |
Long-term debt, less current portion | Long-term debt, less current portion | | 776,205 | | | 669,158 | | Long-term debt, less current portion | | 623,865 | | | 687,034 | |
Deferred income taxes | Deferred income taxes | | 46,562 | | | 49,763 | | Deferred income taxes | | 51,229 | | | 50,134 | |
Accrued post-retirement benefits | Accrued post-retirement benefits | | 39,653 | | | 38,198 | | Accrued post-retirement benefits | | 42,894 | | | 45,802 | |
Non-current operating lease liabilities | Non-current operating lease liabilities | | 15,155 | | | 17,166 | | Non-current operating lease liabilities | | 14,190 | | | 12,950 | |
Other long-term liabilities | Other long-term liabilities | | 61,892 | | | 64,037 | | Other long-term liabilities | | 67,410 | | | 67,252 | |
Shareholders’ equity: | Shareholders’ equity: | | Shareholders’ equity: | |
Common stock, par value $0.01 per share: 34,000,000 shares authorized; shares issued, June 27, 2020–25,983,147; December 28, 2019–25,855,203 | | 257 | | | 256 | | |
Treasury stock, at cost: 1,643,369 and 1,473,901 shares, respectively | | (242,192) | | | (216,447) | | |
Common stock, par value $0.01 per share: 34,000,000 shares authorized; shares issued, March 27, 2021–26,196,472; December 26, 2020–26,131,544 | | Common stock, par value $0.01 per share: 34,000,000 shares authorized; shares issued, March 27, 2021–26,196,472; December 26, 2020–26,131,544 | | 259 | | | 259 | |
Additional paid-in capital | Additional paid-in capital | | 885,306 | | | 867,996 | | Additional paid-in capital | | 918,762 | | | 907,858 | |
Treasury stock, at cost: 1,644,283 and 1,644,283 shares, respectively | | Treasury stock, at cost: 1,644,283 and 1,644,283 shares, respectively | | (242,366) | | | (242,366) | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (124,219) | | | (106,823) | | Accumulated other comprehensive loss | | (96,028) | | | (91,157) | |
Retained earnings | Retained earnings | | 943,151 | | | 950,901 | | Retained earnings | | 1,079,979 | | | 1,034,048 | |
Littelfuse, Inc. shareholders’ equity | Littelfuse, Inc. shareholders’ equity | | 1,462,303 | | | 1,495,883 | | Littelfuse, Inc. shareholders’ equity | | 1,660,606 | | | 1,608,642 | |
Non-controlling interest | Non-controlling interest | | 131 | | | 131 | | Non-controlling interest | | 131 | | | 131 | |
Total equity | Total equity | | 1,462,434 | | | 1,496,014 | | Total equity | | 1,660,737 | | | 1,608,773 | |
Total liabilities and equity | Total liabilities and equity | | $ | 2,611,058 | | | $ | 2,559,898 | | Total liabilities and equity | | $ | 2,786,870 | | | $ | 2,747,593 | |
See accompanying Notes to Condensed Consolidated Financial Statements.
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF NET (LOSS) INCOME
(Unaudited)
| | | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended | |
(in thousands, except per share data) | (in thousands, except per share data) | | June 27, 2020 | | June 29, 2019 | | June 27, 2020 | | June 29, 2019 | (in thousands, except per share data) | | March 27, 2021 | | March 28, 2020 | |
Net sales | Net sales | | $ | 307,337 | | | $ | 397,879 | | | $ | 653,433 | | | $ | 803,379 | | Net sales | | $ | 463,794 | | | $ | 346,096 | | |
Cost of sales | Cost of sales | | 208,238 | | | 256,071 | | | 430,622 | | | 506,343 | | Cost of sales | | 303,328 | | | 221,740 | | |
Gross profit | Gross profit | | 99,099 | | | 141,808 | | | 222,811 | | | 297,036 | | Gross profit | | 160,466 | | | 124,356 | | |
| Selling, general, and administrative expenses | Selling, general, and administrative expenses | | 53,981 | | | 57,666 | | | 108,367 | | | 120,621 | | Selling, general, and administrative expenses | | 58,288 | | | 51,200 | | |
Goodwill impairment charge | | 33,841 | | | — | | | 33,841 | | | — | | |
| Research and development expenses | Research and development expenses | | 13,400 | | | 21,458 | | | 27,995 | | | 42,867 | | Research and development expenses | | 14,739 | | | 14,463 | | |
Amortization of intangibles | Amortization of intangibles | | 9,827 | | | 10,050 | | | 19,808 | | | 20,241 | | Amortization of intangibles | | 10,521 | | | 9,981 | | |
Restructuring, impairment, and other charges | | Restructuring, impairment, and other charges | | 437 | | | 3,962 | | |
Total operating expenses | Total operating expenses | | 111,049 | | | 89,174 | | | 190,011 | | | 183,729 | | Total operating expenses | | 83,985 | | | 79,606 | | |
Operating (loss) income | | (11,950) | | | 52,634 | | | 32,800 | | | 113,307 | | |
Operating income | | Operating income | | 76,481 | | | 44,750 | | |
| Interest expense | Interest expense | | 5,855 | | | 5,589 | | | 11,273 | | | 11,275 | | Interest expense | | 4,673 | | | 5,418 | | |
Foreign exchange (gain) loss | | (6,010) | | | (3,575) | | | (3,426) | | | 668 | | |
Foreign exchange loss | | Foreign exchange loss | | 6,837 | | | 2,584 | | |
Other (income) expense, net | Other (income) expense, net | | (1,210) | | | (2,947) | | | 39 | | | 1,358 | | Other (income) expense, net | | (7,737) | | | 1,249 | | |
(Loss) income before income taxes | | (10,585) | | | 53,567 | | | 24,914 | | | 100,006 | | |
Income before income taxes | | Income before income taxes | | 72,708 | | | 35,499 | | |
Income taxes | Income taxes | | (1,594) | | | 9,775 | | | 9,261 | | | 19,225 | | Income taxes | | 14,995 | | | 10,855 | | |
Net (loss) income | | $ | (8,991) | | | $ | 43,792 | | | $ | 15,653 | | | $ | 80,781 | | |
Net income | | Net income | | $ | 57,713 | | | $ | 24,644 | | |
| (Loss) income per share: | | | | | | | | | |
Earnings per share: | | Earnings per share: | | | | | |
Basic | Basic | | $ | (0.37) | | | $ | 1.77 | | | $ | 0.64 | | | $ | 3.27 | | Basic | | $ | 2.35 | | | $ | 1.01 | | |
Diluted | Diluted | | $ | (0.37) | | | $ | 1.75 | | | $ | 0.64 | | | $ | 3.23 | | Diluted | | $ | 2.32 | | | $ | 1.00 | | |
| Weighted-average shares and equivalent shares outstanding: | Weighted-average shares and equivalent shares outstanding: | | Weighted-average shares and equivalent shares outstanding: | | |
Basic | Basic | | 24,312 | | | 24,740 | | | 24,353 | | | 24,729 | | Basic | | 24,532 | | | 24,393 | | |
Diluted | Diluted | | 24,312 | | | 24,983 | | | 24,520 | | | 24,998 | | Diluted | | 24,892 | | | 24,578 | | |
See accompanying Notes to Condensed Consolidated Financial Statements.
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
| | | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended | |
(in thousands) | (in thousands) | | June 27, 2020 | | June 29, 2019 | | June 27, 2020 | | June 29, 2019 | (in thousands) | | March 27, 2021 | | March 28, 2020 | |
Net (loss) income | | $ | (8,991) | | | $ | 43,792 | | | $ | 15,653 | | | $ | 80,781 | | |
Other comprehensive (loss) income: | | |
Net income | | Net income | | $ | 57,713 | | | $ | 24,644 | | |
Other comprehensive income (loss): | | Other comprehensive income (loss): | | |
Pension and postemployment adjustment, net of tax | Pension and postemployment adjustment, net of tax | | (10,839) | | | 161 | | | (10,278) | | | 112 | | Pension and postemployment adjustment, net of tax | | 454 | | | 561 | | |
| Foreign currency translation adjustments | Foreign currency translation adjustments | | 8,422 | | | (5,892) | | | (7,118) | | | 2,230 | | Foreign currency translation adjustments | | (5,325) | | | (15,540) | | |
Comprehensive (loss) income | | $ | (11,408) | | | $ | 38,061 | | | $ | (1,743) | | | $ | 83,123 | | |
Comprehensive income | | Comprehensive income | | $ | 52,842 | | | $ | 9,665 | | |
See accompanying Notes to Condensed Consolidated Financial Statements.
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | Six Months Ended | | | | Three Months Ended |
(in thousands) | (in thousands) | | June 27, 2020 | | June 29, 2019 | (in thousands) | | March 27, 2021 | | March 28, 2020 |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | | | | OPERATING ACTIVITIES | | | | |
Net income | Net income | | $ | 15,653 | | | $ | 80,781 | | Net income | | $ | 57,713 | | | $ | 24,644 | |
Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation | Depreciation | | 27,728 | | | 25,727 | | Depreciation | | 13,677 | | | 13,821 | |
Amortization of intangibles | Amortization of intangibles | | 19,808 | | | 20,241 | | Amortization of intangibles | | 10,521 | | | 9,981 | |
| Deferred revenue | Deferred revenue | | (289) | | | — | | Deferred revenue | | (157) | | | (145) | |
| Non-cash inventory charges | | Non-cash inventory charges | | 3,489 | | | 0 | |
Impairment charges | Impairment charges | | 36,078 | | | — | | Impairment charges | | 0 | | | 2,237 | |
| Stock-based compensation | Stock-based compensation | | 10,852 | | | 12,250 | | Stock-based compensation | | 3,395 | | | 2,965 | |
Loss on investments and other assets | | 542 | | | 2,458 | | |
(Gain) loss on investments and other assets | | (Gain) loss on investments and other assets | | (7,675) | | | 2,604 | |
Deferred income taxes | Deferred income taxes | | 2,512 | | | (632) | | Deferred income taxes | | 378 | | | 616 | |
Other | Other | | (1,222) | | | 2,009 | | Other | | 8,537 | | | 3,547 | |
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | Changes in operating assets and liabilities: | |
Trade receivables | Trade receivables | | 13,914 | | | (13,242) | | Trade receivables | | (32,973) | | | (9,457) | |
Inventories | Inventories | | (10,761) | | | 6,230 | | Inventories | | (6,152) | | | 6,667 | |
Accounts payable | Accounts payable | | 3,439 | | | (17,927) | | Accounts payable | | 17,070 | | | (3,964) | |
| Accrued liabilities and income taxes | Accrued liabilities and income taxes | | (19,144) | | | (36,713) | | Accrued liabilities and income taxes | | (15,427) | | | (7,012) | |
Prepaid expenses and other assets | Prepaid expenses and other assets | | 2,176 | | | (1,090) | | Prepaid expenses and other assets | | (2,230) | | | (1,225) | |
Net cash provided by operating activities | Net cash provided by operating activities | | 101,286 | | | 80,092 | | Net cash provided by operating activities | | 50,166 | | | 45,279 | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | | | | INVESTING ACTIVITIES | | | | |
Acquisitions of businesses, net of cash acquired | Acquisitions of businesses, net of cash acquired | | — | | | (775) | | Acquisitions of businesses, net of cash acquired | | (109,852) | | | 0 | |
| Purchases of property, plant, and equipment | Purchases of property, plant, and equipment | | (29,479) | | | (25,249) | | Purchases of property, plant, and equipment | | (14,721) | | | (16,586) | |
Net proceeds from sale of property, plant and equipment | Net proceeds from sale of property, plant and equipment | | 89 | | | 6,212 | | Net proceeds from sale of property, plant and equipment | | 2,553 | | | 50 | |
Net cash used in investing activities | Net cash used in investing activities | | (29,390) | | | (19,812) | | Net cash used in investing activities | | (122,020) | | | (16,536) | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | | | | | FINANCING ACTIVITIES | | | | |
Proceeds of revolving credit facility | Proceeds of revolving credit facility | | 240,000 | | | — | | Proceeds of revolving credit facility | | 0 | | | 100,000 | |
Payments of revolving credit facility | | Payments of revolving credit facility | | (30,000) | | | 0 | |
| Payments of term loan | Payments of term loan | | (145,000) | | | (7,500) | | Payments of term loan | | 0 | | | (2,500) | |
| Net proceeds related to stock-based award activities | Net proceeds related to stock-based award activities | | 3,642 | | | 3,011 | | Net proceeds related to stock-based award activities | | 7,509 | | | 2,956 | |
Purchases of common stock | Purchases of common stock | | (22,927) | | | (49,861) | | Purchases of common stock | | 0 | | | (22,927) | |
Debt issuance costs | | (1,786) | | | — | | |
| Cash dividends paid | Cash dividends paid | | (23,403) | | | (21,274) | | Cash dividends paid | | (11,782) | | | (11,725) | |
Net cash provided by (used in) financing activities | | 50,526 | | | (75,624) | | |
Effect of exchange rate changes on cash and cash equivalents | | (1,694) | | | 392 | | |
Increase (decrease) in cash and cash equivalents | | 120,728 | | | (14,952) | | |
Cash and cash equivalents at beginning of period | | 531,139 | | | 489,733 | | |
Cash and cash equivalents at end of period | | $ | 651,867 | | | $ | 474,781 | | |
Net cash (used in) provided by financing activities | | Net cash (used in) provided by financing activities | | (34,273) | | | 65,804 | |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | | Effect of exchange rate changes on cash, cash equivalents, and restricted cash | | (4,101) | | | (5,111) | |
(Decrease) increase in cash, cash equivalents, and restricted cash | | (Decrease) increase in cash, cash equivalents, and restricted cash | | (110,228) | | | 89,436 | |
Cash, cash equivalents, and restricted cash at beginning of period | | Cash, cash equivalents, and restricted cash at beginning of period | | 687,525 | | | 531,139 | |
Cash, cash equivalents, and restricted cash at end of period | | Cash, cash equivalents, and restricted cash at end of period | | $ | 577,297 | | | $ | 620,575 | |
Supplementary Cash Flow Information | Supplementary Cash Flow Information | | | | | Supplementary Cash Flow Information | | | | |
Reconciliation of cash and cash equivalents: | | Reconciliation of cash and cash equivalents: | |
Cash and cash equivalents | | Cash and cash equivalents | | $ | 572,771 | | | $ | 620,575 | |
Restricted cash included in prepaid expenses and other current assets | | Restricted cash included in prepaid expenses and other current assets | | $ | 3,462 | | | 0 | |
Restricted cash included in other assets | | Restricted cash included in other assets | | $ | 1,064 | | | $ | 0 | |
Cash paid during the period for interest | Cash paid during the period for interest | | $ | 10,799 | | | $ | 11,478 | | Cash paid during the period for interest | | $ | 6,235 | | | $ | 7,354 | |
| Capital expenditures, not yet paid | Capital expenditures, not yet paid | | $ | 4,665 | | | $ | — | | Capital expenditures, not yet paid | | $ | 4,141 | | | $ | 5,832 | |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
| | | Littelfuse, Inc. Shareholders’ Equity | | | | | | | Littelfuse, Inc. Shareholders’ Equity | | | | |
(in thousands, except share and per share data) | (in thousands, except share and per share data) | Common Stock | | Addl. Paid in Capital | | Treasury Stock | | Accum. Other Comp. (Loss) Income | | Retained Earnings | | Non-controlling Interest | | Total | (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 December 28, 2019 | $ | 256 | | | $ | 867,996 | | | $ | (216,447) | | | $ | (106,823) | | | $ | 950,901 | | | $ | 131 | | | $ | 1,496,014 | | |
Balance at December 26, 2020 | | Balance at December 26, 2020 | $ | 259 | | | $ | 907,858 | | | $ | (242,366) | | | $ | (91,157) | | | $ | 1,034,048 | | | $ | 131 | | | $ | 1,608,773 | |
Net income | Net income | — | | | — | | | — | | | — | | | 24,644 | | | — | | | 24,644 | | Net income | — | | | — | | | — | | | — | | | 57,713 | | | — | | | 57,713 | |
| Other comprehensive loss, net of tax | Other comprehensive loss, net of tax | — | | | — | | | — | | | (14,979) | | | — | | | — | | | (14,979) | | Other comprehensive loss, net of tax | — | | | — | | | — | | | (4,871) | | | — | | | — | | | (4,871) | |
Stock-based compensation | Stock-based compensation | — | | | 2,965 | | | — | | | — | | | — | | | — | | | 2,965 | | Stock-based compensation | — | | | 3,395 | | | — | | | — | | | — | | | — | | | 3,395 | |
| Withheld shares on restricted share units for withholding taxes | — | | | — | | | (443) | | | — | | | — | | | — | | | (443) | | |
Stock options exercised | — | | | 3,399 | | | — | | | — | | | — | | | — | | | 3,399 | | |
Repurchases of common stock | — | | | — | | | (22,927) | | | — | | | — | | | — | | | (22,927) | | |
Cash dividends paid ($0.48 per share) | — | | | — | | | — | | | — | | | (11,725) | | | — | | | (11,725) | | |
Balance at March 28, 2020 | $ | 256 | | | $ | 874,360 | | | $ | (239,817) | | | $ | (121,802) | | | $ | 963,820 | | | $ | 131 | | | $ | 1,476,948 | | |
Net loss | — | | | — | | | — | | | — | | | (8,991) | | | — | | | (8,991) | | |
| Other comprehensive loss, net of tax | — | | | — | | | — | | | (2,417) | | | — | | | — | | | (2,417) | | |
Stock-based compensation | — | | | 7,887 | | | — | | | — | | | — | | | — | | | 7,887 | | |
| Withheld shares on restricted share units for withholding taxes | — | | | — | | | (2,375) | | | — | | | — | | | — | | | (2,375) | | |
Stock options exercised | Stock options exercised | 1 | | | 3,059 | | | — | | | — | | | — | | | — | | | 3,060 | | Stock options exercised | 0 | | | 7,509 | | | — | | | — | | | — | | | — | | | 7,509 | |
| Cash dividends paid ($0.48 per share) | Cash dividends paid ($0.48 per share) | — | | | — | | | — | | | — | | | (11,678) | | | — | | | (11,678) | | Cash dividends paid ($0.48 per share) | — | | | — | | | — | | | — | | | (11,782) | | | — | | | (11,782) | |
Balance at June 27, 2020 | $ | 257 | | | $ | 885,306 | | | $ | (242,192) | | | $ | (124,219) | | | $ | 943,151 | | | $ | 131 | | | $ | 1,462,434 | | |
Balance at March 27, 2021 | | Balance at March 27, 2021 | $ | 259 | | | $ | 918,762 | | | $ | (242,366) | | | $ | (96,028) | | | $ | 1,079,979 | | | $ | 131 | | | $ | 1,660,737 | |
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| 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 December 28, 2019 | $ | 256 | | | $ | 867,996 | | | $ | (216,447) | | | $ | (106,823) | | | $ | 950,901 | | | $ | 131 | | | $ | 1,496,014 | |
Net income | — | | | — | | | — | | | — | | | 24,644 | | | — | | | 24,644 | |
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Other comprehensive loss, net of tax | — | | | — | | | — | | | (14,979) | | | — | | | — | | | (14,979) | |
Stock-based compensation | — | | | 2,965 | | | — | | | — | | | — | | | — | | | 2,965 | |
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Withheld shares on restricted share units for withholding taxes | — | | | — | | | (443) | | | — | | | — | | | — | | | (443) | |
Stock options exercised | — | | | 3,399 | | | — | | | — | | | — | | | — | | | 3,399 | |
Repurchases of common stock | — | | | — | | | (22,927) | | | — | | | — | | | — | | | (22,927) | |
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Cash dividends paid ($0.48 per share) | — | | | — | | | — | | | — | | | (11,725) | | | — | | | (11,725) | |
Balance at March 28, 2020 | $ | 256 | | | $ | 874,360 | | | $ | (239,817) | | | $ | (121,802) | | | $ | 963,820 | | | $ | 131 | | | $ | 1,476,948 | |
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See accompanying Notes to Condensed Consolidated Financial Statements.
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| Littelfuse, Inc. Shareholders’ Equity | | | | | | | | | | | | |
(in thousands, except share and per share data) | Common Stock | | Addl. Paid in Capital | | Treasury Stock | | Accum. Other Comp. (Loss) Income | | Retained Earnings | | Non-controlling Interest | | Total |
Balance at December 29, 2018 | $ | 254 | | | $ | 835,828 | | | $ | (116,454) | | | $ | (97,924) | | | $ | 856,507 | | | $ | 131 | | | $ | 1,478,342 | |
Net income | — | | | — | | | — | | | — | | | 36,989 | | | — | | | 36,989 | |
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Other comprehensive loss, net of tax | — | | | — | | | — | | | 8,073 | | | — | | | — | | | 8,073 | |
Stock-based compensation | — | | | 3,966 | | | — | | | — | | | — | | | — | | | 3,966 | |
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Withheld shares on restricted share units for withholding taxes | — | | | — | | | (94) | | | — | | | — | | | — | | | (94) | |
Stock options exercised | — | | | 2,292 | | | — | | | — | | | — | | | — | | | 2,292 | |
Repurchases of common stock | — | | | — | | | (13,555) | | | — | | | — | | | — | | | (13,555) | |
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Cash dividends paid ($0.43 per share) | — | | | — | | | — | | | — | | | (10,625) | | | — | | | (10,625) | |
Balance at March 30, 2019 | $ | 254 | | | $ | 842,086 | | | $ | (130,103) | | | $ | (89,851) | | | $ | 882,871 | | | $ | 131 | | | $ | 1,505,388 | |
Net income | — | | | — | | | — | | | — | | | 43,792 | | | — | | | 43,792 | |
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Other comprehensive loss, net of tax | — | | | — | | | — | | | (5,731) | | | — | | | — | | | (5,731) | |
Stock-based compensation | — | | | 8,284 | | | — | | | — | | | — | | | — | | | 8,284 | |
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Withheld shares on restricted share units for withholding taxes | — | | | — | | | (4,010) | | | — | | | — | | | — | | | (4,010) | |
Stock options exercised | 1 | | | 4,822 | | | — | | | — | | | — | | | — | | | 4,823 | |
Repurchases of common stock | — | | | — | | | (31,955) | | | — | | | — | | | — | | | (31,955) | |
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Cash dividends paid ($0.43 per share) | — | | | — | | | — | | | — | | | (10,649) | | | — | | | (10,649) | |
Balance at June 29, 2019 | $ | 255 | | | $ | 855,192 | | | $ | (166,068) | | | $ | (95,582) | | | $ | 916,014 | | | $ | 131 | | | $ | 1,509,942 | |
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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 Inc.is an industrial technology manufacturing company empowering a sustainable, connected, and subsidiaries (the “Company”) is asafer world. Across more than 15 countries, and with 12,000 global manufacturer of leading technologies in circuit protection, power controlassociates, we partner with customers to design and sensing.deliver innovative, reliable solutions. Serving over 100,000 end customers, the Company’sour products are found in automotivea variety of industrial, transportation and commercial vehicles, industrial applications, data and telecommunications, medical devices, consumer electronics and appliances. With its broad product portfolio of fuses, semiconductors, polymers, ceramics, relays and sensors, and extensive global infrastructure, the Company’s worldwide associates partner with its customers to design, manufacture and deliver innovative, high-quality solutions for a safer, greener and increasingly connected world.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 (loss) income and comprehensive (loss) income, statements of cash flows, and statement 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 28, 201926, 2020 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 six months ended JuneMarch 27, 20202021 and June 29, 2019:March 28, 2020:
| | | | Three Months Ended June 27, 2020 | | | Six Months Ended June 27, 2020 | | | | Three Months Ended March 27, 2021 | |
(in thousands) | (in thousands) | | Electronics Segment | | Automotive Segment | | Industrial Segment | | Total | | Electronics Segment | | Automotive Segment | | Industrial Segment | | Total | (in thousands) | | Electronics Segment | | Automotive Segment | | Industrial Segment | | Total | |
Electronics – Passive Products and Sensors | Electronics – Passive Products and Sensors | | $ | 92,846 | | | $ | — | | | $ | — | | | $ | 92,846 | | | $ | 177,444 | | | $ | — | | | $ | — | | | $ | 177,444 | | Electronics – Passive Products and Sensors | | $ | 132,437 | | | $ | 0 | | | $ | 0 | | | $ | 132,437 | | |
Electronics – Semiconductor | Electronics – Semiconductor | | 130,425 | | | — | | | — | | | 130,425 | | | 260,016 | | | — | | | — | | | 260,016 | | Electronics – Semiconductor | | 154,098 | | | 0 | | | 0 | | | 154,098 | | |
Passenger Car Products | Passenger Car Products | | — | | | 30,309 | | | — | | | 30,309 | | | — | | | 82,954 | | | — | | | 82,954 | | Passenger Car Products | | 0 | | | 67,901 | | | 0 | | | 67,901 | | |
Automotive Sensors | Automotive Sensors | | — | | | 13,899 | | | — | | | 13,899 | | | — | | | 38,073 | | | — | | | 38,073 | | Automotive Sensors | | 0 | | | 28,284 | | | 0 | | | 28,284 | | |
Commercial Vehicle Products | Commercial Vehicle Products | | — | | | 17,791 | | | — | | | 17,791 | | | — | | | 45,742 | | | — | | | 45,742 | | Commercial Vehicle Products | | 0 | | | 32,344 | | | 0 | | | 32,344 | | |
Industrial Products | Industrial Products | | — | | | — | | | 22,067 | | | 22,067 | | | — | | | — | | | 49,204 | | | 49,204 | | Industrial Products | | 0 | | | 0 | | | 48,730 | | | 48,730 | | |
Total | Total | | $ | 223,271 | | | $ | 61,999 | | | $ | 22,067 | | | $ | 307,337 | | | $ | 437,460 | | | $ | 166,769 | | | $ | 49,204 | | | $ | 653,433 | | Total | | $ | 286,535 | | | $ | 128,529 | | | $ | 48,730 | | | $ | 463,794 | | |
| | | | Three Months Ended June 29, 2019 | | | Six Months Ended June 29, 2019 | | | | Three Months Ended March 28, 2020 | |
(in thousands) | (in thousands) | | Electronics Segment | | Automotive Segment | | Industrial Segment | | Total | | Electronics Segment | | Automotive Segment | | Industrial Segment | | Total | (in thousands) | | Electronics Segment | | Automotive Segment | | Industrial Segment | | Total | |
Electronics – Passive Products and Sensors | Electronics – Passive Products and Sensors | | $ | 108,481 | | | $ | — | | | $ | — | | | $ | 108,481 | | | $ | 216,858 | | | $ | — | | | $ | — | | | $ | 216,858 | | Electronics – Passive Products and Sensors | | $ | 84,598 | | | $ | 0 | | | $ | 0 | | | $ | 84,598 | | |
Electronics – Semiconductor | Electronics – Semiconductor | | 151,072 | | | — | | | — | | | 151,072 | | | 308,089 | | | — | | | — | | | 308,089 | | Electronics – Semiconductor | | 129,591 | | | 0 | | | 0 | | | 129,591 | | |
Passenger Car Products | Passenger Car Products | | — | | | 53,916 | | | — | | | 53,916 | | | — | | | 110,459 | | | — | | | 110,459 | | Passenger Car Products | | 0 | | | 52,645 | | | 0 | | | 52,645 | | |
Automotive Sensors | Automotive Sensors | | — | | | 24,682 | | | — | | | 24,682 | | | — | | | 50,739 | | | — | | | 50,739 | | Automotive Sensors | | 0 | | | 24,174 | | | 0 | | | 24,174 | | |
Commercial Vehicle Products | Commercial Vehicle Products | | — | | | 30,052 | | | — | | | 30,052 | | | — | | | 60,935 | | | — | | | 60,935 | | Commercial Vehicle Products | | 0 | | | 27,951 | | | 0 | | | 27,951 | | |
Industrial Products | Industrial Products | | — | | | — | | | 29,676 | | | 29,676 | | | — | | | — | | | 56,299 | | | 56,299 | | Industrial Products | | 0 | | | 0 | | | 27,137 | | | 27,137 | | |
Total | Total | | $ | 259,553 | | | $ | 108,650 | | | $ | 29,676 | | | $ | 397,879 | | | $ | 524,947 | | | $ | 222,133 | | | $ | 56,299 | | | $ | 803,379 | | Total | | $ | 214,189 | | | $ | 104,770 | | | $ | 27,137 | | | $ | 346,096 | | |
See Note 14,15, 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 historic activity, electronic 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 historic 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 March 27, 2021 and December 26, 2020 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.
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(in thousands) | | March 27, 2021 | | December 26, 2020 |
Cash and cash equivalents | | $ | 572,771 | | | $ | 687,525 | |
Restricted cash included in prepaid expenses and other current assets | | 3,462 | | | 0 | |
Restricted cash included in other assets | | 1,064 | | | $ | 0 | |
Total cash, cash equivalents and restricted cash | | $ | 577,297 | | | $ | 687,525 | |
Recently Adopted Accounting Standards
In June 2016,December 2019, the FASBFinancial Accounting Standards Board (FASB) issued ASU No. 2016-13, "Financial Instruments2019-12, "Income Taxes (Topic 740) - Credit Losses (Topic 326), MeasurementSimplifying the Accounting for Income Taxes" as part of Credit Losses on Financial Instruments."its initiative to reduce complexity in the accounting standards. The standard modifies the measurement approachguidance is effective for credit losses on financial instruments, including trade receivables, from an incurred loss method to a current expected credit loss method ("CECL"). The standard requires the measurement of expected credit losses to be based on relevant information, including historical experiences, current conditions and a forecast that is supportable. The Company adopted the new standard onfiscal years beginning after December 29, 2019. The15, 2020 with early adoption of the standard did not have a material effect on our Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurement." ASU 2018-13 modifies the disclosure requirements in Topic 820: "Fair Value Measurement," based on the FASB Concepts Statement, "Conceptual Framework for Financial Reporting - Chapter 8: Notes to Financial Statements," including consideration of costs and benefits. The new standard removes certain disclosures, modifies other disclosures and adds additional disclosures related to fair value measurement. The Company adopted the new standard on December 29, 2019.permitted. The adoption of ASU 2018- 13 did not have a material impact on our Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic: 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)." ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted the new standard on December 29, 2019. The adoption of ASU 2018-152019-12 did not have a material impact on our Condensed Consolidated Financial Statements.
In March 2020,
2. Acquisitions
The Company accounts for acquisitions using the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitationacquisition method in accordance with ASC 805, “Business Combinations,” in which assets acquired and liabilities assumed are recorded at fair value as of the Effectsdate of Reference Rate Reform onacquisition. The operating results of the acquired business are included in the Company’s Consolidated Financial Reporting.” This ASU provides optional expedientStatements from the date of the acquisition.
Hartland Controls
On January 28, 2021, the Company acquired Hartland Controls ("Hartland"), a manufacturer and exceptions for applying generally accepted accounting principles to contracts, hedging relationships,leading supplier of electrical components used primarily in heating, ventilation, air conditioning (HVAC) and other transactions affected by reference rate reform ifindustrial and control systems applications with annualized sales of approximately $70 million. The purchase price for Hartland was approximately $112.3 million and the operations of Hartland are included in the Industrial segment.
The total purchase consideration of $109.9 million, net of cash, cash equivalents, and restricted 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 consideration is subject to change for the final working capital adjustments. As of March 27, 2021, the Company had restricted cash of $1.7 million in an escrow account for general indemnification purposes. 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 areas that are not yet finalized relate to the completion of the valuations of certain criteriaacquired income tax assets and liabilities. As a result, these allocations are met. subject to change during the purchase price allocation period as the valuations are finalized.
The objectivefollowing table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the Hartland acquisition:
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(in thousands) | Purchase Price Allocation |
Total purchase consideration: | |
Cash, net of cash acquired, and restricted cash | $ | 109,852 | |
Allocation of consideration to assets acquired and liabilities assumed: | |
Trade receivables, net | 14,305 | |
Inventories | 36,306 | |
Other current assets | 2,384 | |
Property, plant, and equipment | 6,296 | |
Intangible assets | 39,660 | |
Goodwill | 38,929 | |
Other non-current assets | 3,542 | |
Current liabilities | (25,024) | |
Other non-current liabilities | (6,546) | |
| $ | 109,852 | |
All Hartland goodwill, other assets and liabilities were recorded in the Industrial segment and are primarily reflected in the Americas 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 Hartland’s products and technology with the Company’s existing industrial products portfolio. Goodwill resulting from the Hartland acquisition is not expected to be deductible for tax purposes.
Included in the Company’s Condensed Consolidated Statements of Net Income for the three months ended March 27, 2021 are net sales of approximately $16.7 million, and a loss before income taxes of $2.2 million, since the January 28, 2021 acquisition of Hartland.
The Company recorded a $6.8 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up is being amortized as a non-cash charge to cost of goods sold during the first and second quarters of 2021, as the acquired inventory is sold, and reflected as other non-segment costs. During the three months ended March 27, 2021, the Company recognized a charge of $3.5 million for the amortization of this isfair value inventory step-up.
During the three months ended March 27, 2021, the Company incurred approximately $0.7 million of legal and professional fees related to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting due to the cessation of the London Interbank Offered Rate (LIBOR)this acquisition recognized as Selling, general, and administrative expenses. The amendments in this update are effective for all entitiesThese costs were reflected as of March 12, 2020 through December 31, 2022. The Company does not expect a material effect from the adoption of this guidance on its Condensed Consolidated Financial Statements.
other non-segment costs.
Pro Forma Results
The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company and Hartland as though the acquisition had occurred as of December 29, 2019. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the Hartland acquisition occurred as of December 29, 2019 or of future consolidated operating results.
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(in thousands, except per share amounts) | | March 27, 2021 | | March 28, 2020 |
Net sales | | $ | 470,832 | | | $ | 363,617 | |
Income before income taxes | | 77,288 | | | 31,431 | |
Net income | | 61,317 | | | 21,438 | |
Net income per share — basic | | 2.50 | | | 0.88 | |
Net income per share — diluted | | 2.46 | | | 0.87 | |
Pro forma results presented above primarily reflect the following adjustments:
2. | | | | | | | | | | | | | | |
| | For the Three Months Ended |
(in thousands) | | March 27, 2021 | | March 28, 2020 |
Amortization(a) | | $ | (279) | | | $ | (834) | |
Depreciation | | 7 | | | 48 | |
Transaction costs(b) | | 707 | | | (707) | |
Amortization of inventory step-up(c) | | 3,490 | | | (5,137) | |
Income tax (expense) benefit of above items | | (831) | | | 1,398 | |
(a)The amortization adjustment for the three months ended March 28, 2020 primarily reflects incremental amortization resulting for the measurement of intangibles at their fair values.
(b)The transaction cost adjustments reflect the reversal of certain bank and attorney fees from the three months ended March 27, 2021 and recognition of those fees during the three months ended March 28, 2020.
(c)The amortization of inventory step-up adjustment reflects the reversal of the amount recognized during the three months ended March 27, 2021 and the recognition of a full quarter of the amortization during the three months ended March 28, 2020. The inventory step-up was amortized over four months as the inventory was sold.
3. Inventories
The components of inventories at JuneMarch 27, 20202021 and December 28, 201926, 2020 are as follows:
| (in thousands) | (in thousands) | | June 27, 2020 | | December 28, 2019 | (in thousands) | | March 27, 2021 | | December 26, 2020 |
Raw materials | Raw materials | | $ | 82,133 | | | $ | 76,732 | | Raw materials | | $ | 97,695 | | | $ | 85,394 | |
Work in process | Work in process | | 92,681 | | | 84,561 | | Work in process | | 102,285 | | | 92,783 | |
Finished goods | Finished goods | | 106,904 | | | 110,388 | | Finished goods | | 130,138 | | | 114,641 | |
Inventory Reserves | Inventory Reserves | | (33,698) | | | (34,174) | | Inventory Reserves | | (35,061) | | | (34,816) | |
Total | Total | | $ | 248,020 | | | $ | 237,507 | | Total | | $ | 295,057 | | | $ | 258,002 | |
3.
4. Property, Plant, and Equipment
The components of net property, plant, and equipment at JuneMarch 27, 20202021 and December 28, 201926, 2020 are as follows:
| (in thousands) | (in thousands) | | June 27, 2020 | | December 28, 2019 | (in thousands) | | March 27, 2021 | | December 26, 2020 |
Land | Land | | $ | 23,095 | | | $ | 24,758 | | Land | | $ | 22,711 | | | $ | 22,851 | |
Building | Building | | 118,409 | | | 108,501 | | Building | | 124,192 | | | 123,497 | |
Equipment | Equipment | | 635,661 | | | 631,273 | | Equipment | | 687,563 | | | 678,220 | |
Accumulated depreciation and amortization | Accumulated depreciation and amortization | | (442,488) | | | (419,915) | | Accumulated depreciation and amortization | | (489,552) | | | (480,390) | |
Total | Total | | $ | 334,677 | | | $ | 344,617 | | Total | | $ | 344,914 | | | $ | 344,178 | |
The Company recorded depreciation expense of $13.9$13.7 million and $12.6$13.8 million for the three months ended JuneMarch 27, 20202021 and June 29, 2019, respectively, and $27.7 million and $25.7 million for six months ended June 27,March 28, 2020, and June 29, 2019, respectively.
4.
5. Goodwill and Other Intangible Assets
The amounts for goodwill and changes in the carrying value by segment for the sixthree months ended JuneMarch 27, 20202021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | | Electronics | | Automotive | | Industrial | | Total |
As of December 28, 2019 | | $ | 650,796 | | | $ | 131,321 | | | $ | 38,472 | | | $ | 820,589 | |
| | | | | | | | |
Impairments | | — | | | (33,841) | | | — | | | (33,841) | |
Currency translation | | 860 | | | 128 | | | (135) | | | 853 | |
As of June 27, 2020 | | $ | 651,656 | | | $ | 97,608 | | | $ | 38,337 | | | $ | 787,601 | |
The Company tests its goodwill annually for impairment on the first day of its fiscal fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. For the three months ended June 27, 2020, the Company recorded a non-cash charge of $33.8 million to recognize the impairment of goodwill in the automotive sensors reporting unit within the Automotive segment. The goodwill impairment charge was due to reductions in the estimated fair value for the automotive sensors reporting unit based on lower expectations for future revenue, profitability and cash flows as compared to the expectations of the 2019 annual goodwill impairment test. These lower future expectations were driven by projected extended declines in end market demand due to the COVID-19 pandemic. In addition, during the second quarter of 2020, certain customers notified the Company of their decision to delay future programs along with a customer canceling their existing program. The goodwill impairment charge was determined using Level 3 inputs, including discounted cash flow analysis and comparable marketplace fair value data. As of June 27, 2020, the automotive sensors reporting unit had $9.1 million of remaining goodwill.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | | Electronics | | Automotive | | Industrial | | Total |
Net book value of goodwill as of December 26, 2020 | | | | | | | | |
Gross goodwill as of December 26, 2020 | | $ | 676,325 | | | $ | 138,354 | | | $ | 47,551 | | | $ | 862,230 | |
Accumulated impairment losses as of December 26, 2020 | | 0 | | | (36,423) | | | (8,995) | | | (45,418) | |
Total | | 676,325 | | | 101,931 | | | 38,556 | | | 816,812 | |
Changes during 2021: | | | | | | | | |
Additions(a) | | 0 | | | 0 | | | 38,929 | | | 38,929 | |
| | | | | | | | |
Currency translation | | (8,124) | | | (2,012) | | | (19) | | | (10,155) | |
Net book value of goodwill as of March 27, 2021 | | | | | | | | |
Gross goodwill as of March 27, 2021 | | 668,201 | | | 136,229 | | | 86,461 | | | 890,891 | |
Accumulated impairment losses as of March 27, 2021 | | 0 | | | (36,310) | | | (8,995) | | | (45,305) | |
Total | | $ | 668,201 | | | $ | 99,919 | | | $ | 77,466 | | | $ | 845,586 | |
(a) The additions resulted from the acquisition of Hartland.
The components of other intangible assets as of JuneMarch 27, 20202021 and December 28, 201926, 2020 are as follows:
| | | | As of June 27, 2020 | | | | As of March 27, 2021 |
(in thousands) | (in thousands) | | | Gross Carrying Value | | Accumulated Amortization | | Net Book Value | (in thousands) | | | Gross Carrying Value | | Accumulated Amortization | | Net Book Value |
Land use rights | Land use rights | | | $ | 9,584 | | | $ | 1,800 | | | $ | 7,784 | | Land use rights | | | $ | 10,251 | | | $ | 2,051 | | | $ | 8,200 | |
Patents, licenses and software | Patents, licenses and software | | | 131,055 | | | $ | 83,989 | | | $ | 47,066 | | Patents, licenses and software | | | 142,732 | | | 94,636 | | | 48,096 | |
Distribution network | Distribution network | | | 43,272 | | | 37,302 | | | 5,970 | | Distribution network | | | 43,704 | | | 39,307 | | | 4,397 | |
Customer relationships, trademarks, and tradenames | Customer relationships, trademarks, and tradenames | | | 360,769 | | | 119,928 | | | 240,841 | | Customer relationships, trademarks, and tradenames | | | 400,253 | | | 143,652 | | | 256,601 | |
| Total | Total | | | $ | 544,680 | | | $ | 243,019 | | | $ | 301,661 | | Total | | | $ | 596,940 | | | $ | 279,646 | | | $ | 317,294 | |
| | | As of December 28, 2019 | | | As of December 26, 2020 |
(in thousands) | (in thousands) | Gross Carrying Value | | Accumulated Amortization | | Net Book Value | (in thousands) | Gross Carrying Value | | Accumulated Amortization | | Net Book Value |
Land use rights | Land use rights | $ | 9,649 | | | $ | 1,730 | | | $ | 7,919 | | Land use rights | $ | 10,280 | | | $ | 2,007 | | | $ | 8,273 | |
Patents, licenses and software | Patents, licenses and software | 131,164 | | | 78,828 | | | 52,336 | | Patents, licenses and software | 137,210 | | | 92,868 | | | 44,342 | |
Distribution network | Distribution network | 43,239 | | | 36,163 | | | 7,076 | | Distribution network | 43,910 | | | 38,980 | | | 4,930 | |
Customer relationships, trademarks, and tradenames | Customer relationships, trademarks, and tradenames | 360,534 | | | 106,618 | | | 253,916 | | Customer relationships, trademarks, and tradenames | 372,064 | | | 137,722 | | | 234,342 | |
Total | Total | $ | 544,586 | | | $ | 223,339 | | | $ | 321,247 | | Total | $ | 563,464 | | | $ | 271,577 | | | $ | 291,887 | |
During the three months ended JuneMarch 27, 20202021 and June 29, 2019, the Company recorded amortization expense of $9.8 million and $10.0 million, respectively. During six months ended June 27,March 28, 2020, the Company recorded amortization expense of $19.8$10.5 million and $20.2$10.0 million, respectively.
During the six months ended June 27, 2020, theThe Company recognized a $0.3 million non-cash impairment charge in the first quarter of 2020 on a certain patent triggered by the Company’s announcement to consolidate a manufacturing facility within the Industrial segment.
During the three months ended March 27, 2021, the Company recorded additions to intangible assets of $39.7 million, related to the Hartland acquisition, the components of which were as follows:
| | | | | | | | | | | |
(in thousands) | Weighted Average Useful Life | | Amount |
Patents, licenses and software | 9.2 | | $ | 7,559 | |
| | | |
Customer relationships, trademarks, and tradenames | 13.7 | | 32,101 | |
Total | 0 | | $ | 39,660 | |
Estimated annual amortization expense related to intangible assets with definite lives as of JuneMarch 27, 20202021 is as follows:
| (in thousands) | (in thousands) | Amount | (in thousands) | Amount |
2020 | $ | 39,200 | | |
2021 | 2021 | 37,811 | | 2021 | $ | 41,545 | |
2022 | 2022 | 36,846 | | 2022 | 40,791 | |
2023 | 2023 | 32,135 | | 2023 | 36,491 | |
2024 | 2024 | 29,356 | | 2024 | 33,054 | |
2025 and thereafter | 145,511 | | |
2025 | | 2025 | 32,603 | |
2026 and thereafter | | 2026 and thereafter | 143,331 | |
Total | Total | $ | 320,859 | | Total | $ | 327,815 | |
5.6. Accrued Liabilities
The components of accrued liabilities as of JuneMarch 27, 20202021 and December 28, 201926, 2020 are as follows:
| (in thousands) | (in thousands) | | June 27, 2020 | | December 28, 2019 | (in thousands) | | March 27, 2021 | | December 26, 2020 |
Employee-related liabilities | Employee-related liabilities | | $ | 40,785 | | | $ | 40,774 | | Employee-related liabilities | | $ | 45,135 | | | $ | 50,689 | |
Operating lease liability | Operating lease liability | | 6,846 | | | 7,259 | | Operating lease liability | | 7,177 | | | 6,811 | |
Interest | Interest | | 4,781 | | | 5,058 | | Interest | | 2,636 | | | 4,517 | |
Restructuring liability | | Restructuring liability | | 2,588 | | | 4,195 | |
Customer liability | | Customer liability | | 794 | | | 3,858 | |
Professional services | Professional services | | 3,130 | | | 3,986 | | Professional services | | 3,010 | | | 3,321 | |
Deferred revenue | | Deferred revenue | | 2,713 | | | 2,959 | |
| Restructuring liability | | 4,463 | | | 2,679 | | |
Other non-income taxes | Other non-income taxes | | 2,075 | | | 1,940 | | Other non-income taxes | | 1,903 | | | 2,126 | |
Other | Other | | 23,276 | | | 22,424 | | Other | | 32,398 | | | 32,002 | |
Total | Total | | $ | 85,356 | | | $ | 84,120 | | Total | | $ | 98,354 | | | $ | 110,478 | |
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.
6.
7. Restructuring, Impairment and Other Charges
The Company recorded restructuring, impairment and other charges for the three and six months ended JuneMarch 27, 20202021 and June 29, 2019March 28, 2020 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 27, 2020 | | | | | | | | Six months ended June 27, 2020 | | | | | | |
(in thousands) | Electronics | | Automotive | | Industrial | | Total | | Electronics | | Automotive | | Industrial | | Total |
Employee terminations | $ | 856 | | | $ | 209 | | | $ | 750 | | | $ | 1,815 | | | $ | 1,737 | | | $ | 608 | | | $ | 1,071 | | | $ | 3,416 | |
Other restructuring charges | (1) | | | (12) | | | 22 | | | 9 | | | — | | | 108 | | | 25 | | | 133 | |
Total restructuring charges | 855 | | | 197 | | | 772 | | | 1,824 | | | 1,737 | | | 716 | | | 1,096 | | | 3,549 | |
Impairment | — | | | 33,841 | | | — | | | 33,841 | | | — | | | 33,841 | | | 2,237 | | | 36,078 | |
| | | | | | | | | | | | | | | |
Total | $ | 855 | | | $ | 34,038 | | | $ | 772 | | | $ | 35,665 | | | $ | 1,737 | | | $ | 34,557 | | | $ | 3,333 | | | $ | 39,627 | |
| | | Three months ended June 29, 2019 | | | Six months ended June 29, 2019 | | | Three months ended March 27, 2021 | |
(in thousands) | (in thousands) | Electronics | | Automotive | | Industrial | | Total | | Electronics | | Automotive | | Industrial | | Total | (in thousands) | Electronics | | Automotive | | Industrial | | Total | |
Employee terminations | Employee terminations | $ | 1,698 | | | $ | 3,241 | | | $ | 674 | | | $ | 5,613 | | | $ | 3,498 | | | $ | 3,846 | | | $ | 721 | | | $ | 8,065 | | Employee terminations | $ | 257 | | | $ | 0 | | | $ | 163 | | | $ | 420 | | |
Other restructuring charges | Other restructuring charges | — | | | 70 | | | — | | | 70 | | | 13 | | | 90 | | | 250 | | | 353 | | Other restructuring charges | 0 | | | 17 | | | 0 | | | 17 | | |
Total restructuring charges | Total restructuring charges | 1,698 | | | 3,311 | | | 674 | | | 5,683 | | | 3,511 | | | 3,936 | | | 971 | | | 8,418 | | Total restructuring charges | 257 | | | 17 | | | 163 | | | 437 | | |
Impairment | Impairment | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Impairment | 0 | | | 0 | | | 0 | | | 0 | | |
| Total | Total | $ | 1,698 | | | $ | 3,311 | | | $ | 674 | | | $ | 5,683 | | | $ | 3,511 | | | $ | 3,936 | | | $ | 971 | | | $ | 8,418 | | Total | $ | 257 | | | $ | 17 | | | $ | 163 | | | $ | 437 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 28, 2020 | | |
(in thousands) | Electronics | | Automotive | | Industrial | | Total | | | | | | | | |
Employee terminations | $ | 881 | | | $ | 399 | | | $ | 321 | | | $ | 1,601 | | | | | | | | | |
Other restructuring charges | 1 | | | 120 | | | 3 | | | 124 | | | | | | | | | |
Total restructuring charges | 882 | | | 519 | | | 324 | | | 1,725 | | | | | | | | | |
Impairment | 0 | | | 0 | | | 2,237 | | | 2,237 | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | $ | 882 | | | $ | 519 | | | $ | 2,561 | | | $ | 3,962 | | | | | | | | | |
2021
For the three months ended March 27, 2021, the Company recorded total restructuring charges of $0.4 million, primarily for employee termination costs. These charges primarily related to the reorganization of certain manufacturing, selling and administrative functions within the Electronics and Industrial segments.
2020
For the three and six months ended June 27,March 28, 2020, the Company recorded total restructuring charges of $1.8 million and $3.5$1.7 million, for employee termination costs and other restructuring charges. These charges primarily related to the reorganization of certain manufacturing, selling and administrative functions across all segments and the previously announced consolidation of a manufacturing facility within the Industrial segment. The Company also recognized $33.8 million and $36.1$2.2 million of impairment charges for the three and six months ended June 27, 2020, respectively, which included a $33.8 million goodwill impairment charge associated with the automotive sensors reporting unit within the Automotive segment in the second quarter of 2020 and $2.2 million related to the land and building associated with the Company’s previously announced consolidation ofannouncement to consolidate a manufacturing facility within the Industrial segment in the first quarter of 2020. The impairment charges of the land and
building were included in selling, general and administrative expenses. See Note 4, Goodwill and Other Intangible Assets for further discussion regarding the goodwill impairment charge.
2019
For the three and six months ended June 29, 2019, the Company recorded total restructuring charges of 5.7 million, and 8.4 million, respectively, for employee termination costs and other restructuring charges. These charges primarily related to reorganization of operations and selling, general and administrative functions as well as integration of IXYS within the Electronics segment and the reorganization of operations in the commercial vehicle products and automotive sensors businesses within the Automotive segment.
The restructuring reservesliability as of JuneMarch 27, 20202021 and December 28, 2019 are $4.526, 2020 is $2.6 million and $2.7$4.2 million, respectively. The restructuring reserves areliability 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 by March 2021.the first quarter of 2022.
7. Debt
The carrying amounts of debt at June 27, 2020 and December 28, 2019 are as follows:
| | | | | | | | | | | | | | |
(in thousands) | | June 27, 2020 | | December 28, 2019 |
Revolving Credit Facility | | $ | 240,000 | | | $ | — | |
Term Loan | | — | | | 145,000 | |
Euro Senior Notes, Series A due 2023 | | 131,378 | | | 129,808 | |
Euro Senior Notes, Series B due 2028 | | 106,675 | | | 105,400 | |
U.S. Senior Notes, Series A due 2022 | | 25,000 | | | 25,000 | |
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 | |
Other | | 2,619 | | | 2,619 | |
Unamortized debt issuance costs | | (4,467) | | | (3,669) | |
Total debt | | 776,205 | | | 679,158 | |
Less: Current maturities | | — | | | (10,000) | |
Total long-term debt | | $ | 776,205 | | | $ | 669,158 | |
Revolving Credit Facility / Term Loan
On March 4, 2016, the Company entered into a five-year credit agreement (“Credit Agreement”) with a group of lenders for up to $700.0 million. The Credit Agreement consisted of an unsecured revolving credit facility (“Revolving Credit Facility”) of $575.0 million and an unsecured term loan credit facility (“Term Loan”) of up to $125.0 million. In addition, the Company had the ability, from time to time, to increase the size of the Revolving Credit Facility and the Term Loan by up to an additional $150.0 million, in the aggregate, in each case in minimum increments of $25.0 million, subject to certain conditions and the agreement of participating lenders.
On October 13, 2017, the Company amended the Credit Agreement to increase the Revolving Credit Facility from $575.0 million to $700.0 million and increase the Term Loan from $125.0 million to $200.0 million and to extend the expiration date from March 4, 2021 to October 13, 2022. The Credit Agreement also included the option for the Company to increase the size of the Revolving Credit Facility and the Term Loan by up to an additional $300.0 million, in the aggregate, subject to the satisfaction of certain conditions set forth in the Credit Agreement. Term Loans could be made in up to 2 advances. The first advance of $125.0 million occurred on October 13, 2017 and the second advance of $75.0 million occurred on January 16, 2018. For the Term Loan, the Company was required to make quarterly principal payments of 1.25% of the original term loan ($2.5 million quarterly) through maturity, with the remaining balance due on October 13, 2022. The Company paid $2.5 million and $5.0 million of principal payments on the term loan during the three and six months ended June 27, 2020, respectively.
On March 25, 2020, the company borrowed $100.0 million from the revolving credit facility to preserve financial flexibility and enhance liquidity, given the increasing levels of uncertainty related to coronavirus disease 2019 ("COVID-19").
8. Debt
The carrying amounts of debt at March 27, 2021 and December 26, 2020 are as follows:
| | | | | | | | | | | | | | |
(in thousands) | | March 27, 2021 | | December 26, 2020 |
Revolving Credit Facility | | $ | 100,000 | | | $ | 130,000 | |
| | | | |
Euro Senior Notes, Series A due 2023 | | 138,039 | | | 142,679 | |
Euro Senior Notes, Series B due 2028 | | 112,083 | | | 115,850 | |
U.S. Senior Notes, Series A due 2022 | | 25,000 | | | 25,000 | |
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 | |
Other | | 2,619 | | | 2,619 | |
Unamortized debt issuance costs | | (3,876) | | | (4,114) | |
Total debt | | 648,865 | | | 687,034 | |
Less: Current maturities | | (25,000) | | | 0 | |
Total long-term debt | | $ | 623,865 | | | $ | 687,034 | |
Revolving Credit Facility
On April 3, 2020, the Company amended theits Credit Agreement to effect certain changes, including, among others: (i) eliminating the $200.0 million unsecured term loan credit facility, the remaining outstanding balance ($140.0 million) of which was repaid in full on April 3, 2020 through the revolving credit facility; (ii) making certain financial and non-financial covenants less restrictive on the Company; (iii) modifying performance-based interest rate margins and undrawn fees; and (iv) extending the maturity date to April 3, 2025. The amended Credit Agreement also allows the Company to increase the size of the revolving credit facility or enter into one or more tranches of term loans if there is no event of default and the Company is in compliance with certain financial covenants. The Company made payments of $30.0 million on the amended revolving credit facility during the three months ended March 27, 2021. The balance under the facility was $100.0 million as of March 27, 2021.
Outstanding borrowings under the amended Credit Agreement bears interest, at the Company’s option, at either LIBOR, fixed for interest periods of one, two, three or six-month periods, plus 1.25% to 2.00%, or at the bank’s Base Rate, as defined, plus 0.25% to 1.00%, based upon the Company’s Consolidated Leverage Ratio, as defined. The Company was also required to pay commitment fees on unused portions of the credit agreement ranging from 0.125% to 0.20%, based on the Consolidated Leverage Ratio, as defined in the agreement. The amended Credit Agreement included representations, covenants and events of default that are customary for financing transactions of this nature.nature. The effective interest rate on outstanding borrowings under the credit facility was 1.70%1.61% at JuneMarch 27, 2020.2021.
As of JuneMarch 27, 2020,2021, the Company had 0 amount outstanding in letters of credit and had available $148.6$571.3 million of borrowing capacity under the Revolving Credit Facility based on financial covenants. At JuneMarch 27, 2020,2021, 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 2 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 2 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”) (together,
(together, the “U.S. Senior Notes due 2022 and 2027”) were funded. Interest on the U.S. Senior Notes due 2022 and 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 2 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” and with the Euro Senior Notes and the U.S. Senior Notes due 2022 and 2027, the “Senior Notes”) 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.
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 JuneMarch 27, 2020,2021, 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 $3.4$6.2 million and $3.5$7.4 million for the three months ended JuneMarch 27, 20202021 and June 29, 2019, respectively, and $10.8 million and $11.5 million for the six months ended June 27,March 28, 2020, and June 29, 2019, respectively.
8.9. 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.
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, which are held with an institution with sound credit rating 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 assets.
Other Investments
The Company has certain convertible debt and convertible preferred stock investments that are accounted for under the cost method reflected in other assets in the Condensed Consolidated Balance Sheets. During the six months ended June 29, 2019, the Company recorded impairment charges of $2.8 million in Other expense (income), net in the Condensed Consolidated Statements of Net (Loss) Income to adjust these certain investments to their estimated fair value. As of JuneMarch 27, 20202021 and December 28, 2019,26, 2020, the balances of these investments were $0.4both $0.5 million. The fair value of these investments are measured on a nonrecurring basis using Level 3 inputs under the fair value hierarchy. The Company's accounting and finance management determines the valuation policies and procedures for Level 3 fair value measurements and is responsible for the development and determination of unobservable inputs.
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 assets.
There were no changes during the quarter ended JuneMarch 27, 20202021 to the Company’s valuation techniques used to measure asset and liability fair values on a recurring basis. On October 30, 2019, the Company entered a foreign currency exchange forward contract to mitigate the currency fluctuation risk between the Chinese renminbi and U.S. dollar. The foreign currency contract was not designated as a hedge instrument and was marked to market on a monthly basis. The notional value of the forward contracts at December 28, 2019 was $16.0 million and expired on May 5, 2020. On March 23, 2020, the Company unwound the foreign currency exchange forward contract entered on October 30, 2019 and recognized a gain of $0.2 million within Other expenses, net during the six months ended June 27, 2020. The fair value of the foreign currency forward contract was valued using market exchange rates and classified as a Level 2 input under the fair value hierarchy.
As of JuneMarch 27, 20202021 and December 28, 2019,26, 2020, 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 JuneMarch 27, 2020:2021:
| | | | Fair Value Measurements Using | | | | | | Fair Value Measurements Using | | |
(in thousands) | (in thousands) | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | (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 | Cash Equivalents | | $ | 148,409 | | | $ | — | | | $ | — | | | $ | 148,409 | | Cash Equivalents | | $ | 66,565 | | | $ | 0 | | | $ | 0 | | | $ | 66,565 | |
Investments in equity securities | Investments in equity securities | | 12,899 | | | — | | | — | | | 12,899 | | Investments in equity securities | | 25,830 | | | 0 | | | 0 | | | 25,830 | |
Mutual funds | Mutual funds | | 10,650 | | | — | | | — | | | 10,650 | | Mutual funds | | 13,397 | | | 0 | | | 0 | | | 13,397 | |
Total | | Total | | $ | 105,792 | | | $ | 0 | | | $ | 0 | | | $ | 105,792 | |
The following table presents assets measured at fair value by classification within the fair value hierarchy as of December 28, 2019:26, 2020:
| | | | Fair Value Measurements Using | | | | | | Fair Value Measurements Using | | |
(in thousands) | (in thousands) | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | (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 | Cash Equivalents | | $ | 118,999 | | | $ | — | | | $ | — | | | $ | 118,999 | | Cash Equivalents | | $ | 73,461 | | | $ | 0 | | | $ | 0 | | | $ | 73,461 | |
Investments in equity securities | Investments in equity securities | | 12,969 | | | — | | | — | | | 12,969 | | Investments in equity securities | | 19,186 | | | 0 | | | 0 | | | 19,186 | |
Mutual funds | Mutual funds | | 10,464 | | | — | | | — | | | 10,464 | | Mutual funds | | 13,249 | | | 0 | | | 0 | | | 13,249 | |
Total | | Total | | $ | 105,896 | | | $ | 0 | | | $ | 0 | | | $ | 105,896 | |
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 debtcredit facilities’ fair values approximate book value at JuneMarch 27, 20202021 and December 28, 2019,26, 2020, 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 JuneMarch 27, 20202021 and December 28, 201926, 2020 were as follows:
| | | | June 27, 2020 | | | December 28, 2019 | | | | March 27, 2021 | | December 26, 2020 |
(in thousands) | (in thousands) | | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value | (in thousands) | | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value |
Euro Senior Notes, Series A due 2023 | Euro Senior Notes, Series A due 2023 | | $ | 131,378 | | | $ | 128,003 | | | $ | 129,808 | | | $ | 131,710 | | Euro Senior Notes, Series A due 2023 | | $ | 138,039 | | | $ | 140,084 | | | $ | 142,679 | | | $ | 144,323 | |
Euro Senior Notes, Series B due 2028 | Euro Senior Notes, Series B due 2028 | | 106,675 | | | 104,332 | | | 105,400 | | | 110,336 | | Euro Senior Notes, Series B due 2028 | | 112,083 | | | 117,703 | | | 115,850 | | | 123,588 | |
USD Senior Notes, Series A due 2022 | USD Senior Notes, Series A due 2022 | | 25,000 | | | 25,150 | | | 25,000 | | | 25,054 | | USD Senior Notes, Series A due 2022 | | 25,000 | | | 25,375 | | | 25,000 | | | 25,437 | |
USD Senior Notes, Series B due 2027 | USD Senior Notes, Series B due 2027 | | 100,000 | | | 103,482 | | | 100,000 | | | 102,548 | | USD Senior Notes, Series B due 2027 | | 100,000 | | | 106,174 | | | 100,000 | | | 109,552 | |
USD Senior Notes, Series A due 2025 | USD Senior Notes, Series A due 2025 | | 50,000 | | | 51,355 | | | 50,000 | | | 50,775 | | USD Senior Notes, Series A due 2025 | | 50,000 | | | 52,817 | | | 50,000 | | | 53,474 | |
USD Senior Notes, Series B due 2030 | USD Senior Notes, Series B due 2030 | | 125,000 | | | 128,954 | | | 125,000 | | | 127,701 | | USD Senior Notes, Series B due 2030 | | 125,000 | | | 130,764 | | | 125,000 | | | 138,036 | |
The Company recognized impairment charges of $1.9 million for the land and building and $0.3 million for a certain patent as a result of the Company’s announcement to consolidate a manufacturing facility within the Industrial segment during the first quarter of 2020. See Note 6,7, Restructuring, Impairment and Other Charges, for further discussion. The fair value of the land and building was valued using a real estate appraisal and classified as a Level 3 input under the fair value hierarchy.
The fair value as of the measurement date, net book value as of June 27, 2020 and related the goodwill impairment charge for assets measured at fair value on nonrecurring basis subsequent to initial recognition during three months ended June 27, 2020 were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 27, 2020 | | | | June 27, 2020 |
(in thousands) | | Impairment Charge | | Estimated Fair Value Measurement (Level 3) | | Carrying Value |
Goodwill | | $ | 33,841 | | | $ | 8,953 | | | $ | 9,142 | |
See Note 4, Goodwill and Other Intangible Assets for further discussion regarding goodwill impairment charges.
9.10. Benefit Plans
The Company has company-sponsored defined benefit pension plans covering employees in the U.K., Germany, the Philippines, China, Japan, Mexico, Italy and France. The amount of the retirement benefits provided under the plans is 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, (income), net in the Condensed Consolidated Statements of Net (Loss) Income. The components of net periodic benefit cost for the three and six months ended JuneMarch 27, 20202021 and June 29, 2019March 28, 2020 were as follows:
| | | | For the Three Months Ended | | | For the Six Months Ended | | | | For the Three Months Ended | |
(in thousands) | (in thousands) | | June 27, 2020 | | June 29, 2019 | | June 27, 2020 | | June 29, 2019 | (in thousands) | | March 27, 2021 | | March 28, 2020 | |
Components of net periodic benefit cost: | Components of net periodic benefit cost: | | | | | | | | | Components of net periodic benefit cost: | | | | | |
Service cost | Service cost | | $ | 592 | | | $ | 514 | | | $ | 1,210 | | | $ | 1,014 | | Service cost | | $ | 702 | | | $ | 618 | | |
Interest cost | Interest cost | | 486 | | | 813 | | | 1,144 | | | 1,597 | | Interest cost | | 440 | | | 658 | | |
Expected return on plan assets | Expected return on plan assets | | (402) | | | (821) | | | (1,129) | | | (1,611) | | Expected return on plan assets | | (367) | | | (727) | | |
Amortization of prior service and net actuarial loss | Amortization of prior service and net actuarial loss | | 264 | | | 62 | | | 409 | | | 124 | | Amortization of prior service and net actuarial loss | | 331 | | | 145 | | |
Net periodic benefit cost | Net periodic benefit cost | | $ | 940 | | | $ | 568 | | | $ | 1,634 | | | $ | 1,124 | | Net periodic benefit cost | | $ | 1,106 | | | $ | 694 | | |
The Company expects to make approximately $2.3$2.2 million of cash contributions to its pensionthe plans and pay $3.8 million of benefits directly in 2020.2021.
The Company also sponsors certain post-employment plans in foreign countries and other statutory benefit plans. The Company recorded expense of $0.5 million and $0.2 million expense for both the three months ended JuneMarch 27, 20202021 and June 29, 2019March 28, 2020, respectively, and $1.0 million and $0.4 million expense for the six months ended June 27, 2020 and June 29, 2019, respectively, in Cost of Salesand Other (income) expense, (income), net within the Condensed Consolidated Statements of Net (Loss) Income. For the three and six months ended JuneMarch 27, 2021 and March 28, 2020, the pre-tax amounts recognized in other comprehensive income (loss) income as components of net periodic benefit costs for these plans were both $0.2 million and $0.4 million.
On April 7, 2020, the Company entered into a definitive agreement to purchase a group annuity contract, under which an insurance company will be required to directly pay and administer pension payments to certain of the Company’s U.K. pension plan participants, or their designated beneficiaries, who have been receiving pension payments.beneficiaries. The purchase of this group annuity contract will reduce the Company’s outstanding pension benefit obligation by approximately $36$55 million, representing approximately 30%37% of the total obligations of the Company’s qualified pension plans, and will be funded with pension plan assets and additional cash on hand. In connection with this transaction, the Company will record a one-time non-cash settlement charge in the second half of 2021 currently estimated between $18 million and $22 million in the fourth quarter of 2021, reflecting the accelerated recognition of unamortized actuarial losses
in the plan. The actual amount and timing of the settlement charge could differ from this estimate due to final data and plan wind-up expenses. Due to the signing of the group annuity contract being a significant change in the U.K. pension plan, the liabilities of the plan were remeasured as of April 6, 2020 resulting in an increase of $13.4 million (£10.9 million) to both the net pension liability and unamortized actuarial loss within other comprehensive income (loss) income during the second quarter.quarter of 2020. Additionally, the Company made a cash contribution of $10.4 million (£8.4 million) under this agreement during the second quarter.
10.11. Other Comprehensive (Loss) Income
Changes in other comprehensive income (loss) income by component were as follows:
| (in thousands) | (in thousands) | | Three Months Ended June 27, 2020 | | | Three Months Ended June 29, 2019 | | (in thousands) | | Three Months Ended March 27, 2021 | | Three Months Ended March 28, 2020 |
| | Pre-tax | | Tax | | Net of Tax | | Pre-tax | | Tax | | Net of Tax | | Pre-tax | | Tax | | Net of Tax | | Pre-tax | | Tax | | Net of Tax |
Defined benefit pension plan adjustments | | $ | (13,098) | | | $ | (2,259) | | | $ | (10,839) | | | $ | 201 | | | $ | 40 | | | $ | 161 | | |
Defined benefit pension plan and other adjustments | | Defined benefit pension plan and other adjustments | | $ | 506 | | | $ | 52 | | | $ | 454 | | | $ | 555 | | | $ | (6) | | | $ | 561 | |
| Foreign currency translation adjustments | Foreign currency translation adjustments | | 8,422 | | | — | | | 8,422 | | | (5,892) | | | — | | | (5,892) | | Foreign currency translation adjustments | | (5,325) | | | 0 | | | (5,325) | | | (15,540) | | | 0 | | | (15,540) | |
Total change in other comprehensive income (loss) | Total change in other comprehensive income (loss) | | $ | (4,676) | | | $ | (2,259) | | | $ | (2,417) | | | $ | (5,691) | | | $ | 40 | | | $ | (5,731) | | Total change in other comprehensive income (loss) | | $ | (4,819) | | | $ | 52 | | | $ | (4,871) | | | $ | (14,985) | | | $ | (6) | | | $ | (14,979) | |
Due to the signing of the group annuity contract being a significant change in the U.K. pension plan, the liabilities of the plan were remeasured as of April 6, 2020 resulting in an increase of $13.4 million to unamortized actuarial loss within other comprehensive (loss) income. See Note 9, Benefits Plans for further discussion.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | | Six Months Ended June 27, 2020 | | | | | | Six Months Ended June 29, 2019 | | | | |
| | Pre-tax | | Tax | | Net of Tax | | Pre-tax | | Tax | | Net of Tax |
Defined benefit pension plan adjustments | | $ | (12,543) | | | $ | (2,265) | | | $ | (10,278) | | | $ | 123 | | | $ | 11 | | | $ | 112 | |
| | | | | | | | | | | | |
Foreign currency translation adjustments | | (7,118) | | | — | | | (7,118) | | | 2,230 | | | — | | | 2,230 | |
Total change in other comprehensive income (loss) | | $ | (19,661) | | | $ | (2,265) | | | $ | (17,396) | | | $ | 2,353 | | | $ | 11 | | | $ | 2,342 | |
The following tables set forth the changes in accumulated other comprehensive (loss) income by component for the sixthree months ended JuneMarch 27, 20202021 and June 29, 2019:March 28, 2020:
| (in thousands) | (in thousands) | | Pension and postretirement liability and reclassification adjustments | | | Foreign currency translation adjustment | | Accumulated other comprehensive (loss) income | (in thousands) | | Defined benefit pension plan and other adjustments | | | Foreign currency translation adjustment | | Accumulated other comprehensive (loss) |
Balance at December 28, 2019 | | $ | (18,046) | | | | $ | (88,777) | | | $ | (106,823) | | |
Balance at December 26, 2020 | | Balance at December 26, 2020 | | $ | (34,141) | | | | $ | (57,016) | | | $ | (91,157) | |
| Activity in the period | Activity in the period | | (10,278) | | | | (7,118) | | | (17,396) | | Activity in the period | | 454 | | | | (5,325) | | | (4,871) | |
Balance at June 27, 2020 | | $ | (28,324) | | | | $ | (95,895) | | | $ | (124,219) | | |
Balance at March 27, 2021 | | Balance at March 27, 2021 | | $ | (33,687) | | | | $ | (62,341) | | | $ | (96,028) | |
| (in thousands) | (in thousands) | | Pension and postretirement liability and reclassification adjustments | | | Foreign currency translation adjustment | | Accumulated other comprehensive (loss) income | (in thousands) | | Defined benefit pension plan and other adjustments | | | Foreign currency translation adjustment | | Accumulated other comprehensive (loss) |
Balance at December 29, 2018 | | $ | (9,959) | | | | $ | (87,965) | | | $ | (97,924) | | |
Balance at December 28, 2019 | | Balance at December 28, 2019 | | $ | (18,046) | | | | $ | (88,777) | | | $ | (106,823) | |
| Activity in the period | Activity in the period | | 112 | | | | 2,230 | | | 2,342 | | Activity in the period | | 561 | | | | (15,540) | | | (14,979) | |
Balance at June 29, 2019 | | $ | (9,847) | | | | $ | (85,735) | | | $ | (95,582) | | |
Balance at March 28, 2020 | | Balance at March 28, 2020 | | $ | (17,485) | | | | $ | (104,317) | | | $ | (121,802) | |
Amounts reclassified from accumulated other comprehensive (loss) income to earnings for the three and six months ended JuneMarch 27, 20202021 and June 29, 2019March 28, 2020 were as follows:
| | | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended | |
(in thousands) | (in thousands) | | June 27, 2020 | | June 29, 2019 | | June 27, 2020 | | June 29, 2019 | | (in thousands) | | March 27, 2021 | | March 28, 2020 | |
Pension and Postemployment plans: | Pension and Postemployment plans: | | | | | | | | | | Pension and Postemployment plans: | | | | | |
Amortization of prior service and net actuarial loss | Amortization of prior service and net actuarial loss | | $ | 429 | | | $ | 62 | | | $ | 774 | | | $ | 124 | | | Amortization of prior service and net actuarial loss | | $ | 504 | | | $ | 345 | | |
|
The Company recognizes the amortization of prior service costs in Other (expense) income,(income) expense, net within the Condensed Consolidated Statements of Net (Loss) Income.
12. Income Taxes
The effective tax rate for the three and six months ended JuneMarch 27, 20202021 was 15.1% and 37.2% respectively,20.6%, compared to the effective tax rate for the three and six months ended June 29, 2019March 28, 2020 of 18.2% and 19.2%30.6%. The effective tax rate for the second quarter of 2020 (which is based upon a pre-tax loss)2021 period is lower than the effective tax rate for the comparable 2019 period (which is based upon pre-tax income), primarily due to the goodwill impairment charge of $33.8 million recorded in the second quarter of 2020 the substantial majority of which did not result in a tax benefit.
The effective tax rate for the first six months of 2020 is higher than the effective tax rate for the comparable 2019 period primarily due to the impact of the goodwill impairment charge of $33.8 million as well as a reductionan increase in the forecasted income earned in lower tax jurisdictions in 2020 driven by the uncertainty resulting from the impact of COVID-19.2021 as compared to 2020. The effective tax rate for the first six months of 20202021 period is higher thanapproximately the same as the applicable U.S. statutory tax rate primarily due to the impact of the goodwill impairment charge of $33.8 million as well as the forecasted impact of non-U.S. losses and expenses with no tax benefit, and the U.S. global intangible low-taxed income provisions ("GILTI") (in the 2019 comparable period the impact of these items was more than offset by the impact of income earned in lower tax jurisdictions).
rate.
12.13. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
| | | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended | |
(in thousands, except per share amounts) | (in thousands, except per share amounts) | | June 27, 2020 | | June 29, 2019 | | June 27, 2020 | | June 29, 2019 | (in thousands, except per share amounts) | | March 27, 2021 | | March 28, 2020 | |
Numerator: | Numerator: | | | | | | | | | Numerator: | | | | | |
Net (loss) income as reported | | $ | (8,991) | | | $ | 43,792 | | | $ | 15,653 | | | $ | 80,781 | | |
Net income as reported | | Net income as reported | | $ | 57,713 | | | $ | 24,644 | | |
| Denominator: | Denominator: | | Denominator: | | |
Weighted average shares outstanding | Weighted average shares outstanding | | Weighted average shares outstanding | | |
Basic | Basic | | 24,312 | | | 24,740 | | | 24,353 | | | 24,729 | | Basic | | 24,532 | | | 24,393 | | |
Effect of dilutive securities | Effect of dilutive securities | | — | | | 243 | | | 167 | | | 269 | | Effect of dilutive securities | | 360 | | | 185 | | |
Diluted | Diluted | | 24,312 | | | 24,983 | | | 24,520 | | | 24,998 | | Diluted | | 24,892 | | | 24,578 | | |
| (Loss) Earnings Per Share: | | |
Basic (loss) earnings per share | | $ | (0.37) | | | $ | 1.77 | | | $ | 0.64 | | | $ | 3.27 | | |
Diluted (loss) earnings per share | | $ | (0.37) | | | $ | 1.75 | | | $ | 0.64 | | | $ | 3.23 | | |
Earnings Per Share: | | Earnings Per Share: | | |
Basic earnings per share | | Basic earnings per share | | $ | 2.35 | | | $ | 1.01 | | |
Diluted earnings per share | | Diluted earnings per share | | $ | 2.32 | | | $ | 1.00 | | |
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 328,62415 and 167,599153,836 for the three months ended JuneMarch 27, 20202021 and June 29, 2019, respectively, and 212,290 and 121,326 for the six months ended June 27,March 28, 2020, and June 29, 2019, respectively.
Share Repurchase Program
The Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company’s common stock under a program for the period May 1, 2018 to April 30, 2019 ("2018 program"). On April 26, 2019, the Company's Board of Directors authorized to a program to repurchase up to 1,000,000 shares of the Company's common stock for the period May 1, 2019 to April 30, 2020 ("2019 program") to replace its previous expired 2018 program.. On April 23,29, 2020, the Company'sCompany announced that the Board of Directors authorized a new program to repurchase up to 1,000,000 shares of the Company's common stock for the period May 1, 2020 to April 30, 2021 (the "2020 program") to replace its previous expired 2019 program. TheOn April, 28, 2021, the Company has suspended share repurchasesannounced 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 near-term dueperiod May 1, 2021 to the uncertainty of the impact and duration of COVID-19 andApril 30, 2024 to focus on other capital allocation priorities.replace its previous 2020 program.
The Company did 0t repurchase any shares of its common stock for the three months ended JuneMarch 27, 2020.2021. During the three months ended June 29, 2019,March 28, 2020, the Company repurchased 188,214 shares of its common stock totaling $32.0 million. For the six months ended June 27, 2020 and June 29, 2019, the Company repurchased 175,110 and 268,130 shares of its common stock totaling $22.9 million and $45.5 million, respectively.million.
13.14. Related Party Transactions
As a result of the Company’s acquisition of IXYS, theThe 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.
| | | | For the Three Months Ended June 27, 2020 | | | For the Three Months Ended June 29, 2019 | | | | For the Three Months Ended March 27, 2021 | | For the Three Months Ended March 28, 2020 |
(in millions) | (in millions) | | Powersem | EB Tech | ATEC | | Powersem | EB Tech | ATEC | (in millions) | | Powersem | EB Tech | ATEC | | Powersem | EB Tech | ATEC |
Sales to related party | Sales to related party | | $ | 0.3 | | $ | — | | $ | — | | | $ | 0.1 | | $ | — | | $ | — | | Sales to related party | | $ | 0.2 | | $ | 0 | | $ | 0 | | | $ | 0.4 | | $ | 0 | | $ | 0 | |
Purchase material/service from related party | Purchase material/service from related party | | 0.8 | | — | | 1.6 | | | 0.9 | | 0.1 | | 2.3 | | Purchase material/service from related party | | $ | 1.1 | | $ | 0.1 | | $ | 3.0 | | | $ | 0.2 | | $ | 0 | | $ | 1.8 | |
| | | | For the Six Months Ended June 27, 2020 | | | For the Six Months Ended June 29, 2019 | | |
(in millions) | | Powersem | EB Tech | ATEC | | Powersem | EB Tech | ATEC | |
Sales to related party | | $ | 0.7 | | $ | — | | $ | — | | | $ | 0.2 | | $ | — | | $ | — | | |
Purchase material/service from related party | | 1.0 | | — | | 3.4 | | | 1.7 | | 0.2 | | 3.8 | | |
| | | | | June 27, 2020 | | | December 28, 2019 | | | | March 27, 2021 | | December 26, 2020 |
(in millions) | (in millions) | | Powersem | EB Tech | ATEC | | Powersem | EB Tech | ATEC | (in millions) | | Powersem | EB Tech | ATEC | | Powersem | EB Tech | ATEC |
Accounts Receivable balance | Accounts Receivable balance | | $ | 0.1 | | $ | — | | $ | — | | | $ | — | | $ | — | | $ | — | | Accounts Receivable balance | | $ | 0 | | $ | 0 | | $ | 0 | | | $ | 0.1 | | $ | 0 | | $ | 0 | |
Accounts Payable balance | Accounts Payable balance | | 0.2 | | — | | 0.1 | | | 0.2 | | — | | 0.1 | | Accounts Payable balance | | $ | 0.2 | | $ | 0 | | $ | 0.3 | | | $ | 0.1 | | $ | 0 | | $ | 0.2 | |
Additionally, the Company has certain cost method investments in VTOOL Ltd. and Securepush Ltd. with a total book value of $0.4$0.5 million as of JuneMarch 27, 2021 and December 26, 2020 and one member of the Company’s Board of Directors is currently an investor and a director of VTOOL Ltd. and Securepush Ltd.
On April 26, 2019, the Company sold its subsidiary Microwave Technology, LLC. (“MWT”) resulting in a loss on disposal of $2.6 million reflected in Other income (expense), net in the Condensed Consolidated Statements of Net (Loss) Income. The
operations of MWT were included in the Electronics segment. One member of the Company’s Board of Directors is an owner of a company that purchased MWT.
14.15. Segment Information
The Company and its subsidiaries design, manufacture and sell components and modules for circuit protection, power controlempowering a sustainable, connected, and sensing throughout thesafer world. The Company reports its operations by the following segments: Electronics, Automotive, 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 3 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, 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, metal-oxide-semiconductor field effect transistors (“MOSFETs”) and silicon carbide 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 infrastructure, power supplies, data centers and telecommunications, medical devices, alternative energy, consumer electronicsbuilding and white goods.home automation, appliances, and mobile electronics.
•Automotive Segment: Consists of a wide range of circuit protection, power control and sensing technologies for global original equipment manufacturers (“OEMs”), Tier-I suppliers and parts distributors in passenger car, heavy duty truck, off-road vehicles, material handling, agricultural, construction and other commercial vehicle end markets. Passenger car fuse products include fuses and fuse accessories for internal combustion engine, vehicles and hybrid and electric vehicles including blade fuses, battery cable
protectors, resettable fuses, high-current fuses, and high-voltage fuses. Commercial vehicle products include fuses, switches, relays, and power distribution modules for the commercial vehicle industry.used in applications serving a number of end markets, including heavy truck, construction, agriculture and material handling. Automotive sensor products include a wide range of automotive and commercial vehicle products designed to monitor the passenger compartment occupants,occupant's safety and environment as well as the vehicle’s powertrain.
•Industrial Segment: Consists of power fuses, protection relays and controls and otherindustrial circuit protection products for use(i.e. fuses, power distribution modules, switches) and industrial control products (i.e. relays, transformers, contactors, sensors). These products are used in various industriala variety of applications such as oil, gas, mining, alternative energy, electric vehicle infrastructure, non-residential construction,and end-markets including: Renewable Energy, Energy Storage, HVAC, systems, elevatorsElectric Vehicle Infrastructure, Industrial Equipment, Industrial Automation, Construction, Mining, and other industrial equipment.
Oil & Gas.
Segment information is summarized as follows:
| | | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended | |
(in thousands) | (in thousands) | | June 27, 2020 | | June 29, 2019 | | June 27, 2020 | | June 29, 2019 | (in thousands) | | March 27, 2021 | | March 28, 2020 | |
Net sales | Net sales | | | | | | | | | Net sales | | | | | |
Electronics | Electronics | | $ | 223,271 | | | $ | 259,553 | | | $ | 437,460 | | | $ | 524,947 | | Electronics | | $ | 286,535 | | | $ | 214,189 | | |
Automotive | Automotive | | 61,999 | | | 108,650 | | | 166,769 | | | 222,133 | | Automotive | | 128,529 | | | 104,770 | | |
Industrial | Industrial | | 22,067 | | | 29,676 | | | 49,204 | | | 56,299 | | Industrial | | 48,730 | | | 27,137 | | |
Total net sales | Total net sales | | $ | 307,337 | | | $ | 397,879 | | | $ | 653,433 | | | $ | 803,379 | | Total net sales | | $ | 463,794 | | | $ | 346,096 | | |
| | | | | | | | | | | | | |
Depreciation and amortization | Depreciation and amortization | | | | Depreciation and amortization | | |
Electronics | Electronics | | $ | 15,617 | | | $ | 14,729 | | | $ | 31,148 | | | 30,071 | | Electronics | | $ | 15,381 | | | $ | 15,531 | | |
Automotive | Automotive | | 7,071 | | | 6,904 | | | 14,258 | | | 13,781 | | Automotive | | 7,073 | | | 7,187 | | |
Industrial | Industrial | | 1,046 | | | 1,056 | | | 2,130 | | | 2,116 | | Industrial | | 1,744 | | | 1,084 | | |
| Total depreciation and amortization | Total depreciation and amortization | | $ | 23,734 | | | $ | 22,689 | | | $ | 47,536 | | | $ | 45,968 | | Total depreciation and amortization | | $ | 24,198 | | | $ | 23,802 | | |
| | | | | | | | | | | | | |
Operating (loss) income | | | | |
Operating income | | Operating income | | |
Electronics | Electronics | | $ | 32,651 | | | $ | 43,630 | | | $ | 64,923 | | | $ | 92,666 | | Electronics | | $ | 55,523 | | | $ | 32,272 | | |
Automotive | Automotive | | (8,857) | | | 10,349 | | | 5,259 | | | 23,550 | | Automotive | | 20,316 | | | 14,116 | | |
Industrial | Industrial | | (23) | | | 5,831 | | | 3,511 | | | 9,336 | | Industrial | | 3,506 | | | 3,534 | | |
Other(a) | Other(a) | | (35,721) | | | (7,176) | | | (40,893) | | | (12,245) | | Other(a) | | (2,864) | | | (5,172) | | |
Total operating (loss) income | | (11,950) | | | 52,634 | | | 32,800 | | | 113,307 | | |
Total operating income | | Total operating income | | 76,481 | | | 44,750 | | |
Interest expense | Interest expense | | 5,855 | | | 5,589 | | | 11,273 | | | 11,275 | | Interest expense | | 4,673 | | | 5,418 | | |
Foreign exchange (gain) loss | | (6,010) | | | (3,575) | | | (3,426) | | | 668 | | |
Foreign exchange loss | | Foreign exchange loss | | 6,837 | | | 2,584 | | |
Other (income) expense, net | Other (income) expense, net | | (1,210) | | | (2,947) | | | 39 | | | 1,358 | | Other (income) expense, net | | (7,737) | | | 1,249 | | |
(Loss) income before income taxes | | $ | (10,585) | | | $ | 53,567 | | | $ | 24,914 | | | $ | 100,006 | | |
Income before income taxes | | Income before income taxes | | $ | 72,708 | | | $ | 35,499 | | |
(a) Included in “Other” Operating (loss) income for the first quarter of 2021 was $3.5 million of purchase accounting inventory step-up charges, $0.8 million of legal and professional fees and other expenses related to Hartland and other contemplated acquisitions and $0.4 million of restructuring, impairment and other charges, primarily related to employee termination costs. See Note 7, Restructuring, Impairment and Other Charges, for further discussion. In addition, there was a $1.9 million gain from the sale of a building within the Electronics segment.
Included in "Other" Operating income for the first quarter of 2020 second quarter is $0.1was $1.2 million ($1.3 million year-to-date) of acquisition-related andacquisition integration charges related to the IXYS acquisition and other contemplated acquisitions. In addition, there was $35.6were $4.0 million ($39.6 million year-to-date) of restructuring, impairment and other charges, primarily related to the goodwill impairment charge of $33.8 million recorded in the second quarter associated with the automotive sensors reporting unit within the Automotive segment, $1.8 million ($3.5 million year-to-date) of employee termination costs, and other restructuring charges and impairment charges of $2.2 million recorded in the first quarter associated with the announced consolidation of a manufacturing facility within the Industrial segment.segment and $1.7 million of employee termination costs and other restructuring charges. See Note 4, Goodwill and Other Intangible Assets and Note 6,7, Restructuring, Impairment and Other Charges, for further discussion.
Included in "Other" Operating income (loss) for the second quarter of 2019 is $1.5 million ($3.8 million year-to-date) of acquisition integration charges primarily related to the IXYS acquisition. In addition, there were $5.7 million ($8.4 million year-to-date) of restructuring charges primarily related to employee termination costs.
The Company’s net sales by country were as follows:
| | | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended | |
(in thousands) | (in thousands) | | June 27, 2020 | | June 29, 2019 | | June 27, 2020 | | June 29, 2019 | (in thousands) | | March 27, 2021 | | March 28, 2020 | |
Net sales | Net sales | | | | | | | | | Net sales | | | | | |
United States | United States | | $ | 76,870 | | | $ | 115,991 | | | $ | 179,780 | | | $ | 235,519 | | United States | | $ | 130,931 | | | $ | 102,910 | | |
China | China | | 102,026 | | | 107,728 | | | 188,041 | | | 214,593 | | China | | 139,158 | | | 86,015 | | |
Other countries(a) | Other countries(a) | | 128,441 | | | 174,160 | | | 285,612 | | | 353,267 | | Other countries(a) | | 193,705 | | | 157,171 | | |
Total net sales | Total net sales | | $ | 307,337 | | | $ | 397,879 | | | $ | 653,433 | | | $ | 803,379 | | Total net sales | | $ | 463,794 | | | $ | 346,096 | | |
The Company’s long-lived assets by country were as follows:
| (in thousands) | (in thousands) | | June 27, 2020 | | December 28, 2019 | (in thousands) | | March 27, 2021 | | December 26, 2020 |
Long-lived assets | Long-lived assets | | | | | Long-lived assets | | | | |
United States | United States | | $ | 54,082 | | | $ | 58,081 | | United States | | $ | 48,908 | | | $ | 46,132 | |
China | China | | 82,224 | | | 88,306 | | China | | 85,280 | | | 85,876 | |
Mexico | Mexico | | 67,967 | | | 73,096 | | Mexico | | 72,499 | | | 70,125 | |
Germany | Germany | | 36,721 | | | 36,025 | | Germany | | 36,227 | | | 37,976 | |
Philippines | Philippines | | 58,272 | | | 51,738 | | Philippines | | 66,956 | | | 66,994 | |
Other countries(a) | Other countries(a) | | 35,411 | | | 37,371 | | Other countries(a) | | 35,044 | | | 37,075 | |
Total long-lived assets | Total long-lived assets | | $ | 334,677 | | | $ | 344,617 | | Total long-lived assets | | $ | 344,914 | | | $ | 344,178 | |
The Company’s additions to long-lived assets by country were as follows:
| | | | Six Months Ended | | | | Three Months Ended |
(in thousands) | (in thousands) | | June 27, 2020 | | June 29, 2019 | (in thousands) | | March 27, 2021 | | March 28, 2020 |
Additions to long-lived assets | Additions to long-lived assets | | | | | Additions to long-lived assets | | | | |
United States | United States | | $ | 2,026 | | | $ | 3,454 | | United States | | $ | 683 | | | $ | 580 | |
China | China | | 4,516 | | | 4,958 | | China | | 2,142 | | | 1,657 | |
Mexico | Mexico | | 4,260 | | | 8,727 | | Mexico | | 6,121 | | | 2,592 | |
Germany | Germany | | 2,509 | | | 3,712 | | Germany | | 593 | | | 753 | |
Philippines | Philippines | | 9,039 | | | 6,629 | | Philippines | | 2,443 | | | 3,218 | |
Other countries(a) | Other countries(a) | | 687 | | | 2,378 | | Other countries(a) | | 754 | | | 2,508 | |
Total additions to long-lived assets | Total additions to long-lived assets | | $ | 23,037 | | | $ | 29,858 | | Total additions to long-lived assets | | $ | 12,736 | | | $ | 11,308 | |
(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; the severity and duration of the coronavirus disease 2019 ("COVID-19") pandemic and the measures taken in response thereto and the effects of those items on the Company’s business; 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; 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 this Quarterly Report on Form 10-Q for the quarter ended June 27, 2020, the Company's Annual Report on Form 10-K for the year ended December 28, 2019,26, 2020, 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 28, 2019.26, 2020.
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 we are 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 an industrial technology manufacturing company empowering a sustainable, connected, and safer world. Across more than 15 countries, and with 12,000 global manufacturer of leading technologies in circuit protection, power controlassociates, we partner with customers to design and sensing.
deliver innovative, reliable solutions. Serving over 100,000 end customers, the Company’sour products are found in automotivea variety of industrial, transportation and commercial vehicles, industrial
applications, data and telecommunications, medical devices, consumer electronics and appliances. With its broad product portfolio of fuses, semiconductors, polymers, ceramics, relays and sensors, and extensive global infrastructure, the Company’s worldwide associates partner with its customers to design, manufacture and deliver innovative, high-quality solutions for a safer, greener and increasingly connected world.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, Automotive, and Industrial. Within these segments, the Company designs, manufactures and sells components and modules for circuit protection, power controlempowering a sustainable, connected, and sensing products throughout thesafer world. The circuit protectionOur products protect against electrostatic discharge, power surges, short circuits, voltage spikes and other harmful occurrences; our power control productsoccurrences, safely and efficiently control power and improve productivity and our sensor products are used to identify and detect temperature, proximity, flow speed and fluid level in various applications.
Executive Summary
For the secondfirst quarter of 2020,2021, the Company recognized net sales of $307.3$463.8 million compared to $397.9$346.1 million in the secondfirst quarter of 20192020 representing a decreasean increase of $90.5$117.7 million, or 22.8%34.0%. The decreaseincrease was primarily driven by lower volumehigher volumes across all ofbusinesses in the Electronics and Automotive segments, due to the impact of COVID-19, a decline in global auto production, and $2.3$16.7 million or 0.6%3.6% of unfavorablenet sales from the Hartland acquisition within the Industrial segment and $12.4 million or 3.6% of favorable changes in foreign exchange rates. The Company recognized a net lossincome of $9.0$57.7 million, or $0.37$2.32 per diluted share, in the secondfirst quarter of 20202021 compared to net income of $43.8$24.6 million, or $1.75$1.00 per diluted share in the secondfirst quarter of 2019.2020. The increase in net loss was primarily due to a non-cash goodwill impairment charge of $33.8 million related to the automotive sensors reporting unit within the Automotive segment and lowerincome reflects higher operating income across allof $31.7 million driven by a $23.3 million and $6.2 million increase in operating income in the segments.Electronics and Automotive segments, respectively, increases of $9.7 million of unrealized gains associated with our equity investments partially offset by higher foreign exchange losses of $4.3 million.
On January 28, 2021, the Company acquired Hartland Controls ("Hartland"), a manufacturer and leading supplier of electrical components used primarily in heating, ventilation, air conditioning (HVAC) and other industrial and control systems applications with annualized sales of approximately $70 million. The Company continues to take actions to improve its cost structure. The Company expects to realize cost savings from the restructuring activities taken during 2019 and 2020, including the reorganization of certain manufacturing, selling and administrative functions across all segmentspurchase price for Hartland was approximately $112.3 million and the consolidationoperations of a manufacturing facility withinHartland are included in the Industrial Segment.segment.
Net cash provided by operating activities was $101.3$50.2 million for the sixthree months ended JuneMarch 27, 20202021 as compared to $80.1$45.3 million for the sixthree months ended June 29, 2019.March 28, 2020. The increase in net cash provided by operating activities was primarily due to lower annual incentive payments and favorable changes in net working capital driven by the timing of collections of accounts receivable and changes in accounts payablehigher cash earnings partially offset by lower earnings largely due to the impact of COVID-19.increases in working capital resulting from higher sales growth.
On March 25, 2020, the company borrowed $100.0 million from its current revolving credit facility to preserve financial flexibility and enhance liquidity, given the increasing levels of uncertainty related to COVID-19. On April 3, 2020, the Company amended the existing credit agreement to effect certain changes, including, among others: (i) eliminating the $200.0 million unsecured term loan credit facility, the remaining outstanding balance ($140.0 million) of which was repaid in full on April 3, 2020 through the revolving credit facility; (ii) making certain financial and non-financial covenants less restrictive on the Company; (iii) modifying performance-based interest rate margins and undrawn fees; and (iv) extending the maturity date to April 3, 2025. The amended credit agreement also allows the Company to increase the size of the revolving credit facility or enter into one or more tranches of term loans if there is no event of default and the Company is in compliance with certain financial covenants.
On April 7, 2020, the Company entered into a definitive agreement to purchase a group annuity contract, under which an insurance company will be required to pay and administer pension payments to certain of the Company’s UK pension plan participants, or their designated beneficiaries, who have been receiving pension payments. The purchase of this group annuity contract will reduce the Company’s outstanding pension benefit obligation by approximately $36 million, representing approximately 30% of the total obligations of the Company’s qualified pension plans, and will be funded with pension plan assets and additional cash on hand. In connection with this transaction, the Company will record a one-time non-cash settlement charge in the second half of 2021 currently estimated between $18 million and $22 million, reflecting the accelerated recognition of a portion of unamortized actuarial losses in the plan. The actual settlement charge could differ from this estimate due to final data and plan wind-up expenses.
Impact of COVID-19 on Business
COVID-19 continued to negatively impact the Company’s 2020 second quarter financial results. During the second quarter, sales volumes across all of the Company's segments were reduced driven by production disruptionsThe effects from temporary closures of manufacturing facilities in the Philippines, Mexico and Italy as a result of government directives. Furthermore, sales volumes in the Automotive segment were significantly impacted by lower global end market demand across passenger vehicle end markets. The Company incurred incremental costs of approximately $5.1 million and $7.6 million during the three and six months ended June 27, 2020, respectively, primarily due to costs related to the above temporary plant closures, higher costs for freight and protective supplies, partially offset by certain international government subsidies and COVID-19 relief programs.
The Company’s priorities continue to be first,drive increased costs, though lower than 2020 levels. Ongoing costs include spending on our associates, their families and the communities in which we operate; second, our customers; and third, long-term financial health of the company. In an effort to protect the health and safety of our employees, the Company has enacted numerous proactive, aggressive actions at its facilities globally, and implemented a number of safety procedures including hygiene and disinfection protocols, social distancing and wearing personal protective equipment ("PPE"). The Company expects these actions will continue for, additional personnel and employee transportation costs, and manufacturing inefficiencies, as well as an increase in freight costs due to the foreseeable future.
In an effort to contain COVID-19 and slow its spread, governments aroundtransportation capacity constraints across the world enacted various measures, including orders to close all businesses not deemed “essential”, isolate residents to their homes or places of residence, and practice social distancing when engaging in essential activities. These government measures disrupted certain of our operating locations in many countries around the world. our operations that were closed or running at limited levels during the second quarter returned to normal or nearly normal capacity levels during June, and all of our manufacturing facilities are currently operating.
The Company continues to work with customers to meet production requirements for their products, many of which are considered essential, including healthcare and medical devices, transportation, communication and energy infrastructure.
The Company took cost containment initiatives to help offset the impact of lower demand and the business disruption created by COVID-19. During the first quarter, the Company suspended annual wage increases and its 2020 annual cash incentive program. The Company also reduced salaries of the CEO and executive leadership team, and reduced cash compensation of its board of directors during the second quarter. The Company continues to develop and execute contingency plans to manage our business performance within this uncertain environment.
The Company anticipates that the global health crisis caused by COVID-19 willmay continue to negatively impact its business activity for the foreseeable future. It is currently difficult to estimate the magnitude of the COVID-19 disruption, if future disruptions will occur due to a resurgence in COVID-19 cases and its impact on our employees, customers, suppliers and vendors. The Company will continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and other stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our business and operations, including the effects on our customers, employees, and prospects, or on our financial results for the remainder of fiscal 2020.year 2021.
Goodwill Impairment Assessment
The Company performs its annual goodwill impairment tests on or about September 30, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. As part of its interim review for indicators of impairment, management analyzed potential changes in the value of individual reporting units with goodwill based on each reporting unit’s operating results for the six months ended June 27, 2020 compared to expected results. In addition, management considered how other key assumptions, including discount rates and expected long-term growth rates, used in last fiscal year’s impairment analysis, could be impacted by changes in market conditions and economic events.
Management considered trends in these factors when performing its assessment of whether an interim impairment review was required for any reporting unit. For the three months ended June 27, 2020, the Company recorded a non-cash charge of $33.8 million to recognize the impairment of goodwill in the automotive sensors reporting unit within the Automotive segment. The goodwill impairment charge was due to reductions in the estimated fair value for the automotive sensors reporting unit based on lower expectations for future revenue, profitability and cash flows as compared to the expectations of the 2019 annual goodwill impairment test. These lower future expectations were driven by projected extended declines in end market demand due to the COVID-19 pandemic. In addition, during the second quarter of 2020, certain customers notified the Company of their decision to delay future programs along with a customer canceling an existing program. The goodwill impairment charge was
determined using Level 3 inputs, including discounted cash flow analysis and comparable marketplace fair value data As of June 27, 2020, the automotive sensors reporting unit had $9.1 million of remaining goodwill.
In addition, the semiconductors reporting unit has experienced declines in net sales due to temporary plant shut-downs and lower customer demand primarily due to COVID-19. The Company continues to evaluate the impact of COVID-19 on its long-term expectations for this unit. Further negative developments having a significant impact on the estimated fair value of this reporting unit could result in future goodwill impairment charges. As of the September 30, 2019 annual goodwill impairment test, the semiconductors reporting unit estimated fair value exceeded its book value by approximately 42%. As of June 27, 2020, $467.1 million of goodwill was allocated to the semiconductors reporting unit. The semiconductors reporting unit is included within the Electronics segment.
Based on the June 27, 2020 interim assessment, management concluded that other than the goodwill impairment recognized in the automotive sensors reporting unit, no events or changes in circumstances indicated that it was more likely than not that the fair value for any reporting unit had declined below its carrying value. Nevertheless, a continued global economic slowdown and further business disruption due to COVID-19 could result in changes to expectations of future financial results and key valuation assumptions. These changes could result in changes to management’s estimates of the fair value of the Company’s reporting units and could result in a review for impairment of goodwill prior to September 29, 2020, the Company’s next annual measurement date, and a potential corresponding impairment charge.
Risks Related to Market Conditions
While the Company has not historically or currently as of June 27, 2020 had significant credit risk on its accounts receivable, the impact of the COVID-19 pandemic and associated economic slowdown may increase the Company’s credit risk on accounts receivable. It is possible that the Company’s customers may experience liquidity issues which may impact the timing of the collections on receivables. The Company will continue to evaluate how the ongoing pandemic may impact collectability.
Results of Operations
The following table summarizes the Company’s unaudited condensed consolidated results of operations for the periods presented. The secondfirst quarter of 2021 includes $3.5 million of purchase accounting inventory step-up charges, $0.8 million of legal and professional fees and other expenses related to Hartland and other contemplated acquisitions and $0.4 million of
restructuring, impairment and other charges, primarily related to employee termination costs. In addition, there was a $1.9 million gain from the sale of a building within the Electronics segment.
The first quarter of 2020 includes $0.1$1.2 million ($1.3 million year-to-date) of acquisition-related andacquisition integration charges related to the IXYS acquisition and other contemplated acquisitions. In addition, there were $35.6$4.0 million ($39.6 million year-to-date) of restructuring, impairment and other charges, primarily related to the goodwill impairment charge of $33.8 million recorded in the second quarter associated with the automotive sensors reporting unit within the Automotive segment, $1.8 million ($3.5 million year-to-date) of employee termination costs, and other restructuring charges and impairment charges of $2.2 million recorded in the first quarter associated with the announced consolidation of a manufacturing facility within the Industrial segment.
The second quartersegment and $1.7 million of 2019 includes $1.5 million ($3.8 million year-to-date) of acquisition integration charges primarily related to the IXYS acquisition. In addition, there were $5.7 million ($8.4 million year-to-date) of restructuring charges primarily related to employee termination costs.costs and other restructuring charges.
| | | | Second Quarter | | | First Six Months | | | | First Quarter | |
(in thousands) | (in thousands) | | 2020 | | 2019 | | Change | | % Change | | 2020 | | 2019 | | Change | | % Change | (in thousands) | | 2021 | | 2020 | | Change | | % Change | |
Net sales | Net sales | | $ | 307,337 | | | $ | 397,879 | | | $ | (90,542) | | | (22.8) | % | | $ | 653,433 | | | $ | 803,379 | | | $ | (149,946) | | | (18.7) | % | Net sales | | $ | 463,794 | | | $ | 346,096 | | | $ | 117,698 | | | 34.0 | % | |
Cost of sales | | Cost of sales | | 303,328 | | | 221,740 | | | 81,588 | | | 36.8 | % | |
Gross profit | Gross profit | | 99,099 | | | 141,808 | | | (42,709) | | | (30.1) | % | | 222,811 | | | 297,036 | | | (74,225) | | | (25.0) | % | Gross profit | | 160,466 | | | 124,356 | | | 36,110 | | | 29.0 | % | |
Operating expenses | Operating expenses | | 111,049 | | | 89,174 | | | 21,875 | | | 24.5 | % | | 190,011 | | | 183,729 | | | 6,282 | | | 3.4 | % | Operating expenses | | 83,985 | | | 79,606 | | | 4,379 | | | 5.5 | % | |
Operating (loss) income | | (11,950) | | | 52,634 | | | (64,584) | | | (122.7) | % | | 32,800 | | | 113,307 | | | (80,507) | | | (71.1) | % | |
(Loss) income before income taxes | | (10,585) | | | 53,567 | | | (64,152) | | | (119.8) | % | | 24,914 | | | 100,006 | | | (75,092) | | | (75.1) | % | |
Operating income | | Operating income | | 76,481 | | | 44,750 | | | 31,731 | | | 70.9 | % | |
Income before income taxes | | Income before income taxes | | 72,708 | | | 35,499 | | | 37,209 | | | 104.8 | % | |
Income taxes | Income taxes | | (1,594) | | | 9,775 | | | (11,369) | | | (116.3) | % | | 9,261 | | | 19,225 | | | (9,964) | | | (51.8) | % | Income taxes | | 14,995 | | | 10,855 | | | 4,140 | | | 38.1 | % | |
Net (loss) income | | $ | (8,991) | | | $ | 43,792 | | | $ | (52,783) | | | (120.5) | % | | $ | 15,653 | | | $ | 80,781 | | | $ | (65,128) | | | (80.6) | % | |
Net income | | Net income | | $ | 57,713 | | | $ | 24,644 | | | $ | 33,069 | | | 134.2 | % | |
Net Sales
Net sales decreased $90.5increased $117.7 million or 22.8% for the second quarter of 2020 compared to the second quarter of 2019 primarily due to lower volume across all segments due to temporary closures of manufacturing facilities resulting from government directives due to the impact of COVID-19 and lower volume across the Automotive segment due to a decline in global auto production driven by lower global end market demand, and $2.334.0% including $12.4 million or 0.6%3.6% of unfavorablefavorable changes in foreign exchange rates.
Net sales decreased $149.9 million or 18.7%rates for the first six monthsquarter of 20202021 compared to the first six monthsquarter of 20192020. The increase was primarily due to lower volume driven by the disruption acrosshigher sales of $72.3 million and $23.8 million, respectively, in the Electronics and Automotive segments due to temporary closures of manufacturing facilities resulting from government directives due to the impact of COVID-19, lowerdriven by higher volumes across all businesses within these segments. The volume acrossincrease within the Electronics segment fromwas led by greater customer demand for products and devices for work-from-home and stay-at-home needs, and strong global automotive demand driving an increase for products used in automotive electronics distribution partners and end customers reducing excess inventories and production, and lowerelectric vehicles. The volume acrossincrease within the Automotive segment was due to a decline instronger global auto productionand commercial vehicle market demand. The remaining increase in net sales was due to $16.7 million of net sales resulting from the Hartland acquisition included in the Industrial segment.
Cost of Sales
Cost of sales was $303.3 million, or 65.4% of net sales, in 2021, compared to $221.7 million, or 64.1% of net sales, in 2020. The increase in cost of sales was primarily due to greater volume in the Electronics and Automotive segments driven by lower global end market demand, and $5.6the factors discussed above along with the acquisition of Hartland. As a percent of net sales, cost of sales increased 1.3% driven by higher freight costs of $7.3 million, or 0.7%0.9%, the Hartland purchase accounting inventory charges of unfavorable changes in foreign exchange rates.$3.5 million or 0.8%, and higher commodity costs partially offset by cost reductions.
Gross Profit
Gross profit was $99.1$160.5 million, or 32.2% of net sales, in the second quarter of 2020 compared to $141.8 million, or 35.6% of net sales, for the second quarter of 2019. The decrease in gross profit is primarily due to lower volume across all segments, additional costs associated with government-directed plant shutdowns and supply chain constraints, higher freight, supplies and other costs due to the impact of COVID-19.
Gross profit was $222.8 million, or 34.1%34.6% of net sales, in the first six monthsquarter of 20202021 compared to $297.0$124.4 million, or 37.0%35.9% of net sales, for the first six monthsquarter of 2019.2020. The decrease$36.1 million increase in gross profit reflected lowerwas primarily due to higher volume across allin the Electronics and Automotive segments. The decrease in gross margin isof 1.3% was primarily due to lower volumes across the Electronics segment, additional costs associated with government-directed plant shutdowns and supply chain constraints, higher freight supplies and other costs due toof $7.3 million or 0.9%, the impactpurchase accounting inventory charges of COVID-19,$3.5 million or 0.8%, higher commodity costs, and unfavorable price and product mix.foreign exchange partially offset by higher volumes within the Electronics and Automotive segments.
Operating Expenses
Total operating expenses were $111.0$84.0 million, or 36.1%18.1% of net sales, for the secondfirst quarter of 20202021 compared to $89.2$79.6 million, or 22.4%23.0% of net sales, for the secondfirst quarter of 2019.2020. The increase in operating expenses of $21.9$4.4 million iswas primarily due to the goodwill impairment chargehigher selling, general and administrative expenses of $33.8$7.1 million or 11.0% of net sales, in the automotive sensors reporting unit within the Automotive segment, partially offset by lowerlargely due to higher accrued incentive compensation lower research and development expenses of $8.1 million, lower sales commissions and travel expenses due to COVID-19, and lower acquisition-related and integration charges of $1.4 million.
Total operating expenses were $190.0 million, or 29.1% of net sales, for the first six months of 2020 compared to $183.7 million, or 22.9% of net sales, for the first six months of 2019. The increase in operating expenses of $6.3 million is primarily due to the goodwill impairment charge of $33.8 million, or 5.2% of net sales, in the automotive sensors reporting unit within the Automotive segment and impairment charges of $2.2 million related to the Company’s first quarter announcement to consolidate a manufacturing facility within the Industrial segment, partially offset by lower incentive compensation, lower research and development expenses of $14.9 million, lower sales commissions and travel expenses due to COVID-19, and lower acquisition-related and integration charges of $2.5 million.
Operating (Loss) Income
Operating loss was $12.0 million, a decrease of $64.6 million, or 122.7%, for the second quarter of 2020 compared to operating income $52.6 million for the second quarter of 2019. The decrease is primarily due to lower gross margin across all of the segments and higher operating expenses noted above. Operating margins decreased from 13.2% in the second quarter of 2019 to (3.9)% in the second quarter of 2020 driven by the factors mentioned above. The goodwill impairment charge of $33.8 million negatively impacted the operating margin by 11.0% for the second quarter of 2020.
Operating income was $32.8 million, a decrease of $80.5 million, or 71.1%, for the first six months of 2020 compared to $113.3 million for the first six months of 2019. The decrease in operating income is primarily due to lower gross margin across all segments and higher operating expenses noted above. Operating margins decreased from 14.1% in the first six months of 2019 to 5.0% in the first six months of 2020 driven by the factors mentioned above. The goodwill impairment charge of $33.8 million negatively impacted the operating margin by 5.2% for the first six months of 2020.
(Loss) Hartland acquisition partially offset by a $1.9 million gain from the sale of a building within the Electronics segment. The increase in operating expenses was also partially offset by lower restructuring, impairment and other charges of $3.5 million.
Operating Income
Operating income was $76.5 million, an increase of $31.7 million, or 70.9%, for the first quarter of 2021 compared to $44.8 million for the first quarter of 2020. The increase in operating income was primarily due to higher gross profit from the Electronics and Automotive segments. Operating margins increased from 12.9% in the first quarter of 2020 to 16.5% in the first quarter of 2021 driven by the factors mentioned above.
Income Before Income Taxes
Loss before income taxes was $10.6 million, or (3.4)% of net sales, for the second quarter of 2020 compared to income before income tax of $53.6 million, or 13.5% of net sales, for the second quarter of 2019. In addition to the factors impacting comparative results for operating (loss) income discussed above, loss before income taxes was primarily impacted by $1.8 million increase in coal mining reserves, lower interest income of $0.9 million, higher interest expense and higher pension non-service costs, partially offset by higher foreign exchange gains of $2.4 million and unrealized investment gains of $1.7 million associated with our equity investments during the three months ended June 27, 2020 compared to the three months ended June 29, 2019.
Income before income taxes was $24.9$72.7 million, or 3.8%15.7% of net sales, for the first six monthsquarter of 20202021 compared to $100.0$35.5 million, or 12.4%10.3% of net sales, for the first six monthsquarter of 2019.2020. In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was primarily impacted by foreign exchange gainsincreases of $3.4$9.7 million during the six months ended June 27, 2020 compared to foreign exchange losses of $0.7 million during the six months ended June 29, 2019, impairment charges of $3.1 million for certain other investments and a $2.6 million loss on the disposal of a business within the Electronics segment during the six months ended June 29, 2019, partially offset by a $1.5 million increase in coal mining reserve and $1.0 million decreases in unrealized investment gains associated with our equity investments.investments partially offset by higher foreign exchange losses of $4.3 million.
Income Taxes
Income tax benefitexpense for the secondfirst quarter of 20202021 was $1.6$15.0 million, or an effective tax rate of 15.1%20.6%, compared to income tax expense of $9.8$10.9 million, or an effective tax rate of 18.2%30.6%, for the secondfirst quarter of 2019.2020. The effective tax rate for the secondfirst quarter of 2020 (which is based upon a pre-tax loss)2021 is lower than the effective tax rate for the comparable 2019 period (which is based upon pre-tax income), primarily due to the goodwill impairment charge of $33.8 million recorded in the second quarter of 2020 the substantial majority of which did not result in a tax benefit.
Income tax expense for the first six months of 2020 was $9.3 million, or an effective tax rate of 37.2%, compared to income tax expense of $19.2 million, or an effective tax rate of 19.2%, for the first six months of 2019. The effective tax rate for the first six months of 2020 is higher than the effective tax rate for the comparable 2019 period, primarily due to the impact of the goodwill impairment charge of $33.8 million, the substantial majority of which did not result in a tax benefit, as well as a reductionan increase in the forecasted income earned in lower tax jurisdictions in 2020 driven by the uncertainty resulting from the impact of COVID-19.2021 compared to 2020. The effective tax rate for the first six months of 20202021 period is higher thanapproximately the same as the applicable U.S. statutory tax rate primarily due to the impact of the goodwill impairment charge of $33.8 million as well as the forecasted impact of non-U.S. losses and expenses with no tax benefit and the U.S. global intangible low-taxed income tax provisions (in the 2019 comparable period the impact of these items was more than offset by the impact of income earned in lower tax jurisdictions).rate.
Segment Results of Operations
The Company reports its operations by the following segments: Electronics, Automotive and Industrial. Segment information is described more fully in Note 14,15, 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 by segment:
| | | | Second Quarter | | | First Six Months | | | | First Quarter | |
(in thousands) | (in thousands) | | 2020 | | 2019 | | Change | | % Change | | 2020 | | 2019 | | Change | | % Change | (in thousands) | | 2021 | | 2020 | | Change | | % Change | |
Electronics | Electronics | | $ | 223,271 | | | $ | 259,553 | | | $ | (36,282) | | | (14.0) | % | | $ | 437,460 | | | $ | 524,947 | | | $ | (87,487) | | | (16.7) | % | Electronics | | $ | 286,535 | | | $ | 214,189 | | | $ | 72,346 | | | 33.8 | % | |
Automotive | Automotive | | 61,999 | | | 108,650 | | | (46,651) | | | (42.9) | % | | 166,769 | | | 222,133 | | | (55,364) | | | (24.9) | % | Automotive | | 128,529 | | | 104,770 | | | 23,759 | | | 22.7 | % | |
Industrial | Industrial | | 22,067 | | | 29,676 | | | (7,609) | | | (25.6) | % | | 49,204 | | | 56,299 | | | (7,095) | | | (12.6) | % | Industrial | | 48,730 | | | 27,137 | | | 21,593 | | | 79.6 | % | |
Total | Total | | $ | 307,337 | | | $ | 397,879 | | | $ | (90,542) | | | (22.8) | % | | $ | 653,433 | | | $ | 803,379 | | | $ | (149,946) | | | (18.7) | % | Total | | $ | 463,794 | | | $ | 346,096 | | | $ | 117,698 | | | 34.0 | % | |
Electronics Segment
Net sales increased $72.3 million, or 33.8%, in the first quarter of 2021 compared to the first quarter of 2020 and included favorable changes in foreign exchange rates of $6.5 million. The sales increase was primarily due to increased volume for the electronics products and semiconductor businesses of $47.8 million and $24.5 million, respectively. The volume increases were led by greater customer demand for products and devices for work-from-home and stay-at-home needs, and strong global automotive demand driving an increase for products used in automotive electronics and electric vehicles. The first quarter of 2020 also included production disruptions due to the impact of COVID-19.
Automotive Segment
Net sales increased $23.8 million, or 22.7%, in the first quarter of 2021 compared to the first quarter of 2020 and included favorable changes in foreign exchange rates of $5.6 million. The sales increase was due to higher volume in passenger car products, commercial vehicle products, and the automotive sensors business of $15.3 million, $4.4 million, and $4.1 million,
Electronics Segment
Net sales decreased $36.3 million, or 14.0%,respectively. These increases were due to stronger global auto and commercial vehicle market demand. Our Asia region experienced the most growth driven by an increase in global auto market demand as compared to the secondfirst quarter of 2020 compared to the second quarter of 2019 primarily due to lower volume in the semiconductor and electronics products businesses driven by thethat had production disruption due to temporary closures of manufacturing facilities resulting from government directivesdisruptions due to the impact of COVID-19, and unfavorable changes in foreign exchange rates of $1.2 million.
Net sales decreased $87.5 million, or 16.7%, in the first six months of 2020 compared to the first six months of 2019 primarily due to lower volume in the semiconductor and electronics products businesses driven by the production disruption due to temporary closures of manufacturing facilities resulting from government directivesCOVID-19. Sales also grew due to the impactlaunch of COVID-19, lower volume from electronics distribution partnersnew products and end customers reducing excess inventories, and unfavorable changes in foreign exchange rates of $2.9 million.
Automotive Segment
Net sales decreased $46.7 million, or 42.9%, in the second quarter of 2020 compared to the second quarter of 2019 due to decreased volume across all businesses driven by the production disruption due to temporary closures of manufacturing facilities resulting from government directives due to the impact of COVID-19, a decline in global auto production driven by lower global end market demand, and unfavorable changes in foreign exchange rates of $0.9 million.
Net sales decreased $55.4 million, or 24.9%, in the first six months of 2020 compared to the first six months of 2019 due to decreased volume across all businesses driven by the production disruption due to temporary closures of manufacturing facilities resulting from government directives due to the impact of COVID-19, a decline in global auto production driven by lower global end market demand, and unfavorable changes in foreign exchange rates of $2.5 million.higher content per vehicle.
Industrial Segment
Net sales decreasedincreased by $7.6$21.6 million, or 25.6%79.6%, in the secondfirst quarter of 2021 compared to the first quarter of 2020, compared to the second quarter of 2019 primarily due to decreased volume across all businesses driven by the production disruption due to temporary closures of manufacturing facilities resulting from government directives due to the impact of COVID-19 and unfavorablewhich included favorable changes in foreign exchange rates of $0.2$0.3 million.
Net The increase in net sales decreased by $7.1 million, or 12.6%, in the first six months of 2020 compared to the first six months of 2019was primarily due to decreasedincremental net sales of $16.7 million or 61.5% from the Hartland acquisition, higher volume across all businesses driven by the production disruption due to temporary closures of manufacturing facilities resulting from government directives due to the impact of COVID-19$4.5 million in the second quarterpower fuse business, and the transfer of 2020, andthe temperature sensor product line totaling $1.9 million which was previously reported in the Electronics segment, partially offset by unfavorable changeslower volume in foreign exchange rates of $0.2 million.the relay business.
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:
| | | | Second Quarter | | | First Six Months | | | | First Quarter | |
(in thousands) | (in thousands) | | 2020 | | 2019 | | Change | | % Change | | 2020 | | 2019 | | Change | | % Change | (in thousands) | | 2021 | | 2020 | | Change | | % Change | |
Asia-Pacific | Asia-Pacific | | $ | 155,737 | | | $ | 172,895 | | | $ | (17,158) | | | (9.9) | % | | $ | 296,610 | | | $ | 345,676 | | | $ | (49,066) | | | (14.2) | % | Asia-Pacific | | $ | 212,185 | | | $ | 140,873 | | | $ | 71,312 | | | 50.6 | % | |
Americas | Americas | | 89,651 | | | 135,894 | | | (46,243) | | | (34.0) | % | | 210,152 | | | 273,928 | | | (63,776) | | | (23.3) | % | Americas | | 152,906 | | | 120,501 | | | 32,405 | | | 26.9 | % | |
Europe | Europe | | 61,949 | | | 89,090 | | | (27,141) | | | (30.5) | % | | 146,671 | | | 183,775 | | | (37,104) | | | (20.2) | % | Europe | | 98,703 | | | 84,722 | | | 13,981 | | | 16.5 | % | |
Total | Total | | $ | 307,337 | | | $ | 397,879 | | | $ | (90,542) | | | (22.8) | % | | $ | 653,433 | | | $ | 803,379 | | | $ | (149,946) | | | (18.7) | % | Total | | $ | 463,794 | | | $ | 346,096 | | | $ | 117,698 | | | 34.0 | % | |
Asia-Pacific
Net sales decreased $17.2increased $71.3 million, or 9.9%50.6%, in the secondfirst quarter of 2021 compared to the first quarter of 2020 compared to the second quarterand included favorable changes in foreign exchange rates of 2019.$4.2 million. The decreaseincrease in net sales was primarily due to lower volume across all businesses within the Electronics segment, lower volume in passenger car products businesses within the Automotive segment, and unfavorable changes in foreign exchange rates of $1.1 million.
Net sales decreased $49.1 million, or 14.2%, in the first six months of 2020 compared to the first six months of 2019. The decrease in net sales was primarily due to lowerhigher volume across all businesses within the Electronics and Automotive segments, and unfavorable changes in foreign exchange ratescompared to the first quarter of $2.0 million.2020 that had production disruptions due to the impact of COVID-19.
Americas
Net sales decreased $46.2increased $32.4 million, or 34.0%26.9%, in the secondfirst quarter of 2021 compared to the first quarter of 2020 compared to the second quarter of 2019 primarily due to lower volume across all segments due to temporary closures of manufacturing facilities resulting from government directives due to the impact of COVID-19, lower volume across the Automotive segment due to a decline in global auto production driven by lower global end market demand, and unfavorableincluded favorable changes in foreign exchange rates of $0.1 million.
Net The increase in net sales decreased $63.8 million, or 23.3%, in the first six months of 2020 compared to the first six months of 2019was primarily due to lowerincremental sales of $16.7 million from the Hartland acquisition, higher volume across all segments driven by the production disruption due to temporary closures of manufacturing facilities resulting from government directives due to the impact of COVID-19, lower volume across the Electronics segment from electronics distribution partners and end customers reducing excess inventories and production, lower volume in all businesses within the AutomotiveElectronics segment, and unfavorable changeshigher volume in foreign exchange rates of $0.3 million.the passenger car products and commercial vehicle businesses within the Automotive segment.
Europe
Net sales decreased $27.1increased $14.0 million, or 30.5%16.5%, in the secondfirst quarter of 20202021 compared to the secondfirst quarter of 2019.2020. The decreaseincrease in net sales was primarily due to favorable changes in foreign exchange rates of $8.1 million and increased volume across all businesses within the Automotive segment and Electronics products business within the Electronics segment, partially offset by lower volume in the semiconductor business within the Electronics segment, lower volume in all businesses within the Automotive segment, and unfavorable changes in foreign exchange rates of $1.1 million.
Net sales decreased $37.1 million, or 20.2%, in the first six months of 2020 compared to the first six months of 2019. The decrease in net sales was primarily due to lower volume in the semiconductor business within the Electronics segment, lower volume in all businesses within the Automotive segment and unfavorable changes in foreign exchange rates of $3.3 million.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 $651.9$572.8 million as of JuneMarch 27, 2020, an increase2021, a decrease of $120.7$114.8 million as compared to December 28, 2019.26, 2020. As of JuneMarch 27, 2020, $312.62021, $306.6 million of the Company's $651.9$572.8 million cash and cash equivalents was held by U.S. subsidiaries.
Revolving Credit Facility/Term Loan
On March 4, 2016, the Company entered into a five-year credit agreement (“Credit Agreement”) with a group of lenders for up to $700.0 million. The Credit Agreement consisted of an unsecured revolving credit facility (“Revolving Credit Facility”) of $575.0 million and an unsecured term loan credit facility (“Term Loan”) of up to $125.0 million. In addition, the Company had the ability, from time to time, to increase the size of the Revolving Credit Facility and the Term Loan by up to an additional $150.0 million, in the aggregate, in each case in minimum increments of $25.0 million, subject to certain conditions and the agreement of participating lenders.
On October 13, 2017, the Company amended the Credit Agreement to increase the Revolving Credit Facility from $575.0 million to $700.0 million and increase the Term Loan from $125.0 million to $200.0 million and to extend the expiration date from March 4, 2021 to October 13, 2022. The Credit Agreement also included the option for the Company to increase the size of the Revolving Credit Facility and the Term Loan by up to an additional $300.0 million, in the aggregate, subject to the satisfaction of certain conditions set forth in the Credit Agreement. Term Loans could be made in up to two advances. The first advance of $125.0 million occurred on October 13, 2017 and the second advance of $75.0 million occurred on January 16, 2018. For the Term Loan, the Company was required to make quarterly principal payments of 1.25% of the original term loan ($2.5 million quarterly) through maturity, with the remaining balance due on October 13, 2022. The Company paid $2.5 million and $5.0 million of principal payments on the term loan during the three and six months ended June 27, 2020, respectively.
On March 25, 2020, the company borrowed $100.0 million from its current revolving credit facility to preserve financial flexibility and enhance liquidity, given the increasing levels of uncertainty related to COVID-19.
On April 3, 2020, the Company amended theits Credit Agreement to effect certain changes, including, among others: (i) eliminating the $200.0 million unsecured term loan credit facility, the remaining outstanding balance ($140.0 million) of which was repaid in full on April 3, 2020 through the revolving credit facility; (ii) making certain financial and non-financial covenants less restrictive on the Company; (iii) modifying performance-based interest rate margins and undrawn fees; and (iv) extending the maturity date to April 3, 2025. The amended Credit Agreement also allows the Company to increase the size of the revolving credit facility or enter into one or more tranches of term loans if there is no event of default and the Company is in compliance with certain financial covenants. The Company made payments of $30.0 million on the amended revolving credit facility during the three months ended March 27, 2021. The balance under the facility was $100.0 million as of March 27, 2021.
Outstanding borrowings under the amended Credit Agreement bears interest, at the Company’s option, at either LIBOR, fixed for interest periods of one, two, three or six-month periods, plus 1.25% to 2.00%, or at the bank’s Base Rate, as defined, plus 0.25% to 1.00%, based upon the Company’s Consolidated Leverage Ratio, as defined. The Company was also required to pay commitment fees on unused portions of the credit agreement ranging from 0.13%0.125% to 0.20%, based on the Consolidated Leverage Ratio, as defined in the agreement. The amended Credit Agreement included representations, covenants and events of default that are customary for financing transactions of this nature.nature. The effective interest rate on outstanding borrowings under the credit facility was 1.70%1.61% at JuneMarch 27, 2020.
2021.
As of JuneMarch 27, 2020,2021, the Company had no amountsamount outstanding in letters of credit and had available $148.6$571.3 million of borrowing capacity under the Revolving Credit Facility based on financial covenants.
Further information regarding At March 27, 2021, the Company’s credit agreement is providedCompany was in Note 7, Debt, ofcompliance with all covenants under the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report.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”) (together, the “U.S. Senior Notes due 2022 and 2027”) were funded. Interest on the U.S. Senior Notes due 2022 and 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” and with the Euro Senior Notes and the U.S. Senior Notes due 2022 and 2027, the “Senior Notes”) 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. Further information regarding the Company’s Senior Notes is provided in Note 7,8, Debt, of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report.
Debt Covenants
The Company was in compliance with all covenants under the Credit Agreement and Senior Notes as of JuneMarch 27, 20202021 and currently expects to remain in compliance based on management’s estimates of operating and financial results for 2020.2021. As of JuneMarch 27, 2020,2021, 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. The ultimate magnitude of COVID-19, including the extent of its impact on our financial and operational results, which could be material, will be determined by the length of time that the
pandemic continues, its effect on
Acquisitions
On January 28, 2021, the demandCompany acquired Hartland Controls ("Hartland"), a manufacturer and leading supplier of electrical components used primarily in heating, ventilation, air conditioning (HVAC) and other industrial and control systems applications with annualized sales of approximately $70 million. The purchase price for our products, as well asHartland was approximately $112.3 million and the effectoperations of governmental regulations imposed in response to the pandemic. While we cannot at this time predict the impact of the COVID-19, it could have a material negative impact on our business, financial condition, results of operations and future cash flows which could impact the Company’s ability to comply with debt covenantsHartland Controls are included in the future.Industrial segment. The net cash payment of $109.9 million for this acquisition was funded by the Company's cash on hand.
Dividends
During the secondfirst quarter of 2020 the Company paid quarterly dividends of $11.7$11.8 million to the shareholders. On July 22, 2020,April 28, 2021, the Board of Directors of the Company declared a quarterly cash dividend of $0.48 per share, payable on SeptemberJune 3, 20202021 to stockholders of record as of AugustMay 20, 2020. Future determinations regarding2021.
U.K. pension plan
On April 7, 2020, the declaration and payment of dividendsCompany entered into a definitive agreement to purchase a group annuity contract, under which an insurance company will be atrequired to directly pay and administer pension payments to certain of the discretionCompany’s U.K. pension plan participants, or their designated beneficiaries. The purchase of our boardthis group annuity contract will reduce the Company’s outstanding pension benefit obligation by approximately $55 million, representing approximately 37% of directorsthe total obligations of the Company’s qualified pension plans, and will dependbe funded with pension plan assets and additional cash on then-existing conditions, including our resultshand. In connection with this transaction, the Company will record a one-time non-cash settlement charge currently estimated between $18 million and $22 million in the fourth quarter of operations, payout ratio, capital requirements, financial condition, prospects2021, reflecting the accelerated recognition of unamortized actuarial losses in the plan. The actual amount and timing of the settlement charge could differ from this estimate due to final data and plan wind-up expenses. Due to the signing of the group annuity contract being a significant change in the U.K. pension plan, the liabilities of the plan were remeasured as of April 6, 2020 resulting in an increase of $13.4 million (£10.9 million) to both the net pension liability and unamortized actuarial loss within other factors that our boardcomprehensive income (loss) during the second quarter of directors may deem relevant.2020. Additionally, the Company made a cash contribution of $10.4 million (£8.4 million) under this agreement during the second quarter of 2020.
Cash Flow Overview
| | | | | | | | | | | | | | |
| | First Six Months | | |
(in thousands) | | 2020 | | 2019 |
Net cash provided by operating activities | | $ | 101,286 | | | $ | 80,092 | |
Net cash used in investing activities | | (29,390) | | | (19,812) | |
Net cash provided by (used in) financing activities | | 50,526 | | | (75,624) | |
Effect of exchange rate changes on cash and cash equivalents | | (1,694) | | | 392 | |
Increase (decrease) in cash and cash equivalents | | 120,728 | | | (14,952) | |
Cash and cash equivalents at beginning of period | | 531,139 | | | 489,733 | |
Cash and cash equivalents at end of period | | $ | 651,867 | | | $ | 474,781 | |
| | | | | | | | | | | | | | |
| | First three Months |
(in thousands) | | 2021 | | 2020 |
Net cash provided by operating activities | | $ | 50,166 | | | $ | 45,279 | |
Net cash used in investing activities | | (122,020) | | | (16,536) | |
Net cash (used in) provided by financing activities | | (34,273) | | | 65,804 | |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | | (4,101) | | | (5,111) | |
(Decrease) increase in cash, cash equivalents, and restricted cash | | (110,228) | | | 89,436 | |
Cash, cash equivalents, and restricted cash at beginning of period | | 687,525 | | | 531,139 | |
Cash, cash equivalents, and restricted cash at end of period | | $ | 577,297 | | | $ | 620,575 | |
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 $101.3$50.2 million for the sixthree months ended JuneMarch 27, 2020,2021 as compared to $80.1$45.3 million duringfor the sixthree months ended June 29, 2019.March 28, 2020. The increase in net cash provided by operating activities was primarily due to lower annual incentive payments and favorable changes in net working capital driven by the timing of collections of accounts receivable and changes in accounts payablehigher cash earnings partially offset by lower earnings largely due to the impact of COVID-19.increases in working capital resulting from higher sales growth.
Cash Flow from Investing Activities
Net cash used in investing activities was $29.4$122.0 million for the sixthree months ended JuneMarch 27, 20202021 compared to $19.8$16.5 million during the sixthree months ended June 29, 2019.March 28, 2020. Net cash paid for the Hartland acquisition was $109.9 million for the three
months ended March 27, 2021. Capital expenditures were $29.5$14.7 million, representing an increasea decrease of $4.2$1.9 million compared to 2019.2020. During the sixthree months ended June 29, 2019,March 28, 2020, the Company received proceeds of $6.4$2.6 million from the sale of a property within the IndustrialElectronics segment.
Cash Flow from Financing Activities
Net cash used in financing activities was $34.3 million for the three months ended March 27, 2021 compared to net cash provided by financing activities was $50.5of $65.8 million for the sixthree months ended June 27, 2020 compared to net cash used in financing activitiesMarch 28, 2020. The Company made payments of $75.6$30.0 million foron the sixamended revolving credit facility during the first quarter of 2021. During the three months ended June 29, 2019. During the six months ended June 27,March 28, 2020, the companyCompany made principal payments of $2.5 million on the term loan and borrowed $100.0 million from its revolving credit facility to preserve financial flexibility and enhance liquidity, given the increasing levels of uncertainty related to COVID-19. On April 3,For the three months ended March 28, 2020, the Company amended the Credit Agreement to eliminate the $200.0 million unsecured term loan credit facility, with the remaining outstanding balance of $140.0 million repaid in full on April 3, 2020 through a new borrowing of $140.0 million under the recently amended revolving credit facility. The Company made principal payments of $5.0 million and $7.5 million on the term loan during the six months ended June 27, 2020 and June 29, 2019, respectively. For the six months ended June 27, 2020 and June 29, 2019, the Company repurchased 175,110 and 268,130 shares of its common stock totaling $22.9 million. Additionally, the Company paid dividends $11.8 million and $45.5 million, respectively, but made payments of $49.9 million related to settled share repurchases during the six months ended June 29, 2019. Additionally, dividends paid
increased $2.1 million from $21.3$11.7 million in the sixthree months ended June 29, 2019 to $23.4 million for the six months ended JuneMarch 27, 2020.2021 and March 28, 2020, respectively.
Share Repurchase Program
The Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company’s common stock under a program for the period May 1, 2018 to April 30, 2019 ("2018 program"). On April 26, 2019, the Company's Board of Directors authorized a program to repurchase up to 1,000,000 shares of the Company's common stock for the period May 1, 2019 to April 30, 2020 ("2019 program") to replace its previous expired 2018 program.. On April 23,29, 2020, the Company'sCompany announced that the Board of Directors authorized a new program to repurchase up to 1,000,000 shares of the Company's common stock for the period May 1, 2020 to April 30, 2021 (the "2020 program") to replace its previous expired 2019 program. The 2019On April, 28, 2021, the Company announced that the Board of Directors authorized a new three year program expired onto 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 with 324,890 of authorized repurchases remaining. The Company has suspended share repurchases for the near-term due to the uncertainty of the impact and duration of COVID-19 and to focus on other capital allocation priorities.program.
The Company did not repurchase any shares of its common stock during the three months ended June 27, 2020, and for the three months ended June 29, 2019,March 27, 2021. During the three months ended March 28, 2020, the Company repurchased 188,214 shares of its common stock totaling $32.0 million. For the six months ended June 27, 2020 and June 29, 2019, the Company repurchased 175,110 and 268,130 shares of its common stock totaling $22.9 million and $45.5 million, respectively.million.
Off-Balance Sheet Arrangements
As of JuneMarch 27, 2020,2021, 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 28, 2019.26, 2020. During the sixthree months ended JuneMarch 27, 2020,2021, 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 our Annual Report on Form 10-K for the year ended December 28, 2019.26, 2020. During the sixthree months ended JuneMarch 27, 2020,2021, there have been no material changes in our 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 our 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 our disclosure controls and procedures as of JuneMarch 27, 2020.2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the quarter ended JuneMarch 27, 2020,2021, our disclosure controls and procedures were effective.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our 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 JuneMarch 27, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
The COVID-19 pandemic could have a material adverse effect on our ability to operate, results of operations, financial condition, liquidity, and capital investments.
The World Health Organization has declared the COVID-19 outbreak a pandemic, and the virus continues to spread in areas where we operate and sell our products. The COVID-19 pandemic and similar situations/circumstances in the future could have a material adverse effect on our ability to operate, results of operations, financial condition, liquidity, and capital investments. Several public health organizations have recommended, and some local governments have implemented, certain measures to slow and limit the transmission of the virus, including travel restrictions, shelter-in-place requirements and social distancing requirements. Such preventive measures, or others we may voluntarily put in place, may have a material adverse effect on our business for an indefinite period of time, such as the potential shut down of certain locations, decreased employee availability, potential border closures, disruptions to the businesses of our channel partners, and others. Our suppliers and customers may also face these and other challenges, which could lead to a disruption in our supply chain as well as decreased demand for our products. These issues may also materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization, and capital investments. These disruptions may continue to occur and may result in future impairment, restructuring and other charges. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in the risk factors disclosed in Part I, Item 1a. Risk Factors of our Form 10-K, including those relating toour products and services, financial performance, debt covenant compliance and debt obligations. The ultimate magnitude of COVID-19, including the extent of its impact on our financial and operational results, which could be material, will be determined by the length of time that the pandemic continues, its effect on the demand for our services, as well as the effect of governmental regulations imposed in response to the pandemic. We cannot at this time predict the impact of the COVID-19 pandemic, but it could have a material adverse effect on our business, financial condition, results of operations and/or cash flows.
Other than the item listed above, thereThere have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for our year ended December 28, 2019.26, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities
On May 1,April 26, 2019, the Company announced that itsCompany's Board of Directors authorized a program to repurchase up to 1,000,000 shares of the Company's common stock for the period May 1, 2019 to April 30, 2020 ("2019 program"). On April 29, 2020, the Company announced that itsthe Board of Directors authorized a new program to repurchase up to 1,000,000 shares of the
Company's common stock for the period May 1, 2020 to April 30, 2021 (the "2020 program") to replace its previous expired 2019 program. There were 324,890On 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 authorizedof the Company’s common stock for the period May 1, 2021 to be repurchased under the 2019 program when it expired.April 30, 2024 to replace its previous 2020 program.
The Company did not repurchase any shares of its common stock duringfor the three months ended JuneMarch 27, 2020. There are 1,000,0002021. During the three months ended March 28, 2020, the Company repurchased 175,110 shares available to be repurchased as of June 27, 2020 under the 2020 program.its common stock totaling $22.9 million.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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| Exhibit | Description |
| | |
| 10.110.1* | Amended and RestatedHartland Credit Agreement dated as of April 3, 2020, by and among Littelfuse, Inc., certain subsidiaries of the company, as designated borrowers, certain subsidiaries of the company, as guarantors, the lenders party thereto and Bank of America, N.A., as agent, JPMorgan Chase Bank, N.A., as syndication agent, PNC Bank, National Association, as senior documentation agent, BMO Harris Bank, N.A. and Wells Fargo Bank, National Association, as co-documentation agents, BofA Securities, Inc. as sole bookrunner and joint lead arranger, and JPMorgan Chase Bank, N.A., as joint lead arrangeJoinder Agreementr (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 7, 2020, Commission File No. 20388).+
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| 10.210.2* | |
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| 10.310.3* |
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| 10.410.4* |
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| 10.5 |
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| 10.6 | |
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| 10.7 | |
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| 10.8* | |
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| 10.9* | |
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| 10.10* | |
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| 10.11* | |
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| 31.1* | |
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| 31.2* | |
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| 32.1** | |
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| 101 | The following financial information from LITTELFUSE, Inc.'s Quarterly Report on Form 10-Q for the quarter ended JuneMarch 27, 20202021 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Net (Loss) Income, (iii) the Condensed Consolidated Statements of Comprehensive (Loss) Income, (iv) the Consolidated Statements of Changes in StockholdersStockholders' Equity , (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements. |
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| 104 | The cover page from this Quarterly Report on Form 10-Q for the quarter ended JuneMarch 27, 2020,2021, formatted in Inline XBRL. |
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| + | Certain schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K promulgated by the SEC. The registrant agrees to furnish supplementary a copy of any omitted schedule or exhibit to the SEC upon request. |
| ++ | Management contract or compensatory plan or arrangement. |
| * | Filed herewith. |
| ** | Furnished herewith. |
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 JuneMarch 27, 2020,2021, to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| Littelfuse, Inc. | | |
| | | |
| By: | /s/ Meenal A. Sethna | |
| | Meenal A. Sethna | |
| Executive Vice President and Chief Financial Officer | | |
| | | |
Date: July 29, 2020April 28, 2021 | By: | /s/ Jeffrey G. Gorski | |
| | Jeffrey G. Gorski | |
| Vice President and Chief Accounting Officer | | |