LITTELFUSE INC /DE [LFUS] Filings

10-Q 1 lfus-20230930.htm 10-Q lfus-20230930

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			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 [X] No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes [ ] No [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No [X]

As of October 27, 2023, the registrant had outstanding 24,902,916 shares of Common Stock, net of Treasury Shares.

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TABLE OF CONTENTS


		Page

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022	3
	Condensed Consolidated Statements of Net Income for the three and nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited)	6
	Condensed Consolidated Statements of Stockholders' Equity for the nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	41
Signatures		42

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ITEM 1. FINANCIAL STATEMENTS

LITTELFUSE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	(Unaudited)
(in thousands)	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	560,056	$	562,588
Short-term investments	229		84
Trade receivables, less allowances of $88,440 and $83,562 at September 30, 2023 and December 31, 2022, respectively	327,500		306,578
Inventories	483,075		547,690
Prepaid income taxes and income taxes receivable	3,776		7,215
Prepaid expenses and other current assets	83,684		87,641
Total current assets	1,458,320		1,511,796











Net property, plant, and equipment	478,906		481,110
Intangible assets, net of amortization	612,366		593,970
Goodwill	1,284,343		1,186,922
Investments	23,371		24,121
Deferred income taxes	13,598		14,367
Right of use lease assets, net	51,755		57,382
Other long-term assets	80,267		34,066
Total assets	$	4,002,926	$	3,903,734
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	166,725	$	208,571



Accrued liabilities	143,540		187,057
Accrued income taxes	35,762		41,793
Current portion of long-term debt	135,619		134,874
Total current liabilities	481,646		572,295
Long-term debt, less current portion	857,006		866,623
Deferred income taxes	106,656		100,230
Accrued post-retirement benefits	29,445		28,037
Non-current operating lease liabilities	39,818		45,661
Other long-term liabilities	83,496		79,510
Shareholders’ equity:
Common stock, par value $0.01 per share: 34,000,000 shares authorized; shares issued, September 30, 2023–26,613,883; December 31, 2022–26,445,618	262		261
Additional paid-in capital	1,007,033		974,097
Treasury stock, at cost: 1,711,033 and 1,685,357 shares, respectively	(259,191)		(252,866)
Accumulated other comprehensive loss	(99,526)		(95,764)
Retained earnings	1,755,936		1,585,466
Littelfuse, Inc. shareholders’ equity	2,404,514		2,211,194
Non-controlling interest	345		184
Total equity	2,404,859		2,211,378
Total liabilities and equity	$	4,002,926	$	3,903,734

See accompanying Notes to Condensed Consolidated Financial Statements.

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LITTELFUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
(in thousands, except per share data)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Net sales	$	607,071	$	658,880	$	1,828,850	$	1,900,646
Cost of sales	380,200		402,059		1,122,190		1,122,258
Gross profit	226,871		256,821		706,660		778,388

Selling, general, and administrative expenses	87,204		90,219		270,057		258,820

Research and development expenses	25,484		25,752		77,270		68,796
Amortization of intangibles	16,022		15,567		49,773		39,883
Restructuring, impairment, and other charges	4,516		3,413		13,221		4,265
Total operating expenses	133,226		134,951		410,321		371,764
Operating income	93,645		121,870		296,339		406,624

Interest expense	10,101		8,399		29,803		17,069
Foreign exchange loss	11,776		18,191		8,697		40,051
Other (income) expense, net	(3,527)		(698)		(11,810)		9,789
Income before income taxes	75,295		95,978		269,649		339,715
Income taxes	17,507		20,510		53,045		59,713
Net income	$	57,788	$	75,468	$	216,604	$	280,002

Earnings per share:
Basic	$	2.32	$	3.05	$	8.72	$	11.32
Diluted	$	2.30	$	3.02	$	8.63	$	11.21

Weighted-average shares and equivalent shares outstanding:
Basic	24,893		24,755		24,838		24,726
Diluted	25,143		24,988		25,100		24,986

See accompanying Notes to Condensed Consolidated Financial Statements.

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LITTELFUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
(in thousands)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Net income	$	57,788	$	75,468	$	216,604	$	280,002
Other comprehensive (loss) income:
Pension and postemployment adjustment, net of tax	(3)		599		(156)		1,548


Cash flow hedge, net of tax	1,546		7,609		2,141		7,068
Foreign currency translation adjustments	(3,677)		(36,396)		(5,747)		(70,356)
Comprehensive income	$	55,654	$	47,280	$	212,842	$	218,262

See accompanying Notes to Condensed Consolidated Financial Statements.

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LITTELFUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Nine Months Ended
(in thousands)	September 30, 2023		October 1, 2022
OPERATING ACTIVITIES
Net income	$	216,604	$	280,002
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	53,510		48,326
Amortization of intangibles	49,773		39,883

Deferred revenue	1,769		(377)
Non-cash inventory charges	—		11,534
Impairment charges	4,742		90

Stock-based compensation	20,132		19,732
Loss on investments and other assets	922		13,740

Deferred income taxes	(689)		(4,320)
Other	7,829		55,334
Changes in operating assets and liabilities:
Trade receivables	(21,752)		(56,431)
Inventories	66,456		(83,803)
Accounts payable	(38,475)		(3,838)



Accrued liabilities and income taxes	(61,359)		(4,399)
Prepaid expenses and other assets	13,678		(2,034)
Net cash provided by operating activities	313,140		313,439
INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired	(198,810)		(532,772)

Purchases of property, plant, and equipment	(63,166)		(77,773)
Net proceeds from sale of property, plant and equipment, and other	597		565
Net cash used in investing activities	(261,379)		(609,980)
FINANCING ACTIVITIES

Proceeds of term loan	—		300,000
Proceeds of senior notes	—		100,000
Payments of senior notes payable	—		(25,000)
Repayments of other debts	(2,027)		(5,979)
Payments of term loan	(5,625)		(1,875)

Net proceeds related to stock-based award activities	6,481		(1,568)

Debt issuance costs	—		(2,600)
Cash dividends paid	(45,973)		(41,055)
Net cash (used in) provided by financing activities	(47,144)		321,923
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(7,965)		(31,963)
Decrease in cash, cash equivalents, and restricted cash	(3,348)		(6,581)
Cash, cash equivalents, and restricted cash at beginning of period	564,939		482,836
Cash, cash equivalents, and restricted cash at end of period	$	561,591	$	476,255
Supplementary Cash Flow Information
Reconciliation of cash and cash equivalents:
Cash and cash equivalents	$	560,056	$	474,003
Restricted cash included in prepaid expenses and other current assets	$	—	$	824
Restricted cash included in other long-term assets	$	1,535	$	1,428
Cash paid during the period for interest	$	33,177	$	16,888

Capital expenditures, not yet paid	$	9,780	$	9,111

See accompanying Notes to Condensed Consolidated Financial Statements.

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LITTELFUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


	Littelfuse, Inc. Shareholders’ Equity
(in thousands, except share and per share data)	Common Stock		Addl. Paid in Capital		Treasury Stock		Accum. Other Comp. Inc. (Loss)		Retained Earnings		Non-controlling Interest		Total
Balance at December 31, 2022	$	261	$	974,097	$	(252,866)	$	(95,764)	$	1,585,466	$	184	$	2,211,378
Net income	—		—		—		—		88,745		—		88,745



Other comprehensive income, net of tax	—		—		—		13,283		—		—		13,283
Stock-based compensation	—		3,730		—		—		—		—		3,730
Non-controlling interest	—		—		—		—		(66)		66		—
Withheld shares on restricted share units for withholding taxes	—		—		(18)		—		—		—		(18)
Stock options exercised	—		5,238		—		—		—		—		5,238

Cash dividends paid ($0.60 per share)	—		—		—		—		(14,880)		—		(14,880)
Balance at April 1, 2023	$	261	$	983,065	$	(252,884)	$	(82,481)	$	1,659,265	$	250	$	2,307,476
Net income	—		—		—		—		70,071		—		70,071



Other comprehensive loss, net of tax	—		—		—		(14,911)		—		—		(14,911)
Stock-based compensation	—		12,545		—		—		—		—		12,545
Non-controlling interest									(45)		$	45	—
Withheld shares on restricted share units for withholding taxes	—		—		(5,999)		—		—		—		(5,999)
Stock options exercised	—		2,979		—		—		—		—		2,979

Cash dividends paid ($0.60 per share)	—		—		—		—		(14,910)		—		(14,910)
Balance at July 1, 2023	$	261	$	998,589	$	(258,883)	$	(97,392)	$	1,714,381	$	295	$	2,357,251
Net income	—		—		—		—		57,788		—		57,788



Other comprehensive loss, net of tax	—		—		—		(2,134)		—		—		(2,134)
Stock-based compensation	—		3,857		—		—		—		—		3,857
Non-controlling interest									(50)		50		—
Withheld shares on restricted share units for withholding taxes	—		—		(308)		—		—		—		(308)
Stock options exercised	1		4,587		—		—		—		—		4,588

Cash dividends paid ($0.65 per share)	—		—		—		—		(16,183)		—		(16,183)
Balance at September 30, 2023	$	262	$	1,007,033	$	(259,191)	$	(99,526)	$	1,755,936	$	345	$	2,404,859

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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 January 1, 2022	$	260	$	946,588	$	(248,120)	$	(73,463)	$	1,268,124	$	131	$	1,893,520
Net income	—		—		—		—		117,518		—		117,518


Other comprehensive loss, net of tax	—		—		—		(2,203)		—		—		(2,203)
Stock-based compensation	—		3,886		—		—		—		—		3,886

Withheld shares on restricted share units for withholding taxes	—		—		(4)		—		—		—		(4)
Stock options exercised	—		1,021		—		—		—		—		1,021

Cash dividends paid ($0.53 per share)	—		—		—		—		(13,086)		—		(13,086)
Balance at April 2, 2022	$	260	$	951,495	$	(248,124)	$	(75,666)	$	1,372,556	$	131	$	2,000,652
Net income	—		—		—		—		87,016		—		87,016



Other comprehensive loss, net of tax	—		—		—		(31,349)		—		—		(31,349)
Stock-based compensation	—		11,382		—		—		—		—		11,382

Withheld shares on restricted share units for withholding taxes	—		—		(4,704)		—		—		—		(4,704)
Stock options exercised	1		2,060		—		—		—		—		2,061


Cash dividends paid ($0.53 per share)	—		—		—		—		(13,115)		—		(13,115)
Balance at July 2, 2022	$	261	$	964,937	$	(252,828)	$	(107,015)	$	1,446,457	$	131	$	2,051,943
Net income	—		—		—		—		75,468		—		75,468



Other comprehensive loss, net of tax	—		—		—		(28,188)		—		—		(28,188)
Stock-based compensation	—		4,464		—		—		—		—		4,464
Non-controlling interest	—		—		—		—		(36)		36		—

Stock options exercised	—		58		—		—		—		—		58


Cash dividends paid ($0.60 per share)	—		—		—		—		(14,854)		—		(14,854)
Balance at October 1, 2022	$	261	$	969,459	$	(252,828)	$	(135,203)	$	1,507,035	$	167	$	2,088,891

See accompanying Notes to Condensed Consolidated Financial Statements.

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Notes to Condensed Consolidated Financial Statements

1. Summary of Significant Accounting Policies and Other Information

Nature of Operations

Founded in 1927, Littelfuse is a diversified, industrial technology manufacturing company empowering a sustainable, connected, and safer world. Across more than 20 countries, and with approximately 17,000 global associates, the Company partners with customers to design and deliver innovative, reliable solutions. Serving over 100,000 end customers, the Company’s products are found in a variety of industrial, transportation and electronics end markets – everywhere, every day.

Basis of Presentation

The Company’s accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures normally included in the consolidated balance sheets, statements of net income and comprehensive income, statements of cash flows, and statements of stockholders' equity prepared in conformity with U.S. GAAP have been condensed or omitted as permitted by such rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. They have been prepared in accordance with accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which should be read in conjunction with the disclosures therein. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. Operating results for interim periods are not necessarily indicative of annual operating results.

Revenue Recognition

Revenue Disaggregation

The following tables disaggregate the Company’s revenue by primary business units for the three and nine months ended September 30, 2023 and October 1, 2022:


	Three Months Ended September 30, 2023								Nine Months Ended September 30, 2023
(in thousands)	Electronics Segment		Transportation Segment		Industrial Segment		Total		Electronics Segment		Transportation Segment		Industrial Segment		Total
Electronics – Passive Products and Sensors	$	152,410	$	—	$	—	$	152,410	$	453,860	$	—	$	—	$	453,860
Electronics – Semiconductor	191,523		—		—		191,523		598,813		—		—		598,813
Passenger Car Products	—		72,524		—		72,524		—		200,104		—		200,104
Automotive Sensors	—		23,205		—		23,205		—		66,839		—		66,839
Commercial Vehicle Products	—		81,290		—		81,290		—		248,765		—		248,765
Industrial Products	—		—		86,119		86,119		—		—		260,469		260,469
Total	$	343,933	$	177,019	$	86,119	$	607,071	$	1,052,673	$	515,708	$	260,469	$	1,828,850

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	Three Months Ended October 1, 2022								Nine Months Ended October 1, 2022
(in thousands)	Electronics Segment		Transportation Segment		Industrial Segment		Total		Electronics Segment		Transportation Segment		Industrial Segment		Total
Electronics – Passive Products and Sensors	$	188,916	$	—	$	—	$	188,916	$	521,172	$	—	$	—	$	521,172
Electronics – Semiconductor	208,713		—		—		208,713		600,454		—		—		600,454
Passenger Car Products	—		62,280		—		62,280		—		186,552		—		186,552
Automotive Sensors	—		22,998		—		22,998		—		72,336		—		72,336
Commercial Vehicle Products	—		96,457		—		96,457		—		289,378		—		289,378
Industrial Products	—		—		79,516		79,516						230,754		230,754
Total	$	397,629	$	181,735	$	79,516	$	658,880	$	1,121,626	$	548,266	$	230,754	$	1,900,646

See Note 15, Segment Information for net sales by segment and countries.

Revenue Recognition

The Company recognizes revenue on product sales in the period in which the Company satisfies its performance obligation and control of the product is transferred to the customer. The Company’s sales arrangements with customers are predominately short term in nature and generally provide for transfer of control at the time of shipment as this is the point at which title and risk of loss of the product transfers to the customer. At the end of each period, for those shipments where title to the products and the risk of loss and rewards of ownership do not transfer until the product has been received by the customer, the Company adjusts revenues and cost of sales for the delay between the time that the products are shipped and when they are received by the customer. The amount of revenue recorded reflects the consideration to which the Company expects to be entitled in exchange for goods and may include adjustments for customer allowance, rebates and price adjustments. The Company’s distribution channels are primarily through direct sales and independent third-party distributors.

The Company elected the practical expedient under Accounting Standards Codification ("ASC") 340-40-25-4 to expense commissions when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less than one year.

Revenue and Billing

The Company generally accepts orders from customers through receipt of purchase orders or electronic data interchange based on written sales agreements and purchasing contracts. Contract pricing and selling agreement terms are based on market factors, costs, and competition. Pricing is often negotiated as an adjustment (premium or discount) from the Company’s published price lists. The customer is invoiced when the Company’s products are shipped to them in accordance with the terms of the sales agreement. As the Company’s standard payment terms are less than one year, the Company elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company also elected the practical expedient provided in ASC 606-10-25-18B to treat all product shipping and handling activities as fulfillment activities, and therefore recognize the gross revenue associated with the contract, inclusive of any shipping and handling revenue.

Ship and Debit Program

Some of the terms of the Company’s sales agreements and normal business conditions provide customers (distributors) the ability to receive price adjustments on products previously shipped and invoiced. This practice is common in the industry and is referred to as a “ship and debit” program. This program allows the distributor to debit the Company for the difference between the distributors’ contracted price and a lower price for specific transactions. Under certain circumstances (usually in a competitive situation or large volume opportunity), a distributor will request authorization for pricing allowances to reduce its

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price. When the Company approves such a reduction, the distributor is authorized to “debit” its account for the difference between the contracted price and the lower approved price. The Company establishes reserves for this program based on historical activity, distributor inventory levels and actual authorizations for the debit and recognizes these debits as a reduction of revenue.

Return to Stock

The Company has a return to stock policy whereby certain customers, with prior authorization from Littelfuse management, can return previously purchased goods for full or partial credit. The Company establishes an estimated allowance for these returns based on historical activity. Sales revenue and cost of sales are reduced to anticipate estimated returns.

Volume Rebates

The Company offers volume based sales incentives to certain customers to encourage greater product sales. If customers achieve their specific quarterly or annual sales targets, they are entitled to rebates. The Company estimates the projected amount of rebates that will be achieved by the customer and recognizes this estimated cost as a reduction to revenue as products are sold.

Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash at September 30, 2023 and December 31, 2022 reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statement of Cash Flows.


(in thousands)	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	560,056	$	562,588
Restricted cash included in prepaid expenses and other current assets	—		802
Restricted cash included in other long-term assets	1,535		1,549
Total cash, cash equivalents, and restricted cash	$	561,591	$	564,939

Recently Issued Accounting Standards

In October 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-06, "Disclosure Improvements". The amendments in this update represent changes to clarify or improve the disclosure or presentation requirements of a variety of Topics in the ASC. The Company may be affected by one or more of those amendments. The amendments in this ASU should be applied prospectively and will not be effective until June 30, 2027. The company is currently evaluating the potential effects of these amendments on its Condensed Consolidated Financial Statements.

In March 2023, the FASB issued ASU No. 2023-01, "Leases (Topic 842): Common Control Arrangements". The standard requires that leasehold improvements associated with common control leases be: 1) Amortized by the lessee over the useful life of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease. However, if the lessor obtained the right to control the use of the underlying asset through a lease with another entity not within the same common control group, the amortization period may not exceed the amortization period of the common control group. 2) Accounted for as a transfer between entities under common control through an adjustment to equity (or net assets for not-for-profit entities) if, and when, the lessee no longer controls the use of the underlying asset. Additionally, those leasehold improvements are subject to the impairment guidance in Topic 360, Property, Plant, and Equipment. This standard is effective on January 1, 2024. The Company does not expect any material effect on the Company's Condensed Consolidated Financial Statements.

2. Acquisitions

The Company accounts for acquisitions using the acquisition method in accordance with ASC 805, “Business Combinations,” in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results of

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the acquired business are included in the Company’s Condensed Consolidated Financial Statements from the date of the acquisition.

Dortmund Fab

On June 28, 2023, the Company entered into a definitive purchase agreement to acquire a 200mm wafer fab located in Dortmund, Germany (“Dortmund Fab”) from Elmos Semiconductor SE. The acquisition of the Dortmund Fab is expected to close in early fiscal year 2025. The total purchase price for the fab is approximately 93 million Euro, of which 37.2 million Euro down payment (approximately $40.5 million) recorded in Other long-term assets in the Condensed Consolidated Balance Sheets was paid in the third quarter after regulatory approvals and approximately 56 million Euro will be paid at closing. The transaction is not expected to have a material impact on the Company’s fiscal year 2023 or 2024 financial results and will be reported in the Electronics-Semiconductor business within the Company’s Electronics segment.

Western Automation

On February 3, 2023, the Company completed the acquisition of Western Automation Research and Development Limited (“Western Automation”) for approximately $162 million in cash. Headquartered in Galway, Ireland, Western Automation is a designer and manufacturer of electrical shock protection devices used across a broad range of high-growth end markets, including e-Mobility off-board charging infrastructure, industrial safety and renewables. At the time the Company and Western Automation entered into the definitive agreement, Western Automation had annualized sales of approximately $25 million. The business is reported within the Company’s Industrial segment.

The acquisition was funded with cash on hand. The total purchase consideration of $158.3 million, net of cash, has been allocated, on a preliminary basis, to assets acquired and liabilities assumed, as of the completion of the acquisition, based on preliminary estimated fair values. The purchase price allocation is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process. The primary area not yet finalized relates to the completion of the valuation of certain acquired income tax assets and liabilities. As a result, these allocations are subject to change during the purchase price allocation period as the valuations are finalized.

The following table summarizes the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed in the Western Automation acquisition:


(in thousands)	Purchase Price Allocation
Total purchase consideration:
Cash, net of cash acquired	$	158,260
Allocation of consideration to assets acquired and liabilities assumed:
Trade receivables, net	3,389
Inventories	3,678
Other current assets	718
Property, plant, and equipment	1,328
Intangible assets	68,000
Goodwill	94,823
Other non-current assets	573
Current liabilities	(5,251)

Other non-current liabilities	(8,998)
	$	158,260

All Western Automation assets and liabilities were recorded in the Industrial segment and are primarily reflected in the Europe geographic area. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining Western Automation’s products and technology with the Company’s existing Industrial products portfolio. Goodwill resulting from the Western Automation acquisition is not expected to be deductible for tax purposes.

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Included in the Company’s Condensed Consolidated Statements of Net Income for the three and nine months ended September 30, 2023 are net sales of $2.7 million and $10.2 million respectively, and a loss before income taxes of $1.0 million and $0.8 million, respectively, since the February 3, 2023 acquisition of Western Automation.

During the nine months ended September 30, 2023, the Company incurred approximately $1.2 million of legal and professional fees related to the Western Automation acquisition recognized as Selling, general, and administrative expenses. These costs were reflected as other non-segment costs.

C&K Switches

On July 19, 2022, the Company completed the previously announced acquisition of C&K Switches (“C&K”) for $540 million in cash. Founded in 1928, C&K is a leading designer and manufacturer of high-performance electromechanical switches and interconnect solutions with a strong global presence across a broad range of end markets, including industrial, transportation, datacom, and aerospace. At the time the Company and C&K entered into the definitive agreement, C&K had annualized sales of over $200 million. The business is reported as part of the electronics-passive products and sensors business within the Company's Electronics segment.

The acquisition was funded through a combination of cash on hand and debt. The total purchase consideration of $523.0 million, net of cash acquired, has been allocated to assets acquired and liabilities assumed, as of the completion of the acquisition, based on estimated fair values.

The following table summarizes the final purchase price allocation of the fair value of assets acquired and liabilities assumed in the C&K acquisition:


(in thousands)	Purchase Price Allocation
Total purchase consideration:
Cash, net of cash acquired	$	523,014
Allocation of consideration to assets acquired and liabilities assumed:
Trade receivables, net	20,967
Inventories	42,968
Other current assets	2,932
Property, plant, and equipment	32,791
Intangible assets	254,700
Goodwill	274,124
Other non-current assets	14,797
Current liabilities	(47,687)
Long-term debt	(9,626)
Other non-current liabilities	(62,952)
	$	523,014

All C&K goodwill, other assets and liabilities were recorded in the Electronics segment and are reflected in the Americas, Europe and Asia-Pacific geographic areas. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining C&K’s products and technology with the Company’s existing Electronics products portfolio. Goodwill resulting from the C&K acquisition is not expected to be deductible for tax purposes.

During the nine months ended September 30, 2023, the Company recorded measurement period adjustments to increase other non-current liabilities of $4.2 million associated with uncertain tax positions, income taxes payable of $0.2 million, and reduce accrued liabilities of $0.3 million and deferred tax liabilities of $0.2 million. As a result of these adjustments, goodwill was increased by $3.9 million.

As required by purchase accounting rules, the Company recorded a $10.8 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of sales during the third and fourth quarter of 2022 as the acquired inventory was sold and reflected as other non-segment costs.

Embed

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On April 12, 2022, the Company acquired Embed Ltd. (“Embed”). Founded in 2005, Embed is a proven provider of embedded software and firmware developed for a broad range of applications serving transportation end markets, primarily including commercial vehicle electrification and eMobility. The business is included in the commercial vehicle business within the Company's Transportation segment. The acquisition was funded with the Company’s cash on hand. The total purchase consideration was $9.2 million, net of cash.

Pro Forma Results

The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company and Western Automation as though the acquisition had occurred as of January 2, 2022, and C&K as though the acquisition had occurred as of December 27, 2020, and Carling business acquired on November 30, 2021 as though the acquisition had occurred as of December 29, 2019. The Company has not included pro forma results of operations for Embed as its operations were not material to the Company. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the Western Automation acquisition occurred as of January 2, 2022, and had the C&K acquisition occurred as of December 27, 2020 and had Carling acquisition occurred as of December 29, 2019 or of future consolidated operating results.


	For the Three Months Ended				For the Nine Months Ended
(in thousands, except per share amounts)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Net sales	$	607,071	$	669,956	$	1,830,736	$	1,376,586
Income before income taxes	75,071		107,585		271,165		271,474
Net income	57,591		83,713		217,930		222,514
Net income per share — basic	2.31		3.38		8.77		12.38
Net income per share — diluted	2.29		3.35		8.68		12.26

Pro forma results presented above primarily reflect the following adjustments:


	For the Three Months Ended				For the Nine Months Ended
(in thousands)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Amortization (a)	$	—	$	(1,512)	$	(479)	$	(8,951)
Depreciation	—		451		—		1,979
Transaction costs (b)	(224)		3,772		1,203		8,015
Amortization of inventory step-up (c)	—		6,765		—		11,534
Interest expense (d)	—		497		—		815
Income tax benefit (expense) of above items	28		(2,644)		(91)		(3,893)

(a) The amortization adjustment for the nine months ended September 30, 2023 and three and nine months ended October 1, 2022 primarily reflects incremental amortization resulting from the measurement of intangibles at their fair values.

(b) The transaction cost adjustments reflect the reversal of certain legal and professional fees from the three and nine months ended September 30, 2023 and three and nine months ended October 1, 2022, and recognition of those fees during the three and nine months ended September 30, 2023.

(c) The amortization of inventory step-up adjustment reflects the reversal of the amount recognized related to the Carling acquisition during the three months ended April 2, 2022. The inventory step-up was amortized over four months as the inventory was sold.

(d) The interest expense adjustment reflects incremental interest expense related to the financing of the C&K acquisition.

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3. Inventories

The components of inventories at September 30, 2023 and December 31, 2022 are as follows:


(in thousands)	September 30, 2023		December 31, 2022
Raw materials	$	214,588	$	231,043
Work in process	134,657		134,792
Finished goods	192,365		226,215
Inventory reserves	(58,535)		(44,360)
Total	$	483,075	$	547,690

4. Property, Plant, and Equipment

The components of net property, plant, and equipment at September 30, 2023 and December 31, 2022 are as follows:


(in thousands)	September 30, 2023		December 31, 2022
Land and land improvements	$	21,579	$	22,089
Building and building improvements	194,322		191,733
Machinery and equipment	846,065		812,540

Accumulated depreciation	(583,060)		(545,252)
Total	$	478,906	$	481,110

The Company recorded depreciation expense of $17.9 million and $17.0 million for the three months ended September 30, 2023 and October 1, 2022, respectively, and $53.5 million and $48.3 million for the nine months ended September 30, 2023 and October 1, 2022, respectively.

5. Goodwill and Other Intangible Assets

Changes in the carrying value of goodwill by segment for the nine months ended September 30, 2023 are as follows:


(in thousands)	Electronics		Transportation		Industrial		Total
Net book value of goodwill as of December 31, 2022
Gross goodwill as of December 31, 2022	$	909,167	$	234,793	$	84,889	$	1,228,849
Accumulated impairment losses as of December 31, 2022	—		(33,401)		(8,526)		(41,927)
Total	909,167		201,392		76,363		1,186,922
Changes during 2023:
Additions (a)	3,879		—		94,823		98,702

Currency translation	676		(1,616)		(341)		(1,281)
Net book value of goodwill as of September 30, 2023
Gross goodwill as of September 30, 2023	913,722		232,668		179,401		1,325,791
Accumulated impairment losses as of September 30, 2023	—		(32,892)		$	(8,556)	(41,448)
Total	$	913,722	$	199,776	$	170,845	$	1,284,343

(a) The additions resulted from the acquisitions of Western Automation and measurement period adjustment related to the C&K acquisition.

The components of other intangible assets as of September 30, 2023 and December 31, 2022 are as follows:

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	As of September 30, 2023
(in thousands)	Gross Carrying Value		Accumulated Amortization		Net Book Value
Land use rights	$	17,133	$	2,579	$	14,554
Patents, licenses, and software	269,219		154,983		114,236
Distribution network	42,888		42,888		—
Customer relationships, trademarks, and tradenames	679,246		195,670		483,576

Total	$	1,008,486	$	396,120	$	612,366


	December 31, 2022
(in thousands)	Gross Carrying Value		Accumulated Amortization		Net Book Value
Land use rights	$	17,938	$	2,299	$	15,639
Patents, licenses, and software	259,603		140,208		119,395
Distribution network	41,733