10-Q 1 lfus-20230930.htm 10-Q lfus-20230930
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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
OR
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)
Delaware36-3795742
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
8755 West Higgins Road 
 Suite 500
ChicagoIllinois60631
(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 SymbolName of exchange on which registered
Common Stock, $0.01 par valueLFUSNASDAQGlobal Select Market
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes [ ] No [ ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No [X]

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


TABLE OF CONTENTS
 
 Page
  
PART I 
Item 1. 
 Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022
 Condensed Consolidated Statements of Net Income for the three and nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited)
 Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited)
 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited)
Condensed Consolidated Statements of Stockholders' Equity for the nine months ended September 30, 2023 (unaudited) and October 01, 2022 (unaudited)
 
Item 2.
Item 3.
Item 4.
PART II 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2


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 investments229 84 
Trade receivables, less allowances of $88,440 and $83,562 at September 30, 2023 and December 31, 2022, respectively
327,500 306,578 
Inventories483,075 547,690 
Prepaid income taxes and income taxes receivable3,776 7,215 
Prepaid expenses and other current assets83,684 87,641 
Total current assets1,458,320 1,511,796 
Net property, plant, and equipment478,906 481,110 
Intangible assets, net of amortization612,366 593,970 
Goodwill1,284,343 1,186,922 
Investments23,371 24,121 
Deferred income taxes13,598 14,367 
Right of use lease assets, net51,755 57,382 
Other long-term assets80,267 34,066 
Total assets$4,002,926 $3,903,734 
LIABILITIES AND EQUITY  
Current liabilities:  
Accounts payable$166,725 $208,571 
Accrued liabilities143,540 187,057 
Accrued income taxes35,762 41,793 
Current portion of long-term debt135,619 134,874 
Total current liabilities481,646 572,295 
Long-term debt, less current portion857,006 866,623 
Deferred income taxes106,656 100,230 
Accrued post-retirement benefits29,445 28,037 
Non-current operating lease liabilities39,818 45,661 
Other long-term liabilities83,496 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 capital1,007,033 974,097 
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 earnings1,755,936 1,585,466 
Littelfuse, Inc. shareholders’ equity2,404,514 2,211,194 
Non-controlling interest345 184 
Total equity2,404,859 2,211,378 
Total liabilities and equity$4,002,926 $3,903,734 
 
See accompanying Notes to Condensed Consolidated Financial Statements.
3


LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)
 Three Months EndedNine 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 sales380,200 402,059 1,122,190 1,122,258 
Gross profit226,871 256,821 706,660 778,388 
Selling, general, and administrative expenses87,204 90,219 270,057 258,820 
Research and development expenses25,484 25,752 77,270 68,796 
Amortization of intangibles16,022 15,567 49,773 39,883 
Restructuring, impairment, and other charges4,516 3,413 13,221 4,265 
Total operating expenses133,226 134,951 410,321 371,764 
Operating income93,645 121,870 296,339 406,624 
Interest expense10,101 8,399 29,803 17,069 
Foreign exchange loss11,776 18,191 8,697 40,051 
Other (income) expense, net(3,527)(698)(11,810)9,789 
Income before income taxes75,295 95,978 269,649 339,715 
Income taxes17,507 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:
Basic24,893 24,755 24,838 24,726 
Diluted25,143 24,988 25,100 24,986 
 
See accompanying Notes to Condensed Consolidated Financial Statements.

4

LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 Three Months EndedNine 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 tax1,546 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, 2023October 1, 2022
OPERATING ACTIVITIES  
Net income$216,604 $280,002 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation53,510 48,326 
Amortization of intangibles49,773 39,883 
Deferred revenue1,769 (377)
Non-cash inventory charges 11,534 
Impairment charges 4,742 90 
Stock-based compensation20,132 19,732 
Loss on investments and other assets922 13,740 
Deferred income taxes(689)(4,320)
Other7,829 55,334 
Changes in operating assets and liabilities:
Trade receivables(21,752)(56,431)
Inventories66,456 (83,803)
Accounts payable(38,475)(3,838)
Accrued liabilities and income taxes(61,359)(4,399)
Prepaid expenses and other assets13,678 (2,034)
Net cash provided by operating activities313,140 313,439 
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 other597 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 activities6,481 (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 period564,939 482,836 
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 StockAddl. Paid in CapitalTreasury StockAccum. Other Comp. Inc. (Loss)Retained EarningsNon-controlling InterestTotal
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 exercised1 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 StockAddl. Paid in CapitalTreasury StockAccum. Other Comp. (Loss)Retained EarningsNon-controlling InterestTotal
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 exercised1 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, 2023Nine 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 – Semiconductor191,523   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 



9

 Three Months Ended October 1, 2022Nine 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 – Semiconductor208,713   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, 2023December 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 assets1,535 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
11

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, net3,389 
Inventories3,678 
Other current assets718 
Property, plant, and equipment1,328 
Intangible assets68,000 
Goodwill94,823 
Other non-current assets573 
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, net20,967 
Inventories42,968 
Other current assets2,932 
Property, plant, and equipment32,791 
Intangible assets254,700 
Goodwill274,124 
Other non-current assets14,797 
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 EndedFor the Nine Months Ended
(in thousands, except per share amounts)September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Net sales$607,071 $669,956 $1,830,736 $1,376,586 
Income before income taxes75,071 107,585 271,165 271,474 
Net income57,591 83,713 217,930 222,514 
Net income per share — basic2.31 3.38 8.77 12.38 
Net income per share — diluted2.29 3.35 8.68 12.26 

Pro forma results presented above primarily reflect the following adjustments:
 
 For the Three Months EndedFor the Nine Months Ended
(in thousands)September 30, 2023October 1, 2022September 30, 2023October 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 items28 (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, 2023December 31, 2022
Raw materials$214,588 $231,043 
Work in process134,657 134,792 
Finished goods192,365 226,215 
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, 2023December 31, 2022
Land and land improvements$21,579 $22,089 
Building and building improvements194,322 191,733 
Machinery and equipment846,065 812,540 
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)ElectronicsTransportationIndustrialTotal
Net book value of goodwill as of December 31, 2022
Gross goodwill as of December 31, 2022
$909,167 $234,793 $84,889 $1,228,849 
Accumulated impairment losses as of December 31, 2022
 (33,401)(8,526)(41,927)
Total909,167 201,392 76,363 1,186,922 
Changes during 2023:
Additions (a)
3,879  94,823 98,702 
Currency translation676 (1,616)(341)(1,281)
Net book value of goodwill as of September 30, 2023
Gross goodwill as of September 30, 2023
913,722 232,668 179,401 1,325,791 
Accumulated impairment losses as of September 30, 2023
 (32,892)$(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:

15

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 software269,219 154,983 114,236 
Distribution network42,888 42,888  
Customer relationships, trademarks, and tradenames679,246 195,670 483,576 
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 software259,603 140,208 119,395 
Distribution network41,733