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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 March 27, 2021
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)
| | | | | | | | |
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 April 23, 2021, the registrant had outstanding 24,555,229 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 March 27, 2021 (unaudited) and December 26, 2020 | |
| Condensed Consolidated Statements of Net Income for the three months ended March 27, 2021 (unaudited) and March 28, 2020 (unaudited) | |
| Condensed Consolidated Statements of Comprehensive Income for the three months ended March 27, 2021 (unaudited) and March 28, 2020 (unaudited) | |
| Condensed Consolidated Statements of Cash Flows for the three months ended March 27, 2021 (unaudited) and March 28, 2020 (unaudited) | |
| Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 27, 2021 (unaudited) and March 28, 2020 (unaudited) | |
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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
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| | (Unaudited) | | |
(in thousands) | | March 27, 2021 | | December 26, 2020 |
ASSETS | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 572,771 | | | $ | 687,525 | |
Short-term investments | | 53 | | | 54 | |
Trade receivables, less allowances of $42,624 and $45,237 at March 27, 2021 and December 26, 2020, respectively | | 276,687 | | | 232,760 | |
Inventories | | 295,057 | | | 258,002 | |
Prepaid income taxes and income taxes receivable | | 4,146 | | | 3,029 | |
Prepaid expenses and other current assets | | 43,698 | | | 35,939 | |
Total current assets | | 1,192,412 | | | 1,217,309 | |
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Net property, plant, and equipment | | 344,914 | | | 344,178 | |
Intangible assets, net of amortization | | 317,294 | | | 291,887 | |
Goodwill | | 845,586 | | | 816,812 | |
Investments | | 37,285 | | | 30,547 | |
Deferred income taxes | | 9,854 | | | 11,224 | |
Right of use lease assets, net | | 19,560 | | | 17,615 | |
Other assets | | 19,965 | | | 18,021 | |
Total assets | | $ | 2,786,870 | | | $ | 2,747,593 | |
LIABILITIES AND EQUITY | | | | |
Current liabilities: | | | | |
Accounts payable | | $ | 179,723 | | | $ | 145,984 | |
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Accrued liabilities | | 98,354 | | | 110,478 | |
Accrued income taxes | | 23,468 | | | 19,186 | |
Current portion of long-term debt | | 25,000 | | | — | |
Total current liabilities | | 326,545 | | | 275,648 | |
Long-term debt, less current portion | | 623,865 | | | 687,034 | |
Deferred income taxes | | 51,229 | | | 50,134 | |
Accrued post-retirement benefits | | 42,894 | | | 45,802 | |
Non-current operating lease liabilities | | 14,190 | | | 12,950 | |
Other long-term liabilities | | 67,410 | | | 67,252 | |
Shareholders’ equity: | | | | |
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 | | 918,762 | | | 907,858 | |
Treasury stock, at cost: 1,644,283 and 1,644,283 shares, respectively | | (242,366) | | | (242,366) | |
Accumulated other comprehensive loss | | (96,028) | | | (91,157) | |
Retained earnings | | 1,079,979 | | | 1,034,048 | |
Littelfuse, Inc. shareholders’ equity | | 1,660,606 | | | 1,608,642 | |
Non-controlling interest | | 131 | | | 131 | |
Total equity | | 1,660,737 | | | 1,608,773 | |
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 INCOME
(Unaudited)
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| | Three Months Ended | | |
(in thousands, except per share data) | | March 27, 2021 | | March 28, 2020 | | | | |
Net sales | | $ | 463,794 | | | $ | 346,096 | | | | | |
Cost of sales | | 303,328 | | | 221,740 | | | | | |
Gross profit | | 160,466 | | | 124,356 | | | | | |
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Selling, general, and administrative expenses | | 58,288 | | | 51,200 | | | | | |
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Research and development expenses | | 14,739 | | | 14,463 | | | | | |
Amortization of intangibles | | 10,521 | | | 9,981 | | | | | |
Restructuring, impairment, and other charges | | 437 | | | 3,962 | | | | | |
Total operating expenses | | 83,985 | | | 79,606 | | | | | |
Operating income | | 76,481 | | | 44,750 | | | | | |
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Interest expense | | 4,673 | | | 5,418 | | | | | |
Foreign exchange loss | | 6,837 | | | 2,584 | | | | | |
Other (income) expense, net | | (7,737) | | | 1,249 | | | | | |
Income before income taxes | | 72,708 | | | 35,499 | | | | | |
Income taxes | | 14,995 | | | 10,855 | | | | | |
Net income | | $ | 57,713 | | | $ | 24,644 | | | | | |
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Earnings per share: | | | | | | | | |
Basic | | $ | 2.35 | | | $ | 1.01 | | | | | |
Diluted | | $ | 2.32 | | | $ | 1.00 | | | | | |
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Weighted-average shares and equivalent shares outstanding: | | | | | | | | |
Basic | | 24,532 | | | 24,393 | | | | | |
Diluted | | 24,892 | | | 24,578 | | | | | |
See accompanying Notes to Condensed Consolidated Financial Statements.
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
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| | Three Months Ended | | |
(in thousands) | | March 27, 2021 | | March 28, 2020 | | | | |
Net income | | $ | 57,713 | | | $ | 24,644 | | | | | |
Other comprehensive income (loss): | | | | | | | | |
Pension and postemployment adjustment, net of tax | | 454 | | | 561 | | | | | |
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Foreign currency translation adjustments | | (5,325) | | | (15,540) | | | | | |
Comprehensive income | | $ | 52,842 | | | $ | 9,665 | | | | | |
See accompanying Notes to Condensed Consolidated Financial Statements.
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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| | Three Months Ended |
(in thousands) | | March 27, 2021 | | March 28, 2020 |
OPERATING ACTIVITIES | | | | |
Net income | | $ | 57,713 | | | $ | 24,644 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation | | 13,677 | | | 13,821 | |
Amortization of intangibles | | 10,521 | | | 9,981 | |
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Deferred revenue | | (157) | | | (145) | |
Non-cash inventory charges | | 3,489 | | | — | |
Impairment charges | | — | | | 2,237 | |
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Stock-based compensation | | 3,395 | | | 2,965 | |
(Gain) loss on investments and other assets | | (7,675) | | | 2,604 | |
Deferred income taxes | | 378 | | | 616 | |
Other | | 8,537 | | | 3,547 | |
Changes in operating assets and liabilities: | | | | |
Trade receivables | | (32,973) | | | (9,457) | |
Inventories | | (6,152) | | | 6,667 | |
Accounts payable | | 17,070 | | | (3,964) | |
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Accrued liabilities and income taxes | | (15,427) | | | (7,012) | |
Prepaid expenses and other assets | | (2,230) | | | (1,225) | |
Net cash provided by operating activities | | 50,166 | | | 45,279 | |
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INVESTING ACTIVITIES | | | | |
Acquisitions of businesses, net of cash acquired | | (109,852) | | | — | |
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Purchases of property, plant, and equipment | | (14,721) | | | (16,586) | |
Net proceeds from sale of property, plant and equipment | | 2,553 | | | 50 | |
Net cash used in investing activities | | (122,020) | | | (16,536) | |
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FINANCING ACTIVITIES | | | | |
Proceeds of revolving credit facility | | — | | | 100,000 | |
Payments of revolving credit facility | | (30,000) | | | — | |
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Payments of term loan | | — | | | (2,500) | |
Net proceeds related to stock-based award activities | | 7,509 | | | 2,956 | |
Purchases of common stock | | — | | | (22,927) | |
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Cash dividends paid | | (11,782) | | | (11,725) | |
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 | |
Supplementary Cash Flow Information | | | | |
Reconciliation of cash and cash equivalents: | | | | |
Cash and cash equivalents | | $ | 572,771 | | | $ | 620,575 | |
Restricted cash included in prepaid expenses and other current assets | | $ | 3,462 | | | — | |
Restricted cash included in other assets | | $ | 1,064 | | | $ | — | |
Cash paid during the period for interest | | $ | 6,235 | | | $ | 7,354 | |
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Capital expenditures, not yet paid | | $ | 4,141 | | | $ | 5,832 | |
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See accompanying Notes to Condensed Consolidated Financial Statements.
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
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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 26, 2020 | $ | 259 | | | $ | 907,858 | | | $ | (242,366) | | | $ | (91,157) | | | $ | 1,034,048 | | | $ | 131 | | | $ | 1,608,773 | |
Net income | — | | | — | | | — | | | — | | | 57,713 | | | — | | | 57,713 | |
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Other comprehensive loss, net of tax | — | | | — | | | — | | | (4,871) | | | — | | | — | | | (4,871) | |
Stock-based compensation | — | | | 3,395 | | | — | | | — | | | — | | | — | | | 3,395 | |
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Stock options exercised | — | | | 7,509 | | | — | | | — | | | — | | | — | | | 7,509 | |
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Cash dividends paid ($0.48 per share) | — | | | — | | | — | | | — | | | (11,782) | | | — | | | (11,782) | |
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.
Notes to Condensed Consolidated Financial Statements
1. Summary of Significant Accounting Policies and Other Information
Nature of Operations
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 associates, we partner with customers to design and deliver innovative, reliable solutions. Serving over 100,000 end customers, our products are found in a variety of industrial, transportation and electronics end markets – everywhere, every day.
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 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 26, 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 months ended March 27, 2021 and March 28, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 27, 2021 | | |
(in thousands) | | Electronics Segment | | Automotive Segment | | Industrial Segment | | Total | | | | | | | | |
Electronics – Passive Products and Sensors | | $ | 132,437 | | | $ | — | | | $ | — | | | $ | 132,437 | | | | | | | | | |
Electronics – Semiconductor | | 154,098 | | | — | | | — | | | 154,098 | | | | | | | | | |
Passenger Car Products | | — | | | 67,901 | | | — | | | 67,901 | | | | | | | | | |
Automotive Sensors | | — | | | 28,284 | | | — | | | 28,284 | | | | | | | | | |
Commercial Vehicle Products | | — | | | 32,344 | | | — | | | 32,344 | | | | | | | | | |
Industrial Products | | — | | | — | | | 48,730 | | | 48,730 | | | | | | | | | |
Total | | $ | 286,535 | | | $ | 128,529 | | | $ | 48,730 | | | $ | 463,794 | | | | | | | | | |
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| | Three Months Ended March 28, 2020 | | |
(in thousands) | | Electronics Segment | | Automotive Segment | | Industrial Segment | | Total | | | | | | | | |
Electronics – Passive Products and Sensors | | $ | 84,598 | | | $ | — | | | $ | — | | | $ | 84,598 | | | | | | | | | |
Electronics – Semiconductor | | 129,591 | | | — | | | — | | | 129,591 | | | | | | | | | |
Passenger Car Products | | — | | | 52,645 | | | — | | | 52,645 | | | | | | | | | |
Automotive Sensors | | — | | | 24,174 | | | — | | | 24,174 | | | | | | | | | |
Commercial Vehicle Products | | — | | | 27,951 | | | — | | | 27,951 | | | | | | | | | |
Industrial Products | | — | | | — | | | 27,137 | | | 27,137 | | | | | | | | | |
Total | | $ | 214,189 | | | $ | 104,770 | | | $ | 27,137 | | | $ | 346,096 | | | | | | | | | |
See Note 15, Segment Information for net sales by segment and countries.
Revenue Recognition
The Company recognizes revenue on product sales in the period in which the Company satisfies its performance obligation and control of the product is transferred to the customer. The Company’s sales arrangements with customers are predominately short term in nature and generally provide for transfer of control at the time of shipment as this is the point at which title and risk of loss of the product transfers to the customer. At the end of each period, for those shipments where title to the products and the risk of loss and rewards of ownership do not transfer until the product has been received by the customer, the Company adjusts revenues and cost of sales for the delay between the time that the products are shipped and when they are received by the customer. The amount of revenue recorded reflects the consideration to which the Company expects to be entitled in exchange for goods and may include adjustments for customer allowance, rebates and price adjustments. The Company’s distribution channels are primarily through direct sales and independent third-party distributors.
The Company elected the practical expedient under Accounting Standards Codification ("ASC") 340-40-25-4 to expense commissions when incurred as the amortization period of the commission asset the Company would have otherwise recognized is less than one year.
Revenue and Billing
The Company generally accepts orders from customers through receipt of purchase orders or electronic data interchange based on written sales agreements and purchasing contracts. Contract pricing and selling agreement terms are based on market factors, costs, and competition. Pricing is often negotiated as an adjustment (premium or discount) from the Company’s published price lists. The customer is invoiced when the Company’s products are shipped to them in accordance with the terms of the sales agreement. As the Company’s standard payment terms are less than one year, the Company elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company also elected the practical expedient provided in ASC 606-10-25-18B to treat all product shipping and handling activities as fulfillment activities, and therefore recognize the gross revenue associated with the contract, inclusive of any shipping and handling revenue.
Ship and Debit Program
Some of the terms of the Company’s sales agreements and normal business conditions provide customers (distributors) the ability to receive price adjustments on products previously shipped and invoiced. This practice is common in the industry and is referred to as a “ship and debit” program. This program allows the distributor to debit the Company for the difference between the distributors’ contracted price and a lower price for specific transactions. Under certain circumstances (usually in a competitive situation or large volume opportunity), a distributor will request authorization for pricing allowances to reduce its price. When the Company approves such a reduction, the distributor is authorized to “debit” its account for the difference between the contracted price and the lower approved price. The Company establishes reserves for this program based on 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 | | | — | |
Restricted cash included in other assets | | 1,064 | | | $ | — | |
Total cash, cash equivalents and restricted cash | | $ | 577,297 | | | $ | 687,525 | |
Recently Adopted Accounting Standards
In December 2019, the Financial Accounting Standards Board (FASB) issued ASU No. 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes" as part of its initiative to reduce complexity in the accounting standards. The guidance is effective for fiscal years beginning after December 15, 2020 with early adoption permitted. The adoption of ASU 2019-12 did not have a material impact on our Condensed Consolidated Financial Statements.
2. Acquisitions
The Company accounts for acquisitions using the acquisition method in accordance with ASC 805, “Business Combinations,” in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results of the acquired business are included in the Company’s Consolidated Financial Statements from the date of the acquisition.
Hartland Controls
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 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 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 purchase price allocation of the fair value of assets acquired and liabilities assumed in the Hartland acquisition:
| | | | | |
(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 fair 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 this acquisition recognized as Selling, general, and administrative expenses. These costs were reflected as 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.
| | | | | | | | | | | | | | |
| | For the Three Months Ended |
(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:
| | | | | | | | | | | | | | |
| | 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 March 27, 2021 and December 26, 2020 are as follows:
| | | | | | | | | | | | | | |
(in thousands) | | March 27, 2021 | | December 26, 2020 |
Raw materials | | $ | 97,695 | | | $ | 85,394 | |
Work in process | | 102,285 | | | 92,783 | |
Finished goods | | 130,138 | | | 114,641 | |
Inventory Reserves | | (35,061) | | | (34,816) | |
Total | | $ | 295,057 | | | $ | 258,002 | |
4. Property, Plant, and Equipment
The components of net property, plant, and equipment at March 27, 2021 and December 26, 2020 are as follows:
| | | | | | | | | | | | | | |
(in thousands) | | March 27, 2021 | | December 26, 2020 |
Land | | $ | 22,711 | | | $ | 22,851 | |
Building | | 124,192 | | | 123,497 | |
Equipment | | 687,563 | | | 678,220 | |
Accumulated depreciation and amortization | | (489,552) | | | (480,390) | |
Total | | $ | 344,914 | | | $ | 344,178 | |
The Company recorded depreciation expense of $13.7 million and $13.8 million for the three months ended March 27, 2021 and March 28, 2020, respectively.
5. Goodwill and Other Intangible Assets
The amounts for goodwill and changes in the carrying value by segment for the three months ended March 27, 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(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 | | — | | | (36,423) | | | (8,995) | | | (45,418) | |
Total | | 676,325 | | | 101,931 | | | 38,556 | | | 816,812 | |
Changes during 2021: | | | | | | | | |
Additions(a) | | — | | | — | | | 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 | | — | | | (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 March 27, 2021 and December 26, 2020 are as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | | As of March 27, 2021 |
(in thousands) | | | Gross Carrying Value | | Accumulated Amortization | | Net Book Value |
Land use rights | | | $ | 10,251 | | | $ | 2,051 | | | $ | 8,200 | |
Patents, licenses and software | | | 142,732 | | | 94,636 | | | 48,096 | |
Distribution network | | | 43,704 | | | 39,307 | | | 4,397 | |
Customer relationships, trademarks, and tradenames | | | 400,253 | | | 143,652 | | | 256,601 | |
| | | | | | | |
Total | | | $ | 596,940 | | | $ | 279,646 | | | $ | 317,294 | |
| | | | | | | | | | | | | | | | | |
| As of December 26, 2020 |
(in thousands) | Gross Carrying Value | | Accumulated Amortization | | Net Book Value |
Land use rights | $ | 10,280 | | | $ | 2,007 | | | $ | 8,273 | |
Patents, licenses and software | 137,210 | | | 92,868 | | | 44,342 | |
Distribution network | 43,910 | | | 38,980 | | | 4,930 | |
Customer relationships, trademarks, and tradenames | 372,064 | | | 137,722 | | | 234,342 | |
Total | $ | 563,464 | | | $ | 271,577 | | | $ | 291,887 | |
During the three months ended March 27, 2021 and March 28, 2020, the Company recorded amortization expense of $10.5 million and $10.0 million, respectively.
The 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 | | | $ | 39,660 | |
Estimated annual amortization expense related to intangible assets with definite lives as of March 27, 2021 is as follows:
| | | | | |
(in thousands) | Amount |
2021 | $ | 41,545 | |
2022 | 40,791 | |
2023 | 36,491 | |
2024 | 33,054 | |
2025 | 32,603 | |
2026 and thereafter | 143,331 | |
Total | $ | 327,815 | |
6. Accrued Liabilities
The components of accrued liabilities as of March 27, 2021 and December 26, 2020 are as follows:
| | | | | | | | | | | | | | |
(in thousands) | | March 27, 2021 | | December 26, 2020 |
Employee-related liabilities | | $ | 45,135 | | | $ | 50,689 | |
Operating lease liability | | 7,177 | | | 6,811 | |
Interest | | 2,636 | | | 4,517 | |
Restructuring liability | | 2,588 | | | 4,195 | |
Customer liability | | 794 | | | 3,858 | |
Professional services | | 3,010 | | | 3,321 | |
Deferred revenue | | 2,713 | | | 2,959 | |
| | | | |
Other non-income taxes | | 1,903 | | | 2,126 | |
Other | | 32,398 | | | 32,002 | |
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.
7. Restructuring, Impairment and Other Charges
The Company recorded restructuring, impairment and other charges for the three months ended March 27, 2021 and March 28, 2020 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 27, 2021 | | |
(in thousands) | Electronics | | Automotive | | Industrial | | Total | | | | | | | | |
Employee terminations | $ | 257 | | | $ | — | | | $ | 163 | | | $ | 420 | | | | | | | | | |
Other restructuring charges | — | | | 17 | | | — | | | 17 | | | | | | | | | |
Total restructuring charges | 257 | | | 17 | | | 163 | | | 437 | | | | | | | | | |
Impairment | — | | | — | | | — | | | — | | | | | | | | | |
| | | | | | | | | | | | | | | |
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 | — | | | — | | | 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 months ended March 28, 2020, the Company recorded total restructuring charges of $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 announced consolidation of a manufacturing facility within the Industrial segment. The Company also recognized $2.2 million of impairment charges related to the land and building associated with the Company’s announcement to consolidate a manufacturing facility within the Industrial segment.
The restructuring liability as of March 27, 2021 and December 26, 2020 is $2.6 million and $4.2 million, respectively. The restructuring liability is included within accrued liabilities in the Condensed Consolidated Balance Sheets. The Company anticipates the remaining payments associated with employee terminations will primarily be completed by the first quarter of 2022.
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 No |