What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-02 · 61 added, 53 removed, 153 unchanged (43% of the section changed)

20 unchanged sentences

dollar weakens against foreign currencies, our revenues and earnings are positively impacted.

Approximately 44% of our consolidated revenues during the quarter ended March 31, 2024 were to customers outside of the U.S.

Approximately 44% of our consolidated revenues during the quarter ended June 30, 2024 were to customers outside of the U.S.

In addition to the translation impact described above, currency rate fluctuations have an economic impact on our financial results.

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To the extent that we exceed the market growth rates, we consider it to be the result of capturing market share.

Precision Optical Technologies Acquisition

On June 30, 2024, we acquired Precision for $289.6 million, net of cash acquired.

Precision, based in New York, is a leading supplier of value-added optical transceivers with proprietary software, firmware configurations, and related components.

Precision is reported within the Enterprise Solutions segment.

Share Repurchase Program

During the three months ended March 31, 2024 , we repurchased 0.7 million shares of our common stock for an aggregate cost of $57.9 million at an average price per share of $85.66.

During the six months ended June 30, 2024 , we repurchased 0.7 million shares of our common stock for an aggregate cost of $57.9 million at an average price per share of $85.66.

Off-Balance Sheet Arrangements

1 unchanged sentence

Critical Accounting Policies

During the three months ended March 31, 2024:

During the six months ended June 30, 2024:

• We did not change any of our existing critical accounting policies from those listed in our 2023 Annual Report on Form 10-K;

3 unchanged sentences

Consolidated Income before Taxes

Three Months Ended % Change

March 31, 2024 April 2, 2023

Three Months Ended % Change Six Months Ended % Change

June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

(In thousands, except percentages)

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Income before taxes 60,125 84,431 (28.8) % 105,794 162,255 (34.8) %

Revenues decreased $106.1 million in the three months ended March 31, 2024 from the comparable period of 2023 due to the following factors:

• Lower sales volume resulted in a $110.8 million decline in revenues.

• Copper pass-through pricing had a $1.8 million unfavorable impact on revenues.

• Currency translation had an $0.8 million unfavorable impact on revenues.

• Acquisitions, net of divestitures contributed an estimated $7.3 million in revenues.

Gross profit decreased $44.5 million in the three months ended March 31, 2024 from the comparable period of 2023 primarily due to the decline in revenues discussed above .

Despite the decline in gross profit, margins remained relatively flat over the year ago period due to favorable pricing and mix .

Selling, general and administrative expenses decreased $10.8 million in the three months ended March 31, 2024 from the comparable period of 2023.

Revenues decreased $87.9 million and $194.0 million in the three and six months ended June 30, 2024, respectively, from the comparable periods of 2023 due to the following factors:

• Lower sales volume resulted in a $92.9 million and $203.7 million decline in revenues, respectively.

• Currency translation had a $3.6 million and $4.4 million unfavorable impact on revenues, respectively.

• Divestitures had a $0.1 million and $0.4 million unfavorable impact on revenues, respectively.

• Acquisitions contributed $0.0 million and $7.6 million in revenues, respectively.

• Copper pass-through pricing had an $8.7 million and $6.9 million favorable impact on revenues, respectively.

Gross profit decreased $34.5 million and $79.0 million in the three and six months ended June 30, 2024, respectively, from the comparable periods of 2023 primarily due to the decline in revenues discussed above.

Despite the decline in gross profit, margins remained relatively flat over the year ago periods due to favorable pricing and mix.

Selling, general and administrative expenses decreased $7.1 million and $17.9 million in the three and six months ended June 30, 2024, respectively, from the comparable periods of 2023.

The decrease in selling, general and administrative expenses was primarily attributable to the benefits realized from our productivity initiatives and a decline in incentive compensation.

Research and development expenses decreased $2.4 million in the three months ended March 31, 2024 from the comparable period of 2023 primarily due to a shift, or change in R&D project timing.

Amortization of intangibles increased $1.2 million in the three months ended March 31, 2024 from the comparable period of 2023 primarily due to acquisitions.

Operating income decreased $32.5 million in the three ended March 31, 2024 from the comparable period of 2023 primarily due to the decline in gross profit, partially offset by the decline in selling, general and administrative expenses as discussed above.

Net interest expense decreased $0.6 million in the three months ended March 31, 2024 from the comparable period of 2023 due to an increase in interest income.

Income before taxes decreased $32.2 million in the three months ended March 31, 2024 from the comparable period of 2023 primarily due to the changes in operating income discussed above.

Three Months Ended % Change

March 31, 2024 April 2, 2023

Research and development expenses decreased $2.5 million and $4.9 million in the three and six months ended June 30, 2024, respectively, from the comparable periods of 2023 primarily due to a shift, or change in R&D project timing.

Amortization of intangibles decreased $1.2 million in the three months ended June 30, 2024 from the comparable period of 2023 primarily due to certain intangible assets becoming fully amortized and foreign currency exchange rates.

Amortization of intangibles remained relatively flat in the six months ended June 30, 2024 from the comparable period of 2023.

Operating income decreased $23.7 million and $56.2 million in the three and six ended June 30, 2024, respectively, from the comparable periods of 2023 primarily due to the decline in gross profit, partially offset by the decline in selling, general and administrative expenses as discussed above.

Net interest expense increased $0.2 million and decreased $0.4 million in the three and six months ended June 30, 2024, respectively, from the comparable periods of 2023 due to fluctuations in interest income and foreign currency translation.

Income before taxes decreased $24.3 million and $56.5 million in the three and six months ended June 30, 2024, respectively, from the comparable periods of 2023 primarily due to the changes in operating income discussed above.

Three Months Ended % Change Six Months Ended % Change

June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

(In thousands, except percentages)

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Effective tax rate 18.4 % 18.5 % 18.4 % 18.8 %

For the three months ended March 31, 2024, we recognized income tax expense of $8.4 million representing an effective tax rate of 18.3%.

The effective tax rate was primarily impacted by the effect of our foreign operations, including statutory tax rates differences and foreign tax credits.

For the three and six months ended June 30, 2024, we recognized income tax expense of $11.1 million and $19.5 million representing effective tax rates of 18.4%.

The effective tax rates were primarily impacted by the effect of our foreign operations, including statutory tax rates differences and foreign tax credits.

Consolidated Adjusted EBITDA

Three Months Ended % Change

March 31, 2024 April 2, 2023

Three Months Ended % Change Six Months Ended % Change

June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

(In thousands, except percentages)

2 unchanged sentences

as a percent of revenues 16.5 % 17.8 % 16.2 % 17.6 %

Adjusted EBITDA decreased $26.7 million in the three months ended March 31, 2024 from the comparable period of 2023 primarily due to the decline in revenues as discussed above, partially offset by favorable mix and benefits realized from our productivity improvement initiatives.

Adjusted EBITDA decreased $23.8 million and $50.5 million in the three and six months ended June 30, 2024 from the comparable periods of 2023 primarily due to the decline in revenues as discussed above, partially offset by favorable mix and benefits realized from our productivity improvement initiatives.

Use of Non-GAAP Financial Information

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The following tables reconcile our GAAP results to our non-GAAP financial measures:

Three Months Ended

March 31, 2024 April 2, 2023

Three Months Ended Six Months Ended

June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

(In thousands, except percentages)

1 unchanged sentence

GAAP net income $ 49,034 $ 68,775 $ 86,343 $ 131,720

Income tax expense 8,360 14,879

Depreciation expense 13,577 12,682 27,042 25,036

Income tax expense 11,091 15,656 19,451 30,535

Amortization of intangible assets 9,940 11,126 20,749 20,736

6 unchanged sentences

Adjusted EBITDA margin 16.5 % 17.8 % 16.2 % 17.6 %

(1) Includes restructuring and integration costs associated with acquisitions as well as costs associated with certain manufacturing footprint actions.

(2) Adjustments related to acquisitions and divestitures include fair value adjustments of acquired assets.

(1) Includes restructuring and integration costs associated with acquisitions and costs associated with certain manufacturing footprint actions.

(2) Adjustments related to acquisitions and divestitures include fair value adjustments of acquired assets and gains associated with the sales of businesses.

Segment Results of Operations

1 unchanged sentence

Enterprise Solutions

Three Months Ended % Change

March 31, 2024 April 2, 2023

Three Months Ended % Change Six Months Ended % Change

June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

(In thousands, except percentages)

2 unchanged sentences

as a percent of segment revenues 11.6 % 14.1 % 11.3 % 13.8 %

Enterprise Solutions revenues decreased $41.2 million in the three months ended March 31, 2024 from the comparable period of 2023.

The decrease in revenues in the three months ended March 31, 2024 was primarily due to decreases in volume, lower copper pass-through pricing, and unfavorable currency translation of $48.3 million, $0.2 million, and $0.2 million, respectively, partially offset by $7.5 million from acquisitions.

Enterprise Solutions EBITDA decreased $11.4 million in the three months ended March 31, 2024 from the comparable period of 2023 primarily as a result of the decrease in revenues discussed above, partially offset by benefits realized from our productivity improvement initiatives .

Enterprise Solutions revenues decreased $42.1 million and $83.3 millio n in the three and six months ended June 30, 2024 from the comparable periods of 2023.

The decrease in revenues in the three months ended June 30, 2024 was primarily due to decreases in volume and unfavorable currency translation of $43.8 million and $0.8 million, respectively, partially offset by higher copper pass-through pricing of $2.5 million.

The decrease in revenues in the six months ended June 30, 2024 was primarily due to decreases in volume and unfavorable currency translation of $92.1 million and $1.0 million, respectively, partially offset by acquisitions and higher copper pass-through pricing of $7.5 million and $2.3 million, respectively.

Enterprise Solutions EBITDA decreased $12.5 million and $23.9 million in the three and six months ended June 30, 2024 from the comparable periods of 2023 primarily as a result of the decrease in revenues discussed above, partially offset by benefits realized from our productivity improvement initiatives.

Industrial Automation Solutions

Three Months Ended % Change

March 31, 2024 April 2, 2023

Three Months Ended % Change Six Months Ended % Change

June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023

(In thousands, except percentages)

2 unchanged sentences

as a percent of segment revenues 20.3 % 20.7 % 19.9 % 20.4 %

Industrial Automation Solutions revenues decreased $64.9 million in the three months ended March 31, 2024 from the comparable period of 2023.

The decrease in revenues in the three months ended March 31, 2024 was primarily due to decreases in volume, lower copper pass-through pricing, unfavorable currency translation, and divestitures, net of acquisitions of $62.5 million, $1.6 million, $0.6 million, and $0.2 million, respectively.

Industrial Automation Solutions EBITDA decreased $15.0 million in the three months ended March 31, 2024 from the comparable period of 2023 primarily as a result of the decrease in revenues discussed above, partially offset by favorable mix as we transition to solutions .

Industrial Automation Solutions revenues decreased $45.9 million and $110.7 million in the three and six months ended June 30, 2024 from the comparable periods of 2023 .

The decrease in revenues in the three months ended June 30, 2024 was primarily due to decreases in volume, unfavorable currency translation, and divestitures of $49.2 million, $2.8 million, and $0.1 million, respectively, partially offset by higher copper pass-through pricing of $6.2 million.

The decrease in revenues in the six months ended June 30, 2024 was primarily due to decreases in volume, unfavorable currency translation, and divestitures of $111.6 million, $3.4 million, and $0.4 million, respectively, partially offset by higher copper pass-through pricing and acquisitions of $4.6 million and $0.1 million, respectively.

Industrial Automation Solutions EBITDA decreased $10.9 mil lion and $25.9 million in the three and six months ended June 30, 2024 from the comparable periods of 2023 primarily as a result of the decrease in revenues discussed above, partially offset by favorable mix as we transition to solutions .

Liquidity and Capital Resources

5 unchanged sentences

The following table is derived from our Condensed Consolidated Cash Flow Statements:

Three Months Ended

March 31, 2024 April 2, 2023

Six Months Ended

June 30, 2024 July 2, 2023

(In thousands)

7 unchanged sentences

Cash and cash equivalents, end of period $ 564,751 $ 514,767

Net cash provided by operating activities totaled $2.7 million in the three months ended March 31, 2024 compared to a use of cash of $31.9 million in the year ago period.

Operating cash flows improved $34.6 million compared to the prior year primarily due to a $56.5 million improvement in operating assets and liabilities as we successfully managed working capital to mitigate the impact of lower revenues.

Net cash used for investing activities totaled $24.2 million for the three months ended March 31, 2024, compared to $3.8 million in the year ago period.

Investing activities for the three months ended March 31, 2024 included $24.3 million for capital expenditures, partially offset by $0.1 million for asset sales.

Investing activities for the three months ended April 2, 2023 included $13.8 million for capital expenditures, partially offset by $10.0 million received from escrow for the disposal of a business.

Net cash used for financing activities totaled $64.9 million for the three months ended March 31, 2024, compared to $63.8 million in the year ago period.

Financing activities for the three months ended March 31, 2024 included payments under our share repurchase program of $57.9 million, payments related to share based compensation activities of $7.9 million, cash dividend payments of $2.1 million, financing lease payments of $0.2 million, and proceeds from the issuance of common stock of $3.1 million.

Financing activities for the three months ended April 2, 2023 included payments under our share repurchase program of $50.0 million, net payments related to share based compensation activities of $13.3 million, cash dividend payments of $2.1 million, and proceeds from the issuance of common stock of $1.6 million.

Our cash and cash equivalents balance was $506.8 million as of March 31, 2024.

Of this amount, $269.5 million was held outside of the U.S.

Net cash provided by operating activities totaled $85.7 million in the six months ended June 30, 2024 compared to $54.7 million in the year ago period.

Despite the decrease in net income, operating assets and liabilities improved $69.9 million compared to the prior year primarily driven by favorable changes in receivables and our successful management of working capital.

Net cash used for invest ing activities totaled $45.7 million for the six months ended June 30, 2024 compared to $121.0 million in the year ago period.

Investing activities for the six months ended June 30, 2024 included capital expenditures of $46.2 million, partially offset by asset sales of $0.5 million.

Investing activities for the six months ended July 2, 2023 included $97.6 million primarily for the acquisition of Sichert and capital expenditures of $32.7 million, partially offset by $9.3 million received from escrow for the disposal of a business.

Net cash used for financing activities totaled $67.4 million for the six months ended June 30, 2024 compared to $105.9 million in th e year ago period.

Financing activities for the six months ended June 30, 2024 included payments under our share repurchase program of $57.9 million, payments related to share based compensation activities of $8.1 million, cash dividend payments of $4.1 million, financing lease payments of $0.4 million, and proceeds from the issuance of common stock of $3.1 million.

Financing activities for the six months ended July 2, 2023 included payments under our share repurchase program of $86.2 million, net payments related to share based compensation activities of $16.9 million, cash dividend payments of $4.3 million, financing lease payments of $0.1 million, and proceeds from the issuance of common stock of $1.6 million.

Our cash and cash equivalents balance was $564.8 million as of June 30, 2024.

Of the total cash balance, $291.5 million was paid to the sellers of Precision in July and $173.0 million was held outside of the U.S.

in our foreign operations.

5 unchanged sentences

tax rules and regulations as a result of the repatriation.

Our outstanding debt obligations as of March 31, 2024 consisted of $1,190.3 million of senior subordinated notes.

Our outstanding debt obligations as of June 30, 2024 consisted of $1,174.5 million of senior subordinated notes.

Additional discussion regarding our various borrowing arrangements is included in Note 10 to the Condensed Consolidated Financial Statements.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis