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2023 EXECUTIVE OVERVIEW
−Removed: Net sales were $2,513.9 million, which increased by $434.0 million or 20.9% in 2022 compared to 2021.
−Removed: The increase was primarily driven by higher volume and price realization in the Electronics and Industrial segments, $202.8 million or 9.8% of incremental net sales from the Carling acquisition within the Transportation segment and $81.7 million or 3.9% of net sales from the C&K acquisition within the Electronics segment, partially offset by $65.3 million or 3.1% of unfavorable changes in foreign exchange rates.
+Added: Net sales were $2,362.7 million, which decreased by $151.2 million or 6.0% in 2023 compared to 2022 including $0.7 million favorable changes in foreign exchange rates.
+Added: The decrease was primarily driven by lower volume in the Electronics segment and the commercial vehicle business within the Transportation segment that more than offset $91.9 million or 3.7% of incremental net sales from the C&K acquisition within the Electronics segment and $13.2 million or 0.5% of net sales from the Western Automation acquisition within the Industrial segment.
The Company recognized net income of $259.5 million, or $10.34 per diluted share, in 2023 compared to net income of $373.3 million, or $14.94 per diluted share in 2022.
−Removed: The increase in net income is primarily due to an increase in operating income of $122.0 million and $26.2 million in the Electronics and Industrial segments, respectively, partially offset by higher interest expense of $7.7 million and foreign exchange losses of $7.2 million.
−Removed: Supply chain constraints, including material shortages and transportation capacity and costs impacted the Company, its suppliers and customers during the first half of 2022 and to a lesser extent during the second half of 2022.
−Removed: The Company expects to see continued improvement in supply chain availability during 2023.
−Removed: Net cash provided by operating activities was $419.7 million for the fiscal year ended December 31, 2022 representing an increase of $46.4 million as compared to the fiscal year ended January 1, 2022.
−Removed: The increase in net cash provided by operating activities was primarily due to higher cash earnings partially offset by increases in working capital resulting from higher sales growth and larger annual incentive bonus payments made in 2022 as compared to 2021.
−Removed: On June 30, 2022, the Company amended and restated its Credit Agreement, dated as of April 3, 2020 (as so amended and restated, the “Credit Agreement”) to effect certain changes, including, among other changes:
−Removed: (i) adding a $300 million unsecured term loan credit facility;
−Removed: (ii) making certain financial and non-financial covenants less restrictive on the Company and its subsidiaries;
−Removed: (iii) replacing LIBOR-based interest rate benchmarks and modifying performance-based interest rate margins;
−Removed: and (iv) extending the maturity date to June 30, 2027 (the “Maturity Date”).
−Removed: Pursuant to the Credit Agreement, the Company may, from time to time, increase the size of the revolving credit facility or enter into one or more tranches of term loans in minimum increments of $25 million if there is no event of default and the Company is in compliance with certain financial covenants.
−Removed: On February 3, 2023, the Company acquired Western Automation Research and Development Limited (“Western Automation”) for approximately $162 million in cash.
+Added: The decrease in net income was primarily due to lower operating income of $131.0 million in the Electronics segment and $29.9 million in the Transportation segment mainly driven by the commercial vehicle business.
+Added: Net cash provided by operating activities was $457.4 million for the fiscal year ended December 30, 2023 representing an increase of $37.7 million as compared to the fiscal year ended December 31, 2022.
+Added: The increase in net cash provided by operating activities was primarily due to reductions in working capital partially offset by lower cash earnings.
+Added: 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.
+Added: The acquisition of the Dortmund Fab is expected to close in early fiscal year 2025.
+Added: The total purchase price for the fab is approximately 93 million Euro, of which 37.2 million Euro down payment (approximately $40.5 million) was made with cash on hand and recorded in Other long-term assets in the Consolidated Balance Sheets was paid in the third quarter after regulatory approvals and approximately 56 million Euro will be paid at closing.
+Added: The transaction did not have a material impact on the Company’s fiscal year 2023 financial results and is not expected to have material impact on the Company's 2024 financial results and will be reported in the semiconductor business within the Company’s Electronics segment.
+Added: On February 3, 2023, the Company completed the acquisition of 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.
−Removed: Western Automation has annualized sales of approximately $25 million and will be reported within the company’s Industrial segment.
−Removed: The company does not expect the acquisition to have a material impact to its 2023 financial results.The Company financed the transaction with cash on hand.
−Removed: On July 19, 2022, the Company acquired C&K for $540 million in cash.
−Removed: 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.
−Removed: At the time the Company and C&K entered into a definitive agreement, C&K had annualized sales of over $200 million.
−Removed: The business is reported as part of the electronics-passive products and sensors business within the Company's Electronics segment.
−Removed: The Company financed the transaction through a combination of cash on hand and debt.
−Removed: Impact of COVID-19 on Business
−Removed: The effects from COVID-19 continue to drive higher ongoing costs including spending on personal protective equipment ("PPE"), additional personnel and employee transportation costs, and manufacturing inefficiencies as well as an increase in material costs and transportation costs due to global supply chain and logistics constraints around the world.
−Removed: Although COVID-19 had less of an effect on fiscal year 2022 as compared to fiscal year 2021, it is difficult to estimate the ongoing magnitude of future COVID-19 disruptions, and its potential impact on the Company's employees, customers, suppliers and vendors.
−Removed: The Company will continue to actively monitor the situation and may take further actions altering its business operations that the Company determines are in the best interests of its employees, customers, partners, suppliers, and other stakeholders, or as required by federal, state, or local authorities.
−Removed: It is not clear what the potential effects any such alterations or modifications may have on the Company's business and operations, including the effects on its customers, employees, and prospects, or on the Company's financial results for the fiscal year 2023.
+Added: At the time the Company and Western Automation entered into the definitive agreement, Western Automation had annualized sales of approximately $25 million.
+Added: The business is reported within the Company’s Industrial segment.
+Added: The Company financed the transaction with cash on hand.
Risks Related to Market Conditions
−Removed: The Company continues to operate in a more volatile macro environment, including events related to the war in Ukraine.
−Removed: Although the Company does not have any direct operations in Ukraine or Russia, it had a modest impact on the Company, including higher transportation costs due to the Company modifying its shipping logistics as well as suspending sales into and purchases from Russia.
−Removed: Additionally, the war impacted some of the Company's customers who had lower production levels during 2022 due to shut-downs and ongoing material shortages.
+Added: The Company continues to operate in a challenging macro environment, including but not limited to, supply chain disruptions, varying regional dynamics, and some pockets of end market softness.
+Added: The ongoing war in Ukraine has had a minimal impact on the Company, as the Company suspended sales into and purchases from Russia.
+Added: The Company does not have any direct operations in Ukraine or Russia.
Vision and Strategy
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Within transportation end markets, the Company’s products are found in passenger vehicles and commercial vehicles, like material handling equipment, heavy-duty truck and bus, off-road and recreational vehicles, construction equipment, agricultural machinery, rail, marine and aerospace.
−Removed: The Company is also a key enabler of electrification, or eMobility, across these transportation applications, and EV charging infrastructure.
+Added: The Company is a key enabler of electrification, or eMobility, across these transportation applications.
+Added: The Company is also a key enabler of electronification advancements across these transportation applications.
The Company continues to advance its existing customer relationships with OEM, Tier One and channel partners while driving product content growth for advanced, high-growth applications.
−Removed: Within industrial end markets, the Company’s products are found in renewable energy and energy storage applications, HVAC, factory automation and industrial safety, industrial motor drives and power conversion, and heavy and general industrial type applications.
+Added: Within industrial end markets, the Company’s products are found in renewable energy and energy storage applications, HVAC, factory automation and industrial safety, industrial motor drives and power conversion, EV charging infrastructure, and heavy and general industrial type applications.
The Company utilizes its deep technical engineering capabilities and design support to drive product content growth across high-growth applications like renewables, energy storage, HVAC, and industrial automation and safety.
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The Company leverages its strategic distribution partnerships and deep OEM relationships, coupled with its comprehensive product offerings, to drive product content growth across a broad range of applications.
−Removed: The Company expects the ever-increasing complexity of application architectures, driven by ongoing electronification and electrification across these end markets, to drive increasing product content opportunities.
+Added: The Company expects the ever-increasing advancements of application architectures, driven by ongoing electronification and electrification across these end markets, to drive increasing product content opportunities.
Built upon that framework, the Company has positioned itself around the structural growth themes of sustainability, connectivity, and safety, which will continue to drive increased demand for the Company’s innovative, reliable solutions across the transportation, industrial and electronics end markets that it serves.
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● Opportunistic share repurchases
−Removed: The Company’s strategy is focused on accelerating organic growth by increasing its product content in applications and share gains, enhancing technology efforts to drive innovation, expanding its digital presence, capitalizing on cross segment opportunities, and gaining traction in underpenetrated, high-growth geographies and end markets.
−Removed: The Company also leverages strategic acquisitions to enhance and sustain its organic growth.
+Added: The Company’s strategy is focused on accelerating organic growth by increasing its product content in applications and share gains, enhancing technology efforts to drive innovation, expanding its digital presence, capitalizing on cross segment opportunities, and gaining traction in niche, high-growth end markets.
+Added: The Company also leverages strategic acquisitions to enhance its organic growth.
The Company will continue to make targeted strategic acquisitions that align to its strategy and financial metrics to drive growth across its businesses, products, markets, and technologies while leveraging existing customers and targeting new customers.
−Removed: Management believes that profitable growth through a combination of organic growth and strategic acquisitions is critical to the Company’s competitiveness, while enhancing the value the Company delivers to all of its stakeholders.
+Added: Management believes profitable growth through a combination of organic growth and strategic acquisitions is critical to the Company’s competitiveness, while enhancing the value it delivers to all of its stakeholders.
In addition, the Company continues to implement initiatives across all businesses to enhance productivity, and its commercial and operational capabilities, while managing its cost structure to align with business conditions, and the markets it serves.
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The Company has identified the following as its most critical accounting policies and judgments.
−Removed: Although management believes that its estimates and assumptions are reasonable, they are based upon information available when they are made, and therefore, actual results may
−Removed: differ from these estimates under different assumptions or conditions.
+Added: Although management believes that its estimates and assumptions are reasonable, they are based upon information available when they are made, and therefore, actual results may differ from these estimates under different assumptions or conditions.
The Company has reviewed these critical accounting policies and related disclosures with the Audit Committee of its Board of Directors.
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There were no impairment charges recorded during the fiscal years of 2023, 2022 and 2021.
−Removed: During the second quarter of 2020, the Company recorded a non-cash charge of $33.8 million to recognize the impairment of goodwill in the automotive sensors reporting unit within the Transportation segment.
Quantitative Assessment for Impairment
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Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates.
−Removed: Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the fair value of the reporting units.
+Added: Changes in assumptions concerning future
+Added: financial results or other underlying assumptions could have a significant impact on the fair value of the reporting units.
Future declines in the overall market value of the Company’s equity may also result in a conclusion that the fair value of one or more reporting units has declined below its carrying value.
1 unchanged sentence
All seven of the reporting units passed the goodwill impairment test, with fair values that exceeded the carrying values between 23% and 369% of their respective estimated fair values.
−Removed: As of the most recent annual test conducted on October 2, 2022, the Company noted that the
−Removed: excess of fair value over the carrying value was 151%, 66%, 98%, 42%, 44%, 57%, and 191% for its reporting units:
−Removed: Electronics-Passive Products and Sensors, Electronics-Semiconductor, Passenger Car Products, Commercial Vehicle Products, Automotive Sensors, Relays, and Power Fuse, respectively.
+Added: As of the most recent annual test conducted on October 1, 2023, the Company noted that the excess of fair value over the carrying value was 110%, 80%, 126%, 47%, 58%, 23%, and 369% for its reporting units:
+Added: Electronics-Passive Products and Sensors, Electronics-Semiconductor, Passenger Car Products, Commercial Vehicle Products, Automotive Sensors, Industrial Controls and Sensors, and Industrial Circuit Protection, respectively.
Relatively small changes in the Company’s key assumptions would not have resulted in any reporting units failing the goodwill impairment test.
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Of the other key assumptions that impact the estimated fair values, most reporting units have the greatest sensitivity to changes in the estimated discount rate.
−Removed: The estimated discount rate was 13.4% for the Electronics-Passive Products and Sensors, the Passenger Car Products, and Commercial Vehicle Products reporting units, 14.3% for the Electronics-Semiconductor reporting unit, and 15.2% for each of the Automotive Sensors, Power Fuse and Relays reporting units.
+Added: The estimated discount rate was 12.6% for the Electronics-Passive Products and Sensors, Electronics-Semiconductor, Passenger Car Products, Commercial Vehicle Products, Automotive Sensors, and Industrial Circuit Protection reporting units, and 16.8% for the Industrial Controls and Sensors reporting unit.
A 1.0% increase in the estimated discount rates would have resulted in no reporting units failing the annual goodwill impairment test.
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In accordance with guidance issued by the Financial Accounting Standards Board ("FASB") staff, the Company has adopted an accounting policy to treat any GILTI inclusions as a period cost if and when incurred.
−Removed: Thus, for the fiscal years ended December 31, 2022 , January 1, 2022, and December 26, 2020 , deferred taxes were computed without consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense.
+Added: Thus, for the fiscal years ended December 30, 2023, December 31, 2022, and January 1, 2022, deferred taxes were computed without consideration of the
+Added: possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense.
Further information regarding income taxes, including a detailed reconciliation of current year activity, is provided in Note 14, Income Taxes, of the Notes to Consolidated Financial Statements included in this Annual Report.
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Revenue Disaggregation
−Removed: The following table disaggregates the Company’s revenue by primary business units for the fiscal years ended December 31, 2022 and January 1, 2022:
+Added: The following table disaggregates the Company’s revenue by primary business units for the fiscal years ended December 30, 2023 and December 31, 2022:
Fiscal Year Ended December 30, 2023
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Total $ 1,350,426 $ 678,278 $ 333,953 $ 2,362,657
−Removed: Fiscal Year Ended January 1, 2022
+Added: Fiscal Year Ended December 31, 2022
(in thousands) Electronics
3 unchanged sentences
Electronics – Passive Products and Sensors 690,538 — — 690,538
−Removed: Passenger Car Products — 266,020 — 266,020
Commercial Vehicle Products — 374,707 — 374,707
+Added: Passenger Car Products — 249,470 — 249,470
Automotive Sensors — 91,963 — 91,963
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As the Company’s standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.
−Removed: The Company also elected the practical expedient provided in ASC 606-10-25-18B to treat all product shipping and handling activities as fulfillment
−Removed: activities, and therefore recognize the gross revenue associated with the contract, inclusive of any shipping and handling revenue.
+Added: 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
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When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the indicators, the assets are assessed for impairment based on the estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition.
−Removed: If the carrying value of an asset exceeds its estimated future
−Removed: undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying value over its fair value.
+Added: If the carrying value of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying value over its fair value.
+Added: For the fiscal year ended December 30, 2023, the Company recognized a $3.9 million impairment charge related to the land and building of a property in the commercial vehicle business within the Transportation segment that the Company made the decision to donate, a $0.9 million impairment charge substantially related to certain patents in a business within the Industrial segment, and a $0.1 million impairment on certain machinery and equipment in the semiconductor business within the Electronics segment.
For the fiscal year ended December 31, 2022, the Company recorded a $2.9 million non-cash impairment charge for certain acquired technology and patent intangible assets due to a change in use and projected cash flows within the Electronics segment.
Additionally, the Company recorded a non-cash impairment charge of $1.7 million for certain machinery and equipment within the Electronics segment due to a decision to cease further production of a product line during the fourth quarter of 2022.
−Removed: For the fiscal year ended December 26, 2020, the Company recognized a $2.2 million impairment charge related to the land and building associated with the Company’s announced consolidation of a manufacturing facility within the Industrial segment.
Environmental Liabilities
6 unchanged sentences
The Company reviews its actuarial assumptions on an annual basis as of the fiscal year-end balance sheet date (or more frequently if a significant event requiring remeasurement occurs) and modifies the assumption based on current rates and trends when it is appropriate to do so.
−Removed: The effects of modifications are recognized immediately on the Consolidated Balance Sheets but are generally amortized into operating earnings over future periods, with the deferred amount recorded in accumulated other comprehensive (loss) income.
+Added: The effects of modifications are recognized immediately on the Consolidated Balance Sheets but are generally amortized into operating earnings over future periods, with the deferred amount recorded in accumulated other comprehensive loss.
The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience, market conditions and input from its actuaries and investment advisors.
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The expected returns on plan assets and discount rates are determined based on each plan’s investment approach, local interest rates and plan participant profiles.
−Removed: The weighted-average discount rates for the Company’s defined benefit plans primarily in Europe and the Asia-Pacific regions at December 31, 2022 and January 1, 2022 were 5.8% and 3.1%, respectively.
+Added: The weighted-average discount rates for the Company’s defined benefit plans primarily in Europe and the Asia-Pacific regions at December 30, 2023 and December 31, 2022 were 5.6% and 5.8%, respectively.
A 50 basis point change in the discount rates at December 30, 2023 would have the following effect on the projected benefit obligation:
2 unchanged sentences
Projected benefit obligation $ (3.8) $ 4.1
−Removed: On April 7, 2020, the Company entered into a definitive agreement to purchase a group annuity contract, under which an insurance company is required to directly pay and administer pension payments to certain of the Company’s U.K.
−Removed: pension plan participants, or their designated beneficiaries.
−Removed: The Company completed the buy-out of this U.K.
−Removed: pension plan during the fourth quarter of 2021 and as a result recorded a non-cash pension settlement charge of $19.9 million (£14.9 million), inclusive of the accelerated recognition of prior service cost of $0.5 million (£0.4 million).
Equity-based Compensation
5 unchanged sentences
Treasury yield curve in effect at the time of grant.
−Removed: The Company initiated a quarterly cash dividend in 2010 and expects to continue making cash dividend payments for the foreseeable future.
+Added: The Company initiated a quarterly cash dividend in
+Added: 2010 and expects to continue making cash dividend payments for the foreseeable future.
The fair value of restricted share units is determined based on the Company's stock price on the grant date reduced by the present value of expected dividends through the vesting period.
1 unchanged sentence
Further information regarding this expense is provided in Note 12, Stock-Based Compensation , of the Notes to Consolidated Financial Statements included in this Annual Report.
−Removed: Off-Balance Sheet Arrangements
−Removed: The Company does not have off-balance sheet arrangements as defined under SEC rules.
−Removed: The Company does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.
In the financial review that follows, the Company discusses its consolidated results of operations, financial position, cash flows and certain other information.
This discussion should be read in conjunction with the Company’s Consolidated Financial Statements and related notes.
−Removed: RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022 AS COMPARED TO THE YEAR ENDED JANUARY 01, 2022
−Removed: Fiscal year 2022 included $43.2 million of non-segment charges, of which $17.6 million related to legal and professional fees and other integration expenses primarily associated with the C&K and Carling acquisitions and other contemplated acquisitions, $15.6 million of purchase accounting inventory step-up charges, and $10.0 million of restructuring, impairment and other charges, primarily related to employee termination costs and a $2.9 million intangible asset impairment charge within the Electronics segment in the fourth quarter of 2022.
+Added: RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 30, 2023 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 2022
+Added: Fiscal year 2023 included $28.2 million of non-segment charges, of which $11.7 million related to legal and professional fees and other integration expenses related to completed and contemplated acquisitions and $16.5 million of restructuring, impairment and other charges, primarily associated with employee termination costs and a $3.9 million impairment charge for the land and building in the commercial vehicle business within the Transportation segment.
See Note 8, Restructuring, Impairment and Other Charges, for further discussion.
−Removed: Fiscal year 2021 included $12.6 million of non-segment charges, of which $8.4 million relates to purchase accounting inventory step-up charges, $7.0 million of acquisition-related and integration charges related to the Carling and Hartland acquisitions and other contemplated acquisitions, and $2.2 million of restructuring, impairment and other charges, primarily related to employee termination costs.
+Added: Fiscal year 2022 included $43.2 million of non-segment charges, of which $17.6 million related to legal and professional fees and other integration expenses primarily associated with the C&K and Carling acquisitions and other contemplated acquisitions, $15.6 million of purchase accounting inventory step-up charges, and $10.0 million of restructuring, impairment and other charges, primarily related to employee termination costs and a $2.9 million intangible asset impairment charge within the Electronics segment in the fourth quarter of 2022.
See Note 8, Restructuring, Impairment and Other Charges, for further discussion.
−Removed: Additionally, partially offsetting the above amounts was a gain of $5.0 million recorded for the sale of buildings within the Electronics segment.
−Removed: Fiscal year 2022 also included approximately $24.4 million in foreign currency exchange losses primarily attributable to changes in the value of the Euro, Philippine peso, Sterling, and Chinese renminbi against the U.S.
−Removed: dollar, while fiscal year 2021 included approximately $17.2 million in foreign currency exchange losses primarily attributable to changes in the value of the Euro, Chinese renminbi, Mexican peso, and Philippine peso against the U.S.
+Added: Fiscal year 2023 also included approximately $12.3 million in foreign currency exchange losses primarily attributable to changes in the value of the Euro, Sterling, and Chinese renminbi against the U.S.
+Added: dollar, while fiscal year 2022 included approximately $24.4 million in foreign currency exchange losses primarily attributable to changes in the value of the Euro, Philippine peso, Sterling, and Chinese renminbi against the U.S.
(in thousands, except % change) 2023 2022 Change % Change
4 unchanged sentences
Operating income 360,862 500,826 (139,964) (27.9) %
−Removed: Other expense, net 7,207 8,932 (1,725) (19.3) %
+Added: Other (income) expense, net (19,901) 7,207 (27,108) (376.1) %
Income before income taxes 328,598 443,044 (114,446) (25.8) %
1 unchanged sentence
Net income 259,485 373,306 (113,821) (30.5) %
−Removed: Net sales were $2,513.9 million, which increased $434.0 million, or 20.9% compared to 2021, including $202.8 million or 9.8% of incremental net sales within the Transportation segment from the Carling acquisition and $81.7 million or 3.9% of net sales within the Electronics segment from the C&K acquisition, partially offset by $65.3 million or 3.1% of unfavorable changes in foreign exchange rates for 2022 compared to 2021.
−Removed: The remaining increase of $110.3 million in the Electronics segment was due to higher volume and price realization across numerous end markets while the Industrial segment increased $53.8 million as a result of higher volume and price realization.
+Added: Net sales were $2,362.7 million, which decreased by $151.2 million, or 6.0% compared to 2022, including $0.7 million of favorable changes in foreign exchange rates for 2023 compared to 2022.
+Added: The sales decrease was primarily due to lower volume in the Electronics segment and the commercial vehicle business within the Transportation segment that more than offset $105.1 million or 4.2% of incremental net sales from the C&K and Western Automation acquisitions and higher volume from the Industrial segment.
Cost of Sales
Cost of sales was $1,462.4 million, or 61.9% of net sales, in 2023, compared to $1,507.0 million, or 59.9% of net sales, in 2022.
−Removed: The increase in cost of sales was primarily due to greater volume across the Electronics and Industrial segments driven by the factors discussed above along with the acquisitions of Carling and C&K.
−Removed: As a percent of net sales, cost of sales decreased 3.0% driven by volume leverage, partially offset by higher purchase accounting inventory charges of $7.2 million or 0.2% compared to 2021.
+Added: As a percent of net sales, cost of sales increased 2.0% driven by lower volume in the Electronics segment and the commercial vehicle business within the Transportation segment, partially offset by volume leverage and favorable product mix from the Industrial segment compared to 2022, and $15.6 million or 0.6% of purchase accounting inventory charges recorded during 2022.
Gross profit was $900.2 million, or 38.1% of net sales, in 2023, compared to $1,006.9 million, or 40.1% of net sales, in 2022.
−Removed: The $235.0 million increase in gross profit was primarily due to higher volume and price realization in the Electronics and Industrial segments along with the acquisitions of Carling and C&K.
−Removed: The increase in gross margin of 3.0% was primarily driven by volume leverage and price realization, partially offset by higher purchase accounting inventory charges of $7.2 million or 0.2% compared to 2021.
+Added: The $106.7 million decrease in gross profit was primarily due to lower volume in the Electronics segment and the commercial vehicle business within the Transportation segment, partially offset by the acquisition of C&K within the Electronics segment, and volume leverage and favorable product mix from the Industrial segment and $15.6 million or 0.6% of purchase accounting inventory charges recorded during the first nine months of 2022.
Operating Expenses
Total operating expenses were $539.4 million, or 22.8% of net sales, for 2023 compared to $506.1 million, or 20.1% of net sales, for 2022.
−Removed: The increase in operating expenses of $119.8 million was primarily due to higher selling, general, and administrative expenses, which increased by $69.4 million, research and development expenses, which increased by $29.7 million and increased amortization expense of $13.0 million and acquisition-related expenses of $10.6 million largely due to the Carling and C&K acquisitions.
+Added: The increase in operating expenses of $33.3 million was primarily due to higher selling, general, and administrative expenses of $9.8 million, higher amortization expense of $10.1 million and research and development expenses of $6.8 million mainly due to the C&K and Western Automation acquisitions.
+Added: Additionally, the Company incurred an increase in restructuring, impairment, and other charges of $6.5 million primarily related to the reorganization of certain manufacturing, selling and administrative functions within the Transportation and Industrial segments and a $3.9 million impairment charge related to the land and building of a property in the commercial vehicle business within the Transportation segment.
+Added: This increase in operating expenses was partially offset by lower variable incentive compensation expense.
Operating Income
−Removed: Operating income for 2022 was $500.8 million , an increase of $115.2 million or 29.9% compared to $385.6 million for 2021.
−Removed: The increase in operating income was primarily due to higher gross profit across from Electronics and Industrial segments, partially offset by higher operating expenses as discussed above.
−Removed: Operating margins increased from 18.5% in 2021 to 19.9% in 2022 primarily driven by higher operating income in the Electronics segment of $122.0 million.
+Added: Operating income for 2023 was $360.9 million , a decrease of $140.0 million or 27.9% compared to $500.8 million for 2022.
+Added: The decrease in operating income was due to lower gross profit from the Electronics and Transportation segments and higher
+Added: operating expenses as noted above .
+Added: Operating margins decreased from 19.9% in 2022 to 15.3% in 2023 primarily driven by lower volume in the Electronics and Transportation segments and the higher operating expenses mentioned above.
Income Before Income Taxes
Income before income taxes for 2023 was $328.6 million, or 13.9% of net sales compared to $443.0 million, or 17.6% of net sales, for 2022.
−Removed: In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was impacted by $14.0 million of unrealized losses during 2022 compared to unrealized gains of $8.8 million during 2021 related to the Company's equity investment, higher interest expense of $7.7 million due to an increase in borrowings outstanding, and higher foreign exchange losses of $7.2 million compared to 2021, partially offset by a $19.9 million non-cash pension settlement charge recognized in 2021.
+Added: In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was primarily benefited by lower foreign exchange losses of $12.1 million and lower unrealized losses of $13.7 million related to one of the Company's equity investments for 2023 compared to 2022.
Income tax expense for 2023 was $69.1 million, or an effective tax rate of 21.0%, compared to income tax expense of $69.7 million, or an effective tax rate of 15.7% for 2022.
−Removed: The Company’s tax rates are lower than the applicable U.S.
−Removed: statutory tax rate primarily due to income earned in lower tax jurisdictions, partially offset by the impact of taxes on unremitted earnings, the GILTI tax provisions, and non-U.S.
−Removed: losses and expenses with no tax benefit.
−Removed: The effective tax rate for 2022 is lower than the effective tax rate for 2021, primarily due to one-time tax benefits resulting from losses on investments in the stock of two of the Company's affiliates.
+Added: The effective tax rate for 2023 is higher than the effective tax rate for 2022,
+Added: primarily due to less income earned in lower tax jurisdictions in 2023 , as well as one-time tax benefits in 2022 resulting from losses on investments in the stock of two of the Company's affiliates.
+Added: The effective tax rate for 2022 was lower than the applicable U.S.
+Added: statutory tax rate primarily due to income earned in lower tax jurisdictions as well as the impact of the one-time deductions previously noted.
Further information regarding these items is provided in Note 14, Income Taxes , of the Notes to Consolidated Financial Statements included in this Annual Report.
3 unchanged sentences
Segment information is described more fully in Note 16, Segment Information , of the Notes to Consolidated Financial Statements included in this Annual Report.
−Removed: The following table is a summary of the Company’s net sales by segment:
+Added: The following table is a summary of the Company’s net sales and operating income by segment:
+Added: Net Sales Fiscal Year
(in millions) 2023 2022 Change % Change
4 unchanged sentences
Total $ 2,362.7 $ 2,513.9 $ (151.2) (6.0) %
+Added: Operating Income Fiscal Year
+Added: (in millions) 2023 2022 Change % Change
+Added: Electronics $ 300.6 $ 431.6 $ (131.0) (30.4) %
+Added: Transportation
+Added: 33.7 63.5 (29.8) (47.0) %
+Added: Industrial 54.8 48.9 5.9 12.1 %
+Added: Other (a) (28.2) (43.2) 15.0
+Added: Total $ 360.9 $ 500.8 $ (139.9) (30.9) %
+Added: (a) Included in “Other” Operating income for the 2023 was $28.2 million of non-segment charges, of which $11.7 million was for legal and professional fees and other integration expenses related to completed and contemplated acquisitions, $16.5 million of restructuring, impairment and other charges, primarily related to employee termination costs and a $3.9 million impairment charge related to the land and building in the commercial vehicle business within the Transportation segment.
+Added: See Note 8, Restructuring, Impairment and Other Charges , for further discussion.
+Added: Included in “Other” Operating income for 2022 was $43.2 million of non-segment charges, of which $17.6 million of legal and professional fees and other integration expenses related to completed and contemplated acquisitions, $15.6 million of purchase accounting inventory step-up charges, and $10.0 million of restructuring, impairment and other charges, primarily related to employee termination costs and a $2.9 million non-cash impairment charge for certain acquired technology and patent intangible assets due to a change in use and projected cash flows within the Electronics segment in the fourth quarter of 2022.
+Added: See Note 8, Restructuring, Impairment and Other Charges , for further discussion.
Electronics Segment
−Removed: Net sales for the Electronics segment increased $192.1 million, or 14.8%, in 2022 compared to 2021 and included unfavorable changes in foreign exchange rates of $37.1 million or 2.9%.
−Removed: The sales increase was $123.4 million for the semiconductor products business and $68.7 million in the electronics products business, primarily driven by increased volume and price realization.
−Removed: The sales increase in electronics products business also included the incremental $81.7 million of sales from the acquisition of C&K.
−Removed: These volume increases were driven by continued broad-based demand across numerous end markets.
+Added: Net sales for the Electronics segment decreased $142.4 million, or 9.5%, in 2023 compared to 2022 and included favorable changes in foreign exchange rates of $2.1 million or 0.1%.
+Added: The sales decrease was mainly due to lower volume from the Electronics products business driven by inventory rebalancing at certain distributors and reduced demand across certain electronics markets, including consumer facing and personal electronics, and telecom, which more than offset the incremental net sales of $91.9 million from the C&K acquisition.
+Added: Operating Income
+Added: Operating income was $300.6 million, representing a decrease of $131.0 million, or 30.4%, in 2023 compared to $431.6 million in 2022.
+Added: The decrease in operating income was primarily due to lower volume mainly driven from the Electronics products business, which more than offset the incremental volume from the C&K acquisition.
+Added: Operating margins decreased from 28.9% in 2022 to 22.3% in 2023 primarily due to the lower volume.
Transportation Segment
−Removed: Net sales in the Transportation segment increased $188.1 million, or 35.6%, in 2022 compared to 2021 and included unfavorable changes in foreign exchange rates of $26.0 million or 4.9%.
−Removed: The sales increase was primarily due to the incremental sales of $202.8 million from the Carling acquisition.
−Removed: Net sales in the commercial vehicle business increased by $214.4 million, largely due to the Carling acquisition noted previously and continued demand across a number of commercial vehicle end markets.
−Removed: The passenger car products and automotive sensors businesses had sales decreases of $16.6 million and $9.8 million, respectively.
−Removed: The decreases were primarily driven by unfavorable changes in foreign exchange rates, certain automotive customers rebalancing their inventory levels of the Company's products, and supply chain constraints, partially offset by greater content growth from vehicle mix and electric vehicles.
+Added: Net sales in the Transportation segment decreased $37.9 million, or 5.3%, in 2023 compared to 2022 and included unfavorable changes in foreign exchange rates of $0.7 million or 0.1%.
+Added: The commercial vehicle business net sales declined $50.9 million, largely driven by reduced demand largely due to inventory rebalancing at certain distributors and customers, and some demand reduction in commercial vehicle end markets.
+Added: The automotive sensors business had net sales declines of $3.4 million primarily due to lower demand in the United States and China.
+Added: These declines were partially offset by an increase of $16.5 million from
+Added: the passenger car products business driven by the ongoing electronification and electrification of vehicles and global passenger vehicle production growth.
+Added: Operating Income
+Added: Operating income was $33.7 million, representing a decrease of $29.8 million, or 47.0%, in 2023 compared to $63.5 million in 2022.
+Added: Operating margins declined from 8.9% to 5.0% primarily due to lower volume from the commercial vehicle business, partially offset by higher volume and price realization in the passenger car business.
Industrial Segment
The Industrial segment net sales increased by $29.1 million, or 9.5%, in 2023 compared to 2022 and included unfavorable changes in foreign exchange rates of $0.7 million or 0.2%.
−Removed: The increase in net sales was primarily due to higher volume and demand across a number of end markets, price realization, and incremental one month net sales of $9.1 million or 3.6% from the Hartland acquisition.
+Added: The increase in net sales was primarily due to higher volume across multiple end markets, and the acquisition of Western Automation.
+Added: Operating Income
+Added: Operating income was $54.8 million, representing an increase of $5.9 million, or 12.1%, in 2023 compared to $48.9 million in 2022.
+Added: The increase in operating income was due to price realization and higher volume, partially offset by higher amortization expenses from the acquisition of Western Automation.
+Added: Operating margins were 16.4% in 2023 compared to 16.0% in 2022.
Geographic Net Sales Information
2 unchanged sentences
(in millions) 2023 2022 Change % Change
−Removed: Asia-Pacific $ 1,019.9 $ 955.7 $ 64.2 6.7 %
Americas $ 901.5 $ 992.3 $ (90.8) (9.2) %
+Added: Asia-Pacific 898.9 1,019.9 (121.0) (11.9) %
Europe 562.3 501.7 60.6 12.1 %
Total $ 2,362.7 $ 2,513.9 $ (151.2) (6.0) %
−Removed: Asia-Pacific net sales increased $64.2 million, or 6.7%, in 2022 compared to 2021 and included unfavorable changes in foreign exchange rates of $18.4 million.
−Removed: The increase in net sales was primarily due to incremental sales from the C&K acquisition and higher volume and price realization from the semiconductor products business within the Electronics segment and incremental sales from the Carling acquisition included in the commercial vehicle products business, partially offset by lower net sales from the electronics products and passenger car products businesses.
−Removed: Net sales in the Americas increased $298.0 million, or 42.9%, in 2022 compared to 2021 and included unfavorable changes in foreign exchange rates of $1.4 million.
−Removed: The increase in net sales was primarily due to incremental sales from the Carling acquisition included in the commercial vehicle products business within the Transportation segment, higher volume and price realization from all businesses within the Electronics segment including incremental sales from the C&K acquisition and higher volume and price realization from the Industrial segment compared to 2021.
−Removed: European net sales increased $71.8 million, or 16.7%, in 2022 compared to 2021 and included unfavorable changes in foreign exchange rates of $45.5 million.
−Removed: The increase in net sales was primarily due to increased volume across all businesses within the Electronics segment including incremental sales from C&K acquisition, and incremental sales from the Carling acquisition included in the commercial vehicle products business within the Transportation segment compared to 2021.
−Removed: RESULTS OF OPERATIONS FOR THE YEAR ENDED JANUARY 01, 2022 AS COMPARED TO THE YEAR ENDED DECEMBER 26, 2020
−Removed: Fiscal year 2021 included approximately $12.6 million of non-segment charges, of which $8.4 million relates to purchase accounting inventory step-up charges, $7.0 million of acquisition-related and integration charges related to the Carling and Hartland acquisitions and other contemplated acquisitions, and $2.2 million of restructuring, impairment and other charges, primarily related to employee termination costs.
+Added: Net sales in the Americas decreased $90.8 million, or 9.2%, in 2023 compared to 2022 and included unfavorable changes in foreign exchange rates of $0.1 million.
+Added: The decrease in net sales was primarily due to lower volume from the electronics products business within the Electronics segment and lower sales from the commercial vehicle business within the Transportation segment, partially offset by incremental sales from C&K acquisition within the Electronics segment and higher sales within the Industrial segment compared to 2022.
+Added: Asia-Pacific net sales decreased $121.0 million, or 11.9%, in 2023 compared to 2022 and included unfavorable changes in foreign exchange rates of $12.3 million.
+Added: The decrease in net sales was primarily due to lower net sales from electronics products business within the Electronics segment and lower net sales from the commercial vehicle business within the Transportation segment, partially offset by incremental sales from C&K acquisition within the Electronics segment and Western Automation acquisition within in the Industrial segment compared to 2022.
+Added: European net sales increased $60.6 million, or 12.1%, in 2023 compared to 2022 and included favorable changes in foreign exchange rates of $13.1 million.
+Added: The increase in net sales was primarily due to incremental sales from the acquisition of C&K, increased volume from the semiconductor business within the Electronics segment and the passenger car products business within the Transportation segment, and the incremental sales from the Western Automation acquisition included within the Industrial segment, partially offset by lower net sales from the electronics products business within the Electronics segment.
+Added: RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022 AS COMPARED TO THE YEAR ENDED JANUARY 01, 2022
+Added: Fiscal year 2022 included $43.2 million of non-segment charges, of which $17.6 million related to legal and professional fees and other integration expenses primarily associated with the C&K and Carling acquisitions and other contemplated acquisitions, $15.6 million of purchase accounting inventory step-up charges, and $10.0 million of restructuring, impairment and other charges, primarily related to employee termination costs and a $2.9 million intangible asset impairment charge within the Electronics segment in the fourth quarter of 2022.
See Note 8, Restructuring, Impairment and Other Charges, for further discussion.
+Added: Fiscal year 2021 included $12.6 million of non-segment charges, of which $8.4 million relates to purchase accounting inventory step-up charges, $7.0 million of acquisition-related and integration charges related to the Carling and Hartland acquisitions and other contemplated acquisitions, and $2.2 million of restructuring, impairment and other charges, primarily related to employee termination costs.
+Added: See Note 8, Restructuring, Impairment and Other Charges , for further discussion.
Additionally, partially offsetting the above amounts was a gain of $5.0 million recorded for the sale of buildings within the Electronics segment.
−Removed: Fiscal year 2020 included approximately $44.0 million of non-segment charges, of which $2.3 million of charges are acquisition-related and integration charges related to the IXYS acquisition and other contemplated acquisitions.
−Removed: In addition, there were $41.7 million of restructuring, impairment and other charges, primarily related to the goodwill impairment charge of $33.8 million recorded in the second quarter associated with the automotive sensors reporting unit within the Transportation segment, employee termination costs of $5.5 million, $2.2 million of impairment charges recorded in the first quarter associated with the announced consolidation of a manufacturing facility within the Industrial segment and other restructuring charges of $0.2 million.
−Removed: Fiscal year 2021 also included approximately $17.2 million in foreign currency exchange losses primarily attributable to changes in the value of the Euro, Chinese renminbi, Mexican peso, and Philippine peso against the U.S.
−Removed: dollar, while fiscal year 2020 included approximately $14.9 million in foreign currency exchange gains primarily attributable to changes in the value of the Euro, Philippine peso, and Chinese renminbi against the U.S.
+Added: Fiscal year 2022 also included approximately $24.4 million in foreign currency exchange losses primarily attributable to changes in the value of the Euro, Philippine peso, Sterling, and Chinese renminbi against the U.S.
+Added: dollar, while fiscal year 2021 included approximately $17.2 million in foreign currency exchange losses primarily attributable to changes in the value of the Euro, Chinese renminbi, Mexican peso, and Philippine peso against the U.S.
(in thousands, except % change) 2022 2021 Change % Change
4 unchanged sentences
Operating income 500,826 385,642 115,184 29.9 %
−Removed: Other expense (income), net 8,932 (5,083) 14,015 (275.7) %
+Added: Other expense, net 7,207 8,932 (1,725) (19.3) %
Income before income taxes 443,044 341,025 102,019 29.9 %
1 unchanged sentence
Net income 373,306 283,806 89,500 31.5 %
−Removed: Net sales increased $634.2 million or 43.9% including $27.4 million or 1.9% of favorable changes in foreign exchange rates for 2021 compared to 2020.
−Removed: The increase was due to volume growth across all segments and businesses while 2020 had temporary closures of manufacturing facilities resulting from government directives due to the impact of COVID-19.
−Removed: The increase was due to higher sales of $363.0 million, $138.9 million, and $132.3 million in the Electronics, Industrial, and Transportation segments, respectively, primarily driven by higher volumes across all businesses within these segments.
−Removed: The volume increase within the Electronics segment was led by broad-based demand across electronics, transportation and industrial end markets.
−Removed: The increase within the Industrial segment was primarily due to $100.5 million of net sales resulting from the Hartland acquisition and volume growth within the Industrial segment.
−Removed: The increase within the Transportation segment was due to volume growth driven by higher demand in the global auto and commercial vehicle markets, greater content growth across passenger vehicles due to vehicle mix, including growth in electric vehicles and some customers maintaining additional inventory of our products, and $15.3 million of net sales resulting from the Carling acquisition.
+Added: Net sales were $2,513.9 million, which increased $434.0 million, or 20.9% compared to 2021, including $202.8 million or 9.8% of incremental net sales within the Transportation segment from the Carling acquisition and $81.7 million or 3.9% of net sales within the Electronics segment from the C&K acquisition, partially offset by $65.3 million or 3.1% of unfavorable changes in foreign exchange rates for 2022 compared to 2021.
+Added: The remaining increase of $110.3 million in the Electronics segment was due to higher volume and price realization across numerous end markets while the Industrial segment increased $53.8 million as a result of higher volume and price realization.
Cost of Sales
Cost of sales was $1,507.0 million, or 59.9% of net sales, in 2022, compared to $1,308.0 million, or 62.9% of net sales, in 2021.
−Removed: The increase in cost of sales was primarily due to greater volume across all segments driven by the factors discussed above along with the Hartland and Carling acquisitions.
−Removed: As a percent of net sales, cost of sales decreased 2.4% driven by volume leverage, partially offset by higher transportation , duty and tariff charges of 2.2%, the purchase accounting inventory charges of $8.4 million or 0.4% resulting from the Hartland and Carling acquisitions, and higher material costs.
+Added: The increase in cost of sales was primarily due to greater volume across the Electronics and Industrial segments driven by the factors discussed above along with the acquisitions of Carling and C&K.
+Added: As a percent of net sales, cost of sales decreased 3.0% driven by volume leverage, partially offset by higher purchase accounting inventory charges of $7.2 million or 0.2% compared to 2021.
Gross profit was $1,006.9 million, or 40.1% of net sales, in 2022, compared to $771.9 million, or 37.1% of net sales, in 2021.
−Removed: The $270.8 million increase in gross profit was primarily due to higher volume across all segments while 2020 had additional costs associated with government-directed plant shutdowns and supply chain constraints.
−Removed: The increase in gross margin of 2.4% was primarily driven by volume leverage and favorable product mix within the Electronics segment, partially offset by higher transportation , duty and tariff charges as a percent of net sales of 2.2%, the purchase accounting inventory charges of $8.4 million or 0.4%, and higher material costs.
+Added: The $235.0 million increase in gross profit was primarily due to higher volume and price realization in the Electronics and
+Added: Industrial segments along with the acquisitions of Carling and C&K.
+Added: The increase in gross margin of 3.0% was primarily driven by volume leverage and price realization, partially offset by higher purchase accounting inventory charges of $7.2 million or 0.2% compared to 2021.
Operating Expenses
Total operating expenses were $506.1 million, or 20.1% of net sales, for 2022 compared to $386.3 million, or 18.6% of net sales, for 2021.
−Removed: The increase in operating expenses of $47.5 million is primarily due to higher selling, general, and administrative expenses of $71.0 million largely due to higher accrued incentive compensation, the Hartland and Carling acquisitions and higher acquisition-related and integration charges of $4.7 million, and higher research and development expenses of $13.4 million, partially offset by the 2020 goodwill impairment charge of $33.8 million, or 2.3% of net sales, in the automotive sensors reporting unit within the Transportation segment and impairment charges of $2.2 million related to the Company’s 2020 first quarter announcement to consolidate a manufacturing facility within the Industrial segment.
+Added: The increase in operating expenses of $119.8 million was primarily due to higher selling, general, and administrative expenses, which increased by $69.4 million, research and development expenses, which increased by $29.7 million and increased amortization expense of $13.0 million and acquisition-related expenses of $10.6 million largely due to the Carling and C&K acquisitions.
Operating Income
Operating income for 2022 was $500.8 million , an increase of $115.2 million or 29.9% compared to $385.6 million for 2021.
−Removed: The increase in operating income was primarily due to higher gross margin across all segments, led by the Electronics segment partially offset by higher operating expenses noted above.
−Removed: Operating margins increased from 11.2% in 2020 to 18.5% in 2021 primarily driven by the factors mentioned above.
−Removed: The 2020 goodwill impairment charge of $33.8 million negatively impacted the 2020 operating margin by 2.3%.
+Added: The increase in operating income was primarily due to higher gross profit across from Electronics and Industrial segments, partially offset by higher operating expenses as discussed above.
+Added: Operating margins increased from 18.5% in 2021 to 19.9% in 2022 primarily driven by higher operating income in the Electronics segment of $122.0 million.
Income Before Income Taxes
Income before income taxes for 2022 was $443.0 million, or 17.6% of net sales compared to $341.0 million, or 16.4% of net sales, for 2021.
−Removed: In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was impacted by foreign exchange losses of $17.2 million during the fiscal year ended January 1, 2022 compared to foreign exchange gains of $14.9 million during the fiscal year ended December 26, 2020, and a $19.9 million non-cash pension settlement charge, partially of fset by a $4.0 million increase in unrealized investment gains associated with our equity investment, and lower interest expense of $2.6 million due to lower outstanding borrowings under the credit facility along with a lower effective interest rate and a reduction in coal mining charges of $1.6 million compared to 2020.
+Added: In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was impacted by $14.0 million of unrealized losses during 2022 compared to unrealized gains of $8.8 million during 2021 related to the Company's equity investment, higher interest expense of $7.7 million due to an increase in borrowings outstanding, and higher foreign exchange losses of $7.2 million compared to 2021, partially offset by a $19.9 million non-cash pension settlement charge recognized in 2021.
Income tax expense for 2022 was $69.7 million, or an effective tax rate of 15.7%, compared to income tax expense of $57.2 million, or an effective tax rate of 16.8% for 2021.
2 unchanged sentences
losses and expenses with no tax benefit.
−Removed: The effective tax rate for 2021 is lower than the effective tax rate for 2020, primarily due to an increase in the income earned in lower tax jurisdictions in 2021 as compared to 2020, as well as the impact of the goodwill impairment charge of $33.8 million recorded in 2020, the substantial majority of which did not result in a tax benefit.
+Added: The effective tax rate for 2022 is lower than the effective tax rate for 2021, primarily due to one-time tax benefits resulting from losses on investments in the stock of two of the Company's affiliates.
Further information regarding these items is provided in Note 14, Income Taxes , of the Notes to Consolidated Financial Statements included in this Annual Report.
3 unchanged sentences
Segment information is described more fully in Note 16, Segment Information , of the Notes to Consolidated Financial Statements included in this Annual Report.
−Removed: The following table is a summary of the Company’s net sales by segment:
+Added: The following table is a summary of the Company’s net sales and operating income by segment:
(in millions) 2022 2021 Change % Change
4 unchanged sentences
Total $ 2,513.9 $ 2,079.9 $ 434.0 20.9 %
+Added: Operating Income Fiscal Year
+Added: (in millions) 2022 2021 Change % Change
+Added: Electronics $ 431.6 $ 309.6 $ 122.0 39.4 %
+Added: Transportation
+Added: 63.5 66.0 (2.5) (3.7) %
+Added: Industrial 48.9 22.6 26.3 116.0 %
+Added: Other (a) (43.2) (12.6) (30.6)
+Added: Total $ 500.8 $ 385.6 $ 115.2 29.9 %
+Added: (a) Included in “Other” Operating income for 2022 was $17.6 million of legal and professional fees and other integration expenses related to completed and contemplated acquisitions, $15.6 million of purchase accounting inventory step-up charges, and $10.0 million of restructuring, impairment and other charges, primarily related to employee termination costs and a $2.9 million non-cash impairment charge for certain acquired technology and patent intangible assets due to a change in use and projected cash flows within the Electronics segment in the fourth quarter of 2022.
+Added: See Note 8, Restructuring, Impairment and Other Charges , for further discussion.
+Added: Included in “Other” Operating income for 2021 was $8.4 million of purchase accounting inventory step-up charges, $7.0 million of legal and professional fees and other integration expenses related to Carling, Hartland and other contemplated acquisitions, and $2.2 million of restructuring, impairment and other charges, primarily related to employee termination costs.
+Added: In addition, there was a gain of $5.0 million recorded for the sale of buildings within the Electronics segment.
+Added: See Note 8, Restructuring, Impairment and Other Charges , for further discussion.
Electronics Segment
−Removed: Net sales for the Electronics segment increased $363.0 million, or 38.7%, in 2021 compared to 2020 and included favorable changes in foreign exchange rates of $14.5 million or 1.5%.
−Removed: The sales increase was primarily due to increased volume for the electronics and semiconductor products businesses of $206.5 million and $156.5 million, respectively.
−Removed: The volume increases were driven by broad-based demand across electronics, transportation and industrial end markets while 2020 were negatively impacted by production disruptions and temporary plant shutdowns due to the impact of COVID-19.
+Added: Net sales for the Electronics segment increased $192.1 million, or 14.8%, in 2022 compared to 2021 and included unfavorable changes in foreign exchange rates of $37.1 million or 2.9%.
+Added: The sales increase was $123.4 million for the semiconductor products business and $68.7 million in the electronics products business, primarily driven by increased volume and price realization.
+Added: The sales increase in electronics products business also included the incremental $81.7 million of sales from the acquisition of C&K.
+Added: These volume increases were driven by continued broad-based demand across numerous end markets.
+Added: Operating Income
+Added: Operating income was $431.6 million, representing an increase of $122.0 million, or 39.4%, in 2022 compared to $309.6 million in 2021.
+Added: The increase in operating income was primarily due to higher volume and price realization from the semiconductor and electronics products businesses and also the incremental operating income from the C&K acquisition.
+Added: Operating margins increased from 23.8% in 2021 to 28.9% in 2022.
Transportation Segment
−Removed: Net sales in the Transportation segment increased $132.3 million, or 33.4%, in 2021 compared to 2020 and included favorable changes in foreign exchange rates of $12.0 million or 3.0%.
−Removed: The sales increase was due to higher volume in passenger car products, commercial vehicle products, and the automotive sensors businesses of $65.6 million, $59.0 million, and $7.8 million, respectively, including the incremental net sales of $15.3 million from the Carling acquisition within the commercial vehicle products business.
−Removed: These increases were due to volume growth driven by higher demand in the global auto and commercial vehicle markets, greater content growth across passenger vehicles due to vehicle mix, including growth in electric vehicles and some customers maintaining additional inventory of our products as compared to 2020, which had production disruptions and temporary plant shutdowns due to the impact of COVID-19.
+Added: Net sales in the Transportation segment increased $188.1 million, or 35.6%, in 2022 compared to 2021 and included unfavorable changes in foreign exchange rates of $26.0 million or 4.9%.
+Added: The sales increase was primarily due to the incremental sales of $202.8 million from the Carling acquisition.
+Added: Net sales in the commercial vehicle business increased by $214.4 million, largely due to the Carling acquisition noted previously and continued demand across a number of commercial vehicle end markets.
+Added: The passenger car products and automotive sensors businesses had sales decreases of $16.6 million and $9.8 million, respectively.
+Added: The decreases were primarily driven by unfavorable changes in foreign exchange rates, certain automotive customers rebalancing their inventory levels of the Company's products, and supply chain constraints, partially offset by greater content growth from vehicle mix and electric vehicles.
+Added: Operating Income
+Added: Operating income was $63.5 million, representing a decrease of $2.5 million, or 3.7%, in 2022 compared to $66.0 million in 2021.
+Added: The decreased in operating income was primarily due to lower volume in the passenger car products and automotive sensors businesses, partially offset by the incremental operating income from the Carling acquisition.
+Added: Operating margins declined from 12.5% to 8.9%.
Industrial Segment
−Removed: The Industrial segment net sales increased by $138.9 million, or 123.8%, in 2021 compared to 2020 and included favorable changes in foreign exchange rates of $0.9 million or 0.8%.
−Removed: The increase in net sales was primarily due to the incremental net sales of $100.5 million or 90% from the Hartland acquisition, growth across all product lines, and the transfer of the temperature sensor product line totaling $4.7 million which was previously reported in the Electronics segment and moved to Industrial segment in the third quarter of 2020.
−Removed: Additionally, 2020 was negatively impacted by production disruptions and temporary plant shutdowns due to the impact of COVID-19.
+Added: The Industrial segment net sales increased by $53.8 million, or 21.4%, in 2022 compared to 2021 and included unfavorable changes in foreign exchange rates of $2.2 million or 0.9%.
+Added: The increase in net sales was primarily due to higher volume and demand across a number of end markets, price realization, and incremental one month net sales of $9.1 million or 3.6% from the Hartland acquisition.
+Added: Operating Income
+Added: Operating income was $48.9 million, representing an increase of $26.3 million, or 116.0%, in 2022 compared to $22.6 million in 2021.
+Added: The increase in operating income was due to higher volume and price realization.
+Added: Operating margins were 16.0% in 2022 compared to 9.0% in 2021.
Geographic Net Sales Information
6 unchanged sentences
Total $ 2,513.9 $ 2,079.9 $ 434.0 20.9 %
−Removed: Asia-Pacific net sales increased $285.2 million, or 42.5%, in 2021 compared to 2020 and included favorable changes in foreign exchange rates of $12.5 million.
−Removed: The increase in net sales was primarily due to higher volume across all segments and businesses compared to 2020 that had production disruptions due to the impact of COVID-19.
−Removed: Net sales in the Americas increased $236.5 million, or 51.7%, in 2021 compared to 2020 and included favorable changes in foreign exchange rates of $0.7 million.
−Removed: The increase in net sales was primarily due to incremental sales from the Hartland and Carling acquisitions, higher volume across all segments and businesses compared to 2020 that had production disruptions due to the impact of COVID-19.
−Removed: European net sales increased $112.5 million, or 35.4%, in 2021 compared to 2020 and included favorable changes in foreign exchange rates of $14.2 million.
−Removed: The increase in net sales was primarily due to higher volume across all businesses within the Electronics and Transportation segments compared to the 2020 that had production disruptions due to the impact of COVID-19.
+Added: Asia-Pacific net sales increased $64.2 million, or 6.7%, in 2022 compared to 2021 and included unfavorable changes in foreign exchange rates of $18.4 million.
+Added: The increase in net sales was primarily due to incremental sales from the C&K acquisition and higher volume and price realization from the semiconductor products business within the Electronics segment and incremental sales from the Carling acquisition included in the commercial vehicle products business, partially offset by lower net sales from the electronics products and passenger car products businesses.
+Added: Net sales in the Americas increased $298.0 million, or 42.9%, in 2022 compared to 2021 and included unfavorable changes in foreign exchange rates of $1.4 million.
+Added: The increase in net sales was primarily due to incremental sales from the Carling acquisition included in the commercial vehicle products business within the Transportation segment, higher volume and price realization from all businesses within the Electronics segment including incremental sales from the C&K acquisition and higher volume and price realization from the Industrial segment compared to 2021.
+Added: European net sales increased $71.8 million, or 16.7%, in 2022 compared to 2021 and included unfavorable changes in foreign exchange rates of $45.5 million.
+Added: The increase in net sales was primarily due to increased volume across all businesses within the Electronics segment including incremental sales from C&K acquisition, and incremental sales from the Carling acquisition included in the commercial vehicle products business within the Transportation segment compared to 2021.
Liquidity and Capital Resources
−Removed: Cash and cash equivalents were $562.6 million as of December 31, 2022, an increase of $84.1 million as compared to January 1, 2022.
+Added: Cash and cash equivalents were $555.5 million as of December 30, 2023, a decrease of $7.1 million as compared to December 31, 2022.
As of December 30, 2023, $376.9 million of the Company's $555.5 million cash and cash equivalents was held by non-U.S.
7 unchanged sentences
This evaluation requires judgment about the future operating and liquidity needs of the Company and its foreign subsidiaries.
−Removed: Changes in economic and business conditions, non-U.S.
−Removed: tax laws could result in changes to these judgments and the need to record additional tax liabilities.
+Added: Changes in economic and business conditions and tax laws could result in changes to these judgments and the need to record additional tax liabilities.
The Company has historically supported its liquidity needs through cash flows from operations.
19 unchanged sentences
The interest rate swap, with a notional value of $200 million, was designated as a cash flow hedge against the variability of cash flows associated with the Company's SOFR based loans scheduled to mature on June 30, 2027.
−Removed: As of December 31, 2022, the effective interest rate on outstanding borrowings under the credit facility was 5.42%.
−Removed: As of December 31, 2022, the Company had no outstanding letters of credit and had available $600.0 million of borrowing capacity under the revolving credit facility.
+Added: As of December 30, 2023, the effective interest rate on unhedged portion of the outstanding borrowings under the credit facility was 6.71%, and 4.13% on the hedged portion.
+Added: As of December 30, 2023, the Company had $0.2 outstanding letters of credit and had available $599.8 million of borrowing capacity under the revolving credit facility.
At December 30, 2023, the Company was in compliance with all covenants under the credit agreement.
2 unchanged sentences
Interest on the Euro Senior Notes is payable semiannually on June 8 and December 8, commencing June 8, 2017.
+Added: On December 8, 2023, the Company paid off €117 million of Euro Senior Notes, Series A due 2023.
On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold $125 million aggregate principal amount of senior notes in two series.
24 unchanged sentences
As of December 30, 2023, the Company met all the conditions required to borrow under the Credit Agreement and management expects the Company to continue to meet the applicable borrowing conditions.
−Removed: On February 3, 2023, the Company acquired Western Automation for approximately $162 million in cash.
+Added: 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.
+Added: The acquisition of the Dortmund Fab is expected to close in early fiscal year 2025.
+Added: The total purchase price for the fab is approximately 93 million Euro, of which 37.2 million Euro down payment (approximately $40.5 million) was made with cash on hand and recorded in Other long-term assets in the Consolidated Balance Sheets was paid in the third quarter after regulatory approvals and approximately 56 million Euro will be paid at closing.
+Added: The transaction did not have a material impact on the Company’s fiscal year 2023 financial results and is not expected to have material impact on the Company's 2024 financial results and will be reported in the semiconductor business within the Company’s Electronics segment.
+Added: On February 3, 2023, the Company completed the acquisition of 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.
−Removed: Western Automation has annualized sales of approximately $25 million and will be reported within the company’s Industrial segment.
−Removed: The company does not expect the acquisition to have a material impact to its 2023 financial results.The Company financed the transaction with cash on hand.
+Added: At the time the Company and Western Automation entered into the definitive agreement, Western Automation
+Added: had annualized sales of approximately $25 million.
+Added: The business is reported within the Company’s Industrial segment.
+Added: The Company financed the transaction with cash on hand.
On July 19, 2022, the Company acquired C&K Switches for $540 million in cash.
16 unchanged sentences
Operating cash outflows are largely attributable to recurring expenditures for raw materials, labor, rent, interest, taxes and other operating activities.
−Removed: The following describes the Company’s cash flows for the fiscal year ended December 31, 2022 and January 1, 2022:
+Added: The following describes the Company’s cash flows for the fiscal year ended December 30, 2023 and December 31, 2022:
(in millions) 2023 2022
1 unchanged sentence
Net cash used in investing activities (284.3) (636.4)
−Removed: Net cash provided by (used in) financing activities 310.2 (69.0)
+Added: Net cash (used in) provided by financing activities (185.7) 310.2
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 4.8 (11.4)
−Removed: Increase (decrease) in cash, cash equivalents, and restricted cash 82.1 (204.7)
+Added: (Decrease) increase in cash, cash equivalents, and restricted cash (7.8) 82.1
Cash, cash equivalents, and restricted cash at beginning of period 564.9 482.8
2 unchanged sentences
Net cash provided by operating activities was $457.4 million for the fiscal year 2023, an increase of $37.7 million, compared to $419.7 million during the fiscal year 2022.
−Removed: The increase in net cash provided by operating activities was primarily due to higher cash earnings partially offset by increases in working capital resulting from higher sales growth and larger annual incentive bonus payments made in 2022 as compared to 2021.
+Added: The increase in net cash provided by operating activities was primarily due to reductions in working capital partially offset by lower cash earnings.
Cash Flow from Investing Activities
Net cash used in investing activities was $284.3 million for the fiscal year 2023, compared to $636.4 million during the fiscal year 2022.
−Removed: Capital expenditures were $104.3 million, representing an increase of $13.8 million compared to the fiscal year 2021.
−Removed: Net cash paid for acquisitions was $532.7 million during the fiscal year 2022 primarily for the C&K and Embed acquisitions versus net cash paid of $422.1 million for the Carling and Hartland acquisitions during the fiscal year 2021.
−Removed: The Company also received proceeds of $0.7 million primarily from the sale of a property within the Transportation segment during the fiscal year 2022 as compared to proceeds of $15.4 million from the sale of buildings within the Electronics segment during the fiscal year 2021.
+Added: Net cash paid for acquisitions was $198.8 million for the Dortmund Fab and Western Automation acquisitions during the fiscal year 2023 versus $532.7 million primarily for the C&K and Embed acquisitions during the fiscal year 2022.
+Added: Capital expenditures were $86.2 million, representing a decrease of $18.2 million compared to the fiscal year 2022.
+Added: The Company also received proceeds of $0.8 million primarily from the sale of a property within the Electronics segment during the fiscal year 2023 as compared to proceeds of $0.7 million from the sale of a property within the Transportation segment during the fiscal year 2022.
Cash Flow from Financing Activities
−Removed: Net cash provided by financing activities was $310.2 million for the fiscal year 2022 compared to $69.0 million used in financing activities for the fiscal year 2021.
+Added: Net cash used in financing activities was $185.7 million for the fiscal year 2023 compared to $310.2 million net cash provided by financing activities for the fiscal year 2022.
On July 18, 2022, the Company issued and funded $100 million in aggregate principal amount of 4.33% U.S.
1 unchanged sentence
On June 30, 2022, the Company amended and restated its Credit Agreement and borrowed $300.0 million through a term loan.
+Added: During the fiscal year 2023, the Company paid $121.3 million (€117 million) of Euro Senior Notes, Series A due 2023 and $7.5 million on the term loan.
During the fiscal year 2022, the Company paid $25.0 million of U.S.
Senior Notes, Series A due on February 15, 2022 and $3.8 million on the term loan.
−Removed: During the fiscal year 2021, the Company made payments of $30 million on the amended revolving credit facility.
−Removed: Additionally, dividends paid by the Company increased $6.2 million from $49.7 million for the fiscal year 2021 to $55.9 million for the fiscal year 2022.
−Removed: The following describes the Company’s cash flows for the twelve months ended January 1, 2022 and December 26, 2020:
+Added: Additionally, the Company paid dividends of $62.2 million and $55.9 million for the fiscal year 2023 and 2022, respectively, representing an increase of $6.3 million from the fiscal year 2022.
+Added: The following describes the Company’s cash flows for the twelve months ended December 31, 2022 and January 1, 2022:
(in millions) 2022 2021
1 unchanged sentence
Net cash used in investing activities (636.4) (499.2)
−Removed: Net cash used in financing activities (69.0) (67.8)
+Added: Net cash provided by (used in) financing activities 310.2 (69.0)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (11.4) (9.8)
−Removed: (Decrease) increase in cash, cash equivalents, and restricted cash (204.7) 156.4
+Added: Increase (decrease) in cash, cash equivalents, and restricted cash 82.1 (204.7)
Cash, cash equivalents, and restricted cash at beginning of period 482.8 687.5
2 unchanged sentences
Net cash provided by operating activities was $419.7 million for the fiscal year 2022, an increase of $46.4 million, compared to $373.3 million during the fiscal year 2021.
−Removed: The increase in net cash provided by operating activities was primarily due to higher cash earnings partially offset by increases in working capital resulting from higher sales growth.
+Added: The increase in net cash provided by operating activities was primarily due to higher cash earnings partially offset by increases in working capital resulting from higher sales growth and larger annual incentive bonus payments made in 2022 as compared to 2021.
Cash Flow from Investing Activities
Net cash used in investing activities was $636.4 million for the fiscal year 2022, compared to $499.2 million during the fiscal year 2021.
−Removed: Capital expenditures were $90.6 million, representing a decrease of $34.4 million compared to the fiscal year 2020.
−Removed: Net cash paid for the Hartland and Carling acquisitions was $422.1 million during the fiscal year 2021.
−Removed: The Company also received proceeds of $15.4 million from the sale of buildings within the Electronics segment during the fiscal year 2021 as compared to proceeds of $4.8 million as a result of the sale of a property within the Industrial segment during the fiscal year 2020.
+Added: Capital expenditures were $104.3 million, representing an increase of $13.8 million compared to the fiscal year 2021.
+Added: Net cash paid for acquisitions was $532.7 million during the fiscal year 2022 primarily for the C&K and Embed acquisitions versus net cash paid of $422.1 million for the Carling and Hartland acquisitions during the fiscal year 2021.
+Added: The Company also received proceeds of $0.7 million primarily from the sale of a property within the Transportation segment during the fiscal year 2022 as compared to proceeds of $15.4 million from the sale of buildings within the Electronics segment during the fiscal year 2021.
Cash Flow from Financing Activities
−Removed: Net cash used in financing activities was $69.0 million for the fiscal year 2021 compared to $67.8 million for the fiscal year 2020.
−Removed: The Company made payments of $30.0 million on the amended revolving credit facility during the fiscal year 2021.
−Removed: On March 25, 2020, the Company borrowed $100.0 million from its revolving credit facility to preserve financial flexibility and enhance liquidity, given the increasing levels of uncertainty related to COVID-19.
−Removed: On April 3, 2020, the Company amended the Credit Agreement to eliminate the $200.0 million unsecured term loan credit facility, with the remaining outstanding balance of $140.0 million repaid in full on April 3, 2020 through a new borrowing of $140.0 million under the amended revolving credit facility.
−Removed: The Company also made principal payments of $5.0 million on the term loan during fiscal year 2020 before amended the Credit Agreement.
+Added: Net cash provided by financing activities was $310.2 million for the fiscal year 2022 compared to $69.0 million used in financing activities for the fiscal year 2021.
+Added: On July 18, 2022, the Company issued and funded $100 million in aggregate principal amount of 4.33% U.S.
+Added: Senior Notes, due 2032.
+Added: On June 30, 2022, the Company amended and restated its Credit Agreement and borrowed $300.0 million through a term loan.
+Added: During the fiscal year 2022, the Company paid $25.0 million of U.S.
+Added: Senior Notes, Series A due on February 15, 2022 and $3.8 million on the term loan.
During the fiscal year 2021, the Company made payments of $30 million on the amended revolving credit facility.
−Removed: During the fiscal year 2020, the Company repurchased 175,110 shares of its common stock totaling $22.9 million.
−Removed: Additionally, dividends paid increased $2.9 million from $46.8 million for the fiscal year 2020 to $49.7 million for the fiscal year 2021.
+Added: Additionally, dividends paid by the Company increased $6.2 million from $49.7 million for the fiscal year 2021 to $55.9 million for the fiscal year 2022.
C ontractual Obligations and Commitments
31 unchanged sentences
At December 30, 2023, the Company had a net unfunded status of $35.8 million.
−Removed: The Company expects to make approximately $2.0 million of contributions to the plans in 2023.
+Added: The Company expects to make approximately $2.2 million of contributions to the plans and pay $2.1 million of benefits directly in 2024.
For additional information, see Note 11, Benefit Plans , of the Notes to Consolidated Financial Statements.
Cash dividends paid totaled $62.2 million, $55.9 million and $49.7 million for 2023, 2022 and 2021, respectively.
−Removed: On February 1, 2023, the Board of Directors of the Company declared a quarterly cash dividend of $0.60 per share, payable on March 9, 2023 to stockholders of record as of February 23, 2023.
+Added: On January 25, 2024, the Board of Directors of the Company declared a quarterly cash dividend of $0.65 per share, payable on March 7, 2024 to stockholders of record as of February 22, 2024.
Capital Resources
3 unchanged sentences
Share Repurchase Program
−Removed: On April 29, 2020, the Company announced that the Board of Directors authorized a new program to repurchase up to 1,000,000 shares of the Company's common stock for the period May 1, 2020 to April 30, 2021 (the "2020 program").
−Removed: On April 28, 2021, the Company announced that the Board of Directors authorized a new three-year program to repurchase up to $300 million in the aggregate of shares of the Company’s common stock for the period May 1, 2021 to April 30, 2024 to replace its previous 2020 program.
−Removed: There are $300 million in the aggregate of shares available for purchase under the new program as of December 31, 2022.
+Added: On April 28, 2021, the Company announced that the Board of Directors authorized a three-year program to repurchase up to $300 million in the aggregate of shares of the Company’s common stock for the period May 1, 2021 to April 30, 2024.
+Added: There are $300 million in the aggregate of shares available for purchase under the program as of December 30, 2023.
During the fiscal years of 2023, 2022, and 2021, the Company did not repurchase any shares of its common stock.
−Removed: During the fiscal year 2020, the Company repurchased 175,110 shares of its common stock totaling $22.9 million.
Off-Balance Sheet Arrangements
5 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.