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Item 2. Management’s Discussion and Analysis

2024-10-30 compared with 2024-07-31 · 139 added, 119 removed, 183 unchanged (59% of the section changed)

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the effect of the Company's accounting policies;

labor disputes;

labor disputes and shortages;

restructuring costs in excess of expectations;

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integration of acquisitions may not be achieved in a timely manner, or at all;

and other risks that may be detailed in Item 1A.

"Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 30, 2023, and the Company's other filings and submissions with the Securities and Exchange Commission.

limited realization of the expected benefits from investment and strategic plans;

and other risks that may be detailed in Item 2 , “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 3 , “Quantitative and Qualitative Disclosures About Market Risk” of Part I and Item 1 , “Legal Proceedings” and Item 1A , “Risk Factors” of Part II of this Report, as well as Item 1A .

"Risk Factors" and Item 7 , “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 7A , “Quantitative and Qualitative Disclosures About Market Risk” of Part II of the Company's Annual Report on Form 10-K for the year ended December 30, 2023, and the Company's other filings and submissions with the Securities and Exchange Commission.

The Company does not undertake any obligation to update or revise any forward-looking statements to reflect future events or circumstances, new information or otherwise.

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Executive Summary

For the second quarter of 2024, the Company recognized net sales of $558.5 million, a decrease of $53.5 million, or 8.7% as compared to $612.0 million in the second quarter of 2023 including $5.1 million or 0.8% of unfavorable changes in foreign exchange rates.

For the third quarter of 2024, the Company recognized net sales of $567.4 million, a decrease of $39.7 million, or 6.5% as compared to $607.1 million in the third quarter of 2023 including $0.7 million or 0.1% of favorable changes in foreign exchange rates.

The decrease in net sales was primarily due to lower volume in the Electronics segment.

The Company recognized net income of $45.5 million, or $1.82 per diluted share, in the second quarter of 2024 compared to $70.1 million, or $2.79 per diluted share, in the second quarter of 2023.

The decrease in net income was primarily due to lower operating income of $33.7 million in the Electronics segment driven by a reduction in volume.

Net cash provided by operating activities was $126.6 million for the six months ended June 29, 2024 compared to $151.6 million for the six months ended July 1, 2023.

The decrease in net cash provided by operating activities was primarily due to lower cash earnings, partially offset by reductions in changes in working capital compared to prior year.

During the three and six months ended June 29, 2024, the Company repurchased 109,031 and 179,311 shares of its common stock totaling $24.7 million and $40.9 million, respectively.

The Company recognized net income of $58.1 million, or $2.32 per diluted share, in the third quarter of 2024 compared to $57.8 million, or $2.30 per diluted share, in the third quarter of 2023.

Net cash provided by operating activities was $207.0 million for the nine months ended September 28, 2024 compared to $313.1 million for the nine months ended September 30, 2023.

The decrease in net cash provided by operating activities was primarily due to lower cash earnings.

On October 4, 2024, the Company entered into a definitive agreement to purchase a group annuity contract, under which an insurance company will be required to pay pension payments to the Company’s United Kingdom pension plan to match required pension payments until a later buyout, at which point the insurance company will directly pay and administer the benefits to the plan's participants, or to their designated beneficiaries.

The purchase of this group annuity contract will reduce the Company’s outstanding pension benefit obligation by approximately $23 million, representing approximately 31% of the total obligations of the Company’s qualified pension plans, and will be funded with pension plan assets and additional cash on hand.

In connection with this transaction, the Company currently expects to record a one-time non-cash settlement charge in 2026 estimated between $6 million and $8 million, reflecting the accelerated recognition of a portion of unamortized actuarial losses in the plan.

The actual settlement charge could differ from this estimate due to final data and plan wind-up expenses.

Risk Related to Market Conditions

The Company performs its goodwill impairment tests annually on the first day of its fiscal fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

As part of its interim review for indicators of impairment, management analyzed potential changes in value of individual reporting units with goodwill based on each reporting unit’s operating results for the nine months ended September 28, 2024 compared to expected results.

In addition, management considered how other key assumptions, including discount rates and expected long-term growth rates, used in the last fiscal year’s impairment analysis could be impacted by changes in market conditions and economic events.

Management considered trends in these factors when performing its assessment of whether an interim impairment review was required for any reporting unit.

Based on this interim assessment, management concluded that as of September 28, 2024, no events or changes in circumstances indicated that it was more likely than not that the fair value of any reporting unit had declined below its carrying value.

Nevertheless, significant changes in global economic and market conditions could result in changes to expectations of future financial results and key valuation assumptions.

Such changes could result in revisions of management’s estimates of the fair value of the Company’s reporting units and could result in a material impairment of goodwill as of September 29, 2024, the Company’s next annual measurement date.

In particular, the Industrial controls and sensors reporting unit within the Industrial segment is at risk for future impairment if projected operating results are not met or other inputs into the fair value measurement change.

The potential reduction in the estimated fair value of the reporting unit is due to lower expectations for future revenue, profitability and cash flows for the Industrial controls and sensors reporting unit as compared to the expectations of the 2023 annual goodwill impairment test driven by lower-than-expected demand in the electric vehicle end market as well as reduced government funding to support charging infrastructures for electric vehicles, primarily in Europe.

Continued negative trends could have a significant impact on the estimate fair value of this reporting unit and could result in future impairment charges.

As of the October 1, 2023 annual goodwill impairment test, the Industrial controls and sensors reporting unit’s estimated fair value exceeded book value by approximately 23%.

As of September 28, 2024, the Industrial controls and sensors reporting unit had $157.8 million of goodwill.

The Company has been notified by one of its customers of a product recall potentially due to certain fuses provided by Littelfuse and incorporated in such products.

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The following table summarizes the Company’s unaudited condensed consolidated results of operations for the periods presented.

The second quarter of 2024 includes $5.3 million ($7.6 million year-to-date) of restructuring charges primarily related to employee termination costs.

The third quarter of 2024 includes $1.8 million ($9.4 million year-to-date) of restructuring charges primarily related to employee termination cost, and $1.0 million ($2.8 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions.

During the first quarter of 2024, the Company recognized a $0.9 million impairment charge related to certain machinery and equipment in the commercial vehicle business within the Transportation segment.

See Note 7, Restructuring, Impairment, and Other Charges, for further discussion.

In addition, during the second quarter of 2024, the Company recognized $0.8 million ($1.8 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions, partially offset by a gain of $0.7 million ($1.0 million year-to-date) recorded for the sale of two buildings within the Transportation segment.

The second quarter of 2023 includes $3.9 million ($7.2 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions, and $2.9 million ($4.8 million year-to-date) of restructuring charges primarily related to employee termination costs.

During the third quarter of 2024, the Company recorded a gain of $0.5 million related to the sale of a land use right within the Electronics segment.

In addition, the Company recognized a gain of $1.0 million for the sale of two buildings within the Transportation segment during the first half of 2024.

The third quarter of 2023 includes $3.7 million ($8.5 million year-to-date) of restructuring charges, primarily related to employee termination costs, and $1.8 million ($9.0 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions.

During the third quarter of 2023, the Company recognized a $0.8 million impairment charge substantially related to certain patents in a business within the Industrial segment.

In addition, during the second quarter of 2023, the Company recognized a $3.9 million impairment charge related to the land and building in the commercial vehicle business within the Transportation segment.

See Note 7, Restructuring, Impairment, and Other Charges, for further discussion.

Second Quarter First Six Months

Third Quarter First Nine Months

(in thousands) 2024 2023 Change %

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Net income $ 58,058 $ 57,788 $ 270 0.5 % $ 151,976 $ 216,604 $ (64,628) (29.8) %

Net sales decreased $53.5 million, or 8.7%, for the second quarter of 2024 compared to the second quarter of 2023 including $5.1 million or 0.8% of unfavorable changes in foreign exchange rates.

The decrease in net sales was primarily due to lower volume of $44.5 million and $5.9 million, in the Electronics and Industrial segments, respectively.

Net sales decreased $127.9 million, or 10.5%, for the first six months of 2024 compared to the first six months of 2023, including $6.9 million or 0.6% of unfavorable changes in foreign exchange rates.

The sales decrease was primarily due to lower volume of $112.0 million and $16.6 million in the Electronics and Industrial segments, respectively, that more than offset higher volume of $11.7 million in the passenger car products business within the Transportation segment.

Net sales decreased $39.7 million, or 6.5%, for the third quarter of 2024 compared to the third quarter of 2023 including $0.7 million or 0.1% of favorable changes in foreign exchange rates.

The decrease in net sales was primarily due to lower volume of $39.7 million in the Electronics segment.

Net sales decreased $167.6 million, or 9.2%, for the first nine months of 2024 compared to the first nine months of 2023, including $6.2 million or 0.3% of unfavorable changes in foreign exchange rates.

The sales decrease was primarily due to lower volume of $151.7 million and $10.8 million in the Electronics and Industrial segments, respectively.

Cost of Sales

Cost of sales was $351.5 million, or 62.9% of net sales, in the second quarter of 2024, compared to $377.2 million, or 61.6% of net sales, in the second quarter of 2023.

Cost of sales was $351.5 million, or 61.9% of net sales, in the third quarter of 2024, compared to $380.2 million, or 62.6% of net sales, in the third quarter of 2023.

As a percent of net sales, cost of sales decreased 0.7% driven by improved margins from all businesses within the Transportation and Industrial segments driven by favorable price, product mix and cost reduction initiatives, partially offset by lower volume in the Electronics segments.

Cost of sales was $1,050.6 million, or 63.2% of net sales, in the first nine months of 2024, compared to $1,122.2 million, or 61.4% of net sales, in the first nine months of 2023.

As a percent of net sales, cost of sales increased 1.8% driven by lower volume in the Electronics and Industrial segments, partially offset by improved margin from all businesses within the Transportation segment driven by favorable price, product mix and cost reduction initiatives.

Cost of sales was $699.1 million, or 63.9% of net sales, in the first six months of 2024, compared to $742.0 million, or 60.7% of net sales, in the first six months of 2023.

As a percent of net sales, cost of sales increased 3.2% driven by lower volume in the Electronics and Industrial segments, partially offset by improved margin from the commercial vehicle and auto sensor businesses within the Transportation segment driven by favorable price, product mix and cost reduction initiatives.

Gross profit was $207.0 million, or 37.1% of net sales, in the second quarter of 2024 compared to $234.8 million, or 38.4% of net sales, for the second quarter of 2023.

The $27.8 million decrease in gross profit was primarily due to lower volume in the Electronics and Industrial segments, partially offset by improved margin from all businesses within the Transportation segment driven by favorable price, product mix and cost reduction initiatives.

Gross profit was $394.8 million, or 36.1% of net sales, in the first six months of 2024 compared to $479.8 million, or 39.3% of net sales, for the first six months of 2023.

The $85.0 million decrease in gross profit was primarily due to lower volume in the Electronics and Industrial segments, partially offset by improved margin from the commercial vehicle and auto sensor businesses within the Transportation segment driven by favorable price, product mix and cost reduction initiatives.

Gross profit was $215.9 million, or 38.1% of net sales, in the third quarter of 2024 compared to $226.9 million, or 37.4% of net sales, for the third quarter of 2023.

The $11.0 million decrease in gross profit was primarily due to lower volume in the Electronics segment, partially offset by improved margin from the Transportation and Industrial segments driven by favorable price, product mix and cost reduction initiatives.

Gross profit was $610.7 million, or 36.8% of net sales, in the first nine months of 2024 compared to $706.7 million, or 38.6% of net sales, for the first nine months of 2023.

The $96.0 million decrease in gross profit was primarily due to lower volume in the Electronics and Industrial segments, partially offset by improved margin from the commercial vehicle and passenger car products businesses within the Transportation segment driven by favorable price, product mix and cost reduction initiatives.

Operating Expenses

Operating expenses were $141.5 million, or 25.3% of net sales, for the second quarter of 2024 compared to $142.8 million, or 23.3% of net sales, for the second quarter of 2023.

The decrease in operating expenses of $1.3 million was primarily due to lower restructuring, impairment, and other charges of $1.6 million caused by a $3.9 million impairment charge recognized during the second quarter 2023 related to the land and building of a property within the Transportation segment and lower legal and professional fees and other integration expenses related to completed and contemplated acquisitions, partially offset by

higher employee termination costs related to the reorganization of certain manufacturing, selling and administrative functions within the semiconductor business in the Electronics segment and higher research and development expenses.

Operating expenses were $274.4 million, or 25.1% of net sales, for the first six months of 2024 compared to $277.1 million, or 22.7% of net sales, for the first six months of 2023.

The decrease in operating expenses of $2.7 million was primarily due to lower selling, general, and administrative expenses of $3.4 million as a result of lower legal and professional fees and other integration expenses related to completed and contemplated acquisitions and lower amortization expense of $2.2 million, partially offset by higher research and development expenses of $3.0 million.

Operating expenses were $128.1 million, or 22.6% of net sales, for the third quarter of 2024 compared to $133.2 million, or 21.9% of net sales, for the third quarter of 2023.

The decrease in operating expenses of $5.2 million was primarily due to lower selling, general, and administrative expenses of $3.3 million driven by cost control initiatives and lower restructuring, impairment, and other charges of $2.7 million, partially offset by higher research and development expenses of $1.0 million.

Operating expenses were $402.4 million, or 24.2% of net sales, for the first nine months of 2024 compared to $410.3 million, or 22.4% of net sales, for the first nine months of 2023.

The decrease in operating expenses of $7.9 million was primarily due to lower selling, general, and administrative expenses of $6.7 million as a result of lower legal and professional fees and other integration expenses related to completed and contemplated acquisitions, lower restructuring, impairment, and other charges of $2.9 million caused by a $3.9 million impairment charge recognized during the second quarter 2023 related to the land and building of a property within the Transportation segment, and lower amortization expense of $2.4 million, partially offset by higher research and development expenses of $4.0 million.

Operating Income

Operating income was $65.5 million, representing a decrease of $26.5 million, or 28.8%, for the second quarter of 2024 compared to $92.1 million for the second quarter of 2023.

The decrease in operating income was due to lower gross profit from the Electronics segment, partially offset by higher gross profit from the Transportation segment.

Operating margins decreased from 15.0% in the second quarter of 2023 to 11.7% in the second quarter of 2024 driven by lower volume in the Electronics segment.

Operating income was $120.5 million, representing a decrease of $82.2 million, or 40.6%, for the first six months of 2024 compared to $202.7 million for the first six months of 2023.

Operating income was $87.8 million, representing a decrease of $5.8 million, or 6.2%, for the third quarter of 2024 compared to $93.6 million for the third quarter of 2023.

The decrease in operating income was due to lower gross profit from the Electronics segment, partially offset by higher gross profit from the Transportation and Industrial segments.

Operating margins increased from 15.4% in the third quarter of 2023 to 15.5% in the third quarter of 2024 driven by improved gross margin in the Transportation and Industrial segments, partially offset by lower volume in the Electronics segment.

Operating income was $208.3 million, representing a decrease of $88.1 million, or 29.7%, for the first nine months of 2024 compared to $296.3 million for the first nine months of 2023.

The decrease in operating income was due to lower gross profit from the Electronics and Industrial segments, partially offset by higher gross profit from the Transportation segment.

Operating margins decreased from 16.6% in the first six months quarter of 2023 to 11.0% in the first six months of 2024 driven by lower volume in the Electronics segment.

Operating margins decreased from 16.2% in the first nine months quarter of 2023 to 12.5% in the first nine months of 2024 driven by lower volume in the Electronics segment.

Income Before Income Taxes

Income before income taxes was $61.1 million, or 10.9% of net sales, for the second quarter of 2024 compared to $85.5 million, or 14.0% of net sales, for the second quarter of 2023.

Income before income taxes was $116.8 million, or 10.7% of net sales, for the first six months of 2024 compared to $194.4 million, or 15.9% of net sales, for the first six months of 2023.

In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was primarily benefited by higher interest income of $5.8 million from short-term investment in cash equivalents and higher foreign exchange gains of $2.3 million in the first six months of 2024 compared to the first six months of 2023, partially offset by unrealized losses of $1.1 million during the first six months of 2024 compared to unrealized gains of $0.7 million during the first six months of 2023 related to the Company's equity investment.

The effective tax rate for the three and six months ended June 29, 2024 was 25.6% and 19.6%, compared to the effective tax rate for the three and six months ended July 1, 2023 of 18.0% and 18.3%.

Income before income taxes was $77.7 million, or 13.7% of net sales, for the third quarter of 2024 compared to $75.3 million, or 12.4% of net sales, for the third quarter of 2023.

In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was primarily benefited by unrealized gains of $3.1 million in the third quarter of 2024 compared to unrealized losses of $1.6 million in the third quarter of 2023 related to the Company's equity investment, higher interest income of $2.3 million from short-term investment in cash equivalents, and lower foreign exchange losses of $2.1 million in the third quarter of 2024 compared to the third quarter of 2023.

Income before income taxes was $194.6 million, or 11.7% of net sales, for the first nine months of 2024 compared to $269.6 million, or 14.7% of net sales, for the first nine months of 2023.

In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was primarily benefited by higher interest income of $8.2 million from short-term investments in cash equivalents and lower foreign exchange losses of $4.4 million in the first nine months of 2024 compared to the first nine months of 2023, and unrealized gains of $1.9 million during the first nine months of 2024 compared to unrealized losses of $0.9 million during the first nine months of 2023 related to the Company's equity investment.

The effective tax rate for the three and nine months ended September 28, 2024 was 25.3% and 21.9%, compared to the effective tax rate for the three and nine months ended September 30, 2023 of 23.3% and 19.7%.

The effective tax rates for 2024 are higher than the effective tax rates for the comparable 2023 periods primarily due to decreases in the income earned in lower tax jurisdictions in 2024 as compared to 2023.

The effective tax rate for the three months ended June 29, 2024 is higher than the statutory tax rate primarily due to the proportion of pre-tax income that is earned in higher tax jurisdictions.

The effective tax rate for the six months ended June 29, 2024 is lower than the statutory tax rate primarily due to the lapse in the statute of limitations for previously unrecognized tax benefits recognized in the first quarter.

The effective tax rates for 2023 are lower than the statutory tax rate primarily due to income earned in lower tax jurisdictions.

The effective tax rates for the three months ended September 28, 2024 and September 30, 2023 are higher than the statutory tax rate primarily due to the impact of foreign exchange losses with no related tax benefit.

Additionally, for the 2024 period, the effective tax rate was also higher due to the proportion of pre-tax income that is earned in higher tax jurisdictions.

The effective tax rate for the nine months ended September 28, 2024 is higher than the statutory tax rate primarily due to the proportion of pre-tax income that is earned in higher tax jurisdictions, partially offset by previously unrecognized tax benefits recognized in the first quarter due to the lapse in the statute of limitations.

The effective tax rate for the nine months ended September 30, 2023 is lower than the statutory tax rate primarily due to income earned in lower tax jurisdictions.

Segment Results of Operations

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The following table is a summary of the Company’s net sales and operating income by segment:

Net Sales Second Quarter First Six Months

Net Sales Third Quarter First Nine Months

(in thousands) 2024 2023 Change %

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Total $ 567,390 $ 607,071 $ (39,681) (6.5) % $ 1,661,263 $ 1,828,850 $ (167,587) (9.2) %

Operating Income Second Quarter First Six Months

Operating Income Third Quarter First Nine Months

(in thousands) 2024 2023 Change %

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Total $ 87,821 $ 93,645 $ (5,824) (6.2) % $ 208,279 $ 296,339 $ (88,060) (29.7) %

(a) Included in “Other” Operating income for the second quarter of 2024 includes $5.3 million ($7.6 million year-to-date) of restructuring charges primarily related to employee termination costs.

(a) Included in “Other” Operating income for the third quarter of 2024 was $1.8 million ($9.4 million year-to-date) of restructuring charges primarily related to employee termination cost, and $1.0 million ($2.8 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions.

See Note 7, Restructuring, Impairment, and Other Charges, for further discussion.

Included in “Other” Operating income for the second quarter of 2023 includes $3.9 million ($7.2 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions, and $2.9 million ($4.8 million year-to-date) of restructuring charges, primarily related to employee termination costs.

During the third quarter of 2024, the Company recorded a gain of $0.5 million related to the sale of a land use right within the Electronics segment.

In addition, the Company recognized a gain of $1.0 million for the sale of two buildings within the Transportation segment during the first half of 2024.

Included in “Other” Operating income for the third quarter of 2023 was $3.7 million ($8.5 million year-to-date) of restructuring charges, primarily related to employee termination costs, and $1.8 million ($9.0 million year-to-date) of legal and professional fees and other integration expenses related to completed and contemplated acquisitions.

During the third quarter of 2023, the Company recognized a $0.8 million impairment charge substantially related to certain patents in a business within the Industrial segment.

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Electronics Segment

Net sales decreased $44.5 million, or 12.7%, in the second quarter of 2024 compared to the second quarter of 2023 and included unfavorable changes in foreign exchange rates of $2.6 million.

The sales decrease was mainly due to lower volume from the semiconductor business driven by reduced demand across industrial markets and inventory rebalancing at certain distributors.

Net sales decreased $112.0 million, or 15.8%, in the first six months of 2024 compared to the first six months of 2023 and included unfavorable changes in foreign exchange rates of $3.5 million.

The sales decrease was mainly due to lower volume from the semiconductor and electronics products businesses driven by inventory rebalancing at certain distributors and reduced demand across certain electronics markets, including consumer facing and personal electronics, as well as industrial markets.

Net sales decreased $39.7 million, or 11.6%, in the third quarter of 2024 compared to the third quarter of 2023 and included favorable changes in foreign exchange rates of $0.5 million.

The sales decrease was due to lower volume from the semiconductor business resulting in a sales decline of $39.6 million driven by reduced demand across industrial markets and inventory rebalancing at certain distributors.

Net sales decreased $151.7 million, or 14.4%, in the first nine months of 2024 compared to the first nine months of 2023 and included unfavorable changes in foreign exchange rates of $3.0 million.

The sales decrease was mainly due to lower volume from the semiconductor business of $129.4 million and to a lesser extent the electronics products business driven by inventory rebalancing at certain distributors and reduced demand across certain electronics markets, including consumer facing and personal electronics, as well as industrial markets.

Operating Income

Operating income was $46.2 million, representing a decrease of $33.7 million, or 42.2%, for the second quarter of 2024 compared to $79.8 million for the second quarter of 2023.

The decrease in operating income was primarily from semiconductor business due to lower volume leverage.

Operating margins decreased from 22.8% in the second quarter of 2023 to 15.1% in the second quarter of 2024 primarily due to the lower volume.

Operating income was $84.0 million, representing a decrease of $86.0 million, or 50.6%, for the first six months of 2024 compared to $170.0 million for the first six months of 2023.

The decrease in operating income was primarily due to lower volume leverage and unfavorable mix that were partially offset by cost control initiatives.

Operating margins decreased from 24.0% in the first six months of 2023 to 14.1% in the first six months of 2024 primarily due to the lower volume.

Operating income was $48.9 million, representing a decrease of $28.1 million, or 36.5%, for the third quarter of 2024 compared to $77.0 million for the third quarter of 2023.

The decrease in operating income was primarily from the semiconductor business due to lower volume leverage and unfavorable product mix.

Operating margins decreased from 22.4% in the third quarter of 2023 to 16.1% in the third quarter of 2024 primarily due to the lower volume.

Operating income was $132.9 million, representing a decrease of $114.2 million, or 46.2%, for the first nine months of 2024 compared to $247.0 million for the first nine months of 2023.

The decrease in operating income was primarily due to lower volume leverage and unfavorable product mix that were partially offset by cost control initiatives.

Operating margins decreased from 23.5% in the first nine months of 2023 to 14.7% in the first nine months of 2024 primarily due to the lower volume.

Transportation Segment

Net sales decreased $3.1 million, or 1.8%, in the second quarter of 2024 compared to the second quarter of 2023 and included unfavorable changes in foreign exchange rates of $2.0 million.

The sales decrease was mainly from sales declines of $3.7 million and $2.6 million from the automotive sensors and commercial vehicle businesses, respectively, driven by reduced demand largely due to inventory rebalancing at certain distributors and customers as well as the strategic exit of certain lower margin products, partially offset by net sales increases of $3.2 million in the passenger car products business driven by vehicle content growth and global passenger vehicle production growth.

Net sales increased $0.6 million, or 0.2%, in the first six months of 2024 compared to the first six months of 2023 and included unfavorable changes in foreign exchange rates of $2.8 million.

The sales increase was mainly from the passenger car products business of $11.7 million driven by the ongoing electronification and electrification of vehicles and global passenger vehicle production growth, partially offset by sales declines of $7.2 million and $3.9 million from the commercial vehicle and automotive sensors businesses driven by reduced demand largely due to inventory rebalancing at certain distributors and customers as well as the strategic exit of certain lower margin products.

Net sales decreased $5.6 million, or 3.2%, in the third quarter of 2024 compared to the third quarter of 2023 and included favorable changes in foreign exchange rates of $0.5 million.

The sales decline was primarily due to lower automotive sensors business volume of $5.2 million driven by the strategic exit of certain lower margin products.

Net sales decreased $5.0 million, or 1.0%, in the first nine months of 2024 compared to the first nine months of 2023 and included unfavorable changes in foreign exchange rates of $2.3 million.

The sales decrease was mainly driven by lower volume of $9.1 million and $6.4 million from the automotive sensors and the commercial vehicles businesses, respectively, due to the strategic exit of certain lower margin products and reduced demand largely due to inventory rebalancing at certain distributors and customers, partially offset by a sales increase of $10.5 million from the passenger car business driven by the ongoing electronification and electrification of vehicles and vehicle content growth.

Operating Income

Operating income was $15.2 million, representing an increase of $7.4 million, or 95.6%, for the second quarter of 2024 compared to $7.8 million for the second quarter of 2023.

The increase in operating income was primarily due to favorable price and cost reduction initiatives in the commercial vehicle business.

Operating margins increased from 4.5% in the second quarter of 2023 to 9.0% in the second quarter of 2024 primarily driven by favorable price and products mix and cost reduction initiatives from the commercial vehicle business.

Operating income was $31.4 million, representing an increase of $15.1 million, or 92.6%, for the first six months of 2024 compared to $16.3 million for the first six months of 2023.

Operating income was $23.5 million, representing an increase of $13.8 million, or 142.3%, for the third quarter of 2024 compared to $9.7 million for the third quarter of 2023.

The increase in operating income was primarily from the commercial vehicle and passenger car businesses due to favorable price and cost reduction initiatives.

Operating margins increased from 5.5% in the third quarter of 2023 to 13.7% in the third quarter of 2024 primarily driven by favorable price and products mix and cost reduction initiatives from all businesses.

Operating income was $54.9 million, representing an increase of $28.9 million, or 111.1%, for the first nine months of 2024 compared to $26.0 million for the first nine months of 2023.

The increase in operating income was primarily due to favorable price and cost reduction initiatives from the commercial vehicle business.

Operating margins increased from 4.8% in the first six months of 2023 to 9.3% in the first six months of 2024 primarily driven by favorable price and products mix and cost reduction initiatives from the commercial vehicle business.

Operating margins increased from 5.0% in the first nine months of 2023 to 10.8% in the first nine months of 2024 primarily driven by favorable price and products mix and cost reduction initiatives from the commercial vehicle business.

Industrial Segment

Net sales decreased by $5.9 million, or 6.6%, in the second quarter of 2024 compared to the second quarter of 2023, which included unfavorable changes in foreign exchange rates of $0.5 million.

The sales decrease was due to lower volume from industrial control products driven by slower end market demand.

Net sales decreased by $16.6 million, or 9.5%, in the first six months of 2024 compared to the first six months of 2023, which included unfavorable changes in foreign exchange rates of $0.6 million.

The sales decrease was due to lower volume across industrial control and industrial circuit protection products driven by slower end market demand.

Net sales increased by $5.7 million, or 6.6%, in the third quarter of 2024 compared to the third quarter of 2023, which included unfavorable changes in foreign exchange rates of $0.3 million.

The sales increase was due to higher volume from industrial circuit protection and industrial control and sensor products driven by higher end market demand.

Net sales decreased by $10.8 million, or 4.2%, in the first nine months of 2024 compared to the first nine months of 2023, which included unfavorable changes in foreign exchange rates of $0.9 million.

The sales decrease was due to lower volume across industrial control products driven by softer end market demand in the first half of 2024.

Operating Income

Operating income was $9.5 million, representing a decrease of $5.6 million, or 36.8%, for the second quarter of 2024 compared to $15.1 million for the second quarter of 2023.

The decrease in operating income was driven by lower volume due to reduced industrial end market demand across industrial control products and unfavorable product mix.

Operating margins decreased from 16.8% in the second quarter of 2023 to 11.4% in the second quarter of 2024 due to lower volume and cost inflation partially offset by favorable price.

Operating income was $14.3 million, representing a decrease of $17.9 million, or 55.5%, for the first six months of 2024 compared to $32.2 million for the first six months of 2023.

The decrease in operating income was driven by lower volume due to reduced industrial end market demand across industrial circuit protection and industrial control products and unfavorable product mix.

Operating margins decreased from 18.5% in the first six months of 2023 to 9.1% in the first six months of 2024 due to lower demand and cost inflation partially offset by favorable price.

Operating income was $17.7 million, representing an increase of $4.5 million, or 34.2%, for the third quarter of 2024 compared to $13.2 million for the third quarter of 2023.

The increase in operating income was driven by higher volume from industrial circuit protection and industrial control and sensor products driven by increased end market demand.

Operating margins increased from 15.3% in the third quarter of 2023 to 19.3% in the third quarter of 2024 due to higher volume, product mix and price.

Operating income was $32.1 million, representing a decrease of $13.4 million, or 29.5%, for the first nine months of 2024 compared to $45.5 million for the first nine months of 2023.

The decrease in operating income was driven by lower volume due to reduced industrial end market demand across industrial control products and industrial circuit protection along with cost inflation.

Operating margins decreased from 17.4% in the first nine months of 2023 to 12.8% in the first nine months of 2024 due to lower demand and cost inflation, partially offset by favorable price.

Geographic Net Sales Information

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The following table is a summary of the Company’s net sales by geography:

Second Quarter First Six Months

Third Quarter First Nine Months

(in thousands) 2024 2023 Change %

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Total $ 567,390 $ 607,071 $ (39,681) (6.5) % $ 1,661,263 $ 1,828,850 $ (167,587) (9.2) %

Net sales increased $0.4 million, or 0.2%, in the second quarter of 2024 compared to the second quarter of 2023 and included unfavorable changes in foreign exchange rates of $0.2 million.

The net sales was essentially flat with higher volume from the commercial vehicle products and passenger car products businesses within the Transportation segment, offset by lower volume from the Electronics and Industrial segments compared to the second quarter of 2023.

Net sales decreased $18.6 million, or 4.0%, in the first six months of 2024 compared to the first six months of 2023 and included unfavorable changes in foreign exchange rates of $0.2 million.

The decrease in net sales was primarily due to lower volume from the Electronics and Industrial segments, partially offset by higher volume from the passenger car products business within the Transportation segment compared to the first six months of 2023.

Net sales decreased $15.6 million, or 6.8%, in the second quarter of 2024 compared to the second quarter of 2023 and included unfavorable changes in foreign exchange rates of $3.8 million.

The decrease in net sales was primarily due to lower net sales from the Electronics and Industrial segments, partially offset by higher net sales from the passenger car products business within the Transportation segment compared to the second quarter of 2023.

Net sales decreased $49.9 million, or 10.9%, in the first six months of 2024 compared to the first six months of 2023 and included unfavorable changes in foreign exchange rates of $7.6 million.

The decrease in net sales was primarily due to lower net sales from the Electronics segment, partially offset by higher net sales from the passenger car products business within the Transportation segment compared to the first six months of 2023.

Net sales decreased $38.4 million, or 24.8%, in the second quarter of 2024 compared to the second quarter of 2023 and included unfavorable changes in foreign exchange rates of $1.0 million.

The decrease in net sales was primarily due to lower net sales from the Electronics and Transportation segments compared to the second quarter of 2023.

Net sales decreased $59.4 million, or 19.6%, in the first six months of 2024 compared to the first six months of 2023 and included favorable changes in foreign exchange rates of $0.9 million.

The decrease in net sales was primarily due to lower net sales from the Electronics segment and lower net sales from the automotive sensors and commercial vehicle businesses within the Transportation segment compared to the first six months of 2023.

Net sales increased $1.2 million, or 0.5%, in the third quarter of 2024 compared to the third quarter of 2023 and included unfavorable changes in foreign exchange rates of $0.3 million.

The net sales increase was due to higher volume from the Industrial segment, partially offset by lower volume from the Electronics segment compared to the third quarter of 2023.

Net sales decreased $17.4 million, or 2.5%, in the first nine months of 2024 compared to the first nine months of 2023 and included unfavorable changes in foreign exchange rates of $0.5 million.

The decrease in net sales was primarily due to lower volume from the Electronics segment, partially offset by higher volume from the Industrial segment and the commercial vehicle and passenger car products businesses within the Transportation segment compared to the first nine months of 2023.

Net sales decreased $22.0 million, or 9.3%, in the third quarter of 2024 compared to the third quarter of 2023 and included unfavorable changes in foreign exchange rates of $0.5 million.

The decrease in net sales was primarily due to lower net sales from the Electronics and Industrial segments, partially offset by higher net sales from the commercial vehicle and passenger car products businesses within the Transportation segment compared to the third quarter of 2023.

Net sales decreased $71.9 million, or 10.4%, in the first nine months of 2024 compared to the first nine months of 2023 and included unfavorable changes in foreign exchange rates of $8.1 million.

Net sales decreased $19.0 million, or 14.1%, in the third quarter of 2024 compared to the third quarter of 2023 and included favorable changes in foreign exchange rates of $1.5 million.

The decrease in net sales was primarily due to lower net sales from the Electronics and Transportation segments compared to the third quarter of 2023.

Net sales decreased $78.3 million, or 17.9%, in the first nine months of 2024 compared to the first nine months of 2023 and included favorable changes in foreign exchange rates of $2.4 million.

The decrease in net sales was primarily due to lower net sales from the Electronics segment and lower net sales from the commercial vehicle and automotive sensors businesses within the Transportation segment compared to the first nine months of 2023.

Liquidity and Capital Resources

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Management expects that the Company’s (i) current level of cash, cash equivalents, and marketable securities, (ii) current and forecasted cash flows from operations, (iii) availability under existing funding arrangements, and (iv) access to capital in the capital markets will provide sufficient funds to support the Company’s operations, capital expenditures, investments, and debt obligations on both a short-term and long-term basis.

Cash and cash equivalents were $561.7 million as of June 29, 2024, an increase of $6.2 million as compared to December 30, 2023.

As of June 29, 2024, $102.1 million of the Company's $561.7 million cash and cash equivalents was held by U.S.

Cash and cash equivalents were $629.7 million as of September 28, 2024, an increase of $74.2 million, as compared to December 30, 2023.

As of September 28, 2024, $135.5 million of the Company's $629.7 million cash and cash equivalents was held by U.S.

subsidiaries.

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Subject to certain conditions, (i) the Company may terminate or reduce the Aggregate Revolving Commitments, as defined in the Credit Agreement, in whole or in part, and (ii) the Company may prepay the revolving loans or the term loans at any time, without premium or penalty.

During the three and six months ended June 29, 2024, the Company made payments of $1.9 million and $3.8 million, respectively, on its term loan.

The revolving loan and term loan balance under the Credit Facility was $100.0 million and $285.0 million, respectively, as of June 29, 2024.

During the nine months ended September 28, 2024, the Company made payments of $3.8 million on its term loan.

The revolving loan and term loan balance under the Credit Facility was $100.0 million and $285.0 million, respectively, as of September 28, 2024.

On May 12, 2022, the Company entered into an interest rate swap agreement to manage interest rate risk exposure, effectively converting the interest rate on the Company's SOFR based floating-rate loans to a fixed-rate.

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.

As of June 29, 2024, the effective interest rate on unhedged portion of the outstanding borrowings under the credit facility was 6.69%, and 4.13% on the hedged portion.

As of June 29, 2024, the Company had $0.2 million outstanding letters of credit under the Credit Facility and had $599.8 million of borrowing capacity available under the revolving credit facility.

As of June 29, 2024, the Company was in compliance with all covenants under the Credit Agreement.

As of September 28, 2024, the effective interest rate on unhedged portion of the outstanding borrowings under the credit facility was 6.60%, and 4.13% on the hedged portion.

As of September 28, 2024, the Company had $0.1 million outstanding letters of credit under the Credit Facility and had $599.9 million of borrowing capacity available under the revolving credit facility.

As of September 28, 2024, the Company was in compliance with all covenants under the Credit Agreement.

On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and sold €212 million aggregate principal amount of senior notes in two series.

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Senior Notes, Series A due 2022”), and $100 million in aggregate principal amount of 3.74% Senior Notes, Series B, due February 15, 2027 (“U.S.

Senior Notes, Series B due 2027”)

Senior Notes, Series B due 2027”) were funded.

During the first quarter of 2022, the Company paid off $25 million of U.S.

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Debt Covenants

The Company was in compliance with all covenants under the Credit Agreement and Senior Notes as of June 29, 2024 and currently expects to remain in compliance based on management’s estimates of operating and financial results for 2023.

As of June 29, 2024, 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.

The Company was in compliance with all covenants under the Credit Agreement and Senior Notes as of September 28, 2024 and currently expects to remain in compliance based on management’s estimates of operating and financial results for 2023.

As of September 28, 2024, 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.

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.

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The transaction is not expected to have a material impact on the Company’s fiscal year 2024 financial results and will be reported in the Electronics-Semiconductor business within the Company’s Electronics segment.

During the second quarter of 2024 the Company paid quarterly dividends of $16.1 million to the shareholders.

On July 30, 2024, the Company announced the declaration of a quarterly cash dividend of $0.70 per share, an 8% percent increase from the first quarter, payable on September 5, 2024 to stockholders of record as of August 22, 2024.

During the third quarter of 2024 the Company paid quarterly dividends of $17.4 million to the shareholders.

On October 29, 2024, the Company announced the declaration of a quarterly cash dividend of $0.70 per share payable on December 5, 2024 to stockholders of record as of November 21, 2024.

Cash Flow Overview

First Six Months

First Nine Months

(in thousands) 2024 2023

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Operating cash outflows are largely attributable to recurring expenditures for raw materials, labor, rent, interest, taxes and other operating activities.

Net cash provided by operating activities was $126.6 million for the six months ended June 29, 2024 compared to $151.6 million for the six months ended July 1, 2023.

The decrease in net cash provided by operating activities was primarily due to lower cash earnings, partially offset by reductions in changes in working capital compared to prior year.

Net cash provided by operating activities was $207.0 million for the nine months ended September 28, 2024 compared to $313.1 million for the nine months ended September 30, 2023.

The decrease in net cash provided by operating activities was primarily due to lower cash earnings.

Cash Flow from Investing Activities

Net cash used in investing activities was $26.7 million for the six months ended June 29, 2024 compared to $199.0 million during the six months ended July 1, 2023.

Capital expenditures were $34.7 million, representing a decrease of $6.8 million compared to the six months ended July 1, 2023.

During the six months ended June 29, 2024, the Company received proceeds of $8.7 million from the sale of two buildings from the Transportation segment.

Net cash paid for the Western Automation acquisition was $158.3 million during the six months ended July 1, 2023.

Net cash used in investing activities was $41.1 million for the nine months ended September 28, 2024 compared to $261.4 million during the nine months ended September 30, 2023.

Capital expenditures were $50.1 million, representing a decrease of $13.1 million compared to the nine months ended September 30, 2023.

During the nine months ended September 28, 2024, the Company received net proceeds of $9.7 million mainly from the sale of a land use right within the Electronics segment and two buildings from the Transportation segment.

Net cash paid for the Western Automation acquisition was $198.8 million during the nine months ended September 30, 2023.

Cash Flow from Financing Activities

Net cash used in financing activities was $79.3 million for the six months ended June 29, 2024 compared to $32.7 million during the six months ended July 1, 2023.

During the six months ended June 29, 2024 and July 1, 2023, the Company made payments of $3.8 million on the term loan for both periods, respectively.

The Company paid dividends of $32.3 million and $29.8 million in the six months ended June 29, 2024 and July 1, 2023, respectively.

Additionally, during the six months ended June 29, 2024, the Company repurchased 179,311 shares of its common stock totaling $40.9 million.

Net cash used in financing activities was $91.3 million for the nine months ended September 28, 2024 compared to $47.1 million during the nine months ended September 30, 2023.

During the nine months ended September 28, 2024 and September 30, 2023, the Company made payments of $3.8 million and $5.6 million on the term loan, respectively.

The Company paid dividends of $49.7 million and $46.0 million in the nine months ended September 28, 2024 and September 30, 2023, respectively.

Additionally, during the nine months ended September 28, 2024, the Company repurchased 179,311 shares of its common stock totaling $40.9 million.

Share Repurchase Program

The Company’s Board of Directors authorized the repurchase of up to $300.0 million in the aggregate of shares of the Company’s common stock for the period May 1, 2021 to April 30, 2024 ("2021 program").

The Company’s Board of Directors authorized the repurchase of up to $300.0 million in the aggregate of shares of the Company’s common stock under a program for the period May 1, 2021 to April 30, 2024 ("2021 program").

On April 25, 2024, the Company's Board of Directors authorized a new three year program to repurchase up to $300.0 million in the aggregate of shares of the Company's stock for the period May 1, 2024 to April 30, 2027 ("2024 program") to replace the expired 2021 program.

During the three and six months ended June 29, 2024, the Company repurchased 109,031 and 179,311 shares of its common stock totaling $24.7 million and $40.9 million, respectively, of which $38.9 million was pursuant to the 2021 program and $2.0 million was pursuant to the 2024 program.

There is $298.0 million of an authorized amount yet purchased under the 2024 program as of June 29, 2024.

The Company did not repurchase shares of its common stock for the three and six months ended July 1, 2023.

The Company did not repurchase shares of its common stock for the three months ended September 28, 2024.

During the nine months ended September 28, 2024, the Company repurchased 179,311 shares of its common stock totaling $40.9 million, of which $38.9 million was pursuant to the 2021 program and $2.0 million was pursuant to the 2024 program.

The Company did not repurchase shares of its common stock for the three and nine months ended September 30, 2023.

Off-Balance Sheet Arrangements

As of June 29, 2024, the Company did not have any off-balance sheet arrangements, as defined under SEC rules.

As of September 28, 2024, the Company did not have any off-balance sheet arrangements, as defined under SEC rules.

Specifically, the Company was not liable for guarantees of indebtedness owed by third parties, the Company was not directly liable for the debt of any unconsolidated entity and the Company did not have any retained or contingent interest in assets.

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The significant accounting policies and critical accounting estimates are consistent with those discussed in Note 1, Summary of Significant Accounting Policies and Other Information, to the consolidated financial statements and the MD&A section of the Company’s Annual Report on Form 10-K for the year ended December 30, 2023.

During the six months ended June 29, 2024, there were no significant changes in the application of critical accounting policies and estimates.

During the nine months ended September 28, 2024, there were no significant changes in the application of critical accounting policies and estimates.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Item 7A, Quantitative and Qualitative Disclosures about Market Risk , of the Company's Annual Report on Form 10-K for the year ended December 30, 2023.

During the six months ended June 29, 2024, there have been no material changes in the Company's exposure to market risk.

During the nine months ended September 28, 2024, there have been no material changes in the Company's exposure to market risk.

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