NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies and Other Information
Nature of Operations
Littelfuse, Inc. and subsidiaries (the “
Company”) is a global leader in circuit protection products with advancing platforms in power control and sensor technologies, serving customers in the electronics, automotive, and industrial markets. With a diverse and extensive product portfolio of fuses, semiconductors, polymers, ceramics, relays and sensors, the Company works with its customers to build safer, more reliable and more efficient products for the connected world in virtually every market that uses electrical energy, ranging across consumer electronics, IT and telecommunication applications, industrial electronics, automobiles and other transportation, and heavy industrial applications. The Company has a network of global engineering centers and labs that develop new products and product enhancements, provides customer application support and test products for safety, reliability, and regulatory compliance.
Fiscal Year
References herein to
“201
7”,
“fiscal
2017”
or “fiscal year
2017”
refer to the fiscal year ended
December 30, 2017.
References herein to
“2016”,
“fiscal
2016”
or “fiscal year
2016”
refer to the fiscal year ended
December 31, 2016.
References herein to
“2015”,
“fiscal
2015”
or “fiscal year
2015”
refer to the fiscal year ended
January 2, 2016.
The Company operates on a
52
-
53
week fiscal year (
4
-
4
-
5
basis) ending on the Saturday closest to
December 31.
Therefore, the financial results of certain fiscal years and the associated
14
week quarters will
not
be exactly comparable to the prior and subsequent
52
week fiscal years and the associated quarters having only
13
weeks. As a result of using this convention, each of fiscal
2017
and fiscal
2016
contained
52
weeks whereas fiscal
2015
contained
53
weeks.
Basis of Presentation
The Consolidated Financial Statements include the accounts of Littelfuse, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The company
’s Consolidated Financial Statements were prepared in accordance with generally accepted accounting principles in the United States of America and include the assets, liabilities, sales and expenses of all wholly-owned subsidiaries and majority-owned subsidiaries over which the Company exercises control.
Use of Estimates
The process of preparing financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities at the date of the Consolidated Financial Statements, and the reported amounts of revenues and expenses and the accompanying notes. The
Company evaluates and updates its assumptions and estimates on an ongoing basis and
may
employ outside experts to assist in its evaluation, as considered necessary. Actual results could differ from those estimates.
Cash Equivalents
All highly liquid investments, with an original maturity of
three
months or less when purchased, are considered to be cash equivalents.
Short-Term and Long-Term Investments
As of
December 3
0,
2017,
the Company had an investment in Polytronics Technology Corporation Ltd. (“Polytronics”). The Company’s Polytronics shares held at the end of fiscal
2017
and
2016
represent approximately
7.2%
of total Polytronics shares outstanding. The Polytronics investment is classified as available-for-sale and is carried at fair value with the unrealized gains and losses reported as a component of “Accumulated Other Comprehensive Income (Loss).” The fair value of the Polytronics investment was
€9.2
million (approximately
$11.0
million) at
December 30, 2017
and
€10.0
million (approximately
$10.4
million) at
December 31, 2016.
Included in
2017
and
2016,
other comprehensive income are unrealized losses of
$1.0
million and
$0.8
million, respectively, due to changes in fair market value of the Polytronics investment. The remaining movement year over year was due to the impact of changes in exchange rates.
The
Company has certain investment securities that are classified as available-for-sale. Available-for-sale securities are carried at fair value with the unrealized gains and losses reported as a component of “Accumulated Other Comprehensive Income (Loss).” Realized gains and losses and declines in unrealized value judged to be other-than-temporary on available-for-sale securities are included in other expense (income), net. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. Short-term investments, which are primarily certificates of deposits, are carried at cost which approximates fair value.
The C
ompany has investments related to its non-qualified Supplemental Retirement and Savings Plan. The Company maintains accounts for participants through which participants make investment elections. The investment securities are subject to the claims of the Company’s creditors. The investment securities are all mutual funds with readily determinable fair values and are classified as trading securities. The investment securities are measured at fair value with unrealized gains and losses recognized in earnings. As of
December 30, 2017,
there was
$8.0
million of marketable securities related to the plan included in
Other assets
on the Consolidated Balance Sheets.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Trade Receivables
The
Company performs credit evaluations of customers’ financial condition and generally does
not
require collateral. Credit losses are provided for in the financial statements based upon specific knowledge of a customer’s inability to meet its financial obligations to the Company. Historically, credit losses have consistently been within management’s expectations and have
not
been a material amount. A receivable is considered past due if payments have
not
been received within agreed upon invoice terms. Write-offs are recorded at the time a customer receivable is deemed uncollectible.
The
Company also maintains allowances against accounts receivable for the settlement of rebates and sales discounts to customers. These allowances are based upon specific customer sales and sales discounts as well as actual historical experience.
Inventories
Inventories are stated at the lower of cost or
net realizable value, which approximates current replacement cost. Cost is principally determined using the
first
-in,
first
-out method. The Company maintains excess and obsolete allowances against inventory to reduce the carrying value to the expected net realizable value. These allowances are based upon a combination of factors including historical sales volume, market conditions, lower of cost or market analysis and expected realizable value of the inventory.
Property, Plant
,
and Equipment
Land, buildings
, and equipment are carried at cost. Depreciation is calculated using the straight-line method with useful lives of
21
years for buildings,
seven
to
nine
years for equipment,
seven
years for furniture and fixtures,
five
years for tooling and
three
years for computer equipment. Leasehold improvements are depreciated over the lesser of their useful life or the lease term. Maintenance and repair costs are charged to expense as incurred. Major overhauls that extend the useful lives of existing assets are capitalized.
Goodwill
The
Company annually tests goodwill for impairment 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.
The Company compares each reporting unit
’s fair value, estimated based on comparable company market valuations and expected future discounted cash flows to be generated by the reporting unit, to its carrying value. For the
seven
reporting units with goodwill, the Company compared the estimated fair value of each reporting unit to its carrying value. The results of the goodwill impairment test as of
October 1, 2017
indicated that the estimated fair values for each of the
seven
reporting units exceeded their respective carrying values. As of the most recent annual test conducted on
October 1, 2017,
the Company noted that the excess of fair value over the carrying value, was
161%,
314%,
247%,
218%,
100%,
25%,
and
248%
for its reporting units; Electronics (non-silicon), Electronics (silicon), Passenger Car, Commercial Vehicle Products, Sensors, Relays, and Power Fuse, respectively. Relatively small changes in the Company’s key assumptions would
not
have resulted in any reporting units failing the goodwill impairment test. See Note
4,
Goodwill
and Other Intangible Assets,
for additional information.
The Company also performs an interim review for indicators of impairment each quarter to assess whether an interim impairment review is required for any reporting unit. As part of its interim reviews, management analyzes potential changes in the value of individual reporting units based on each reporting unit
’s operating results for the period compared to expected results as of the prior year’s annual impairment test. In addition, management considers how other key assumptions, including discount rates and expected long-term growth rates, used in the last annual impairment test, could be impacted by changes in market conditions and economic events. Based on the interim assessments as of
December 30, 2017,
management concluded that
no
events or changes in circumstances indicated that it was more likely than
not
that the fair value for any reporting unit had declined below its carrying value.
Long-Lived Assets
Customer relationships, t
rademarks and tradenames are amortized using the straight-line method over estimated useful lives that have a range of
five
to
20
years. Patents, licenses and software are amortized using the straight-line method or an accelerated method over estimated useful lives that have a range of
five
to
17
years. The distribution networks are amortized on either a straight-line or accelerated basis over estimated useful lives that have a range of
three
to
20
years.
The Company assesses potential impairments to its long-lived assets if events or changes in circumstances indicate that the carrying amount of an asset
may
not
be recoverable. An impaired asset is written down to its estimated fair value based upon the most recent information available. Estimated fair market value is generally measured by discounting estimated future cash flows. Long-lived assets, other than goodwill and other intangible assets, that are held for sale are recorded at the lower of carrying value or the fair market value less the estimated cost to sell.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the year ended
December 31, 2016,
the Company recognized non-cash impairment charges totaling
$6.0
million, of which
$2.2
million related to the impairment of certain customer relationship intangible assets in the customs reporting unit within the Industrial segment and
$3.8
million related to the impairment of the
Custom Products tradename. The impairment of the customer relationship intangible assets resulted from lower expectations of future revenue to be derived from those relationships while the tradename impairment resulted from lower expectations of future cash flows of the customs reporting unit.
Environmental Liabilities
Environmental liabilities are accrued based on engineering studies estimating the cost of remediating sites. Expenses related to on-going maintenance of environmental sites are expensed as incurred. If actual or estimated probable future losses exceed the
Company’s recorded liability for such claims, the Company would record additional charges during the period in which the actual loss or change in estimate occurred.
Pension and Other Post-retirement Benefits
The Company records annual income and expense amounts relating to its pension and post-retirement benefits plans based on calculations which include various actuarial assumptions including discount rates, expected long-term rates of return and compensation increases. 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. 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 income (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.
Revenue Recognition
The
Company recognizes revenue on product sales in the period in which the sales process is complete. This generally occurs when persuasive evidence of an arrangement exists, products are shipped (FOB origin) to the customer in accordance with the terms of the sale, the risk of loss has been transferred, collectability is reasonably assured, and the pricing is fixed and determinable.
At the end of each period, for those shipments where title to the products and the risk of loss and rewards of ownership do
not
transfer until the product has been received by the customer, the
Company adjusts revenues and cost of sales for the delay between the time that the products are shipped and when they are received by the customer. The Company’s distribution channels are primarily through direct sales and independent
third
-party distributors.
Revenue and Billing
The
Company generally accepts orders from customers based on long term purchasing contracts and written sales agreements. Contract pricing and selling agreement terms are based on market factors, costs, and competition. Pricing normally is negotiated as an adjustment (premium or discount) from the Company’s published price lists. The customer is invoiced when the Company’s products are shipped to them in accordance with the terms of the sales agreement.
Returns and Credits
Some of the terms of the
Company’s sales agreements and normal business conditions provide customers (distributors) the ability to receive price adjustments on products previously shipped and invoiced. This practice is common in the industry and is referred to as a “ship and debit” program. This program allows the distributor to debit the Company for the difference between the distributors’ contracted price and a lower price for specific transactions. Under certain circumstances (usually in a competitive situation or large volume opportunity), a distributor will request authorization to reduce its price to its buyer. If the Company approves such a reduction, the distributor is authorized to “debit” its account for the difference between the contracted price and the lower approved price. The Company establishes reserves for this program based on historic activity and actual authorizations for the debit and recognizes these debits as a reduction of revenue.
Return to Stock
The
Company has a return to stock policy whereby a customer with prior authorization from Littelfuse management can return previously purchased goods for full or partial credit. The Company establishes an estimated allowance for these returns based on historic activity. Sales revenue and cost of sales are reduced to anticipate estimated returns.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Volume Rebates
The
Company offers incentives to certain customers to achieve specific quarterly or annual sales targets. If customers achieve their sales targets, they are entitled to rebates. The Company estimates the future cost of these rebates and recognizes this estimated cost as a reduction to revenue as products are sold.
Allowance for Doubtful Accounts
The
Company evaluates the collectability of its trade receivables based on a combination of factors. The Company regularly analyzes its significant customer accounts and, when the Company becomes aware of a specific customer’s inability to meet its financial obligations, the Company records a specific reserve for bad debt to reduce the related receivable to the amount the Company reasonably believes is collectible. The Company also records allowances for all other customers based on a variety of factors including the length of time the receivables are past due, the financial health of the customer, macroeconomic considerations and past experience. Accounts receivable balances that are deemed to be uncollectible, are written off against the reserve on a case-by-case basis. Historically, the allowance for doubtful accounts has been adequate to cover bad debts. If circumstances related to specific customers change, the estimates of the recoverability of receivables could be further adjusted. However, due to the Company’s diverse customer base and lack of credit concentration, the Company does
not
believe its estimates would be materially impacted by changes in its assumptions.
Advertising Costs
The
Company expenses advertising costs as incurred, which amounted to
$2.9
million in both
2017
and
2016
and
$2.3
million in
2015,
respectively, and are included as a component of selling, general, and administrative expenses.
Shipping and Handling Fees and Costs
Amounts billed to customers related to shipping and handling is classified as revenue. Costs incurred for shipping and handling of
$10.9
million
$9.1
million, and
$7.0
million in
2017,
2016,
and
2015,
respectively, are classified in selling, general, and administrative expenses.
Foreign Currency Translation
/
Remeasurement
The
Company’s foreign subsidiaries use the local currency or the U.S. dollar as their functional currency, as appropriate. Assets and liabilities are translated using exchange rates at the balance sheet date, and revenues and expenses are translated at weighted average rates. The amount of foreign currency gain or loss from remeasurement recognized in the income statement was a loss of
$2.4
million in
2017,
a loss of
$0.5
million in
2016,
and a gain of
$1.5
million in
2015.
Adjustments from the translation process are recognized in “Shareholders’ equity” as a component of “Accumulated other comprehensive income.”
Stock-based Compensation
The
Company recognizes compensation expense for the cost of awards of equity compensation using a fair value method. Benefits of tax deductions in excess of recognized compensation expense are reported as operating cash flows. See Note
9,
Shareholders’ Equity
, for additional information on stock-based compensation.
Coal Mining Liability
Included in other long-term liabilities is an accrual related to former coal mining operations at Littelfuse GmbH (formerly known as Heinrich Industries, AG) for the amounts of €
0.9
million (
$1.1
million) and
€1.4
million (
$1.5
million) at
December 30, 2017
and
December 31, 2016,
respectively. Management, in conjunction with an independent
third
-party, performs an annual evaluation of the former coal mining operations in order to develop an estimate of the probable future obligations in regard to remediating the dangers (such as a shaft collapse) of abandoned coal mine shafts in the former coal mining operations. Management accrues for costs associated with such remediation efforts based on management's best estimate when such costs are probable and reasonably able to be estimated. The ultimate determination can only be done after respective investigations because the concrete conditions are mostly unknown at this time. The accrual is
not
discounted as management cannot reasonably estimate when such remediation efforts will take place.
Other Expense (Income), Net
Other expense (income), net generally consists of interest income, royalties
, and non-operating income.
Income Taxes
The
Company accounts for income taxes using the liability method. Deferred taxes are recognized for the future effects of temporary differences between financial and income tax reporting using enacted tax rates in effect for the years in which the differences are expected to reverse. The Company recognizes deferred taxes for temporary differences, operating loss carryforwards and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is more likely than
not
that some portion, or all, of the deferred tax assets will
not
be realized. U.S. state and non-U.S. income taxes are provided on the portion of non-U.S. income that is expected to be remitted to the U.S. and be taxable (and non-U.S. income taxes are provided on the portion of non-U.S. income that is expected to be remitted to an upper-tier non-U.S. entity). Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred U.S. income taxes and non-U.S. taxes are not provided on the excess of the investment value for financial reporting over the tax basis of investments in those non-U.S. subsidiaries for which such excess is considered to be permanently reinvested
in those operations. Management regularly evaluates whether non-U.S. earnings are expected to be permanently reinvested. This evaluation requires judgment about the future operating and liquidity needs of the Company’s foreign subsidiaries. Changes in economic and business conditions, non-U.S. or U.S. tax laws, or the Company’s financial situation could result in changes to these judgments and the need to record additional tax liabilities.
The
Company recognizes the tax benefit from an uncertain tax position only if it is more likely than
not
that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than
50%
likelihood of being realized upon ultimate settlement.
On
December 22, 2017,
the U.S. enacted legislation commonly referred to as t
he Tax Cuts and Jobs Act (the "Tax Act"). Among other things, the Tax Act reduces the U.S. corporate federal income tax rate from
35%
to
21%,
adds base broadening provisions which limit deductions and address excessive international tax planning, imposes a
one
-time tax (the “Toll Charge”) on accumulated earnings of certain non-U.S. subsidiaries and enables repatriation of earnings of non-U.S. subsidiaries free of U.S. federal income tax. Other than the Toll Charge (which is applicable to the Company for
2017
), the provisions will generally be applicable to the Company in
2018
and beyond.
In accordance with the guidance provided in SEC Staff Accounting Bulletin (“SAB”)
No.
118,
in the
fourth
quarter of
2017
the Company recorded a charge of
$47
million as a provisional reasonable estimate of the impact of the Tax Act, including
$49
million for the Toll Charge net of
$2
million for other net tax benefits. The Company is continuing to analyze the Tax Act and plans to finalize the estimate within the measurement period outlined in SAB
No.118.
The final charge
may
differ from the provisional reasonable estimate if provisions of the Tax Act, and their interaction with other provisions of the U.S. Internal Revenue Code, are interpreted differently than interpretations made by the Company in determining the estimate, whether through issuance of administrative guidance, or through further review of the Tax Act by the Company and its advisors. Aside from these interpretation issues, the final charge
may
differ from the provisional reasonable estimate due to refinements of accumulated non-U.S. earnings and tax pool data.
One of the base broadening provisions of the Tax Act is commonly referred to as the global intangible low-taxed income “
GILTI” provisions. In accordance with guidance issued by the FASB staff, the Company has not adopted an accounting policy for GILTI. Thus, the U.S. balance sheet tax accounts, notably deferred taxes, were computed without consideration of the possible future impact of the GILTI provisions. The Company intends to adopt an accounting policy for GILTI within the measurement period outlined in SAB 118.
Fair Value Measurements
Certain assets and liabilities are required to be recorded at fair value on a recurring basis. Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company records the fair value of its available-for-sale securities and pension plan assets on a recurring basis. Assets measured at fair value on a nonrecurring basis include long-lived assets held and used, long-lived assets held for sale, goodwill and other intangible assets. The fair value of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate their carrying values. The
three
-tier value hierarchy, which prioritizes valuation methodologies based on the reliability of the inputs, is:
Level
1
– Valuations based on quoted prices for identical assets and liabilities in active markets.
Level
2
– Valuations based on observable inputs other than quoted prices included in Level
1,
such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are
not
active, or other inputs that are observable or can be corroborated by observable market data.
Level
3
– Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants.
Reclassifications
Certain reclassifications of prior year amounts for
Trade receivables, net
and
Prepaid expenses and other current assets
were made to conform to the
2017
presentation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recently
Adopted
Accounting Standards
In
July 2015,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No.
2015
-
11
– “Inventory (Topic
330
): Simplifying the Measurement of Inventory,” which simplifies the measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. The update is effective for financial statements issued for fiscal years beginning after
December 15, 2016,
and interim periods within those fiscal years. The Company adopted the new standard on
January 1, 2017.
The adoption of the update did
not
have a material impact on the Company’s consolidated financial position and results of operations. As a result of the adoption of the update, inventories are stated at the lower of cost or net realizable value. Cost is principally determined using the
first
-in,
first
-out method. The Company maintains excess and obsolete allowances against inventory to reduce the carrying value to the expected net realizable value. These allowances are based upon a combination of factors including historical sales volume, market conditions, lower of cost or market analysis and expected realizable value of the inventory.
In
March 2016,
the FASB issued ASU
No.
2016
-
09
– “Improvements to Employee Share-Based Payment Accounting,” which amends ASC
718,
“Compensation – Stock Compensation.” The update simplifies several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures, and statutory withholding requirements, as well as classification in the Consolidated Statements of Cash Flows. The update is effective for financial statements issued for fiscal years beginning after
December 15, 2016,
and interim periods within those fiscal years. The Company adopted the new standard on
January 1, 2017.
As a result of the adoption, on a prospective basis, the Company recognized
$2.0
million of excess tax benefits from stock-based compensation as a discrete item in income tax expense for the year ended
December 30, 2017.
Historically, these amounts were recorded as additional paid-in capital. The Company also elected to apply the change prospectively to the Consolidated Statements of Cash Flows. As a result, on a prospective basis, share-based payments will be reported as operating activities in the Consolidated Statements of Cash Flows. The Company elected
not
to change its policy on accounting for forfeitures and will continue to estimate a requisite forfeiture rate. Additional amendments to the accounting for income taxes and minimum statutory withholding requirements had
no
impact on the results of operations.
In
January 2017,
the FASB issued ASU
No.
2017
-
04,
“Intangibles-Goodwill and Other” (Topic
350
). This ASU modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity
no
longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Because the update will eliminate Step
2
from the goodwill impairment test, it should reduce the cost and complexity of evaluating goodwill for impairment. This ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after
December 15, 2020,
with early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after
January 1, 2017.
The
ASU did
not
impact the Company in
2017.
Recently Issued Accounting Standards
In
October 2016,
the FASB issued ASU
No.
2016
-
16,
"Income Taxes
” (Topic
740
). This ASU update requires entities to recognize the income tax consequences of many intercompany asset transfers at the transaction date. The seller and buyer will immediately recognize the current and deferred income tax consequences of an intercompany transfer of an asset other than inventory. The tax consequences were previously deferred. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2017,
with early adoption permitted. Adoption will require a modified retrospective transition
, and is not expected to have a material impact.
In March 2016, the FASB issued ASU No. 2016-09
– “Improvements to Employee Share-Based Payment Accounting,” which amends ASC 718, “Compensation – Stock Compensation.” The update simplifies several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures, and statutory withholding requirements, as well as classification in the Consolidated Statements of Cash Flows. The update is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company adopted the new standard on January 1, 2017. As a result of the adoption, on a prospective basis, the Company recognized $2.0 million of excess tax benefits from stock-based compensation as a discrete item in income tax expense for the year ended December 30, 2017. Historically, these amounts were recorded as additional paid-in capital. The Company also elected to apply the change prospectively to the Consolidated Statements of Cash Flows. As a result, on a prospective basis, share-based payments will be reported as operating activities in the Consolidated Statements of Cash Flows. The Company elected not to change its policy on accounting for forfeitures and will continue to estimate a requisite forfeiture rate. Additional amendments to the accounting for income taxes and minimum statutory withholding requirements had no impact on the results of operations.
In
January 2016,
the FASB issued ASU
No.
2016
-
01,
“Financial Instruments-Recognition and Measurement of Financial Assets and Financial Liabilities” which addresses certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. The ASU will require the Company to recognize any changes in the fair value of certain equity investments in net income. These changes are currently recognized in other comprehensive income ("OCI"). This guidance is effective for interim and fiscal years beginning after
December 15, 2017.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In
February 2016,
the FASB issued ASU
No.
2016
-
02,
"Leases" (Topic
842
). This ASU requires lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases of greater than
twelve
months. The accounting by lessors will remain largely unchanged. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018,
with early adoption permitted. Adoption will require a modified retrospective transition,
and the Company plans to adopt the standard in the
first
quarter of
2019.
The Company is currently evaluating the impact of ASU
2016
-
02.
In
May 2014,
the FASB issued ASU
No.
2014
-
09,
“Revenue from Contracts with Customers” (Topic
606
) which supersedes the revenue recognition requirements in ASC
605,
“Revenue Recognition.” This ASU provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The guidance permits
two
implementation approaches,
one
requiring retrospective application of the new standard with restatement of prior years and
one
requiring prospective application of the new standard with disclosure of results under old standards. In
August, 2015,
the FASB issued ASU
No.
2015
-
14,
which postponed the effective date of ASU
No.
2014
-
09
to fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2017,
with early adoption permitted on the original effective date of fiscal years beginning after
December 15, 2016.
The Company is in the process of finalizing its assessment and the documentation of its evaluation of the new standard.
The majority of the Company’s revenue arrangements generally consist of a single performance obligation to transfer promised finished goods. Based on the Company’s evaluation process completed and review of its contracts with customers, the timing and amount of revenue recognized based on ASU
2015
-
14
is consistent with its revenue recognition policy under previous guidance. The Company adopted the new standard effective
December 31, 2017,
using the modified retrospective approach, and will expand its consolidated financial statement disclosures in order to comply with the ASU. The Company has determined the adoption of ASU
2015
-
14
will
not
have a material impact on its results of operations, cash flows, or financial position.
2
. Acquisitions and Dispositions
The
Company accounts for acquisitions using the acquisition method in accordance with ASC
805,
“Business Combinations,” in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results of the acquired business are included in the Company’s Consolidated Financial Statements from the date of the acquisition.
Subsequent Event
IXYS Corporation
On
January 17, 2018,
the
Company acquired IXYS Corporation (“IXYS”), a global pioneer in the power semiconductor and integrated circuit markets with a focus on medium to high voltage power control semiconductors across the industrial, communications, consumer and medical markets. IXYS has a broad customer base, serving more than
3,500
customers through its direct sales force and global distribution partners. The acquisition of IXYS is expected to accelerate the Company’s growth across the power control market driven by IXYS’s extensive power semiconductor portfolio and technology expertise. With IXYS, the Company will be able to diversify and expand its presence within industrial electronics markets, leveraging the strong IXYS industrial OEM customer base. The Company also expects to increase long-term penetration of its power semiconductor portfolio in automotive markets, expanding its global content per vehicle.
The Company has commenced the determination of the purchase price allocation.
Upon completion of the acquisition, at IXYS stockholders’ election and subject to proration, each share of IXYS common stock, par value
$0.01
per share, owned immediately prior to the effective time were cancelled and extinguished and automatically converted into the right to receive: (i)
$23.00
in cash (subject to applicable withholding tax), without interest (referred to as the cash consideration), or (ii)
0.1265
of a share of common stock, par value
$0.01
per share, of Littelfuse (referred to as the stock consideration and together with the cash consideration, the merger consideration). IXYS stockholders received cash in lieu of any fractional shares of Littelfuse common stock that the IXYS stockholders would otherwise have been entitled to receive. Additionally, each outstanding option to purchase shares of IXYS common stock granted under an IXYS equity plan were assumed by Littelfuse and converted into an option to acquire (i) a number of shares of Littelfuse common stock equal to the number of shares of IXYS common stock subject to such option immediately prior to the effective time multiplied by
0.1265,
rounded down to the nearest whole share, with (ii) an exercise price per share of Littelfuse common stock equal to the exercise price of such IXYS stock option immediately prior to the effective time divided by
0.1265,
rounded up to the nearest whole cent.
Based on the
$207.5
per share opening price of Littelfuse common stock on
January 17, 2018,
the consideration IXYS stockholders received in exchange of their IXYS common stock in the acquisition had a value of approximately
$814.8
million comprised of
$380.5
million of cash and
$434.2
million of Littelfuse stock. In addition to the consideration transferred related to IXYS common stock, the value of consideration transferred, and included in the purchase price, related to IXYS stock options that were converted to Littelfuse stock options, or cash settled, had a value of approximately
$41.7
million. As a result, total consideration is valued at approximately
$856.5
million. The Company is in the process of estimating the purchase price allocation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2017
Acquisitions
U.S. Sensor
O
n
July 7, 2017,
the Company acquired the assets of U.S. Sensor Corporation (“U.S. Sensor”). The acquisition purchase price of
$24.3
million, net of the finalization of an income tax gross up which was settled in the
fourth
quarter of
2017,
was funded with available cash
. The acquired business
expands the Company’s existing sensor portfolio in several key electronics and industrial end markets. U.S. Sensor manufactures a variety of high quality negative temperature coefficient thermistors as well as thermistor probes and assemblies. Product lines also include thin film platinum resistance temperature detectors (“RTDs”) and RTD assemblies.
The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the U.S. Sensor acquisition:
(in thousands)
|
|
Purchase Price Allocation
|
|
Total purchase consideration:
|
|
|
|
|
Cash
|
|
$
|
24,340
|
|
Allocation of consideration to assets acquired and liabilities assumed:
|
|
|
|
|
Current assets, net
|
|
$
|
4,635
|
|
Patented and unpatented technologies
|
|
|
1,090
|
|
Trademarks and tradenames
|
|
|
200
|
|
Non-compete agreement
|
|
|
50
|
|
Customer relationships
|
|
|
2,830
|
|
Goodwill
|
|
|
16,075
|
|
Current liabilities
|
|
|
(540
|
)
|
|
|
$
|
24,340
|
|
Included in U.S. Sensor
’s current assets, net was approximately
$1.5
million of receivables. All U.S. Sensor goodwill, other assets and liabilities were recorded in the Electronics segment and reflected in the United States geographic area. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining U.S. Sensor’s products and technology with the Company’s existing electronics product portfolio. Goodwill for the above acquisition is expected to be deductible for tax purposes.
As required by purchase accounting rules, the
Company recorded a
$1.6
million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold during the
third
quarter of
2017,
as the acquired inventory was sold, and reflected as other non-segment costs.
Monolith
In
December 2015,
the Company invested
$3.5
million in the preferred stock of Monolith Semiconductor Inc. (
“Monolith”), a U.S. start-up Company developing silicon carbide technology, which represented approximately
12%
of the common stock of Monolith on an as-converted basis. The Company accounted for its investment in Monolith under the cost method with any changes in value recorded in other comprehensive income. The value of the Monolith investment was
$3.5
million at
December 31, 2016.
On
February 28, 2017,
pursuant to a Securities Purchase Agreement between the Company and the stockholders of Monolith and conditioned on Monolith achieving a product development milestone and other provisions, the Company acquired approximately
62%
of the outstanding common stock of Monolith for
$15
million. The Securities Purchase Agreement includes provisions whereby the Company will acquire the remaining outstanding stock of Monolith (“non-controlling interest”) at a time or times based on Monolith meeting certain technical and sales targets. Consideration for the additional investment(s) will range from
$1.0
million to
$10
million and will be paid
no
later than
June 30, 2019.
The additional investment resulted in the Company gaining control of Monolith and was accounted for as a step-acquisition with the fair value of the original investment immediately before the acquisition estimated to be approximately $3.5 million. As the
fair value of the investment immediately prior to the transaction equaled the carrying value, there was no impact on the Company’s Consolidated Statements of Net Income. As the Securities Purchase Agreement includes an obligation of the Company to mandatorily redeem the non-controlling interest for cash, the fair value of the non-controlling interest was recognized as a liability on the Company’s Consolidated Balance Sheets. Changes in the fair value of the non-controlling interest are recognized in the Company’s Consolidated Statements of Net Income.
Commencing March 1, 2017, Monolith was reflected as a consolidated subsidiary within the Company
’s Consolidated Financial Statements. Had the acquisition occurred as of January 1, 2017, the impact on the Company’s consolidated results of operations would not have been material.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the Monolith acquisition:
(in thousands)
|
|
Purchase Price Allocation
|
|
Total purchase consideration:
|
|
|
|
|
Original investment
|
|
$
|
3,500
|
|
Cash, net of cash acquired
|
|
|
14,172
|
|
Fair value of commitment to purchase non-controlling interest
|
|
|
9,000
|
|
Total purchase consideration
|
|
$
|
26,672
|
|
Allocation of consideration to assets acquired and liabilities assumed:
|
|
|
|
|
Current assets, net
|
|
$
|
891
|
|
Property, plant, and equipment
|
|
|
789
|
|
Patented and unpatented technologies
|
|
|
6,720
|
|
Non-compete agreement
|
|
|
140
|
|
Goodwill
|
|
|
20,641
|
|
Current liabilities
|
|
|
(639
|
)
|
Other non-current liabilities
|
|
|
(1,870
|
)
|
|
|
$
|
26,672
|
|
Included in Monolith
’s current assets, net was approximately
$0.7
million of receivables. All Monolith goodwill, other assets and liabilities were recorded in the Electronics segment and reflected in the United States geographic area. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining Monolith’s products and technology with the Company’s existing electronics product portfolio. Goodwill for the above acquisition is
not
expected to be deductible for tax purposes.
2016
Acquisitions
ON Portfolio
On
August 29, 2016,
the
Company acquired certain assets of select businesses (the “ON Portfolio”) of ON Semiconductor Corporation for
$104.0
million. The Company funded the acquisition with available cash and proceeds from its credit facility
. The acquired business, which is included in the Electronics segment,
consists of a product portfolio that includes transient voltage suppression (“TVS”) diodes, switching thyristors and insulated gate bipolar transistors (“IGBTs”) for automotive ignition applications. The acquisition expands the Company’s offerings in power semiconductor applications as well as increases its presence in the automotive electronics market. The ON Portfolio products have strong synergies with the Company’s existing circuit protection business and will strengthen its channel partnerships and customer engagement.
The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the
ON Portfolio acquisition:
(in thousands)
|
|
Purcha
se Price Allocation
|
|
Total purchase consideration:
|
|
|
|
|
Cash
|
|
$
|
104,000
|
|
Allocation of consideration to assets acquired and liabilities assumed:
|
|
|
|
|
Current assets, net
|
|
$
|
4,816
|
|
Customer relationships
|
|
|
31,800
|
|
Patented and unpatented technologies
|
|
|
8,800
|
|
Non-compete agreement
|
|
|
2,500
|
|
Goodwill
|
|
|
56,084
|
|
|
|
$
|
104,000
|
|
All the ON Portfolio business goodwill and other assets were recorded in the Electronics segment and are reflected in the Americas and Europe geographic areas. The customer relationships are being amortized over
13.5
years. The patented and unpatented technologies are being amortized over
6
-
8.5
years. The non-compete agreement is being amortized over
4
years. The goodwill resulting from this acquisition consists largely of the
Company’s expected future product sales and synergies from combining the ON Portfolio products with the Company’s existing
power semiconductor product portfolio.
$7.3
million of goodwill for the above acquisition is expected to be deductible for tax purposes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As required by purchase accounting rules, the
Company recorded a
$0.7
million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. All of the step-up was amortized as a non-cash charge to cost of goods sold during
2016,
as the acquired inventory was sold, and reflected as other non-segment costs.
Included in the
Company’s Consolidated Statements of Net Income for the year ended
December 31, 2016
are net sales of approximately
$21.8
million since the
August 29, 2016
acquisition of the ON Portfolio business.
Menber
’s
On
April 4, 2016,
the
Company completed the acquisition of Menber’s S.p.A. (“Menber’s”) headquartered in Legnago, Italy for
$19.2
million, net of acquired cash and after settlement of a working capital adjustment. The Company funded the acquisition with cash on hand and borrowings under the Company’s revolving credit facility. The acquired business is part of the Company's commercial vehicle product business within the Automotive segment and specializes in the design, manufacturing, and selling of manual and electrical high current switches and trailer connectors for commercial vehicles. The acquisition expands the Company’s commercial vehicle products business globally.
The following table summarizes the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed in the
Menber’s acquisition:
(in thousands)
|
|
Purchase Price
Allocation
|
|
Total purchase consideration:
|
|
|
|
|
Cash, net of acquired cash
|
|
$
|
19,162
|
|
Preliminary allocation of consideration to assets acquired and liabilities assumed:
|
|
|
|
|
Current assets, net
|
|
$
|
12,919
|
|
Property, plant, and equipment
|
|
|
1,693
|
|
Customer relationships
|
|
|
3,050
|
|
Patented and unpatented technologies
|
|
|
224
|
|
Trademarks and tradenames
|
|
|
1,849
|
|
Goodwill
|
|
|
8,091
|
|
Current liabilities
|
|
|
(7,220
|
)
|
Other non-current liabilities
|
|
|
(1,444
|
)
|
|
|
$
|
19,162
|
|
All Menber
’s goodwill and other assets and liabilities were recorded in the Automotive segment and reflected in the Europe geographic area. The customer relationships are being amortized over
10
years. The patented and unpatented technologies are being amortized over
5
years. The trademarks and tradenames are being amortized over
10
years. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining Menber’s products with the Company’s existing automotive product portfolio. Goodwill for the above acquisition is
not
expected to be deductible for tax purposes.
As required by purchase accounting rules, the
Company recorded a
$0.2
million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold during
2016,
as the acquired inventory was sold, with the charge reflected as other non-segment costs.
Included in the
Company’s Consolidated Statements of Net Income for the year ended
December 31, 2016
are net sales of approximately
$17.3
million since the
April 4, 2016
acquisition of Menber’s.
PolySwitch
On
March 25, 2016,
the
Company acquired
100%
of the circuit protection business (“PolySwitch”) of TE Connectivity Ltd. for
$348.3
million, net of acquired cash and after settlement of certain post-closing adjustments. The Company funded the acquisition with available cash on hand and borrowings under the Company’s revolving credit facility. The PolySwitch business, which is split between the Automotive and Electronics segments,
has a leading position in polymer based resettable circuit protection devices, with a strong global presence in the automotive, battery, industrial, communications and mobile computing markets. PolySwitch has manufacturing facilities in Shanghai and Kunshan, China and Tsukuba, Japan. The acquisition allows the Company to strengthen its global circuit protection product portfolio, as well as strengthen its presence in the automotive electronics and battery end markets. The acquisition also significantly increases the Company’s presence in Japan.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the
PolySwitch acquisition:
(in thousands)
|
|
Purchase Price
Allocation
|
|
Total purchase consideration:
|
|
|
|
|
Original consideration
|
|
$
|
350,000
|
|
Post closing consideration adjustment received
|
|
|
(1,708
|
)
|
Acquired cash
|
|
|
(3,810
|
)
|
Acquired cash to be returned to seller
|
|
|
3,810
|
|
Total purchase consideration
|
|
$
|
348,292
|
|
Allocation of consideration to assets acquired and liabilities assumed:
|
|
|
|
|
Current assets, net
|
|
$
|
60,228
|
|
Property, plant, and equipment
|
|
|
51,613
|
|
Land lease
|
|
|
4,290
|
|
Patented and unpatented technologies
|
|
|
56,425
|
|
Customer relationships
|
|
|
39,720
|
|
Goodwill
|
|
|
165,088
|
|
Other long-term assets
|
|
|
11,228
|
|
Current liabilities
|
|
|
(35,280
|
)
|
Other non-current liabilities
|
|
|
(5,020
|
)
|
|
|
$
|
348,292
|
|
All PolySwitch goodwill and other assets and liabilities were recorded in the Electronics
and Automotive segments and reflected in all geographic areas. The customer relationships are being amortized over
15
years. The patented and unpatented technologies are being amortized over
10
years. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining PolySwitch products with the Company’s existing automotive and electronics product portfolio.
$103.8
million and
$61.3
million of the goodwill for the above acquisition has been assigned to the Electronics and Automotive segments, respectively, with
$64.9
million expected to be deductible for tax purposes.
As required by purchase accounting rules, the
Company recorded a
$6.9
million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold during the
second
quarter of
2016,
as the acquired inventory was sold, and reflected as other non-segment costs.
Included in the
Company’s Consolidated Statements of Net Income for the year ended
December 31, 2016
are net sales of approximately
$126.5
million since the
March 25, 2016
acquisition of PolySwitch.
2016
Dispositions
During the
first
quarter of
2016,
the
Company sold its tangible and intangible assets relating to a marine product line that it acquired as part of its acquisition of Selco A/S in
2011.
In connection with this sale, the Company recorded a loss on sale of the product line of
$1.4
million reflected within selling, general, and administrative expenses for the year ended
December 31, 2016.
This loss was recognized as an “other” charge for segment reporting purposes.
2015
Acquisitions
Sigmar S.r.l
On
October 1, 2015,
the
Company acquired
100%
of Sigmar S.r.l. (“Sigmar”). The total purchase price for Sigmar was
$6.5
million, net of cash acquired and including estimated additional net payments of up to
$0.9
million, a portion of which is subject to the achievement of certain milestones.
Located in Ozegna, Italy, Sigmar is a leading global manufacturer of water-in-fuel sensors and also manufactures selective catalytic reduction (
“SCR”) quality sensors and diesel fuel heaters for automotive and commercial vehicle applications. The acquisition further expanded the Company’s automotive sensor product line offerings within its Automotive segment. The Company funded the acquisition with available cash.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the Sigmar acquisition:
(in thousands)
|
|
Purchase Price
Allocation
|
|
Total purchase consideration:
|
|
|
|
|
Cash, net of acquired cash
|
|
$
|
5,558
|
|
Estimated additional consideration payable
|
|
|
901
|
|
Total purchase consideration
|
|
$
|
6,459
|
|
Allocation of consideration to assets acquired and liabilities assumed:
|
|
|
|
|
Current assets, net
|
|
$
|
2,519
|
|
Property, plant, and equipment
|
|
|
1,097
|
|
Goodwill
|
|
|
4,084
|
|
Patents
|
|
|
2,845
|
|
Current liabilities
|
|
|
(1,518
|
)
|
Other non-current liabilities
|
|
|
(2,568
|
)
|
|
|
$
|
6,459
|
|
All Sigmar goodwill and other assets and liabilities were recorded in the Automotive segment and reflected in the Europe geographic area. The patents are being amortized over
10
years. The goodwill resulting from this acquisition consists largely of the
Company’s expected future product sales and synergies from combining Sigmar’s products with the Company’s existing automotive product offerings. Goodwill for the above acquisition is
not
expected to be deductible for tax purposes.
Pro Forma Results
The following table summarizes, on a pro forma basis, the combined results of operations of the
Company and the acquired PolySwitch and the ON Portfolio businesses as though the acquisitions had occurred as of
December 28, 2014.
The Company has
not
included pro forma results of operations for Menber’s or Sigmar as these results were
not
material to the Company. The pro forma amounts presented are
not
necessarily indicative of either the actual consolidated results had the PolySwitch or ON Portfolio acquisitions occurred as of
December 28, 2014
or of future consolidated operating results.
|
|
For the Year Ended
|
|
(in thousands, except per share amounts)
|
|
2016
|
|
|
2015
|
|
Net sales
|
|
$
|
1,130,645
|
|
|
$
|
1,104,838
|
|
Income before income taxes
|
|
|
143,110
|
|
|
|
120,370
|
|
Net income
|
|
|
124,388
|
|
|
|
92,983
|
|
Net income per share
—
basic
|
|
|
5.51
|
|
|
|
4.12
|
|
Net income per share
—
diluted
|
|
|
5.47
|
|
|
|
4.09
|
|
Pro forma results presented above primarily reflect: (
i) incremental depreciation relating to fair value adjustments to property, plant, and equipment; (ii) amortization adjustments relating to fair value estimates of intangible assets; (iii) incremental interest expense on assumed indebtedness; and (iv) additional cost of goods sold relating to the capitalization of gross profit as part of purchase accounting recognized for purposes of the pro forma as if it was recognized during the Company’s
first
quarter of
2015.
Pro forma adjustments described above have been tax affected using the Company's effective rate during the respective periods.
The historical PolySwitch and ON Portfolio business results for the years ended
December 31, 2016
and
January 2, 2016
do
not
include a provision for income taxes. Income tax expense for the historical PolySwitch business was only provided at the end of the business
’s fiscal year ended
September 25, 2015.
Income tax expense for the historical ON Portfolio business was
not
provided on a standalone basis.
3
. Inventories
The components of inventories at
December 3
0,
2017
and
December 31, 2016
are as follows:
(in thousands)
|
|
201
7
|
|
|
201
6
|
|
Raw materials
|
|
$
|
39,030
|
|
|
$
|
32,231
|
|
Work in process
|
|
|
27,454
|
|
|
|
23,354
|
|
Finished goods
|
|
|
74,305
|
|
|
|
58,478
|
|
Total
|
|
$
|
140,789
|
|
|
$
|
114,063
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4.
Goodwill and Other Intangible Assets
The amounts for goodwill and changes in the carrying value by segment are as follows:
(in thousands)
|
|
Electronics
|
|
|
Automotive
|
|
|
Industrial
|
|
|
Total
|
|
As of January 2, 2016
|
|
$
|
58,246
|
|
|
$
|
80,262
|
|
|
$
|
51,259
|
|
|
$
|
189,767
|
|
Additions
(a)
|
|
|
162,172
|
|
|
|
70,762
|
|
|
|
—
|
|
|
|
232,934
|
|
Impairments
(
b
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,794
|
)
|
|
|
(8,794
|
)
|
A
djustments
(
c
)
|
|
|
(4,653
|
)
|
|
|
(6,439
|
)
|
|
|
729
|
|
|
|
(10,363
|
)
|
As of December 31, 2016
|
|
$
|
215,765
|
|
|
$
|
144,585
|
|
|
$
|
43,194
|
|
|
$
|
403,544
|
|
Additions
(
d
)
|
|
|
36,716
|
|
|
|
—
|
|
|
|
—
|
|
|
|
36,716
|
|
Adjustments
(
e
)
|
|
|
26,478
|
|
|
|
(8,756
|
)
|
|
|
(4,568
|
)
|
|
|
13,154
|
|
As of December 30, 2017
|
|
$
|
278,959
|
|
|
$
|
135,829
|
|
|
$
|
38,626
|
|
|
$
|
453,414
|
|
|
(a)
|
The
2016
additions resulted primarily from the acquisitions of PolySwitch, ON and Menber’s.
|
|
(
b)
|
The
2016
impairments in the Industrial segment was due to the
$8.8
million impairment of Custom Products reporting unit goodwill.
|
|
(
c)
|
Adjustments in
2016
reflect the impact of changes in foreign exchange rates.
|
|
(
d)
|
The
2017
additions resulted from the acquisitions of U.S. Sensor and Monolith.
|
|
|
|
|
(e)
|
Adjustments in
2017
reflect adjustments to reclass goodwill by segment as well as the impact of changes in foreign exchange rates. The impact of the reclassification was an increase in goodwill to the Electronics segment of
$21.6
million and a decrease of goodwill of
$16.8
million and
$4.8
million to the Automotive segment and the Industrial segment, respectively.
|
Due to negative events in the potash market in
2016,
management revisited its long-term projections and conducted a step
one
goodwill impairment analysis for its
Custom Products reporting unit in the
third
quarter of
2016.
The reporting unit failed the step
one
test and management conducted a step
two
analysis. The fair value of the unit was estimated using the expected present value of future cash flows over a
seven
-year forecast period and appraisal of certain assets. As a result, the Company recognized a charge for goodwill impairment of
$8.8
million as it wrote off the entire goodwill balance.
The
components of other intangible assets at
December 30, 2017
and
December 31, 2016
are as follows:
|
|
As of December 30, 2017
|
|
(in thousands)
|
|
Weighted Average
Useful Life
|
|
|
Gross
Carrying
Value
|
|
|
Accumulated
Amortization
|
|
|
Net
Book
Value
|
|
Patents, licenses and software
|
|
11.4
|
|
|
$
|
141,520
|
|
|
$
|
59,609
|
|
|
$
|
81,911
|
|
Distribution network
|
|
12.1
|
|
|
|
46,233
|
|
|
|
33,361
|
|
|
|
12,872
|
|
Customer relationships, trademarks and tradenames
|
|
15.6
|
|
|
|
162,679
|
|
|
|
53,612
|
|
|
|
109,067
|
|
Total
|
|
|
|
|
$
|
350,432
|
|
|
$
|
146,582
|
|
|
$
|
203,850
|
|
|
|
As of December 31, 2016
|
|
(in thousands)
|
|
Weighted Average
Useful Life
|
|
|
Gross
Carrying
Value
|
|
|
Accumulated
Amortization
|
|
|
Net
Book
Value
|
|
Patents, licenses and software
|
|
11.4
|
|
|
$
|
131,611
|
|
|
$
|
48,004
|
|
|
$
|
83,607
|
|
Distribution network
|
|
12.1
|
|
|
|
49,150
|
|
|
|
30,155
|
|
|
|
18,995
|
|
Customer relationships, trademarks and tradenames
|
|
14.4
|
|
|
|
150,887
|
|
|
|
40,463
|
|
|
|
110,424
|
|
Total
|
|
|
|
|
$
|
331,648
|
|
|
$
|
118,622
|
|
|
$
|
213,026
|
|
During the year ended
December 31, 2016,
the Company recognized non-cash impairment charges totaling
$6.0
million, of which
$2.2
million related to the impairment of certain customer relationship intangib
le assets in the Custom Products reporting unit within the Industrial segment and
$3.8
million related to the impairment of the Custom Products tradename. The impairment of the customer relationship intangible assets resulted from lower expectations of future revenue to be derived from those relationships while the tradename impairment resulted from lower expectations of future cash flows of the Custom Products reporting unit.
During the years ended
December 30, 2017
and
December 31, 2016,
the Company recorded additions to other intangible assets of
$11.0
million and
$144.4
million, respectively, for acquisitions during those years, the components of which were as follows:
|
|
2017
|
|
|
2016
|
|
(in thousands)
|
|
Weighted
Average
Useful Life
|
|
|
Amount
|
|
|
Weighted
Average
Useful Life
|
|
|
Amount
|
|
Patents, licenses and software
|
|
9.6
|
|
|
$
|
7,810
|
|
|
9.6
|
|
|
$
|
65,449
|
|
Customer relationships, trademarks and tradenames
|
|
9.0
|
|
|
|
3,220
|
|
|
13.5
|
|
|
|
78,919
|
|
Total
|
|
|
|
|
$
|
11,030
|
|
|
|
|
|
$
|
144,368
|
|
For intangible assets with definite lives, the Company recorded amortization expense of
$24.7
million,
$19.3
million, and
$11.9
million in
2017,
2016,
and
2015,
respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Estimated amortization expense related to intangible assets with definite lives at
December 30, 2017
is as follows:
(in
thousands
)
|
|
Amount
|
|
2018
|
|
$
|
25,689
|
|
2019
|
|
|
25,528
|
|
2020
|
|
|
24,879
|
|
2021
|
|
|
23,093
|
|
2022
|
|
|
22,058
|
|
2023 and thereafter
|
|
|
82,603
|
|
|
|
$
|
203,850
|
|
5.
Lease Commitments
The
Company leases certain office and warehouse space as well as certain machinery and equipment under non-cancellable operating leases. Rent expense under these leases was
$11.6
million,
$12.6
million, and
$11.1
million in
2017,
2016,
and
2015,
respectively.
Rent expense is recognized on a straight-line basis over the term of the leases. The difference between straight-line basis rent and the amount paid has been recorded as accrued lease obligations. The
Company also has leases that have lease renewal provisions. As of
December 30, 2017,
all operating leases outstanding were with
third
parties. The Company did
not
have any capital leases as of
December 30, 2017
.
Future minimum payments for all non-cancellable operating leases with initial terms of
one
year or more at D
ecember
30,
2017
are as follows:
(in
thousands
)
|
|
Future Minimum
Payments
|
|
201
8
|
|
$
|
10,842
|
|
201
9
|
|
|
6,194
|
|
20
20
|
|
|
5,425
|
|
202
1
|
|
|
4,632
|
|
202
2
|
|
|
3,464
|
|
202
3 and thereafter
|
|
|
5,021
|
|
|
|
$
|
35,578
|
|
6
. Debt
The carrying amounts of debt at
December 3
0,
2017
and
December 31, 2016
are as follows:
(in
thousands
)
|
|
201
7
|
|
|
2016
|
|
Revolving
Credit Facility
|
|
$
|
—
|
|
|
$
|
112,500
|
|
Term
Loan
|
|
|
122,500
|
|
|
|
120,313
|
|
Entrusted loan
|
|
|
—
|
|
|
|
3,522
|
|
Euro Senior Notes, Series A due 2023
|
|
|
139,623
|
|
|
|
122,313
|
|
Euro Senior Notes, Series B due 2028
|
|
|
113,369
|
|
|
|
99,314
|
|
U
.S. Senior Notes, Series A due 2022
|
|
|
25,000
|
|
|
|
—
|
|
U
.S. Senior Notes, Series B due 2027
|
|
|
100,000
|
|
|
|
—
|
|
Unamortized debt issuance costs
|
|
|
(4,881
|
)
|
|
|
(3,820
|
)
|
Total debt
|
|
|
495,611
|
|
|
|
454,142
|
|
Less: Current maturities
|
|
|
(6,250
|
)
|
|
|
(6,250
|
)
|
Total long-term debt
|
|
$
|
489,361
|
|
|
$
|
447,892
|
|
Revolving Credit Facility / Term Loan
On
March 4, 2016,
the Company entered into a
five
-year credit agreement (“Credit Agreement”) with a group of lenders for up to
$700.0
million. The Credit Agreement consisted of an unsecured revolving credit facility (“Revolving Credit Facility”) of
$575.0
million and an unsecured term loan credit facility (“Term Loan”) of up to
$125.0
million. In addition, the Company had the ability, from time to time, to increase the size of the Revolving Credit Facility and the Term Loan by up to an additional
$150.0
million, in the aggregate, in each case in minimum increments of
$25.0
million, subject to certain conditions and the agreement of participating lenders. For the Term Loan, the Company was required to make quarterly principal payments of
$1.6
million through
March 31, 2018
and
$3.1
million from
June 30, 2018
through
December 31, 2020
with the remaining balance due on
March 4, 2021.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
October 13, 2017,
the Company amended
the Credit Agreement to increase the Revolving Credit Facility from
$575.0
million to
$700.0
million and increase the Term Loan from
$125.0
million to
$200.0
million and to extend the expiration date from
March 4, 2021
to
October 13, 2022.
The Credit Agreement also includes the option for the Company to increase the size of the Revolving Credit Facility and the Term Loan by up to an additional
$300.0
million, in the aggregate, subject to the satisfaction of certain conditions set forth in the Credit Agreement. Term Loans
may
be made in up to
two
advances. The
first
advance of
$125.0
million occurred on
October 13, 2017
and the
second
advance of
$75.0
million occurred on
January 16, 2018.
For the Term Loan, the Company is required to make quarterly principal payments of
1.25%
of the original term loan (
$1.6
million as of
December 30, 2017
increasing to
$2.5
million with the
second
advance on
January 16, 2018)
through maturity, with the remaining balance due on
October 13, 2022.
Outstanding borrowings under the
Credit Agreement bear interest, at the Company’s option, at either LIBOR, fixed for interest periods of one, two,
three
or
six
-month periods, plus
1.00%
to
2.00%,
or at the bank’s Base Rate, as defined, plus
0.00%
to
1.00%,
based upon the Company’s Consolidated Leverage Ratio, as defined. The Company is also required to pay commitment fees on unused portions of the credit agreement ranging from
0.15%
to
0.25%,
based on the Consolidated Leverage Ratio, as defined. The credit agreement includes representations, covenants and events of default that are customary for financing transactions of this nature. The effective interest rate on outstanding borrowings under the credit facility was
3.07%
at
December 30, 2017.
As of
December 3
0,
2017,
the Company had
$0.1
million outstanding in letters of credit and had available
$699.9
million of borrowing capacity under the Revolving Credit Facility. At
December 30, 2017,
the Company was in compliance with all covenants under the Credit Agreement.
Senior Notes
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. The funding date for the Euro denominated senior notes occurred on
December 8, 2016
for
€117
million in aggregate amount of
1.14%
Senior Notes, Series A, due
December 8, 2023 (
“Euro Senior Notes, Series A due
2023”
)
, and
€95
million in aggregate amount of
1.83%
Senior Notes, Series B due
December 8, 2028 (
“Euro Senior Notes, Series B due
2028”
)
(together, the “Euro Senior Notes”). Interest on the Euro Senior Notes is payable semiannually on
June 8
and
December 8,
commencing
June 8, 2017.
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. On
February 15, 2017,
$25
million in aggregate principal amount of
3.03%
Senior Notes, Series A, due
February 15, 2022 (
“U.S. 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”
)
(together, the “U.S. Senior Notes due
2022
and
2027”
) were funded. Interest on the U.S. Senior Notes due
2022
and
2027
is payable semiannually on
February 15
and
August 15,
commencing
August 15, 2017.
On
November 15, 2017,
the Company entered into a Note Purchase Agreement pursuant to which the Company issued and sold
$175
million in aggregate principal amount of senior notes in
two
series. On
January 16, 2018,
$50
million aggregate principal amount of
3.48%
Senior Notes, Series A, due
February 15, 2025
(“U.S. Senior Notes, Series A due
2025”
)
and
$125
million in aggregate principal amount of
3.78%
Senior Notes, Series B, due
February 15, 2030 (
“U.S. Senior Notes, Series A due
2030”
)
(together the “U.S. Senior Notes due
2025
and
2030”
and with the Euro Senior Notes and the U.S. Senior Notes
2022
and
2027,
the “Senior Notes”) were funded. Interest on the U.S. Senior Notes due
2025
and
2030
will be payable on
February 15
and
August 15,
commencing on
August 15, 2018.
The Senior Notes have
not
been registered under the Securities Act, or applicable state securities laws. The Senior Notes are general unsecured senior obligations and rank equal in right of payment with all existing and future unsecured unsubordinated indebtedness of the
Company.
The Senior Notes are subject to certain customary covenants, including limitations on the
Company’s ability, with certain exceptions, to engage in mergers, consolidations, asset sales and transactions with affiliates, to engage in any business that would substantially change the general business of the Company, and to incur liens. In addition, the Company is required to satisfy certain financial covenants and tests relating to, among other matters, interest coverage and leverage. At
December 30, 2017,
the Company was in compliance with all covenants under the Senior Notes.
The
Company
may
redeem the Senior Notes upon the satisfaction of certain conditions and the payment of a make-whole amount to noteholders, and are required to offer to repurchase the Senior Notes at par following certain events, including a change of control.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Debt Issuance Costs
The
Company incurred debt issuance costs of
$1.6
million in relation to the Credit Agreement which, along with the remaining balance of debt issuance costs of the previous credit facility, are being amortized over the life of the Credit Agreement. The Company additionally incurred aggregate debt issuance costs of
$2.6
million in relation to the Senior Notes which are being amortized over the respective lives of the Series A and B notes.
Entrusted Loan
During
2014,
the
Company entered into an entrusted loan arrangement (“Entrusted Loan”) of
Chinese renminbi
110.0
million (approximately U.S.
$17.9
million) between
two
of its China legal entities, Littelfuse Semiconductor (“Wuxi”) Company (the “lender”) and Suzhou Littelfuse OVS Ltd. (the “borrower”), utilizing Bank of America, N.A., Shanghai Branch as agent. Direct borrowing and lending between
two
commonly owned commercial entities was strictly forbidden at the time under China’s regulations requiring the use of a
third
-party agent to enable loans between Chinese legal entities. As a result, the Entrusted Loan is reflected as both a long-term asset and long-term debt on the Company’s Consolidated Balance Sheets and is reflected in the investing and financing activities in its Consolidated Statements of Cash Flows. Interest expense and interest income will be recorded between the lender and borrower with
no
net impact on the Company’s Consolidated Statements of Income since the amounts will be offsetting. The loan interest rate per annum is
5.25%.
The Entrusted Loan is used to finance the operation and working capital needs of the borrower and matures in
November 2019.
The balance of the Entrusted Loan was paid off as of
September 30, 2017.
Interest paid on all
Company debt was approximately
$13.4
million,
$8.6
million, and
$4.1
million in
2017,
2016,
and
2015,
respectively.
Debt Maturities
Scheduled maturities of the
Company’s long-term debt for each of the
five
years succeeding
December 30, 2017
and thereafter are summarized as follows:
(in
thousands
)
|
|
Scheduled
Maturities
|
|
201
8
|
|
$
|
6,250
|
|
201
9
|
|
|
6,250
|
|
20
20
|
|
|
6,250
|
|
202
1
|
|
|
6,250
|
|
202
2
|
|
|
122,500
|
|
202
3 and thereafter
|
|
|
352,992
|
|
|
|
$
|
500,492
|
|
7
. Fair Value of Assets and Liabilities
For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a
three
-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect
the Company’s assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each fair value measurement as follows
:
Level
1
—Valuations based on unadjusted quoted prices for identical assets or liabilities in active markets;
Level
2
—Valuations based upon quoted prices for similar instruments, prices for identical or similar instruments in markets that are
not
active, or model-derived valuations, all of whose significant inputs are observable, and
Level
3
—
Valuations
based upon
one
or more significant unobservable inputs.
Following is a description of the valuation methodologies used for instruments measured at fair value and their classification in the valuation hierarchy.
Investments
Investments in equity securities listed on a national market or exchange are valued at the last sales price
and classified within Level
1
of the valuation hierarchy. Such securities are further detailed in Note
1,
Summary of Significant Accounting Policies and Other Information
.
Defined Benefit Plan Assets / Non-qualified Supplemental Retirement and Savings Plan
Investments
See
Note
8,
Benefit Plans
for description of valuation methodologies and investment balances for defined benefit plan assets and investments related to the Company’s Non-Qualified Supplemental Retirement and Savings Plan.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents assets measured at fair value by classification within the fair value hierarchy
as of
December 30, 2017:
|
|
Fair Value Measurements Using
|
|
|
|
|
|
(in
thousands
)
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Investment in Polytronics
|
|
$
|
10,993
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,993
|
|
The following table presents assets measured at fair value by classification within the fair value hierarchy as of
December 31, 2016:
|
|
Fair Value Measurements Using
|
|
|
|
|
|
(in
thousands
)
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Investment in Polytronics
|
|
$
|
10,435
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,435
|
|
Ther
e were
no
changes during
2017
to the Company’s valuation techniques used to measure asset and liability fair values on a recurring basis. As of
December 30, 2017
and
December 31, 2016,
the Company held
no
non-financial assets or liabilities that are required to be measured at fair value on a recurring basis.
In addition to the methods and assumptions used for the financial instruments recorded at fair value as discussed above, the following methods and assumptions are used to estimate the fair value of other financial instruments that are
not
marked to market on a recurring basis. The
Company’s other financial instruments include cash and cash equivalents, short-term investments, accounts receivable and its long-term debt. Due to their short-term maturity, the carrying amounts of cash and cash equivalents, short-term investments and accounts receivable approximate their fair values. The Company’s revolving and term loan debt facilities’ fair values approximate book value at
December 30, 2017
and
December 31, 2016,
as the rates on these borrowings are variable in nature.
The carrying value and estimated fair values of the
Company’s Euro Senior Notes, Series A and Series B and U.S. Senior Notes, Series A and Series B, as of
December 30, 2017
and
December 31, 2016
were as follows:
|
|
2017
|
|
|
2016
|
|
(in
thousands
)
|
|
Carrying
Value
|
|
|
Estimated
Fair Value
|
|
|
Carrying
Value
|
|
|
Estimated
Fair Value
|
|
Euro Senior Notes, Series
A due 2023
|
|
$
|
139,623
|
|
|
$
|
138,294
|
|
|
$
|
122,313
|
|
|
$
|
122,586
|
|
Euro Senior Notes, Series B due 2028
|
|
|
113,369
|
|
|
|
111,579
|
|
|
|
95,314
|
|
|
|
99,230
|
|
U
.S. Senior Notes, Series A due 2022
|
|
|
25,000
|
|
|
|
24,737
|
|
|
|
25,000
|
|
|
|
24,746
|
|
U
.S. Senior Notes, Series B due 2027
|
|
|
100,000
|
|
|
|
99,992
|
|
|
|
100,000
|
|
|
|
98,660
|
|
The fair value as of the measurement date, net book value as of the end of the year and related impairment charge for assets measured at fair value on a nonrecurring basis subsequent to initial recognition during the years ended
December 31, 2016
were as follows:
|
|
Year Ended December 31, 2016
|
|
|
As of December 31, 2016
|
|
(in
thousands
)
|
|
Impairment
Charge
|
|
|
Fair Value
Measurement (Level 3)
|
|
|
Net Book
Value
|
|
Goodwill
|
|
$
|
8,794
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other intangible assets
|
|
|
6,015
|
|
|
|
680
|
|
|
|
660
|
|
Total
|
|
$
|
14,809
|
|
|
$
|
680
|
|
|
$
|
660
|
|
During the
year ended
December 31, 2016,
the goodwill related to the Custom Products reporting unit was written down to its implied fair value of zero. In addition, the company recorded a
$6.0
million impairment charge, including
$3.8
million related to the Custom Products trade name and
$2.2
million for the customer relationship intangible assets. After recording the impairment charges, there was
no
remaining value related to the customer relationship intangible assets while
$0.7
million remaining net book value related to the tradename.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The company
’s accounting and finance management determines the valuation policies and procedures for Level
3
fair value measurements and is responsible for the development and determination of unobservable inputs. The following table presents the fair value, valuation techniques and related unobservable inputs for these Level
3
measurements for the year ended
December 31, 2016:
(in
thousands
, except rates data
)
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Inputs
|
|
Rates
|
|
Tradename
|
|
$
|
680
|
|
Relief from royalty
|
|
Discount rate:
|
|
|
18%
|
|
|
|
|
|
|
|
|
R
oyalty rate:
|
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
—
|
|
Excess earnings
|
|
Discount rate:
|
|
|
18%
|
|
|
|
|
|
|
|
|
Attrition rate:
|
|
|
5%
|
|
8
. Benefit Plans
The
Company has Company-sponsored defined benefit pension plans covering employees in the U.K., Germany, the Philippines, China, Japan, Mexico, Italy and France. The amount of the retirement benefits provided under the plans is based on years of service and final average pay.
PolySwitch Acquisition
During
2016,
as a result of the PolySwitch acquisition, past service l
iabilities were assumed by the Company in mainland China, France, Germany, Japan, Mexico, and Taiwan (China), together with a small amount of plan assets in Taiwan (China).
Littelfuse Inc. Retirement Plan Termination
The company received approval from the IRS on
April 14, 2015
on its Application for Determination for Terminating Plan to terminate the U.S. defined benefit pension plan, the Littelfuse Inc. Retirement Plan, effective
July 30, 2014.
All plan liabilities were settled (either via lump sum payout or purchase of a group annuity contract) in the
third
quarter of
2015.
A cash contribution of
$9.1
million was made to the U.S. defined benefit plan
’s trust in the
third
quarter of
2015
to fully fund the plan on a buyout basis, and the eventual settlement of the plan’s liabilities triggered a settlement charge of
$30.2
million in the
third
quarter of
2015.
In the
fourth
quarter of
2015
there was an adjustment to the price of the annuity contract which resulted in a refund of premium to the company of
$0.3
million. This refund of premium, effectively a re-measurement gain, was recognized in the
fourth
quarter of
2015
as a dollar-for-dollar adjustment to the
$30.2
million earnings charge recognized in the
third
quarter of
2015,
resulting in a final settlement loss of
$29.9
million for the fiscal year ended
January 2, 2016.
During
2016,
there were
two
further adjustments to the price of the annuity contract. Their combined effect resulted in a further refund of premium to the company of
$0.3
million. This refund of premium was considered additional actual return on the assets during
2016,
followed by a negative employer contribution of that same amount in the asset reconciliation table below.
Benefit plan related information is as follows
for the years
2017
and
2016:
(in
thousands
)
|
|
2017
|
|
|
2016
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
55,606
|
|
|
$
|
50,282
|
|
Service cost
|
|
|
2,037
|
|
|
|
1,509
|
|
Interest cost
|
|
|
1,887
|
|
|
|
1,662
|
|
Net actuarial loss (gain)
|
|
|
(433
|
)
|
|
|
10,190
|
|
Benefits paid from the trust
|
|
|
(1,405
|
)
|
|
|
(2,329
|
)
|
Benefits paid directly by
the Company
|
|
|
(1,098
|
)
|
|
|
250
|
|
Curtailments and settlements
|
|
|
(31
|
)
|
|
|
(427
|
)
|
Acquisitions
|
|
|
—
|
|
|
|
2,023
|
|
Effect of exchange rate movements
|
|
|
5,477
|
|
|
|
(7,554
|
)
|
Other
|
|
|
5,228
|
|
|
|
—
|
|
Benefit obligation at end of year
|
|
$
|
67,268
|
|
|
$
|
55,606
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets at fair value:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
42,208
|
|
|
$
|
44,629
|
|
Actual return on plan assets
|
|
|
2,962
|
|
|
|
6,929
|
|
Employer contributions
|
|
|
264
|
|
|
|
(126
|
)
|
Benefits paid
|
|
|
(1,405
|
)
|
|
|
(2,329
|
)
|
Acquisitions
|
|
|
—
|
|
|
|
24
|
|
Effect of exchange rate movements
|
|
|
4,094
|
|
|
|
(6,919
|
)
|
Fair value of plan assets at end of year
|
|
|
48,123
|
|
|
|
42,208
|
|
Net amount recognized/(unfunded status)
|
|
$
|
(19,145
|
)
|
|
$
|
(13,398
|
)
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts recognized in the Consolidated Balance Sheet
s as of
December 30, 2017
and
December 31, 2016
consist of the following:
(in
thousands
)
|
|
2017
|
|
|
2016
|
|
Amounts recognized in the Consolidated Balance Sheet
s consist of:
|
|
|
|
|
|
|
|
|
Noncurrent assets
|
|
$
|
78
|
|
|
$
|
—
|
|
Current benefit liability
|
|
|
(481
|
)
|
|
|
—
|
|
Noncurrent benefit liability
|
|
|
(18,742
|
)
|
|
|
(13,398
|
)
|
Net
liability recognized
|
|
$
|
(19,145
|
)
|
|
$
|
(13,398
|
)
|
Amounts recognized in accumulated other comprehensive income (loss), pre-tax
as of
December 30, 2017
and
December 31, 2016
consist of:
(in
thousands
)
|
|
2017
|
|
|
2016
|
|
Net actuarial loss
|
|
$
|
12,261
|
|
|
$
|
13,107
|
|
Prior service (cost)
|
|
|
—
|
|
|
|
—
|
|
Net amount recognized
, pre-tax
|
|
$
|
12,261
|
|
|
$
|
13,107
|
|
The estimated net actuarial loss (gain) which will be amortized from accumulated other comprehensive income
(loss) into benefit cost in
2018
is
approximately
$0.3
million.
The components of pension exp
ense for the years
2017,
2016,
and
2015
are as follows:
|
|
|
|
|
|
|
|
|
|
2015
|
|
(in
thousands
)
|
|
2017
|
|
|
2016
|
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
Components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
2,037
|
|
|
$
|
1,509
|
|
|
$
|
750
|
|
|
$
|
824
|
|
|
$
|
1,574
|
|
Interest cost
|
|
|
1,887
|
|
|
|
1,662
|
|
|
|
3,093
|
|
|
|
1,735
|
|
|
|
4,828
|
|
Expected return on plan assets
|
|
|
(1,990
|
)
|
|
|
(1,935
|
)
|
|
|
(2,749
|
)
|
|
|
(2,346
|
)
|
|
|
(5,095
|
)
|
Amortization of losses
|
|
|
337
|
|
|
|
306
|
|
|
|
870
|
|
|
|
221
|
|
|
|
1,091
|
|
Net periodic benefit cost
|
|
|
2,271
|
|
|
|
1,542
|
|
|
|
1,964
|
|
|
|
434
|
|
|
|
2,398
|
|
Curtailment/Settlement loss (gain)
|
|
|
(25
|
)
|
|
|
(36
|
)
|
|
|
29,928
|
|
|
|
—
|
|
|
|
29,928
|
|
Total expense (income) for the year
|
|
$
|
2,246
|
|
|
$
|
1,506
|
|
|
$
|
31,892
|
|
|
$
|
434
|
|
|
$
|
32,326
|
|
Weighted average assumptions used to determine net periodic
benefit cost for the years
2017,
2016,
and
2015
are as follows:
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
2017
|
|
|
2016
|
|
|
U.S.
|
|
|
Foreign
|
|
Discount rate
|
|
|
3.0
|
%
|
|
|
3.7
|
%
|
|
|
3.9
|
%
|
|
|
3.7
|
%
|
Expected return on plan assets
|
|
|
4.5
|
%
|
|
|
4.9
|
%
|
|
|
6.8
|
%
|
|
|
5.1
|
%
|
Compensation increase rate
|
|
|
4.5
|
%
|
|
|
5.3
|
%
|
|
|
—
|
|
|
|
5.3
|
%
|
Measurement dates
|
|
12/31/16
|
|
|
1/2/16
|
|
|
12/27/14
|
|
|
12/27/14
|
|
The accumulated benefit obligation for the foreign plans
was
$60.5
million and
$51.3
million at
December 30, 2017
and
December 31, 2016,
respectively.
The following table provides a summary of under-funded or unfunded pension benefit plans with projected benefit obligations in excess of plan assets as of
December 30, 2017
and
December 31, 2016:
(in
thousands
)
|
|
2017
|
|
|
2016
|
|
Projected benefit obligation
|
|
$
|
28,515
|
|
|
$
|
48,985
|
|
Fair value of plan assets
|
|
|
9,292
|
|
|
|
42,179
|
|
The following table provides a summary of under-funded or unfunded pension benefit plans with accumulated benefit obligations in excess of plan assets as of
December 30, 2017
and
December 31, 2016:
(in
thousands
)
|
|
2017
|
|
|
2016
|
|
Accumulated benefit obligation
|
|
$
|
18,990
|
|
|
$
|
51,306
|
|
Fair value of plan assets
|
|
|
6,003
|
|
|
|
38,912
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Weighted average assumptions used to determine benefit obligations
as of
December 30, 2017,
December 31, 2016
and
January 2, 2016
are as follows:
|
|
2017
|
|
|
201
6
|
|
|
201
5
|
|
Discount rate
|
|
|
3.1
|
%
|
|
|
2.6
|
%
|
|
|
3.8
|
%
|
Compensation increase rate
|
|
|
5.0
|
%
|
|
|
4.5
|
%
|
|
|
6.2
|
%
|
Measurement dates
|
|
12/
30/17
|
|
|
12/31/16
|
|
|
1/
2/16
|
|
Expected benefit payments to be paid to participants for the fiscal year ending are as follows:
(in
thousands
)
|
|
Expected Benefit Payments
|
|
201
8
|
|
$
|
2,467
|
|
201
9
|
|
|
2,474
|
|
20
20
|
|
|
2,473
|
|
202
1
|
|
|
2,802
|
|
202
2
|
|
|
2,776
|
|
2023-2027
|
|
|
16,777
|
|
The Company expects to make approximately
$1.4
million of contributions to the plans in
2018.
Defined Benefit Plan Assets
Based upon analysis of the target asset allocation and historical retu
rns by type of investment, the Company has assumed that the expected long-term rate of return will be
4.5%
on plan assets. Assets are invested to maximize long-term return taking into consideration timing of settlement of the retirement liabilities and liquidity needs for benefits payments. Pension plan assets were invested as follows, and were
not
materially different from the target asset allocation:
|
|
Asset Allocation
|
|
|
|
2017
|
|
|
201
6
|
|
Equity securities
|
|
|
35
|
%
|
|
|
32
|
%
|
Debt securities
|
|
|
64
|
%
|
|
|
65
|
%
|
Cash and equivalents
|
|
|
1
|
%
|
|
|
3
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
The Company segregated its plan assets by the following major categories and level for determining their fair value as of
December 30, 2017
and
December 31, 2016.
All plan assets that are valued using the net asset value per share (“NAV”) practical expedient have
not
been included within the fair value hierarchy but are separately disclosed.
Cash and cash equivalents
–
Carrying value approximates fair value. As such these assets were classified as Level
1.
The Company also invests in certain short-term investments which are valued using the amortized cost method and at NAV.
Equity
–
The values of individual equity securities were based on quoted prices in active markets. As such, these assets are classified as Level
1.
Additionally, the Company invests in certain equity funds that are valued at calculated NAV.
Fixed income
– Fixed income securities are typically priced based on a last trade basis and are exchange-traded. Accordingly, the Company classified fixed income securities as Level
1.
The Company also invests in certain fixed income funds which are valued at NAV.
For any Level
2
plan assets, management reviews significant investments on a periodic basis including investigation of unusual fluctuations in price or returns and obtaining an understanding of the pricing methodology to assess the reliability of
third
-party pricing estimates.
The valuation methodologies described above
may
generate a fair value calculation that
may
not
be indicative of net realizable value or future fair values. While the Company believes the valuation methodologies used are appropriate, the use of different methodologies or assumptions in calculating fair value could result in different amounts. The Company invests in various assets in which valuation is determined by NAV. The Company believes that the NAV is representative of fair value at the reporting date, as there are
no
significant restrictions on redemption of these investments or other reasons to indicate that the investment would be redeemed at an amount different than the NAV.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Th
e following table presents the Company’s pension plan assets measured at fair value by classification within the fair value hierarchy as of
December 30, 2017:
|
|
Fair Value Measurements Usin
g
|
|
|
|
|
|
|
|
|
|
(in
thousands
)
|
|
Level
1
|
|
|
Level
2
|
|
|
L
evel 3
|
|
|
NAV
|
|
|
Total
|
|
Equities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Equity 50:50 Index Fund
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,898
|
|
|
$
|
7,898
|
|
Global Equity 50:50 GBP Hedged Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,134
|
|
|
|
8,134
|
|
Philippine Stock
|
|
|
1,031
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,031
|
|
Fix
ed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Grade Corporate Bond Funds
|
|
|
6,003
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,003
|
|
Over 15y Gilts Index Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,684
|
|
|
|
3,684
|
|
Active Corp Bond
– Over 10 Yr Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,835
|
|
|
|
6,835
|
|
Over 5y Index-Linked Gilts Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,049
|
|
|
|
12,049
|
|
Philippine Long Gov
ernment Securities
|
|
|
1,362
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,362
|
|
Philippine Long Corporate Bonds
|
|
|
723
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
723
|
|
Cash and equivalents
|
|
|
173
|
|
|
|
—
|
|
|
|
—
|
|
|
|
231
|
|
|
|
404
|
|
Total pension plan assets
|
|
$
|
9,292
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38,831
|
|
|
$
|
48,123
|
|
Th
e following table presents the Company’s pension plan assets measured at fair value by classification within the fair value hierarchy as of
December 31, 2016:
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
|
|
|
(in
thousands
)
|
|
Level
1
|
|
|
Level
2
|
|
|
L
evel 3
|
|
|
NAV
|
|
|
Total
|
|
Equities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Equity 50:50 Index Fund
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,321
|
|
|
$
|
6,321
|
|
Global Equity 50:50 GBP Hedged Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,406
|
|
|
|
6,406
|
|
Philippine Stock
|
|
|
906
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
906
|
|
Fixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Grade Corporate Bond Funds
|
|
|
5,372
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,372
|
|
Over 15y Gilts Index Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,265
|
|
|
|
3,265
|
|
Active Corp Bond
– Over 10 Yr Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,902
|
|
|
|
5,902
|
|
Over 5y Index-Linked Gilts Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,724
|
|
|
|
10,724
|
|
Philippine Long Gov
ernment Securities
|
|
|
1,133
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,133
|
|
Philippine Long Corporate Bonds
|
|
|
751
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
751
|
|
Cash and equivalents
|
|
|
476
|
|
|
|
—
|
|
|
|
—
|
|
|
|
952
|
|
|
|
1,428
|
|
Total pension plan assets
|
|
$
|
8,638
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
33,570
|
|
|
$
|
42,208
|
|
Defined Contribution Plan
The
Company also maintains a
401
(k) savings plan covering substantially all U.S. employees. The Company matches
100%
of the employee’s annual contributions for the
first
4%
of the employee’s eligible compensation. The Company
may
provide an additional discretionary match to participants and made discretionary matches of
2%
of the employee’s eligible compensation for each of the years ended
December 30, 2017,
December 31, 2016
and
January 2, 2016.
Employees are immediately vested in their contributions plus actual earnings thereon, as well as the Company contributions. Company matching contributions amounted to
$3.5
million,
$3.2
million, and
$2.8
million in
2017,
2016,
and
2015,
respectively.
Non-qualified Supplemental Retirement and Savings Plan
The C
ompany has a non-qualified Supplemental Retirement and Savings Plan which provides additional retirement benefits for certain management employees and named executive officers by allowing participants to defer a portion of their annual compensation. The Company maintains accounts for participants through which participants make investment elections. The investments are subject to the claims of the Company’s creditors and the Company is responsible for the payment of all benefits under the plan from its general assets. As of
December 30, 2017,
there was
$8.0
million of marketable securities related to the plan included in
Other assets
and
$8.0
million of accrued compensation included in
Other long-term liabilities
. The marketable securities are classified as Level
1
under the fair value hierarchy as they are maintained in mutual funds with readily determinable fair value. The Company made matching contributions to the plan of
$0.3
million in
2017.
9
. Shareholders’ Equity
Equity Plans
: The Company has equity-based compensation plans authorizing the granting of stock options, restricted shares, restricted share units, performance shares and other stock rights to employees and directors. As of
December 30, 2017,
there were
1.3
million shares available for issuance of future awards under the Company’s equity-based compensation plans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock options vest over a three,
four
or
five
-year period and are exercisable over either a
seven
or
ten
-year period commencing from the date of the grant. Restricted shares and share units granted by the
Company generally vest over
three
to
four
years.
The following table provides a reconciliation of outstanding stock options for the fiscal year ended
December 3
0,
2017.
|
|
Shares Under
Option
|
|
|
Weighted
Average
Price
|
|
|
Weighted
Average
Remaining
Contract Life
(Years)
|
|
|
Aggregate
Intrinsic
Value
(000
’s)
|
|
Outstanding
December 31, 2016
|
|
|
356,184
|
|
|
$
|
98.65
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
76,082
|
|
|
|
154.15
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(27,965
|
)
|
|
|
84.93
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
—
|
|
|
NA
|
|
|
|
|
|
|
|
|
|
Outstanding December 3
0, 2017
|
|
|
404,301
|
|
|
|
110.04
|
|
|
|
4.5
|
|
|
$
|
35,488
|
|
Exercisable December 3
0, 2017
|
|
|
203,745
|
|
|
|
92.36
|
|
|
|
3.6
|
|
|
|
21,486
|
|
The following table provides a reconciliation of non-vested restricted share and share unit awards for the fiscal year ended
December 3
0,
2017.
|
|
Shares
|
|
|
Weighted Average
Grant-Date Fair
Value
|
|
Nonvested
December 31, 2016
|
|
|
207,330
|
|
|
$
|
106.92
|
|
Granted
|
|
|
95,621
|
|
|
|
151.91
|
|
Vested
|
|
|
(95,520
|
)
|
|
|
102.49
|
|
Forfeited
|
|
|
(7,738
|
)
|
|
|
111.56
|
|
Nonvested December 3
0, 2017
|
|
|
199,693
|
|
|
|
130.40
|
|
The total intrinsic value of options exercised during
201
7,
2016,
and
2015
was
$2.2
million,
$13.3
million, and
$5.0
million, respectively. The total fair value of shares vested was
$15.0
million,
$10.7
million, and
$8.1
million for
2017,
2016,
and
2015,
respectively. The total amount of share-based liabilities paid was
$0.9
million,
$0.6
million and
$0.4
million for
2017,
2016,
and
2015,
respectively.
The
Company recognizes compensation cost of all share-based awards as an expense on a straight-line basis over the vesting period of the awards. At
December 30, 2017,
the unrecognized compensation cost for options, restricted shares and performance shares was
$15.9
million before tax, and will be recognized over a weighted-average period of
1.9
years. Compensation cost included as a component of selling, general, and administrative expense for all equity compensation plans discussed above was
$17.3
million,
$12.8
million, and
$10.7
million for
2017,
2016,
and
2015
, respectively. The total income tax benefit recognized in the Consolidated Statements of Net Income was
$6.0
million,
$4.4
million and
$3.7
million for
2017,
2016,
and
2015
, respectively.
The
Company uses the Black-Scholes option valuation model to determine the fair value of awards granted. The weighted average fair value of and related assumptions for options granted are as follows:
|
|
2017
|
|
|
201
6
|
|
|
201
5
|
|
Weighted average fair value of options granted
|
|
|
$30.77
|
|
|
|
$26.06
|
|
|
|
$21.99
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
1.79%
|
|
|
|
1.37%
|
|
|
|
1.25%
|
|
Expected dividend yield
|
|
|
0.86%
|
|
|
|
0.97%
|
|
|
|
1.04%
|
|
Expected stock price volatility
|
|
|
23.0%
|
|
|
|
26.0%
|
|
|
|
28.0%
|
|
Expected life of options (years)
|
|
|
4.4
|
|
|
|
4.6
|
|
|
|
4.6
|
|
Expected volatilities are based on the historical volatility of the
Company’s stock price. The expected life of options is based on historical data for options granted by the Company. The risk-free rates are based on yields available at the time of grant on U.S. Treasury bonds with maturities consistent with the expected life assumption.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accumulated Other Comprehensive Income (Loss) (“AOCI”)
:
The following table sets forth the changes in the components of AOCI by component for fiscal years
2017,
2016,
and
2015:
(in
thousands
)
|
|
Pension and postretirement liability and reclassification adjustments
(a)
|
|
|
Gain
(Loss)
on investments
|
|
|
Foreign currency translation adjustment
s
|
|
|
Accumulated other comprehensive income (loss)
|
|
Balance at
December 27, 2014
|
|
$
|
(29,615
|
)
|
|
$
|
10,791
|
|
|
$
|
(2,302
|
)
|
|
$
|
(21,126
|
)
|
201
5 activity
|
|
|
20,893
|
|
|
|
793
|
|
|
|
(46,231
|
)
|
|
|
(24,545
|
)
|
Balance at
January 2, 2016
|
|
|
(8,722
|
)
|
|
|
11,584
|
|
|
|
(48,533
|
)
|
|
|
(45,671
|
)
|
201
6 activity
|
|
|
(3,261
|
)
|
|
|
(815
|
)
|
|
|
(24,832
|
)
|
|
|
(28,908
|
)
|
Balance at
December 31, 2016
|
|
|
(11,983
|
)
|
|
|
10,769
|
|
|
|
(73,365
|
)
|
|
|
(74,579
|
)
|
2017 activity
|
|
|
1,147
|
|
|
|
(974
|
)
|
|
|
10,738
|
|
|
|
10,911
|
|
Balance at December 30, 2017
|
|
$
|
(10,836
|
)
|
|
$
|
9,795
|
|
|
$
|
(62,627
|
)
|
|
$
|
(63,668
|
)
|
(a) Net of tax of $
1.4
million,
$1.1
million, and
$0.7
million
at December 30, 2017; December 31, 2016; and January 2, 2016, respectively.
Preferred Stock
: The Board of Directors
may
authorize the issuance of preferred stock from time to time in
one
or more series with such designations, preferences, qualifications, limitations, restrictions, and optional or other special rights as the Board
may
fix by resolution.
The
Company’s Board of Directors authorized the repurchase of up to
1,000,000
shares of the Company’s common stock under a program for the period
May 1, 2017
to
April 30, 2018.
The Company did
not
repurchase any shares of its common stock during fiscal
2017
under the stock repurchase program.
10.
Income
Taxes
On
December 22, 2017,
the U.S. enacted legislation commonly referred to as t
he Tax Cuts and Jobs Act (the "Tax Act"). Among other things, the Tax Act reduces the U.S. corporate federal income tax rate from
35%
to
21%,
adds base broadening provisions which limit deductions and address excessive international tax planning, imposes a
one
-time tax (the “Toll Charge”) on accumulated earnings of certain non-U.S. subsidiaries and enables repatriation of earnings of non-U.S. subsidiaries free of U.S. federal income tax. Other than the Toll Charge (which is applicable to the Company for
2017
), the provisions will generally be applicable to the Company in
2018
and beyond.
In accordance with the guidance provided in SEC Staff Accounting Bulletin (“SAB”)
No.
118,
in the
fourth
quarter of
2017
the Company recorded a charge of
$47
million as a provisional reasonable estimate of the impact of the Tax Act, including
$49
million for the Toll Charge net of
$2
million for other net tax benefits. The Company is continuing to analyze the Tax Act and plans to finalize the estimate within the measurement period outlined in SAB
No.
118.
The final charge
may
differ from the provisional reasonable estimate if provisions of the Tax Act, and their interaction with other provisions of the U.S. Internal Revenue Code, are interpreted differently than interpretations made by the Company in determining the estimate, whether through issuance of administrative guidance, or through further review of the Tax Act by the Company and its advisors. Aside from these interpretation issues, the final charge
may
differ from the provisional reasonable estimate due to refinements of accumulated non-U.S. earnings and tax pool data.
One of the base broadening provisions of the Tax Act is commonly referred to as the “GILTI” provisions. In accordance with guidance issued by the FASB staff, the Company has
not
adopted an accounting policy for GILTI. Thus, the U.S. balance sheet tax accounts, notably deferred taxes, were computed without consideration of the possible future impact of the GILTI provisions. The Company intends to adopt an accounting policy for GILTI within the measurement period outlined in SAB
118.
Domestic and foreign income (loss) before income taxes is as follows:
(in
thousands
)
|
|
201
7
|
|
|
201
6
|
|
|
201
5
|
|
Domestic
|
|
$
|
(20,496
|
)
|
|
$
|
(9,563
|
)
|
|
$
|
1,313
|
|
Foreign
|
|
|
224,533
|
|
|
|
132,837
|
|
|
|
105,635
|
|
Income before income taxes
|
|
$
|
204,037
|
|
|
$
|
123,274
|
|
|
$
|
106,948
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Federal, state and foreign income tax expense (benefit) consists of the following:
(in
thousands
)
|
|
201
7
|
|
|
201
6
|
|
|
201
5
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
34,060
|
|
|
$
|
(3,992
|
)
|
|
$
|
(6,686
|
)
|
State
|
|
|
450
|
|
|
|
(648
|
)
|
|
|
2,078
|
|
Foreign
|
|
|
32,945
|
|
|
|
28,695
|
|
|
|
19,211
|
|
Subtotal
|
|
|
67,455
|
|
|
|
24,055
|
|
|
|
14,603
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal and State
|
|
|
16,562
|
|
|
|
(1,594
|
)
|
|
|
11,330
|
|
Foreign
|
|
|
501
|
|
|
|
(3,675
|
)
|
|
|
149
|
|
Subtotal
|
|
|
17,063
|
|
|
|
(5,269
|
)
|
|
|
11,479
|
|
Provision for income taxes
|
|
$
|
84,518
|
|
|
$
|
18,786
|
|
|
$
|
26,082
|
|
The current federal and state income tax expense for
2017
includes the preliminary estimate of
$49
million
for the Toll Charge as discussed above, partially offset by
$13
million of foreign tax credits. The Company will elect to pay the
2017
current federal income tax over the
eight
-year period prescribed by the Tax Act. The long-term portion of the
2017
current federal income tax (approximately
$32
million) is recorded in the
O
ther long-term liabilit
ies
on the Consolidated Balance Sheets as of
December 30, 2017.
The current federal tax benefit for
2016
includes an estimated
$3
million benefit as a result of the carry-back of the
2016
U.S. federal net operating loss to the
2014
tax year.
The current federal tax benefit for
2015
includes an
$11.7
million benefit reclassified from accumulated other comprehensive income as a result of the company
’s termination of the U.S. defined benefit pension plan as described in Note
8,
Benefit Plans
.
A reconciliation between income taxes computed on income before income taxes at the federal statutory rate and the provision for income taxes is provided below:
(in
thousands
)
|
|
201
7
|
|
|
201
6
|
|
|
201
5
|
|
Tax expense at statutory rate of 35%
|
|
$
|
71,413
|
|
|
$
|
43,146
|
|
|
$
|
37,432
|
|
Provisional amount of
the Toll charge
|
|
|
49,000
|
|
|
|
—
|
|
|
|
—
|
|
Provisional
Tax Act impact other than the Toll charge
|
|
|
(1,962
|
)
|
|
|
—
|
|
|
|
—
|
|
State and local taxes, net of federal tax benefit
|
|
|
292
|
|
|
|
(415
|
)
|
|
|
1,907
|
|
Non-U.S.
income tax rate differential
|
|
|
(47,077
|
)
|
|
|
(25,471
|
)
|
|
|
(18,253
|
)
|
Impairment of goodwill without tax benefit
|
|
|
—
|
|
|
|
3,088
|
|
|
|
—
|
|
Tax on unremitted earnings
|
|
|
12,202
|
|
|
|
2,747
|
|
|
|
—
|
|
Mexico manufacturing operations restructuring
|
|
|
—
|
|
|
|
—
|
|
|
|
4,841
|
|
Nondeductible professional fees
|
|
|
1,240
|
|
|
|
313
|
|
|
|
1,011
|
|
Tax deduction for stock of foreign subsidiary
|
|
|
—
|
|
|
|
(3,896
|
)
|
|
|
—
|
|
Other, net
|
|
|
(590
|
)
|
|
|
(726
|
)
|
|
|
(856
|
)
|
Provision for income taxes
|
|
$
|
84,518
|
|
|
$
|
18,786
|
|
|
$
|
26,082
|
|
Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the tax bases of the company
’s assets and liabilities. Significant components of the company’s deferred tax assets and liabilities at
December 30, 2017
and
December 31, 2016,
are as follows:
(in thousands)
|
|
2017
|
|
|
2016
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
24,094
|
|
|
$
|
31,770
|
|
Foreign tax credit carryforwards
|
|
|
1,053
|
|
|
|
6,472
|
|
Accrued restructuring
|
|
|
156
|
|
|
|
456
|
|
Capital losses
|
|
|
3,165
|
|
|
|
4,557
|
|
Domestic and foreign net operating loss carryforwards
|
|
|
5,778
|
|
|
|
2,223
|
|
Gross deferred tax assets
|
|
|
34,246
|
|
|
|
45,478
|
|
Less: Valuation allowance
|
|
|
(6,203
|
)
|
|
|
(6,738
|
)
|
Total deferred tax assets
|
|
|
28,043
|
|
|
|
38,740
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Tax depreciation and amortization in excess of book
|
|
|
21,254
|
|
|
|
23,471
|
|
T
ax on unremitted earnings
|
|
|
12,000
|
|
|
|
1,750
|
|
Total deferred tax liabilities
|
|
|
33,254
|
|
|
|
25,221
|
|
Net deferred tax (liabilities) assets
|
|
$
|
(5,211
|
)
|
|
$
|
13,519
|
|
The deferred tax asset valuation allowance is related to a U.S. capital loss carryover (which expire in 2018) and tax attributes of certain non-US subsidiaries which are not expected to be realized. The remaining net operating losses either have no expira
tion date or are expected to be utilized prior to expiration (which begin expiring in 2021). The Company paid income taxes of $31.8 million, $35.6 million, and $23.3 million in 2017, 2016, and 2015, respectively, and received income tax refunds of $13.7 million in 2017.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes are
not
provided on the excess of the investment value for financial reporting over the tax basis of investments in those non-U.S. subsidiaries for which such excess is considered to be permanently reinvested in those operations. As of
December 30, 2017,
unremitted earnings of the Company
’s non-U.S. subsidiaries was approximately
$680
million. The Company recognized deferred tax liabilities of
$12.0
million (
$11.8
million for non-U.S. taxes and
$0.2
million for U.S. state taxes) as of
December 30, 2017
and
$1.8
million as of
December 31, 2016,
related to taxes on certain non-U.S. earnings which are
not
considered to be permanently reinvested. Some of these taxes
may
provide a U.S. federal income tax benefit as a foreign tax credit. However, due to uncertainty in regard to the Tax Act’s provisions,
no
such tax benefit was recorded. The Company will reconsider this provisional conclusion when it finalizes its preliminary reasonable estimate of the impact of the Tax Act, based upon interpretations and administrative guidance as of that time.
The
Company has
three
subsidiaries in China which benefit from lowered income tax rates due to “tax holidays” which apply for
three
-year periods, subject to extension. One such tax holiday expires in
2018,
and the Company expects to be granted an extension. Such tax holidays contributed
$5.7
million in tax benefits,
or $0.25
per diluted share, during
2017,
with similar amounts expected in future years while such tax holidays are in effect.
A reconciliation of the beginning and ending amount of unrecognized tax benefits as of
December 30, 2017,
December 31, 2016,
and
January 2, 2016
is as follows:
(in
thousands, except per share amounts
)
|
|
Unrecognized Tax Benefits
|
|
Balance at January 2, 2016
|
|
$
|
3,532
|
|
Additions for tax positions taken in the current year
|
|
|
2,696
|
|
Additions for tax positions taken in the pre-acquisition periods of acquired subsidiaries
|
|
|
2,491
|
|
Settlements
|
|
|
(102
|
)
|
Balance at December 31, 2016
|
|
$
|
8,617
|
|
Additions for tax positions taken in the current year
|
|
|
370
|
|
Other
|
|
|
(1,327
|
)
|
Balance at December 30, 2017
|
|
$
|
7,660
|
|
The company recognizes accrued interest and penalties associated with uncertain tax positions as part of income tax expense. The company recognized interest expense of
$0.9
million,
$0.9
million, and
$0.2
million in
2017,
2016,
and
2015,
respectively. Accrued interest was
$3.3
million,
$2.4
million, and
$1.5
million as of
December 30, 2017,
December 31, 2016,
and
January 2, 2016,
respectively.
The amount of unrecognized tax benefits at
December 30, 2017
was $
7.7
million. This total represents the net amount of tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The company does
not
expect any material decrease in unrecognized tax benefits in the next
12
months.
None
of the positions included in unrecognized tax benefits are related to tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.
The U.S. federal statute of limitations remains open for
201
4
onward although the company has been audited for
2014
(during
2016
) and the audit concluded with
no
additional tax due. In late
2017,
the U.S. Internal Revenue Service began an examination of the Company’s federal income tax returns for
2015
and
2016
(with certain aspects of
2014
also subject to review as a consequence of a carryback of tax attributes from
2016
). Foreign and U.S. state statute of limitations generally range from
three
to
seven
years. The German tax authority is currently conducting its examination for tax years
2011
through
2014.
Other non-U.S. tax examinations occur from time to time, including
one
which is currently in process in Italy. The company does
not
expect to recognize a significant amount of additional tax expense as a result of concluding any of these examinations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11
. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
(in
thousands, except per share amounts
)
|
|
201
7
|
|
|
201
6
|
|
|
201
5
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income as reported
|
|
$
|
119,519
|
|
|
$
|
104,488
|
|
|
$
|
80,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
22,687
|
|
|
|
22,559
|
|
|
|
22,565
|
|
Effect of dilutive securities
|
|
|
244
|
|
|
|
168
|
|
|
|
154
|
|
Diluted
|
|
|
22,931
|
|
|
|
22,727
|
|
|
|
22,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
5.27
|
|
|
$
|
4.63
|
|
|
$
|
3.58
|
|
Diluted earnings per share
|
|
$
|
5.21
|
|
|
$
|
4.60
|
|
|
$
|
3.56
|
|
Potential shares of common stock attributable to stock options excluded from the earnings per share calculation because their effect would be anti-dilutive were
37,443
shares,
53,448
shares, and
113,130
shares in
2017,
2016,
and
2015,
respectively.
On January 17, 2018, the Company acquired IXYS through a combination of cash, Littelfuse common stock, and the value of converted, or cash settled IXYS equity awards. The Company issued approximately 2.1 million shares of Littelfuse common stock and conve
rted IXYS equity awards into approximately 0.5 million Littelfuse equity awards.
12
. Segment Information
The
Company and its subsidiaries design, manufacture and sell components and modules for circuit protection, power control and sensing throughout the world. The Company reports its operations by the following segments: Electronics, Automotive, and Industrial. An operating segment is defined as a component of an enterprise that engages in business activities from which it
may
earn revenues and incur expenses, and about which separate financial information is regularly evaluated by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources. The CODM is the Company’s President and Chief Executive Officer (“CEO”). The CODM allocates resources to and assesses the performance of each operating segment using information about its revenue and operating income (loss) before interest and taxes, but does
not
evaluate the operating segments using discrete balance sheet information.
Sales, marketing
, and research and development expenses are charged directly into each operating segment. Manufacturing, purchasing, logistics, customer service, finance, information technology, and human resources are shared functions that are allocated back to the
three
operating segments. The Company does
not
report inter-segment revenue because the operating segments do
not
record it. Certain expenses, determined by the CODM to be strategic in nature and
not
directly related to segments current results, are
not
allocated but identified as “Other”. Additionally, the Company does
not
allocate interest and other income, interest expense, or taxes to operating segments. These costs are
not
allocated to the segments, as management excludes such costs when assessing the performance of the segments. Although the CODM uses operating income (loss) to evaluate the segments, operating costs included in
one
segment
may
benefit other segments. Except as discussed above, the accounting policies for segment reporting are the same as for the Company as a whole.
|
●
|
Electronics Segment
: Consists of
one
of the broadest product offerings in the industry, including fuses and fuse accessories, positive temperature coefficient (“PTC”) resettable fuses, polymer electrostatic discharge (“ESD”) suppressors, varistors, gas discharge tubes; semiconductor and power semiconductor products such as discrete transient voltage suppressor (“TVS”) diodes, TVS diode arrays, protection and switching thyristors, silicon carbide, metal-oxide-semiconductor field-effect transistors (“MOSFETs”) and silicon carbide diodes; and insulated gate bipolar transistors (“IGBT”) technologies. The segment covers a broad range of end markets, including consumer electronics, automotive electronics, IT and telecommunications equipment, medical devices, lighting products, and white goods.
|
|
●
|
Automotive Segment:
Consists of a wide range of circuit protection, power control and sensing technologies for global original equipment manufacturers (“OEMs”), Tier-I suppliers and parts distributors in the automotive, commercial vehicle, and agricultural and construction equipment industries. Passenger car fuse products include fuses and fuse accessories, including blade fuses, battery cable protectors, varistors, high-current fuses, and high-voltage fuses for hybrid and electric vehicles. Commercial vehicle products include fuses, switches, relays, and power distribution modules for the commercial vehicle industry. Automotive sensor products include a wide range of automotive and commercial vehicle sensors designed to monitor the passenger compartment occupants and environment as well as the vehicle’s powertrain, emissions, speed and suspension.
|
|
●
|
Industrial Segment:
Consists of power fuses, protection relays and controls and other circuit protection products for use in heavy industrial applications such as mining, oil and gas, energy storage, construction, HVAC systems, elevator and other industrial equipment.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company has provided this segment information for all comparable prior periods.
Segment information is summarized as follows:
(in
thousands
)
|
|
201
7
|
|
|
201
6
|
|
|
201
5
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics
|
|
$
|
661,928
|
|
|
$
|
535,191
|
|
|
$
|
405,497
|
|
Automotive
|
|
|
453,227
|
|
|
|
415,200
|
|
|
|
339,957
|
|
Industrial
|
|
|
106,379
|
|
|
|
105,768
|
|
|
|
122,410
|
|
Total net sales
|
|
$
|
1,221,534
|
|
|
$
|
1,056,159
|
|
|
$
|
867,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics
|
|
$
|
35,215
|
|
|
$
|
29,141
|
|
|
$
|
22,936
|
|
Automotive
|
|
|
22,459
|
|
|
|
18,107
|
|
|
|
13,437
|
|
Industrial
|
|
|
5,337
|
|
|
|
5,889
|
|
|
|
5,268
|
|
Total depreciation and amortization
|
|
$
|
63,011
|
|
|
$
|
53,137
|
|
|
$
|
41,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics
|
|
$
|
155,880
|
|
|
$
|
117,088
|
|
|
$
|
78,194
|
|
Automotive
|
|
|
62,571
|
|
|
|
59,905
|
|
|
|
53,086
|
|
Industrial
|
|
|
10,334
|
|
|
|
3,615
|
|
|
|
18,094
|
|
Other
(a)
|
|
|
(10,274
|
)
|
|
|
(49,964
|
)
|
|
|
(45,217
|
)
|
Total operating income
|
|
|
218,511
|
|
|
|
130,644
|
|
|
|
104,157
|
|
Interest expense
|
|
|
13,380
|
|
|
|
8,628
|
|
|
|
4,091
|
|
Foreign exchange loss (gain)
|
|
|
2,376
|
|
|
|
472
|
|
|
|
(1,465
|
)
|
Other
(income) expense, net
|
|
|
(1,282
|
)
|
|
|
(1,730
|
)
|
|
|
(5,417
|
)
|
Income before income taxes
|
|
$
|
204,037
|
|
|
$
|
123,274
|
|
|
$
|
106,948
|
|
(a)
Included in “Other” Operating income (loss) for
2017
are costs related to the acquisition and integration costs associated with the Company’s completed and pending acquisitions (
$8.0
million in
Cost of sales
(“COS”) and
Selling, general, and administrative expenses
(“SG&A”) and charges related to restructuring and production transfers in the Company’s Asia operations (
$2.2
million in SG&A).
Included in “Other” Operating income (loss) for
2016
are costs related to the impairment of the
Custom Products reporting unit (
$14.8
million), acquisition and integration costs associated with the Company’s
2016
acquisitions (
$29.2
million in COS and SG&A), transfer of the Company’s reed switch manufacturing operations from its Lake Mills, Wisconsin and Suzhou, China locations to the Philippines (
$1.6
million in COS), impairment and severance costs related to the closure of the Company’s manufacturing facility in Denmark (
$1.9
million in SG&A), and restructuring costs (
$2.5
million in SG&A and
Research and development expenses
).
Included in “Other” Operating income (loss) for
2015
are costs related to the transfer of the
Company’s reed switch manufacturing operations from its Lake Mills, Wisconsin and Suzhou, China locations to the Philippines (
$5.2
million in COS), acquisition related fees (
$4.6
million included in SG&A), pension settlement and other costs (
$31.9
million in SG&A), and restructuring costs (
$3.6
million in SG&A).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company’s significant net sales, long-lived assets and additions to long-lived assets by country for the fiscal years ended
2017,
2016,
and
2015
are as follows:
(in
thousands
)
|
|
201
7
|
|
|
201
6
|
|
|
201
5
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
383,025
|
|
|
$
|
356,674
|
|
|
$
|
344,305
|
|
China
|
|
|
321,111
|
|
|
|
263,701
|
|
|
|
193,792
|
|
Other countries
|
|
|
517,398
|
|
|
|
435,784
|
|
|
|
329,767
|
|
Total net sales
|
|
$
|
1,221,534
|
|
|
$
|
1,056,159
|
|
|
$
|
867,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
23,490
|
|
|
$
|
23,731
|
|
|
$
|
23,965
|
|
China
|
|
|
86,310
|
|
|
|
65,345
|
|
|
|
37,241
|
|
Mexico
|
|
|
62,510
|
|
|
|
52,262
|
|
|
|
47,130
|
|
Philippines
|
|
|
31,129
|
|
|
|
33,345
|
|
|
|
33,525
|
|
Other countries
|
|
|
47,138
|
|
|
|
42,492
|
|
|
|
20,707
|
|
Total long-lived assets
|
|
$
|
250,577
|
|
|
$
|
217,175
|
|
|
$
|
162,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to long-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
3,518
|
|
|
$
|
4,694
|
|
|
$
|
8,609
|
|
China
|
|
|
32,775
|
|
|
|
13,181
|
|
|
|
9,710
|
|
Mexico
|
|
|
19,395
|
|
|
|
15,667
|
|
|
|
9,193
|
|
Philippines
|
|
|
2,979
|
|
|
|
5,096
|
|
|
|
12,620
|
|
Other countries
|
|
|
7,258
|
|
|
|
7,590
|
|
|
|
3,887
|
|
Total additions to long-lived assets
|
|
$
|
65,925
|
|
|
$
|
46,228
|
|
|
$
|
44,019
|
|
For the year ended
December 30, 2017,
approximately
69%
of the Company’s net sales were to customers outside the United States (exports and foreign operations) including
26%
to China (including Hong Kong). Sales to Arrow Electronics, Inc., which were included in the Electronics, Automotive, and Industrial segments, were
10.6%
of consolidated net sales in
2017
but less than
10%
for
2016
and
2015.
No
other single customer accounted for more than
10%
of net sales during the last
three
years.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
3
. Selected Quarterly Financial Data (Unaudited)
The quarterly periods for
201
7
are for the
13
-weeks ended
December 30, 2017,
September 30, 2017,
July 1, 2017,
and
April 1, 2017,
respectively. The quarterly periods for
2016
are for the
13
-weeks ended
December 31, 2016,
October 1, 2016,
July 2, 2016,
and
April 2, 2016,
respectively.
(in
thousands, except per share data
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
4Q
(a)
|
|
|
3
Q
(b
)
|
|
|
2
Q
(c
)
|
|
|
1
Q
(d
)
|
|
|
4Q
(e
)
|
|
|
3
Q
(f
)
|
|
|
2
Q
(g
)
|
|
|
1
Q
(h
)
|
|
Net sales
|
|
$
|
304,849
|
|
|
$
|
317,889
|
|
|
$
|
313,355
|
|
|
$
|
285,441
|
|
|
$
|
284,518
|
|
|
$
|
280,331
|
|
|
$
|
271,912
|
|
|
$
|
219,398
|
|
Gross profit
|
|
|
126,624
|
|
|
|
133,651
|
|
|
|
132,608
|
|
|
|
113,650
|
|
|
|
114,337
|
|
|
|
113,759
|
|
|
|
97,866
|
|
|
|
87,155
|
|
Operating income
|
|
|
50,780
|
|
|
|
58,609
|
|
|
|
60,270
|
|
|
|
48,852
|
|
|
|
40,988
|
|
|
|
27,526
|
|
|
|
29,702
|
|
|
|
32,428
|
|
Net income/(loss)
|
|
|
(10,819
|
)
|
|
|
42,808
|
|
|
|
48,638
|
|
|
|
38,891
|
|
|
|
27,245
|
|
|
|
30,802
|
|
|
|
27,152
|
|
|
|
19,289
|
|
Net income/(loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.48
|
)
|
|
$
|
1.88
|
|
|
$
|
2.13
|
|
|
$
|
1.71
|
|
|
$
|
1.20
|
|
|
$
|
1.36
|
|
|
$
|
1.21
|
|
|
$
|
0.86
|
|
Diluted
|
|
$
|
(0.48
|
)
|
|
$
|
1.87
|
|
|
$
|
2.11
|
|
|
$
|
1.69
|
|
|
$
|
1.19
|
|
|
$
|
1.35
|
|
|
$
|
1.20
|
|
|
$
|
0.85
|
|
(
a)
|
In the
fourth
quarter of
2017,
the Company recorded an estimated
one
-time tax charge of
$49
million for the enactment of the Tax Cuts and Jobs Act for deemed repatriation of unremitted earnings of foreign subsidiaries,
$1.4
million in acquisition and integration costs and
$0.7
million in restructuring and production costs related to the transfer of Asian operations.
|
|
|
(
b)
|
In the
third
quarter of
2017,
the Company recorded
$4.8
million in acquisition and integration costs and
$1.5
million in restructuring and production costs related to the transfer of Asian operations.
|
|
|
(
c)
|
In the
second
quarter of
2017,
the Company recorded
$0.3
million in acquisition and integration costs.
|
|
|
(
d)
|
In the
first
quarter of
2017,
the Company
$1.5
million in acquisition and integration costs
|
|
|
(
e)
|
In the
fourth
quarter of
2016,
the Company recorded (
$0.1
) million gain related to the Company’s transfer of its reed sensor manufacturing operations from the U.S. and China to the Philippines,
$1.2
million of restructuring costs,
$3.2
million in acquisition and integration costs and
$0.3
million in non-cash inventory charges related to the
2016
acquisitions.
|
|
|
(
f)
|
In the
third
quarter of
2016,
the Company recorded
$0.9
million of restructuring costs,
$5.9
million in acquisition and integration costs,
$14.8
million of charges related to the impairment of the Custom Products reporting unit and
$0.5
million in non-cash inventory charges as noted above.
|
|
|
(
g)
|
In the
second
quarter of
2016,
the Company recorded
$0.7
million related to the reed sensor manufacturing transfer as noted above,
$0.1
million of restructuring costs,
$6.1
million in acquisition and integration costs,
$0.3
million in charges related to the closure of the manufacturing facility in Denmark and
$6.9
million in non-cash inventory charges as noted above.
|
|
|
(
h)
|
In the
first
quarter of
2016,
the Company recorded
$1.0
million related to the reed sensor manufacturing transfer as noted above,
$0.4
million of restructuring costs,
$6.2
million in acquisition and integration costs, and
$1.6
million in charges related to the closure of the manufacturing facility in Denmark.
|