# Littelfuse Inc: Form 10-Q for the period ended Mar 27, 2021

- Company: [Littelfuse Inc](/companies/lfus.md) (CIK 889331)
- Form: 10-Q
- Filed: 2021-04-28
- Accepted by EDGAR: Apr 28, 2021, 13:36 ET
- Period: 2021-03-27
- Accession: 0000889331-21-000034
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/889331/000088933121000034/lfus-20210327.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/889331/000088933121000034/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-03-27.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-12-27 to 2021-03-27 | $463.8m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2020-12-27 to 2021-03-27 | $303.3m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2020-12-27 to 2021-03-27 | $160.5m | us-gaap:GrossProfit |
| Research and development | 3 months, 2020-12-27 to 2021-03-27 | $14.7m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2020-12-27 to 2021-03-27 | $58.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2020-12-27 to 2021-03-27 | $76.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2020-12-27 to 2021-03-27 | $4.7m | us-gaap:InterestExpense |
| Income tax | 3 months, 2020-12-27 to 2021-03-27 | $15.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-12-27 to 2021-03-27 | $57.7m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2020-12-27 to 2021-03-27 | $2.32 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2020-12-27 to 2021-03-27 | $2.35 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2020-12-27 to 2021-03-27 | 24,892,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2020-12-27 to 2021-03-27 | $50.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2020-12-27 to 2021-03-27 | $14.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2020-12-27 to 2021-03-27 | $11.8m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2020-12-27 to 2021-03-27 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2021-03-27 | $572.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-03-27 | $1.19bn | us-gaap:AssetsCurrent |
| Total assets | at 2021-03-27 | $2.79bn | us-gaap:Assets |
| Current liabilities | at 2021-03-27 | $326.5m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2021-03-27 | $623.9m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2021-03-27 | $25.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2021-03-27 | $1.66bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,591 characters.

*Cautionary Statement Regarding Forward-Looking Statements Under the Private Securities Litigation Reform Act of 1995 (“PSLRA”).*

Certain statements in this section and other parts of this Quarterly Report on Form 10-Q may constitute "forward-looking statements" within the meaning of the federal securities laws and are entitled to the safe-harbor provisions of the PSLRA. These statements include statements regarding the Company’s future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future. Such statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "estimates," "will," "should," "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy, although not all forward-looking statements contain such terms. The Company cautions that forward-looking statements, which speak only as of the date they are made, are subject to risks, uncertainties and other factors, and actual results and outcomes may differ materially from those indicated or implied by the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, risks and uncertainties relating to general economic conditions; the severity and duration of the coronavirus disease 2019 ("COVID-19") pandemic and the measures taken in response thereto and the effects of those items on the Company’s business; product demand and market acceptance; economic conditions; the impact of competitive products and pricing; product quality problems or product recalls; capacity and supply difficulties or constraints; coal mining exposures reserves; failure of an indemnification for environmental liability; exchange rate fluctuations; commodity price fluctuations; the effect of the Company's accounting policies; labor disputes; restructuring costs in excess of expectations; pension plan asset returns less than assumed; uncertainties related to political or regulatory changes; integration of acquisitions may not be achieved in a timely manner, or at all; and other risks that may be detailed in Item 1A. "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 26, 2020, and the Company's other filings and submissions with the Securities and Exchange Commission. The Company does not undertake any obligation to update or revise any forward-looking statements to reflect future events or circumstances, new information or otherwise.

This report, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, should be read in conjunction with information provided in the consolidated financial statements and the related Notes thereto appearing in the Company's Annual Report on Form 10-K for the year ended December 26, 2020.

Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide information that is supplemental to, and should be read together with, the consolidated financial statements and the accompanying notes. Information in MD&A is intended to assist the reader in obtaining an understanding of (i) the consolidated financial statements, (ii) the changes in certain key items within those financial statements from year-to-year, (iii) the primary factors that contributed to those changes, and (iv) any changes in known trends or uncertainties that we are aware of and that may have a material effect on future performance. In addition, MD&A provides information about the Company’s segments and how the results of those segments impact the results of operations and financial condition as a whole.

### Executive Overview

Founded in 1927, Littelfuse is an industrial technology manufacturing company empowering a sustainable, connected, and safer world. Across more than 15 countries, and with 12,000 global associates, we partner with customers to design and deliver innovative, reliable solutions. Serving over 100,000 end customers, our products are found in a variety of industrial, transportation and electronics end markets – everywhere, every day.

The Company maintains a network of global laboratories and engineering centers that develop new products and product enhancements, provide customer application support and test products for safety, reliability, and regulatory compliance. The Company conducts its business through three reportable segments: Electronics, Automotive, and Industrial. Within these segments, the Company designs, manufactures and sells components and modules empowering a sustainable, connected, and safer world. Our products protect against electrostatic discharge, power surges, short circuits, voltage spikes and other harmful occurrences, safely and efficiently control power and improve productivity and are used to identify and detect temperature, proximity, flow speed and fluid level in various applications.

### Executive Summary

For the first quarter of 2021, the Company recognized net sales of $463.8 million compared to $346.1 million in the first quarter of 2020 representing an increase of $117.7 million, or 34.0%. The increase was driven by higher volumes across all businesses in the Electronics and Automotive segments, $16.7 million or 3.6% of net sales from the Hartland acquisition within the Industrial segment and $12.4 million or 3.6% of favorable changes in foreign exchange rates. The Company recognized net income of $57.7 million, or $2.32 per diluted share, in the first quarter of 2021 compared to net income of $24.6 million, or $1.00 per diluted share in the first quarter of 2020. The increase in net income reflects higher operating income of $31.7 million driven by a $23.3 million and $6.2 million increase in operating income in the Electronics and Automotive segments, respectively, increases of $9.7 million of unrealized gains associated with our equity investments partially offset by higher foreign exchange losses of $4.3 million.

On January 28, 2021, the Company acquired Hartland Controls ("Hartland"), a manufacturer and leading supplier of electrical components used primarily in heating, ventilation, air conditioning (HVAC) and other industrial and control systems applications with annualized sales of approximately $70 million. The purchase price for Hartland was approximately $112.3 million and the operations of Hartland are included in the Industrial segment.

Net cash provided by operating activities was $50.2 million for the three months ended March 27, 2021 as compared to $45.3 million for the three months ended March 28, 2020. The increase in net cash provided by operating activities was primarily due to higher cash earnings partially offset by increases in working capital resulting from higher sales growth.

### Impact of COVID-19 on Business

The effects from COVID-19 continue to drive increased costs, though lower than 2020 levels. Ongoing costs include spending on personal protective equipment ("PPE"), additional personnel and employee transportation costs, and manufacturing inefficiencies, as well as an increase in freight costs due to the transportation capacity constraints across the world.

The Company anticipates that the global health crisis caused by COVID-19 may continue to negatively impact its business activity for the foreseeable future. It is currently difficult to estimate the magnitude of the COVID-19 disruption, if future disruptions will occur due to a resurgence in COVID-19 cases and its impact on our employees, customers, suppliers and vendors. The Company will continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and other stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our business and operations, including the effects on our customers, employees, and prospects, or on our financial results for the fiscal year 2021.

### Results of Operations

The following table summarizes the Company’s unaudited condensed consolidated results of operations for the periods presented. The first quarter of 2021 includes $3.5 million of purchase accounting inventory step-up charges, $0.8 million of legal and professional fees and other expenses related to Hartland and other contemplated acquisitions and $0.4 million of restructuring, impairment and other charges, primarily related to employee termination costs. In addition, there was a $1.9 million gain from the sale of a building within the Electronics segment.

The first quarter of 2020 includes $1.2 million of acquisition integration charges related to the IXYS acquisition and other contemplated acquisitions. In addition, there were $4.0 million of restructuring, impairment and other charges, primarily related to impairment charges of $2.2 million associated with the announced consolidation of a manufacturing facility within the Industrial segment and $1.7 million of employee termination costs and other restructuring charges.

*(in thousands)*

|  | First Quarter 2021 | 2020 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $463,794 | $346,096 | $117,698 | 34.0% |
| Cost of sales | 303,328 | 221,740 | 81,588 | 36.8% |
| Gross profit | 160,466 | 124,356 | 36,110 | 29.0% |
| Operating expenses | 83,985 | 79,606 | 4,379 | 5.5% |
| Operating income | 76,481 | 44,750 | 31,731 | 70.9% |
| Income before income taxes | 72,708 | 35,499 | 37,209 | 104.8% |
| Income taxes | 14,995 | 10,855 | 4,140 | 38.1% |
| Net income | $57,713 | $24,644 | $33,069 | 134.2% |

### Net Sales

Net sales increased $117.7 million or 34.0% including $12.4 million or 3.6% of favorable changes in foreign exchange rates for the first quarter of 2021 compared to the first quarter of 2020. The increase was primarily due to higher sales of $72.3 million and $23.8 million, respectively, in the Electronics and Automotive segments driven by higher volumes across all businesses within these segments. The volume increase within the Electronics segment was led by greater customer demand for products and devices for work-from-home and stay-at-home needs, and strong global automotive demand driving an increase for products used in automotive electronics and electric vehicles. The volume increase within the Automotive segment was due to stronger global auto and commercial vehicle market demand. The remaining increase in net sales was due to $16.7 million of net sales resulting from the Hartland acquisition included in the Industrial segment.

### Cost of Sales

Cost of sales was $303.3 million, or 65.4% of net sales, in 2021, compared to $221.7 million, or 64.1% of net sales, in 2020. The increase in cost of sales was primarily due to greater volume in the Electronics and Automotive segments driven by the factors discussed above along with the acquisition of Hartland. As a percent of net sales, cost of sales increased 1.3% driven by higher freight costs of $7.3 million, or 0.9%, the Hartland purchase accounting inventory charges of $3.5 million or 0.8%, and higher commodity costs partially offset by cost reductions.

### Gross Profit

Gross profit was $160.5 million, or 34.6% of net sales, in the first quarter of 2021 compared to $124.4 million, or 35.9% of net sales, for the first quarter of 2020. The $36.1 million increase in gross profit was primarily due to higher volume in the Electronics and Automotive segments. The decrease in gross margin of 1.3% was primarily due to the higher freight costs of $7.3 million or 0.9%, the purchase accounting inventory charges of $3.5 million or 0.8%, higher commodity costs, and unfavorable price and foreign exchange partially offset by higher volumes within the Electronics and Automotive segments.

### Operating Expenses

Total operating expenses were $84.0 million, or 18.1% of net sales, for the first quarter of 2021 compared to $79.6 million, or 23.0% of net sales, for the first quarter of 2020. The increase in operating expenses of $4.4 million was primarily due to higher selling, general and administrative expenses of $7.1 million largely due to higher accrued incentive compensation and the

Hartland acquisition partially offset by a $1.9 million gain from the sale of a building within the Electronics segment. The increase in operating expenses was also partially offset by lower restructuring, impairment and other charges of $3.5 million.

### Operating Income

Operating income was $76.5 million, an increase of $31.7 million, or 70.9%, for the first quarter of 2021 compared to $44.8 million for the first quarter of 2020. The increase in operating income was primarily due to higher gross profit from the Electronics and Automotive segments. Operating margins increased from 12.9% in the first quarter of 2020 to 16.5% in the first quarter of 2021 driven by the factors mentioned above.

### Income Before Income Taxes

Income before income taxes was $72.7 million, or 15.7% of net sales, for the first quarter of 2021 compared to $35.5 million, or 10.3% of net sales, for the first quarter of 2020. In addition to the factors impacting comparative results for operating income discussed above, income before income taxes was primarily impacted by increases of $9.7 million of unrealized gains associated with our equity investments partially offset by higher foreign exchange losses of $4.3 million.

### Income Taxes

Income tax expense for the first quarter of 2021 was $15.0 million, or an effective tax rate of 20.6%, compared to income tax expense of $10.9 million, or an effective tax rate of 30.6%, for the first quarter of 2020. The effective tax rate for the first quarter of 2021 is lower than the effective tax rate for the comparable 2020 period, primarily due to an increase in the forecasted income earned in lower tax jurisdictions in 2021 compared to 2020. The effective tax rate for the 2021 period is approximately the same as the applicable U.S. statutory rate.

### Segment Results of Operations

The Company reports its operations by the following segments: Electronics, Automotive and Industrial. Segment information is described more fully in Note 15, *Segment Information*, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.

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

*(in thousands)*

|  | First Quarter 2021 | 2020 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Electronics | $286,535 | $214,189 | $72,346 | 33.8% |
| Automotive | 128,529 | 104,770 | 23,759 | 22.7% |
| Industrial | 48,730 | 27,137 | 21,593 | 79.6% |
| Total | $463,794 | $346,096 | $117,698 | 34.0% |

### Electronics Segment

Net sales increased $72.3 million, or 33.8%, in the first quarter of 2021 compared to the first quarter of 2020 and included favorable changes in foreign exchange rates of $6.5 million. The sales increase was primarily due to increased volume for the electronics products and semiconductor businesses of $47.8 million and $24.5 million, respectively. The volume increases were led by greater customer demand for products and devices for work-from-home and stay-at-home needs, and strong global automotive demand driving an increase for products used in automotive electronics and electric vehicles. The first quarter of 2020 also included production disruptions due to the impact of COVID-19.

### Automotive Segment

Net sales increased $23.8 million, or 22.7%, in the first quarter of 2021 compared to the first quarter of 2020 and included favorable changes in foreign exchange rates of $5.6 million. The sales increase was due to higher volume in passenger car products, commercial vehicle products, and the automotive sensors business of $15.3 million, $4.4 million, and $4.1 million, respectively. These increases were due to stronger global auto and commercial vehicle market demand. Our Asia region experienced the most growth driven by an increase in global auto market demand as compared to the first quarter of 2020 that had production disruptions due to the impact of COVID-19. Sales also grew due to the launch of new products and higher content per vehicle.

### Industrial Segment

Net sales increased by $21.6 million, or 79.6%, in the first quarter of 2021 compared to the first quarter of 2020, which included favorable changes in foreign exchange rates of $0.3 million. The increase in net sales was primarily due to incremental net sales of $16.7 million or 61.5% from the Hartland acquisition, higher volume of $4.5 million in the power fuse business, and the transfer of the temperature sensor product line totaling $1.9 million which was previously reported in the Electronics segment, partially offset by lower volume in the relay business.

### Geographic Net Sales Information

Net sales by geography represent net sales to customer or distributor locations. The following table is a summary of the Company’s net sales by geography:

*(in thousands)*

|  | First Quarter 2021 | 2020 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Asia-Pacific | $212,185 | $140,873 | $71,312 | 50.6% |
| Americas | 152,906 | 120,501 | 32,405 | 26.9% |
| Europe | 98,703 | 84,722 | 13,981 | 16.5% |
| Total | $463,794 | $346,096 | $117,698 | 34.0% |

### Asia-Pacific

Net sales increased $71.3 million, or 50.6%, in the first quarter of 2021 compared to the first quarter of 2020 and included favorable changes in foreign exchange rates of $4.2 million. The increase in net sales was primarily due to higher volume across all businesses within the Electronics and Automotive segments, compared to the first quarter of 2020 that had production disruptions due to the impact of COVID-19.

### Americas

Net sales increased $32.4 million, or 26.9%, in the first quarter of 2021 compared to the first quarter of 2020 and included favorable changes in foreign exchange rates of $0.1 million. The increase in net sales was primarily due to incremental sales of $16.7 million from the Hartland acquisition, higher volume across all businesses within the Electronics segment, and higher volume in the passenger car products and commercial vehicle businesses within the Automotive segment.

### Europe

Net sales increased $14.0 million, or 16.5%, in the first quarter of 2021 compared to the first quarter of 2020. The increase in net sales was primarily due to favorable changes in foreign exchange rates of $8.1 million and increased volume across all businesses within the Automotive segment and Electronics products business within the Electronics segment, partially offset by lower volume in the semiconductor business within the Electronics segment.

### Liquidity and Capital Resources

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

Cash and cash equivalents were $572.8 million as of March 27, 2021, a decrease of $114.8 million as compared to December 26, 2020. As of March 27, 2021, $306.6 million of the Company's $572.8 million cash and cash equivalents was held by U.S. subsidiaries.

#### Revolving Credit Facility

On April 3, 2020, the Company amended its Credit Agreement to effect certain changes, including, among others: (i) eliminating the $200.0 million unsecured term loan credit facility, the remaining outstanding balance ($140.0 million) of which was repaid in full on April 3, 2020 through the revolving credit facility; (ii) making certain financial and non-financial covenants less restrictive on the Company; (iii) modifying performance-based interest rate margins and undrawn fees; and (iv) extending the maturity date to April 3, 2025. The amended Credit Agreement also allows the Company to increase the size of the revolving credit facility or enter into one or more tranches of term loans if there is no event of default and the Company is in compliance with certain financial covenants. The Company made payments of $30.0 million on the amended revolving credit facility during the three months ended March 27, 2021. The balance under the facility was $100.0 million as of March 27, 2021.

Outstanding borrowings under the amended Credit Agreement bears interest, at the Company’s option, at either LIBOR, fixed for interest periods of one, two, three or six-month periods, plus 1.25% to 2.00%, or at the bank’s Base Rate, as defined, plus 0.25% to 1.00%, based upon the Company’s Consolidated Leverage Ratio, as defined. The Company was also required to pay commitment fees on unused portions of the credit agreement ranging from 0.125% to 0.20%, based on the Consolidated Leverage Ratio, as defined in the agreement. The amended Credit Agreement included 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 1.61% at March 27, 2021.

As of March 27, 2021, the Company had no amount outstanding in letters of credit and had available $571.3 million of borrowing capacity under the Revolving Credit Facility based on financial covenants. At March 27, 2021, 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 B due 2030”) (together the “U.S. Senior Notes due 2025 and 2030” and with the Euro Senior Notes and the U.S. Senior Notes due 2022 and 2027, the “Senior Notes”) were funded. Interest on the U.S. Senior Notes due 2025 and 2030 is payable semiannually on February 15 and August 15, commencing on August 15, 2018. Further information regarding the Company’s Senior Notes is provided in Note 8, *Debt*, of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report.

#### Debt Covenants

The Company was in compliance with all covenants under the Credit Agreement and Senior Notes as of March 27, 2021 and currently expects to remain in compliance based on management’s estimates of operating and financial results for 2021. As of March 27, 2021, the Company met all the conditions required to borrow under the Credit Agreement and management expects the Company to continue to meet the applicable borrowing conditions.

#### Acquisitions

On January 28, 2021, the Company acquired Hartland Controls ("Hartland"), a manufacturer and leading supplier of electrical components used primarily in heating, ventilation, air conditioning (HVAC) and other industrial and control systems applications with annualized sales of approximately $70 million. The purchase price for Hartland was approximately $112.3 million and the operations of Hartland Controls are included in the Industrial segment. The net cash payment of $109.9 million for this acquisition was funded by the Company's cash on hand.

#### Dividends

During the first quarter of 2020 the Company paid quarterly dividends of $11.8 million to the shareholders. On April 28, 2021, the Board of Directors of the Company declared a quarterly cash dividend of $0.48 per share, payable on June 3, 2021 to stockholders of record as of May 20, 2021.

#### U.K. pension plan

On April 7, 2020, the Company entered into a definitive agreement to purchase a group annuity contract, under which an insurance company will be required to directly pay and administer pension payments to certain of the Company’s U.K. pension plan participants, or their designated beneficiaries. The purchase of this group annuity contract will reduce the Company’s outstanding pension benefit obligation by approximately $55 million, representing approximately 37% of the total obligations of the Company’s qualified pension plans, and will be funded with pension plan assets and additional cash on hand. In connection with this transaction, the Company will record a one-time non-cash settlement charge currently estimated between $18 million and $22 million in the fourth quarter of 2021, reflecting the accelerated recognition of unamortized actuarial losses in the plan. The actual amount and timing of the settlement charge could differ from this estimate due to final data and plan wind-up expenses. Due to the signing of the group annuity contract being a significant change in the U.K. pension plan, the liabilities of the plan were remeasured as of April 6, 2020 resulting in an increase of $13.4 million (£10.9 million) to both the net pension liability and unamortized actuarial loss within other comprehensive income (loss) during the second quarter of 2020. Additionally, the Company made a cash contribution of $10.4 million (£8.4 million) under this agreement during the second quarter of 2020.

### Cash Flow Overview

*(in thousands)*

|  | First three Months 2021 | 2020 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $50,166 | $45,279 |
| Net cash used in investing activities | (122,020) | (16,536) |
| Net cash (used in) provided by financing activities | (34,273) | 65,804 |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (4,101) | (5,111) |
| (Decrease) increase in cash, cash equivalents, and restricted cash | (110,228) | 89,436 |
| Cash, cash equivalents, and restricted cash at beginning of period | 687,525 | 531,139 |
| Cash, cash equivalents, and restricted cash at end of period | $577,297 | $620,575 |

#### Cash Flow from Operating Activities

Operating cash inflows are largely attributable to sales of the Company’s products. Operating cash outflows are largely attributable to recurring expenditures for raw materials, labor, rent, interest, taxes and other operating activities.

Net cash provided by operating activities was $50.2 million for the three months ended March 27, 2021 as compared to $45.3 million for the three months ended March 28, 2020. The increase in net cash provided by operating activities was primarily due to higher cash earnings partially offset by increases in working capital resulting from higher sales growth.

#### Cash Flow from Investing Activities

Net cash used in investing activities was $122.0 million for the three months ended March 27, 2021 compared to $16.5 million during the three months ended March 28, 2020. Net cash paid for the Hartland acquisition was $109.9 million for the three months ended March 27, 2021. Capital expenditures were $14.7 million, representing a decrease of $1.9 million compared to 2020. During the three months ended March 28, 2020, the Company received proceeds of $2.6 million from the sale of a property within the Electronics segment.

#### Cash Flow from Financing Activities

Net cash used in financing activities was $34.3 million for the three months ended March 27, 2021 compared to net cash provided by financing activities of $65.8 million for the three months ended March 28, 2020. The Company made payments of $30.0 million on the amended revolving credit facility during the first quarter of 2021. During the three months ended March 28, 2020, the Company made principal payments of $2.5 million on the term loan and borrowed $100.0 million from its revolving credit facility to preserve financial flexibility and enhance liquidity, given the increasing levels of uncertainty related to COVID-19. For the three months ended March 28, 2020, the Company repurchased 175,110 shares of its common stock totaling $22.9 million. Additionally, the Company paid dividends $11.8 million and $11.7 million in the three months ended March 27, 2021 and March 28, 2020, respectively.

### Share Repurchase Program

On April 26, 2019, the Company's Board of Directors authorized a program to repurchase up to 1,000,000 shares of the Company's common stock for the period May 1, 2019 to April 30, 2020 ("2019 program"). On April 29, 2020, the Company announced that the Board of Directors authorized a new program to repurchase up to 1,000,000 shares of the Company's common stock for the period May 1, 2020 to April 30, 2021 (the "2020 program") to replace its previous expired 2019 program. On April, 28, 2021, the Company announced that the Board of Directors authorized a new three year program to repurchase up to $300.0 million in the aggregate of shares of the Company’s common stock for the period May 1, 2021 to April 30, 2024 to replace its previous 2020 program.

The Company did not repurchase any shares of its common stock for the three months ended March 27, 2021. During the three months ended March 28, 2020, the Company repurchased 175,110 shares of its common stock totaling $22.9 million.

### Off-Balance Sheet Arrangements

As of March 27, 2021, the Company did not have any off-balance sheet arrangements, as defined under SEC rules. Specifically, the Company was not liable for guarantees of indebtedness owed by third parties, the Company was not directly liable for the debt of any unconsolidated entity and the Company did not have any retained or contingent interest in assets. The Company does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

### Critical Accounting Policies and Estimates

The Company’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP. In connection with the preparation of the Condensed Consolidated Financial Statements, the Company uses estimates and makes judgments and assumptions about future events that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures. The assumptions, estimates, and judgments are based on historical experience, current trends, and other factors the Company believes are relevant at the time it prepares the Condensed Consolidated Financial Statements.

The significant accounting policies and critical accounting estimates are consistent with those discussed in Note 1, Summary of Significant Accounting Policies and Other Information, to the consolidated financial statements and the MD&A section of the Company’s Annual Report on Form 10-K for the year ended December 26, 2020. During the three months ended March 27, 2021, there were no significant changes in the application of critical accounting policies.

## Market risk

As filed, 258 characters.

See Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of our Annual Report on Form 10-K for the year ended December 26, 2020. During the three months ended March 27, 2021, there have been no material changes in our exposure to market risk.

## Controls and procedures

As filed, 1,515 characters.

### (a) Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(b) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 27, 2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the quarter ended March 27, 2021, our disclosure controls and procedures were effective.

### (b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(f) and 15d-15(f) under the Exchange Act that occurred during the quarter ended March 27, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 148 characters.

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for our year ended December 26, 2020.

Filed Apr 28, 2021.
Source: SEC EDGAR, the filing index for accession 0000889331-21-000034. Last ingested by Listed: Oct 30, 2026, 16:31 ET. No prices; not investment advice.