Littelfuse(LFUS)2024-02-15 16:00Financial Performance - Net sales decreased by 2,362.7 million in 2023, primarily due to lower volume in the Electronics segment and the commercial vehicle business within the Transportation segment[166] - Net income decreased to 10.34 per diluted share) in 2023 from 14.94 per diluted share) in 2022, driven by lower operating income in the Electronics and Transportation segments[166] - Total revenue for fiscal year 2023 was 2,513.9 million in 2022[197] - Operating income for 2022 was 115.2 million (29.9%) compared to 2021[251] - Operating margins increased from 18.5% in 2021 to 19.9% in 2022, primarily driven by higher operating income in the Electronics segment[251] Cash Flow and Capital Management - Net cash provided by operating activities increased by 457.4 million in 2023, primarily due to reductions in working capital[167] - The company plans to return 40% of free cash flow to shareholders through dividends and opportunistic share repurchases[178] - The company's ability to access capital markets and bank credit facilities is critical for investments, strategic acquisitions, and refinancing maturing debt obligations[119] Acquisitions and Strategic Growth - The company completed the acquisition of Western Automation for approximately 25 million[169] - The company entered into a definitive purchase agreement to acquire a 200mm wafer fab in Dortmund, Germany for approximately 93 million Euro, with 37.2 million Euro paid in 2023 and the remaining 56 million Euro to be paid at closing in early 2025[168] - The company targets 5-7% average annual organic sales growth and 5-7% average annual growth from strategic acquisitions as part of its five-year strategic plan[178] - The company's strategy focuses on increasing product content, expanding into high-growth geographies and end markets, and leveraging strategic acquisitions to enhance organic growth[178] Regional Sales Performance - Asia-Pacific net sales decreased by 60.6 million (12.1%) in 2023, driven by acquisitions and increased semiconductor and passenger car product sales[241] Goodwill and Asset Valuation - The company's goodwill impairment test as of October 1, 2023 indicated no impairment charges, with the estimated fair values of all seven reporting units exceeding their carrying values[185] - All seven reporting units passed the goodwill impairment test with fair values exceeding carrying values by 23% to 369% as of October 1, 2023[188] - A 1.0% decrease in estimated annual future cash flows would decrease the estimated fair value of the reporting unit by approximately 1.0%[189] - The estimated discount rate was 12.6% for most reporting units and 16.8% for the Industrial Controls and Sensors unit[189] - The company holds material amounts of goodwill and other long-lived assets, and a decline in expected profitability could lead to asset impairment[117] Revenue Recognition and Sales Incentives - The Company recognizes revenue when control of the product is transferred to the customer, typically at the time of shipment[198] - The Company offers volume-based sales incentives, estimating rebates as a reduction to revenue as products are sold[204] Market and Operational Risks - The company's revenues may vary significantly due to factors such as changes in customer buying decisions, demand for products, distributor inventory stocking, and product mix[116] - The company's fixed costs may reduce operating results if sales fall below expectations, as many expenses, particularly capital equipment and manufacturing overhead, are relatively fixed[120] - The company is exposed to potential security breaches or disruptions to its IT systems, which could result in financial liability, legal sanctions, or reputational damage[123] - The company faces risks related to currency exchange rates, commodity prices, and interest rates, which could have a material adverse effect on its results of operations and financial condition[113] - The company may incur additional expenses due to customer demands and regulations related to conflict-free minerals, particularly in the semiconductor industry[124] - The bankruptcy or insolvency of a major customer, such as an auto manufacturer or supplier, could lead to substantial disruptions and lower demand for the company's products[118] Currency Exposure - The company's most significant net long exposure is to the euro, while its most significant net short exposures are to the Chinese renminbi, Mexican peso, and Philippine peso[114] Stock Performance - The company's stock price ranged between a low of 309.9 from December 31, 2022, to December 30, 2023[121]