Segment Information

6 Months Ended

Jun. 29, 2019

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.

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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, reed switch based magnetic sensing, 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 industrial and automotive electronics, electric vehicle infrastructure, data and telecommunications, medical devices, LED lighting, consumer electronics and appliances

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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 passenger car, heavy duty truck, off-road vehicles, material handling, agricultural, construction and other commercial vehicle industries. Passenger car fuse products include fuses and fuse accessories for internal combustion engine vehicles and hybrid and electric vehicles including blade fuses, battery cable protectors, resettable fuses, high-current fuses, and high-voltage fuses. 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 products designed to monitor the passenger compartment occupants, safety 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 various industrial applications such as oil, gas, mining, alternative energy - solar and wind, electric vehicle infrastructure, construction, HVAC systems, elevator and other industrial equipment.

Segment information is summarized as follows:



	Three Months Ended						Six Months Ended
(in thousands)	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Net sales
Electronics	$	259,553		$	299,357		$	524,947		$	563,768
Automotive	108,650			127,172			222,133			253,302
Industrial	29,676			32,654			56,299			59,926
Total net sales	$	397,879		$	459,183		$	803,379		$	876,996

Depreciation and amortization
Electronics	$	14,729		$	15,651		$	30,071		$	29,329
Automotive	6,904			5,969			13,781			11,939
Industrial	1,056			1,467			2,116			2,927
Other	—			3,103			—			5,607
Total depreciation and amortization	$	22,689		$	26,190		$	45,968		$	49,802

Operating income (loss)
Electronics	$	43,630		$	67,311		$	92,666		$	121,275
Automotive	10,349			15,711			23,550			34,102
Industrial	5,831			5,279			9,336			9,988
Other(a)	(7,176		)	(28,679		)	(12,245		)	(68,172		)
Total operating income	52,634			59,622			113,307			97,193
Interest expense	5,589			5,782			11,275			11,205
Foreign exchange (gain) loss	(3,575		)	3,200			668			(7,354		)
Other (income) expense, net	(2,947		)	(1,678		)	1,358			(3,621		)
Income before income taxes	$	53,567		$	52,318		$	100,006		$	96,963

(a) Included in “Other” Operating income (loss) for the 2019 second quarter is $1.5 million ($3.8 million year-to-date) of acquisition related and integration charges primarily related to the IXYS acquisition. In addition, there were $5.7 million ($8.4 million year-to-date)of restructuring charges primarily related to employee termination costs. See Note 8, Restructuring, Impairment and Other Charges, for further discussion.

Included in "Other" Operating income (loss) for the second quarter of 2018 is includes approximately $26.8 million ($65.4 million year-to-date) of charges primarily related to the IXYS acquisition, which include $19.0 million ($36.9 million year-to-date) of purchase accounting inventory step-up charges, $2.0 million ($13.6 million year-to-date) in acquisition-related and integration costs primarily related to legal, accounting and other expenses, $3.1 million ($5.6 million year-to-date) in backlog amortization costs, $2.7 million of employee termination costs and other restructuring charges, and $4.5 million year-to-date stock compensation expense recognized immediately upon close for converted IXYS options related to prior service periods and $2.1 million year-to-date change in control expense related to IXYS. In addition, there were $0.5 million ($1.2 million year-to-date) of employee termination costs, other restructuring, impairment charges of $1.1 million associated with the exit of the Custom business in the second quarter, and $0.3 million ($0.5 million year-to-date) of acquisition-related expenses for other contemplated acquisitions.

The Company’s net sales by country were as follows:



	Three Months Ended				Six Months Ended
(in thousands)	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Net sales
United States	$	115,991	$	137,236	$	235,519	$	261,112
China	107,728		127,776		214,593		234,284
Other countries(a)	174,160		194,171		353,267		381,600
Total net sales	$	397,879	$	459,183	$	803,379	$	876,996

The Company’s long-lived assets by country were as follows:



(in thousands)	June 29, 2019		December 29, 2018
Long-lived assets
United States	$	58,015	$	58,691
China	92,621		95,806
Mexico	74,147		70,495
Germany	37,976		36,548
Philippines	37,275		32,459
Other countries(a)	38,466		45,895
Total long-lived assets	$	338,500	$	339,894

The Company’s additions to long-lived assets by country were as follows:



	Six Months Ended
(in thousands)	June 29, 2019		June 30, 2018
Additions to long-lived assets
United States	$	3,454	$	4,234
China	4,958		14,711
Mexico	8,727		8,874
Germany	3,712		5,182
Philippines	6,629		4,241
Other countries(a)	2,378		3,073
Total additions to long-lived assets	$	29,858	$	40,315

(a)

Each country included in other countries are less than 10% of net sales.