Littelfuse Reports Second Quarter Results

CHICAGO--()--Littelfuse, Inc. (NASDAQ:LFUS) today reported sales and earnings for the second quarter of 2014 and announced a 14% increase in the quarterly cash dividend.

Second Quarter Highlights

  • Sales for the second quarter of 2014 were $220.9 million, an 18% increase compared to the prior-year quarter. This strong sales performance was due to double-digit organic growth for both automotive and electronics as well as the Hamlin and SymCom acquisitions, partially offset by continued weakness in the electrical business. Excluding acquisitions, sales increased 7% compared to the prior year.
  • On a GAAP basis, second quarter 2014 earnings were $1.08 per diluted share. This included $3.6 million of special operating items including severance charges resulting from restructuring at the Hamlin-Mexico plant and purchase accounting charges related to the SymCom acquisition. In addition, there was a non-operating foreign exchange loss of $2.4 million due primarily to balance sheet revaluation in the Philippines. Excluding these special items, earnings for the second quarter of 2014 were $1.26 per diluted share.
  • Earnings for the second quarter of 2014 were negatively impacted by higher scrap and obsolete inventory charges of approximately $1.9 million and a $2.3 million increase in stock compensation expense compared to the first quarter of 2014. The additional scrap and obsolete inventory charges were primarily the result of quality and performance issues at one of our North American plants as well as the downturn in the company’s mining business. The increase in stock compensation expense in the second quarter relates to technical accounting issues and will return to more normal levels in the third quarter.
  • Sales trends by business unit were as follows:
    • Electronics sales increased 20% year over year due to strong growth across all product lines and the addition of the Hamlin electronic sensor business. Excluding acquisitions, electronics sales increased 13% compared to the prior year.
    • Automotive sales increased 27% year over year reflecting continued strong growth for passenger car fuses and Accel sensors, solid performance for commercial vehicle products and the acquisition of Hamlin. Excluding acquisitions, automotive sales increased 15% compared to the prior year.
    • Electrical sales declined 9% year over year due to the sharp decline in the mining market and a weak quarter for electrical fuses, partially offset by the acquisition of SymCom. Excluding acquisitions, electrical sales declined 26% compared to the prior year.
  • The electronics book-to-bill ratio for the second quarter of 2014 was 1.08.
  • Cash provided by operating activities was $31.0 million for the second quarter of 2014 compared to $23.0 million for the second quarter of 2013. Capital expenditures for the second quarter of 2014 were $6.7 million compared to $9.0 million for the second quarter of 2013.
  • The company repurchased 161,751 shares of its common stock in the second quarter of 2014 at an average price of $88.30. The company has 838,249 shares left on its current share repurchase authorization which is effective through April 30, 2015.
  • In the second quarter, the company restructured its labor contracts at the Hamlin-Mexico plant. This resulted in a one-time charge of $2.0 million for severance, as employees had to be terminated and re-hired under a new contract. This is expected to result in savings of approximately $1.5 million annually beginning in the third quarter.

“The positive top-line trends in our automotive and electronics businesses continued through the second quarter,” said Gordon Hunter, Chief Executive Officer. “On the other hand, the electrical segment had its challenges as weakness in the mining sector continues, and electrical fuse sales declined in the second quarter after six consecutive quarters of growth.”

“Despite achieving our sales forecast for the second quarter, we did not see the expected margin improvement,” said Phil Franklin, Chief Financial Officer. “Improved electronics margins were offset by margin declines in automotive and electrical. However, several of the factors that depressed margins in the second quarter have either been corrected or are believed to be non-recurring, and therefore margins are expected to improve significantly in the third quarter.”

Outlook

  • Sales for the third quarter of 2014 are expected to be in the range of $215 to $225 million which represents 9% year-over-year growth at the midpoint.
  • Operating margin for the third quarter (excluding special items) is expected to improve by 150 to 200 basis points compared to the second quarter of 2014 due primarily to lower stock compensation expense and reduced scrap and obsolete inventory charges.
  • Earnings for the third quarter of 2014 are expected to be in the range of $1.29 to $1.43 per diluted share.
  • Capital expenditures are expected to be approximately $35 million for the year.

Dividend

The Board has approved a 14% increase in the quarterly cash dividend from $0.22 to $0.25. This dividend is payable on September 4, 2014 to shareholders of record at the close of business on August 21, 2014.

“Since the dividend was initiated in 2010, we have increased it at a compound annual growth rate of 14%,” said Franklin.

Conference Call and Webcast Information

Littelfuse will host a conference call today, Wednesday, July 30, 2014, at 10:00 a.m. Central / 11:00 a.m. Eastern time to discuss the second quarter results. The call will be broadcast live over the Internet and can be accessed through the company’s website: www.littelfuse.com. Listeners should go to the website at least 15 minutes prior to the call to download and install any necessary audio software. The call will be available for replay through September 30, 2014 on the company’s website.

About Littelfuse

Founded in 1927, Littelfuse is the world leader in circuit protection with growing global platforms in powercontrol and sensing. The company serves customers in the electronics, automotive and industrial markets with technologies including fuses, semiconductors, polymers, ceramics, relays and sensors. Littelfuse has over 7,500 employees in more than 35 locations throughout the Americas, Europe and Asia. For more information, please visit the Littelfuse website: littelfuse.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995.

The statements in this press release that are not historical facts are intended to constitute “forward-looking statements” entitled to the safe-harbor provisions of the PSLRA. These statements may involve risks and uncertainties, including, but not limited to, risks relating to 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, integration of acquisitions and other risks which may be detailed in the company’s other Securities and Exchange Commission filings. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual results and outcomes may differ materially from those indicated or implied in the forward-looking statements. This report should be read in conjunction with information provided in the financial statements appearing in the company’s Annual Report on Form 10-K for the year ended December 28, 2013. For a further discussion of the risk factors of the company, please see Item 1A. “Risk Factors” to the company’s Annual Report on Form 10-K for the year ended December 28, 2013.

LFUS-F

 
 
LITTELFUSE, INC.
Net Sales and Operating Income by Business Unit
(In thousands of USD, unaudited)
           
 
 
Second Quarter Year-to-Date
2014 2013 % Change 2014 2013 % Change
 

Net Sales

Electronics (2) $ 109,947 $ 91,450 20 % $ 205,972 $ 170,865 21 %
Automotive (3) 82,042 64,548 27 % 164,444 123,933 33 %
Electrical (4)   28,919     31,768   (9 %)   57,351     63,886   (10 %)
 
Total net sales (1) $ 220,908   $ 187,766   18 % $ 427,767   $ 358,684   19 %
 
(1) Total net sales for 2014 include $19.9M for the quarter and $46.3M year-to-date from business acquisitions.
(2) Total Electronics net sales for 2014 include $6.9M for the quarter and $16.3M year-to-date from the Hamlin acquisition.
(3) Total Automotive net sales for 2014 include $7.7M for the quarter and $20.2M year-to-date from the Hamlin acquisition.
(4) Total Electrical net sales for 2014 include $5.3M for the quarter and $9.8M year-to-date from the SymCom acquisition.
 
 
 
Second Quarter Year-to-Date
2014 2013 % Change 2014 2013 % Change
 

Operating Income

Electronics $ 25,634 $ 19,779 30 % $ 45,005 $ 31,922 41 %
Automotive 11,049 8,913 24 % 22,931 18,396 25 %
Electrical 571 5,623 (90 %) 4,317 12,114 (64 %)
Other (5)   (3,535 )   (2,933 ) 21 %   (4,944 )   (2,933 ) 69 %
 
Total operating income $ 33,719 $ 31,382 7 % $ 67,309 $ 59,499 13 %
 
Interest expense 1,228 644 2,444 1,020
Investment impairment (6) - - - 10,678
Foreign exchange (gain) loss 2,375 (3,724 ) 2,123 (3,405 )
Other (income) expense, net   (1,446 )   (935 )   (2,632 )   (2,163 )
 
Income before taxes $ 31,562   $ 35,397   (11 %) $ 65,374   $ 53,369   22 %
 
(5) "Other" typically includes special items such as acquisition-related costs, restructuring costs, asset impairments, and gains and losses on asset sales. For the second quarter of 2014, Other included a purchase accounting charge (ASC 805) related to the SymCom acquisition ($1.4M) and severance charges related to restructuring at the Hamlin - Mexico plant ($2.0M) all in Cost of sales and other acquisition costs ($0.2M) all in Selling, general and administrative.
(6) Impairment and loan losses from investment in Shocking Technologies.
 
 
LITTELFUSE, INC.
Supplemental Financial Information
(in millions of USD except share amounts)
                       
 
 
GAAP EPS Reconciliation
Q1-14 Q2-14 YTD-14 Q1-13 Q2-13 YTD-13
GAAP diluted EPS $ 1.12 $ 1.08 $ 2.20 $ 0.51 $ 1.18 $ 1.70
EPS impact of special items (below)   0.04     0.18     0.22     0.44   (0.03 )   0.41  
Adjusted diluted EPS $ 1.16   $ 1.26   $ 2.42   $ 0.95 $ 1.15   $ 2.11  
 
Year-over-year adjusted EPS growth 1 % 10 % 15 %
 
 
Special Items (income)/expense
 
Purchase accounting adjustment $ 1.4 $ 1.4 $ 2.8 $ - $ 1.7 $ 1.7
Restructuring - 2.0 2.0 - - -
Acquisition expenses   -     0.2     0.2     -   1.2     1.2  
Adjustment to Operating income 1.4 3.6 5.0 - 2.9 2.9
Impairment charges - - - 10.7 - 10.7
Foreign exchange (gain)/loss   (0.2 )   2.4     2.2     -   (3.7 )   (3.7 )
Adjustment to pre-tax income $ 1.2   $ 6.0   $ 7.2   $ 10.7 $ (0.8 ) $ 9.9  
 
 
EPS impact of above special items $ 0.04 $ 0.18 $ 0.22 $ 0.29 $ (0.03 ) $ 0.26
EPS impact of Shocking tax adjustment   -     -     -     0.15   -     0.15  
Total EPS impact $ 0.04   $ 0.18   $ 0.22   $ 0.44 $ (0.03 ) $ 0.41  
 
(1) Reflects $3.3 million of the Shocking tax adjustment recorded in Q1-13.
 
 
Operating margin reconciliation Q2-14 YTD-14 Q2-13 YTD-13
 
Net sales $ 220.9   $ 427.8   $ 187.8   $ 358.7  
 
GAAP Operating income $ 33.7 $ 67.3 $ 31.3 $ 59.5
Add back amortization 3.1 6.3 1.9 3.5
Add back special items   3.6     5.0     2.9     2.9  
Operating income before amortization and special items $ 40.4   $ 78.6   $ 36.1   $ 65.9  
 
Operating margin before amortization and special items 18.3 % 18.4 % 19.2 % 18.4 %
 
 
LITTELFUSE, INC.
Condensed Consolidated Balance Sheets
(In thousands of USD, except share amounts)
       
June 28, 2014 December 28, 2013
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 346,406 $ 305,192
Short-term investments 6,849 6,886
Accounts receivable, less allowances 144,869 127,887
Inventories 96,674 92,591
Deferred income taxes 10,610 10,463
Prepaid expenses and other current assets 18,492 17,080
Assets held for sale   5,500     5,500  
Total current assets 629,400 565,599
Property, plant and equipment:
Land 6,044 4,382
Buildings 71,154 59,699
Equipment   359,252     354,475  
436,450 418,556
Accumulated depreciation   (277,791 )   (268,383 )
Net property, plant and equipment 158,659 150,173
Intangible assets, net of amortization:
Patents, licenses and software 25,638 25,166
Distribution network 40,992 42,685
Customer lists, trademarks and tradenames 44,750 30,506
Goodwill   201,769     186,464  
313,149 284,821
Investments 15,787 12,286
Deferred income taxes 4,839 5,092
Other assets   7,065     6,402  
Total assets $ 1,128,899   $ 1,024,373  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 36,793 $ 33,872
Accrued payroll 22,149 29,437
Accrued expenses 13,972 13,087
Accrued severance 327 182
Accrued income taxes 6,422 5,931
Deferred income taxes 7 229
Current portion of long-term debt   204,000     126,000  
Total current liabilities 283,670 208,738
Long-term debt, less current portion 91,250 93,750
Deferred income taxes 11,382 11,585
Accrued post-retirement benefits 182 8,528
Other long-term liabilities 14,922 14,856
Total equity   727,493     686,916  
Total liabilities and equity $ 1,128,899   $ 1,024,373  
 
Common shares issued and outstanding of
22,524,723 and 22,467,491 at June 28, 2014 and
December 28, 2013, respectively.
 
 
LITTELFUSE, INC.
Consolidated Statements of Comprehensive Income
(In thousands of USD, except per share data, unaudited)
           
 
For the Three Months Ended For the Six Months Ended
 
June 28, 2014 June 29, 2013 June 28, 2014 June 29, 2013
 
Net sales $ 220,908 $ 187,766 $ 427,767 $ 358,684
 
Cost of sales   137,913     114,209     266,278     220,521  
 
Gross profit 82,995 73,557 161,489 138,163
 
 
Selling, general and administrative 38,328 34,452 72,499 63,654
Research and development expenses 7,810 5,793 15,384 11,508
Amortization of intangibles   3,138     1,930     6,297     3,502  
49,276 42,175 94,180 78,664
 
Operating income 33,719 31,382 67,309 59,499
 
Interest expense 1,228 644 2,444 1,020
Impairment and loan loss in
unconsolidated affiliate - - - 10,678
Foreign exchange loss (gain) 2,375 (3,724 ) 2,123 (3,405 )
Other (income) expense, net   (1,446 )   (935 )   (2,632 )   (2,163 )
 
Income before income taxes 31,562 35,397 65,374 53,369
Income taxes   6,984     8,749     15,407     15,233  
 
Net income $ 24,578   $ 26,648   $ 49,967   $ 38,136  
 
Net income per share:
Basic $ 1.09   $ 1.19   $ 2.22   $ 1.72  
Diluted $ 1.08   $ 1.18   $ 2.20   $ 1.70  
 
Weighted average shares and
equivalent shares outstanding:
Basic   22,579     22,296     22,536     22,197  
Diluted   22,750     22,499     22,738     22,431  
 

Diluted Net Income Per Share

Net income as reported $ 24,578 $ 26,648 $ 49,967 $ 38,136
Less: income allocated to participating
securities   -     (10 )   -     (32 )
Net income available to common
shareholders $ 24,578   $ 26,638   $ 49,967   $ 38,104  
 
Weighted average shares adjusted for
securities   22,750     22,499     22,738     22,431  
 
Diluted net income per share $ 1.08   $ 1.18   $ 2.20   $ 1.70  
 
Comprehensive income $ 33,743   $ 17,956   $ 52,235   $ 28,924  
 
 
LITTELFUSE, INC.
Consolidated Statements of Cash Flows
(In thousands of USD, unaudited)
   
For the Six Months Ended
June 28, 2014 June 29, 2013
 
OPERATING ACTIVITIES:
Net income $ 49,967 $ 38,136
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 14,459 12,748
Amortization of intangibles 6,297 3,502
Impairment and loan loss in unconsolidated affiliate - 10,678
Non-cash inventory charge (1) 2,769 1,725
Stock-based compensation 5,229 4,562
Excess tax benefit on stock-based compensation (2,230 ) (3,494 )
Loss on sale of assets 141 120
Changes in operating assets and liabilities:
Accounts receivable (17,871 ) (20,246 )
Inventories 410 3,354
Accounts payable 2,533 4,655
Accrued expenses (including post retirement) (7,578 ) (11,477 )
Accrued payroll and severance (7,323 ) (1,725 )
Accrued taxes (2,101 ) (4,257 )
Prepaid expenses and other   (2,189 )   724  
Net cash provided by operating activities 42,513 39,005
 
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (13,132 ) (14,445 )
Acquisition of businesses, net of cash acquired (52,768 ) (145,000 )
Purchase of short-term investments - (8,478 )
Proceeds from sale of assets   37     56  
Net cash used in investing activities (65,863 ) (167,867 )
 
FINANCING ACTIVITIES:
Proceeds from term loan - 100,000
Proceeds of revolving credit facility 97,500 152,000
Payments of term loan (2,500 ) -
Payments of revolving credit facility (19,500 ) (103,000 )
Debt issuance costs paid (108 ) (808 )
Cash dividends paid (9,921 ) (8,865 )
Purchase of common stock (14,283 ) -
Proceeds from exercise of stock options 11,101 15,401
Excess tax benefit on stock-based compensation   2,230     3,494  
Net cash provided by financing activities 64,519 158,222
 
Effect of exchange rate changes on cash and cash
equivalents   45     (7,092 )
 
Increase in cash and cash equivalents 41,214 22,268
Cash and cash equivalents at beginning of period   305,192     235,404  
Cash and cash equivalents at end of period $ 346,406   $ 257,672  
 
(1) Purchase accounting adjustment related to acquisitions.

Contacts

Littelfuse, Inc.
Phil Franklin, (773) 628-0810
Senior Vice President and CFO

Release Summary

Littelfuse Reports Second Quarter Results

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Contacts

Littelfuse, Inc.
Phil Franklin, (773) 628-0810
Senior Vice President and CFO