Littelfuse Reports Second Quarter Results

CHICAGO--()--Littelfuse, Inc. (NASDAQ:LFUS) today reported financial results for the second quarter ended July 1, 2017.

Second Quarter 2017 Highlights

  • Net sales were $313.4 million, up 15% versus the prior year period. Organic revenue growth was 11%, excluding the ON portfolio acquisition, e-house business divestiture and currency effects.
  • Growth by segment versus the prior year period:

    • Electronics sales increased 28% (up 16% organically)
    • Automotive sales increased 5% (up 6% organically)
    • Industrial sales decreased 3% (up 5% organically)
  • GAAP diluted EPS was $2.11; Adjusted EPS of $2.10 increased 46% over last year
  • The GAAP and adjusted effective tax rate were both 15.2% for the quarter. Included in the tax rate was a discrete tax benefit of $1.4 million resulting from the new stock compensation accounting guidance.
  • Cash flow from operations was $70.6 million
  • The electronics book-to-bill ratio for the second quarter was 1.13
  • The company recently announced it had acquired the assets of U.S. Sensor Corporation, a manufacturer of temperature sensors based in Orange, California.

“We followed our strong first quarter performance with record sales and earnings in the second quarter,” said Dave Heinzmann, Chief Executive Officer. “The strong order rates we’ve seen across our electronics segment since late last year continued in the second quarter, and along with solid operational execution, drove record performance across electronics. Our automotive and industrial segments also performed well, which included the expected profitability improvement in industrial.”

Third Quarter 2017 Outlook

All comparisons are to the prior year period unless otherwise noted. Littelfuse provides guidance on a non-GAAP (adjusted) basis. GAAP items excluded from guidance may include the after-tax impact of items including acquisition and integration costs, impairment and severance charges, foreign exchange adjustments and unusual gains and losses. These items are uncertain, depend on various factors, and could be material to results computed in accordance with GAAP. Littelfuse is not able to forecast the excluded items in order to provide the most directly comparable GAAP financial measure without unreasonable efforts.

“While electronics order rates remain strong, they have slowed from the peak in the second quarter. We continue, however, to see robust end demand and expect the momentum in electronics sales to continue in the third quarter,” continued Heinzmann. “We also expect the automotive and industrial segments to have another solid growth quarter, including margin expansion in both businesses.”

For the third quarter of 2017:

  • Sales are expected to be in the range of $311 to $323 million, up 13% on an as reported basis and up 9% organically, at the midpoint versus the prior year quarter
  • Adjusted diluted earnings per share are expected to be in the range of $2.02 to $2.16

For the full year, the company expects an adjusted effective tax rate in the range of 18% – 19%.

Dividend

The company’s board of directors approved a 12% increase in the quarterly cash dividend from $0.33 to $0.37. This equates to an annualized dividend of $1.48 per share. The dividend will be paid on September 7, 2017 to shareholders of record as of August 24, 2017.

Conference Call and Webcast Information

Littelfuse will host a conference call today, Wednesday, August 2, 2017, at 10:00 a.m. Central / 11:00 a.m. Eastern time to discuss the results. The call will be broadcast live over the Internet and can be accessed through the company’s website: www.littelfuse.com. The call will be available for replay on the company’s website.

About Littelfuse

Founded in 1927, Littelfuse is the world leader in circuit protection with growing global platforms in power control 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 10,000 employees in more than 40 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, uncertainties related to political and regulatory changes 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 release 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 31, 2016. 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 31, 2016.

Non-GAAP Financial Measures

The information included in this press release includes the non-GAAP financial measures of adjusted net sales growth, adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, adjusted effective tax rate and free cash flow. Many of these non-GAAP financial measures exclude the effect of certain expenses and income not related directly to the underlying performance of our fundamental business operations. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included herein.

The company believes that adjusted net sales growth, adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, and adjusted effective tax rate provide useful information to investors regarding its operational performance because they enhance an investor’s overall understanding of our core financial performance and facilitate comparisons to historical results of operations, by excluding items that are not related directly to the underlying performance of our fundamental business operations or were not part of our business operations during a comparable period. The company believes free cash flow is a useful measure of its ability to generate cash. The company believes that all of these non-GAAP financial measures are commonly used by financial analysts and others in the industries in which we operate, and thus further provide useful information to investors. Management additionally uses these measures when assessing the performance of the business and for business planning purposes. Note that our definitions of these non-GAAP financial measures may differ from those terms as defined or used by other companies.

LFUS-F

 
LITTELFUSE, INC.
Net Sales and Operating Income by Business Unit
(In thousands of USD, unaudited)
           
Second Quarter Year-to-Date
2017 2016

%
Growth /
(Decline)

2017 2016

%
Growth /
(Decline)

 

Net Sales

Electronics $ 169,387 $ 132,170 28% $ 323,154 $ 230,966 40%
Automotive 116,457 111,370 5% 224,297 203,303 10%
Industrial   27,511     28,372   (3%)   51,346     57,041   (10%)
 
Total net sales $ 313,355   $ 271,912   15% $ 598,797   $ 491,310   22%
 
 
Second Quarter Year-to-Date
2017 2016

%
Growth /
(Decline)

2017 2016

%
Growth /
(Decline)

 

Operating Income/(Expense)

Electronics $ 42,967 $ 25,259 70% $ 78,173 $ 47,675 64%
Automotive 15,713 16,474 (5%) 30,778 33,965 (9%)
Industrial 1,905 2,028 (6%) 2,012 3,701 (46%)
Other (1)   (315 )   (14,059 ) 98%   (1,840 )   (23,211 ) (92%)
 
Total operating income $ 60,270 $ 29,702 103% $ 109,123 $ 62,130 76%
Operating margins 19.2 % 10.9 % 18.2 % 12.6 %
 
Interest expense 3,281 1,670 6,401 3,715
Foreign exchange (gain) loss (558 ) (6,237 ) (2,115 ) (2,414 )
Other (income) expense, net   190     255     52     (262 )
 
Income before taxes $ 57,357   $ 34,014   69% $ 104,785   $ 61,091   72%
 
(1) "Other" typically includes special items such as acquisition-related costs, restructuring costs, asset impairments, and gains and losses on asset sales. (See Supplemental Financial Information for details on page 8.)
                                 
Second Quarter Year-to-Date
2017     2016

Growth /
(Decline)

2017 2016

Growth /
(Decline)

 

Operating Margins

Electronics 25.4% 19.1% 6.3% 24.2% 20.6% 3.5%
Automotive 13.5% 14.8% -1.3% 13.7% 16.7% -3.0%
Industrial 6.9% 7.1% -0.2% 3.9% 6.5% -2.6%
 
LITTELFUSE, INC.
Condensed Consolidated Balance Sheets
(In thousands of USD)
   
July 1, 2017 December 31, 2016
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 321,893 $ 275,124
Short-term investments 34 3,690
Accounts receivable, less allowances 199,027 176,032
Inventories 125,240 114,063
Prepaid income taxes and income taxes receivable 6,720 11,671
Prepaid expenses and other current assets   51,938     31,501  
Total current assets 704,852 612,081
Property, plant and equipment:
Land 9,691 9,268
Buildings 84,481 80,553
Equipment   471,960     439,542  
566,132 529,363
Accumulated depreciation   (333,593 )   (312,188 )
Net property, plant and equipment 232,539 217,175
Intangible assets, net of amortization:
Patents, licenses and software 85,798 83,607
Distribution network 18,191 18,995
Customer lists, trademarks and tradenames 106,848 110,425
Goodwill   432,134     403,544  
642,971 616,571
Investments 11,916 13,933
Deferred income taxes 19,028 20,585
Other assets   10,885     10,849  
Total assets $ 1,622,191   $ 1,491,194  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 100,826 $ 90,712
Accrued payroll 32,866 42,810
Accrued expenses 50,536 36,138
Accrued severance 629 2,785
Accrued income taxes 9,522 8,846
Current portion of long-term debt   7,813     6,250  
Total current liabilities 202,192 187,541
Long-term debt, less current portion 473,879 447,892
Deferred income taxes 8,826 7,066
Accrued post-retirement benefits 15,975 13,398
Other long-term liabilities 25,887 20,366
Total equity   895,432     814,931  
Total liabilities and equity $ 1,622,191   $ 1,491,194  
 
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
July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016
 
Net sales $ 313,355 $ 271,912 $ 598,797 $ 491,310
 
Cost of sales   180,747     174,046     352,539     306,289  
 
Gross profit 132,608 97,866 246,258 185,021
 
 
Selling, general and administrative expenses 53,438 51,092 100,139 93,458
Research and development expenses 12,729 11,916 24,881 20,481
Amortization of intangibles   6,171     5,156     12,115     8,952  
72,338 68,164 137,135 122,891
 
Operating income 60,270 29,702 109,123 62,130
 
Interest expense 3,281 1,670 6,401 3,715
Foreign exchange (gain) loss (558 ) (6,237 ) (2,115 ) (2,414 )
Other (income) expense, net   190     255     52     (262 )
 
Income before income taxes 57,357 34,014 104,785 61,091
Income taxes   8,719     6,862     17,255     14,650  
 
Net income $ 48,638   $ 27,152   $ 87,530   $ 46,441  
 
Net income per share:
Basic $ 2.13   $ 1.21   $ 3.84   $ 2.07  
Diluted $ 2.11   $ 1.20   $ 3.80   $ 2.05  
 
Weighted average shares and
equivalent shares outstanding:
Basic   22,822     22,528     22,785     22,483  
Diluted   23,023     22,674     23,005     22,647  
 
Comprehensive income $ 44,485   $ 11,899   $ 89,004   $ 41,874  
 
LITTELFUSE, INC.
Consolidated Statements of Cash Flows
(In thousands of USD, unaudited)
   
For the Six Months Ended
July 1, 2017 July 2, 2016
 
OPERATING ACTIVITIES:
Net income $ 87,530 $ 46,441
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 18,575 16,156
Amortization of intangibles 12,115 8,952
Impairment of intangible assets - 1,391
Provision for bad debts 1,895 -
Stock-based compensation 8,590 6,124
Non-cash inventory charge - 6,902
Excess tax benefit on stock-based compensation - (1,585 )
Loss on sale of assets 593 331
Deferred income taxes 1,514 -
Changes in operating assets and liabilities:
Accounts receivable (32,039 ) (25,028 )
Inventories (8,739 ) (1,282 )
Accounts payable 7,985 2,974
Accrued expenses (including post retirement) 3,912 5,715
Accrued payroll and severance (13,190 ) (10,227 )
Accrued taxes 515 (13,946 )
Prepaid expenses and other   4,317     (7,642 )
Net cash provided by operating activities 93,573 35,276
 
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (28,278 ) (20,217 )
Acquisition of business, net of cash acquired (14,172 ) (354,356 )
Proceeds from maturities of short-term investments 3,739 -
Decrease in entrusted loan receivable 2,416 -
Proceeds from sale of assets   178     370  
Net cash used in investing activities (36,117 ) (374,203 )
 
FINANCING ACTIVITIES:
Proceeds of revolving credit facility - 258,000
Proceeds of term loan - 125,000
Payments of revolving credit facility (112,500 ) (97,500 )
Payments of term loan (3,125 ) (86,563 )
Net proceeds from Sr. Notes Payable 125,000 -
Payments of entrusted loan (2,416 ) -
Debt issuance costs paid (1 ) (1,701 )
Cash dividends paid (14,963 ) (12,995 )
Net proceeds (payments) related to stock-based award activities (2,074 ) 2,960
Excess tax benefit on share-based compensation   -     1,586  
Net cash (used in) provided by financing activities (10,079 ) 188,787
 
Effect of exchange rate changes on cash and cash
equivalents   (608 )   815  
 
Increase (decrease) in cash and cash equivalents 46,769 (149,325 )
Cash and cash equivalents at beginning of period   275,124     328,786  
Cash and cash equivalents at end of period $ 321,893   $ 179,461  
 
LITTELFUSE, INC.
Supplemental Financial Information
(in millions of USD except per share amounts)
       
GAAP EPS Reconciliation
Q2-17 YTD-17 Q2-16 YTD-16
GAAP diluted EPS $ 2.11 $ 3.80 $ 1.20 $ 2.05
EPS impact of Non-GAAP adjustments (below)   (0.01 )   (0.01 )   0.24     0.77  
Adjusted diluted EPS $ 2.10   $ 3.79   $ 1.44   $ 2.82  
 
Non-GAAP Adjustments - (income)/expense
Q2-17 YTD-17 Q2-16 YTD-16
Reed switch manufacturing transfer costs $ - $ - $ 0.7 $ 1.7
Restructuring - - 0.1 0.5
Acquisitions/divestiture/purchase acctg adjs 0.3 1.8 13.0 19.2
Impairment and severance charges   -     -     0.3   1.9
Adjustment to Operating income 0.3 1.8 14.0 23.2
Non-operating Foreign exchange loss/(gain)   (0.6 )   (2.2 )   (6.2 )   (2.4 )
Adjustment to income before income taxes (0.3 ) (0.4 ) 7.8 20.8
Income taxes   -     -     2.3     3.4  
Adjustment to net income $ (0.3 ) $ (0.4 ) $ 5.5   $ 17.4  
 
Total EPS impact $ (0.01 ) $ (0.01 ) $ 0.24   $ 0.77  
 
Operating margin / EBITDA reconciliation
Q2-17 YTD-17 Q2-16 YTD-16
 
Net sales $ 313.4   $ 598.8   $ 271.9   $ 491.3  
 
GAAP operating income $ 60.3 $ 109.2 $ 29.7 $ 62.1
Add back special operating items   0.3     1.8     14.0     23.2  
Adjusted operating income $ 60.6 $ 111.0 $ 43.7 $ 85.3
Adjusted operating margin 19.3 % 18.5 % 16.1 % 17.4 %
 
Add back amortization 6.2 12.1 5.2 9.0
Add back depreciation   9.4     18.5     8.9     16.1  
Adjusted EBITDA $ 76.2   $ 141.6   $ 57.8   $ 110.4  
Adjusted EBITDA margin 24.3 % 23.6 % 21.3 % 22.5 %
 
Net sales reconciliation Q2-17 vs. Q2-16

Electronics

Automotive

Industrial

Total

Net sales growth 28 % 5 % -3 % 15 %
Less:
Acquisitions 13 % 0 % 0 % 6 %
Divestitures 0 % 0 % -8 % -1 %
FX impact   -1 %   -2 %   -1 %   -1 %
Adjusted (organic) net sales growth   16 %   6 %   5 %   11 %
 
Income tax reconciliation
Q2-17 YTD-17 Q2-16 YTD-16
 
Income taxes $ 8.7 $ 17.2 $ 6.9 $ 14.7
Effective rate 15.2 % 16.5 % 20.2 % 24.0 %
 
Non-GAAP adjustment - income taxes - - 2.3 3.3
       
Adjusted income taxes $ 8.7   $ 17.2   $ 9.2   $ 18.0  
Adjusted effective rate 15.2 % 15.2 % 22.0 % 22.0 %
 
Free Cash Flow reconcilation
Q2-17 Q2-16 YTD-17 YTD-16
Net cash provided by operating activities $ 70.6 $ 25.8 $ 93.6 $ 35.3
Less:
Purchases of property, plant and equipment   (15.9 )   (11.1 )   (28.3 )   (20.2 )
Free Cash Flow $ 54.7   $ 14.7   $ 65.3   $ 15.1  
 
Note: Totals will not always foot due to rounding
 

Contacts

Littelfuse, Inc.
Meenal Sethna
Executive Vice President and CFO
(773) 628-0616

Release Summary

Littelfuse Reports Second Quarter Results

Contacts

Littelfuse, Inc.
Meenal Sethna
Executive Vice President and CFO
(773) 628-0616