Littelfuse Reports First Quarter Results

May 2, 2018 at 6:30 AM EDT

Company delivers record sales and adjusted earnings per share

CHICAGO--(BUSINESS WIRE)--May 2, 2018-- Littelfuse, Inc. (NASDAQ:LFUS) today reported financial results for the first quarter ended March 31, 2018:

  • Net sales were $417.8 million, up 46% versus the prior year. Organic revenue growth was 10%.
  • Growth by segment versus the prior year period:
    • Electronics sales increased 72% (up 10% organically)
    • Automotive sales increased 17% (up 10% organically)
    • Industrial sales increased 14% (up 13% organically)
  • GAAP diluted EPS was $1.45; this includes $23 million of after-tax charges primarily related to certain purchase accounting adjustments and costs for the acquisition of IXYS Corporation, net of non-operating foreign exchange gains
  • Adjusted diluted EPS of $2.39 increased 41% over last year
  • GAAP effective tax rate was 19.3% and the adjusted effective tax rate was 19.6%
  • Cash flow from operations was $69.3 million and free cash flow was $51.4 million
  • The electronics segment book-to-bill ratio for the first quarter was 1.14 (excluding IXYS)

"We continued our momentum with an exceptional start to 2018,” said Dave Heinzmann, Littelfuse Chief Executive Officer. “With our focus on the secular trends of a safer, greener and increasingly connected world, and consistent operational performance, we delivered sales and adjusted earnings that meaningfully exceeded our guidance. We are off to a strong start integrating the IXYS business, and have taken initial steps to drive synergy realization. Leveraging the broad-based demand across our businesses, we expect robust top-line growth and consistent operating margins in the second quarter. We are focused on the right growth opportunities to continue executing our long-term strategy and driving double digit sales and earnings growth.”

For the second quarter of 2018*:

  • Net sales are expected to be in the range of $450 to $462 million, up 45% on a reported basis and up 8% organically, at the midpoint versus the prior year quarter
  • Adjusted diluted earnings per share are expected to be in the range of $2.39 to $2.53, representing 17% growth over the prior year quarter at the midpoint
  • Similar to prior years, second quarter stock compensation expense is higher than other quarters due to equity grant provisions, equating to approximately eight cents of earnings per share
  • Adjusted effective tax rate is expected to be in the range of 19.5% to 20.5%; the midpoint is approximately 500 basis points higher than the prior year quarter. At a constant year-over-year tax rate, EPS growth would be 25%

The guidance includes a full quarter of IXYS results, along with a full quarter of related share dilution and interest expense from the debt issued in conjunction with the transaction.

For the 2018 full year, the company expects an adjusted effective tax rate in the range of 18% – 21%.

*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, certain purchase accounting adjustments, foreign exchange adjustments and significant and unusual items. 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.

Dividend and Share Repurchase Authorization

  • The company will pay a cash dividend on its common stock of $0.37 per share on June 7, 2018 to shareholders of record as of May 24, 2018
  • The company’s previous share repurchase authorization expired on April 30, 2018 and has been replaced with a one million share repurchase authorization effective through April 30, 2019. No shares were repurchased under the former authorization

Conference Call and Webcast Information

Littelfuse will host a conference call today, Wednesday, May 2, 2018, at 9:00 a.m. Central / 10:00 a.m. Eastern time to discuss the results. The call will be broadcast live and available for replay at Littelfuse.com.

About Littelfuse

Founded in 1927, Littelfuse is the global leader in circuit protection with advancing platforms in power control and sensor technologies. The company serves customers in the electronics, automotive and industrial markets with products that include fuses, semiconductors, polymers, ceramics, relays and sensors. Littelfuse has more than 11,000 employees in more than 50 locations worldwide. For more information, please visit 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 Littelfuse, Inc.'s ("Littelfuse" or the "Company") accounting policies; labor disputes; restructuring costs in excess of expectations; pension plan asset returns less than assumed; uncertainties related to political or regulatory changes; the integration of the recently acquired business of IXYS Corporation ("IXYS") and the risk that expected benefits, synergies and growth prospects of the acquisition of IXYS may not be achieved in a timely manner, or at all; and other risks which may be detailed in the company's 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 30, 2017. 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 30, 2017.

Non-GAAP Financial Measures

The information included in this press release includes the non-GAAP financial measures of organic revenue 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 set forth in the attached schedules.

The company believes that organic revenue 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 Segment
(In thousands of USD, unaudited)
 
First Quarter
%
Growth /
2018 2017 (Decline)
 

Net Sales

Electronics $ 264,411 $ 153,767 72%
Automotive 126,131 107,839 17%
Industrial   27,271     23,835   14%
 
Total net sales $ 417,813   $ 285,441   46%
 
 
 
First Quarter
%
Growth /
2018 2017 (Decline)
 

Operating Income/(Expense)

Electronics $ 53,964 $ 35,206 53%
Automotive 18,390 15,065 22%
Industrial 4,709 106 N.M.
Other (1)   (39,492 )   (1,525 ) N.M.
 
Total operating income $ 37,571 $ 48,852 (23%)
Operating margin 9.0 % 17.1 %
 
Interest expense 5,423 3,120
Foreign exchange gain (10,555 ) (1,557 )
Other income, net   (1,943 )   (139 )
 
Income before taxes $ 44,646   $ 47,428   (6%)
 
N.M. - Not meaningful
 
(1) "Other" typically includes non-GAAP adjustments such as acquisition-related costs, purchase accounting inventory adjustments and other charges, restructuring costs, asset impairments, and gains and losses on asset sales. (See Supplemental Financial Information for details.)
 
First Quarter
Growth /
2018 2017 (Decline)
 

Operating Margins

Electronics 20.4 % 22.9 % (2.5 %)
Automotive 14.6 % 14.0 % 0.6 %
Industrial 17.3 % 0.4 % 16.8 %
 
LITTELFUSE, INC.
Condensed Consolidated Balance Sheets
(In thousands of USD)
       
March 31, 2018 December 30, 2017
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 412,458 $ 429,676
Short-term investments 37 35
Accounts receivable, less allowances 244,905 182,699
Inventories 263,969 140,789
Prepaid income taxes and income taxes receivable 3,899 1,689
Prepaid expenses and other current assets   47,794     37,452  
Total current assets 973,062 792,340
Property, plant and equipment:
Land 29,575 9,547
Buildings 118,170 86,599
Equipment   555,578     505,838  
703,323 601,984
Accumulated depreciation   (366,118 )   (351,407 )
Net property, plant and equipment 337,205 250,577
Intangible assets, net of amortization:
Patents, licenses and software 129,610 81,911
Distribution network 11,038 12,872
Customer lists, trademarks and tradenames 254,755 109,067
Backlog 10,003
Goodwill   840,574     453,414  
1,245,980 657,264
Investments 31,128 10,993
Deferred income taxes 12,039 11,858
Other assets   28,096     17,070  
Total assets $ 2,627,510   $ 1,740,102  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 120,817 $ 101,844
Accrued payroll 41,220 49,962
Accrued expenses 74,925 48,994
Accrued severance 1,367 1,459
Accrued income taxes 15,938 16,285
Current portion of long-term debt   10,111     6,250  
Total current liabilities 264,378 224,794
Long-term debt, less current portion 743,437 489,361
Deferred income taxes 60,525 17,069
Accrued post-retirement benefits 35,817 18,742
Other long-term liabilities 81,379 62,580
Total equity   1,441,974     927,556  
Total liabilities and equity $ 2,627,510   $ 1,740,102  
 
LITTELFUSE, INC.
Condensed Consolidated Statements of Comprehensive Income
(In thousands of USD, except per share data, unaudited)
       
For the Three Months Ended
March 31, 2018 April 1, 2017
 
Net sales $ 417,813 $ 285,441
 
Cost of sales   268,190     171,791  
 
Gross profit 149,623 113,650
 
 
Selling, general and administrative expenses 77,514 46,703
Research and development expenses 22,540 12,151
Amortization of intangibles   11,998     5,944  
112,052 64,798
 
Operating income 37,571 48,852
 
Interest expense 5,423 3,120
Foreign exchange gain (10,555 ) (1,557 )
Other income, net   (1,943 )   (139 )
 
Income before income taxes 44,646 47,428
Income taxes   8,617     8,537  
 
Net income $ 36,029   $ 38,891  
 
Net income per share:
Basic $ 1.48   $ 1.71  
Diluted $ 1.45   $ 1.69  
 
Weighted average shares outstanding:
Basic   24,339     22,748  
Diluted   24,775     22,989  
 
Comprehensive income $ 35,750   $ 44,518  
 
LITTELFUSE, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands of USD, unaudited)
       

For the Three Months Ended

March 31, 2018 April 1, 2017
 
OPERATING ACTIVITIES:
Net income $ 36,029 $ 38,891
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 11,614 9,128
Amortization of intangibles 11,998 5,944
Provision for bad debts (13 ) 351
Stock-based compensation 8,714 3,583
Non-cash inventory charges 17,896 -
Unrealized gain on investments (1,864 ) -
Loss on sale of assets 99 600
Deferred income taxes 842 616
 
Changes in operating assets and liabilities
Accounts receivable (8,417 ) (2,719 )
Inventories (269 ) (3,296 )
Accounts payable 2,990 (3,295 )
Accrued expenses (including post-retirement) 12,573 4,140
Accrued payroll and severance (18,607 ) (20,221 )
Accrued income taxes (1,174 ) (220 )
Prepaid expenses and other assets   (3,143 )   (10,559 )
Net cash provided by operating activities 69,268 22,943
 
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (17,909 ) (12,377 )
Acquisition of business, net of cash acquired (306,487 ) (14,172 )
Proceeds from maturities of short-term investments - 3,739
Decrease in entrusted loan receivable - 655
Proceeds from sale of assets   19     57  
Net cash used in investing activities (324,377 ) (22,098 )
 
FINANCING ACTIVITIES:
Proceeds of revolving credit facility 50,000 -
Proceeds of term loan 75,000 -
Payments of revolving credit facility (47,000 ) (112,500 )
Payments of term loan (2,500 ) (1,563 )
Net proceeds from senior notes payable 175,000 125,000
Payments of entrusted loan - (655 )
Debt issuance costs paid (878 ) (71 )
Cash dividends paid (9,198 ) (7,472 )
Net (payments) proceeds related to stock-based award activities   (116 )   199  
Net cash provided by financing activities 240,308 2,938
 
Effect of exchange rate changes on cash and cash
equivalents   (2,417 )   (928 )
 
Increase (decrease) in cash and cash equivalents (17,218 ) 2,855
Cash and cash equivalents at beginning of period   429,676     275,124  
Cash and cash equivalents at end of period $ 412,458   $ 277,979  
 
LITTELFUSE, INC.                
Supplemental Financial Information
(in millions of USD except per share amounts, unaudited)
 
Non-GAAP EPS reconciliation
Q1-18 Q1-17
GAAP diluted EPS $ 1.45 $ 1.69
EPS impact of Non-GAAP adjustments (below)   0.94     -  
Adjusted diluted EPS $ 2.39   $ 1.69  
 
Non-GAAP adjustments - (income)/expense
Q1-18 Q1-17
Acquisition related and integration costs $ 11.7 $ 1.5
Restructuring 0.8 -
Amortization backlog - IXYS 2.5 -
Change in control - IXYS 2.1 -
Acquisition related stock-based compensation charge 4.5 -
Purchase accounting inventory adjustments   17.9     -  
Non-GAAP adjustments to operating income 39.5 1.5
Non-operating foreign exchange gain   (10.6 )   (1.6 )
Non-GAAP adjustments to income before income taxes 28.9 (0.1 )
Income taxes   5.8     -  
Non-GAAP adjustments to net income $ 23.1   $ (0.1 )
 
Total EPS impact $ 0.94   $ -  
 
Adjusted operating margin /Adjusted EBITDA reconciliation  
Q1-18 Q1-17
 
Net sales $ 417.8   $ 284.4  
 
GAAP operating income $ 37.6 $ 48.9
Add back non-GAAP adjustments   39.5     1.5  
Adjusted operating income $ 77.1 $ 50.4
Adjusted operating margin 18.5 % 17.7 %
 
Add back amortization 12.0 5.9
Add back depreciation   11.6     9.1  
Adjusted EBITDA $ 100.7   $ 65.4  
Adjusted EBITDA margin 24.1 % 23.0 %
 
Net sales reconciliation Q1-18 vs. Q1-17        

Electronics

Automotive

Industrial

Total

Net sales growth 72 % 17 % 14 % 46 %
Less:
Acquisitions 58 % - - 31 %
Divestitures - - - -
FX impact   4 %   7 % 1 % 5 %
Organic net sales growth   10 %   10 % 13 % 10 %
 
Income tax reconciliation
Q1-18 Q1-17
 
Income taxes $ 8.6 $ 8.5
Effective rate 19.3 % 18.0 %
 
Non-GAAP adjustments - income taxes 5.8 -
   
Adjusted income taxes $ 14.4   $ 8.5  
Adjusted effective rate 19.6 % 18.0 %
 

Free cash flow reconciliation

Q1-18 Q1-17
Net cash provided by operating activities $ 69.3 $ 22.9
Less: Purchases of property, plant and equipment   (17.9 )   (12.4 )
Free cash flow $ 51.4   $ 10.5  
 
Note: Totals will not always foot due to rounding
 

Source: Littelfuse, Inc.

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

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