Littelfuse Reports Fourth Quarter and Full Year Results

February 4, 2015 at 6:30 AM EST

CHICAGO--(BUSINESS WIRE)-- Littelfuse, Inc. (NASDAQ:LFUS) today reported sales and earnings for the fourth quarter and fiscal year ending December 27, 2014.

Fourth Quarter Highlights

  • Sales for the fourth quarter of 2014 were $207 million, a 4% increase (7% excluding currency effects) compared to the prior-year quarter due primarily to continued strong growth in the automotive business. Excluding acquisitions, sales increased 2% (4% excluding currency effects) compared to the prior year.
  • On a GAAP basis, fourth quarter 2014 earnings were $0.86 per diluted share. This included $4.7 million of special items comprised primarily of restructuring charges and non-operating foreign exchange losses related to balance sheet revaluation (see Supplemental Financial Information on page 9). Excluding these special items, earnings for the fourth quarter of 2014 were $1.02 per diluted share.
  • In addition to the restructuring charges mentioned above, operating income for the fourth quarter was negatively impacted by the following:
    • Foreign currency effects primarily related to the company's long euro exposure. In total these currency effects negatively affected operating income by approximately $2.1 million in the fourth quarter.
    • Year-end true up of certain accruals including those for customer credits, inventory reserves and medical and post-retirement plans. In total these expenses negatively affected operating income by approximately $1.9 million in the fourth quarter.
    • Performance issues at a few of the company's plants including reduced production volumes and higher overhead expenses. In total these plant performance issues negatively affected operating income by approximately $1.0 million in the fourth quarter.
  • The effective tax rate for the fourth quarter was favorably impacted by the mix of income (less income in high tax jurisdictions) and various favorable adjustments.
  • Sales trends by business unit for the fourth quarter were as follows:
    • Electronics sales increased 1% year over year (3% excluding currency effects) reflecting sales growth in constant currency in all regions.
    • Automotive sales increased 10% year over year (14% excluding currency effects) reflecting growth across all product categories and all regions.
    • Electrical sales were flat year over year. Excluding the effects of the SymCom acquisition and currency, electrical sales declined 12% year over year due primarily to continued weakness in mining and lower sales into the solar market. As expected, sales of the company's custom products increased compared to the third quarter of 2014.
  • The electronics book-to-bill ratio for the fourth quarter of 2014 was 1.06 (1.00 excluding Sensors).
  • Cash provided by operating activities was $49.3 million for the fourth quarter of 2014 compared to $31.6 million for the fourth quarter of 2013. Capital expenditures for the fourth quarter of 2014 were $12.9 million compared to $9.6 million for the fourth quarter of 2013.

Full Year Highlights

  • Sales for 2014 were $852.0 million, a 12.4% increase compared to 2013. Organic growth for the year was 5.0% and acquisition growth was 7.4%.
  • On a GAAP basis, 2014 earnings were $4.37 per diluted share, an 11% increase compared to 2013.
  • Excluding special items, 2014 earnings were $4.78 per diluted share, a 7% increase compared to 2013.
  • Cash flow from operating activities for 2014 was $153.1 million, a 30% increase compared to 2013.

"After strong performance for the first three quarters of the year, fourth quarter earnings were below our expectations," said Gordon Hunter, Chief Executive Officer. "The combination of unfavorable currency effects, non-recurring charges and poor execution in a few areas of the business made for a challenging quarter. While we will continue to be impacted by currency headwinds for the foreseeable future, we will also be taking a number of corrective actions including selective price increases, more aggressive expense controls and, where possible, moving faster on our various restructuring efforts."

"Despite the disappointing results for the fourth quarter, our full year performance was solid," said Phil Franklin, Chief Financial Officer. "Cash flow continues to be a bright spot as we generated cash from operating activities of $153.1 million for 2014. This beat our previous record by over $30 million."

Outlook

  • Sales for the first quarter of 2015 are expected to be in the range of $202 to $212 million which represents flat revenue at the midpoint compared to the prior year after currency effects (approximately 4% growth in constant currency).
  • Earnings for the first quarter of 2015 are expected to be in the range of $1.00 to $1.14 per diluted share. This includes negative currency effects of approximately $0.10 compared to the prior year.

"It now seems likely that we will be facing currency headwinds for much of 2015," said Franklin. "At the current exchange rates, we estimate that sales would be negatively impacted by approximately $30 million and earnings by approximately 40 cents per share compared to 2014. Nevertheless, with our planned improvements in the electrical, automotive sensor and CVP businesses, continued solid performance in the core automotive and electronics businesses and a lower tax rate, we believe we can achieve 2015 earnings above $5.00 per share."

Dividend

The company will pay a cash dividend of $0.25 per common share on March 5, 2015 to shareholders of record at the close of business on February 13, 2015.

Conference Call and Webcast Information

Littelfuse will host a conference call today, Wednesday, February 4, 2015, at 10:00 a.m. Central / 11:00 a.m. Eastern time to discuss the fourth 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 March 31, 2015 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 8,000 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)
       
 
 
Fourth Quarter Year-to-Date  
2014 2013 % Change 2014 2013 % Change
 

Net Sales

Electronics (2) $ 96,339 $ 95,174 1 % $ 410,065 $ 367,052 12 %
Automotive (3) 80,332 72,888 10 % 325,415 267,207 22 %
Electrical (4)   29,949     30,067   (0 %)   116,515     123,594   (6 %)
 
Total net sales (1) $ 206,620   $ 198,129   4 % $ 851,995   $ 757,853   12 %
 
(1) Total net sales for 2014 include an incremental $4.3M for the quarter and $56.1M year-to-date from business acquisitions.
(2) Total Electronics net sales for 2014 include an incremental $16.3M year-to-date from the Hamlin acquisition.
(3) Total Automotive net sales for 2014 include an incremental $20.2M year-to-date from the Hamlin acquisition.

(4) Total Electrical net sales for 2014 include an incremental $4.3M for the quarter and $19.6M year-to-date from the SymCom acquisition.

 

 
 
Fourth Quarter Year-to-Date  
2014 2013 % Change 2014 2013 % Change
 

Operating Income/(Expense)

Electronics $ 16,176 $ 17,275 (6 %) $ 86,981 $ 69,559 25 %
Automotive 9,928 9,639 3 % 45,086 39,170 15 %
Electrical 3,133 5,562 (44 %) 10,674 24,363 (56 %)
Other (5)   (2,846 )

(6)

  347   (920 %)   (8,911 )   (3,211 ) 178 %
 
Total operating income $ 26,391 $ 32,823 (20 %) $ 133,830 $ 129,881 3 %
 
Interest expense 1,167 958 4,903 2,917
Investment impairment - - - 10,678

(7)

 

Foreign exchange (gain) loss 1,903 (1,374 ) 3,925 (3,303 )
Other (income) expense, net   (1,751 )   (1,103 )   (6,644 )   (4,646 )
 
Income before taxes $ 25,072   $ 34,342   (27 %) $ 131,646   $ 124,235   6 %
 
(5) "Other" typically includes special items such as acquisition-related costs, restructuring costs, asset impairments, and gains and losses on asset sales.
(6) Primarily consists of tax consulting and legal expenses to effect changes in the company's legal structure that will enable the up-streaming of cash to the U.S. ($1.1M), severance and restructuring charges at various locations ($1.2M), acquisition-related expenses ($0.3M) and asset impairments ($0.3M).
(7) Impairment and loan losses from investment in Shocking Technologies.
     
LITTELFUSE, INC.
Condensed Consolidated Balance Sheets
(In thousands of USD, except share amounts)
 
December 27, 2014 December 28, 2013
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 297,571 $ 305,192
Short-term investments 4,302 6,886
Accounts receivable, less allowances 135,356 127,887
Inventories 97,391 92,591
Deferred income taxes 17,481 10,463
Prepaid expenses and other current assets 13,904 17,080
Assets held for sale   5,500     5,500  
Total current assets 571,505 565,599
Property, plant and equipment:
Land 5,697 4,382
Buildings 64,609 59,699
Equipment   370,179     354,475  
440,485 418,556
Accumulated depreciation   (281,845 )   (268,383 )
Net property, plant and equipment 158,640 150,173
Intangible assets, net of amortization:
Patents, licenses and software 23,640 25,166
Distribution network 19,428 22,770
Customer lists, trademarks and tradenames 60,605 50,421
Goodwill   196,256     186,464  
299,929 284,821
Investments 12,056 12,286
Deferred income taxes 5,393 5,092
Other assets   23,303     6,402  
Total assets $ 1,070,826   $ 1,024,373  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 50,793 $ 33,872
Accrued payroll 30,511 29,437
Accrued expenses 13,059 13,087
Accrued severance 790 182
Accrued income taxes 9,045 5,931
Deferred income taxes - 229
Current portion of accrued post-retirement benefits 11,768 -
Current portion of long-term debt   88,500     126,000  
Total current liabilities 204,466 208,738
Long-term debt, less current portion 106,658 93,750
Deferred income taxes 11,076 11,585
Accrued post-retirement benefits 5,147 8,528
Other long-term liabilities 15,814 14,856
Total equity   727,665     686,916  
Total liabilities and equity $ 1,070,826   $ 1,024,373  
 
Common shares issued and outstanding of
22,585,529 and 22,467,491 at December 27, 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 Twelve Months Ended
 
December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
 
Net sales $ 206,620 $ 198,129 $ 851,995 $ 757,853
 
Cost of sales   131,061     121,020     527,567     461,621  
 
Gross profit 75,559 77,109 324,428 296,232
 
 
Selling, general and administrative 37,829 34,566 146,975 132,657
Research and development expenses 8,289 6,690 31,122 24,415
Amortization of intangibles   3,050     3,030     12,501     9,279  
49,168 44,286 190,598 166,351
 
Operating income 26,391 32,823 133,830 129,881
 
Interest expense 1,167 958 4,903 2,917
Impairment and loan loss in
unconsolidated affiliate - - - 10,678
Foreign currency revaluation (income) expense 1,903 (1,374 ) 3,925 (3,303 )
Other (income) expense, net   (1,751 )   (1,103 )   (6,644 )   (4,646 )
 
Income before income taxes 25,072 34,342 131,646 124,235
Income taxes   5,561     10,684     32,228     35,451  
 
Net income $ 19,511   $ 23,658   $ 99,418   $ 88,784  
 
Net income per share:
Basic $ 0.86   $ 1.05   $ 4.41   $ 3.98  
Diluted $ 0.86   $ 1.04   $ 4.37   $ 3.94  
 
Weighted average shares and
equivalent shares outstanding:
Basic   22,563     22,440     22,543     22,315  
Diluted   22,729     22,657     22,727     22,537  
 

Diluted Net Income Per Share

Net income as reported $ 19,511 $ 23,658 $ 99,418 $ 88,784
Less: income allocated to participating
securities   -     (6 )   -     (51 )
Net income available to common
shareholders $ 19,511   $ 23,652   $ 99,418   $ 88,733  
 
Weighted average shares adjusted for
securities   22,729     22,657     22,727     22,537  
 
Diluted net income per share $ 0.86   $ 1.04   $ 4.37   $ 3.94  
 
Comprehensive (loss) income $ (8,569 ) $ 27,022   $ 57,875   $ 92,653  
   
LITTELFUSE, INC.
Consolidated Statements of Cash Flows
(In thousands of USD, unaudited)
 
For the Twelve Months Ended
December 27, 2014 December 28, 2013
 
OPERATING ACTIVITIES:
Net income $ 99,418 $ 88,784
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 29,374 25,201
Amortization of intangibles 12,501 9,279
Impairment and loan loss in unconsolidated affiliate - 10,678
Provision for bad debts 130 289
Non-cash inventory charge (1) 2,769 1,525
Stock-based compensation 9,069 8,609
Excess tax benefit on stock-based compensation (2,843 ) (4,054 )
Loss on sale of assets 1,042 92
Deferred income taxes (4,488 ) 6,640
Changes in operating assets and liabilities:
Accounts receivable (13,062 ) (16,683 )
Inventories (2,258 ) (5,486 )
Accounts payable 17,281 2,000
Accrued expenses (including post retirement) (1,577 ) (8,906 )
Accrued payroll and severance 2,360 8,032
Accrued taxes (549 ) (10,773 )
Prepaid expenses and other   3,974     2,140  
Net cash provided by operating activities 153,141 117,367
 
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (32,281 ) (34,953 )
Acquisition of businesses, net of cash acquired (56,368 ) (144,382 )
Purchase of short-term investments (4,331 ) (8,478 )
Proceeds from maturities of short-term investments 6,770 2,044
Increase in entrusted loan receivable (17,908 ) -
Proceeds from sale of assets   125     176  
Net cash used in investing activities (103,993 ) (185,593 )
 
FINANCING ACTIVITIES:
Proceeds from term loan - 100,000
Proceeds of revolving credit facility 97,500 160,500
Proceeds from entrusted loan 17,908 -
Payments of term loan (5,000 ) (1,250 )
Payments of revolving credit facility (135,000 ) (123,500 )
Debt issuance costs paid (107 ) (809 )
Cash dividends paid (21,175 ) (18,722 )
Purchase of common stock (14,283 ) -
Proceeds from exercise of stock options 14,061 21,959
Excess tax benefit on stock-based compensation   2,843     4,054  
Net cash (used in) provided by financing activities (43,253 ) 142,232
 
Effect of exchange rate changes on cash and cash
equivalents   (13,516 )   (4,218 )
 
Increase in cash and cash equivalents (7,621 ) 69,788
Cash and cash equivalents at beginning of period   305,192     235,404  
Cash and cash equivalents at end of period $ 297,571   $ 305,192  
 
(1) Purchase accounting adjustment related to acquisitions.
                   
LITTELFUSE, INC.
Supplemental Financial Information
(in millions of USD except share amounts)
 
 
 

GAAP EPS Reconciliation

Q1-14 Q2-14 Q3-14 Q4-14 YTD-14 Q1-13 Q2-13 Q3-13 Q4-13 YTD-13
GAAP diluted EPS $ 1.12 $ 1.08 $ 1.32 $ 0.86 $ 4.37 $ 0.51 $ 1.18 $ 1.19 $ 1.04 $ 3.94
EPS impact of special items (below)   0.04     0.18     0.03     0.16     0.41     0.44     (0.03 )   0.07     0.04     0.52  
Adjusted diluted EPS $ 1.16   $ 1.26   $ 1.35   $ 1.02   $ 4.78   $ 0.95   $ 1.15   $ 1.26   $ 1.08   $ 4.46  
Year-over-year adjusted EPS growth 22 % 10 % 7 % -6 % 7 %
 

Special Items (income)/expense

 
Purchase accounting adjustment $ 1.4 $ 1.4 $ - $ - $ 2.8 $ - $ 1.7 $ 0.3 $ (0.5 ) $ 1.5
Restructuring - 2.0 1.1 2.2 5.3 - - - - -
Impairment charges - - - 0.3 0.3 - - - - -
Acquisition expenses   -     0.2     -     0.3     0.5     -     1.2     0.3     0.2     1.7  
Adjustment to Operating income 1.4 3.5 1.1 2.8 8.9 - 2.9 0.6 (0.3 ) 3.2
Impairment charges - - - - - 10.7 - - - 10.7
Foreign exchange (gain)/loss   (0.3 )   2.4     (0.1 )   1.9     3.9     -     (3.7 )   1.5     (1.4 )   (3.6 )
Adjustment to pre-tax income $ 1.2   $ 5.9   $ 1.0   $ 4.7   $ 12.8   $ 10.7   $ (0.8 ) $ 2.1   $ (1.7 ) $ 10.3  
 
EPS impact of above special items $ 0.04 $ 0.18 $ 0.03 $ 0.16 $ 0.41 $ 0.29 $ (0.03 ) $ 0.07 $ (0.06 ) $ 0.27
EPS impact of Shocking tax adjustment - - - - - 0.15 - - 0.12 0.27
EPS impact of other special tax items   -     -     -     -     -     -     -     -     (0.02 )   (0.02 )
Total EPS impact $ 0.04   $ 0.18   $ 0.03   $ 0.16   $ 0.41   $ 0.44   $ (0.03 ) $ 0.07   $ 0.04   $ 0.52  
 

Operating margin / EBITDA reconciliation

Q1-14 Q2-14 Q3-14 Q4-14 YTD-14 Q1-13 Q2-13 Q3-13 Q4-13 YTD-13
 
Net sales $ 206.9   $ 220.9   $ 217.6   $ 206.6   $ 852.0   $ 170.9   $ 187.8   $ 201.0   $ 198.1   $ 757.9  
 
GAAP operating income $ 33.6 $ 33.7 $ 40.1 $ 26.4 $ 133.8 $ 28.1 $ 31.4 $ 37.6 $ 32.8 $ 129.9
Add back special operating items   1.4     3.5     1.1     2.8     8.9     -     2.9     0.6     (0.3 )   3.2  
Adjusted operating income $ 35.0 $ 37.3 $ 41.3 $ 29.2 $ 142.7 $ 28.1 $ 34.3 $ 38.2 $ 32.5 $ 133.1
Adjusted operating margin 16.9 % 16.9 % 19.0 % 14.1 % 16.7 % 16.5 % 18.3 % 19.0 % 16.4 % 17.6 %
 
Add back amortization 3.2 3.1 3.2 3.1 12.6 1.6 1.9 2.7 3.0 9.3
Add back depreciation   7.0     7.5     7.3     7.6     29.3     6.2     6.5     6.9     5.6     25.2  
Adjusted EBITDA $ 45.2   $ 47.8   $ 51.7   $ 39.9   $ 184.6   $ 35.9   $ 42.8   $ 47.8   $ 41.1   $ 167.6  
Adjusted EBITDA margin 21.8 % 21.7 % 23.8 % 19.3 % 21.7 % 21.0 % 22.8 % 23.8 % 20.7 % 22.1 %
Year-over-year adjusted EBITDA growth 26 % 12 % 8 % -3 % 10 %
 
Note: Totals will not always foot due to rounding

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

Source: Littelfuse, Inc.

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