Littelfuse Reports Fourth Quarter and Full Year Results

January 31, 2018 at 6:30 AM EST

 

Company delivers record sales, adjusted earnings per share and cash flow for 2017

CHICAGO--(BUSINESS WIRE)-- Littelfuse, Inc. (NASDAQ:LFUS) today reported financial results for the fourth quarter and full year ended December 30, 2017:

Fourth Quarter 2017 Highlights

  • Net sales were $304.8 million, up 7% versus the prior year period. Organic revenue growth was 4%, excluding revenue from acquisitions closed in the past 12 months, divestitures and foreign currency effects.
  • Growth by segment versus the prior year period:
     
    • Electronics sales increased 4% (up 1% organically)
    • Automotive sales increased 9% (up 6% organically)
    • Industrial sales increased 19% (up 21% organically)
  • GAAP diluted loss per share was ($0.48); This includes $52.5 million of charges primarily due to an estimated one-time tax charge of $49 million for the enactment of the Tax Cuts and Jobs Act for deemed repatriation of unremitted earnings of foreign subsidiaries, and charges related to the acquisition of IXYS Corporation
  • Adjusted diluted EPS of $1.81 increased 15% over last year
  • GAAP effective tax rate was 124.7%, including the impact of the estimated one-time tax charge noted above; Adjusted effective tax rate was 16.2%
  • The electronics segment book-to-bill ratio for the fourth quarter was 1.11
  • During January, the company completed a private placement of $175 million of senior notes
  • On January 17th, the company completed its acquisition of IXYS Corporation

Full Year 2017 Highlights

  • Net sales were $1.222 billion, up 16% versus the prior year period, and 7% organically
  • GAAP diluted EPS was $5.21, which includes the estimated one-time $49 million tax charge noted above; Adjusted diluted EPS of $7.74 increased 24% over last year
  • GAAP effective tax rate was 41.4% and adjusted effective tax rate was 18.1%
  • Cash flow from operations was $269 million and free cash flow was $203 million, both records for the company

"The fourth quarter capped off a tremendous year for us, as we finished 2017 with record sales, earnings and cash flow," said Dave Heinzmann, Littelfuse Chief Executive Officer. "While our 2017 organic sales growth of 7% was led by strength across our Electronics segment, all of our businesses had a strong finish for the year. We delivered 160 basis points in full year adjusted operating margin expansion, which included returning our industrial segment back to double digit operating margin profitability. We made significant progress in our strategy with two acquisitions that will add more than $350 million in annualized revenue, while expanding our sensor and power control portfolios."

First Quarter 2018 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.

"We enter 2018 with good momentum, a track record of strong operational performance and a diversified portfolio that capitalizes on the key trends of a safe, green and connected world," continued Heinzmann. "We're well positioned to deliver on our strategy, which we expect will drive double digit revenue and earnings growth."

The outlook includes IXYS results, with the first quarter including approximately two and a half months of IXYS financial results.

For the first quarter of 2018:

  • Net sales are expected to be in the range of $384 to $396 million, up 37% on an as reported basis and up 6% organically, at the midpoint versus the prior year quarter
  • Adjusted diluted earnings per share are expected to be in the range of $1.73 to $1.87
  • Adjusted effective tax rate is expected to be in the range of 22.5% to 23.5%

For the 2018 full year:

  • Adjusted effective tax rate is expected to be in the range of 18% - 21%
  • Capital expenditures are expected to be in the range of $80 - $85 million, including expenditures for IXYS' operations.

Dividend

The company will pay a cash dividend on its common stock of $0.37 per share on March 8, 2018 to shareholders of record as of February 22, 2018.

Conference Call and Webcast Information

Littelfuse will host a conference call today, Wednesday, January 31, 2018, at 9:00 a.m. Central / 10:00 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 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 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 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)
                         
    Fourth Quarter   Year-to-Date
            % Growth /           % Growth /
    2017   2016   (Decline)   2017   2016   (Decline)
                         

Net Sales

                       
Electronics   $ 162,875     $ 156,495     4 %   $ 661,928     $ 535,191     24 %
Automotive     115,134       105,556     9 %     453,227       415,200     9 %
Industrial     26,840       22,467     19 %     106,379       105,768     1 %
                         
Total net sales   $ 304,849     $ 284,518     7 %   $ 1,221,534     $ 1,056,159     16 %
                         
                         
    Fourth Quarter   Year-to-Date
            % Growth /           % Growth /
    2017   2016   (Decline)   2017   2016   (Decline)
                         

Operating Income/(Expense)

                       
Electronics   $ 33,362     $ 34,842     (4 %)   $ 155,880     $ 117,088     33 %
Automotive     14,972       10,908     37 %     62,571       59,905     4 %
Industrial     4,565       (143 )   3,292 %     10,334       3,615     186 %
Other (1)     (2,119 )     (4,619 )   54 %     (10,274 )     (49,964 )   79 %
                         
Total operating income   $ 50,780     $ 40,988     24 %   $ 218,511     $ 130,644     67 %
Operating margin     16.7 %     14.4 %         17.9 %     12.4 %    
                         
Interest expense     3,512       2,342           13,380       8,628      
Foreign exchange loss     3,859       7,586           2,376       472      
Other income, net     (320 )     (690 )         (1,282 )     (1,730 )    
                         
Income before taxes   $ 43,729     $ 31,750     38 %   $ 204,037     $ 123,274     66 %
                         
(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.)
                         
    Fourth Quarter   Year-to-Date
            Growth /           Growth /
    2017   2016   (Decline)   2017   2016   (Decline)
                         

Operating Margins

                       
Electronics     20.5 %     22.3 %   (1.8 %)     23.5 %     21.9 %   1.6 %
Automotive     13.0 %     10.3 %   2.7 %     13.8 %     14.4 %   (0.6 %)
Industrial     17.0 %     (0.6 %)   17.6 %     9.7 %     3.4 %   6.3 %
 
LITTELFUSE, INC.
Condensed Consolidated Balance Sheets
(In thousands of USD)
         
    December 30, 2017   December 31, 2016
    (Unaudited)    
ASSETS        
Current assets:        
Cash and cash equivalents   $ 429,676     $ 275,124  
Short-term investments     35       3,690  
Accounts receivable, less allowances     182,699       176,032  
Inventories     140,789       114,063  
Prepaid income taxes and income taxes receivable     1,689       11,671  
Prepaid expenses and other current assets     37,452       31,501  
Total current assets     792,340       612,081  
Property, plant and equipment:        
Land     9,547       9,268  
Buildings     86,599       80,553  
Equipment     505,838       439,542  
      601,984       529,363  
Accumulated depreciation     (351,407 )     (312,188 )
Net property, plant and equipment     250,577       217,175  
Intangible assets, net of amortization:        
Patents, licenses and software     81,911       83,607  
Distribution network     19,505       18,995  
Customer lists, trademarks and tradenames     102,434       110,425  
Goodwill     453,414       403,544  
      657,264       616,571  
Investments     10,993       13,933  
Deferred income taxes     11,858       20,585  
Other assets     17,070       10,849  
Total assets   $ 1,740,102     $ 1,491,194  
         
LIABILITIES AND EQUITY        
Current liabilities:        
Accounts payable   $ 101,844     $ 90,712  
Accrued payroll     49,962       42,810  
Accrued expenses     48,994       36,138  
Accrued severance     1,459       2,785  
Accrued income taxes     16,285       8,846  
Current portion of long-term debt     6,250       6,250  
Total current liabilities     224,794       187,541  
Long-term debt, less current portion     489,361       447,892  
Deferred income taxes     17,069       7,066  
Accrued post-retirement benefits     18,742       13,398  
Other long-term liabilities     62,580       20,366  
Total equity     927,556       814,931  
Total liabilities and equity   $ 1,740,102     $ 1,491,194  
 
LITTELFUSE, INC.
Condensed 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 30, 2017   December 31, 2016   December 30, 2017   December 31, 2016
                 
Net sales   $ 304,849     $ 284,518     $ 1,221,534     $ 1,056,159  
                 
Cost of sales     178,225       170,181       715,001       643,042  
                 
Gross profit     126,624       114,337       506,533       413,117  
                 
Selling, general and administrative expenses     55,934       56,082       212,833       206,129  
Research and development expenses     13,617       11,314       50,489       42,198  
Amortization of intangibles     6,293       5,953       24,700       19,337  
Impairment of goodwill and intangible assets     -       -       -       14,809  
      75,844       73,349       288,022       282,473  
                 
Operating income     50,780       40,988       218,511       130,644  
                 
Interest expense     3,512       2,342       13,380       8,628  
Foreign exchange loss     3,859       7,586       2,376       472  
Other income, net     (320 )     (690 )     (1,282 )     (1,730 )
                 
Income before income taxes     43,729       31,750       204,037       123,274  
Income taxes     54,548       4,505       84,518       18,786  
                 
Net income (loss)   $ (10,819 )   $ 27,245     $ 119,519     $ 104,488  
                 
Net income (loss) per share:                
Basic   $ (0.48 )   $ 1.20     $ 5.27     $ 4.63  
Diluted   $ (0.48 )   $ 1.19     $ 5.21     $ 4.60  
                 
Weighted average shares outstanding:                
Basic     22,714       22,692       22,687       22,559  
Diluted     22,714       22,863       22,931       22,727  
                 
Comprehensive income (loss)   $ (1,143 )   $ 7,818     $ 130,431     $ 75,580  
 
LITTELFUSE, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands of USD, unaudited)
         
    For the Twelve Months Ended
    December 30, 2017   December 31, 2016
         
OPERATING ACTIVITIES:        
Net income   $ 119,519     $ 104,488  
Adjustments to reconcile net income to net cash        
provided by operating activities:        
Depreciation     38,311       33,800  
Amortization of intangibles     24,700       19,337  
Impairment of goodwill and intangible assets     -       14,809  
Provision for bad debts     2,414       1,769  
Loss on sale of product line     -       1,391  
Stock-based compensation     16,315       11,987  
Non-cash inventory charges     1,607       7,834  
Excess tax benefit on stock-based compensation     -       (3,421 )
Loss on sale of assets     3,634       813  
Deferred income taxes     17,063       (5,269 )
         
Changes in operating assets and liabilities        
Accounts receivable     (11,087 )     (22,779 )
Inventories     (20,180 )     8,539  
Accounts payable     6,494       19,190  
Accrued expenses (including post-retirement)     7,641       2,287  
Accrued payroll and severance     3,709       6,131  
Accrued income taxes     39,276       (18,062 )
Prepaid expenses and other assets     19,754       (2,711 )
Net cash provided by operating activities     269,170       180,133  
         
INVESTING ACTIVITIES:        
Purchases of property, plant and equipment     (65,925 )     (46,228 )
Acquisition of business, net of cash acquired     (38,512 )     (471,118 )
Proceeds from maturities of short-term investments     3,739       345  
Decrease in entrusted loan receivable     3,599       5,510  
Proceeds from sale of property, plant and equipment     962       248  
Net cash used in investing activities     (96,137 )     (511,243 )
         
FINANCING ACTIVITIES:        
Proceeds of revolving credit facility     15,000       367,000  
Proceeds of term loan     9,375       125,000  
Payments of revolving credit facility     (127,500 )     (331,500 )
Payments of term loan     (7,188 )     (89,688 )
Net proceeds from senior notes payable     125,000       226,428  
Payments of entrusted loan     (3,599 )     (5,510 )
Debt issuance costs paid     (1,626 )     (3,583 )
Cash dividends paid     (31,670 )     (27,866 )
Net (payments) proceeds related to stock-based award activities     (2,373 )     20,494  
Excess tax benefit on share-based compensation     -       3,421  
Net cash (used in) provided by financing activities     (24,581 )     284,196  
         
Effect of exchange rate changes on cash and cash        
equivalents     6,100       (6,748 )
         
Increase (decrease) in cash and cash equivalents     154,552       (53,662 )
Cash and cash equivalents at beginning of period     275,124       328,786  
Cash and cash equivalents at end of period   $ 429,676     $ 275,124  
     
LITTELFUSE, INC.
Supplemental Financial Information
(in millions of USD except per share amounts, unaudited)
                   
Non-GAAP EPS reconciliation                  
      Q4-17   Q4-16   YTD-17   YTD-16

GAAP diluted EPS

    $ (0.48 )   $ 1.19     $ 5.21     $ 4.60  
EPS impact of Non-GAAP adjustments (below)       2.30       0.38       2.53       1.66  
Adjusted diluted EPS     $ 1.81     $ 1.57     $ 7.74     $ 6.26  
                   
Non-GAAP adjustments - (income)/expense                  
      Q4-17   Q4-16   YTD-17   YTD-16
Reed switch manufacturing transfer costs     $ -     $ (0.1 )   $ -     $ 1.6  
Restructuring       0.7       1.2       2.2       2.5  
Acquisition-related and integration costs       1.4       3.5       8.1       31.1  
Impairment of goodwill and intangible assets       -       -       -       14.8  

Non-GAAP adjustments to operating income

      2.1       4.6       10.3       50.0  
Non-operating foreign exchange loss       3.9       7.6       2.4       0.5  

Non-GAAP adjustments to income before income taxes

      6.0       12.2       12.7       50.5  
Income taxes       (46.5 )     3.5       (45.3 )     12.6  

Non-GAAP adjustments to net income

    $ 52.5     $ 8.7     $ 58.0     $ 37.9  
                   
Total EPS impact     $ 2.30     $ 0.38     $ 2.53     $ 1.66  
                   
Adjusted operating margin /Adjusted EBITDA reconciliation                
      Q4-17   Q4-16   YTD-17   YTD-16
                   
Net sales     $ 304.8    

$

284.5    

$

1221.5

   

$

1056.2

 
                   
GAAP operating income     $ 50.8     $ 41.0     $ 218.5     $ 130.6  

Add back non-GAAP adjustments

      2.1       4.6       10.3       49.9  
Adjusted operating income     $ 52.9     $ 45.6     $ 228.8     $ 180.5  
Adjusted operating margin       17.4 %     16.0 %     18.7 %     17.1 %
                   
Add back amortization       6.3       6.0       24.7       19.4  
Add back depreciation       10.1       9.0       38.3       33.8  
Adjusted EBITDA     $ 69.3     $ 60.6     $ 291.8     $ 233.7  
Adjusted EBITDA margin       22.7 %     21.3 %     23.9 %     22.1 %
                   
Net sales reconciliation     Q4-17 vs. Q4-16
      Electronics   Automotive   Industrial   Total
Net sales growth       4 %     9 %     19 %     7 %
Less:                  
Acquisitions       2 %     -       -       1 %
Divestitures       -       -       (2 %)     -  
FX impact       1 %     3 %     -       2 %
Organic net sales growth       1 %     6 %     21 %     4 %
                   
      2017 YTD vs. 2016 YTD
      Electronics   Automotive   Industrial   Total
Net sales growth       24 %     9 %     1 %     16 %
Less:                  
Acquisitions       14 %     5 %     -       9 %
Divestitures       -       -       (7 %)     (1 %)
FX impact       -       -       1 %     1 %
Organic net sales growth       10 %     4 %     7 %     7 %
                   
Income tax reconciliation                  
      Q4-17   Q4-16   YTD-17   YTD-16
                   
Income taxes     $ 54.5     $ 4.5     $ 84.5     $ 18.8  
Effective rate       124.7 %     14.2 %     41.4 %     15.2 %
                   
Non-GAAP adjustments - income taxes       (46.5 )     3.5       (45.3 )     12.6  
                   
Adjusted income taxes     $ 8.0     $ 8.0     $ 39.2     $ 31.4  
Adjusted effective rate       16.2 %     18.3 %     18.1 %     18.1 %
                   

Free cash flow reconciliation

                 
      Q4-17   Q4-16   YTD-17   YTD-16
Net cash provided by operating activities     $ 87.9     $ 80.1     $ 269.2     $ 180.1  
Less: Purchases of property, plant and equipment       (17.5 )     (11.7 )     (65.9 )     (46.2 )
Free cash flow     $ 70.4     $ 68.4     $ 203.3     $ 133.9  
                   
                   
Note: Totals will not always foot due to rounding
 

 

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

 

Source: Littelfuse, Inc.

 

 

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