Littelfuse Reports Second Quarter Results

July 29, 2015 at 6:30 AM EDT

CHICAGO--(BUSINESS WIRE)-- Littelfuse, Inc. (NASDAQ:LFUS) today reported sales and earnings for the second quarter ended June 27, 2015 and announced a 16% increase in the quarterly cash dividend.

Second Quarter Highlights

  • Sales for the second quarter of 2015 were $222.0 million, a 1% increase (6% excluding currency effects) compared to the prior-year quarter due to continued growth in automotive and improvement in the electrical business.
  • On a GAAP basis, second quarter 2015 earnings were $1.26 per diluted share. This included $2.1 million of special items comprised primarily of restructuring and pension wind-up charges partially offset by non-operating foreign exchange gains (see Supplemental Financial Information on page 8). Excluding these special items, earnings for the second quarter of 2015 were $1.33 per diluted share.
  • Sales trends by business unit for the second quarter were as follows:
    • Electronics sales declined 4% year over year (1% excluding currency effects) due to a slower seasonal ramp-up for core products and capacity constraints for sensor products as they are being transferred to the Philippines.
    • Automotive sales increased 5% year over year (13% excluding currency effects) as all three regions had double-digit growth on a constant-currency basis.
    • Electrical sales increased 6% year over year (9% excluding currency effects) as improvements in fuse and custom products sales were partially offset by weaker relay sales.
  • The electronics book-to-bill ratio for the second quarter of 2015 was 0.94.
  • Cash provided by operating activities was $38.7 million for the second quarter of 2015 compared to $31.0 million for the second quarter of 2014. Capital expenditures for the second quarter of 2015 increased to $14.1 million compared to $6.7 million for the second quarter of 2014 primarily related to capacity addition for new automotive programs and the manufacturing transfer to the Philippines.

"Execution was excellent across our businesses in the second quarter," said Gordon Hunter, chief executive officer. "This enabled us to outperform our earnings guidance despite the continuing negative effects of the weak euro and some sluggishness in our electronics markets. Improved manufacturing performance at our Piedras Negras, Mexico site was particularly encouraging."

Outlook

"There are mixed signals regarding the near term outlook," said Hunter. "The .94 book to bill indicates less- than-normal seasonal strength for electronics, although we did see this increase some in July. On the other hand, the electrical business continues to improve and automotive trends remain solid despite slowing growth in global car production."

  • Sales for the third quarter of 2015 are expected to be in the range of $211 to $221 million. At the midpoint, this is flat with the prior year quarter or approximately 4% growth on a constant currency basis.
  • The full year effective tax rate is expected to be approximately 23.5%, although this assumes that Congress approves the R&D credit and the "look-through" provision for 2015 as it did in 2014. Until such time, the rate is expected to be about 50 basis points higher.
  • Earnings for the third quarter of 2015 are expected to be in the range of $1.24 to $1.36 per diluted share. This includes negative currency effects of approximately $0.10 compared to the prior year.
  • Although capital expenditures through the first six months of the year are $26.4 million, it is expected that spending will slow down in the second half resulting in full year capital expenditures of approximately $40 to $45 million.

Dividend

The Board has approved a 16% increase in the quarterly cash dividend from $0.25 to $0.29 per share. This dividend is payable on September 3, 2015 to shareholders of record at the close of business on August 20, 2015.

"Since the dividend was initiated in 2010, we have increased it at a compound annual growth rate of 15%," said Phil Franklin, chief financial officer. "As previously indicated, we will be revisiting our capital allocation targets in the coming months and, if M&A activity does not pick up, will increase the percentage of free cash returned to shareholders."

Conference Call and Webcast Information

Littelfuse will host a conference call today, Wednesday, July 29, 2015, 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, 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 27, 2014. 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 27, 2014.

LFUS-F

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

2015

2014

% Change

2015

2014

% Change

 

Net Sales

Electronics $ 105,553 $ 109,947 (4 %) $ 204,933 $ 205,972 (1 %)
Automotive 85,918 82,042 5 % 169,989 164,444 3 %
Electrical   30,550     28,919   6 %   57,412     57,351   0 %
 
Total net sales $ 222,021   $ 220,908   1 % $ 432,334   $ 427,767   1 %
 
 
 
Second Quarter Year-to-Date

2015

2014

% Change

2015

2014

% Change

 

Operating Income/(Expense)

Electronics $ 22,167 $ 25,634 (14 %) $ 40,832 $ 45,005 (9 %)
Automotive 12,699 11,049 15 % 23,870 22,931 4 %
Electrical 4,709 571 725 % 7,439 4,317 72 %
Other (1)   (3,404 )   (3,535 ) (4 %)   (6,422 )   (4,944 ) 30 %
 
Total operating income $ 36,171 $ 33,719 7 % $ 65,719 $ 67,309 (2 %)
 
Interest expense 948 1,228 2,099 2,444
Foreign exchange (gain) loss (1,292 ) 2,375 1,825 2,123
Other (income) expense, net   (1,202 )   (1,446 )   (2,328 )   (2,632 )
 
Income before taxes $ 37,717   $ 31,562   20 % $ 64,123   $ 65,374   (2 %)
 
(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.)
   
LITTELFUSE, INC.
Condensed Consolidated Balance Sheets
(In thousands of USD, except share amounts)
 
June 27, 2015 December 27, 2014
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 311,915 $ 297,571
Short-term investments 3,954 4,302
Accounts receivable, less allowances 151,283 135,356
Inventories 97,735 97,391
Deferred income taxes 17,378 17,481
Prepaid expenses and other current assets 15,357 13,904
Assets held for sale   5,500     5,500  
Total current assets 603,122 571,505
Property, plant and equipment:
Land 5,542 5,697
Buildings 63,546 64,609
Equipment   389,026     370,179  
458,114 440,485
Accumulated depreciation   (291,735 )   (281,845 )
Net property, plant and equipment 166,379 158,640
Intangible assets, net of amortization:
Patents, licenses and software 21,449 23,640
Distribution network 17,813 19,428
Customer lists, trademarks and tradenames 58,018 60,605
Goodwill   192,947     196,256  
290,227 299,929
Investments 14,503 12,056
Deferred income taxes 5,604 5,393
Other assets   19,456     23,303  
Total assets $ 1,099,291   $ 1,070,826  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 53,919 $ 50,793
Accrued payroll 25,501 30,511
Accrued expenses 19,668 13,059
Accrued severance 2,033 790
Accrued income taxes 8,547 9,045
Current portion of accrued post-retirement benefits 11,768 11,768
Current portion of long-term debt   82,250     88,500  
Total current liabilities 203,686 204,466
Long-term debt, less current portion 96,993 106,658
Deferred income taxes 11,173 11,076
Accrued post-retirement benefits 5,247 5,147
Other long-term liabilities 14,900 15,814
Total equity   767,292     727,665  
Total liabilities and equity $ 1,099,291   $ 1,070,826  
 
Common shares issued and outstanding of
22,725,882 and 22,585,529 at June 27, 2015 and
December 27, 2014, 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 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014
 
Net sales $ 222,021 $ 220,908 $ 432,334 $ 427,767
 
Cost of sales   136,740     137,913     270,723     266,278  
 
Gross profit 85,281 82,995 161,611 161,489
 
 
Selling, general and administrative expenses 38,772 38,328 75,117 72,499
Research and development expenses 7,361 7,810 14,745 15,384
Amortization of intangibles   2,977     3,138     6,030     6,297  
49,110 49,276 95,892 94,180
 
Operating income 36,171 33,719 65,719 67,309
 
Interest expense 948 1,228 2,099 2,444
Foreign exchange (gain) loss (1,292 ) 2,375 1,825 2,123
Other (income) expense, net   (1,202 )   (1,446 )   (2,328 )   (2,632 )
 
Income before income taxes 37,717 31,562 64,123 65,374
Income taxes   9,033     6,984     15,444     15,407  
 
Net income $ 28,684   $ 24,578   $ 48,679   $ 49,967  
 
Net income per share:
Basic $ 1.26   $ 1.09   $ 2.15   $ 2.22  
Diluted $ 1.26   $ 1.08   $ 2.13   $ 2.20  
 

Weighted average shares and equivalent shares outstanding:

Basic   22,691     22,579     22,645     22,536  
Diluted   22,835     22,750     22,810     22,738  
 
Comprehensive income $ 34,672   $ 33,743   $ 43,709   $ 52,235  
   
LITTELFUSE, INC.
Consolidated Statements of Cash Flows
(In thousands of USD, unaudited)
 

For the Six Months Ended

June 27, 2015

June 28, 2014

 
OPERATING ACTIVITIES:
Net income $ 48,679 $ 49,967

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 14,761 14,459
Amortization of intangibles 6,030 6,297
Non-cash inventory charge (1) - 2,769
Stock-based compensation 5,764 5,229
Excess tax benefit on stock-based compensation (1,470 ) (2,230 )
Loss on sale of assets 329 141
Changes in operating assets and liabilities:
Accounts receivable (21,266 ) (17,871 )
Inventories (1,199 ) 410
Accounts payable 3,440 2,533
Accrued expenses (including post retirement) 11,129 (7,578 )
Accrued payroll and severance (3,652 ) (7,323 )
Accrued taxes (3,003 ) (2,101 )
Prepaid expenses and other   2,422     (2,189 )
Net cash provided by operating activities 61,964 42,513
 
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (26,388 ) (13,132 )
Acquisition of business, net of cash acquired - (52,768 )
Decrease in entrusted loan receivable 3,519 -
Proceeds from sale of assets   48     37  
Net cash used in investing activities (22,821 ) (65,863 )
 
FINANCING ACTIVITIES:
Proceeds of revolving credit facility 11,000 97,500
Payments of revolving credit facility (21,000 ) (19,500 )
Payments of term loan (2,500 ) (2,500 )
Payments of entrusted loan (3,519 ) -
Debt issuance costs paid (42 ) (108 )
Cash dividends paid (11,296 ) (9,921 )
Purchases of common stock - (14,283 )
Proceeds from exercise of stock options 6,278 11,101
Excess tax benefit on share-based compensation   1,470     2,230  
Net cash (used in) provided by financing activities (19,609 ) 64,519
 

Effect of exchange rate changes on cash and cash equivalents

  (5,190 )   45  
 
Increase in cash and cash equivalents 14,344 41,214
Cash and cash equivalents at beginning of period   297,571     305,192  
Cash and cash equivalents at end of period $ 311,915   $ 346,406  
 
(1) Purchase accounting adjustment related to acquisitions.
           
LITTELFUSE, INC.
Supplemental Financial Information
(in millions of USD except share amounts)
 
 
 
GAAP EPS Reconciliation

Q1-15

Q2-15

YTD-15

Q1-14

Q2-14

YTD-14

GAAP diluted EPS $ 0.88 $ 1.26 $ 2.13 $ 1.12 $ 1.08 $ 2.20
EPS impact of special items (below)   0.20     0.07     0.27     0.04     0.18     0.22  
Adjusted diluted EPS $ 1.08   $ 1.33   $ 2.40   $ 1.16   $ 1.26   $ 2.42  
Year-over-year adjusted EPS growth -7 % 6 % -1 %
 
Special Items (income)/expense
 
Reed switch manufacturing transfer costs $ 1.0 $ 0.9 $ 1.9 $ - $ - $ -
Restructuring 1.2 1.7 2.9 - 2.0 2.0
Acquisition expenses 0.2 0.2 0.4 - 0.2 0.2
Pension wind-up 0.7 0.7 1.4 - - -
Purchase accounting adjustment   -     -     -     1.4     1.4     2.8  
Adjustment to Operating income 3.0 3.4 6.4 1.4 3.5 5.0
Foreign exchange loss/(gain)   3.1     (1.3 )   1.8     (0.3 )   2.4     2.1  
Adjustment to pre-tax income $ 6.1   $ 2.1   $ 8.2   $ 1.2   $ 6.0   $ 7.2  
 
Total EPS impact $ 0.20   $ 0.07   $ 0.27   $ 0.04   $ 0.18   $ 0.22  
 
Operating margin / EBITDA reconciliation

Q1-15

Q2-15

YTD-15

Q1-14

Q2-14

YTD-14

 
Net sales $ 210.3   $ 222.0   $ 432.3   $ 206.9   $ 220.9   $ 427.8  
 
GAAP operating income $ 29.5 $ 36.2 $ 65.7 $ 33.6 $ 33.7 $ 67.3
Add back special operating items   3.0     3.4     6.4     1.4     3.5     5.0  
Adjusted operating income $ 32.5 $ 39.6 $ 72.1 $ 35.0 $ 37.2 $ 72.3
Adjusted operating margin 15.5 % 17.8 % 16.7 % 16.9 % 16.8 % 16.9 %
 
Add back amortization 3.1 2.9 6.0 3.2 3.1 6.3
Add back depreciation   7.4     7.4     14.8     7.0     7.5     14.5  
Adjusted EBITDA $ 43.0   $ 49.9   $ 92.9   $ 45.2   $ 47.8   $ 93.0  
Adjusted EBITDA margin 20.4 % 22.5 % 21.5 % 21.8 % 21.6 % 21.7 %
Year-over-year adjusted EBITDA growth -5 % 4 % 0 %
 
Note: Totals will not always foot due to rounding

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

Source: Littelfuse, Inc.

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