January 31, 2018

Littelfuse Reports Fourth Quarter and Full Year Results

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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