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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