Littelfuse Reports Second Quarter Results

July 29, 2015 at 6:30 AM EDT

Littelfuse Reports Second Quarter Results 63.4 KB

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

View source version on businesswire.com: http://www.businesswire.com/news/home/20150729005402/en/

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

Source: Littelfuse, Inc.

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News Release

Littelfuse Reports Second Quarter Results