Littelfuse Reports Second Quarter Results

August 2, 2017 at 6:30 AM EDT

Littelfuse Reports Second Quarter Results 64.1 KB

CHICAGO--(BUSINESS WIRE)-- Littelfuse, Inc. (NASDAQ:LFUS) today reported financial results for the second quarter ended July 1, 2017.

Second Quarter 2017 Highlights

Net sales were $313.4 million, up 15% versus the prior year period. Organic revenue growth was 11%, excluding the ON portfolio acquisition, e-house business divestiture and currency effects.
Growth by segment versus the prior year period:
- Electronics sales increased 28% (up 16% organically)
- Automotive sales increased 5% (up 6% organically)
- Industrial sales decreased 3% (up 5% organically)
GAAP diluted EPS was $2.11; Adjusted EPS of $2.10 increased 46% over last year
The GAAP and adjusted effective tax rate were both 15.2% for the quarter. Included in the tax rate was a discrete tax benefit of $1.4 million resulting from the new stock compensation accounting guidance.
Cash flow from operations was $70.6 million
The electronics book-to-bill ratio for the second quarter was 1.13
The company recently announced it had acquired the assets of U.S. Sensor Corporation, a manufacturer of temperature sensors based in Orange, California.

"We followed our strong first quarter performance with record sales and earnings in the second quarter," said Dave Heinzmann, Chief Executive Officer. "The strong order rates we've seen across our electronics segment since late last year continued in the second quarter, and along with solid operational execution, drove record performance across electronics. Our automotive and industrial segments also performed well, which included the expected profitability improvement in industrial."

Third Quarter 2017 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.

"While electronics order rates remain strong, they have slowed from the peak in the second quarter. We continue, however, to see robust end demand and expect the momentum in electronics sales to continue in the third quarter," continued Heinzmann. "We also expect the automotive and industrial segments to have another solid growth quarter, including margin expansion in both businesses."

For the third quarter of 2017:

Sales are expected to be in the range of $311 to $323 million, up 13% on an as reported basis and up 9% organically, at the midpoint versus the prior year quarter
Adjusted diluted earnings per share are expected to be in the range of $2.02 to $2.16

For the full year, the company expects an adjusted effective tax rate in the range of 18% - 19%.

Dividend

The company's board of directors approved a 12% increase in the quarterly cash dividend from $0.33 to $0.37. This equates to an annualized dividend of $1.48 per share. The dividend will be paid on September 7, 2017 to shareholders of record as of August 24, 2017.

Conference Call and Webcast Information

Littelfuse will host a conference call today, Wednesday, August 2, 2017, at 10:00 a.m. Central / 11:00 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 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 10,000 employees in more than 40 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, uncertainties related to political and regulatory changes 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 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 adjusted net sales 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 included herein.

The company believes that adjusted net sales 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 Business Unit
(In thousands of USD, unaudited)

	Second Quarter							Year-to-Date
	2017			2016			% Growth / (Decline)	2017			2016			% Growth / (Decline)

Net Sales
Electronics	$	169,387		$	132,170		28%	$	323,154		$	230,966		40%
Automotive		116,457			111,370		5%		224,297			203,303		10%
Industrial		27,511			28,372		(3%)		51,346			57,041		(10%)

Total net sales	$	313,355		$	271,912		15%	$	598,797		$	491,310		22%


	Second Quarter							Year-to-Date
	2017			2016			% Growth / (Decline)	2017			2016			% Growth / (Decline)

Operating Income/(Expense)
Electronics	$	42,967		$	25,259		70%	$	78,173		$	47,675		64%
Automotive		15,713			16,474		(5%)		30,778			33,965		(9%)
Industrial		1,905			2,028		(6%)		2,012			3,701		(46%)
Other ⁽¹⁾		(315	)		(14,059	)	98%		(1,840	)		(23,211	)	(92%)

Total operating income	$	60,270		$	29,702		103%	$	109,123		$	62,130		76%
Operating margins		19.2	%		10.9	%			18.2	%		12.6	%

Interest expense		3,281			1,670				6,401			3,715
Foreign exchange (gain) loss		(558	)		(6,237	)			(2,115	)		(2,414	)
Other (income) expense, net		190			255				52			(262	)

Income before taxes	$	57,357		$	34,014		69%	$	104,785		$	61,091		72%

(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.)


	Second Quarter			Year-to-Date
	2017	2016	Growth / (Decline)	2017	2016	Growth / (Decline)

Operating Margins
Electronics	25.4%	19.1%	6.3%	24.2%	20.6%	3.5%
Automotive	13.5%	14.8%	-1.3%	13.7%	16.7%	-3.0%
Industrial	6.9%	7.1%	-0.2%	3.9%	6.5%	-2.6%


LITTELFUSE, INC.
Condensed Consolidated Balance Sheets
(In thousands of USD)

	July 1, 2017			December 31, 2016
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	321,893		$	275,124
Short-term investments		34			3,690
Accounts receivable, less allowances		199,027			176,032
Inventories		125,240			114,063
Prepaid income taxes and income taxes receivable		6,720			11,671
Prepaid expenses and other current assets		51,938			31,501
Total current assets		704,852			612,081
Property, plant and equipment:
Land		9,691			9,268
Buildings		84,481			80,553
Equipment		471,960			439,542
		566,132			529,363
Accumulated depreciation		(333,593	)		(312,188	)
Net property, plant and equipment		232,539			217,175
Intangible assets, net of amortization:
Patents, licenses and software		85,798			83,607
Distribution network		18,191			18,995
Customer lists, trademarks and tradenames		106,848			110,425
Goodwill		432,134			403,544
		642,971			616,571
Investments		11,916			13,933
Deferred income taxes		19,028			20,585
Other assets		10,885			10,849
Total assets	$	1,622,191		$	1,491,194

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	100,826		$	90,712
Accrued payroll		32,866			42,810
Accrued expenses		50,536			36,138
Accrued severance		629			2,785
Accrued income taxes		9,522			8,846
Current portion of long-term debt		7,813			6,250
Total current liabilities		202,192			187,541
Long-term debt, less current portion		473,879			447,892
Deferred income taxes		8,826			7,066
Accrued post-retirement benefits		15,975			13,398
Other long-term liabilities		25,887			20,366
Total equity		895,432			814,931
Total liabilities and equity	$	1,622,191		$	1,491,194


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
	July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016

Net sales	$	313,355		$	271,912		$	598,797		$	491,310

Cost of sales		180,747			174,046			352,539			306,289

Gross profit		132,608			97,866			246,258			185,021


Selling, general and administrative expenses		53,438			51,092			100,139			93,458
Research and development expenses		12,729			11,916			24,881			20,481
Amortization of intangibles		6,171			5,156			12,115			8,952
		72,338			68,164			137,135			122,891

Operating income		60,270			29,702			109,123			62,130

Interest expense		3,281			1,670			6,401			3,715
Foreign exchange (gain) loss		(558	)		(6,237	)		(2,115	)		(2,414	)
Other (income) expense, net		190			255			52			(262	)

Income before income taxes		57,357			34,014			104,785			61,091
Income taxes		8,719			6,862			17,255			14,650

Net income	$	48,638		$	27,152		$	87,530		$	46,441

Net income per share:
Basic	$	2.13		$	1.21		$	3.84		$	2.07
Diluted	$	2.11		$	1.20		$	3.80		$	2.05

Weighted average shares and
equivalent shares outstanding:
Basic		22,822			22,528			22,785			22,483
Diluted		23,023			22,674			23,005			22,647

Comprehensive income	$	44,485		$	11,899		$	89,004		$	41,874


LITTELFUSE, INC.
Consolidated Statements of Cash Flows
(In thousands of USD, unaudited)

	For the Six Months Ended
	July 1, 2017			July 2, 2016

OPERATING ACTIVITIES:
Net income	$	87,530		$	46,441
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation		18,575			16,156
Amortization of intangibles		12,115			8,952
Impairment of intangible assets		-			1,391
Provision for bad debts		1,895			-
Stock-based compensation		8,590			6,124
Non-cash inventory charge		-			6,902
Excess tax benefit on stock-based compensation		-			(1,585	)
Loss on sale of assets		593			331
Deferred income taxes		1,514			-
Changes in operating assets and liabilities:
Accounts receivable		(32,039	)		(25,028	)
Inventories		(8,739	)		(1,282	)
Accounts payable		7,985			2,974
Accrued expenses (including post retirement)		3,912			5,715
Accrued payroll and severance		(13,190	)		(10,227	)
Accrued taxes		515			(13,946	)
Prepaid expenses and other		4,317			(7,642	)
Net cash provided by operating activities		93,573			35,276

INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(28,278	)		(20,217	)
Acquisition of business, net of cash acquired		(14,172	)		(354,356	)
Proceeds from maturities of short-term investments		3,739			-
Decrease in entrusted loan receivable		2,416			-
Proceeds from sale of assets		178			370
Net cash used in investing activities		(36,117	)		(374,203	)

FINANCING ACTIVITIES:
Proceeds of revolving credit facility		-			258,000
Proceeds of term loan		-			125,000
Payments of revolving credit facility		(112,500	)		(97,500	)
Payments of term loan		(3,125	)		(86,563	)
Net proceeds from Sr. Notes Payable		125,000			-
Payments of entrusted loan		(2,416	)		-
Debt issuance costs paid		(1	)		(1,701	)
Cash dividends paid		(14,963	)		(12,995	)
Net proceeds (payments) related to stock-based award activities		(2,074	)		2,960
Excess tax benefit on share-based compensation		-			1,586
Net cash (used in) provided by financing activities		(10,079	)		188,787

Effect of exchange rate changes on cash and cash
equivalents		(608	)		815

Increase (decrease) in cash and cash equivalents		46,769			(149,325	)
Cash and cash equivalents at beginning of period		275,124			328,786
Cash and cash equivalents at end of period	$	321,893		$	179,461


LITTELFUSE, INC.
Supplemental Financial Information
(in millions of USD except per share amounts)

GAAP EPS Reconciliation
	Q2-17			YTD-17			Q2-16			YTD-16
GAAP diluted EPS	$	2.11		$	3.80		$	1.20		$	2.05
EPS impact of Non-GAAP adjustments (below)		(0.01	)		(0.01	)		0.24			0.77
Adjusted diluted EPS	$	2.10		$	3.79		$	1.44		$	2.82

Non-GAAP Adjustments - (income)/expense
	Q2-17			YTD-17			Q2-16			YTD-16
Reed switch manufacturing transfer costs	$	-		$	-		$	0.7		$	1.7
Restructuring		-			-			0.1			0.5
Acquisitions/divestiture/purchase acctg adjs		0.3			1.8			13.0			19.2
Impairment and severance charges		-			-			0.3			1.9
Adjustment to Operating income		0.3			1.8			14.0			23.2
Non-operating Foreign exchange loss/(gain)		(0.6	)		(2.2	)		(6.2	)		(2.4	)
Adjustment to income before income taxes		(0.3	)		(0.4	)		7.8			20.8
Income taxes		-			-			2.3			3.4
Adjustment to net income	$	(0.3	)	$	(0.4	)	$	5.5		$	17.4

Total EPS impact	$	(0.01	)	$	(0.01	)	$	0.24		$	0.77

Operating margin / EBITDA reconciliation
	Q2-17			YTD-17			Q2-16			YTD-16

Net sales	$	313.4		$	598.8		$	271.9		$	491.3

GAAP operating income	$	60.3		$	109.2		$	29.7		$	62.1
Add back special operating items		0.3			1.8			14.0			23.2
Adjusted operating income	$	60.6		$	111.0		$	43.7		$	85.3
Adjusted operating margin		19.3	%		18.5	%		16.1	%		17.4	%

Add back amortization		6.2			12.1			5.2			9.0
Add back depreciation		9.4			18.5			8.9			16.1
Adjusted EBITDA	$	76.2		$	141.6		$	57.8		$	110.4
Adjusted EBITDA margin		24.3	%		23.6	%		21.3	%		22.5	%

Net sales reconciliation	Q2-17 vs. Q2-16
	Electronics			Automotive			Industrial			Total
Net sales growth		28	%		5	%		-3	%		15	%
Less:
Acquisitions		13	%		0	%		0	%		6	%
Divestitures		0	%		0	%		-8	%		-1	%
FX impact		-1	%		-2	%		-1	%		-1	%
Adjusted (organic) net sales growth		16	%		6	%		5	%		11	%

Income tax reconciliation
	Q2-17			YTD-17			Q2-16			YTD-16

Income taxes	$	8.7		$	17.2		$	6.9		$	14.7
Effective rate		15.2	%		16.5	%		20.2	%		24.0	%

Non-GAAP adjustment - income taxes		-			-			2.3			3.3

Adjusted income taxes	$	8.7		$	17.2		$	9.2		$	18.0
Adjusted effective rate		15.2	%		15.2	%		22.0	%		22.0	%

Free Cash Flow reconcilation
	Q2-17			Q2-16			YTD-17			YTD-16
Net cash provided by operating activities	$	70.6		$	25.8		$	93.6		$	35.3
Less:
Purchases of property, plant and equipment		(15.9	)		(11.1	)		(28.3	)		(20.2	)
Free Cash Flow	$	54.7		$	14.7		$	65.3		$	15.1

Note: Totals will not always foot due to rounding

View source version on businesswire.com: http://www.businesswire.com/news/home/20170802005210/en/

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

Source: Littelfuse, Inc.

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Littelfuse Reports Second Quarter Results