Littelfuse Reports Second Quarter Results

August 1, 2018 at 6:00 AM EDT

Company delivers record sales and adjusted earnings per share

CHICAGO--(BUSINESS WIRE)--Aug. 1, 2018-- Littelfuse, Inc. (NASDAQ: LFUS), the global leader in circuit protection with advancing platforms in power control and sensor technologies, today reported financial results for the second quarter ended June 30, 2018:

Net sales were $459.2 million, up 47% versus the prior year. Organic revenue growth was 11%.
Growth by segment versus the prior year period:
- Electronics sales increased 77% (up 14% organically)
- Automotive sales increased 9% (up 5% organically)
- Industrial sales increased 19% (up 18% organically)
GAAP diluted EPS was $1.67; this includes $26 million of after-tax charges primarily related to certain purchase accounting adjustments, acquisition and integration costs related to IXYS Corporation and non-operating foreign exchange losses
Adjusted diluted EPS of $2.68 increased 28% over last year
GAAP and adjusted effective tax rate were both 19.1% for the quarter
Cash flow from operations was $71.6 million and free cash flow was $49.2 million
During the quarter, the company exited its Custom business within its Industrial segment; this is not expected to have a material impact to the company’s future sales and earnings
The electronics segment book-to-bill ratio exiting the second quarter was 1.02 (excluding the IXYS business)

"We are pleased with our record second quarter results driven by strong demand for our products across all segments and consistent operational performance, including the ongoing integration of the IXYS business,” said Dave Heinzmann, Littelfuse Chief Executive Officer. “With our diversified product portfolio and global presence, we are benefiting from broad-based market demand. Looking ahead, we remain well-positioned to leverage the global mega trends of a safer, greener and increasingly connected world as we execute our long-term strategy and drive double-digit sales and earnings growth.”

For the third quarter of 2018*:

Net sales are expected to be in the range of $434 to $446 million, up 38% 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 $2.31 to $2.45, representing 13% growth over the prior year quarter at the midpoint
Adjusted effective tax rate is expected to be approximately 21%

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

The company’s Board of Directors approved a 16% increase in the quarterly cash dividend from $0.37 to $0.43. This equates to an annualized dividend of $1.72 per share. The dividend will be paid on September 6, 2018 to shareholders of record as of August 23, 2018.

Conference Call and Webcast Information

Littelfuse will host a conference call today, Wednesday, August 1, 2018, at 9:00 a.m. Central 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)

	Second Quarter								Year-to-Date
							%								%
							Growth /								Growth /
	2018			2017			(Decline)		2018			2017			(Decline)

Net Sales
Electronics	$	299,357		$	169,387		77	%	$	563,768		$	323,154		74	%
Automotive		127,172			116,457		9	%		253,302			224,297		13	%
Industrial		32,654			27,511		19	%		59,926			51,346		17	%

Total net sales	$	459,183		$	313,355		47	%	$	876,996		$	598,797		46	%



	Second Quarter								Year-to-Date
							%								%
							Growth /								Growth /
	2018			2017			(Decline)		2018			2017			(Decline)

Operating Income/(Expense)
Electronics	$	67,311		$	42,967		57	%	$	121,275		$	78,173		55	%
Automotive		15,711			15,713		-			34,102			30,778		11	%
Industrial		5,279			1,905		177	%		9,988			2,012		396	%
Other ⁽¹⁾		(28,679	)		(315	)	N.M.			(68,172	)		(1,840	)	N.M.

Total operating income	$	59,622		$	60,270		(1	%)	$	97,193		$	109,123		(11	%)
Operating margin		13.0	%		19.2	%				11.1	%		18.2	%

Interest expense		5,782			3,281					11,205			6,401
Foreign exchange loss (gain)		3,200			(558	)				(7,354	)		(2,115	)
Other (income) expense, net		(1,678	)		190					(3,621	)		52

Income before taxes	$	52,318		$	57,357		(9	%)	$	96,963		$	104,785		(7	%)

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.)

	Second Quarter								Year-to-Date
							Growth /								Growth /
	2018			2017			(Decline)		2018			2017			(Decline)

Operating Margins
Electronics		22.5	%		25.4	%	(2.9	%)		21.5	%		24.2	%	(2.7	%)
Automotive		12.4	%		13.5	%	(1.1	%)		13.5	%		13.7	%	(0.2	%)
Industrial		16.2	%		6.9	%	9.3	%		16.7	%		3.9	%	12.8	%


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

	June 30, 2018			December 30, 2017
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	408,147		$	429,676
Short-term investments		34			35
Accounts receivable, less allowances		260,444			182,699
Inventories		239,201			140,789
Prepaid income taxes and income taxes receivable		4,648			1,689
Prepaid expenses and other current assets		45,727			37,452
Total current assets		958,201			792,340
Property, plant and equipment:
Land		29,198			9,547
Buildings		118,432			86,599
Equipment		558,855			505,838
		706,485			601,984
Accumulated depreciation		(367,730	)		(351,407	)
Net property, plant and equipment		338,755			250,577
Intangible assets, net of amortization:
Patents, licenses and software		124,798			81,911
Distribution network		10,434			12,872
Customer lists, trademarks and tradenames		248,007			109,067
Backlog		6,813			-
Goodwill		832,227			453,414
		1,222,279			657,264
Investments		31,326			10,993
Deferred income taxes		10,320			11,858
Other assets		27,113			17,070
Total assets	$	2,587,994		$	1,740,102

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	127,290		$	101,844
Accrued payroll		43,047			49,962
Accrued expenses		66,341			48,994
Accrued severance		1,049			1,459
Accrued income taxes		19,376			16,285
Current portion of long-term debt		10,060			6,250
Total current liabilities		267,163			224,794
Long-term debt, less current portion		687,538			489,361
Deferred income taxes		53,996			17,069
Accrued post-retirement benefits		33,210			18,742
Other long-term liabilities		76,067			62,580
Total equity		1,470,020			927,556
Total liabilities and equity	$	2,587,994		$	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						For the Six Months Ended
	June 30, 2018			July 1, 2017			June 30, 2018			July 1, 2017

Net sales	$	459,183		$	313,355		$	876,996		$	598,797

Cost of sales		290,196			180,747			558,386			352,539

Gross profit		168,987			132,608			318,610			246,258


Selling, general and administrative expenses		73,244			53,438			150,758			100,139
Research and development expenses		22,748			12,729			45,288			24,881
Amortization of intangibles		13,373			6,171			25,371			12,115
		109,365			72,338			221,417			137,135

Operating income		59,622			60,270			97,193			109,123

Interest expense		5,782			3,281			11,205			6,401
Foreign exchange loss (gain)		3,200			(558	)		(7,354	)		(2,115	)
Other (income) expense, net		(1,678	)		190			(3,621	)		52

Income before income taxes		52,318			57,357			96,963			104,785
Income taxes		9,992			8,719			18,609			17,255

Net income	$	42,326		$	48,638		$	78,354		$	87,530

Net income per share:
Basic	$	1.69		$	2.13		$	3.18		$	3.84
Diluted	$	1.67		$	2.11		$	3.12		$	3.80

Weighted average shares outstanding:
Basic		25,004			22,822			24,671			22,785
Diluted		25,401			23,023			25,086			23,005

Comprehensive income	$	26,384		$	44,485		$	62,133		$	89,004


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

	For the Six Months Ended
	June 30, 2018			July 1, 2017

OPERATING ACTIVITIES:
Net income	$	78,354		$	87,530
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		24,431			18,575
Amortization of intangibles		25,371			12,115
Provision for bad debts		(2	)		1,895
Deferred revenue		1,921			-
Stock-based compensation		15,883			8,590
Non-cash inventory charges		36,927			-
Impairment charges		1,125			-
Unrealized gain on investments		(3,311	)		-
Loss on sale of property, plant and equipment		780			593
Deferred income taxes		2,434			1,514

Changes in operating assets and liabilities
Accounts receivable		(33,481	)		(32,039	)
Inventories		(1,502	)		(8,739	)
Accounts payable		13,684			7,985
Accrued expenses (including post-retirement)		3,773			3,912
Accrued payroll and severance		(13,745	)		(13,190	)
Accrued taxes		(6,411	)		515
Prepaid expenses and other		(5,316	)		4,317
Net cash provided by operating activities		140,915			93,573

INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(40,315	)		(28,278	)
Acquisition of businesses, net of cash acquired		(310,487	)		(14,172	)
Proceeds from maturities of short-term investments		-			3,739
Decrease in entrusted loan receivable		-			2,416
Proceeds from sale of property, plant and equipment		68			178
Net cash used in investing activities		(350,734	)		(36,117	)

FINANCING ACTIVITIES:
Proceeds of revolving credit facility		60,000			-
Proceeds of term loan		75,000			-
Payments of revolving credit facility		(60,000	)		(112,500	)
Payments of term loan		(40,025	)		(3,125	)
Net proceeds from senior notes payable		175,000			125,000
Payments of entrusted loan		-			(2,416	)
Debt issuance costs paid		(878	)		(1	)
Cash dividends paid		(18,458	)		(14,963	)
Net proceeds (payments) related to stock-based award activities		5,568			(2,074	)
Net cash provided by (used in) financing activities		196,207			(10,079	)

Effect of exchange rate changes on cash and cash equivalents		(7,917	)		(608	)

Increase (decrease) in cash and cash equivalents		(21,529	)		46,769
Cash and cash equivalents at beginning of period		429,676			275,124
Cash and cash equivalents at end of period	$	408,147		$	321,893


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

Non-GAAP EPS reconciliation
	Q2-18			Q2-17			YTD-18			YTD-17
GAAP diluted EPS	$	1.67		$	2.11		$	3.12		$	3.80
EPS impact of Non-GAAP adjustments (below)		1.01			(0.01	)		1.95			(0.01	)
Adjusted diluted EPS	$	2.68		$	2.10		$	5.07		$	3.79

Non-GAAP adjustments - (income)/expense
	Q2-18			Q2-17			YTD-18			YTD-17
Acquisition related and integration costs	$	2.3		$	0.3		$	14.1		$	1.8
Restructuring and other charges		3.2			-			3.9			-
Amortization backlog - IXYS		3.1			-			5.6			-
Impairments		1.1			-			1.1			-
Change in control - IXYS		-			-			2.1			-
Acquisition related stock-based compensation charge		-			-			4.5			-
Purchase accounting inventory adjustments		19.0			-			36.9			-
Non-GAAP adjustments to operating income		28.7			0.3			68.2			1.8
Non-operating foreign exchange loss (gain)		3.2			(0.6	)		(7.4	)		(2.2	)
Non-GAAP adjustments to income before income taxes		31.9			(0.3	)		60.8			(0.4	)
Income taxes		6.1			-			11.9			-
Non-GAAP adjustments to net income	$	25.8		$	(0.3	)	$	48.9		$	(0.4	)

Total EPS impact	$	1.01		$	(0.01	)	$	1.95		$	(0.01	)

Adjusted operating margin /Adjusted EBITDA reconciliation
	Q2-18			Q2-17			YTD-18			YTD-17

Net sales	$	459.2		$	313.4		$	877.0		$	598.8

GAAP operating income	$	59.6		$	60.3		$	97.2		$	109.2
Add back non-GAAP adjustments		28.7			0.3			68.2			1.8
Adjusted operating income	$	88.3		$	60.6		$	165.4		$	111.0
Adjusted operating margin		19.2	%		19.3	%		18.9	%		18.5	%

Add back amortization		10.3			6.2			19.8			12.1
Add back depreciation		12.8			9.4			24.4			18.5
Adjusted EBITDA	$	111.4		$	76.2		$	209.6		$	141.6
Adjusted EBITDA margin		24.3	%		24.3	%		23.9	%		23.6	%

Net sales reconciliation	Q2-18 vs. Q2-17
	Electronics			Automotive			Industrial			Total
Net sales growth		77	%		9	%		19	%		47	%
Less:
Acquisitions		61	%		-			-			33	%
Divestitures		-			-			-			-
FX impact		2	%		4	%		1	%		3	%
Organic net sales growth		14	%		5	%		18	%		11	%

Income tax reconciliation
	Q2-18			Q2-17			YTD-18			YTD-17

Income taxes	$	10.0		$	8.7		$	18.6		$	17.2
Effective rate		19.1	%		15.2	%		19.2	%		16.5	%

Non-GAAP adjustments - income taxes		6.1			-			11.9			-

Adjusted income taxes	$	16.1		$	8.7		$	30.5		$	17.2
Adjusted effective rate		19.1	%		15.2	%		19.3	%		15.2	%

Free cash flow reconcilation
	Q2-18			Q2-17			YTD-18			YTD-17
Net cash provided by operating activities	$	71.6		$	70.6		$	140.9		$	93.6
Less: Purchases of property, plant and equipment		(22.4	)		(15.9	)		(40.3	)		(28.3	)
Free cash flow	$	49.2		$	54.7		$	100.6		$	65.3


Note: Totals will not always foot due to rounding


LITTELFUSE, INC.
Condensed Consolidated Statement of Comprehensive Income
Supplemental GAAP to Non-GAAP Reconciliation
(In thousands of USD, except per share data, unaudited)

	GAAP As Reported			Non-GAAP Adjustments				Non-GAAP			GAAP As Reported			Non-GAAP Adjustments				Non-GAAP
	June 30, 2018 QTD			June 30, 2018 QTD				June 30, 2018 QTD			July 1, 2017 QTD			July 1, 2017 QTD				July 1, 2017 QTD

Net sales	$	459,183		$	-			$	459,183		$	313,355		$	-			$	313,355

Cost of sales		290,196			(19,454	)	^(a)		270,742			180,747			-				180,747

Gross profit		168,987			19,454				188,441			132,608			-				132,608


Selling, general and administrative expenses		73,244			(6,123	)	^(b)		67,121			53,438			(315	)	^(d)		53,123
Research and development expenses		22,748			-				22,748			12,729			-				12,729
Amortization of intangibles		13,373			(3,103	)	^(c)		10,270			6,171			-				6,171
Total operating expenses		109,365			(9,226	)			100,139			72,338			(315	)			72,023

Operating income		59,622			28,680				88,302			60,270			315				60,585

Interest expense		5,782			-				5,782			3,281			-				3,281
Foreign exchange loss (gain)		3,200			(3,200	)			-			(558	)		558				-
Other (income) expense, net		(1,678	)		-				(1,678	)		190			-				190

Income before income taxes		52,318			31,880				84,198			57,357			(243	)			57,114
Income taxes		9,992			6,073				16,065			8,719			(38	)			8,681

Net income	$	42,326		$	25,807			$	68,133		$	48,638		$	(205	)		$	48,433

Net income per share:
Basic	$	1.69		$	1.03			$	2.72		$	2.13		$	(0.01	)		$	2.12
Diluted	$	1.67		$	1.01			$	2.68		$	2.11		$	(0.01	)		$	2.10


Weighted average shares outstanding:
Basic		25,004							25,004			22,822							22,822
Diluted		25,401							25,401			23,023							23,023


Comprehensive income	$	26,384						$	52,191		$	44,486						$	44,281



(a) Cost of sales included $19.0 million for purchase accounting inventory adjustments and $0.5 million of restructuring charges
(b) Selling, general and administrative included $2.3 million for acquisition related and integration costs and $3.8 million of restructuring, impairment and other charges
(c) Amortization of intangibles included $3.1 million of IXYS backlog amortization
(d) Selling, general and administrative included $0.3 million for acquisition related costs

The Company believes that certain non-GAAP measures, when presented in conjunction with comparable GAAP measures, are useful because that information is an appropriate measure for evaluating the Company’s operating performance. Internally, the Company uses this non-GAAP information as an indicator of business performance, and evaluates management’s effectiveness with specific reference to this indicator. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.


LITTELFUSE, INC.
Condensed Consolidated Statement of Comprehensive Income
Supplemental GAAP to Non-GAAP Reconciliation
(In thousands of USD, except per share data, unaudited)

	GAAP As Reported			Non-GAAP Adjustments				Non-GAAP			GAAP As Reported			Non-GAAP Adjustments				Non-GAAP
	June 30, 2018 YTD			June 30, 2018 YTD				June 30, 2018 YTD			July 1, 2017 YTD			July 1, 2017 YTD				July 1, 2017 YTD

Net sales	$	876,996		$	-			$	876,996		$	598,797		$	-			$	598,797

Cost of sales		558,386			(38,332	)	^(a)		520,054			352,539			(22	)			352,517

Gross profit		318,610			38,332				356,942			246,258			22				246,280


Selling, general and administrative expenses		150,758			(22,627	)	^(b)		128,131			100,139			(1,818	)	^(e)		98,321
Research and development expenses		45,288			(1,606	)	^(c)		43,682			24,881			-				24,881
Amortization of intangibles		25,371			(5,607	)	^(d)		19,764			12,115			-				12,115
Total operating expenses		221,417			(29,840	)			191,577			137,135			(1,818	)			135,317

Operating income		97,193			68,172				165,365			109,123			1,840				110,963

Interest expense		11,205			-				11,205			6,401			-				6,401
Foreign exchange loss (gain)		(7,354	)		7,354				-			(2,115	)		2,115				-
Other (income) expense, net		(3,621	)		-				(3,621	)		52			-				52

Income before income taxes		96,963			60,818				157,781			104,785			(275	)			104,510
Income taxes		18,609			11,878				30,487			17,255			(42	)			17,213

Net income	$	78,354		$	48,940			$	127,294		$	87,530		$	(233	)		$	87,297

Net income per share:
Basic	$	3.18		$	1.98			$	5.16		$	3.84		$	(0.01	)		$	3.83
Diluted	$	3.12		$	1.95			$	5.07		$	3.80		$	(0.01	)		$	3.79


Weighted average shares outstanding:
Basic		24,671							24,671			22,785							22,785
Diluted		25,086							25,086			23,005							23,005


Comprehensive income	$	62,133						$	111,073		$	89,004						$	88,771



(a) Cost of sales included $36.9 million for purchase accounting inventory adjustments, $0.5 million for acquisition related stock-based compensation charges and $0.9 million of restructuring charges
(b) Selling, general and administrative included $14.1 million for acquisition related and integration costs, $2.4 million for acquisition related stock-based compensation charges, $2.1 million for IXYS change in control and $4.1 million of restructuring, impairment and other charges
(c) Research and development expenses included $1.6 million for acquisition related stock-based compensation charges
(d) Amortization of intangibles included $5.6 million of IXYS backlog amortization
(e) Selling, general and administrative included $1.8 million for acquisition related and integration costs

The Company believes that certain non-GAAP measures, when presented in conjunction with comparable GAAP measures, are useful because that information is an appropriate measure for evaluating the Company’s operating performance. Internally, the Company uses this non-GAAP information as an indicator of business performance, and evaluates management’s effectiveness with specific reference to this indicator. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

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Source: Littelfuse, Inc.

Littelfuse, Inc.
Trisha Tuntland, (773) 628-2163
Head of Investor Relations

News Release

Littelfuse Reports Second Quarter Results