Littelfuse Reports Third Quarter Results
Third Quarter 2017 Highlights
- Net sales were
$317.9 million , up 13% versus the prior year period. Organic revenue growth was 9%, excluding revenue from acquisitions closed in the past 12 months, the e-house business divestiture and foreign currency effects. - Growth by segment versus the prior year period:
- Electronics sales increased 19% (up 11% organically)
- Automotive sales increased 7% (up 5% organically)
- Industrial sales increased 7% (up 15% organically)
- GAAP diluted EPS was
$1.87 ; Adjusted EPS of$2.11 increased 13% over last year - The GAAP effective tax rate was 22.9% and adjusted effective tax rate was 22.4%
- Cash flow from operations was a record
$87.7 million , up 36% from the prior year period - The electronics segment book-to-bill ratio for the third quarter was 1.00
- On
August 28 , the company announced it had entered into a definitive agreement to acquire all of the outstanding shares ofIXYS Corporation (NASDAQ:IXYS ) in a cash and stock transaction. The transaction represented an enterprise value of approximately$655 million at announcement. (1) - In October, the company amended and expanded its unsecured credit facility to
$900 million
"We continued our positive momentum, as our team delivered another quarter of strong sales, earnings and cash flow growth coupled with quality execution," said
Fourth Quarter 2017 Outlook
All comparisons are to the prior year period unless otherwise noted.
"While we are seeing a typical seasonal slowdown in order rates, end market demand remains strong across electronics," continued Heinzmann. "We expect continued top line growth in the fourth quarter across all of our businesses, with normal sequential declines in both sales and margins for the quarter."
For the fourth quarter of 2017:
- Net sales are expected to be in the range of
$292 to$304 million , up 5% on a reported basis and up 2% organically at the midpoint, versus the prior year quarter - Adjusted diluted earnings per share are expected to be in the range of
$1.58 to$1.72
For the full year, the company expects an adjusted effective tax rate in the range of 18% - 19%.
Dividend
The company will pay a cash dividend on its common stock of
Conference Call and Webcast Information
About
Founded in 1927,
(1) Based on
"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
Non-GAAP Financial Measures
The information included in this press release includes the non-GAAP financial measures of organic 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 set forth in the attached schedules.
The company believes that organic 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.
Important Additional Information and Where to Find It
In connection with the proposed transaction,
Participants in the Solicitation
Non-Solicitation
This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
LFUS-F
(In thousands of USD, unaudited) | ||||||||||||||||||||||||
Third Quarter | Year-to-Date | |||||||||||||||||||||||
% | % | |||||||||||||||||||||||
Growth / | Growth / | |||||||||||||||||||||||
2017 | 2016 | (Decline) | 2017 | 2016 | (Decline) | |||||||||||||||||||
|
||||||||||||||||||||||||
Electronics | $ | 175,899 | $ | 147,730 | 19 | % | $ | 499,052 | $ | 378,696 | 32 | % | ||||||||||||
Automotive | 113,797 | 106,341 | 7 | % | 338,094 | 309,644 | 9 | % | ||||||||||||||||
Industrial | 28,193 | 26,260 | 7 | % | 79,539 | 83,301 | (5 | %) | ||||||||||||||||
Total net sales | $ | 317,889 | $ | 280,331 | 13 | % | $ | 916,685 | $ | 771,641 | 19 | % | ||||||||||||
Third Quarter | Year-to-Date | |||||||||||||||||||||||
% | % | |||||||||||||||||||||||
Growth / | Growth / | |||||||||||||||||||||||
2017 | 2016 | (Decline) | 2017 | 2016 | (Decline) | |||||||||||||||||||
Operating Income/(Expense) |
||||||||||||||||||||||||
Electronics | $ | 44,345 | $ | 34,571 | 28 | % | $ | 122,518 | $ | 82,246 | 49 | % | ||||||||||||
Automotive | 16,821 | 15,032 | 12 | % | 47,599 | 48,997 | (3 | %) | ||||||||||||||||
Industrial | 3,757 | 57 | 6491 | % | 5,769 | 3,758 | 54 | % | ||||||||||||||||
Other (1) | (6,314 | ) | (22,134 | ) | (71 | %) | (8,155 | ) | (45,345 | ) | (82 | %) | ||||||||||||
Total operating income | $ | 58,609 | $ | 27,526 | 113 | % | $ | 167,731 | $ | 89,656 | 87 | % | ||||||||||||
Operating margins | 18.4 | % | 9.8 | % | 18.3 | % | 11.6 | % | ||||||||||||||||
Interest expense | 3,467 | 2,571 | 9,868 | 6,286 | ||||||||||||||||||||
Foreign exchange loss (gain) | 632 | (4,700 | ) | (1,483 | ) | (7,114 | ) | |||||||||||||||||
Other income, net | (1,013 | ) | (778 | ) | (962 | ) | (1,040 | ) | ||||||||||||||||
Income before taxes | $ | 55,523 | $ | 30,433 | 82 | % | $ | 160,308 | $ | 91,524 | 75 | % | ||||||||||||
(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.) | ||||||||||||||||||||||||
Third Quarter | Year-to-Date | |||||||||||||||||||||||
Growth / | Growth / | |||||||||||||||||||||||
2017 | 2016 | (Decline) | 2017 | 2016 | (Decline) | |||||||||||||||||||
Operating Margins |
||||||||||||||||||||||||
Electronics | 25.2 | % | 23.4 | % | 1.8 | % | 24.6 | % | 21.7 | % | 2.8 | % | ||||||||||||
Automotive | 14.8 | % | 14.1 | % | 0.6 | % | 14.1 | % | 15.8 | % | (1.7 | %) | ||||||||||||
Industrial | 13.3 | % | 0.2 | % | 13.1 | % | 7.3 | % | 4.5 | % | 2.7 | % | ||||||||||||
Condensed Consolidated Balance Sheets | ||||||||||
(In thousands of USD) | ||||||||||
(Unaudited) | ||||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 372,828 | $ | 275,124 | ||||||
Short-term investments | 35 | 3,690 | ||||||||
Accounts receivable, less allowances | 197,539 | 176,032 | ||||||||
Inventories | 136,505 | 114,063 | ||||||||
Prepaid income taxes and income taxes receivable | 6,658 | 11,671 | ||||||||
Prepaid expenses and other current assets | 45,799 | 31,501 | ||||||||
Total current assets | 759,364 | 612,081 | ||||||||
Property, plant and equipment: | ||||||||||
Land | 9,690 | 9,268 | ||||||||
Buildings | 86,111 | 80,553 | ||||||||
Equipment | 493,361 | 439,542 | ||||||||
589,162 | 529,363 | |||||||||
Accumulated depreciation | (344,288 | ) | (312,188 | ) | ||||||
Net property, plant and equipment | 244,874 | 217,175 | ||||||||
Intangible assets, net of amortization: | ||||||||||
Patents, licenses and software | 84,455 | 83,607 | ||||||||
Distribution network | 20,329 | 18,995 | ||||||||
Customer lists, trademarks and tradenames | 104,738 | 110,425 | ||||||||
451,131 | 403,544 | |||||||||
660,653 | 616,571 | |||||||||
Investments | 10,582 | 13,933 | ||||||||
Deferred income taxes | 17,806 | 20,585 | ||||||||
Other assets | 8,913 | 10,849 | ||||||||
Total assets | $ | 1,702,192 | $ | 1,491,194 | ||||||
LIABILITIES AND EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 103,849 | $ | 90,712 | ||||||
Accrued payroll | 42,131 | 42,810 | ||||||||
Accrued expenses | 52,786 | 36,138 | ||||||||
Accrued severance | 1,734 | 2,785 | ||||||||
Accrued income taxes | 16,281 | 8,846 | ||||||||
Current portion of long-term debt | 9,375 | 6,250 | ||||||||
Total current liabilities | 226,156 | 187,541 | ||||||||
Long-term debt, less current portion | 492,272 | 447,892 | ||||||||
Deferred income taxes | 7,719 | 7,066 | ||||||||
Accrued post-retirement benefits | 16,571 | 13,398 | ||||||||
Other long-term liabilities | 26,230 | 20,366 | ||||||||
Total equity | 933,244 | 814,931 | ||||||||
Total liabilities and equity | $ | 1,702,192 | $ | 1,491,194 | ||||||
Condensed Consolidated Statements of Comprehensive Income | ||||||||||||||||||
(In thousands of USD, except per share data, unaudited) | ||||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||
Net sales | $ | 317,889 | $ | 280,331 | $ | 916,685 | $ | 771,641 | ||||||||||
Cost of sales | 184,238 | 166,572 | 536,776 | 472,861 | ||||||||||||||
Gross profit | 133,651 | 113,759 | 379,909 | 298,780 | ||||||||||||||
Selling, general and administrative expenses | 56,759 | 56,589 | 156,899 | 150,047 | ||||||||||||||
Research and development expenses | 11,991 | 10,403 | 36,872 | 30,884 | ||||||||||||||
Amortization of intangibles | 6,292 | 4,432 | 18,407 | 13,384 | ||||||||||||||
Impairment of goodwill and intangible assets | - | 14,809 | - | 14,809 | ||||||||||||||
75,042 | 86,233 | 212,178 | 209,124 | |||||||||||||||
Operating income | 58,609 | 27,526 | 167,731 | 89,656 | ||||||||||||||
Interest expense | 3,467 | 2,571 | 9,868 | 6,286 | ||||||||||||||
Foreign exchange loss (gain) | 632 | (4,700 | ) | (1,483 | ) | (7,114 | ) | |||||||||||
Other income, net | (1,013 | ) | (778 | ) | (962 | ) | (1,040 | ) | ||||||||||
Income before income taxes | 55,523 | 30,433 | 160,308 | 91,524 | ||||||||||||||
Income taxes | 12,715 | (369 | ) | 29,970 | 14,281 | |||||||||||||
Net income | $ | 42,808 | $ | 30,802 | $ | 130,338 | $ | 77,243 | ||||||||||
Net income per share: | ||||||||||||||||||
Basic | $ | 1.88 | $ | 1.36 | $ | 5.75 | $ | 3.43 | ||||||||||
Diluted | $ | 1.87 | $ | 1.35 | $ | 5.69 | $ | 3.41 | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||
Basic | 22,713 | 22,578 | 22,678 | 22,515 | ||||||||||||||
Diluted | 22,953 | 22,734 | 22,906 | 22,675 | ||||||||||||||
Comprehensive income | $ | 42,569 | $ | 25,888 | $ | 131,575 | $ | 67,762 | ||||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||||
(In thousands of USD, unaudited) | ||||||||||
For the Nine Months Ended | ||||||||||
OPERATING ACTIVITIES: | ||||||||||
Net income | $ | 130,338 | $ | 77,243 | ||||||
Adjustments to reconcile net income to net cash | ||||||||||
provided by operating activities: | ||||||||||
Depreciation | 28,228 | 24,841 | ||||||||
Amortization of intangibles | 18,407 | 13,384 | ||||||||
Impairment of intangible assets | - | 14,809 | ||||||||
Provision for bad debts | 1,586 | - | ||||||||
Impairment of long-lived assets | - | 1,391 | ||||||||
Stock-based compensation | 12,437 | 9,166 | ||||||||
Non-cash inventory charges | 1,607 | 7,456 | ||||||||
Excess tax benefit on stock-based compensation | - | (2,272 | ) | |||||||
Loss on sale of assets | 584 | 440 | ||||||||
Deferred income taxes | 1,863 | - | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts receivable | (26,792 | ) | (17,973 | ) | ||||||
Inventories | (17,159 | ) | 4,505 | |||||||
Accounts payable | 9,448 | 7,845 | ||||||||
Accrued expenses (including post retirement) | 1,757 | 6,497 | ||||||||
Accrued payroll and severance | (3,788 | ) | 1,388 | |||||||
Accrued income taxes | 7,267 | (23,613 | ) | |||||||
Prepaid expenses and other current assets | 15,537 | (25,092 | ) | |||||||
Net cash provided by operating activities | 181,320 | 100,015 | ||||||||
INVESTING ACTIVITIES: | ||||||||||
Purchases of property, plant and equipment | (48,470 | ) | (34,501 | ) | ||||||
Acquisition of business, net of cash acquired | (38,610 | ) | (468,636 | ) | ||||||
Proceeds from maturities of short-term investments | 3,739 | 345 | ||||||||
Decrease in entrusted loan receivable | 3,599 | 4,056 | ||||||||
Proceeds from sale of assets | 541 | 255 | ||||||||
Net cash used in investing activities | (79,201 | ) | (498,481 | ) | ||||||
FINANCING ACTIVITIES: | ||||||||||
Proceeds of revolving credit facility | 15,000 | 258,000 | ||||||||
Proceeds of term loan | - | 234,000 | ||||||||
Payments of revolving credit facility | (112,500 | ) | (97,500 | ) | ||||||
Payments of term loan | (4,687 | ) | (119,125 | ) | ||||||
Net proceeds from senior notes payable | 125,000 | - | ||||||||
Payments of entrusted loan | (3,599 | ) | (4,056 | ) | ||||||
Debt issuance costs paid | (2 | ) | (1,701 | ) | ||||||
Cash dividends paid | (23,367 | ) | (20,405 | ) | ||||||
Net (payments) proceeds related to stock-based award activities | (2,336 | ) | 14,581 | |||||||
Excess tax benefit on share-based compensation | - | 2,272 | ||||||||
Purchases of common stock | - | (3,685 | ) | |||||||
Net cash (used in) provided by financing activities | (6,491 | ) | 262,381 | |||||||
Effect of exchange rate changes on cash and cash | ||||||||||
equivalents | 2,076 | 1,793 | ||||||||
Increase (decrease) in cash and cash equivalents | 97,704 | (134,292 | ) | |||||||
Cash and cash equivalents at beginning of period | 275,124 | 328,786 | ||||||||
Cash and cash equivalents at end of period | $ | 372,828 | $ | 194,494 | ||||||
Supplemental Financial Information | |||||||||||||||||||
(in millions of USD except per share amounts) | |||||||||||||||||||
GAAP EPS Reconciliation | |||||||||||||||||||
Q3-17 | YTD-17 | Q3-16 | YTD-16 | ||||||||||||||||
GAAP diluted EPS | $ | 1.87 | $ | 5.69 | $ | 1.35 | $ | 3.41 | |||||||||||
EPS impact of Non-GAAP adjustments (below) | 0.25 | 0.24 | 0.52 | 1.29 | |||||||||||||||
Adjusted diluted EPS | $ | 2.12 | $ | 5.93 | $ | 1.87 | $ | 4.69 | |||||||||||
Non-GAAP Adjustments - (income)/expense | |||||||||||||||||||
Q3-17 | YTD-17 | Q3-16 | YTD-16 | ||||||||||||||||
Reed switch manufacturing transfer costs | $ | - | $ | - | $ | - | $ | 1.7 | |||||||||||
Restructuring | 1.5 | 1.5 | 0.9 | 1.4 | |||||||||||||||
Acquisition-related and integration costs | 4.8 | 6.6 | 5.9 | 18.2 | |||||||||||||||
Product line divestiture costs | - | - | - | 1.9 | |||||||||||||||
Impairment of intangible assets | - | - | 14.8 | 14.8 | |||||||||||||||
Purchase accounting inventory adjustments | - | - | 0.5 | 7.4 | |||||||||||||||
Non-gaap adjustments to operating income | 6.3 | 8.1 | 22.1 | 45.3 | |||||||||||||||
Non-operating foreign exchange loss/(gain) | 0.6 | (1.5 | ) | (4.7 | ) | (7.1 | ) | ||||||||||||
Non-gaap adjustments to income before income taxes | 6.9 | 6.6 | 17.4 | 38.2 | |||||||||||||||
Income taxes | 1.2 | 1.2 | 5.7 | 9.0 | |||||||||||||||
Non-gaap adjustments to net income | $ | 5.7 | $ | 5.4 | $ | 11.7 | $ | 29.2 | |||||||||||
Total EPS impact | $ | 0.25 | $ | 0.24 | $ | 0.52 | $ | 1.29 | |||||||||||
Operating margin / EBITDA reconciliation | |||||||||||||||||||
Q3-17 | YTD-17 | Q3-16 | YTD-16 | ||||||||||||||||
Net sales | $ | 317.9 | $ | 916.7 | $ | 280.3 | $ | 771.6 | |||||||||||
GAAP operating income | $ | 58.6 | $ | 167.7 | $ | 27.5 | $ | 89.7 | |||||||||||
Add back non-gaap adjustments | 6.3 | 8.1 | 22.1 | 45.3 | |||||||||||||||
Adjusted operating income | $ | 64.9 | $ | 175.8 | $ | 49.6 | $ | 135.0 | |||||||||||
Adjusted operating margin | 20.4 | % | 19.2 | % | 17.7 | % | 17.5 | % | |||||||||||
Add back amortization | 6.3 | 18.4 | 4.4 | 13.4 | |||||||||||||||
Add back depreciation | 9.7 | 28.2 | 8.7 | 24.8 | |||||||||||||||
Adjusted EBITDA | $ | 80.9 | $ | 222.4 | $ | 62.7 | $ | 173.2 | |||||||||||
Adjusted EBITDA margin | 25.4 | % | 24.3 | % | 22.4 | % | 22.4 | % | |||||||||||
Net sales reconciliation | Q3-17 vs. Q3-16 | ||||||||||||||||||
Electronics |
Automotive |
Industrial |
Total |
||||||||||||||||
Net sales growth | 19 | % | 7 | % | 7 | % | 13 | % | |||||||||||
Less: | |||||||||||||||||||
Acquisitions | 8 | % | - | - | 4 | % | |||||||||||||
Divestitures | - | - | (8 | %) | (1 | %) | |||||||||||||
FX impact | 1 | % | 2 | % | 1 | % | 1 | % | |||||||||||
Organic net sales growth | 11 | % | 5 | % | 15 | % | 9 | % | |||||||||||
Income tax reconciliation | |||||||||||||||||||
Q3-17 | YTD-17 | Q3-16 | YTD-16 | ||||||||||||||||
Income taxes | $ | 12.7 | $ | 30.0 | $ | (0.4 | ) | $ | 14.3 | ||||||||||
Effective rate | 22.9 | % | 18.7 | % | -1.2 | % | 15.6 | % | |||||||||||
Non-GAAP adjustments - income taxes | 1.3 | 1.2 | 5.7 | 9.1 | |||||||||||||||
Adjusted income taxes | $ | 14.0 | $ | 31.2 | $ | 5.3 | $ | 23.4 | |||||||||||
Adjusted effective rate | 22.4 | % | 18.7 | % | 11.2 | % | 18.0 | % | |||||||||||
Free cash flow reconciliation |
|||||||||||||||||||
Q3-17 | Q3-16 | YTD-17 | YTD-16 | ||||||||||||||||
Net cash provided by operating activities | $ | 87.7 | $ | 64.7 | $ | 181.3 | $ | 100.0 | |||||||||||
Less: | |||||||||||||||||||
Purchases of property, plant and equipment | (20.2 | ) | (14.3 | ) | (48.5 | ) | (34.5 | ) | |||||||||||
Free cash flow | $ | 67.5 | $ | 50.4 | $ | 132.8 | $ | 65.5 | |||||||||||
Note: Totals will not always foot due to rounding | |||||||||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20171101005452/en/
Executive Vice President and CFO
(773) 628-0616
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