Oct 31, 2018   SOURCE: BusinessWire

Littelfuse Reports Third Quarter Results

Littelfuse, Inc. (NASDAQ: LFUS), a global manufacturer of leading technologies in circuit protection, power control and sensing, today reported financial results for the third quarter ended September 29, 2018:

  • Net sales were $439.2 million, up 38% versus the prior year. Organic revenue growth was 8%.
  • Revenue by segment versus the prior year period:
    • Electronics sales increased 69% (up 12% organically)
    • Automotive sales increased 1% on flat global auto build (up 1% organically)
    • Industrial sales were flat due to the exit of the Custom business this year (up 10% organically)
  • GAAP diluted EPS was $2.10, up 12% versus the prior year
  • Adjusted diluted EPS of $2.49 increased 17% over last year
  • GAAP effective tax rate was 21.5% and the adjusted effective tax rate was 21.0%
  • Cash flow from operations was $111.2 million and free cash flow was $95.6 million
  • The electronics segment book-to-bill ratio exiting the third quarter was 0.91 (excluding the IXYS business)
  • During October, the company completed its acquisition of Monolith Semiconductor and now owns 100% of the company
  • During October, the company purchased approximately 200,000 shares of common stock under its share repurchase program

"Sustained momentum in our Electronics and Industrial segments drove solid third quarter results,” said Dave Heinzmann, Littelfuse Chief Executive Officer. “We delivered a 20% adjusted operating margin and 17% adjusted earnings growth. During the quarter, we continued to capture design wins across a broad range of transportation, telecom and industrial electronics end markets, and we remain on track with the integration of the IXYS business. While we expect seasonally softer sales in our fourth quarter, our end markets continue to show long-term growth and content opportunities. We remain well positioned to deliver on our five-year double-digit sales and earnings growth strategy.”

For the fourth quarter of 2018*:

  • Net sales are expected to be in the range of $408 to $420 million, up 36% on a reported basis and up 6% organically, at the midpoint versus the prior year quarter
  • Adjusted diluted earnings per share are expected to be in the range of $1.92 to $2.06, representing 10% growth over the prior year quarter at the midpoint
  • Adjusted effective tax rate is expected to be in the range of 20% – 21%

For the 2018 full year, the company expects an adjusted effective tax rate of approximately 20%.

*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.

Conference Call and Webcast Information

Littelfuse will host a conference call today, Wednesday, October 31, 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

Littelfuse (NASDAQ: LFUS) is a global manufacturer of leading technologies in circuit protection, power control and sensing. Sold in over 150 countries, our products are found in automotive and commercial vehicles, industrial applications, data and telecommunications, medical devices, consumer electronics and appliances. Our 12,000 worldwide associates partner with customers to design, manufacture and deliver innovative, high-quality solutions, for a safer, greener and increasingly connected world – everywhere, every day. Learn more at 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
September 29, December 30,
(in thousands) 2018 2017
ASSETS
Current assets:
Cash and cash equivalents $ 498,215 $ 429,676
Short-term investments 35 35
Trade receivables, less allowances (September 29, 2018 - $36,392; December 30, 2017 - $27,516) 251,644 182,699
Inventories 247,255 140,789
Prepaid income taxes and income taxes receivable 6,802 1,689
Prepaid expenses and other current assets 48,683   37,452  
Total current assets 1,052,634 792,340
Property, plant, and equipment:
Land 29,528 9,547
Buildings 119,380 86,599
Equipment 569,550 505,838
Accumulated depreciation and amortization (374,575 ) (351,407 )
Net property, plant, and equipment 343,883 250,577
Intangible assets, net of amortization 377,151 203,850
Goodwill 830,354 453,414
Investments 29,084 10,993
Deferred income taxes 8,979 11,858
Other assets 21,401   17,070  
Total assets $ 2,663,486   $ 1,740,102  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 129,871 $ 101,844
Accrued payroll 52,208 49,962
Accrued expenses 74,084 48,994
Accrued severance 901 1,459
Accrued income taxes 36,746 16,285
Current portion of long-term debt 10,076   6,250  
Total current liabilities 303,886 224,794
Long-term debt, less current portion 690,637 489,361
Deferred income taxes 49,262 17,069
Accrued post-retirement benefits 32,901 18,742
Other long-term liabilities 67,404 62,580
Total equity 1,519,396   927,556  
Total liabilities and equity $ 2,663,486   $ 1,740,102  
   
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 

Three Months Ended

Nine Months Ended
September 29,   September 30, September 29,   September 30,
(in thousands, except per share data) 2018 2017 2018 2017
Net sales $ 439,191 $ 317,889 $ 1,316,187 $ 916,685
Cost of sales 259,597   184,238   817,983   536,776  
Gross profit 179,594 133,651 498,204 379,909
 
Selling, general, and administrative expenses 69,782 56,759 220,540 156,899
Research and development expenses 20,454 11,991 65,742 36,872
Amortization of intangibles 13,130   6,292   38,501   18,407  
Total operating expenses 103,366   75,042   324,783   212,178  
Operating income 76,228 58,609 173,421 167,731
 
Interest expense 5,775 3,467 16,980 9,868
Foreign exchange loss (gain) 982 632 (6,372 ) (1,483 )
Other expense (income), net 1,259   (1,013 ) (2,362 ) (962 )
Income before income taxes 68,212 55,523 165,175 160,308
Income taxes 14,666   12,715   33,275   29,970  
Net income $ 53,546   $ 42,808   $ 131,900   $ 130,338  
 
Income per share:
Basic $ 2.13   $ 1.88   $ 5.31   $ 5.75  
Diluted $ 2.10   $ 1.87   $ 5.23   $ 5.69  
 
Weighted-average shares and equivalent shares outstanding:
Basic 25,109 22,713 24,817 22,678
Diluted 25,471   22,953   25,212   22,906  
Comprehensive income $ 45,599   $ 42,569   $ 107,732   $ 131,574  
 
LITTELFUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended
(in thousands) September 29, 2018   September 30, 2017
Operating activities
Net income $ 131,900 $ 130,338
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 37,559 28,228
Amortization of intangibles 38,501 18,407
Provision for bad debts 83 1,586
Deferred revenue 3,965 —
Non-cash inventory charges 36,927 1,607
Impairment charges 1,125 —
Loss on sale of property, plant, and equipment 511 584
Stock-based compensation 23,153 12,437
Unrealized gain on investments (350 ) —
Deferred income taxes (10,979 ) 1,863
Changes in operating assets and liabilities:
Accounts receivables (20,588 ) (26,792 )
Inventories (17,624 ) (17,159 )
Accounts payable 17,033 9,448
Accrued expenses (including post-retirement) 11,523 1,757
Accrued payroll and severance (5,330 ) (3,788 )
Accrued taxes 14,543 7,267
Prepaid expenses and other (9,836 ) 15,537  
Net cash provided by operating activities 252,116 181,320
 
Investing activities
Acquisitions of businesses, net of cash acquired (313,475 ) (38,610 )
Proceeds from maturities of short-term investments — 3,739
Decrease in entrusted loan — 3,599
Purchases of property, plant, and equipment (55,946 ) (48,470 )
Proceeds from sale of property, plant, and equipment 858   541  
Net cash used in investing activities (368,563 ) (79,201 )
 
Financing activities
Proceeds of revolving credit facility 60,000 15,000
Proceeds of term loan 75,000 —
Net proceeds from senior notes payable 175,000 125,000
Payments of term loan (42,525 ) (4,687 )
Payments of revolving credit facility (60,000 ) (112,500 )
Net proceeds (payments) related to stock-based award activities 17,920 (2,336 )
Payments of entrusted loan — (3,599 )
Debt issuance costs (878 ) (2 )
Cash dividends paid (29,258 ) (23,367 )
Net cash provided by (used in) financing activities 195,259 (6,491 )
Effect of exchange rate changes on cash and cash equivalents (10,273 ) 2,076  
Increase (decrease) in cash and cash equivalents 68,539 97,704
Cash and cash equivalents at beginning of period 429,676   275,124  
Cash and cash equivalents at end of period $ 498,215   $ 372,828  
   
LITTELFUSE, INC.

NET SALES AND OPERATING INCOME BY SEGMENT

(Unaudited)
 
Third Quarter Year-to-Date
    %     %
Growth Growth
(in thousands) 2018 2017 /(Decline) 2018 2017 /(Decline)
Net sales
Electronics $ 296,472 $ 175,899 68.5 % $ 860,240 $ 499,052 72.4 %
Automotive 114,416 113,797 0.5 % 367,718 338,094 8.8 %
Industrial 28,303   28,193   0.4 % 88,229   79,539   10.9 %
Total net sales $ 439,191   $ 317,889   38.2 % $ 1,316,187   $ 916,685   43.6 %
 
Operating income (loss)
Electronics $ 72,464 $ 44,345 63.4 % $ 193,739 $ 122,518 58.1 %
Automotive 10,863 16,821 (35.4 )% 44,965 47,599 (5.5 )%
Industrial 4,134 3,757 10.0 % 14,123 5,769 144.8 %
Other(a) (11,233 ) (6,314 ) N.M. (79,406 ) (8,155 ) N.M.
Total operating income $ 76,228 $ 58,609 30.1 % $ 173,421 $ 167,731 3.4 %
Operating Margin 17.4 % 18.4 % 13.2 % 18.3 %
 
Interest expense 5,775 3,467 16,980 9,868
Foreign exchange loss (gain) 982 632 (6,372 ) (1,483 )
Other expense (income), net 1,259   (1,013 ) (2,362 ) (962 )
Income before income taxes $ 68,212   $ 55,523   22.9 % $ 165,175   $ 160,308   3.0 %

(a) "other" typically includes non-GAAP adjustments such as acquisition-related and integration costs, purchase accounting inventory adjustments and other charges, restructuring costs, asset impairments, and gain and losses on asset sales.(See Supplemental Financial Information for details.)

N.M. - Not meaningful

   
Third Quarter Year-to-Date
    %     %
Growth Growth
(in thousands) 2018 2017 /(Decline) 2018 2017 /(Decline)
Operating Margin
Electronics 24.4 % 25.2 % (0.8 )% 22.5 % 24.6 % (2.0 )%
Automotive 9.5 % 14.8 % (5.3 )% 12.2 % 14.1 % (1.9 )%
Industrial 14.6 % 13.3 % 1.3 % 16.0 % 7.3 % 8.8 %
 
LITTELFUSE, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(In millions of USD except per share amounts unaudited)
 
Non-GAAP EPS reconciliation
Q3-18 Q3-17 YTD-18 YTD-17
GAAP diluted EPS $ 2.10 $ 1.87 $ 5.23 $ 5.69
EPS impact of Non-GAAP adjustments (below) 0.39   0.25   2.34   0.24  
Adjusted diluted EPS $ 2.49   $ 2.12   $ 7.57   $ 5.93  
Non-GAAP adjustments - (income)/expense
Q3-18 Q3-17 YTD-18 YTD-17
Acquisition related and integration costs (a) $ 2.9 $ 4.8 $ 17.0 $ 6.6
Restructuring, impairment and other charges (b) 5.2 1.5 10.2 1.5
Amortization backlog - IXYS (c) 3.1 — 8.7 —
Change in control - IXYS (d) — — 2.1 —
Acquisition related stock-based compensation charge (e) — — 4.5 —
Purchase accounting inventory adjustments (f) —   —   36.9 —  
Non-GAAP adjustments to operating income 11.2 6.3 79.4 8.1
Non-operating foreign exchange loss (gain) 1.0   0.6   (6.4 ) (1.5 )
Non-GAAP adjustments to income before income taxes 12.2 6.9 73.0 6.6
Income taxes 2.2   1.2   14.1 1.2  
Non-GAAP adjustments to net income $ 10.0   $ 5.7   $ 58.9 $ 5.4  
 
Total EPS impact $ 0.39   $ 0.25   $ 2.34 $ 0.24  
Adjusted operating margin /Adjusted EBITDA reconciliation
Q3-18 Q3-17 YTD-18 YTD-17
Net sales $ 439.2   $ 317.9   $ 1,316.2   $ 916.7    
 
GAAP operating income $ 76.2 $ 58.6 $ 173.4 $ 167.7
Add back non-GAAP adjustments 11.2   6.3   79.4   8.1    
Adjusted operating income $ 87.4 $ 64.9 $ 252.8 $ 175.8
Adjusted operating margin 19.9 %

20.4

%

19.2

%

19.2 %
 
Add back amortization 10.0 6.3 29.8 18.4
Add back depreciation 13.1   9.7   37.6   28.2    
Adjusted EBITDA $ 110.5   $ 80.9   $ 320.2   $ 222.4    
Adjusted EBITDA margin 25.2

%

 

25.4

%

24.3

%

24.3 %
Net sales reconciliation Q3-18 vs. Q3-17 YTD-18 vs. YTD-17
Electronics Automotive

Industrial

Total

Total
Net sales growth

69

%

1

%    

—

%

 

 

 

 

38

%

   

44

%

Less:
Acquisitions 57 % — —

 

 

31

%

32

%
Divestitures — — (9

)%

 

 

 

(1

)%

FX impact —   —   (1

)%

 

 

 

 

—

%

2

%  
Organic net sales growth 12 % 1 %

10

%

 

 

 

 

8

%

10

%  
Income tax reconciliation
Q3-18 Q3-17 YTD-18 YTD-17  
Income taxes $ 14.7 $ 12.7 $ 33.3 $ 30.0
Effective rate 21.5 % 22.9 % 20.1 % 18.7 %
 
Non-GAAP adjustments - income taxes 2.2 1.3 14.1 1.2
         
Adjusted income taxes $ 16.9   $ 14.0   $ 47.4   $ 31.2    
Adjusted effective rate 21.0 % 22.4 % 19.9 % 18.7 %
 
Free cash flow reconciliation
Q3-18 Q3-17 YTD-18 YTD-17  
Net cash provided by operating activities $ 111.2 $ 87.7 $ 252.1 $ 181.3
Less: Purchases of property, plant and equipment (15.6 ) (20.2 )

(55.9

)

(48.5 )  
Free cash flow $ 95.6   $ 67.5   $ 196.2   $ 132.8    
Note: Total will not always foot due to rounding.
(a) reflected in selling, general and administrative expenses ("SG&A").
(b) $5.1 million and $0.1 million reflected in SG&A and cost of sales, respectively for the three months ended September 29, 2018 and $9.2 million and $1.0 million reflected in SG&A and cost of sales, respectively for the nine months ended September 29, 2018.
(c) reflected in amortization of intangibles.
(d) reflected in SG&A.
(e) $2.4 million, $1.6 million and $0.5 million reflected in SG&A, research and development expenses and cost of sales, respectively.
(f) reflected in cost of sales.