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Littelfuse Reports Third Quarter Results For 2019

CHICAGO--(BUSINESS WIRE)--

Company performance in line with expectations

Littelfuse, Inc. (LFUS), a global manufacturer of leading technologies in circuit protection, power control and sensing, today reported financial results for the third quarter ended September 28, 2019:

  • Net sales of $362.0 million were down 18% versus the prior year period, and down 16% organically, primarily due to ongoing global trade uncertainties, excess electronics channel inventories and declines in global auto production
  • Segment performance versus the prior year period:
    • Electronics sales decreased 23% (down 21% organically)
    • Automotive sales decreased 9% (down 7% organically)
    • Industrial sales increased 6% (up 7% organically)
  • GAAP diluted EPS was $1.44; adjusted diluted EPS was $1.78 and includes $0.17 of benefits related to certain tax items and a non-operating mark-to-market gain that were not in the company's original guidance
  • GAAP effective tax rate was 13.9% and the adjusted effective tax rate was 15.5%
  • During the quarter, the company repurchased approximately $49.5 million of common stock
  • Year-to-date, cash flow from operations was $160.9 million and free cash flow was $122.5 million, representing a 105% conversion from net income

“Our performance this quarter reflects the successful execution by our global teams to actively manage costs as we continue to work through the challenging macro environment,” said Dave Heinzmann, Littelfuse President and Chief Executive Officer. “While navigating the soft demand, we achieved an adjusted EBITDA margin of 21% to deliver adjusted EPS above guidance. Beyond the current back-drop, we remain well-positioned to deliver ongoing superior value for our stakeholders.”

For the fourth quarter of 2019*, the company expects:

  • Net sales in the range of $333 to $345 million
  • Adjusted diluted EPS in the range of $1.06 to $1.20
  • Adjusted effective tax rate in the range of 19% - 20%

For the full year of 2019*, the company expects:

  • Adjusted effective tax rate of approximately 18%
  • Free cash flow to exceed 100% of net income

*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, restructuring, impairment and other charges, certain purchase accounting adjustments, non-operating 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 will pay a cash dividend on its common stock of $0.48 per share on December 5, 2019 to shareholders of record as November 21, 2019

Conference Call and Webcast Information

Littelfuse will host a conference call today, Wednesday, October 30, 2019, 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 (LFUS) is a global manufacturer of leading technologies in circuit protection, power control and sensing. Serving over 100,000 end customers, our products are found in automotive and commercial vehicles, industrial applications, data and telecommunications, medical devices, consumer electronics and appliances. Our 11,000 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; integration of acquisitions; uncertainties related to political or regulatory changes 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 29, 2018. 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 29, 2018.

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, free cash flow, net debt, adjusted gross leverage, and adjusted net leverage. 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 net debt, adjusted gross leverage and adjusted net leverage are useful measures of its credit position. 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)

 

 

(in thousands)

 

September 28,
2019

 

December 29,
2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

476,057

 

 

$

489,733

 

Short-term investments

 

33

 

 

34

 

Trade receivables, less allowances of $39,874 and $36,038 at September 28, 2019 and December 29, 2018, respectively

 

226,352

 

 

232,892

 

Inventories

 

240,059

 

 

258,228

 

Prepaid income taxes and income taxes receivable

 

2,730

 

 

2,339

 

Prepaid expenses and other current assets

 

62,361

 

 

49,291

 

Total current assets

 

1,007,592

 

 

1,032,517

 

Net property, plant, and equipment

 

329,792

 

 

339,894

 

Intangible assets, net of amortization

 

326,417

 

 

361,474

 

Goodwill

 

813,653

 

 

826,715

 

Investments

 

26,662

 

 

25,405

 

Deferred income taxes

 

7,485

 

 

7,330

 

Right of use lease assets, net

 

21,598

 

 

 

Other assets

 

18,162

 

 

20,971

 

Total assets

 

$

2,551,361

 

 

$

2,614,306

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

107,211

 

 

$

126,323

 

Accrued liabilities

 

114,549

 

 

138,405

 

Accrued income taxes

 

16,989

 

 

20,547

 

Current portion of long-term debt

 

10,000

 

 

10,000

 

Total current liabilities

 

248,749

 

 

295,275

 

Long-term debt, less current portion

 

668,160

 

 

684,730

 

Deferred income taxes

 

51,776

 

 

51,853

 

Accrued post-retirement benefits

 

28,725

 

 

31,874

 

Non-current operating lease liabilities

 

17,237

 

 

 

Other long-term liabilities

 

64,502

 

 

72,232

 

Total equity

 

1,472,212

 

 

1,478,342

 

Total liabilities and equity

 

$

2,551,361

 

 

$

2,614,306

 

LITTELFUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

(in thousands, except per share data)

 

September 28,
2019

 

September 29,
2018

 

September 28,
2019

 

September 29,
2018

Net sales

 

$

361,971

 

 

$

439,191

 

 

$

1,165,350

 

 

$

1,316,187

 

Cost of sales

 

231,025

 

 

259,597

 

 

737,368

 

 

817,983

 

Gross profit

 

130,946

 

 

179,594

 

 

427,982

 

 

498,204

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses

 

54,224

 

 

69,782

 

 

174,845

 

 

220,540

 

Research and development expenses

 

19,728

 

 

20,454

 

 

62,595

 

 

65,742

 

Amortization of intangibles

 

9,827

 

 

13,130

 

 

30,068

 

 

38,501

 

Total operating expenses

 

83,779

 

 

103,366

 

 

267,508

 

 

324,783

 

Operating income

 

47,167

 

 

76,228

 

 

160,474

 

 

173,421

 

 

 

 

 

 

 

 

 

 

Interest expense

 

5,559

 

 

5,775

 

 

16,834

 

 

16,980

 

Foreign exchange loss (gain)

 

4,968

 

 

982

 

 

5,636

 

 

(6,372

)

Other (income) expense, net

 

(4,764

)

 

1,259

 

 

(3,406

)

 

(2,362

)

Income before income taxes

 

41,404

 

 

68,212

 

 

141,410

 

 

165,175

 

Income taxes

 

5,757

 

 

14,666

 

 

24,982

 

 

33,275

 

Net income

 

$

35,647

 

 

$

53,546

 

 

$

116,428

 

 

$

131,900

 

 

 

 

 

 

 

 

 

 

Income per share:

 

 

 

 

 

 

 

 

Basic

 

$

1.46

 

 

$

2.13

 

 

$

4.72

 

 

$

5.31

 

Diluted

 

$

1.44

 

 

$

2.10

 

 

$

4.68

 

 

$

5.23

 

 

 

 

 

 

 

 

 

 

Weighted-average shares and equivalent shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

24,482

 

 

25,109

 

 

24,646

 

 

24,817

 

Diluted

 

24,684

 

 

25,471

 

 

24,894

 

 

25,212

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

18,621

 

 

$

45,599

 

 

$

101,744

 

 

$

107,732

 

LITTELFUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended

(in thousands)

 

September 28,
2019

 

September 29,
2018

OPERATING ACTIVITIES

 

 

 

 

Net income

 

$

116,428

 

 

$

131,900

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

93,511

 

 

130,495

 

Changes in operating assets and liabilities:

 

 

 

 

Trade receivables

 

2,781

 

 

(20,588

)

Inventories

 

18,102

 

 

(17,624

)

Accounts payable

 

(29,453

)

 

17,033

 

Accrued liabilities and income taxes

 

(44,241

)

 

20,736

 

Prepaid expenses and other assets

 

3,735

 

 

(9,836

)

Net cash provided by operating activities

 

160,863

 

 

252,116

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

Acquisitions of businesses, net of cash acquired

 

(775

)

 

(313,475

)

Purchases of property, plant, and equipment

 

(38,397

)

 

(55,946

)

Proceeds from sale of property, plant, and equipment

 

6,212

 

 

858

 

Net cash used in investing activities

 

(32,960

)

 

(368,563

)

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

Net (payments) proceeds from credit facility and senior notes

 

(7,500

)

 

207,475

 

Purchases of common stock

 

(99,387

)

 

 

Cash dividends paid

 

(32,990

)

 

(29,258

)

All other cash provided by financing activities

 

4,412

 

 

17,042

 

Net cash (used in) provided by financing activities

 

(135,465

)

 

195,259

 

Effect of exchange rate changes on cash and cash equivalents

 

(6,114

)

 

(10,273

)

(Decrease) increase in cash and cash equivalents

 

(13,676

)

 

68,539

 

Cash and cash equivalents at beginning of period

 

489,733

 

 

429,676

 

Cash and cash equivalents at end of period

 

$

476,057

 

 

$

498,215

 

LITTELFUSE, INC.

NET SALES AND OPERATING INCOME BY SEGMENT

(Unaudited)

 

 

 

Third Quarter

 

Year-to-Date

(in thousands)

 

2019

 

2018

 

Change

 

%

Growth
/(Decline)

 

2019

 

2018

 

Change

 

%

Growth
/(Decline)

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Electronics

 

$

227,252

 

 

$

296,472

 

 

$

(69,220

)

 

(23.3

)%

 

$

752,199

 

 

$

860,240

 

 

$

(108,041

)

 

(12.6

)%

Automotive

 

104,681

 

 

114,416

 

 

(9,735

)

 

(8.5

)%

 

326,814

 

 

367,718

 

 

(40,904

)

 

(11.1

)%

Industrial

 

30,038

 

 

28,303

 

 

1,735

 

 

6.1

%

 

86,337

 

 

88,229

 

 

(1,892

)

 

(2.1

)%

Total net sales

 

$

361,971

 

 

$

439,191

 

 

$

(77,220

)

 

(17.6

)%

 

$

1,165,350

 

 

$

1,316,187

 

 

$

(150,837

)

 

(11.5

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Electronics

 

$

34,567

 

 

$

72,464

 

 

$

(37,897

)

 

(52.3

)%

 

$

127,233

 

 

$

193,739

 

 

$

(66,506

)

 

(34.3

)%

Automotive

 

11,437

 

 

10,863

 

 

574

 

 

5.3

%

 

34,987

 

 

44,965

 

 

(9,978

)

 

(22.2

)%

Industrial

 

6,822

 

 

4,134

 

 

2,688

 

 

65.0

%

 

16,158

 

 

14,123

 

 

2,035

 

 

14.4

%

Other(a)

 

(5,659

)

 

(11,233

)

 

 

 

N.M.

 

(17,904

)

 

(79,406

)

 

 

 

N.M.

Total operating income

 

$

47,167

 

 

$

76,228

 

 

$

(29,061

)

 

(38.1

)%

 

$

160,474

 

 

$

173,421

 

 

$

(12,947

)

 

(7.5

)%

Operating Margin

 

13.0

%

 

17.4

%

 

 

 

 

 

13.8

%

 

13.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

5,559

 

 

5,775

 

 

 

 

 

 

16,834

 

 

16,980

 

 

 

 

 

Foreign exchange loss (gain)

 

4,968

 

 

982

 

 

 

 

 

 

5,636

 

 

(6,372

)

 

 

 

 

Other (income) expense, net

 

(4,764

)

 

1,259

 

 

 

 

 

 

(3,406

)

 

(2,362

)

 

 

 

 

Income before income taxes

 

$

41,404

 

 

$

68,212

 

 

$

(26,808

)

 

(39.3

)%

 

$

141,410

 

 

$

165,175

 

 

$

(23,765

)

 

(14.4

)%

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

N.M. - Not meaningful

 

 

Third Quarter

 

Year-to-Date

(in thousands)

 

2019

 

2018

 

%

Growth
/(Decline)

 

2019

 

2018

 

%

Growth
/(Decline)

Operating Margin

 

 

 

 

 

 

 

 

 

 

 

 

Electronics

 

15.2

%

 

24.4

%

 

(9.2

)%

 

16.9

%

 

22.5

%

 

(5.6

)%

Automotive

 

10.9

%

 

9.5

%

 

1.4

%

 

10.7

%

 

12.2

%

 

(1.5

)%

Industrial

 

22.7

%

 

14.6

%

 

8.1

%

 

18.7

%

 

16.0

%

 

2.7

%

LITTELFUSE, INC.

SUPPLEMENTAL FINANCIAL INFORMATION

(In millions of USD except per share amounts unaudited)

 

Non-GAAP EPS reconciliation

 

 

 

 

 

 

 

 

 

 

Q3-19

 

Q3-18

 

YTD-19

 

YTD-18

GAAP diluted EPS

 

$

1.44

 

 

$

2.10

 

 

$

4.68

 

 

$

5.23

 

EPS impact of Non-GAAP adjustments (below)

 

0.34

 

0.39

 

0.97

 

 

2.34

 

Adjusted diluted EPS

 

$

1.78

 

 

$

2.49

 

 

$

5.65

 

 

$

7.57

 

Non-GAAP adjustments - (income)/expense

 

 

 

 

 

 

 

 

 

 

Q3-19

 

Q3-18

 

YTD-19

 

YTD-18

Acquisition related and integration costs (a)

 

$

3.2

 

 

$

2.9

 

 

$

6.9

 

 

$

17.0

 

Restructuring, impairment and other charges (b)

 

2.5

 

 

5.2

 

 

11.0

 

 

10.2

 

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

 

5.7

 

 

11.2

 

 

17.9

 

 

79.4

 

Other expense, net (g)

 

 

 

 

 

5.8

 

 

 

Non-operating foreign exchange loss (gain)

 

5.0

 

 

1.0

 

 

5.6

 

 

(6.4

)

Non-GAAP adjustments to income before income taxes

 

10.7

 

 

12.2

 

 

29.3

 

 

73.0

 

Income taxes (h)

 

2.3

 

 

2.2

 

 

5.1

 

 

14.1

 

Non-GAAP adjustments to net income

 

$

8.4

 

 

$

10.0

 

 

$

24.2

 

 

$

58.9

 

 

 

 

 

 

 

 

 

 

Total EPS impact

 

$

0.34

 

 

$

0.39

 

 

$

0.97

 

 

$

2.34

 

Adjusted operating margin /Adjusted EBITDA reconciliation

 

 

 

 

 

 

 

 

 

 

Q3-19

 

Q3-18

 

YTD-19

 

YTD-18

Net sales

 

$

362.0

 

 

$

439.2

 

 

$

1,165.4

 

 

$

1,316.2

 

GAAP operating income

 

$

47.2

 

 

$

76.2

 

 

$

160.5

 

 

$

173.4

 

Add back non-GAAP adjustments

 

5.7

 

 

11.2

 

 

17.9

 

 

79.4

 

Adjusted operating income

 

$

52.9

 

 

$

87.4

 

 

$

178.4

 

 

$

252.8

 

Adjusted operating margin

 

14.6

%

 

19.9

%

 

15.3

%

 

19.2

%

Add back amortization

 

9.8

 

 

10.0

 

 

30.1

 

 

29.8

 

Add back depreciation

 

13.3

 

 

13.1

 

 

39.0

 

 

37.6

 

Adjusted EBITDA

 

$

76.0

 

 

$

110.5

 

 

$

247.5

 

 

$

320.2

 

Adjusted EBITDA margin

 

21.0

%

 

25.2

%

 

21.2

%

 

24.3

%

Net sales reconciliation

 

Q3-19 vs. Q3-18

 

 

Electronics

 

Automotive

 

Industrial

 

Total

Net sales growth

 

(23

)%

 

(9

)%

 

6

%

 

(18

)%

Less:

 

 

 

 

 

 

 

 

Divestitures

 

(1

)%

 

 

 

%

 

(1

)%

FX impact

 

(1

)%

 

(2

)%

 

(1

)%

 

(1

)%

Organic net sales growth

 

(21

)%

 

(7

)%

 

7

%

 

(16

)%

Net sales reconciliation

 

2019 YTD vs. 2018 YTD

 

 

Electronics

 

Automotive

 

Industrial

 

Total

Net sales growth

 

(13

)%

 

(11

)%

 

(2

)%

 

(12

)%

Less:

 

 

 

 

 

 

 

 

Acquisitions

 

1

%

 

 

 

 

 

1

%

Divestitures

 

%

 

%

 

(5

)%

 

(1

)%

FX impact

 

(2

)%

 

(3

)%

 

(1

)%

 

(2

)%

Organic net sales growth

 

(12

)%

 

(8

)%

 

4

%

 

(10

)%

Income tax reconciliation

 

 

 

 

 

 

 

 

 

 

Q3-19

 

Q3-18

 

YTD-19

 

YTD-18

Income taxes

 

$

5.8

 

 

$

14.7

 

 

$

25.0

 

 

$

33.3

 

Effective rate

 

13.9

%

 

21.5

%

 

17.7

%

 

20.1

%

Non-GAAP adjustments - income taxes

 

2.3

 

 

2.2

 

 

5.1

 

 

14.1

 

Adjusted income taxes

 

$

8.1

 

 

$

16.9

 

 

$

30.1

 

 

$

47.4

 

Adjusted effective rate

 

15.5

%

 

21.0

%

 

17.6

%

 

19.9

%

Free cash flow reconciliation

 

 

 

 

 

 

 

 

 

 

Q3-19

 

Q3-18

 

YTD-19

 

YTD-18

Net cash provided by operating activities

 

$

80.8

 

 

$

111.2

 

 

$

160.9

 

 

$

252.1

 

Less: Purchases of property, plant and equipment

 

(13.1

)

 

(15.6

)

 

(38.4

)

 

(55.9

)

Free cash flow

 

$

67.7

 

 

$

95.6

 

 

$

122.5

 

 

$

196.2

 

 

 

Q4-18

 

Q1-19

 

Q2-19

 

Q3-19

 

For the Twelve Months

Ended September 28, 2019

Adjusted EBITDA

 

$

84.3

 

 

$

89.1

 

 

$

82.5

 

 

$

76.0

 

 

$

331.9

 

 

 

 

 

 

 

 

 

 

 

September 28, 2019

Current portion of long-term debt

 

 

 

 

 

 

 

 

 

$

10.0

 

Long-term debt, less current portion

 

 

 

 

 

 

 

 

 

668.2

 

Total debt

 

 

 

 

 

 

 

 

 

$

678.2

 

Less: Cash and cash equivalents

 

 

 

 

 

 

 

 

 

476.1

 

Net debt

 

 

 

 

 

 

 

 

 

$

202.1

 

Adjusted Gross Leverage (defined as total debt divided by adjusted EBITDA)

 

 

 

 

 

 

 

 

 

2.0

Adjusted Net Leverage (defined as net debt divided by adjusted EBITDA)

 

 

 

 

 

 

 

 

 

0.6

 

Note: Total will not always foot due to rounding.

(a) reflected in selling, general and administrative expenses ("SG&A").

(b) $1.8 million and $0.7 million and $0.1 million and $5.1 million reflected in cost of sales and SG&A, respectively for the three months ended September 28, 2019 and September 29, 2018, and $4.6 million and $6.4 million and $1.0 million and $9.2 million reflected in cost of sales and SG&A, respectively for the nine months ended September 28, 2019 and 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.

(g) year-to-date amounts included $2.8 million impairment charges to certain other investments, $2.6 million loss on the disposal of a business, and $0.4 million gain primarily related to the final payments for the acquisition of Monolith.

(h) reflected the tax impact associated with the non-GAAP adjustments.

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