Littelfuse Reports Third Quarter Results - Littelfuse (NASDAQ:LFUS)

CHICAGO--(BUSINESS WIRE)--

Littelfuse, Inc. LFUS today reported financial results for the third quarter ended October 1, 2016.

Third Quarter Highlights

All comparisons are to the prior year period unless otherwise noted. A reconciliation of non-GAAP (adjusted) financial measures used in this release to the comparable GAAP financial measures is included below.

Sales for the third quarter of 2016 were $280.3 million, a 30% increase. Excluding revenue from acquisitions, sales increased 2%, led by strong growth in the automotive segment partially offset by end market softness in the industrial segment.
GAAP earnings for the third quarter of 2016 were $1.35 per diluted share. The third quarter GAAP effective tax rate of (1.2%) included a year-to-date adjustment to a 15.6% effective tax rate. Included in GAAP earnings were $17.4 million of pretax special charges. The primary item was $14.8 million in pretax non-cash impairment charges related to the custom business within the industrial segment, due to continued end market softness in the potash mining market.
Excluding special items, adjusted earnings for the third quarter of 2016 were $1.87 per diluted share, representing a 31% increase. The third quarter adjusted effective tax rate of 11.2% included a year-to-date adjustment to an 18% adjusted effective tax rate.
Highlights by segment included:
- Electronics sales increased 44% (4% excluding revenue from acquisitions), led by higher fuse and sensor sales.
- Automotive sales increased 31% (7% excluding revenue from acquisitions), driven by strong growth in Asia.
- Industrial sales decreased 16% primarily due to weakness in solar, mining, and oil and gas end markets.

The electronics book-to-bill ratio for the third quarter of 2016 was 0.99, which excludes the ON product portfolio acquisition.
Cash provided by operating activities was $64.7 million for the third quarter of 2016 compared to $51.6 million for the third quarter of 2015.
Capital expenditures for the third quarter of 2016 increased to $14.3 million compared to $8.6 million in the prior year. The increase was primarily due to capital spending for new acquisitions and integration related activities.
As announced on October 25^th, the company completed the sale of its portable electrical house (e-house) business, which was included in the company's custom business within the industrial segment.

"We're very pleased with our third quarter performance, led by our electronics and automotive segments as well as a sustained reduction in our tax rate," said Gordon Hunter, chief executive officer. "While we continued to face end market weakness across our industrial business, we took further action this quarter to improve profitability. On the acquisition front, we're ahead of our initial expectations with the PolySwitch integration, and off to a strong start with the ON product portfolio."

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.

"Order rates in electronics have been strong going into the fourth quarter. However, we expect organic revenue growth to be flat in automotive due to the planned customer transitions in our automotive sensor business," said Hunter. "We're continuing to take action to improve profitability in our industrial segment, as we expect weakness in our industrial end markets to continue into next year." The outlook for the fourth quarter of 2016 is as follows:

Total sales are expected to be in the range of $270 million to $280 million. This represents approximately 24% revenue growth at the midpoint. Excluding acquisitions, the effects of the e-house business sale and the fourth quarter 2015 extra week, this represents approximately 3% revenue growth at the midpoint.

Adjusted earnings are expected to be in the range of $1.45 to $1.59 per diluted share, excluding special items.
The adjusted effective tax rate is expected to be 18% for the fourth quarter and full year 2016.

Conference Call and Webcast Information

Littelfuse will host a conference call today, Thursday, November 3, 2016, 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 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 January 2, 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 January 2, 2016.

Non-GAAP Financial Measures

The information included in this press release includes the non-GAAP financial measures of adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, and adjusted effective tax rate. 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 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. The company believes that 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)

	Third Quarter								Year-to-Date
	2016			2015			% Change		2016			2015			% Change

Net Sales
Electronics	$	147,730		$	102,616		44	%	$	378,696		$	307,549		23	%
Automotive		106,341			81,475		31	%		309,644			251,464		23	%
Industrial		26,260			31,419		(16	%)		83,301			88,831		(6	%)

Total net sales	$	280,331		$	215,510		30	%	$	771,641		$	647,844		19	%


	Third Quarter								Year-to-Date
	2016			2015			% Change		2016			2015			% Change

Operating Income/(Expense)
Electronics	$	34,571		$	20,923		65	%	$	82,246		$	61,755		33	%
Automotive		15,032			15,253		(1	%)		48,997			39,123		25	%
Industrial		57			5,781		(99	%)		3,758			13,220		(72	%)
Other ⁽¹⁾		(22,134	)		(33,373	)	(34	%)		(45,345	)		(39,795	)	14	%

Total operating income	$	27,526		$	8,584		221	%	$	89,656		$	74,303		21	%

Interest expense		2,571			922					6,286			3,021
Impairment and equity in net loss of
unconsolidated affiliate		-			-					-			-
Foreign exchange (gain) loss		(4,700	)		(3,549	)				(7,114	)		(1,724	)
Other (income) expense, net		(778	)		(1,430	)				(1,040	)		(3,758	)

Income before taxes	$	30,433		$	12,641		141	%	$	91,524		$	76,764		19	%

(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.)


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

	October 1, 2016			January 2, 2016
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	194,494		$	328,786
Short-term investments		3,961			4,179
Accounts receivable, less allowances		205,211			142,882
Inventories		121,616			98,629
Prepaid income taxes and income taxes receivable		14,344			1,510
Prepaid expenses and other current assets		15,543			7,943
Total current assets		555,169			583,929
Property, plant and equipment:
Land		10,044			5,236
Buildings		83,441			71,383
Equipment		439,430			382,429
		532,915			459,048
Accumulated depreciation		(309,062	)		(296,480	)
Net property, plant and equipment		223,853			162,568
Intangible assets, net of amortization:
Patents, licenses and software		88,322			20,221
Distribution network		19,566			16,490
Customer lists, trademarks and tradenames		116,684			54,912
Goodwill		409,527			189,767
		634,099			281,390
Investments		14,974			15,197
Deferred income taxes		17,151			8,333
Other assets		12,857			14,058
Total assets	$	1,458,103		$	1,065,475

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	81,382		$	51,658
Accrued payroll		39,517			32,611
Accrued expenses		48,713			24,145
Accrued severance		3,420			3,798
Accrued income taxes		8,622			11,836
Current portion of long-term debt		6,250			87,000
Total current liabilities		187,904			211,048
Long-term debt, less current portion		434,206			83,753
Deferred income taxes		7,345			8,014
Accrued post-retirement benefits		6,235			5,653
Other long-term liabilities		19,037			17,755
Total equity		803,376			739,252
Total liabilities and equity	$	1,458,103		$	1,065,475

Common shares issued and outstanding of
22,643,816 and 22,420,785 at October 1, 2016 and
January 2, 2016, respectively.


LITTELFUSE, INC.
Consolidated Statements of Comprehensive Income
(In thousands of USD, except per share data, unaudited)

	For the Three Months Ended						For the Nine Months Ended

	Oct. 1, 2016			Sept. 26, 2015			Oct. 1, 2016			Sept. 26, 2015

Net sales	$	280,331		$	215,510		$	771,641		$	647,844

Cost of sales		166,572			129,328			472,861			400,051

Gross profit		113,759			86,182			298,780			247,793


Selling, general and administrative expenses		56,589			37,002			150,047			112,119
Research and development expenses		10,403			7,479			30,884			22,224
Pension settlement expenses		-			30,194			-			30,194
Amortization of intangibles		4,432			2,923			13,384			8,953
Impairment of goodwill and intangible assets		14,809			-			14,809			-
		86,233			77,598			209,124			173,490

Operating income		27,526			8,584			89,656			74,303

Interest expense		2,571			922			6,286			3,021
Foreign exchange (gain) loss		(4,700	)		(3,549	)		(7,114	)		(1,724	)
Other (income) expense, net		(778	)		(1,430	)		(1,040	)		(3,758	)

Income before income taxes		30,433			12,641			91,524			76,764
Income taxes		(369	)		1,317			14,281			16,761

Net income	$	30,802		$	11,324		$	77,243		$	60,003

Net income per share:
Basic	$	1.36		$	0.50		$	3.43		$	2.65
Diluted	$	1.35		$	0.50		$	3.41		$	2.64

Weighted average shares and
equivalent shares outstanding:
Basic		22,578			22,581			22,515			22,623
Diluted		22,734			22,693			22,675			22,771

Comprehensive income	$	25,888		$	2,187		$	67,762		$	45,896


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

	For the Nine Months Ended
	Oct. 1, 2016			Sept. 26, 2015

OPERATING ACTIVITIES:
Net income	$	77,243		$	60,003
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation		24,841			22,154
Amortization of intangibles		13,384			8,952
Impairment of intangible assets and goodwill		14,809			-
Loss on sale of product line		1,391			-
Stock-based compensation		9,166			7,997
Non-cash inventory charge		7,456			-
Net loss on pension settlement, net of tax		-			19,472
Excess tax benefit on stock-based compensation		(2,272	)		(1,500	)
Loss on sale of assets		440			308
Changes in operating assets and liabilities:
Accounts receivable		(24,862	)		(18,274	)
Inventories		4,505			(4,203	)
Accounts payable		7,845			4,216
Accrued expenses (including post retirement)		6,497			6,577
Accrued payroll and severance		1,388			3,598
Accrued taxes		(23,613	)		4,006
Prepaid expenses and other		(18,203	)		277
Net cash provided by operating activities		100,015			113,583

INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(34,501	)		(35,016	)
Acquisition of business, net of cash acquired		(468,636	)		-
Proceeds from maturities of short-term investments		345			-
Decrease in entrusted loan receivable		4,056			5,930
Proceeds from sale of assets		255			38
Net cash used in investing activities		(498,481	)		(29,048	)

FINANCING ACTIVITIES:
Proceeds of revolving credit facility		258,000			49,000
Proceeds of term loan		234,000			-
Payments of revolving credit facility		(97,500	)		(25,000	)
Payments of term loan		(119,125	)		(3,750	)
Payments of entrusted loan		(4,056	)		(5,930	)
Debt issuance costs paid		(1,701	)		(42	)
Cash dividends paid		(20,405	)		(17,864	)
Proceeds from exercise of stock options		14,581			6,186
Excess tax benefit on share-based compensation		2,272			1,500
Purchases of common stock		(3,685	)		(31,252	)
Net cash (used in) provided by financing activities		262,381			(27,152	)

Effect of exchange rate changes on cash and cash
equivalents		1,793			(18,314	)

Increase in cash and cash equivalents		(134,292	)		39,069
Cash and cash equivalents at beginning of period		328,786			297,571
Cash and cash equivalents at end of period	$	194,494		$	336,640

(1) Purchase accounting adjustment related to acquisitions.


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

GAAP EPS Reconciliation
	Q1-16			Q2-16			Q3-16			YTD-16			Q1-15			Q2-15			Q3-15			YTD-15
GAAP diluted EPS	$	0.85		$	1.20		$	1.35		$	3.41		$	0.88		$	1.26		$	0.50		$	2.64
EPS impact of special items (below)		0.53			0.24			0.52			1.29			0.20			0.07			0.93			1.20
Adjusted diluted EPS	$	1.38		$	1.44		$	1.87		$	4.69		$	1.08		$	1.33		$	1.43		$	3.84
Year-over-year adjusted EPS growth		28	%		8	%		31	%		22	%

Non-GAAP Adjustments - (income)/expense

Reed switch manufacturing transfer costs	$	1.0		$	0.7		$	-		$	1.7		$	1.0		$	0.9		$	1.2		$	3.1
Restructuring		0.4			0.1			0.9			1.4			1.2			1.7			0.9			3.8
Acquisition expenses		6.2			6.1			5.9			18.2			0.2			0.2			0.3			0.7
Pension wind-up		-			-			-			-			0.7			0.7			30.8			32.2
Product line divestiture costs		1.6			0.3			-			1.9			-			-			0.1			0.1
Impairment of intangible assets		-			-			14.8			14.8			-			-			-			-
Purchase accounting adjustment		-			6.9			0.5			7.4			-			-			-			-
Adjustment to Operating income		9.2			14.0			22.1			45.3			3.0			3.4			33.4			39.8
Foreign exchange loss/(gain)		3.8			(6.2	)		(4.7	)		(7.1	)		3.1			(1.3	)		(3.5	)		(1.7	)
Adjustment to income before income taxes	$	13.0		$	7.8		$	17.4		$	38.2		$	6.1		$	2.1		$	29.8		$	38.1
Income taxes		1.0			2.3			5.7			9.0			1.5			0.5			8.6			10.6
Adjustment to net income	$	12.0		$	5.5		$	11.7		$	29.2		$	4.6		$	1.6		$	21.2		$	27.5

Total EPS impact	$	0.53		$	0.24		$	0.52		$	1.29		$	0.20		$	0.07		$	0.93		$	1.20

Operating margin / EBITDA reconciliation
	Q1-16			Q2-16			Q3-16			YTD-16			Q1-15			Q2-15			Q3-15			YTD-15

Net sales	$	219.4		$	271.9		$	280.3		$	771.6		$	210.3		$	222.0		$	215.5		$	647.8

GAAP operating income	$	32.4		$	29.7		$	27.5		$	89.7		$	29.5		$	36.2		$	8.6		$	74.3
Add back special operating items		9.2			14.0			22.1			45.3			3.0			3.4			33.4			39.8
Adjusted operating income	$	41.6		$	43.7		$	49.6		$	135.0		$	32.5		$	39.6		$	42.0		$	114.1
Adjusted operating margin		19.0	%		16.1	%		17.7	%		17.5	%		15.5	%		17.8	%		19.5	%		17.6	%

Add back amortization		3.8			5.2			4.4			13.4			3.1			2.9			3.0			9.0
Add back depreciation		7.2			8.9			8.7			24.8			7.4			7.4			7.4			22.1
Adjusted EBITDA	$	52.6		$	57.8		$	62.7		$	173.2		$	43.0		$	49.9		$	52.4		$	145.2
Adjusted EBITDA margin		24.0	%		21.3	%		22.4	%		22.4	%		20.4	%		22.5	%		24.3	%		22.4	%
Year-over-year adjusted EBITDA growth		22	%		16	%		20	%		19	%

Income tax reconciliation
	Q1-16			Q2-16			Q3-16			YTD-16			Q1-15			Q2-15			Q3-15			YTD-15

Income taxes	$	7.8		$	6.9		$	(0.4	)	$	14.3		$	6.4		$	9.0		$	1.3		$	16.8
Effective rate		28.8	%		20.2	%		-1.2	%		15.6	%		24.3	%		23.9	%		10.4	%		21.8	%

Non-GAAP adjustment - income taxes		1.0			2.3			5.7			9.1			1.5			0.5			8.6			10.6

Adjusted income taxes	$	8.8		$	9.2		$	5.3		$	23.4		$	7.9		$	9.5		$	9.9		$	27.4
Adjusted effective rate		22.0	%		22.0	%		11.2	%		18.0	%		24.3	%		24.0	%		23.4	%		23.8	%

Note: Totals will not always foot due to rounding

View source version on businesswire.com: http://www.businesswire.com/news/home/20161103005291/en/

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

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