SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 28, 1996 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM TO
Commission file number 0-20388
LITTELFUSE, INC.
(Exact name of registrant as specified in its charter)
Delaware
36-3795742
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
800 East Northwest Highway
Des Plaines, Illinois 60016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(847) 824-1188
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes X No
As of September 28, 1996, 9,899,679 shares of common stock, $.01 par
value, of the Registrant and warrants to purchase 2,091,782 shares of common
stock, $.01 par value, of the Registrant were outstanding.
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1. Consolidated Condensed (unaudited) Statements of
Income, Financial Condition, and Cash Flows
and Notes to the Consolidated Condensed Financial
Statements .............................................. 1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 9
<PAGE>
Part I - Financial Information
Item 1. CONSOLIDATED CONDENSED
STATEMENTS OF INCOME
(In thousands, except per share data)
(unaudited)
For the Three For the Nine
Months Ended Months Ended
September September September September
28, 30, 28, 30,
1996 1995 1996 1995
Net sales $ 60,483 $ 54,688 $180,404 $167,091
Cost of sales 35,948 32,484 106,910 98,900
Gross profit 24,535 22,204 73,494 68,191
Selling, administrative
and general expenses 13,139 12,164 40,108 36,929
Amortization of intangibles 1,763 1,632 5,293 4,893
Operating income 9,633 8,408 28,093 26,369
Interest expense 1,111 1,019 3,275 3,276
Other income, net (189) (99) (551) (271)
Income before income
taxes 8,711 7,488 25,369 23,364
Income taxes 3,136 2,658 9,133 8,294
Net income $ 5,575 $ 4,830 $ 16,236 $ 15,070
Net income per share $ 0.47 $ 0.39 $ 1.35 $ 1.21
Weighted average number
of common and common
equivalent shares
outstanding 11,806 12,504 12,036 12,503
1
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CONSOLIDATED CONDENSED
STATEMENTS OF FINANCIAL CONDITION
(In thousands)
September December
28, 31,
1996 1995
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 544 $ 1,308
Accounts receivable 40,161 29,722
Inventories 31,814 30,076
Deferred income taxes 1,336 1,336
Prepaid expenses and other 1,924 2,581
Total current assets 75,779 65,023
Property, plant, and equipment, net 62,465 61,229
Reorganization value, net 45,786 48,056
Patents and other identifiable
intangible assets, net 24,863 27,971
Prepaid pension cost and other assets 3,598 2,907
$212,491 $205,186
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses 29,111 27,390
Accrued income taxes 10,832 8,362
Current portion of long-term debt 9,925 10,065
Total current liabilities 49,868 45,817
Long-term debt, less current portion 52,587 40,804
Deferred income taxes 4,637 4,615
Minority Interest 338 568
Shareholders' equity:
Preferred stock, par value $.01 per
share: 1,000,000 shares authorized;
no shares issued and outstanding _ _
Common stock, par value $.01 per
share: 19,000,000 shares authorized;
9,899,679 and 10,086,000 shares issued
and outstanding 101 102
Cost of treasury stock, 1996 -
368,130 shares; 1995 - 110,000 shares (12,203) (3,533)
Additional paid-in capital 56,813 72,364
Notes receivable - common stock (571) (571)
Foreign translation adjustment (479) (120)
Retained earnings 61,400 45,140
Total shareholders' equity $105,061 $113,382
$212,491 $205,186
2
<PAGE>
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
For the Three For the Nine
Months Ended Months Ended
September September September September
28, 1996 30, 1995 28, 1996 30, 1995
Operating activities:
Net income $ 5,575 $ 4,830 $16,236 $15,070
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 3,634 2,941 10,132 8,505
Amortization 1,763 1,631 5,293 4,893
Provision for bad debts 108 61 322 307
Deferred income taxes - - 22 -
Minority interest (60) - (201) -
Changes in operating assets
and liabilities:
Accounts receivable (2,489) (399) (11,075) (7,296)
Inventories (1,504) (118) (2,072) 1,501
Accounts payable and
accrued expenses 146 278 1,887 8
Other, net 502 (903) 3,355 2,111
Net cash provided by operating
activities 7,675 8,321 23,899 25,099
Cash used in investing
activities:
Purchases of property,
plant, and equipment, net (4,418) (2,740) (12,376) (9,567)
Cash used in financing
activities:
Proceeds/(payments) of long-
term debt, net (2,017) (3,016) 11,940 (12,549)
Proceeds from exercise of
stock options 1 202 1,084 1,059
Purchase of common stock and
warrants (2,660) (2,251) (25,400) (2,251)
Other, net - (17) - (731)
(4,676) (5,082) (12,376) (14,472)
Effect of exchange rate
changes on cash 72 (6) 89 58
Increase (decrease) in cash
and cash equivalents (1,347) 493 (764) 1,118
Cash and cash equivalents at
beginning of period 1,891 1,887 1,308 1,262
Cash and cash equivalents at
end of period $ 544 $2,380 $ 544 $ 2,380
3
<PAGE>
Notes to Consolidated Condensed Financial Statements
(Unaudited)
September 28, 1996
1. Basis of Presentation
Littelfuse, Inc. and its subsidiaries (the "Company") are
the successors in interest to the components business
previously conducted by subsidiaries of Tracor Holdings,
Inc. ("Predecessor"). The Company acquired its business as a
result of the Predecessor's reorganization activities
concluded on December 27, 1991.
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information. Accordingly, they do not include all of the
information and notes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments, consisting
solely of normal recurring items, considered necessary for a
fair presentation have been included. Operating results for
the period ended September 28, 1996 are not necessarily
indicative of the results that may be expected for the
fiscal year ending December 28, 1996. For further
information, refer to the Company's consolidated financial
statements and the notes thereto as of December 31, 1995,
included in the Company's Annual Report on Form 10-K.
Beginning in 1996, the Company changed its fiscal year end
to the Saturday nearest December 31 and reports its
quarterly interim financial information on the basis of
periods of thirteen weeks. Previously the Company reported
on a calendar year and quarter basis. The consolidated
condensed statements of operations and cash flows for the
three months ended September 28, 1996 are for the period
from June 29, 1996 to September 28, 1996.
2. Inventories
The components of inventories are as follows (in thousands):
September 28, December 31,
1996 1995
Raw material $ 9,067 $ 8,823
Work in process 3,091 3,445
Finished goods 19,656 17,808
Total $31,814 $ 30,076
4
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3. Per Share Data
Net income per share amounts for the three months and nine
months ended September 28, 1996 and September 30, 1995 are
based on the weighted average number of common and common
equivalent shares outstanding during the periods as follows
(in thousands, except per share data):
Three months ended Nine months ended
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
1996 1995 1996 1995
Average shares outstanding 9,926 10,134 9,958 10,116
Net effect of dilutive
stock options and warrants
- Primary 1,880 2,370 2,078 2,347
- Fully diluted 1,907 2,370 2,109 2,387
Average shares outstanding
- Primary 11,806 12,504 12,036 12,463
- Fully diluted 11,833 12,504 12,067 12,503
Net income $ 5,575 $ 4,830 $16,236 $15,070
Net income per share
- Primary $ 0.47 $ 0.39 $ 1.35 $ 1.21
- Fully diluted $ 0.47 $ 0.39 $ 1.35 $ 1.21
4. Long Term Debt
The Company concluded a financing package on August 31,
1993. The package consists of $45,000,000 of Senior
Notes issued pursuant to a Note Purchase Agreement
which requires annual principal payments of $9,000,000
payable annually beginning August 31, 1996 through
August 31, 2000. The package also includes a bank
Credit Agreement which provides an open revolver line of
credit of $65,000,000 less current borrowings subject to a
maximum indebtedness calculation and other traditional
covenants. No revolver principal payments are required
until the line matures on August 31, 2000. At September
28, 1996 the Company had available $41.5 million of
borrowing capability under the revolver facility
5
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Sales increased 11 percent to $60.5 million the third
quarter of 1996 compared to $54.7 million the third quarter
of 1995. Operating income and net income each increased 15
percent to $9.6 and $5.6 million respectively for the
quarter compared to the third quarter of last year.
Earnings per share increased 21 percent to $0.47 per share
the third quarter of 1996 compared to $0.39 per share the
third quarter of 1995.
Cash flow from operations was $7.7 million the third quarter
of 1996. The Company repurchased 75,000 shares of its common
stock for $2.7 million during the quarter and made capital
investments of $4.4 million. The debt to equity ratio was
0.60 to 1 at September 28, 1996 compared to 0.45 to 1 at
year end 1995 and 0.48 to 1 at September 30, 1995.
Third Quarter, 1996
Littelfuse enjoyed a sales increase of 11 percent to $60.5
million the third quarter 1996 from $54.7 million the same
period last year. The gross margin was 40.6 percent for the
quarter both years. Operating income increased to 15.9
percent of sales the third quarter this year from 15.4
percent last year. Net income increased 15 percent to $5.6
million the third quarter this year compared to $4.8 million
last year. Earnings per share increased 21 percent to $0.47
compared to $0.39 partly due to fewer equivalent shares
outstanding related to our share repurchase program.
Third quarter 1996 sales grew $5.8 million compared to the
same quarter last year. Very strong automotive OEM sales in
Europe spurred 21 percent sales growth in U.S. dollars and
26 percent sales growth in local currency. A portion of
Europe's automotive OEM sales were due to a non-recurring
item approximating $0.7 million accounting for 9 percent of
the 21 percent sales growth for the quarter. Very strong
electronics sales, particularly in Japan, spurred 24 percent
sales growth in Asia Pacific. Respectable automotive and
power fuse sales spurred 5 percent sales growth in North
America.
Electronics sales grew to $27.8 million in the third quarter
1996 from $25.8 million the same quarter of last year for an
increase of $2.0 million or 8 percent. Sales were
particularly strong in consumer electronics in Japan.
Although electronics OEM gained some strength in North
America and Europe in the third quarter, electronics
distribution remained weak in North America and Europe and
the personal computer and telecommunications markets
remained weak in Southeast Asia. Automotive sales grew to
$23.2 million in the third quarter 1996 from $19.9 million
the same quarter last year for an increase of $3.3 million
or 16 percent. The European automotive OEM business was
very strong and would have shown quite respectable growth
even without the $0.7 million non-recurring sale. The
North American automotive OEM business also was
6
<PAGE>
quite strong in the quarter. Power fuse sales grew to $9.5
million in the third quarter 1996 from $9.0 million the same
quarter last year for an increase of $0.5 million or 6
percent. The Company believes that its electrical business
sales continue to grow faster than the electrical industry
in general.
Gross profit was $24.5 million or 40.6 percent of sales for
the third quarter 1996 compared to $22.2 million or 40.6
percent last year. North America gross margins improved
compared to last year, while Europe declined slightly due to
currency and Asia Pacific declined slightly due to the start
up of the China operations and the assimilation of the
Korean operations.
Selling, general and administrative expenses were $13.1
million or 21.7 percent of sales for the third quarter 1996,
compared to $12.2 million or 22.2 percent of sales for the
same quarter last year. Selling expenses accounted for
approximately two-thirds of the expenses both quarters. The
S,G&A expenses as a percent of sales decreased slightly due
to lower selling and to lower R&D expense as a percent of
sales for the quarter. The amortization of the
reorganization value and other intangibles was 2.9 percent
of sales for the third quarter 1996 and 3.0 percent of sales
for the third quarter of last year. Total S,G&A expenses
including intangibles amortization were 24.6 percent of
sales the third quarter 1996 compared to 25.2 percent the
same quarter last year.
Operating income was $9.6 million or 15.9 percent of sales
for the third quarter 1996 compared to $8.4 million or 15.4
percent last year.
Interest expense was $1.1 million for the third quarter 1996
compared to $1.0 million last year partly due to the
Company's stock repurchase program. Other income, net, was
$0.2 million for the third quarter compared to $0.1 million
last year. Income before taxes was $8.7 million for the
third quarter 1996 compared to $7.5 million last year.
Income taxes were $3.1 million with an effective tax rate of
36 percent for the third quarter 1996 compared to $2.7
million with an effective tax rate of 35.5 percent the third
quarter of last year.
Net income for the third quarter 1996 was $5.6 million or
$0.47 per share compared to $4.8 million or $0.39 per share
last year.
Nine Months, 1996
Sales increased 8 percent to $180.4 million from $167.1
million last year. Cash provided by operations before
interest expense was $27.2 million and after interest
expense was $23.9 million. Earnings per share increased 12
percent to $1.35 the first nine months of 1996 compared to
$1.21 for the same period last year.
The automotive sales trend has been very strong the first
nine months of 1996. However, electronics sales growth has
been noticeably lower in the first nine months of this year
compared to recent years. Nine months electronics sales
were up 5 percent at $83.3 million compared to $79.5 million
last year. Asia Pacific business has been very strong,
particularly consumer electronics in Japan. Automotive
sales were up 13 percent at $71.0 million compared to $63.0
million last year. Recent European automotive sales
7
<PAGE>
growth has been even stronger than our quite respectable
North American automotive sales growth. Power fuse sales
were up 6 percent to $26.2 million from $24.6 million last
year. This business has benefited from improving economic
conditions and market share gains associated with our new
product introductions.
Gross profit was 40.7 percent or $73.5 million for the first
nine months of 1996 compared to 40.8 percent or $68.2
million the first nine months of last year. The slight
decline in the gross profit this year is due to start up
costs associated with our new operations in Asia Pacific --
the new greenfield plant in China and the new joint venture
in Korea.
Selling, general and administrative expenses were 22.2
percent of sales for the first nine months 1996 compared to
22.1 percent of sales last year. The increase in new
systems implementation and foreign selling expenses were
mostly offset by a decline in North American R&D and other
general and administrative expenses. The amortization of
intangibles was 2.9 percent of sales for the first nine
months of both years. Total S,G & A expenses including
intangibles amortization were 25.2 percent of sales the
first nine months 1996 compared to 25.0 percent of sales the
first nine months of last year.
Operating income was $28.1 million or 15.6 percent of sales
the first nine months 1996 compared to $26.4 million or 15.8
percent last year.
Interest expense was $3.3 million the first nine months of
both years since the company has invested all its free cash
flow after financial expenses and capital expenditures the
past twelve months in the repurchase of its own common stock
and warrants. Other income, net was $0.6 million the first
nine months 1996 compared to $0.3 million last year. Income
before taxes was $25.4 million the first nine months 1996
compared to $23.4 million the first nine months of last
year.
Income taxes were $9.1 million the first nine months 1996
compared to $8.3 million last year. The year to date
effective rate is 36 percent for 1996 compared to 35.5
percent last year.
Net income the first nine months 1996 was $16.2 million
compared to $15.1 million last year. Earnings per share the
first nine months of 1996 increased 12 percent to $1.35 per
share compared to $1.21 per share last year.
Liquidity and Capital Resources
Assuming no material adverse changes in market conditions or
interest rates, management expects that the Company will
have sufficient cash from operations to support its
operations, its capital expenditures and its current debt
obligations for the foreseeable future.
Littelfuse started the 1996 year with $ 1.3 million of cash.
Net cash provided by operations was $23.9 million for the
first nine months. Cash used to invest in property, plant
and equipment was $12.4 million. Cash used to repurchase
stock and warrants was $25.4 million, proceeds of option
exercises were $1.1 million, and proceeds of bank debt
8
<PAGE>
were $11.9 million for net financing of $12.4 million use of
cash. The net of cash provided by operations, less
investing activities, less financing activities resulted in
a decrease in cash of $0.9 million. The effect of exchange
rates on cash added $0.1 million. This left the Company
with a cash balance of approximately $0.5 million at
September 28, 1996.
The ratio of current assets to current liabilities was 1.5
to 1 at the end of the third quarter 1996, 1.4 to 1 at year
end 1995, and 1.5 to 1 at the end of the third quarter 1995.
The days sales in receivables was approximately 59 days at the
end of the third quarter 1996 compared to 52 days at year end
1995 and 52 days at the end of the third quarter 1995. The
increase in days sales in receivables is primarily due to the
strong foreign sales (which have longer payment terms) and
higher sales the second half of the quarter. The inventory
turnover rate was approximately 4.5 turns at the end of the
third quarter 1996 compared to 4.1 turns at year end 1995 and
5.2 turns at the end of the third quarter 1995.
The lower turns is primarily due to the new China and Korean
operations in Asia Pacific.
The Company's capital expenditures were $12.4 million for
the first nine months 1996. The Company expects that
capital expenditures, which will be primarily for new
machinery and equipment, will total approximately $18.0
million in 1996. The ratio of debt to equity was 0.60 to 1
at the end of the first nine months 1996 compared to 0.45 to
1 at year end 1995. The debt to equity ratio increased due
to the Company's repurchase of common shares and warrants.
The long term debt at the end of the first nine months 1996
consists of four types totaling $62.5 million. They are as
follows: (1) private placement notes totaling $36.0
million, (2) bank revolver borrowings totaling $23.5
million, (3) notes payable relating to income taxes and
mortgages totaling $1.3 million, and (4) other long-term
debt totaling $1.7 million. These four items include $9.9
million of the bank revolver borrowings, tax notes and
mortgage notes, which are considered to be current. This
leaves net long term debt totaling $52.6 million at
September 28, 1996. The private placement notes carry an
interest rate of 6.31 percent and the bank revolver debt
carries an interest rate of prime or LIBOR plus 0.5%, which
currently is approximately 6.3%. The Company had available
at September 28, 1996, a revolver facility of $41.5 million.
The Company also has a $3.0 million letter of credit
facility of which approximately $1.9 million was being used
at September 28, 1996.
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on
Form 8-K
There were no reports on Form 8-K during the quarter
ended September
28, 1996.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this Quarterly
Report on Form 10-Q for the quarter ended September 28,
1996, to be signed on its behalf by the undersigned
thereunto duly authorized.
Littelfuse, Inc.
Date: November 12, 1996 By /s/ James F. Brace
James F. Brace
Vice President, Treasurer,
and Chief Financial Officer
(As duly authorized officer and
as the principal financial and
accounting officer)
10
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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