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 June 29, 1996 OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OF 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 June 29, 1996, 9,969,579 shares of common stock, $.01
par value, of the Registrant and warrants to purchase 2,093,734
shares of common stock, $.01 par value, of the Registrant were
outstanding.
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 Financial Statements ............1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................6
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders..........9
Item 6. Exhibits and Reports on Form 8-K..............................10
Part I - Financial
Information
Item 1. CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
For the Three For the Six
Months Ended Months Ended
June 29, June 30, June 29, June 30,
1996 1995 1996 1995
Net sales $ 60,843 $ 56,949 $119,921 $112,403
Cost of sales 35,996 33,724 70,962 66,416
Gross profit 24,847 23,225 48,959 45,987
Selling, administrative
and general expenses 13,507 12,388 26,969 24,765
Amortization of intangibles 1,766 1,630 3,530 3,261
Operating income 9,574 9,207 18,460 17,961
Interest expense 1,185 1,083 2,164 2,257
Other income, net (105) (67) (362) (172)
Income before income taxes 8,494 8,191 16,658 15,876
Income taxes 3,058 2,946 5,997 5,636
Net income $ 5,436 $ 5,245 $ 10,661 $ 10,240
Net income per share $ 0.46 $ 0.42 $ 0.88 $ 0.82
Weighted average number of common
and common equivalent shares
outstanding 11,894 12,498 12,155 12,439
1
CONSOLIDATED CONDENSED
STATEMENTS OF FINANCIAL CONDITION
(In thousands)
June 29, Dec. 31,
1996 1995
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,891 $ 1,308
Accounts receivable 37,765 29,722
Inventories 30,337 30,076
Deferred income taxes 1,336 1,336
Prepaid expenses and other 2,528 2,581
Total current assets 73,857 65,023
Property, plant, and equipment, net 61,561 61,229
Reorganization value, net 46,543 48,056
Patents and other identifiable
intangible assets, net 25,887 27,971
Prepaid pension cost and other assets 3,572 2,907
$211,420 $205,186
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 28,676 27,390
Accrued income taxes 10,900 8,362
Current portion of long-term debt 10,267 10,065
Total current liabilities 49,843 45,817
Long-term debt, less current portion 54,598 40,804
Deferred income taxes 4,637 4,615
Minority Interest 403 568
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; 9,969,579
and 10,086,000 shares issued and outstanding 101 102
Cost of Treasury Stock, 1996 - 293,130 shares;
1995 - 110,000 shares (9,542) (3,533)
Additional paid-in capital 56,762 72,364
Notes receivable - common stock (571) (571)
Foreign translation adjustment (619) (120)
Retained earnings 55,808 45,140
Total shareholders' equity $101,939 $113,382
$211,420 $205,186
2
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
For the Three For the Six
Months Ended Months Ended
June 29, June 30, June 29, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating activities:
Net income $ 5,436 $ 5,245 $ 10,661 $ 10,240
Adjustments to reconcile
net income to net cash provided
by operating activities:
Depreciation 3,372 2,848 6,498 5,564
Amortization 1,746 1,631 3,530 3,262
Provision for bad debts 117 153 214 246
Deferred income taxes 22 - 22 -
Minority interest (71) - (141) -
Changes in operating assets
and liabilities:
Accounts receivable (2,293) (1,092) (8,586) (6,897)
Inventories (302) 743 (568) 1,619
Accounts payable and
accrued expenses 1,162 326 1,441 (271)
Other, net 819 659 2,853 3,015
Net cash provided by
operating activities 10,008 10,513 15,924 16,778
Cash used in investing
activities:
Purchases of property,plant, and
equipment, net (4,336) (4,443) (7,004) (6,827)
Cash used in financing activities:
Proceeds/(payments) of
long-term debt, net 11,987 (5,517) 13,957 (9,533)
Proceeds from exercise of
stock options 780 841 1,083 857
Purchase of common stock
and warrants (16,731) - (22,740) -
Other, net (654) (680) (654) (714)
(4,618) (5,356) (8,354) (9,390)
Effect of exchange rate
changes on cash 27 (17) 17 64
Increase in cash
and cash equivalents 1,081 697 583 625
Cash and cash equivalents at
beginning of period 810 1,190 1,308 1,262
Cash and cash equivalents at
end of period $1,891 $1,887 $1,891 $1,887
</TABLE>
3
Notes to Consolidated Condensed Financial Statements
(Unaudited)
June 29, 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 June 29, 1996 are not
necessarily indicative of the results that may be expected for
the fiscal year ending December 29, 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 June 29, 1996 are for the
period from March 30, 1996 to June 29, 1996.
2. Inventories
The components of inventories are as follows (in thousands):
June 29, December 31,
1996 1995
Raw material $ 8,934 $ 8,823
Work in process 3,366 3,445
Finished goods 18,037 17,808
Total $30,337 $30,076
3. Per Share Data
Net income per share amounts for the three months and six months
ended June 29, 1996 and 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):
4
Three months ended Six months ended
June 29, June 30, June 29, June 30,
1996 1995 1996 1995
Average shares outstanding 9,946 10,121 9,974 10,106
Net effect of dilutive
stock options and
warrants
- Primary 1,948 2,377 2,181 2,333
- Fully diluted 1,948 2,377 2,200 2,362
Average shares outstanding
- Primary 11,894 12,498 12,155 12,439
- Fully diluted 11,894 12,498 12,174 12,468
Net income $ 5,436 $ 5,245 $10,661 $10,240
Net income per share $ .46 $ .42 $ .88 $ . 82
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 June 29, 1996 the Company
had available $48.5 million of borrowing capability under the
revolver facility.
5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Sales increased 7 percent the second quarter of 1996 compared to
the second quarter of 1995. Sales were $60.8 million for the
quarter or $3.9 million higher than the second quarter of last
year. Operating income increased to $9.6 million for the quarter
compared to $9.2 million the second quarter of last year. Net
income was $5.4 million or $0.46 per share the second quarter of
1996 compared to $5.2 million or $0.42 per share the second
quarter of 1995.
Cash flow from operations was $10.0 million the second quarter of
1996. The Company repurchased 665,500 warrants for $16.7 million
and made capital investments of $4.3 million the second quarter
of 1996. As a result, long-term debt increased $12.0 million in
the quarter. The total long-term debt to equity ratio was 0.64
to 1 at June 29, 1996 compared to 0.45 to 1 at year end 1995 and
0.52 to 1 at June 30, 1995.
Second Quarter, 1996
Littelfuse enjoyed a sales increase of 7 percent to $60.8 million
this year from $56.9 million last year. The gross margin was
unchanged at 40.8 percent the second quarter of both years.
Operating income decreased to 15.7 percent of sales the second
quarter this year compared to 16.2 percent last year. Net income
increased 4 percent or slightly less than sales to $5.4 million
this year compared to $5.2 million last year. Earnings per share
increased 10% or slightly more than sales to $0.46 compared to
$0.42 due to fewer equivalent shares outstanding related to our
share repurchase program.
Second quarter 1996 sales grew $3.9 million compared to the same
quarter last year. Very strong consumer electronics market sales
spurred 27 percent sales growth in the Asia Pacific region.
Sales grew 4 percent in local currency and declined 5 percent in
dollars in the European Community with strong automotive OEM
sales and slightly lower electronics sales. Currency changes
reduced sales approximately $0.8 million compared to last year.
Respectable automotive and power fuse sales spurred 4 percent
sales growth in North America.
Electronic sales grew to $28.4 million in the second quarter 1996
from $27.0 million the same quarter of last year for an increase
of $1.4 million or 5 percent. Sales were particularly strong in
consumer electronics in Asia Pacific although they were weaker in
North America, Europe and personal computers market in Asia
Pacific. Automotive sales grew to $23.8 million in the second
quarter 1996 from $22.0 million the same quarter last year for an
increase of $1.8 million or 8 percent. The European automotive
OEM, the North American automotive OEM and aftermarket businesses
were relatively strong though slower than the first quarter.
Power fuse sales grew to $8.6 million in the second quarter 1996
from $8.0 million the same quarter last year for an increase of
$0.6 million or 8 percent. The Company believes that its
electrical business sales continue to grow faster than the
electrical industry in general.
6
Gross profit was $24.8 million or 40.8 percent of sales for the
second quarter 1996 compared to $23.2 million or 40.8 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 $13.5 million
or 22.2 percent of sales for the second quarter 1996, compared to
$12.4 million or 21.8 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 increased only slightly despite greater investment in
foreign sales effort and new system implementation activities.
The amortization of the reorganization value and other
intangibles was 2.9 percent of sales for the second quarter of
both years. Total S,G&A expenses including intangibles
amortization were 25.1 percent of sales the second quarter 1996
compared to 24.6 percent the same quarter last year.
Operating income was $9.6 million or 15.7 percent of sales for
the second quarter 1996 compared to $9.2 million or 16.2 percent
last year.
Interest expense was $1.2 million for the second quarter 1996
compared to $1.1 million last year due to the repurchasing of the
Company's warrants. Other income, net was $0.1 million both
quarters. Income before taxes was $8.5 million for the second
quarter 1996 compared to $8.2 million last year. Income taxes
were $3.1 million with an effective tax rate of 36 percent for
the second quarter 1996 compared to $2.9 million with an
effective tax rate of 36 percent the second quarter of last year.
Net income for the second quarter 1996 was $5.4 million or $0.46
per share compared to $5.2 million or $0.42 per share last year.
Six Months, 1996
Sales increased 7 percent for the first half of 1996 to $120.0
million from $112.4 million the first half of last year. Cash
provided by operations before interest expense was $17.1 million
and after interest expense was $15.9 million.
The sales trend in automotive has been very strong the first two
quarters of 1996. However, electronics sales were noticeably
lower in the first half of this year compared to the first half
of last year. First half electronic sales were up 4 percent at
$55.5 million compared to $53.6 million last year. Asia Pacific
Japan business has been very strong while the rest of Asia
Pacific, North America and Europe have been noticeably weaker
primarily due to lower production of personal computer and
related electronics items. Automotive sales were up 11 percent
at $47.9 million compared to $43.1 million last year. European
auto sales growth has been slightly stronger than domestic auto
sales growth so far this year. Power fuse sales were up 6
percent to $16.6 million from $15.6 million last year. This
business has benefited from market share gains.
7
The gross profit was 40.8 percent for the first half 1996
compared to 40.9 percent the first half of last year. The slight
decrease resulted from our European currency effects and Asia
Pacific expansion in China and Korea. North America margins have
improved this year due to favorable mix and tight operating
expense control.
Selling, general and administrative expenses were 22.5 percent of
sales for the first half 1996 compared to 22.0 percent of sales
last year. The increases are due to sales growth being slightly
less than the planned S,G &A expense increases, since our plan
assumed higher sales growth than we have actually achieved. The
amortization of intangibles was 2.9 percent of sales for the
first half of both years. Total S,G & A expenses including
intangibles amortization were 25.4 percent of sales the first
half 1996 compared to 24.9 percent of sales the first half of
last year.
Operating income was $18.5 million or 15.4 percent of sales the
first half 1996 compared to $18.0 million or 16.0 percent last
year.
Interest expense was $2.2 million the first half 1996 compared to
$2.3 million last year. Other income, net was $0.4 million the
first half of 1996 and $0.2 million the first half of 1995. As a
result, income before taxes was $16.7 million the first half 1996
compared to $15.9 million the first half of last year. Income
taxes were $6.0 million the first half 1996 compared to $5.6
million last year.
Net income the first half 1996 was $10.7 million or $.88 per
share compared to $10.2 million or $.82 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 both its operations
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 $15.9 million for the first half.
Cash used to invest in property, plant and equipment was $7.0
million. Cash used to repurchase stock and warrants was $22.7
million, proceeds of option exercises were $1.1 million, proceeds
of bank debt were $13.9 and other long-term items were $0.7
million for net financing of $8.4 million use of cash. The net
of cash provided by operations, less investing activities, less
financing activities resulted in an increase in cash of $0.6
million. This left the Company with a cash balance of
approximately $1.9 million at June 29, 1996.
The ratio of current assets to current liabilities was 1.5 to 1
at the end of the second quarter 1996 compared to 1.4 to 1 at
year end 1995 and 1.4 to 1 at the end of the second quarter 1995.
The days sales in receivables was approximately 56 days at the
end of the second quarter 1996 compared to 52 days at year end
1995 and 52 days at the end of the second quarter 1995. The
8
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 4.8 turns at the end of the second quarter
1996 compared to 4.1 turns at year end 1995 and 5.1 turns at the
end of the second quarter 1995.
The Company's capital expenditures were $7.0 million for the
first half 1996. The Company expects that capital expenditures,
which will be primarily for new machinery and equipment, will be
approximately $17.5 million in 1996. The ratio of total long-
term debt to equity was 0.64 to 1 at the end of the first half
1996 compared to 0.45 to 1 at year end 1995.
The long-term debt at the end of the first half 1996 consists of
four types totaling $64.9 million. They are as follows: (1)
private placement notes totaling $45.0 million, (2) bank
revolver facility totaling $16.5 million, (3) notes payable
relating to income taxes and mortgages totaling $1.3 million, and
(4) other long-term debt totaling $2.1 million. These four
items are offset by $10.3 million of the bank revolver, tax notes
and mortgage notes, which are considered to be current. This
leaves net long-term debt totaling $54.6 million at June 29,
1996. The private placement notes carry an interest rate of 6.31
percent and the revolver debt carries an interest rate of prime
or LIBOR plus 0.625%, which currently is approximately 6.2%.
The Company had available at June 29, 1996, a revolver facility
of $65.0 million of which $16.5 million was being used at June
29, 1996. The Company also has a $3.0 million letter of credit
facility of which approximately $1.9 million was being used at
June 29, 1996.
Other Matters
The Company and LaSalle National Bank, as Rights Agent, entered
into a First Amendment to Littelfuse Rights Plan Agreement on
August 1, 1996. The First Amendment (attached hereto as Exhibit
4.0) amends the definition of "Acquiring Person" in Section 1(a)
of the Rights Plan by providing that, for purposes of calculating
the threshold 15% of outstanding Common Shares, included in the
total number of Common Shares shall be the number of Common
Shares which may be purchased upon exercise of then outstanding
Warrants. The Warrants to purchase Common Shares of the Company
were issued pursuant to the Warrant Agreement dated December 20,
1991 between the Company and LaSalle National Trust, N.A., as
Warrant Agent.
PART II - OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security - Holders
The annual meeting of stockholders of Littelfuse, Inc.
(the "Company") was held on April 26, 1996. The
following matters were voted upon at this annual
meeting and the results of such vote are provided
below:
9
1. Election of five nominees to the Board of Directors to
serve terms of one year or until their successors are
elected:
(i) Howard B. Witt
Withhold Broker
For 7,936,804 Authority 46,086 Abstentions Nonvotes
(ii) Anthony Grillo
Withhold Broker
For 7,937,404 Authority 45,486 Abstentions Nonvotes
(iii) Bruce A. Karsh
Withhold Broker
For 7,937,504 Authority 45,386 Abstentions Nonvotes
(iv) John E. Major
Withhold Broker
For 7,937,504 Authority 45,386 Abstentions Nonvotes
(v) John J. Nevin
Withhold Broker
For 7,929,704 Authority 53,186 Abstentions Nonvotes
2. Approval and ratification of the Directors' appointment
of Ernst & Young LLP as the Company's independent auditors
for the year ending December 31, 1996
Broker
For 7,972,015 Against 3,850 Abstentions 7,025 Nonvotes
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibit 4.0 - First Amendment to Littelfuse Rights Plan
Agreement (Littelfuse Rights Plan Agreement filed as
Exhibit 1 to Form 8-A filed December 4,1996 (File No. 0-20388))
(b) There were no reports on Form 8-K during the quarter
ended June 29, 1996.
10
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 June 29, 1996, to be signed on
its behalf by the undersigned thereunto duly authorized.
Littelfuse, Inc.
Date: August 14, 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)
11
-2-
-1-
Exhibit 4.0
First Amendment
To
Littelfuse Rights Plan Agreement
This First Amendment is made and entered into as of the 1st day
of August, 1996, by and between Littelfuse, Inc., a Delaware
corporation (hereinafter referred to as the OCompanyO), and
LaSalle National Bank, as Rights Agent (hereinafter referred to
as the ORights AgentO);
W i t n e s s e t h:
Whereas, the Company and the Rights Agent have heretofore
executed that certain Littelfuse Rights Plan Agreement dated as
of December 15, 1995 (hereinafter referred to as the ORights
PlanO); and
Whereas, the Company and the Rights Agent wish to amend the
Rights Plan in certain respects, all in accordance with the terms
and provisions hereof;
Now, Therefore, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged and confessed, the parties hereto hereby
agree as follows:
1. The definition of OAcquiring PersonO contained in the Rights
Plan is hereby amended by adding the following language to the
end of the first sentence of Section 1(a) of the Rights Plan:
; provided, however, that for purposes of calculating said 15%,
there shall be included in the number of Common Shares of the
Company then outstanding the number of Common Shares of the
Company into which the then outstanding Warrants to purchase
Common Shares of the Company issued pursuant to that certain
Warrant Agreement dated December 20, 1991, between the Company
and LaSalle National Trust, N.A., as Warrant Agent, are then
exercisable.
2. Except as specifically amended hereby the Rights Plan shall
remain unchanged and continue in full force and effect.
In Witness Whereof, the parties hereto have executed this First
Amendment to Littelfuse Rights Plan Agreement as of the day and
year first above written.
Littelfuse, Inc.
By /s/ James F. Brace
Its Vice President, Treasurer & Chief Financial Officer
LaSalle National Bank, as Rights Agent
By /s/ Laura Mackey
Its Assistant Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000889331
<NAME> LITTELFUSE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> JUN-29-1996
<CASH> $1,891
<SECURITIES> 0
<RECEIVABLES> 37,765
<ALLOWANCES> 0
<INVENTORY> 30,337
<CURRENT-ASSETS> 73,857
<PP&E> 61,561
<DEPRECIATION> 6,498
<TOTAL-ASSETS> $211,420
<CURRENT-LIABILITIES> 49,843
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> (9,542)
<TOTAL-LIABILITY-AND-EQUITY> $211,420
<SALES> $60,843
<TOTAL-REVENUES> 60,843
<CGS> 35,996
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,164
<INCOME-PRETAX> 16,658
<INCOME-TAX> 5,997
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<EXTRAORDINARY> 0
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