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 27, 1997 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 27, 1997, 19,959,840 shares of common
stock, $.01 par value, of the Registrant and warrants to
purchase 3,818,302 shares of common stock, $.01 par value,
of the Registrant were outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Consolidated Condensed Statements of
Income, Financial Condition, and Cash Flows
and Notes to the Consolidated Condensed
Financial
Statements (unaudited)
............................................................
....... 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
<TABLE>
CONSOLIDATEDCONDENSED
STATEMENTS OFINCOME
<CAPTION>
(In thousands, except per share data)
(Unaudited)
For the three For the Nine
Months Ended Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $68,993 $60,483 $204,404 $180,404
Cost of sales 41,133 35,948 121,116 106,910
Gross profit 27,860 24,535 83,288 73,494
Selling, administrative and
general expenses 14,853 13,139 44,423 40,108
Amortization of intangibles 1,787 1,763 5,293 5,293
Operating income 11,220 9,633 33,572 28,093
Interest expense 1,165 1,111 2,989 3,275
Other income, net (123) (189) (488) (551)
Income before income taxes 10,178 8,711 31,071 25,369
Income taxes 3,766 3,136 11,496 9,133
Net income $6,412 $5,575 $19,575 $16,236
Net income per share
- Primary $ 0.27 $ 0.24 $ 0.82 $ 0.67
- Fully Diluted $ 0.27 $ 0.24 $ 0.81 $ 0.67
Weighted average number of
common and common equivalent
shares outstanding - Primary 23,914 23,612 23,821 24,072
</TABLE>
1
<TABLE>
CONSOLIDATED CONDENSED
STATEMENTS OF FINANCIAL CONDITION
(In thousands)
September 27, December 28,
1997 1996
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 251 $ 1,427
Accounts receivable 44,572 35,468
inventory 40,441 31,586
Deferred income taxes 3,100 3,100
Prepaid expenses and other 2,128 2,228
Total current assets 90,492 73,809
Property, plant, and equipment, net 70,191 63,889
Reorganization value, net 42,404 44,635
patents and other identifiable intangible
assets, net 23,751 23,978
Prepaid pension cost and other assets 4,961 3,640
$ 231,799 $ 209,951
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 37,188 $ 30,264
Accrued income taxes 9,856 10,775
Current portion of long-term debt 11,426 10,005
Total current liabilities 58,470 51,044
Long-term debt, less current portion 45,742 44,556
Deferred income taxes 5,416 5,417
Minority interest 306 312
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:
34,000,000 shares authorized; 19,959,840
and 19,775,358 shares issued
and outstanding 200 198
Additional paid-in capital 52,893 43,889
Notes receivable - common stock (1,954) (1,470)
Foreign translation adjustment (2,590) (870)
Retained earnings 73,316 66,875
Total shareholders' equity 121,865 108,622
$ 231,799 $ 209,951
</TABLE>
2
<TABLE>
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the three For the Nine
Months Ended Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Operating activities:
Net income $ 6,412 $ 5,575 $ 19,575 $ 16,236
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 3,201 3,634 9,781 10,132
Amortization 1,787 1,763 5,293 5,293
Provision for bad debts 120 108 371 322
Deferred income taxes 52 - (1) 22
Minority interest (102) (60) (115) (201)
Changes in operating assets and liabilities:
Accounts receivable (158) (2,489) (8,955) (11,075)
Inventories (3,221) (1,504) (8,363) (2,072)
Accounts payable and
accrued expenses 717 146 5,546 1,887
Other, net (491) 502 (534) 3,355
Net cash provided by operating activities 8,317 7,675 22,598 23,899
Cash used in investing activities:
Purchases of property, plant and
equipment,net (5,208) (4,418) (12,545) (12,376)
Acquisition of business, net - - (5,060) -
(5,208) (4,418) (17,605) (12,376)
Cash used in financing activities:
(Payments)/proceeds of long-term
debt,net (4,330) (2,017) (1,209) 11,940
Proceeds from exercise of
stock options 953 1 1,453 1,084
Purchase of common stock
and warrants - (2,660) (6,147) (25,400)
(3,377) (4,676) (5,903) (12,376)
Effect of exchange rate changes on cash (7) 72 (266) 89
Decrease in cash and cash equivalents (275) (1,347) (1,176) (764)
Cash and cash equivalents at beginning
of period 526 1,891 1,427 1,308
Cash and cash equivalents at end
ofperiod $ 251 $ 544 $ 251 $ 544
</TABLE>
3
Notes to Consolidated Condensed Financial Statements
(Unaudited)
September 27, 1997
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 27, 1997 are not necessarily
indicative of the results that may be expected for the
fiscal year ending January 3, 1998. For further
information, refer to the Company's consolidated financial
statements and the notes thereto as of December 28, 1996,
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 27, 1997 are for the period
from June 29, 1997 to September 27, 1997.
2. Inventories
The components of inventories are as follows (in thousands):
<TABLE>
September 27, December 28,
1997 1996
<S> <C> <C>
Raw material $10,250 $ 8,411
Work in process 3,81 3 3,263
Finished goods 26,378 19,912
Total $40,441 $31,586
</TABLE>
4
3. Per Share Data
Net income per share amounts for the three months and nine
months ended September 27, 1997 and September 28, 1996 are
based on the weighted average number of common and common
equivalent shares outstanding during the periods and reflect
adjustment for the two-for-one stock split in the first half
of 1997 as follows (in thousands, except per share data):
<TABLE>
Three months ended Nine months ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Average shares outstanding 19,887 19,852 19,777 19,916
Net effect of dilutive
stock options and warrants
- Primary 4,027 3,760 4,044 4,156
- Fully diluted 4,154 3,814 4,314 4,218
Average shares outstanding
- Primary 23,914 23,612 23,821 24,072
- Fully diluted 24,041 23,666 24,091 24,134
Net income $ 6,412 $ 5,575 $19,575 $16,236
Net income per share
- Primary $ 0.27 $ 0.24 $ 0.82 $ 0.67
- Fully diluted $ 0.27 $ 0.24 $ 0.81 $ 0.67
</TABLE>
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 $65.0 million 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 27, 1997 the Company had available $41.0
million of borrowing capability under the revolver
facility.
4
5. Recently Issued Accounting Standard
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings per Share, which is
required to be adopted by the Company for interim and annual
periods beginning in fiscal year 1998. At that time, the
Company will be required to change the method currently used
to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating basic
earnings per share, the dilutive effect of warrants and
stock options will be excluded. The adoption of Statement
128 is expected to result in basic earnings per share being
higher than the previously reported primary earnings per
share for the third quarters ended September 27, 1997 and
September 28, 1996 by $0.05 and $0.04 per share,
respectively. The impact of Statement 128 on the
calculation of fully diluted earnings per share for these
quarters is not expected to be material.
5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Sales increased 14 percent the third quarter of 1997 to
$69.0 million compared to $60.5 million the third quarter of
1996. Operating income increased 16 percent to $11.2
million for the quarter compared to $9.6 million the third
quarter of last year. Net income increased 15 percent to
$6.4 million for the quarter compared to $5.6 the third
quarter of last year. After adjusting for the two-for-one
stock split in the first half of 1997, earnings per share
increased 13 percent to $0.27 compared to $0.24 per share
the third quarter of 1996.
Cash flow from operations was $8.3 million the third quarter
of 1997. The Company made capital investments of $5.2
million during the third quarter. The debt to equity ratio
was 0.47 to 1 at September 27, 1997 compared to 0.50 to 1 at
year end 1996 and 0.60 to 1 at September 28, 1996.
Third Quarter, 1997
Littelfuse enjoyed a 14 percent sales increase the third
quarter 1997 compared to the same period last year. The
gross margin was 40.4 percent the third quarter this year
compared to 40.6 percent last year. Operating income
increased to 16.3 percent of sales the third quarter this
year from 15.9 percent last year. Net income increased 15
percent the third quarter this year compared to last year.
Earnings per share increased 13 percent to $0.27 compared to
$0.24, after adjusting for the two-for-one stock split in
the first half of 1997.
Third quarter 1997 sales grew $8.5 million compared to the
same quarter last year. Strong sales in both electronics
and auto OEM spurred 10 percent sales growth in North
America. Strong electronics sales growth was partially
offset by slightly weaker auto OEM sales in Europe.
Although European sales grew by 10 percent in local currency
they were down 1 percent in US dollars for the quarter.
Very strong electronics sales in Southeast Asia and sales
from our recent acquisition in Korea spurred 37 percent
sales growth in Asia Pacific.
Electronics sales grew to $34.8 million in the third quarter
1997 from $27.8 million the same quarter of last year for an
increase of $7.0 million or 25 percent. Electronics sales
growth was very strong in all areas except Japan. Personal
computer, telecommunications and ballast applications sales
were strong worldwide and resettable fuse sales volume is
starting to increase. Automotive sales grew to $24.5 million
in the third quarter 1997 from $23.2 million the same
quarter last year for an increase of $1.3 million or 6
percent. The North American and Asian areas showed strong
auto OEM sales growth. This strength was partially offset
by slightly weaker European auto OEM sales reduced even
further by currency translation this year compared to last
year for the quarter.
6
Power fuse sales grew to $9.7 million in the third quarter
1997 from $9.5 million the same quarter last year for an
increase of $0.2 million or 2 percent. The Company believes
that its electrical business sales continue to grow greater
than the electrical industry in general.
Gross profit was $27.9 million or 40.4 percent of sales for
the third quarter 1997 compared to $24.5 million or 40.6
percent last year. European margins improved slightly
compared to last year, while North American margins were
held relatively flat by resettable fuse start up expenses.
Asia Pacific margins declined slightly due to the China
operations and the assimilation of the two Korean
operations.
Selling, general and administrative expenses were $14.9
million or 21.5 percent of sales for the third quarter 1997,
compared to $13.1 million or 21.7 percent of sales for the
same quarter last year. The S,G&A expenses as a percent of
sales decreased slightly due to lower selling and R&D
expense as a percent of sales for the quarter. The
amortization of the reorganization value and other
intangibles was 2.6 percent of sales for the third quarter
1997 and 2.9 percent of sales for the third quarter of last
year. Total S,G&A expenses including intangibles
amortization were 24.1 percent of sales the third quarter
1997 compared to 24.6 percent the same quarter last year.
Operating income was $11.2 million or 16.3 percent of sales
for the third quarter 1997 compared to $9.6 million or 15.9
percent last year.
Interest expense was $1.2 million for the third quarter 1997
compared to $1.1 million last year primarily due to the
Company's acquisition of Samjoo in Korea and the Company's
stock repurchase programs in the first six months of this
year. Other income, net, was $0.1 million for the third
quarter compared to $0.2 million last year. Income before
taxes was $10.2 million for the third quarter 1997 compared
to $8.7 million last year. Income taxes were $3.8 million
with an effective tax rate of 37 percent for the third
quarter 1996 compared to $3.1 million with an effective tax
rate of 36 percent the third quarter of last year.
Net income for the third quarter 1997 was $6.4 million or
$0.27 per share compared to $5.6 million or $0.24 per share
last year.
Nine Months, 1997
Sales increased 13 percent to $204.4 million from $180.4
million last year. Cash provided by operations before
interest expense was $25.6 million and after interest
expense was $22.6 million. Earnings per share increased 22
percent to $0.82 the first nine months of 1997 compared to
$0.67 for the same period last year.
The electronics sales trend has been very strong for the
first nine months of 1997. However, auto growth has been
slower primarily due to European currency translation and
slow worldwide aftermarket sales. Power fuse sales growth
has been slower this
year partially due to no growth in the industry.
7
Nine months electronics sales were up 22 percent at $101.2
million compared to $83.3 million last year. Asia Pacific
electronic sales have been very strong, particularly
personal computer and ballast business in Southeast Asia.
North American and European electronics sales have also has
been strong particularly in telecommunications. Automotive
sales were up 7 percent at $76.0 million compared to $71.0
million last year. North American auto OEM business has
been strong while both North American and European
aftermarket sales have been sluggish. Power fuse sales were
up 4 percent to $27.2 million from $26.2 million last year.
This business has been growing more slowly the last year and
a half.
Gross profit was 40.7 percent or $83.3 million for the first
nine months of 1997 compared to 40.7 percent or $73.5
million the first nine months of last year. While margin
improvements have been made in both North American and
European recurring businesses, our investments in
resettables, China and the new Korea operations essentially
have offset these improvements.
Selling, general and administrative expenses were 21.7
percent of sales for the first nine months 1997 compared to
22.2 percent of sales last year. Both selling and R&D
expenses have declined as a percent of sales during the
first nine months of this year. The amortization of
intangibles was 2.6 percent of sales for the first nine
months 1997 compared to 2.9 percent last year. Total S,G &
A expenses including intangibles amortization were 24.3
percent of sales the first nine months 1997 compared to 25.2
percent of sales the first nine months of last year.
Operating income was $33.6 million or 16.4 percent of sales
the first nine months 1997 compared to $28.1 million or 15.6
percent last year.
Interest expense was $3.0 million the first nine months 1997
compared to $3.3 million the first nine months of last year.
Other income, net was $0.5 million the first nine months
1997 compared to $0.6 million last year. Income before
taxes was $31.1 million the first nine months 1997 compared
to $25.4 million the first nine months of last year. Income
taxes were $11.5 million the first nine months 1997 compared
to $9.1 million last year. The year to date effective tax
rate is 37 percent for 1997 compared to 36 percent last
year.
Net income the first nine months 1997 was $19.6 million
compared to $16.2 million last year. Earnings per share the
first nine months of 1997 increased 22 percent to $0.82 per
share compared to $0.67 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.
8
Littelfuse started the 1997 year with $ 1.4 million of cash.
Net cash provided by operations was $22.6 million for the
first nine months. Cash used to invest in property, plant
and equipment was $12.5 million, as well as foreign
investment of $5.1 million. Cash used to repurchase stock
and warrants was $6.1 million, proceeds of option exercises
were $1.5 million, and payments of bank debt were
$1.2 million for net
financing of $5.9 million use of cash. The net of
cash provided by operations, less investing activities,
less financing activities resulted in a decrease in cash of
$1.2 million. This left the Company with a cash balance of
approximately $0.3 million at September 27, 1997.
The ratio of current assets to current liabilities was 1.5
to 1 at the end of the third quarter 1997, 1.4 to 1 at year
end 1996, and 1.5 to 1 at the end of the third quarter 1996.
The
days sales in receivables was approximately 59 days at the
end of the third quarter 1997
compared to 51 days at year end 1996 and 59 days at the end
of the third quarter 1996. 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 days inventory outstanding
was approximately 89 days at the end of the third quarter
1997 compared to 79 days at year end 1996 and 81 days at the
end of the third quarter 1996. The higher days inventory
outstanding is primarily due to resettables and auto OEM
fuses. Sales of each were lower than originally projected
for the third quarter.
The Company's capital expenditures were $12.5 million for
the first nine months 1997. In addition, the Company made
year to date foreign investments of $5.1 million. The
Company expects that capital expenditures, which will be
primarily for new machinery and equipment, will total
approximately $21.0 million in 1997. The ratio of total
long-term debt to equity was 0.38 to 1 at the end of the
first nine months 1997 compared to 0.41 to 1 at year end
1996.
The long term debt at the end of the first nine months 1997
consists of four types totaling $57.2 million. They are as
follows: (1) private placement notes totaling $27.0
million, (2) bank revolver borrowings totaling $24.0
million, (3) notes payable relating to income taxes and
mortgages totaling $1.3 million, and (4) other long-term
debt totaling $4.9 million. These four items include $11.4
million of the bank revolver borrowings, tax and mortgage
notes, and other long-term items which are considered to be
current. This leaves net long term debt totaling $45.7
million at September 27, 1997. 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 6.4%. The Company had
$41.0 million available at September 27, 1997, under its
revolver facility. The Company also has a $3.0 million
letter of credit facility of which approximately $1.8
million was being used at September 27, 1997.
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
27, 1997.
9
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 27, 1997
to be signed on its behalf by the undersigned thereunto duly
authorized.
Littelfuse, Inc.
Date: November 11, 1997 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
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000889331
<NAME> LITTELFUSE, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> SEP-27-1997
<CASH> $251
<SECURITIES> 0
<RECEIVABLES> 44,572
<ALLOWANCES> 0
<INVENTORY> 40,441
<CURRENT-ASSETS> 90,492
<PP&E> 70,191
<DEPRECIATION> 9,781
<TOTAL-ASSETS> 231,799
<CURRENT-LIABILITIES> 58,470
<BONDS> 0
0
0
<COMMON> 200
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 231,799
<SALES> 204,404
<TOTAL-REVENUES> 204,404
<CGS> 121,116
<TOTAL-COSTS> 0
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<INCOME-TAX> 11,496
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</TABLE>
