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 April 4, 1998 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 April 4, 1998, 20,978,912 shares of common stock, $.01 par value,
of the Registrant and warrants to purchase 2,744,663 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 Operations,
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>
<TABLE>
Part I - Financial Information
Item 1.
CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
For the Three
Months Ended
April 4, March 28,
1998 1997
<S> <C> <C>
Net sales $ 69,331 $ 65,583
Cost of sales 42,739 38,764
Gross profit 26,592 26,819
Selling, administrative and general
expenses 15,533 14,490
Amortization of intangibles 1,888 1,747
------ ------
Operating income 9,171 10,582
Costs associated with consolidation of operations 716 -
Interest expense 843 903
Other income, net (80) (275)
-------- -------
Income before income taxes 7,692 9,954
Income taxes 1,866 3,687
Net income $ 5,826 $ 6,267
========== ==========
Net income per share
- Basic $ 0.29 $ 0.32
========= =========
- Diluted 0.25 0.27
========= =========
Weighted average number of common
And common equivalent shares outstanding
- Basic 20,187 19,711
========== =========
- Diluted
23,611 23,563
========== =========
</TABLE>
1
<PAGE>
<TABLE>
CONSOLIDATED CONDENSED
STATEMENTS OF FINANCIAL CONDITION
(In thousands)
April 4, Jan. 3
1998 1998
----------- ------------
(unaudited)
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 43 $ 755
Accounts receivable 43,038 37,458
Inventories 38,216 39,075
Deferred income taxes 3,672 3,672
Prepaid expenses and other 3,657 2,896
------- ----------
Total current assets 88,626 83,856
Property, plant, and equipment, net 73,620 70,763
Reorganization value, net 40,455 41,202
Patents and other identifiable intangible 21,645 22,786
assets, net
Prepaid pension cost and other assets 3,029 3,278
-------- ---------
$227,375 $221,885
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 32,521 $ 31,601
Accrued income taxes 10,007 9,952
Current portion of long-term debt 9,631 10,172
--------- ---------
Total current liabilities 52,159 51,725
Long term debt, less current portion 36,281 40,385
Deferred income taxes 6,205 6,205
Minority Interest 18 65
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; 20,978,912
and 19,843,140 shares issued and outstanding 210 199
Additional paid-in capital 57,377 52,540
Notes receivable - common stock (1,960) (1,960)
Foreign translation adjustment (4,463) (4,767)
Retained earnings 81,548 77,493
---------- ---------
Total shareholders' equity $132,712 $123,505
---------- ---------
$227,375 $221,885
========== =========
</TABLE>
2
<PAGE>
<TABLE>
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
For the Three
Months Ended
April 4, March 28,
1998 1997
Operating activities:
<S> <C> <C>
Net income $ 5,826 $ 6,267
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 3,324 3,331
Amortization 1,888 1,747
Provision for bad debts 317 124
Minority interest (59) (64)
Changes in operating assets and liabilities:
Accounts receivable (5,706) (7,813)
Inventories 1,017 (1,885)
Accounts payable and accrued expenses 668 5,972
Other, net (350) (360)
----------- ----------
Net cash provided by operating activities 6,925 7,319
Cash used in investing activities:
Purchases of property, plant, and
equipment, net (5,713) (2,533)
Cash used in financing activities:
Payments of long-term debt, net (4,939) (2,051)
Proceeds from exercise of stock options and warrants 4,705 156
Purchase of common stock (1,639) (2,271)
----------- ----------
(1,873) (4,166)
Effect of exchange rate changes on cash (51) (44)
Increase/(Decrease) in cash and cash equivalents (712) 576
Cash and cash equivalents at Beginning of period 755 1,427
Cash and cash equivalents at end of period $ 43 $ 2,003
=========== ==========
</TABLE>
3
<PAGE>
Notes to Consolidated Condensed Financial Statements
(Unaudited)
April 4, 1998
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
of normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the period ended April 4, 1998 are not
necessarily indicative of the results that may be expected for the year ending
January 2, 1999. For further information, refer to the Company's consolidated
financial statements and the notes thereto incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended January 3, 1998.
The Company's fiscal year end is the Saturday nearest December 31. Additionally,
the Company reports its quarterly interim financial information on the basis of
periods of thirteen weeks. The consolidated condensed statements of operations
and cash flows for the three months ended April 4, 1998 are for the period from
January 4, 1998 to April 4, 1998, and for the three months ended March 28, 1997
are for the period from December 29, 1996 to March 28, 1997.
2. Inventories
The components of inventories are as follows (in thousands):
<TABLE>
April 4, January 3,
1998 1998
<S> <C> <C>
Raw material $ 8,904 $ 8,788
Work in process 4,089 3,556
Finished goods 25,223 26,731
-------- --------
Total $ 38,216 $ 39,075
======== ========
</TABLE>
4
<PAGE>
3. Per Share Data
Net income per share amounts for the three months ended April 4, 1998 and March
28, 1997 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):
<TABLE>
Three months ended
April 4, March 28,
1998 1997
----- -----
<S> <C> <C>
Average shares outstanding 20,187 19,711
Net effect of dilutive stock options,
warrants and restricted shares
- Basic - -
---------- ------
- Diluted 3,424 3,852
---------- ------
Average shares outstanding
- Basic 20,187 19,711
====== =======
- Diluted 23,611 23,563
====== =======
Net income $ 5,826 $ 6,267
======= ========
Net income per share
- Basic $ .29 $ .32
========= =========
- Diluted $ .25 $ .27
========= =========
</TABLE>
4. Long Term Debt
The Company concluded a financing package on August 31, 1993. The package
consists of a Note Purchase Agreement which requires principal payments of
$9,000,000 payable annually beginning August 31, 1996 through August 31, 2000.
The package also includes a bank Credit Agreement providing for an open revolver
line of credit of $65,000,000 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 April 4, 1998 the Company had available
$48.5 million of borrowing capability under the revolver facility.
5. Comprehensive Income
In accordance with Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income", total comprehensive income for the three
months ended April 4, 1998 and March 28, 1997 was approximately $5.5 million and
$7.3 million respectively. The adjustment for comprehensive income is related to
the Company's foreign currency translation.
5
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Sales increased 6 percent to $69.3 million the first quarter of 1998, compared
to $65.6 million the first quarter of 1997. Sales in constant currency increased
11 percent and would have been $6.9 million higher than last year, rather than
the $3.7 million sales increase reported. Operating income decreased to $9.2
million for the quarter compared to $10.6 million the first quarter of last
year. Net income was $5.8 million or $0.25 per diluted share the first quarter
of 1998 compared to $6.3 million or $0.27 per diluted share the first quarter
1997.
Cash flow from operations was $6.9 million the first quarter 1998. The Company
repurchased 68,000 shares of its common stock for $1.6 million and made capital
investments of $5.7 million during the first quarter. The long term debt to
equity ratio was 0.3 to 1 at April 4, 1998 compared to 0.4 to 1 at year end 1997
and March 28, 1997.
First Quarter, 1998
Littelfuse sales increased 6 percent to $69.3 million the first quarter this
year compared to $65.6 million last year. The gross margin was 38.4 percent this
year compared to 40.9 percent last year. Operating income decreased to 13.2
percent of sales the first quarter this year compared to 16.1 percent last year.
Net income decreased 7 percent to $5.8 million this year compared to $6.3
million last year and earnings per share decreased 7 percent to $.25 this year
compared to $.27 per share last year.
First quarter 1998 sales grew $3.7 million compared to the same quarter last
year. Below normal automotive sales resulted in sales growth in North America of
only 3 percent. Sales grew 18 percent in local currency and 9 percent in dollars
in Europe based upon strong electronics and automotive OEM sales. Strong
electronics sales everywhere except Japan spurred 28 percent sales increase in
constant currency and 12 percent sales increase in dollars in the Asia Pacific
region.
Our regions have been redefined so that the Middle East is now a part of Europe.
This moves about $0.5 million of sales per quarter and $1.8 million for the year
from our Asia Pacific region to our Europe region. We made the change when we
issued our 1997 annual report. However, when we issued the first quarter press
release sales percentage changes for Europe and Asia Pacific this change was not
reflected. The correct numbers are reflected above. The product line sales
increase percentages were not effected.
Electronic sales grew to $34.6 million in the first quarter 1998 from $32.1
million the same quarter of last year for an increase of $2.5 million or 8
percent. Electronic sales growth was about half the historical rate. Electronic
sales in Europe and South Asia were quite strong. However, our Japanese
electronics stocking representative and our North
6
<PAGE>
American electronics distributors reduced their inventories during the quarter.
Automotive sales grew to $25.2 million in the first quarter 1998 from $24.7
million the same quarter last year for an increase of $0.5 million or 2 percent.
European automotive OEM businesses were very strong, but European currency
exchange rate against the US dollar and weak North American automotive OEM sales
resulted in lower net sales growth for the quarter. Power fuse sales grew to
$9.5 million in the first quarter 1998 from $8.8 million the same quarter last
year for an increase of $0.7 million or 8 percent. The Company continues to
improve its market share in this segment.
Gross profit was $26.6 million or 38.4 percent of sales for the first quarter
1998 compared to $26.8 million or 40.9 percent last year. Margins declined in
North America and Europe. The primary cause of the decline in gross margin was
underabsorption of labor and overhead in North America. The company was staffed
and equipped to support $5 million more sales than were shipped, while inventory
was reduced $1 million. The other two contributors were unfavorable relative
currency costs for electronics product made in England and the United States and
sold to continental Europe and slightly greater than normal average selling
price reductions.
Selling, general and administrative expenses were $15.5 million or 22.4 percent
of sales for the first quarter 1998, compared to $14.5 million or 22.1 percent
of sales for the same quarter last year. Selling expenses accounted for
approximately sixty-three percent of the expenses both quarters. The S,G&A
expenses as a percent of sales increased slightly due to lower than historical
sales growth and to greater investment in foreign sales effort. The amortization
of the reorganization value and other intangibles was 2.7 percent of sales for
the first quarter of 1998, unchanged from the first quarter of 1997. Total S,G&A
expenses, including intangibles amortization, were 25.1 percent of sales the
first quarter 1998 compared to 24.8 percent the same quarter last year.
Operating income was $9.2 million or 13.2 percent of sales for the first quarter
1998 compared to $10.6 million or 16.1 percent of sales last year.
Interest expense was $0.8 million the first quarter of this year compared to
$0.9 million the first quarter last year. Other income, net, was $0.1 million
for the first quarter of 1998 compared to $0.3 million the first quarter last
year.
Costs associated with consolidation of operations were $0.7 million in the first
quarter compared to zero the prior year. These costs relate to the consolidation
of our two Korean operations during the first half of 1998 and have all been
included in the first quarter. These costs include the accelerated recognition
of future liabilities of our first Korean acquisition, Sam Hwa, as we are
liquidating that operation as part of the consolidation.
Income before taxes was $7.7 million for the first quarter 1998 compared to
$10.0 million last year. Income taxes were $1.9 million with an effective tax
rate of 24 percent for the first quarter 1998 compared to $3.7 million with an
effective tax rate of 37 percent the first quarter of last year. The effective
tax rate was reduced due the accumulated losses of Sam Hwa becoming tax
deductible for the quarter. The company expects its effective rate will be 37
percent for the remaining quarters of this year.
7
Net income for the first quarter 1998 was $5.8 million or $0.25 per diluted
share compared to $6.3 million or $0.27 per diluted 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 1998 year with $0.8 million of cash. Net cash provided by
operations was $6.9 million for the first three months. Cash used to invest in
property, plant and equipment was $5.7 million. Cash used to repay long term
debt and to repurchase stock was $6.6 million. In addition, proceeds from
warrant and stock option exercises were $4.7 million, resulting in net financing
activities use of cash of $1.9 million. The net of cash provided, less investing
activities and financing activities, resulted in a decrease in cash of $0.7
million. This left the Company with a cash balance of approximately $0.1 million
at April 4, 1998.
The ratio of current assets to current liabilities was 1.7 to 1 at the end of
the first quarter 1998 compared to 1.6 to 1 at year end 1997 and 1.5 to 1 at the
end of the first quarter 1997. The days sales in receivables was approximately
55 days at the end of the first quarter 1998 compared to 56 days at year end
1997 and 54 days at first quarter end 1997. The days inventory outstanding was
approximately 81 days at first quarter end 1998 compared to 90 days at year end
1997 and 80 days at first quarter end 1997. The company has worked to keep
working capital under control even during this lower than normal sales growth
period.
The Company's capital expenditures were $5.7 million for the first quarter 1997.
The Company expects that capital expenditures, which will be primarily for new
machinery and equipment, will be approximately $21.5 million in 1998. The ratio
of long term debt to equity was 0.3 to 1 at the end of the first quarter 1998
compared to 0.3 to 1 at year end 1997 and 0.4 to 1 at the end of the first
quarter of 1997. The debt to equity ratio has stayed relatively constant as the
free cash flow has been used to repurchase shares and warrants.
The long term debt at the end of the first quarter 1998 consisted of five types
totaling $45.9 million. They are as follows: (1) private placement notes
totaling $27.0 million, (2) US revolver borrowings totaling $16.5 million, (3)
foreign revolver borrowings totaling $0.5 million (4) notes payable relating to
mortgages totaling $0.7 million, and (5) other long term debt totaling $1.2
million. These five items include $9.6 million of the bank revolver plus the tax
notes and mortgage notes, which are considered to be current liabilities. This
leaves net long term debt totaling $36.3 million at April 4, 1998. The private
placement notes carry an interest rate of 6.31%. The Company had available at
April 4, 1998, a revolver facility of $48.5 million. The bank revolver loan
notes carry an interest rate of prime or LIBOR plus 0.5%, which currently is
approximately 6.4%. The Company also has a $3.0 million letter of credit
facility, of which approximately $1.8 million was being used at April 4, 1998.
8
Year 2000
The Company is currently in the process of evaluating its computer software and
databases to determine whether or not modifications will be required to prepare
the Company's computer systems for the year 2000. These problems, which have
been widely reported in the media, could cause malfunctions in certain software
and databases with respect to dates on or after January 1, 2000, unless
corrected. At this time, the Company has not yet completed its evaluation of the
cost to modify its computer software or databases.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995.
The following commentary presents management's discussion and analysis of the
Company's financial condition and results of operations for the periods
presented. Certain of the statements included below, including those regarding
future financial performance or results or those that are not historical facts,
are or contain "forward-looking" information as that term is defined in the
Securities Exchange Act of 1934, as amended. The words "expect," "believe,"
"anticipate," "project," "estimate," and similar expressions are intended to
identify forward-looking statements. The Company cautions readers that any such
statements are not guarantees of future performance or events and such
statements involve risks, uncertainties and assumption, including, but not
limited to, product demand and market acceptance risks, the effect of economic
conditions, the impact of competitive products and pricing, product development
and patent protection, commercialization and technological difficulties,
capacity and supply constraints or difficulties, actual purchases under
agreements, the effect of the company's accounting policies, and other factors
discussed above and in the Company's Annual Report on Form 10-K for the year
ended January 3, 1998. 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 review 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 3, 1998.
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibit Description
Exhibit No. 27 Financial Data Schedule
(b) There were no reports on Form 8-K during the quarter ended
April 4, 1998.
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 April 4, 1998, to be signed on its behalf by the undersigned thereunto
duly authorized.
Littelfuse, Inc.
Date: May 15, 1998 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
<PAGE>
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<NAME> LITTELFUSE, INC
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