Littelfuse Reports Record Sales and Cash Flow for Second Quarter
DES PLAINES, Ill.--Aug. 9, 2006--Littelfuse, Inc. today reported second quarter 2006 results which included record sales and cash flow from operating activities.Second Quarter Highlights
-- Sales of $137.9 million for the second quarter of 2006 were up 19% compared to the prior-year quarter due to strong performance across all geographies. Electronics end markets were particularly strong, while the automotive and electrical markets also contributed to the increase. Sales grew 10% sequentially (9% excluding a partial quarter of sales from the Concord Semiconductor acquisition) compared to guidance of 5% to 8% sequential growth.
-- Diluted earnings per share were $0.02 for the second quarter of 2006 compared to $0.19 per diluted share for the second quarter of 2005. Earnings for the second quarter of 2006 included pre-tax charges of $17.1 million and $2.8 million related to the closure of the Ireland plant and write-down of Heinrich real estate in Germany, respectively. Earnings also included a tax benefit of $2.8 million, partially offset by tax charges of $0.9 million. The tax benefit related to the recognition of certain net operating losses acquired as part of the Teccor acquisition.
-- Adjusted operating margin (see Supplemental Information schedule) improved to 12.4% in the second quarter of 2006 compared to adjusted operating margin of 7.3% for the second quarter of 2005.
-- Cash flow from operating activities was $25.7 million for the second quarter of 2006 compared to $12.1 million for the prior year quarter. This reflects improvements in profitability and working capital performance.
-- The book-to-bill ratio for electronics for the second quarter of 2006 was 1.03. This is down from 1.17 for the first quarter but still indicative of a generally healthy market environment.
-- Overall capacity utilization for electronics is currently running at approximately 85%, with capacity utilization for Teccor products also at about 85%.
-- The company has announced five acquisitions so far in 2006. SurgX, Concord Semiconductor, Catalina and SRC have all closed. The Song Long transaction is awaiting Chinese government approval and is expected to close in the fourth quarter of 2006. These acquisitions are expected to add over $10 million of sales in the second half of 2006 and should in the aggregate be modestly accretive to earnings.
Second Quarter Operating Results
Higher sales in the Americas and Europe continue to be driven by increased demand from broadline electronic distributors, reflecting strength in the telecom and general electronics end markets. To a lesser extent, increased electrical sales contributed to the Americas sales growth and higher automotive sales contributed to the gains in Europe. The increase in Asia sales was due primarily to strong consumer electronics and telecom demand in Greater China and increased consumer electronics sales in Japan.
"It was a great quarter on many fronts," said Gordon Hunter, Chief Executive Officer. "We set new records for sales and cash flow. Our earnings, excluding special charges, were outstanding. We continue to make small but strategic acquisitions which add to our capabilities and improve our market position. We established a clear path forward to move the varistor product line to China. And finally, we are making excellent progress on the Heinrich integration and other critical cost reduction initiatives."
"As expected, our operating margin for the second quarter, excluding special charges, was similar to the first quarter as the favorable operating leverage from increased sales was offset by higher commodity prices," said Phil Franklin, Chief Financial Officer. "We have implemented price increases that will partially offset these higher commodity prices, but because of existing contracts, some of the largest increases will not take effect until late this year or early next year."
Second Half Outlook
-- Third quarter sales are expected to be up 0% to 3% sequentially reflecting the recent acquisitions. Operating margin for the third quarter is expected to be somewhat lower than adjusted operating margin for the second quarter due to higher commodity prices and temporary cost increases related to plant, warehouse and office consolidations which will be mostly complete by the end of the year. Diluted earnings per share for the third quarter are expected to be in the range of $0.45 to $0.50.
-- The fourth quarter is expected to show the typical seasonal sales decline of about 5% sequentially. Although we currently see no signs of a slowdown, there is some risk of an electronics distributor inventory correction before the end of the year if the global economy slows.
-- The effective tax rate for the second half of the year could vary significantly from quarter to quarter, but is expected to average about 35%. We expect the 2007 effective tax rate to be in the 30% to 35% range.
LITTELFUSE, INC.
Sales by Geography and Market(a)
(Dollars in millions)
Second Quarter Year-to-Date
-------------------------- -------------------------
2006 2005 % Change 2006 2005 % Change
-------- ------- --------- ------- ------- ---------
Geography
-----------
Americas $57.9 $49.4 17% $112.5 $99.6 13%
Europe 29.0 24.3 19% 56.8 51.4 11%
Asia-Pacific 51.0 42.0 21% 94.3 78.4 20%
-------- ------- --------- ------- ------- ---------
Total $137.9 $115.7 19% $263.6 $229.4 15%
======== ======= ========= ======= ======= =========
Second Quarter Year-to-Date
-------------------------- -------------------------
2006 2005 % Change 2006 2005 % Change
-------- ------- --------- ------- ------- ---------
Market
-----------
Electronics $94.8 $75.0 27% $178.8 $147.8 21%
Automotive 31.6 29.8 6% 62.6 60.7 3%
Electrical 11.5 10.9 6% 22.2 20.9 6%
-------- ------- --------- ------- ------- ---------
Total $137.9 $115.7 19% $263.6 $229.4 15%
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(a) Certain prior year amounts have been reclassified to conform to
the current year presentation. Amounts exclude Efen.
LITTELFUSE, INC.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)
July 1, December 31,
2006 2005
------------ ------------
Assets:
Cash and cash equivalents $34,780 $21,947
Receivables 96,498 80,303
Inventories 65,831 63,423
Deferred income taxes 12,946 11,927
Assets held for sale (Efen) - 17,633
Other current assets 11,406 7,936
------------ ------------
Total current assets 221,461 203,169
Property, plant, and equipment, net 131,692 125,493
Intangible assets, net 19,177 14,742
Goodwill 69,038 54,440
Investments 5,328 5,590
Long-term deferred tax asset 6,653 -
Other assets 856 497
------------ ------------
Total assets $454,205 $403,931
============ ============
Liabilities and Shareholders' Equity:
Accounts payable $24,798 $20,457
Accrued payroll 16,430 20,128
Accrued expenses 14,140 8,141
Accrued severance 26,048 7,866
Accrued income tax 21,507 9,920
Liabilities held for sale (Efen) - 6,722
Current portion of long-term debt 24,524 26,682
------------ ------------
Total current liabilities 127,447 99,916
Long-term debt 1,605 -
Deferred income taxes - 1,879
Accrued post-retirement benefits 23,407 19,268
Other long-term liabilities 5,412 5,658
Minority interest 143 144
Shareholders' equity 296,191 277,066
------------ ------------
Total liabilities and shareholders' equity $454,205 $403,931
============ ============
Common shares issued and outstanding of
22,335,039 and 22,229,288, at July 1, 2006,
and December 31, 2005, respectively
LITTELFUSE, INC.
Condensed Consolidated Statements of Income
(in thousands, except per share data, unaudited)
For the For the
Three Months Ended Six Months Ended
------------------- -------------------
July 1, July 2, July 1, July 2,
--------- --------- --------- ---------
2006 2005 2006 2005
--------- --------- --------- ---------
Net sales $137,941 $115,693 $263,552 $229,450
Cost of sales 106,652 80,576 187,463 157,112
--------- --------- --------- ---------
Gross profit 31,289 35,117 76,089 72,338
Selling, general and
administrative expense 28,599 23,538 54,421 48,999
Research and development
expenses 4,790 4,246 9,465 8,525
Amortization of intangibles 591 434 1,111 1,065
--------- --------- --------- ---------
Total operating expense 33,980 28,218 64,997 58,589
Operating income (loss) (2,691) 6,899 11,092 13,749
Interest expense 359 568 772 1,041
Other income (939) (96) (1,510) (227)
--------- --------- --------- ---------
Earnings (loss) from
continuing operations before
minority interest and income
taxes (2,111) 6,427 11,830 12,935
Minority interest - (5) - 2
Income taxes (benefit) (2,560) 2,118 2,598 4,333
--------- --------- --------- ---------
Earnings from continuing
operations 449 4,314 9,232 8,600
Discontinued operations (net
of tax) - (57) 588 96
--------- --------- --------- ---------
Net income $449 $4,257 $9,820 $8,696
========= ========= ========= =========
Net income per share:
Basic:
Continuing operations $0.02 $0.19 $0.41 $0.38
========= ========= ========= =========
Discontinued operations $- $- $0.03 $0.01
========= ========= ========= =========
Net income $0.02 $0.19 $0.44 $0.39
========= ========= ========= =========
Diluted:
Continuing operations $0.02 $0.19 $0.41 $0.38
========= ========= ========= =========
Discontinued operations $- $- $0.03 $-
========= ========= ========= =========
Net income $0.02 $0.19 $0.44 $0.38
========= ========= ========= =========
Weighted average shares and
equivalent shares
outstanding:
Basic 22,328 22,423 22,293 22,453
========= ========= ========= =========
Diluted 22,693 22,613 22,612 22,681
========= ========= ========= =========
LITTELFUSE, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
For the For the
Three Months Ended Six Months Ended
------------------- -------------------
July 1, July 2, July 1, July 2,
--------- --------- --------- ---------
2006 2005 2006 2005
--------- --------- --------- ---------
Operating activities:
Net income $449 $4,257 $9,820 $8,696
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 8,688 7,511 14,900 14,152
Amortization 591 463 1,111 1,094
Stock-based compensation 1,251 - 2,704 -
Changes in operating assets
and liabilities:
Accounts receivable (6,847) (4,908) (10,622) (6,435)
Inventories 4,055 4,006 496 4,951
Accounts payable and
accrued expenses 17,741 (1,971) 20,518 (9,234)
Prepaid expenses and other (197) 2,759 802 (1,014)
--------- --------- --------- ---------
Net cash provided by operating
activities 25,731 12,117 39,729 12,210
Cash used in investing
activities:
Purchases of property and
equipment (4,797) (8,266) (9,400) (16,964)
Acquisitions of businesses (28,825) (991) (31,526) (1,019)
Sale of Efen 2,146 - 11,574 -
--------- --------- --------- ---------
Net cash used in investing
activities (31,476) (9,257) (29,352) (17,983)
Cash provided by financing
activities:
Proceeds from long-term
debt 16,500 11,895 22,858 26,951
Payments of long-term debt (8,924) (11,000) (25,298) (16,213)
Proceeds from repayment of
notes receivable, common
stock - 12 7 3,533
Proceeds from exercise of
stock options 1,516 214 3,350 675
Purchase of treasury stock - - - (3,199)
--------- --------- --------- ---------
Net cash provided by financing
activities 9,092 1,121 917 11,747
Effect of exchange rate
changes on cash 983 (724) 1,539 (1,910)
--------- --------- --------- ---------
Increase in cash and cash
equivalents 4,330 3,257 12,833 4,064
Cash and cash equivalents at
beginning of period 30,450 29,390 21,947 28,583
--------- --------- --------- ---------
Cash and cash equivalents at
end of period $34,780 $32,647 $34,780 $32,647
========= ========= ========= =========
LITTELFUSE, INC.
Supplemental Information
(in thousands, except per share data, unaudited)
July 1, July 2, April 1,
2006 2005 2006
--------- --------- ---------
Net sales $137,941 $115,693 $125,611
Cost of sales 106,652 80,576 80,811
Special charges (1) (17,076) (1,600) (852)
--------- --------- ---------
Adjusted cost of sales 89,576 78,976 79,959
Adjusted gross profit 48,365 36,717 45,652
% of sales 35.1% 31.7% 36.3%
Selling, general and administrative
expenses 28,599 23,538 25,822
Special charges (2) (2,764) - (1,206)
Stock-based compensation (1,251) - (1,453)
--------- --------- ---------
Adjusted selling, general and
administrative expenses 24,584 23,538 23,163
Adjusted operating expenses 29,965 28,218 28,358
% of sales 21.7% 24.4% 22.6%
Adjusted operating income excluding
stock-based compensation 18,400 8,499 17,294
========= ========= =========
% of sales 13.3% 7.3% 13.8%
Operating income (loss) (2,691) 6,899 13,783
Special charges 19,840 1,600 2,058
--------- --------- ---------
Adjusted operating income 17,149 8,499 15,841
========= ========= =========
% of sales 12.4% 7.3% 12.6%
Note: The company believes that adjusted operating income is more
indicative of the company's ongoing operating performance than GAAP
operating income since it excludes charges that are related to closure
of legacy operations.
Special Charges:
(1) Special charges relate to Ireland severance for the period ending
July 1, 2006, inventory and asset write-downs for the periods
ending July 2, 2005 and Heinrich severance for the period ending
April 1, 2006.
(2) Special charges relate to Heinrich real estate write-down for the
period ending July 1, 2006 and Heinrich severance for the period
ending April 1, 2006.