Littelfuse, Inc. — Q1 2013 Form 10-Q
Reporting period: Three months ended March 30, 2013. Littelfuse designs, manufactures and sells circuit-protection products across electronics, automotive and electrical markets. Financial amounts below are in U.S. dollars; millions unless otherwise noted.
Financial performance
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Net sales | $170.9 million | $160.6 million |
| Gross profit / margin | $64.6 million / 37.8% | $60.9 million / 37.9% |
| Operating income / margin | $28.1 million / 16.4% | $25.8 million / 16.1% |
| Net income | $14.8 million | $17.6 million |
| Diluted EPS | $0.66 | $0.80 |
| Cash from operations | $16.0 million | $7.9 million |
Sales grew 6% year over year, including $7.5 million from acquisitions; excluding acquisitions and currency effects, sales rose 2%. Operating income increased 9%, while net income fell 16% largely because of a $10.7 million impairment and loan loss related to Shocking Technologies. Gross margin was broadly stable; operating margin improved. Q1 2013 effective tax rate was 17.7%; MD&A gives the Q1 2012 rate as 29.1%, while a note gives 29.3%.
By business unit, sales were Electronics $79.4 million (+3%), Automotive $59.4 million (+13%) and Electrical $32.1 million (+4%). Automotive growth included acquisitions; excluding acquisitions and currency effects, Automotive sales declined 2%. Commercial vehicle sales were down 10%, while passenger vehicle sales grew. Sales rose 5% in the Americas, 10% in Europe and 6% in Asia-Pacific.
Cash, debt and liquidity
Cash and cash equivalents were $246.9 million at quarter-end, up $11.5 million from year-end; short-term investments were $8.3 million. Operating cash flow of $16.0 million was offset by $13.9 million of investing outflows, mainly $5.5 million of capital spending and $8.5 million of short-term investment purchases. Financing provided $11.3 million, including $10.0 million net revolving-credit borrowings, partly offset by $4.4 million in dividends.
Revolving-credit debt was $94.0 million, all current and variable-rate; $55.4 million of borrowing capacity remained under the $150 million facility. The company was in compliance with covenants. Current assets were $465.9 million versus current liabilities of $155.6 million; the reported current ratio was 3.0. Of cash, $231.8 million was held by foreign subsidiaries; the company did not expect to repatriate most of it. Management said operating cash flow and credit lines should support operations and debt obligations for the foreseeable future.
Material developments, outlook and risks
- Shocking Technologies filed for Chapter 7 bankruptcy on March 12, 2013. Littelfuse wrote off its $8.7 million equity investment and $2.0 million loan receivable.
- After quarter-end, Littelfuse announced a definitive agreement to acquire Hamlin, Inc. for $145 million in cash, with closing expected by the end of May 2013.
- Management expected Q2 2013 sales to increase 4%–9% from Q1. It cited a rebound in sales and orders, improving electronics conditions, and modest growth in electrical and passenger-vehicle markets. Commercial vehicles were showing signs of recovery but remained challenged; mining-related weakness was expected to pressure protection relays and custom products in the second half.
- Risks identified include demand and economic conditions, competition and pricing, product quality or recalls, supply constraints, foreign exchange and commodity prices, acquisition integration, pension returns, labor issues and potential restructuring costs. A 10% commodity-price change was estimated to affect annual pretax profit by about $2.2 million for copper, $0.7 million for zinc, $0.4 million for gold and $0.8 million for silver.
- Prior-period comparison: 2012 results were retrospectively adjusted to include Littelfuse’s equity-method share of Shocking’s losses.
Key facts for investors to verify
- Whether Q2 sales guidance and the anticipated Hamlin closing were achieved, and the acquisition’s funding and integration effects.
- Underlying sales and margins excluding acquisitions, particularly commercial vehicles, Europe and mining-exposed products.
- Shocking impairment treatment and the effect of the tax-rate disclosure inconsistency (29.1% versus 29.3% for Q1 2012).
- Availability and practical use of foreign-held cash, revolving-credit capacity, and compliance with debt covenants.