Littelfuse, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended April 2, 2022; compared with the three months ended March 27, 2021. Unaudited results. Littelfuse designs and manufactures components and modules for electronics, transportation and industrial markets.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Net sales | $623.3 million | $463.8 million | +34.4% |
| Gross profit / margin | $258.6 million / 41.5% | $160.5 million / 34.6% | Margin +6.9 percentage points |
| Operating income / margin | $150.6 million / 24.2% | $76.5 million / 16.5% | +96.9% |
| Net income | $117.5 million | $57.7 million | +103.6% |
| Diluted EPS | $4.70 | $2.32 | Up from $2.32 |
| Operating cash flow | $51.7 million | $50.2 million | +$1.6 million |
Sales growth reflected higher volumes in Electronics and Industrial and $55.8 million of Carling acquisition sales. Electronics sales rose 27.7%, Transportation 43.6%, and Industrial 49.8%. Gross margin benefited from volume leverage, favorable product mix—particularly in Electronics—and higher prices; higher transportation, duty, tariff and commodity costs were offsets.
Income tax expense was $16.6 million and the effective tax rate was 12.4%, versus $15.0 million and 20.6% a year earlier. A one-time $7.2 million tax benefit from dissolving an affiliate was a key contributor to the lower rate. Other expense included $4.7 million of unrealized investment losses, compared with $7.5 million of unrealized gains in Q1 2021.
Cash, debt and liquidity
- Cash and cash equivalents were $461.6 million at quarter-end, down $16.9 million from January 1, 2022. Total debt was $606.7 million, down from $636.9 million; the company repaid $25.0 million of notes due in 2022. Cash less debt was approximately negative $145.1 million.
- The revolving credit facility had $100.0 million outstanding and $600.0 million of available borrowing capacity. The company reported compliance with its credit and note covenants.
- Operating cash flow of $51.7 million was largely offset by $29.8 million of capital expenditures, $13.1 million of dividends and debt repayment. Cash used in investing was $29.8 million, versus $122.0 million in the prior-year quarter, which included acquisition spending.
- Inventories increased to $470.6 million from $445.7 million; trade receivables increased to $319.5 million from $275.2 million. Management attributed working-capital use partly to sales growth and higher annual incentive payments.
Material changes, outlook and risks
- Carling, acquired in November 2021, contributed $55.8 million of Q1 sales. The company recorded a $4.8 million non-cash inventory step-up charge and $3.8 million of acquisition-related legal, professional and integration expenses.
- After quarter-end, Littelfuse announced a proposed $540 million cash acquisition of C&K Switches, expected to close in Q2 2022 subject to customary conditions and regulatory approvals; financing was expected to combine cash and debt. It also acquired Embed Ltd. on April 12, funded with cash.
- Management cited ongoing supply-chain and transportation constraints, higher input and freight costs, and COVID-related expenses. Temporary shutdowns at certain China facilities during April followed a late-March outbreak; the company said the duration and financial impact were not yet determinable.
- The war in Ukraine had a modest reported impact, including changed shipping logistics, suspended sales into and purchases from Russia, and lower production at some OEM customers. Management also noted semiconductor shortages and OEM shutdowns affecting passenger-car demand.
- The filing provides no formal numerical earnings or revenue guidance. Management said existing cash, operating cash flows, borrowing availability and capital-market access were expected to support operations and obligations. The board declared a $0.53-per-share dividend payable in June 2022.
- No material change to reported risk factors was disclosed. The filing reported no legal proceedings or off-balance-sheet arrangements. Disclosure controls were deemed effective; a new consolidation and reporting software system was implemented, with related control-process changes.
Key facts for investors to verify
- Whether strong volume and margin performance persists as supply, freight, duty, tariff and commodity cost pressures evolve.
- How China facility disruptions, COVID-19 and semiconductor-related customer production constraints affect subsequent quarters.
- The final Carling purchase-price allocation and integration costs, and the closing, financing, integration and contribution of C&K and Embed.
- The sustainability of earnings after considering the one-time tax benefit and investment valuation losses or gains.
- Working-capital trends, capital spending, debt levels and liquidity following the planned acquisition spending.