Business Context and Reporting Period
Company: Littelfuse, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 27, 1997 (Third Quarter)
Business Overview: Littelfuse is a successor in interest to the components business of Tracor Holdings, Inc. The company manufactures electronic, automotive, and power fuses. The fiscal year end was changed in 1996 to the Saturday nearest December 31, with quarters reported on a 13-week basis.
Key Financial Metrics
| Metric (in thousands) | Q3 1997 | Q3 1996 | 9 Months 1997 | 9 Months 1996 |
|---|---|---|---|---|
| Net Sales | $68,993 | $60,483 | $204,404 | $180,404 |
| Gross Profit | $27,860 | $24,535 | $83,288 | $73,494 |
| Operating Income | $11,220 | $9,633 | $33,572 | $28,093 |
| Net Income | $6,412 | $5,575 | $19,575 | $16,236 |
| Diluted EPS | $0.27 | $0.24 | $0.81 | $0.67 |
| Cash from Operations | $8,317 | $7,675 | $22,598 | $23,899 |
| Cash & Equivalents (End) | $251 | $544 | $251 | $544 |
Balance Sheet Highlights (Sept 27, 1997):
- Total Assets: $231,799
- Total Liabilities: $109,934 (Current: $58,470; Long-term: $45,742)
- Shareholders' Equity: $121,865
- Debt-to-Equity Ratio: 0.47 to 1
- Current Ratio: 1.5 to 1
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 14% in Q3 1997 and 13% for the nine-month period compared to the prior year. Electronics sales drove significant growth (25% in Q3, 22% YTD), particularly in Asia Pacific and North America.
- Profitability: Operating income rose 16% in Q3 and 20% YTD. Net income increased 15% in Q3 and 21% YTD. Operating margins improved to 16.3% in Q3 from 15.9% in the prior year.
- Segment Performance:
- Electronics: Strong growth in personal computer, telecommunications, and ballast applications.
- Automotive: Sales grew 6% in Q3, driven by North American and Asian OEM sales, partially offset by weaker European sales and currency translation effects.
- Power Fuses: Modest growth of 2% in Q3.
- Working Capital: Days sales in receivables increased to 59 days (from 51 days at year-end 1996) due to foreign sales with longer payment terms. Days inventory outstanding rose to 89 days (from 79 days) due to resettable fuse and auto OEM inventory buildup.
Guidance, Outlook, and Risks
Management Commentary:
- Liquidity: Management expects sufficient cash from operations to support operations, capital expenditures, and debt obligations. The company has $41.0 million available under its revolver facility.
- Capital Expenditures: $12.5 million spent YTD; total 1997 capex expected to be approximately $21.0 million, primarily for new machinery.
- Acquisitions: Recent acquisition in Korea (Samjoo) contributed to sales growth and increased interest expense.
Risks and Contingencies:
- Currency Translation: European sales were negatively impacted by currency fluctuations, reducing reported USD sales despite local currency growth.
- Inventory Levels: Higher inventory days outstanding indicate sales of resettable fuses and auto OEM fuses were lower than originally projected for the quarter.
- Accounting Changes: The company will adopt FASB Statement No. 128 (Earnings per Share) in fiscal 1998, which will restate prior periods and likely increase reported basic EPS.
Investor Verification Checklist
- Cash Position: Verify the low cash balance of $251,000 against the $41.0 million revolver availability and upcoming debt obligations.
- Inventory Turnover: Investigate the cause of the increase in days inventory outstanding (89 days) and the specific demand outlook for resettable fuses and auto OEM products.
- EPS Restatement: Confirm the impact of the upcoming FASB Statement No. 128 adoption on historical and future earnings per share calculations.
- Debt Structure: Review the terms of the $45 million senior notes and the $65 million credit facility, noting the annual principal payments of $9 million on the notes.
- Foreign Exposure: Assess the sensitivity of future earnings to currency fluctuations, particularly in Europe and Asia Pacific.