Littelfuse, Inc. 10-Q Summary
Business Context and Reporting Period
This filing is a Quarterly Report on Form 10-Q for Littelfuse, Inc., covering the three and six months ended June 28, 1997. The Company, a successor to the components business of Tracor Holdings, Inc., manufactures electronic, automotive, and power fuse products. The fiscal year end was changed in 1996 to the Saturday nearest December 31, with interim periods reported on a 13-week basis.
Key Financial Metrics
| Metric | Q2 1997 | Q2 1996 | 6 Months 1997 | 6 Months 1996 |
|---|---|---|---|---|
| Net Sales | $69.8 million | $60.8 million | $135.4 million | $119.9 million |
| Gross Profit | $28.6 million | $24.8 million | $55.4 million | $49.0 million |
| Operating Income | $11.8 million | $9.6 million | $22.4 million | $18.5 million |
| Net Income | $6.9 million | $5.4 million | $13.2 million | $10.7 million |
| Diluted EPS | $0.29 | $0.23 | $0.55 | $0.44 |
| Cash from Operations | $6.9 million | $10.0 million | $14.3 million | $15.9 million |
| Cash Balance (End of Period) | $0.5 million | $1.9 million | $0.5 million | $1.9 million |
| Long-Term Debt (Net) | $50.8 million | $44.6 million | $50.8 million | $44.6 million |
Margins (Q2 1997): Gross margin was 41.0% (vs. 40.8% prior year); Operating margin was 16.9% (vs. 15.7% prior year).
Material Changes vs. Prior Period
- Revenue Growth: Sales increased 15% in Q2 and 13% for the six months, driven by strong demand in computer, telecommunications, and electronic ballast markets, particularly in the Asia Pacific region (26% growth).
- Profitability: Net income rose 27% in Q2 and 23% for the six months. Operating income improved due to volume efficiencies and favorable product mix in North America.
- Acquisitions: The Company acquired a second company in Korea (Samjoo Littelfuse) for $5.1 million during the quarter.
- Stock Split: A two-for-one stock split was effected on June 10, 1997. All per-share data has been adjusted retroactively.
- Debt: Long-term debt increased by $5.2 million in Q2, primarily to fund the Korean acquisition and capital expenditures.
Guidance, Outlook, and Risks
- Capital Expenditures: The Company expects total capital expenditures for 1997 to be approximately $21.0 million, primarily for new machinery and equipment.
- Liquidity: Management expects sufficient cash from operations to support operations and debt obligations. However, cash on hand decreased to $0.5 million due to investing and financing activities.
- Working Capital: Days sales in receivables increased to 59 days (from 51 days at year-end 1996) due to longer payment terms on foreign sales. Inventory turnover slowed slightly to 4.5 turns as the Company built inventory for new products and anticipated strong auto OEM sales in late summer.
- Accounting Changes: The Company will adopt FASB Statement No. 128 (Earnings per Share) in fiscal 1998, which is expected to increase reported basic EPS by excluding the dilutive effect of stock options.
Investor Verification Checklist
- Verify the impact of the $5.1 million Korean acquisition on future revenue and integration costs.
- Monitor the trend in days sales outstanding (59 days) to ensure collection efficiency does not deteriorate further.
- Confirm the availability of the $45.5 million remaining under the bank revolver facility to support liquidity needs.
- Review the upcoming adoption of FASB Statement No. 128 and its effect on reported EPS in the next fiscal year.
- Assess the sustainability of the 26% sales growth in the Asia Pacific region given the volatility of the computer and telecommunications markets.