Littelfuse, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; comparisons are to the three and nine months ended October 1, 2022. Amounts are U.S. dollars unless stated otherwise. Littelfuse operates in Electronics, Transportation, and Industrial markets.
Financial performance
| Metric | Q3 2023 | Q3 2022 | First nine months 2023 | First nine months 2022 |
|---|---|---|---|---|
| Net sales | $607.1 million | $658.9 million | $1,828.9 million | $1,900.6 million |
| Gross profit / margin | $226.9 million / 37.4% | $256.8 million / 39.0% | $706.7 million / 38.6% | $778.4 million / 41.0% |
| Operating income / margin | $93.6 million / 15.4% | $121.9 million / 18.5% | $296.3 million / 16.2% | $406.6 million / 21.4% |
| Net income | $57.8 million | $75.5 million | $216.6 million | $280.0 million |
| Diluted EPS | $2.30 | $3.02 | $8.63 | $11.21 |
- Q3 sales declined 7.9% year over year, including $7.3 million of favorable foreign-exchange impact. Nine-month sales fell 3.8%, including $3.1 million of unfavorable currency impact.
- Q3 cost of sales was 62.6% of sales, up from 61.0%; the nine-month rate was 61.4%, up from 59.0%. Management attributed margin pressure chiefly to weaker Electronics volume and, year to date, weaker commercial-vehicle volume.
- Cash and cash equivalents were $560.1 million at September 30, 2023. Total debt was $992.6 million, including $135.6 million current maturities; shareholders’ equity was $2,404.9 million.
- For the first nine months, operating cash flow was $313.1 million, near the prior-year $313.4 million. Investing cash outflow was $261.4 million, including $198.8 million for acquisitions and $63.2 million of capital expenditures. Financing cash outflow was $47.1 million; dividends paid were $46.0 million.
Changes, segments, and notable items
- Electronics: Q3 sales declined 13.5% to $343.9 million and operating income fell 31.9% to $77.0 million. Management cited distributor inventory rebalancing and softer demand, including consumer-facing, personal-electronics, and telecom markets.
- Transportation: Q3 sales declined 2.6% to $177.0 million and operating income fell 25.4% to $9.7 million. Lower commercial-vehicle sales outweighed growth in passenger-car products.
- Industrial: Q3 sales rose 8.3% to $86.1 million and operating income increased 8.4% to $13.2 million, supported by construction/MRO demand, pricing, and Western Automation.
- The February 2023 Western Automation acquisition cost approximately $162 million in cash; the acquired business contributed $10.2 million of sales and a $0.8 million pretax loss from acquisition through September 30.
- Q3 restructuring charges were $3.7 million; nine-month charges were $8.5 million. The company also recorded impairment charges of $0.8 million for Industrial-segment patents in Q3 and $3.9 million for Transportation-segment property in Q2. Nine-month operating expenses rose 10.4%, partly reflecting acquisition-related amortization, R&D, and restructuring/impairment costs.
Liquidity, outlook, and risks
- The company reported $599.8 million of available revolving-credit borrowing capacity, in addition to cash, and stated it was compliant with credit-agreement and senior-note covenants. The effective rate on outstanding revolving and term borrowings was 6.67% at quarter-end.
- Management expects cash, operating cash flows, available funding, and capital-market access to be sufficient for operations, investment, and debt obligations in the short and long term. The filing provides no specific earnings or revenue guidance.
- A €93 million purchase agreement for a 200mm wafer fab in Dortmund, Germany, is expected to close in early fiscal 2025. A €37.2 million down payment (approximately $40.5 million) was paid in Q3; approximately €56 million is due at closing. Management said it is not expected to materially affect 2023 or 2024 results.
- Management described a challenging macro environment, including supply-chain disruptions, regional variation, and pockets of end-market softness. It cited inventory rebalancing and lower demand in parts of Electronics and commercial vehicles. The company suspended sales into and purchases from Russia; it reported no direct operations in Russia or Ukraine and a modest impact from the war.
- Forward-looking risks include demand and pricing, competition, supply and capacity constraints, foreign exchange and commodity movements, cybersecurity, labor issues, acquisition integration, and restructuring costs. The filing reported no material changes to previously disclosed risk factors, no material market-risk changes, and no off-balance-sheet arrangements. Management found disclosure controls effective; no material internal-control changes were reported.
Important facts for investors to verify
- Whether weaker Electronics and commercial-vehicle demand and distributor inventory adjustments persist, and how they affect margins.
- Whether Industrial growth and acquisition contributions offset declines elsewhere; review Western Automation integration and final purchase-price allocation.
- Near-term debt maturities and refinancing or repayment plans, including the Euro Senior Notes due December 2023, alongside the company’s liquidity and covenant headroom.
- Funding and closing conditions for the Dortmund fab acquisition, including the remaining purchase consideration and timing.
- The extent to which restructuring, impairment, acquisition-related expenses, currency effects, and higher interest expense affect reported results and cash generation.