Littelfuse, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended January 1, 2022. FY2021 included 53 weeks; FY2020 included 52 weeks, so comparisons are not fully period-matched. Littelfuse designs and manufactures circuit protection, power control and sensing products across Electronics, Transportation and Industrial markets.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $2,079.9 million | $1,445.7 million |
| Gross profit / margin | $771.9 million / 37.1% | $501.2 million / 34.7% |
| Operating income / margin | $385.6 million / 18.5% | $162.4 million / 11.2% |
| Net income | $283.8 million | $130.0 million |
| Diluted earnings per share | $11.38 | $5.29 |
| Operating cash flow | $373.3 million | $258.0 million |
| Capital expenditures | $90.6 million | $56.2 million |
Sales rose 43.9%, including $27.4 million of favorable foreign exchange effects. Management attributed growth to higher volumes across all segments, recovery from COVID-related disruption in 2020, and acquisitions. Operating cash flow less capital expenditures was approximately $282.8 million. FY2021 net margin was approximately 13.6%, versus 9.0% in FY2020.
Segment sales
| Segment | FY2021 sales | Change vs. FY2020 | FY2021 operating income |
|---|---|---|---|
| Electronics | $1,300.7 million | +38.7% | $309.6 million |
| Transportation | $528.1 million | +33.4% | $66.0 million |
| Industrial | $251.1 million | +123.8% | $22.6 million |
Industrial’s increase included $100.5 million of Hartland sales; Transportation included $15.3 million from Carling. Segment sales also benefited from stronger volumes and recovery from 2020 production interruptions.
Liquidity, debt and capital allocation
- Cash and cash equivalents were $478.5 million at year-end, down from $687.5 million. Current assets were $1.270 billion and current liabilities $434.6 million.
- Debt carrying value was $636.9 million, including $25.0 million current maturities; cash less debt was approximately net debt of $158.4 million. Long-term debt excluding current maturities was $611.9 million.
- The revolving facility had $100.0 million drawn and $600.0 million of available capacity; its stated maturity is April 2025. The company reported covenant compliance. The $25.0 million U.S. note maturity was due in February 2022.
- Investing cash outflow was $499.2 million, including $423.6 million for acquisitions; financing cash outflow was $69.0 million. Dividends paid totaled $49.7 million. No shares were repurchased in FY2021; $300 million remained authorized under the program.
Material changes, outlook and commentary
- Gross margin improved 2.4 percentage points, primarily from volume leverage and favorable Electronics mix; higher freight, duties and tariffs, material costs, and $8.4 million of acquisition inventory step-up charges offset part of the improvement. Operating margin rose from 11.2% to 18.5%.
- FY2020 included a $33.8 million goodwill impairment charge, largely explaining part of the year-over-year operating income increase. FY2021 included a $19.9 million non-cash U.K. pension settlement charge, $17.2 million of foreign-exchange losses (versus $14.9 million gains in FY2020), acquisition/integration charges and inventory step-up costs. A $5.0 million gain was recorded on building sales.
- Hartland Controls was acquired in January 2021 for approximately $111 million; Carling Technologies was acquired in November 2021 for approximately $315 million. Carling contributed $15.3 million of FY2021 sales and reported a $1.2 million pre-tax loss after acquisition; Hartland contributed $100.5 million of sales and reported a $2.8 million pre-tax loss after acquisition. Carling’s purchase-price allocation was preliminary, including $125.9 million of identified intangibles.
- Management’s five-year strategic plan targets average annual organic sales growth of 5–7% and acquisition-driven sales growth of 5–7%. It also targets earnings-per-share growth above revenue growth, free cash flow returned to shareholders of 40%, and return on invested capital in the high teens. These are targets, not near-term earnings guidance.
- Backlog reached approximately $1.657 billion versus $709.9 million at the prior year-end; substantially all was scheduled for delivery in 2022. Management cited continuing supply, freight-capacity and input-cost constraints, and said COVID-related disruption could persist; the effect on FY2022 results was uncertain.
Risks and contingencies
Key disclosed risks include supply-chain and manufacturing disruption, COVID-19, competition and pricing pressure, commodity and transportation-cost inflation, foreign-exchange exposure, tariffs and geopolitical change, acquisition integration and valuation, cybersecurity, environmental obligations, and changes in tax laws or tax rates. Approximately 69% of FY2021 sales were outside the U.S., including approximately 30% to China; Arrow Electronics represented 10.7% of sales. The company reported no material legal proceedings and no off-balance-sheet arrangements. It maintains an accrual for former German coal-mine obligations; the recorded liability was approximately $2.1 million.
The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting. The audit identified Carling acquired-intangible valuation as a critical audit matter; the acquisition valuation remained subject to finalization.
Important facts for investors to verify
- How much reported sales growth reflects organic volume, acquisitions, favorable currency and the extra fiscal week, and whether FY2022 backlog converts as scheduled.
- Whether higher freight, material and supply-chain costs can be offset through pricing and productivity without eroding margins.
- Integration progress and final purchase accounting for Hartland and Carling, including acquired intangible valuations and expected returns.
- Working-capital needs, cash generation after acquisitions, debt repayment and refinancing plans, including the February 2022 note maturity.
- The sustainability of earnings benefits from lower-tax jurisdictions and China tax holidays, and exposure to foreign exchange and tax-law changes.