Littelfuse, Inc. — FY 2012 Form 10-K
Reporting period: Fiscal year ended December 29, 2012 (52 weeks); comparison is fiscal 2011, ended December 31, 2011. Littelfuse designs and sells circuit-protection and related products in Electronics, Automotive and Electrical markets.
Financial performance
| Metric | FY 2012 | FY 2011 |
|---|---|---|
| Net sales | $667.9 million | $665.0 million |
| Gross profit / margin | $258.5 million / 38.7% | $256.7 million / 38.6% |
| Operating income / margin | $106.9 million / 16.0% | $113.9 million / 17.1% |
| Net income | $75.3 million | $87.0 million |
| Diluted EPS | $3.40 | $3.90 |
| Cash from operations | $116.2 million | $120.8 million |
- Sales rose less than 1%; excluding acquisitions and currency effects, they declined $4.3 million. Acquisitions added $16.6 million to FY 2012 sales, while unfavorable currency effects reduced sales by $9.4 million.
- Segment sales: Electronics $329.5 million, down 7%; Automotive $206.2 million, up 4%; Electrical $132.2 million, up 17%. Electronics softness and distributor inventory de-stocking contrasted with Electrical growth in relays, mining products, solar and industrial fuses.
- Operating income fell mainly because sales growth was limited and expenses rose. Operating expenses were $151.6 million, versus $142.8 million, including acquisition costs and a $5.1 million pension settlement charge.
- FY 2012 cash from investing activities was negative $51.7 million, including $34.0 million for acquisitions, $22.5 million in capital expenditures, and $12.0 million invested in or loaned to Shocking Technologies. Cash from financing activities was $0.8 million; dividends paid totaled $16.6 million.
- Year-end cash and equivalents were $235.4 million, up from $164.0 million. Current assets were $445.5 million and current liabilities $155.4 million; the reported current ratio was 2.9 to 1.
- Debt was $84.0 million, all classified as current, versus $85.0 million in 2011. The revolving facility had $65.4 million of available capacity, bore interest at LIBOR plus 1.25%, and matures in 2016. The company reported covenant compliance.
Material changes and unusual items
- Net income declined about 13% and operating margin fell 1.1 percentage points despite slightly higher sales.
- In 2012, Littelfuse acquired automotive suppliers Accel AB for approximately $23.9 million and Terra Power Systems for $10.6 million, funded with cash.
- The company recorded $7.3 million of Shocking Technologies equity-method losses and impairment: approximately $4.0 million in its share of losses and $3.3 million in impairment. 2012 quarterly results were retrospectively adjusted for equity-method accounting. Shocking was seeking additional funding; unsuccessful fundraising could cause further impairment.
- Fourth-quarter 2012 net sales were $158.8 million and net income, as restated, was $12.0 million. The filing attributes the quarter’s unusual charges to the Shocking investment and pension settlement.
- Of the $235.4 million in year-end cash, $227.3 million was held by foreign subsidiaries. Management said it expected to retain most of those foreign balances abroad; approximately $28.1 million could be repatriated with minimal tax consequences.
Outlook, risks and contingencies
- Management described the 2013 outlook as guarded amid global economic uncertainty and forecast revenue of $680 million to $720 million and capital expenditures of $25 million to $30 million. It expected to fund capex from operating cash flows.
- Management cited improving Electronics book-to-bill, strong Asian and solid U.S. passenger-vehicle markets, weak Europe and commercial vehicles, and a worldwide Potash mining slowdown that could affect relay and custom-product demand.
- Key disclosed risks include cyclical end-market demand, competition and pricing, distributor inventory movements, foreign exchange and metal-price volatility, supply constraints, international operations, acquisition integration, pension assumptions, environmental exposure from former German coal mines, and cybersecurity. A 10% commodity-price change was estimated to affect annual pretax profit by about $1.9 million for copper, $0.7 million for zinc, $0.6 million for gold and $1.0 million for silver.
- The filing reports no material legal proceedings and no off-balance-sheet arrangements. Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting.
Investor verification points
- Assess whether the forecast sales range and improvement in Electronics demand materialized, particularly given channel de-stocking and the weak commercial-vehicle and European markets.
- Review the Shocking Technologies investment’s carrying value, funding outlook and potential for further impairment.
- Evaluate the sustainability of earnings after the pension settlement, acquisition-related costs and purchase-accounting charges.
- Confirm the accessibility and intended use of offshore cash, and assess the current-classified $84 million debt against available revolver capacity and liquidity needs.
- Monitor pension funding and assumptions, German coal-mine remediation estimates, and sensitivity to currency, commodities and mining-market conditions.