10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF - 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF ---- 1934 FOR THE TRANSITION PERIOD FROM ___________ TO _________ Commission file number 0-20388 LITTELFUSE, INC. ---------------- (Exact name of registrant as specified in its charter) Delaware 36-3795742 ----------------------------- ---------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 800 East Northwest Highway Des Plaines, Illinois 60016 --------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (847) 824-1188 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No ---- ---- As of September 30, 2000, 20,075,025 shares of common stock, $.01 par value, of the Registrant and warrants to purchase 1,955,189 shares of common stock, $.01 par value, of the Registrant were outstanding. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements Condensed Consolidated Statements of Income for the periods ended September 30, 2000 and October 2, 1999...........................1 Condensed Consolidated Balance Sheets for the periods ended September 30, 2000 and January 1, 2000...........................2 Condensed Consolidated Statements of Cash Flows for the periods ended September 30, 2000 and October 2, 1999.....................3 Notes to the Condensed Consolidated Financial Statements.........4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ..................7 Item 3. Qualitative and Quantitative Disclosures about Market Risk ....12 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K................................13 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (unaudited) For the Three For the Nine Months Ended Months Ended September 30, October 2, September 30, October 2, 2000 1999 2000 1999 ---- ---- ---- ---- Net sales $ 96,362 $ 73,292 $ 289,037 $ 214,357 Cost of sales 57,623 43,975 171,719 131,200 ------------ ----------- ------------- ---------- Gross profit 38,739 29,317 117,318 83,157 Selling, general and administrative expenses 17,914 13,911 53,606 39,457 Research and development expenses 2,853 2,138 8,261 7,023 Amortization of intangibles 1,701 1,730 5,249 5,214 ------------- ------------ --------------- ------------ Operating income 16,271 11,538 50,202 31,463 Interest expense 1,104 1,330 3,527 4,026 Other (income) /expense (276) (420) (1,877) (978) -------------- -------------- ---------------- ------------- Income before income taxes 15,443 10,628 48,552 28,415 Income taxes 5,715 4,040 17,964 10,799 Net income $ 9,728 $ 6,588 $ 30,588 $ 17,616 Net income per share -Basic $ 0.49 $ 0.34 $ 1.54 $ 0.90 -Diluted $ 0.44 $ 0.30 $ 1.38 $ 0.81 Weighted-average shares and Equivalent shares outstanding 20,078 19,505 19,821 19,591 -Basic =========== ============== ============= ============ -Diluted 22,306 21,712 22,202 21,747 =========== ============== ============= ============
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (unaudited) September 30, January 1, 2000 2000 ---- ---- ASSETS Cash and cash equivalents $ 6,096 $ 1,888 Receivables 67,992 59,583 Inventories 55,525 48,916 Other current assets 10,271 8,750 ------------- ----------- Total current assets $ 139,884 $ 119,137 Property, plant, and equipment, net 91,840 91,791 Reorganization value, net 31,826 33,943 Other intangible assets, net 26,557 29,570 Other assets 583 1,257 --------------- ----------- $ 290,690 $ 275,698 =============== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities excluding current portion of long-term debt 51,678 57,241 Current portion of long-term debt 17,807 20,974 -------------- --------- Total current liabilities 69,485 78,215 Long-term debt 50,737 55,460 Deferred liabilities 4,522 4,490 Other long-term liabilities 894 501 Shareholders' Equity 165,052 137,032 -------------- --------- Shares issued and outstanding: 20,075,025 $ 290,690 $ 275,698 ============== ==========
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) For the Nine Months Ended September 30, October 2, 2000 1999 ---- ---- Operating activities: Net income $ 30,588 $ 17,616 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 14,923 13,012 Amortization 5,249 5,214 Changes in operating assets and liabilities: Accounts receivable (9,818) (15,388) Inventories (7,039) (3,517) Accounts payable and accrued expenses (5,593) 6,398 Other, net (146) (1,701) --------------- ------------ Net cash provided by operating activities $ 28,164 $ 21,634 Cash used in investing activities: Purchases of property, plant, and equipment, net (15,665) (16,504) ------------ -------- Net cash used in investing activities (15,665) (16,504) Cash provided by (used in) financing activities: Payments of long-term debt, net (7,294) (15,036) Proceeds from exercise of stock options and warrants 4,035 1,207 Purchase of common stock and warrants (4,095) (10,476) ------------ ----------- Net cash used in financing activities (7,354) (24,305) Effect of exchange rate changes on cash (938) (198) ------------ ------------- Increase/ (decrease) in cash and cash equivalents 4,207 (19,373) Cash and cash equivalents at Beginning of period 1,888 27,961 ------------ -------------- Cash and cash equivalents at end of period $ 6,096 $ 8,588 ============ ==============
Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2000 1. Basis of Presentation The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the period ended September 30, 2000, are not necessarily indicative of the results that may be expected for the year ending December 30, 2000. For further information, refer to the Company's consolidated financial statements and the notes thereto incorporated by reference in the Company's Annual Report on Form 10-K for the year ended January 1, 2000. 2. Inventories The components of inventories are as follows (in thousands): September 30, January 1, 2000 2000 -------- ------------ Raw material $14,998 $ 12,684 Work in process 16,459 14,854 Finished goods 24,068 21,378 ------- --------- Total $55,525 $ 48,916 ======== =========
3. Per Share Data Net income per share amounts for the three months and nine months ended September 30, 2000 and October 2, 1999 are based on the weighted average number of common and common equivalent shares outstanding during the periods as follows (in thousands, except per share data): Three months Nine months ended ended September 30, October 2, September 30, October 2, 2000 1999 2000 1999 --------- --------- --------- --------- Average shares outstanding 20,078 19,505 19,821 19,591 Net effect of dilutive stock options, warrants and restricted shares - Basic - - - - ----------- ---------- ------------ ---------- - Diluted 2,228 2,207 2,381 2,156 ----------- ---------- ------------ ---------- Average shares outstanding - Basic 20,078 19,505 19,821 19,591 ====== ====== ====== ========== - Diluted 22,306 21,712 22,202 21,747 ====== ====== ========== ========== Net income $9,728 $ 6,588 $ 30,588 $ 17,616 ====== ======= ========== ========== Net income per share - Basic $ 0.49 $ 0.34 $ 1.54 $ 0.90 ======== ======== ========== ========== - Diluted $ 0.44 $ 0.30 $ 1.38 $ 0.81 ======== ======== ========== ==========
4. Comprehensive Income In accordance with Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," total comprehensive income for the three months ended September 30, 2000, and October 2, 1999, was approximately $8.5 million and $7.2 million, respectively, and the nine months ended September 30, 2000, and October 2, 1999, was $28.1 million and $16.4 million, respectively. The adjustment for comprehensive income is related to the Company's foreign currency translation. 5. Recently Issued Accounting Standard In June 1998, the Financial Accounting Standards Board issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivatives and hedging activities. The Company is required to adopt SFAS 133 on March 31, 2001, and does not expect adoption to have a material effect on its consolidated financial statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Sales for the third quarter 2000 increased 31% or $23.1 million to $96.4 million, compared to $73.3 million in the third quarter of 1999. Growth in worldwide demand for electronic products, particularly in the telecommunications and wireless markets, continued to be the driving force behind increased sales. Sales in the Americas increased 33% over the third quarter of 1999 primarily due to continued strength in the electronics market. Sales in Europe grew 28% in dollars and 43% in constant currency, and in the Asia-Pacific region sales increased 31% in dollars and 30% in constant currency. Increased electronic product sales contributed to higher sales in all regions of the world. Electronic sales increased to $61.6 million in the third quarter of 2000 from $38.6 million in the same quarter of last year for an increase of $23.0 million or 60%. Excluding sales of suppression products, acquired in October 1999, sales of electronic products increased $13.4 million or 35% over the prior year. Automotive sales increased to $23.9 million in the third quarter 2000 from $23.4 million in the same quarter last year for an increase of $0.5 million or 2%. Automotive sales excluding suppression products were down 3%, as higher U.S. automotive OEM sales were offset by lower U.S. aftermarket sales and the effects of the weaker Euro. Power fuse sales decreased $0.5 million or 5% to $10.8 million in the third quarter 2000 from $11.3 million in the same quarter last year. Gross margin was $38.7 million or 40.2% of sales for the third quarter of 2000 compared to $29.3 million or 40.0% in the same quarter last year. Operating income increased to $16.3 million or 16.9% of sales in the third quarter of 2000 compared to $11.5 million or 15.7% in the prior year. The continued benefit from higher unit volumes and ongoing cost reduction activities contributed to the increase in gross margin and operating income as compared to the prior year. Operating expenses, excluding amortization, were $20.8 million or 21.6% of sales for the third quarter of 2000 compared to $16.0 million or 21.9% of sales for the same quarter in the prior year. Amortization of the reorganization value and other intangibles decreased to 1.8% of sales for the third quarter of 2000, from 2.4 % of sales in the third quarter of 1999 due to increased sales. Total operating expenses, including intangible amortization, were 23.3% of sales in the third quarter of 2000 compared to 24.3% of sales in the same quarter last year. Interest expense was $1.1 million in the third quarter of this year compared to $1.3 million in the third quarter of last year due to lower average debt levels. Other income was $0.3 million for the third quarter of 2000 compared to $0.4 million in the third quarter of the prior year. Income before income taxes was $15.4 million for the third quarter 2000 compared to $10.6 million for the third quarter of 1999. Income taxes were $5.7 million with an effective tax rate of 37% for the third quarter of 2000 compared to $4.0 million with an effective tax rate of 38% in the third quarter of last year. Net income increased 48% to $9.7 million in the third quarter this year compared to $6.6 million in the third quarter of last year and diluted earnings per share increased 44% to $0.44 in the third quarter this year compared to $0.30 per diluted share in the same quarter last year. Nine Months, 2000. Sales for the first nine months increased 35% to $289.0 million from $214.4 million last year. Nine months electronics sales were up 68% at $179.4 million compared to $107.0 million last year. Automotive sales were up 4% at $77.7 million compared to $74.9 million last year. Power fuse sales were down 2% at $31.9 million from $32.5 million last year. As detailed above in discussion of the quarterly results, increased sales of electronic products have been driven by telecommunications and wireless applications. Gross margin was $117.3 million or 40.6% for the first nine months of 2000 compared to $83.2 million or 38.8% the first nine months of last year. Operating income for the first nine months of 2000 increased 59.6% to $50.2 million from $31.5 million last year. Operating expenses, excluding amortization, were 21.4% of sales for the first nine months of 2000 compared to 21.7% last year. The amortization of intangibles was 1.8% of sales for the first nine months of 2000 compared to 2.4% last year. Total operating expenses including intangibles amortization were 23.2% of sales for the first nine months of 2000 compared to 24.1% of sales for the first nine months of last year. Interest expense was $3.5 million for the first nine months of 2000 compared to $4.0 million last year. Other income was $1.9 million for the first nine months of 2000 compared to $1.0 million for the same period last year. Income before taxes was $48.6 million for the first nine months of 2000 compared to $28.4 million the first nine months of last year. Income taxes were $18.0 million the first nine months 2000 compared to $10.8 million last year. Net income for the first nine months of 2000 increased 74% to $30.6 million from $17.6 million for the same period last year. Earnings per share for the first nine months of 2000 increased 70% to $1.38 per diluted share compared to $0.81 per diluted share last year. Liquidity and Capital Resources Assuming no material adverse changes in market conditions or interest rates, management expects that the Company will have sufficient cash from operations to support both its operations and its current debt obligations for the foreseeable future. Littelfuse started the 2000 year with $1.9 million of cash. Net cash provided by operations was $28.2 million for the first nine months. Net cash used to invest in property, plant and equipment was $15.7 million. Cash used to repay long term debt and to repurchase stock was $11.4 million. In addition, proceeds from warrant and stock option exercises were $4.0 million, resulting in net cash used in financing activities of $7.4 million. The net increase in cash for the nine months ended September 30, 2000 was $4.2 million, leaving the Company with a cash balance of approximately $6.1 million at September 30, 2000. The ratio of current assets to current liabilities was 2.0 to 1 at the end of the third quarter 2000 compared to 1.5 to 1 at year end 1999 and 1.9 to 1 at the end of the third quarter 1999. The days sales in receivables was approximately 64 days at the end of the third quarter 2000 compared to 68 days at year-end 1999 and 69 days at third quarter end 1999. The days inventory outstanding was approximately 91 days at third quarter end 2000 compared to 94 days at year-end 1999 and 82 days at third quarter end 1999. The Company's capital expenditures were $7.6 million for the third quarter 2000. The Company expects that capital expenditures, which are primarily for new machinery, equipment and information systems, will be approximately $22 million for the full year 2000. The long-term debt at the end of the third quarter 2000 consisted of five types totaling $68.5 million. They are as follows: (1) private placement notes totaling $50.0 million, (2) foreign revolver borrowings totaling $3.2 million, (3) notes payable relating to mortgages totaling $0.3 million, (4) U.S. revolver borrowings totaling $13.5 million and (5) other long-term debt, including capital leases, totaling $1.5 million. These five items include $17.8 million of senior notes and mortgage notes, which are considered to be current liabilities. This leaves net long-term debt totaling $50.7 million at September 30, 2000. During the quarter, the Company made the final $9.0 million principal payment on the 1993 private placement notes. The remaining private placement notes carry an interest rate of 6.16%. The Company has a $55.0 million revolver in the U.S., of which $41.5 million was available at September 30, 2000. The bank revolver loan notes carry an interest rate of prime or LIBOR plus 0.375%, which currently is approximately 7.0%. The Company also has an $8.0 million letter of credit facility, of which approximately $1.6 million was being used at September 30, 2000 Business Segment Information The Company designs, manufactures and sells circuit protection devices throughout the world. The Company has three reportable geographic segments: The Americas, Europe and Asia-Pacific. The circuit protection market in these geographical segments is categorized into three major product areas: electronic, automotive and power fuses. The Company evaluates the performance of each geographic segment based on its net income or loss. The Company also accounts for intersegment sales as if the sales were to third parties. The Company's reportable segments are the business units where the revenue is earned and expenses are incurred. The Company has subsidiaries in The Americas, Europe and Asia-Pacific where each region is measured based on its sales and operating income or loss. Information concerning the operations in these geographic segments for the period ended September 30, 2000 and October 2, 1999, is as follows (in thousands): Three Three Nine Nine Months Months months months Ended Ended Ended Ended September 30, 2000 October 2, 1999 September 30, 2000 October 2, 1999 Revenues The Americas $56,337 $42,485 $168,472 $124,498 Europe 14,316 11,200 48,031 36,274 Asia-Pacific 25,709 19,607 72,534 53,585 ------ ------- ------ ------ Combined Total 96,362 73,292 289,037 214,357 Corporate 0 0 0 0 Reconciliation 0 0 0 0 -- -- -- - Consolidated Total $96,362 $73,292 $289,037 $214,357 ======== ======== ======== ======== Intersegment Revenues The Americas $12,957 $8,425 $33,181 $23,656 Europe 8,809 2,768 23,861 8,141 Asia-Pacific 1,595 1,005 4,682 2,647 ------ ----- ----- ----- Combined Total 23,361 12,198 61,724 34,444 Corporate 0 0 0 0 Reconciliation (23,361) (12,198) (61,724) (34,444) -------- -------- -------- -------- Consolidated Total 0 0 0 0 == == == == Interest Expense The Americas $1,037 $1,260 $3,262 $3,837 Europe 4 4 75 8 Asia-Pacific 63 66 190 181 --- --- --- --- Combined Total 1,104 1,330 3,527 4,026 Corporate 0 0 0 0 Reconciliation 0 0 0 0 -- -- -- -- Consolidated Total $1,104 $1,330 $3,527 $4,026 Depreciation and Amortization The Americas $2,828 $2,767 $8,578 $7,659 Europe 698 431 2,092 1,092 Asia-Pacific 1,155 957 3,133 2,708 ------ ---- ----- ------ Combined Total 4,681 4,155 13,803 11,459 Corporate 2,080 2,259 6,369 6,767 Reconciliation 0 0 0 0 -- -- -- -- Consolidated Total $6,761 $6,414 $20,172 $18,226 Other income (loss) The Americas $(5) $243 $1,167 $782 Europe 153 7 420 144 Asia-Pacific 128 170 290 52 ---- --- --- -- Combined Total 276 420 1,877 978 Corporate 0 0 0 0 Reconciliation 0 0 0 0 -- -- -- -- Consolidated Total $276 $420 $1,877 $978 Income Tax Expense The Americas $3,243 $2,437 $10,530 $5,347 Europe 1,211 814 3,958 3,080 Asia-Pacific 1,261 789 3,476 2,372 ------ ---- ----- ----- Combined Total 5,715 4,040 17,964 10,799 Corporate 0 0 0 0 Reconciliation 0 0 0 0 -- -- -- -- Consolidated Total $5,715 $4,040 $17,964 $10,799 Net Income The Americas $5,849 $5,590 $20,357 $14,841 Europe 2,021 1,683 7,401 5,676 Asia-Pacific 3,938 1,579 9,220 3,871 ------ ------ ----- ----- Combined Total 11,808 8,852 36,978 24,388 Corporate (2,080) (2,264) (6,390) (6,772) Reconciliation 0 0 0 0 -- -- -- -- Consolidated Total $9,728 $6,588 $30,588 $17,616 Revenues Electronic $61,638 $38,587 $179,438 $106,958 Automotive 23,927 23,376 77,708 74,907 Power 10,797 11,329 31,891 32,492 ------- ------- ------ ------ Consolidated Total $96,362 $73,292 $289,037 $214,357 ======== ======== ======== ========
Revenues from no single customer of the Company amount to 10% or more for the quarter ended September 30, 2000. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995. The preceding commentary presents management's discussion and analysis of the Company's financial condition and results of operations for the periods presented. Certain of the statements included above, including those regarding future financial performance or results or those that are not historical facts, are or contain "forward-looking" information as that term is defined in the Securities Exchange Act of 1934, as amended. The words "expect," "believe," "anticipate," "project," "estimate," and similar expressions are intended to identify forward-looking statements. The Company cautions readers that any such statements are not guarantees of future performance or events and such statements involve risks, uncertainties and assumptions, including, but not limited to, product demand and market acceptance risks, the effect of economic conditions, the impact of competitive products and pricing, product development and patent protection, commercialization and technological difficulties, capacity and supply constraints or difficulties, actual purchases under agreements, the effect of the Company's accounting policies, currency rate fluctuations, and other factors discussed above and in the Company's Annual Report on Form 10-K for the year ended January 1, 2000. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual results and outcomes may differ materially from those indicated or implied in the forward-looking statements. This report should be read in conjunction with information provided in the financial statements appearing in the Company's Annual Report on Form 10-K for the year ended January 1, 2000. Item 3. Qualitative and Quantitative Disclosures about Market Risk The Company is exposed to market risk from changes in interest rates, foreign exchange rates and commodities. The Company had long-term debt outstanding at September 30, 2000 in the form of Senior Notes and lines of credit at both variable and fixed interest rates. Since substantially all of the debt has fixed interest rates, the Company's interest expense is not sensitive to changes in interest rate levels. A portion of the Company's operations consists of manufacturing and sales activities in foreign countries. The Company has manufacturing facilities in Mexico, England, Ireland, Switzerland, South Korea, China and the Philippines. Substantially all sales in Europe are denominated in Dutch Guilders, British Pounds Sterling, United States Dollars and Euros and substantially all sales in the Asia-Pacific region are denominated in United States Dollars and South Korean Won. The Company's identifiable foreign exchange exposures result from the purchase and sale of products from affiliates, repayment of intercompany trade and loan amounts and translation of local currency amounts in consolidation of financial results. Changes in foreign currency exchange rates or weak economic conditions in the foreign countries in which it manufactures and distributes products could affect the Company's sales and financial results. Other than utilizing netting and offsetting intercompany account management techniques to reduce known exposures, the Company does not use derivative financial instruments to mitigate its foreign currency risk at the present time. The Company uses various metals in the production of its products, including zinc, copper and silver. The Company's earnings are exposed to fluctuations in the prices of these commodities. The Company does not currently use derivative financial instruments to mitigate this commodity price risk. PART II - OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K (a) Exhibit Description Exhibit 3.2 Bylaws (as amended) Exhibit 27 Financial Data Schedule (b) There were no reports on Form 8-K filed during the quarter ended September 30, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, to be signed on its behalf by the undersigned thereunto duly authorized. Littelfuse, Inc. Date: November 14, 2000 By /s/ Philip G. Franklin -------------------------------- Philip G. Franklin Vice President, Treasurer, and Chief Financial Officer (As duly authorized officer and as the principal financial and accounting officer)