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LFUS > SEC Filings for LFUS > Form 10-Q/A on 18-Feb-2014All Recent SEC Filings

Show all filings for LITTELFUSE INC /DE

Form 10-Q/A for LITTELFUSE INC /DE


18-Feb-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Littelfuse, Inc. and its subsidiaries (the "company") design, manufacture, and sell circuit protection devices for use in the electronics, automotive and electrical markets throughout the world. The following table is a summary of the company's net sales by business unit and geography:

Net Sales by Business Unit and Geography (in millions, unaudited)



                          First Quarter
                 2013        2012        % Change
Business Unit
  Electronics   $  79.4     $  77.1              3 %
Automotive         59.4        52.6             13 %
 Electrical        32.1        30.9              4 %

Total           $ 170.9     $ 160.6              6 %




                         First Quarter
                2013        2012        % Change
Geography(a)
 Americas      $  77.8     $  74.0              5 %
 Europe           30.5        27.8             10 %
Asia-Pacific      62.6        58.8              6 %

Total          $ 170.9     $ 160.6              6 %

(a) Sales by geography represent sales to customer or distributor locations.

Results of Operations - First Quarter, 2013 compared to 2012

Net sales increased $10.3 million or 6% to $170.9 million in the first quarter of 2013 compared to $160.6 million in the first quarter of 2012 due primarily to an incremental $7.5 million from business acquisitions and broad-based growth in all businesses and geographies. The company also experienced $0.2 million in unfavorable foreign currency effects in the first quarter of 2013 as compared to the first quarter of 2012. The unfavorable foreign currency impact primarily resulted from sales denominated in the Japanese yen and Canadian dollar, offset by the favorable impact of the euro. Excluding incremental sales from acquisitions and currency effects, net sales increased $3.0 million or 2% year-over-year.

Electronics sales increased $2.3 million or 3% to $79.4 million in the first quarter of 2013 compared to $77.1 million in the first quarter of 2012 due to low channel inventories and improving market sentiment. The electronics segment experienced $0.2 million in unfavorable currency effects in the first quarter of 2013 primarily from sales denominated in Japanese yen.

Automotive sales increased $6.8 million or 13% to $59.4 million in the first quarter of 2013 compared to $52.6 million in the first quarter of 2012 due to an incremental $7.5 million from business acquisitions and growth in the passenger vehicle business. This was partially offset by a decline in the commercial vehicle business which, while showing signs of recovery, still declined 10% as compared to the first quarter of 2012. The automotive segment experienced $0.2 million in favorable currency effects in the first quarter of 2013 primarily due to sales denominated in euros. Excluding incremental sales from acquisitions and currency effects, net sales decreased $0.9 million or 2% year-over-year.

Electrical sales increased $1.2 million or 4% to $32.1 million in the first quarter of 2013 compared to $30.9 million in the first quarter of 2012 due to growth in power fuses primarily reflecting increased sales into the solar market. The electrical segment experienced $0.2 million in unfavorable currency effects in the first quarter of 2013 primarily from sales denominated in Canadian dollars.


On a geographic basis, sales in the Americas increased $3.8 million or 5% to $77.8 million in the first quarter of 2013 compared to $74.0 million in the first quarter of 2012 due to increased sales of power fuses offset by weaker commercial vehicle product sales and $0.2 million in unfavorable currency effects from sales denominated in Canadian dollars.

Europe sales increased $2.7 million or 10% to $30.5 million in the first quarter of 2013 compared to $27.8 million in the first quarter of 2012 mainly due to incremental sales of $5.7 million from Accel and $0.2 million in favorable currency effects offset by lower demand for electronics and automotive products. Excluding incremental sales and currency effects, Europe sales declined 11% year-over-year primarily due to a decrease in demand for automotive and electrical products partially offset by an increase in sales of electronics products.

Asia-Pacific sales increased $3.8 million or 6% to $62.6 million in the first quarter of 2013 compared to $58.8 million in the first quarter of 2012 primarily due to higher demand for electrical and automotive products offset by $0.2 million in unfavorable currency effects primarily from sales denominated in Japanese yen.

Gross profit was $64.6 million or 38% of net sales for the first quarter of 2013 compared to $60.9 million or 38% of net sales in the same quarter last year.

Total operating expense was $36.5 million or 21% of net sales for the first quarter of 2013 compared to $35.0 million or 22% of net sales for the same quarter in 2012. The increase in operating expenses primarily reflects incremental operating expenses of $1.5 million from the business acquisitions.

Operating income for the first quarter of 2013 was approximately $28.1 million compared to operating income of $25.8 million for the same quarter in 2012 primarily due to higher sales and gross margin partially offset by slightly higher operating expenses as described above.

Interest expense was $0.4 million in both the first quarter of 2013 and the first quarter of 2012.

Impairment, loan loss and equity losses from the investment in and loan to Shocking Technologies was $10.7 million in the first quarter of 2013 compared to $0.5 million in the first quarter of 2012. The company fully impaired its investment and loan receivable in Shocking during the first quarter of 2013 as described in Note 6.

Other (income) expense, net, consisting of interest income, royalties, non-operating income and foreign currency items was approximately $0.9 million of income for the first quarter of 2013 compared to $0.1 million of expense in the first quarter of 2012. The results for 2013 and 2012 were primarily due to the impact from foreign exchange revaluation.

Income before income taxes was $18.0 million for the first quarter of 2013 compared to income before income taxes of $24.8 million for the first quarter of 2012. Income tax expense was $6.5 million with an effective tax rate of 36.1% for the first quarter of 2013 compared to income tax expense of $7.2 million with an effective tax rate of 29.1% in the first quarter of 2012. The effective tax rates for both the first quarter of 2013 (which includes incremental income tax expense of $3.3 million relating to the Shocking Technologies impairment loss as discussed further in Item 1, Note 16 - Restatement) and 2012 are lower than the U.S. statutory tax rate primarily due to the result of more income earned in low tax jurisdictions.

Net income for the first quarter of 2013 was $11.5 million or $0.51 per diluted share compared to net income of $17.6 million or $0.80 per diluted share for the same quarter of 2012.

Liquidity and Capital Resources

As of March 30, 2013, $231.8 million of the $246.9 million of the company's cash and cash equivalents was held by foreign subsidiaries. Of the $231.8 million held by foreign subsidiaries, approximately $20.5 million could be repatriated with minimal tax consequences. The company expects to maintain its foreign cash balances (other than the aforementioned $20.5 million) for local operating requirements, to provide funds for future capital expenditures and for potential acquisitions. The company does not expect to repatriate these funds to the U.S.


The company historically has financed capital expenditures through cash flows from operations. Management expects that cash flows from operations and available lines of credit will be sufficient to support both the company's operations and its debt obligations for the foreseeable future.

Revolving Credit Facilities

On June 13, 2011 the company entered into a domestic unsecured financing agreement, which expires on June 13, 2016, consisting of a credit agreement with certain commercial banks that provides a $150.0 million revolving credit facility, with a potential to increase up to $225.0 million upon request of the company and agreement with the lenders. At March 30, 2013, the company had available $55.4 million of borrowing capacity under the revolving credit facility at an interest rate of LIBOR plus 1.250% (1.45% as of March 30, 2013). The credit agreement replaced the company's previous credit agreement dated July 21, 2006 and term loan agreement dated September 29, 2008, and, unless terminated earlier, will terminate on June 13, 2016. This arrangement contains covenants that, among other matters, impose limitations on the incurrence of additional indebtedness, future mergers, sales of assets, payment of dividends, and changes in control, as defined in the agreement. In addition, the company is required to satisfy certain financial covenants and tests relating to, among other matters, interest coverage and leverage. At March 30, 2013, the company was in compliance with all covenants under the revolving credit facility.

The company also had $0.8 million outstanding in letters of credit at March 30, 2013. No amounts were drawn under these letters of credit at March 30, 2013.

Cash Flow

The company started 2013 with $235.4 million of cash and cash equivalents. Net cash provided by operating activities was approximately $16.0 million for the first three months of 2013 reflecting $11.5 million in net income and $19.8 million in non-cash adjustments (primarily $10.7 million in impairment charges and $7.8 million in depreciation and amortization) offset by $15.2 million in net changes to various operating assets and liabilities.

Changes in operating assets and liabilities for the first three months of 2013 (including short-term and long-term items) that impacted cash flows negatively consisted of increases in accounts receivables ($9.7 million) and decreases in accrued payroll and severance ($7.3 million), accrued expenses (including post-retirement) ($4.6 million) and accrued taxes ($0.6 million). The increase in accounts receivables was due to increased sales in the first quarter. The decrease in accrued payroll and severance was due primarily to payouts for the 2012 management incentive plan which occurred in the first quarter. The decrease in accrued expenses was due primarily to a $5.0 million pension contribution made during the first quarter. Changes that had a positive impact on cash flows were decreases in inventories ($3.6 million) and prepaid expenses and other ($1.0 million) and increases in accounts payable ($2.4 million).

Net cash used in investing activities was approximately $13.9 million and included $5.4 million in capital spending, and $8.5 million in expenditures for short-term investments.

Net cash provided by financing activities was approximately $11.3 million and included $10.0 million in net proceeds from borrowing and $5.8 million from the exercise of stock options, including tax benefits, partially offset by cash dividends paid of $4.4 million. The effects of exchange rate changes decreased cash and cash equivalents by approximately $2.0 million. The net cash provided by operating activities combined with the effects of exchange rate changes less net cash used in investing and financing activities resulted in an $11.5 million increase in cash, which left the company with a cash and cash equivalents balance of $246.9 million at March 30, 2013.

The ratio of current assets to current liabilities was 3.0 at the end of the first quarter of 2013 compared to 2.9 at year-end 2012 and 2.5 at the end of the first quarter of 2012. Days sales outstanding in accounts receivable was approximately 57 days at the end of the first quarter of 2013 compared to 61 days at the end of the first quarter of 2012 and 58 days at year-end 2012. Days inventory outstanding was approximately 61 days at the end of the first quarter of 2013 compared to 69 days at the year-end 2012 and 71 days at end of the first quarter of 2012.


Outlook

The company's sales and order rates have rebounded during the first quarter. The electronics business is showing signs of improvement while the electrical and automotive passenger vehicle markets continue to grow modestly. The commercial vehicle business appears to be recovering but still faces headwinds in key end markets. Protection relays and custom products have been negatively impacted by the slowdown in mining and are expected to show further weakness in the second half of 2013 as several large projects near completion. Sales for the second quarter of 2013 are expected to increase between 4% and 9% compared to the first quarter of 2013.

Cautionary Statement Regarding Forward-Looking Statements Under the Private Securities Litigation Reform Act of 1995 ("PSLRA").

The statements in this section and the other sections of this report that are not historical facts are intended to constitute "forward-looking statements" entitled to the safe-harbor provisions of the PSLRA. These statements may involve risks and uncertainties, including, but not limited to, risks relating to product demand and market acceptance, economic conditions, the impact of competitive products and pricing, product quality problems or product recalls, capacity and supply difficulties or constraints, coal mining exposures reserves, failure of an indemnification for environmental liability, exchange rate fluctuations, commodity price fluctuations, the effect of the company's accounting policies, labor disputes, restructuring costs in excess of expectations, pension plan asset returns less than assumed, integration of acquisitions and other risks which may be detailed in the company's other Securities and Exchange Commission filings. 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 December 29, 2012. For a further discussion of the risk factors of the company, please see Item 1A. "Risk Factors" to the company's Annual Report on Form 10-K for the year ended December 29, 2012.

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