Littelfuse Reports Second Quarter Results For 2022

Littelfuse, Inc. (NASDAQ: LFUS), an industrial technology manufacturing company empowering a sustainable, connected, and safer world, today reported financial results for the second quarter ended July 2, 2022:

• Net sales of $618.4 million were up 18% versus the prior year period, and up 10% organically
• GAAP diluted EPS was $3.48; adjusted diluted EPS was $4.26, up 25% versus the prior year period
• Cash flow from operations was $113.6 million and free cash flow was $87.2 million
• On July 19, the company completed its acquisition of C&K Switches
• The company’s Board of Directors approved a 13% increase in the quarterly cash dividend from $0.53 to $0.60; this equates to an annualized dividend of $2.40 per share

“We delivered very strong second quarter results above our expectations while continuing to advance our strategic initiatives,” said Dave Heinzmann, Littelfuse President and Chief Executive Officer. “Our record performance to date in 2022 is a testament to our global teams’ execution across the breadth of our end markets. I am also excited to welcome C&K to our organization which significantly expands our ability to serve customers with market leading technologies, capabilities and talent. Looking ahead, we remain focused on effectively managing our business through market volatility while securing growth opportunities driven by sustainability, connectivity, and safety, which will deliver long-term value to our stakeholders.”

Third Quarter of 2022*

Based on current market conditions, for the third quarter the company expects,

• Net sales in the range of $630 to $644 million; adjusted diluted EPS in the range of $3.71 to $3.87

*Littelfuse provides guidance on a non-GAAP (adjusted) basis. GAAP items excluded from guidance may include the after-tax impact of items including acquisition and integration costs, restructuring, impairment and other charges, certain purchase accounting adjustments, non-operating foreign exchange adjustments and significant and unusual items. These items are uncertain, depend on various factors, and could be material to results computed in accordance with GAAP. Littelfuse is not able to forecast the excluded items in order to provide the most directly comparable GAAP financial measure without unreasonable efforts.

Dividend

• The company will pay a cash dividend on its common stock of $0.60 per share on September 8, 2022, to shareholders of record as of August 25, 2022

Conference Call and Webcast Information

Littelfuse will host a conference call on Wednesday, August 3, 2022, at 9:00 a.m. Central Time to discuss the results. The call will be broadcast and available for replay at Littelfuse.com. A slide presentation is available in the Investor Relations section of the company’s website at Littelfuse.com.

About Littelfuse

Littelfuse (NASDAQ: LFUS) is an industrial technology manufacturing company empowering a sustainable, connected, and safer world. Across more than 15 countries, and with approximately 17,000 global associates, we partner with customers to design and deliver innovative, reliable solutions. Serving over 100,000 end customers, our products are found in a variety of industrial, transportation and electronics end markets – everywhere, every day. Learn more at Littelfuse.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

The statements in this press release that are not historical facts are intended to constitute "forward-looking statements" entitled to the safe-harbor provisions of the Private Securities Litigation Reform Act. Such statements are based on Littelfuse, Inc.’s (“Littelfuse” or the “Company”) current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties, include, but are not limited to, risks and uncertainties relating to general economic conditions; the severity and duration of the COVID-19 pandemic and the measures taken in response thereto and the effects of those items on the company’s business; product demand and market acceptance; the impact of competitive products and pricing; product quality problems or product recalls; capacity and supply difficulties or constraints; coal mining exposures reserves; cybersecurity matters; failure of an indemnification for environmental liability; exchange rate fluctuations; commodity and other raw material price fluctuations; the effect of Littelfuse's accounting policies; labor disputes; restructuring costs in excess of expectations; pension plan asset returns less than assumed; integration of acquisitions; uncertainties related to political or regulatory changes; and other risks which may be detailed in the company's 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 release 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, 2022.

Further discussion of the risk factors of the company can be found under the caption "Risk Factors" in the company's Annual Report on Form 10-K for the year ended January 1, 2022, its Quarterly Report on Form 10-Q for the quarter ended April 2, 2022, and in other filings and submissions with the SEC, each of which are available free of charge on the company’s investor relations website at investor.littelfuse.com and on the SEC’s website at www.sec.gov. These forward-looking statements are made as of the date hereof. The company does not undertake any obligation to update, amend or clarify these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the availability of new information.

Non-GAAP Financial Measures

The information included in this press release includes the non-GAAP financial measures of organic net sales growth (decline), adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, adjusted income taxes, adjusted effective tax rate, free cash flow, net debt, consolidated EBITDA, and consolidated net leverage ratio (as defined in the credit agreement). Many of these non-GAAP financial measures exclude the effect of certain expenses and income not related directly to the underlying performance of our fundamental business operations.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is set forth in the attached schedules.

The company believes that organic net sales growth (decline), adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, adjusted income taxes, and adjusted effective tax rate provide useful information to investors regarding its operational performance because they enhance an investor’s overall understanding of our core financial performance and facilitate comparisons to historical results of operations, by excluding items that are not related directly to the underlying performance of our fundamental business operations or were not part of our business operations during a comparable period. The company believes that free cash flow is a useful measure of its ability to generate cash. The company believes that net debt, consolidated EBITDA, and consolidated net leverage ratio are useful measures of its credit position. The company believes that all of these non-GAAP financial measures are commonly used by financial analysts and others in the industries in which we operate, and thus further provide useful information to investors. Management additionally uses these measures when assessing the performance of the business and for business planning purposes. Note that our definitions of these non-GAAP financial measures may differ from those terms as defined or used by other companies.

LFUS-F

LITTELFUSE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
		(Unaudited)
(in thousands)		July 2, 2022			January 1, 2022
ASSETS
Current assets:
Cash and cash equivalents		$	809,122		$	478,473
Short-term investments			20			28
Trade receivables, less allowances of $68,933 and $59,232 at July 2, 2022 and January 1, 2022, respectively			343,321			275,192
Inventories			496,207			445,671
Prepaid income taxes and income taxes receivable			4,861			2,035
Prepaid expenses and other current assets			65,294			68,812
Total current assets			1,718,825			1,270,211
Net property, plant, and equipment			435,683			437,889
Intangible assets, net of amortization			374,593			407,126
Goodwill			914,358			929,790
Investments			25,626			39,211
Deferred income taxes			12,476			13,127
Right of use lease assets, net			39,724			29,616
Other long-term assets			23,184			24,734
Total assets		$	3,544,469		$	3,151,704
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	219,764		$	222,039
Accrued liabilities			137,377			159,689
Accrued income taxes			34,128			27,905
Current portion of long-term debt			7,500			25,000
Total current liabilities			398,769			434,633
Long-term debt, less current portion			884,569			611,897
Deferred income taxes			74,286			81,289
Accrued post-retirement benefits			35,090			37,037
Non-current operating lease liabilities			32,334			22,305
Other long-term liabilities			67,478			71,023
Total equity			2,051,943			1,893,520
Total liabilities and equity		$	3,544,469		$	3,151,704

LITTELFUSE, INC. CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (Unaudited)
		Three Months Ended							Six Months Ended
(in thousands, except per share data)		July 2, 2022			June 26, 2021				July 2, 2022			June 26, 2021
Net sales		$	618,436		$	523,488			$	1,241,766		$	987,282
Cost of sales			355,465			326,092				720,199			629,420
Gross profit			262,971			197,396				521,567			357,862
Selling, general, and administrative expenses			93,093			73,315				168,601			131,603
Research and development expenses			23,488			16,394				43,044			31,133
Amortization of intangibles			11,592			10,641				24,316			21,162
Restructuring, impairment, and other charges			634			789				852			1,226
Total operating expenses			128,807			101,139				236,813			185,124
Operating income			134,164			96,257				284,754			172,738
Interest expense			4,368			4,626				8,670			9,299
Foreign exchange loss (gain)			14,124			(1,676	)			21,860			5,161
Other expense (income), net			6,060			(1,890	)			10,487			(9,627	)
Income before income taxes			109,612			95,197				243,737			167,905
Income taxes			22,596			13,102				39,203			28,097
Net income		$	87,016		$	82,095			$	204,534		$	139,808
Earnings per share:
Basic		$	3.52		$	3.34			$	8.28		$	5.69
Diluted		$	3.48		$	3.30			$	8.19		$	5.62
Weighted-average shares and equivalent shares outstanding:
Basic			24,734			24,592				24,712			24,562
Diluted			24,985			24,900				24,986			24,894
Comprehensive income		$	55,667		$	87,549			$	170,982		$	140,391

LITTELFUSE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
		Six Months Ended
(in thousands)		July 2, 2022				June 26, 2021
OPERATING ACTIVITIES
Net income		$	204,534			$	139,808
Adjustments to reconcile net income to net cash provided by operating activities:			114,659				63,947
Changes in operating assets and liabilities:
Trade receivables			(76,807	)			(69,881	)
Inventories			(70,285	)			(38,205	)
Accounts payable			9,153				38,955
Accrued liabilities and income taxes			(23,107	)			4,488
Prepaid expenses and other assets			7,175				(12,766	)
Net cash provided by operating activities			165,322				126,346
INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired			(9,758	)			(109,852	)
Purchases of property, plant, and equipment			(56,151	)			(32,657	)
Net proceeds from sale of property, plant and equipment, and other			542				2,569
Net cash used in investing activities			(65,367	)			(139,940	)
FINANCING ACTIVITIES
Net proceeds (payments) from credit facility			275,000				(30,000	)
Cash dividends paid			(26,201	)			(23,596	)
All other cash provided by financing activities			(3,782	)			4,413
Net cash provided by (used in) financing activities			245,017				(49,183	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			(15,511	)			(2,894	)
Increase (decrease) in cash, cash equivalents, and restricted cash			329,461				(65,671	)
Cash, cash equivalents, and restricted cash at beginning of period			482,836				687,525
Cash, cash equivalents, and restricted cash at end of period		$	812,297			$	621,854

LITTELFUSE, INC. NET SALES AND OPERATING INCOME BY SEGMENT (Unaudited)
		Second Quarter											Year-to-Date
(in thousands)		2022				2021				% Growth/ (Decline)			2022				2021				% Growth
Net sales
Electronics		$	358,176			$	325,347			10.1	%		$	723,997			$	611,882			18.3	%
Transportation			182,027				133,318			36.5	%			366,531				261,847			40.0	%
Industrial			78,233				64,823			20.7	%			151,238				113,553			33.2	%
Total net sales		$	618,436			$	523,488			18.1	%		$	1,241,766			$	987,282			25.8	%
Operating income
Electronics		$	105,958			$	74,236			42.7	%		$	226,535			$	129,759			74.6	%
Transportation			18,309				19,258			(4.9	)%			44,617				39,574			12.7	%
Industrial			15,285				8,375			82.5	%			27,790				11,881			133.9	%
Other(a)			(5,388	)			(5,612	)		N.M.				(14,188	)			(8,476	)		N.M.
Total operating income		$	134,164			$	96,257			39.4	%		$	284,754			$	172,738			64.8	%
Operating Margin			21.7	%			18.4	%						22.9	%			17.5	%
Interest expense			4,368				4,626							8,670				9,299
Foreign exchange loss (gain)			14,124				(1,676	)						21,860				5,161
Other expense (income), net			6,060				(1,890	)						10,487				(9,627	)
Income before income taxes		$	109,612			$	95,197			15.1	%		$	243,737			$	167,905			45.2	%

(a) "other" typically includes non-GAAP adjustments such as acquisition-related and integration costs, purchase accounting inventory adjustments and restructuring and impairment charges. (See Supplemental Financial Information for details.)

N.M. - Not meaningful

		Second Quarter									Year-to-Date
(in thousands)		2022			2021			% Growth /(Decline)			2022			2021			% Growth/ (Decline)
Operating Margin
Electronics		29.6	%		22.8	%		6.8	%		31.3	%		21.2	%		10.1	%
Transportation		10.1	%		14.4	%		(4.3	)%		12.2	%		15.1	%		(2.9	)%
Industrial		19.5	%		12.9	%		6.6	%		18.4	%		10.5	%		7.9	%

LITTELFUSE, INC. SUPPLEMENTAL FINANCIAL INFORMATION (In millions of USD except per share amounts - unaudited)
Non-GAAP EPS reconciliation
		Q2-22				Q2-21				YTD-22				YTD-21
GAAP diluted EPS		$	3.48			$	3.30			$	8.19			$	5.62
EPS impact of Non-GAAP adjustments (below)			0.78				0.11				1.06				0.46
Adjusted diluted EPS		$	4.26			$	3.41			$	9.25			$	6.08

Non-GAAP adjustments - (income) / expense
		Q2-22				Q2-21				YTD-22				YTD-21
Acquisition-related and integration costs (a)		$	4.8			$	0.5			$	8.6			$	1.3
Purchase accounting inventory adjustments (b)			—				3.3				4.8				6.8
Restructuring, impairment and other charges (c)			0.6				0.8				0.8				1.3
Loss (gain) on sale of fixed assets (d)			—				1.0				—				(0.9	)
Non-GAAP adjustments to operating income			5.4				5.6				14.2				8.5
Other (income) expense, net (e)			(0.5	)			0.5				(0.5	)			0.5
Non-operating foreign exchange loss (gain)			14.1				(1.7	)			21.9				5.2
Non-GAAP adjustments to income before income taxes			19.0				4.4				35.6				14.2
Income taxes (f)			(0.4	)			1.7				9.1				2.5
Non-GAAP adjustments to net income		$	19.4			$	2.7			$	26.5			$	11.7
Total EPS impact		$	0.78			$	0.11			$	1.06			$	0.46

Adjusted operating margin / Adjusted EBITDA reconciliation
		Q2-22				Q2-21				YTD-22				YTD-21
Net sales		$	618.4			$	523.5			$	1,241.8			$	987.3
GAAP operating income		$	134.2			$	96.3			$	284.8			$	172.7
Add back non-GAAP adjustments			5.4				5.6				14.2				8.5
Adjusted operating income		$	139.6			$	101.9			$	299.0			$	181.2
Adjusted operating margin			22.6	%			19.5	%			24.1	%			18.4	%
Add back amortization			11.6				10.6				24.3				21.2
Add back depreciation			15.7				13.6				31.3				27.3
Adjusted EBITDA		$	166.9			$	126.1			$	354.6			$	229.7
Adjusted EBITDA margin			27.0	%			24.1	%			28.6	%			23.3	%

Adjusted EBITDA by Segment		Q2-22												Q2-21
		Electronics				Transportation				Industrial				Electronics				Transportation				Industrial
GAAP operating income		$	106.0			$	18.3			$	15.3			$	74.2			$	19.3			$	8.4
Add:
Add back amortization			6.1				4.3				1.2				7.0				2.3				1.3
Add back depreciation			8.4				6.3				1.0				8.1				4.6				0.9
Adjusted EBITDA		$	120.5			$	28.9			$	17.5			$	89.3			$	26.2			$	10.6
Adjusted EBITDA Margin			33.6	%			15.9	%			22.3	%			27.5	%			19.7	%			16.2	%

Adjusted EBITDA by Segment		YTD-22												YTD-21
		Electronics				Transportation				Industrial				Electronics				Transportation				Industrial
GAAP operating income		$	226.5			$	44.6			$	27.8			$	129.8			$	39.6			$	11.9
Add:
Add back amortization			12.8				9.0				2.5			$	14.2			$	4.7			$	2.3
Add back depreciation			17.1				12.3				1.9			$	16.3			$	9.3			$	1.6
Adjusted EBITDA		$	256.4			$	65.9			$	32.2			$	160.3			$	53.6			$	15.8
Adjusted EBITDA Margin			35.4	%			18.0	%			21.3	%			26.2	%			20.5	%			13.9	%

Net sales reconciliation		Q2-22 vs. Q2-21
		Electronics			Transportation			Industrial			Total
Net sales growth		10	%		37	%		21	%		18	%
Less:
Acquisitions		—	%		45	%		—	%		11	%
FX impact		(3	)%		(4	)%		(1	)%		(3	)%
Organic net sales growth (decline)		13	%		(4	)%		22	%		10	%

Net sales reconciliation		YTD-22 vs. YTD-21
		Electronics			Transportation			Industrial			Total
Net sales growth		18	%		40	%		33	%		26	%
Less:
Acquisitions		—	%		44	%		8	%		13	%
FX impact		(3	)%		(4	)%		(1	)%		(3	)%
Organic net sales growth		21	%		—	%		26	%		16	%

Income tax reconciliation
		Q2-22				Q2-21				YTD-22				YTD-21
Income taxes		$	22.6			$	13.1			$	39.2			$	28.1
Effective rate			20.6	%			13.8	%			16.1	%			16.7	%
Non-GAAP adjustments - income taxes			(0.4	)			1.7				9.1				2.5
Adjusted income taxes		$	22.2			$	14.8			$	48.3			$	30.6
Adjusted effective rate			17.3	%			14.8	%			17.3	%			16.8	%
Free cash flow reconciliation
		Q2-22				Q2-21				YTD-22				YTD-21
Net cash provided by operating activities		$	113.6			$	76.2			$	165.3			$	126.3
Less: Purchases of property, plant and equipment			(26.4	)			(17.9	)			(56.2	)			(32.6	)
Free cash flow		$	87.2			$	58.2			$	109.1			$	93.7

Consolidated Total Debt		As of July 2, 2022
Consolidated Total Debt		$	892.1
Unamortized debt issuance costs			5.0
Consolidated funded indebtedness			897.1
Cash held in U.S. (up to $400 million)			400.0
Net debt		$	497.1
Consolidated EBITDA		Twelve Months Ended July 2, 2022
Net Income		$	348.5
Interest expense			17.9
Income taxes			68.3
Depreciation			60.0
Amortization			45.9
Non-cash additions (reductions):
Stock-based compensation expense			22.6
Non-cash pension settlement charge			19.9
Purchase accounting inventory step-up charge			6.4
Unrealized loss on investments			12.5
Impairment charges			—
Other			62.4
Consolidated EBITDA (1)		$	664.4
Consolidated Net Leverage Ratio (as defined in the Credit Agreement) *		0.7x

* Our Credit Agreement and Private Placement Note with maturities ranging from 2023 to 2032, contain financial ratio covenants providing that if, as of the last day of each fiscal quarter, the Consolidated Net Leverage ratio at such time for the then most recently concluded period of four consecutive fiscal quarters of the Company exceeds 3.50:1.00, an Event of Default (as defined in the Credit Agreement and Private Placement Senior Notes) is triggered.

The Credit Agreement and Private Placement Senior Notes were amended in Q2 2022 and now allow for the addition of acquisition and integration costs up to 15% of Consolidated EBITDA and the Netting of up to $400M of Available Cash (Cash held by US Subsidiaries).

(1) Represents Consolidated EBITDA as defined in our Credit Agreement and Private Placement Senior Notes and is calculated using the most recently concluded period of four consecutive quarters.

Note: Total will not always foot due to rounding.

(a) reflected in selling, general and administrative expenses ("SG&A").

(b) reflected in cost of sales.

(c) reflected in restructuring, impairment and other charges.

(d) reflected in SG&A, a loss of $1.0 million recorded during the second quarter of 2021 for a total year-to-date gain of $0.9 million from the sale of a building within the Electronics segment 2021.

(e) 2022 amount included $0.5 million gain from the sale of a building within Transportation segment. 2021 amount included $0.5 million of impairment charges on certain other investments.

(f) reflected the tax impact associated with the non-GAAP adjustments and the one-time net benefit of $7.2 million that resulted from the dissolution of one of the Company’s affiliates.

 

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