Littelfuse Reports Third 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 third quarter ended October 1, 2022:

Net sales of $658.9 million were up 22% versus the prior year period, and up 8% organically
GAAP diluted EPS was $3.02; adjusted diluted EPS was $4.28, up 8% versus the prior year period
Cash flow from operations was $148.1 million; free cash flow was $126.5 million, 41% higher than the prior year period
On September 29, the company released its 2021 Sustainability Report

"In the third quarter, we continued the outstanding performance we achieved during the first half of this year, once again exceeding our expectations," said Dave Heinzmann, Littelfuse President and Chief Executive Officer. "Our strong results were driven by growth from global business wins, additions from acquisitions, and progress on our operational excellence initiatives. Our significant achievements to date position us for ongoing long-term profitable growth within the mega themes of sustainability, connectivity, and safety."

Fourth Quarter of 2022*

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

Net sales in the range of $603 to $623 million, the midpoint of which represents 11% growth over the prior year and 4% organic growth; includes an approximately 700 basis point year-over-year sales headwind from foreign exchange and last year’s extra "14^th week"
Adjusted diluted EPS in the range of $3.14 to $3.34; the midpoint of which represents 11% growth over the prior year when excluding last year’s combined $0.25 benefit from a tax holiday and "14^th week"

*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 December 8, 2022, to shareholders of record as of November 24, 2022

Conference Call and Webcast Information

Littelfuse will host a conference call on Wednesday, November 2, 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 19,000 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 July 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, 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, 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)	October 1, 2022		January 1, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	474,003	$	478,473
Short-term investments		79		28
Trade receivables, less allowances of $83,872 and $59,232 at October 1, 2022 and January 1, 2022, respectively		339,729		275,192
Inventories		536,026		445,671
Prepaid income taxes and income taxes receivable		5,833		2,035
Prepaid expenses and other current assets		75,643		68,812
Total current assets		1,431,313		1,270,211
Net property, plant, and equipment		458,234		437,889
Intangible assets, net of amortization		605,310		407,126
Goodwill		1,168,458		929,790
Investments		23,770		39,211
Deferred income taxes		10,461		13,127
Right of use lease assets, net		46,175		29,616
Other long-term assets		34,207		24,734
Total assets	$	3,777,928	$	3,151,704
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	219,447	$	222,039
Accrued liabilities		177,127		159,689
Accrued income taxes		42,016		27,905
Current portion of long-term debt		10,220		25,000
Total current liabilities		448,810		434,633
Long-term debt, less current portion		975,610		611,897
Deferred income taxes		116,595		81,289
Accrued post-retirement benefits		36,842		37,037
Non-current operating lease liabilities		35,778		22,305
Other long-term liabilities		75,402		71,023
Total equity		2,088,891		1,893,520
Total liabilities and equity	$	3,777,928	$	3,151,704

LITTELFUSE, INC.
CONDENSEDCONSOLIDATED STATEMENTS OF NET INCOME
(Unaudited)

	Three Months Ended						Nine Months Ended
(in thousands, except per share data)	October 1, 2022			September 25, 2021			October 1, 2022		September 25, 2021
Net sales	$	658,880		$	539,581		$	1,900,646	$	1,526,863
Cost of sales		402,059			325,009			1,122,258		954,429
Gross profit		256,821			214,572			778,388		572,434

Selling, general, and administrative expenses		90,219			67,468			258,820		199,071
Research and development expenses		25,752			15,779			68,796		46,912
Amortization of intangibles		15,567			10,446			39,883		31,608
Restructuring, impairment, and other charges		3,413			772			4,265		1,998
Total operating expenses		134,951			94,465			371,764		279,589
Operating income		121,870			120,107			406,624		292,845

Interest expense		8,399			4,602			17,069		13,901
Foreign exchange loss		18,191			3,154			40,051		8,315
Other (income) expense, net		(698	)		(1,240	)		9,789		(10,867	)
Income before income taxes		95,978			113,591			339,715		281,496
Income taxes		20,510			21,537			59,713		49,634
Net income	$	75,468		$	92,054		$	280,002	$	231,862

Earnings per share:
Basic	$	3.05		$	3.74		$	11.32	$	9.43
Diluted	$	3.02		$	3.69		$	11.21	$	9.31

Weighted-average shares and equivalent shares outstanding:
Basic		24,755			24,622			24,726		24,582
Diluted		24,988			24,926			24,986		24,904

Comprehensive income	$	47,280		$	87,100		$	218,262	$	227,491

LITTELFUSE, INC.
CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended
(in thousands)	October 1, 2022			September 25, 2021
OPERATING ACTIVITIES
Net income	$	280,002		$	231,862
Adjustments to reconcile net income to net cash provided by operating activities:		183,942			96,824
Changes in operating assets and liabilities:
Trade receivables		(56,431	)		(83,793	)
Inventories		(83,803	)		(71,232	)
Accounts payable		(3,838	)		53,945
Accrued liabilities and income taxes		(4,399	)		23,294
Prepaid expenses and other assets		(2,034	)		(10,236	)
Net cash provided by operating activities		313,439			240,664

INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired		(532,772	)		(110,646	)
Purchases of property, plant, and equipment		(77,773	)		(57,526	)
Net proceeds from sale of property, plant and equipment, and other		565			2,561
Net cash used in investing activities		(609,980	)		(165,611	)

FINANCING ACTIVITIES
Net proceeds (payments) of credit facility		373,125			(30,000	)
Cash dividends paid		(41,055	)		(36,648	)
All other cash provided by financing activities		(10,147	)		5,771
Net cash provided by (used in) financing activities		321,923			(60,877	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(31,963	)		(5,832	)
(Decrease) increase in cash, cash equivalents, and restricted cash		(6,581	)		8,344
Cash, cash equivalents, and restricted cash at beginning of period		482,836			687,525
Cash, cash equivalents, and restricted cash at end of period	$	476,255		$	695,869

LITTELFUSE, INC.
NET SALES AND OPERATING INCOME BY SEGMENT
(Unaudited)

	Third Quarter								Year-to-Date
(in thousands)	2022			2021			% Growth / (Decline)		2022			2021			% Growth
Net sales
Electronics	$	397,629		$	347,240		14.5	%	$	1,121,626		$	959,122		16.9	%
Transportation		181,735			124,415		46.1	%		548,266			386,262		41.9	%
Industrial		79,516			67,926		17.1	%		230,754			181,479		27.2	%
Total net sales	$	658,880		$	539,581		22.1	%	$	1,900,646		$	1,526,863		24.5	%

Operating income
Electronics	$	113,140		$	100,524		12.6	%	$	339,675		$	230,283		47.5	%
Transportation		12,987			15,806		(17.8	) %		57,604			55,380		4.0	%
Industrial		12,178			6,571		85.3	%		39,968			18,452		116.6	%
Other(a)		(16,435	)		(2,794	)	N.M.			(30,623	)		(11,270	)	N.M.
Total operating income	$	121,870		$	120,107		1.5	%	$	406,624		$	292,845		38.9	%
Operating Margin		18.5	%		22.3	%				21.4	%		19.2	%

Interest expense		8,399			4,602					17,069			13,901
Foreign exchange loss		18,191			3,154					40,051			8,315
Other (income) expense, net		(698	)		(1,240	)				9,789			(10,867	)
Income before income taxes	$	95,978		$	113,591		(15.5	) %	$	339,715		$	281,496		20.7	%

(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

	Third Quarter						Year-to-Date
(in thousands)	2022		2021		% Growth /(Decline)		2022		2021		% Growth /(Decline)
Operating Margin
Electronics	28.5	%	28.9	%	(0.4	) %	30.3	%	24.0	%	6.3	%
Transportation	7.1	%	12.7	%	(5.6	) %	10.5	%	14.3	%	(3.8	) %
Industrial	15.3	%	9.7	%	5.6	%	17.3	%	10.2	%	7.1	%

LITTELFUSE, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(In millions of USD except per share amounts - unaudited)

Non-GAAP EPS reconciliation
	Q3-22		Q3-21		YTD-22		YTD-21
GAAP diluted EPS	$	3.02	$	3.69	$	11.21	$	9.31
EPS impact of Non-GAAP adjustments (below)		1.26		0.26		2.32		0.73
Adjusted diluted EPS	$	4.28	$	3.95	$	13.53	$	10.04

Non-GAAP adjustments - (income) / expense
	Q3-22		Q3-21			YTD-22			YTD-21
Acquisition-related and integration costs (a)	$	6.2	$	2.0		$	14.8		$	3.4
Purchase accounting inventory adjustments (b)		6.8		—			11.6			6.8
Restructuring, impairment and other charges (c)		3.4		0.8			4.3			2.0
Gain on sale of fixed assets (d)		—		—			—			(0.9	)
Non-GAAP adjustments to operating income		16.4		2.8			30.7			11.3
Other expense (income), net (e)		—		0.1			(0.5	)		0.6
Non-operating foreign exchange loss		18.2		3.2			40.1			8.3
Non-GAAP adjustments to income before income taxes		34.6		6.1			70.3			20.2
Income taxes (f)		3.0		(0.4	)		12.2			2.1
Non-GAAP adjustments to net income	$	31.6	$	6.5		$	58.1		$	18.1

Total EPS impact	$	1.26	$	0.26		$	2.32		$	0.73

Adjusted operating margin / Adjusted EBITDA reconciliation
	Q3-22			Q3-21			YTD-22			YTD-21
Net sales	$	658.9		$	539.6		$	1,900.6		$	1,526.9
GAAP operating income	$	121.9		$	120.1		$	406.6		$	292.8
Add back non-GAAP adjustments		16.4			2.8			30.7			11.3
Adjusted operating income	$	138.3		$	122.9		$	437.3		$	304.1
Adjusted operating margin		21.0	%		22.8	%		23.0	%		19.9	%
Add back amortization		15.6			10.4			39.9			31.6
Add back depreciation		17.0			14.2			48.3			41.4
Adjusted EBITDA	$	170.9		$	147.5		$	525.5		$	377.1
Adjusted EBITDA margin		25.9	%		27.3	%		27.6	%		24.7	%

Adjusted EBITDA by Segment	Q3-22									Q3-21
	Electronics			Transportation			Industrial			Electronics			Transportation			Industrial
GAAP operating income	$	113.1		$	13.0		$	12.2		$	100.5		$	15.8		$	6.6
Add:
Add back amortization		9.7			4.7			1.2			6.8			2.4			1.2
Add back depreciation		9.4			6.7			1.0			8.7			4.6			0.8
Adjusted EBITDA	$	132.2		$	24.4		$	14.4		$	116.0		$	22.9		$	8.6
Adjusted EBITDA Margin		33.3	%		13.4	%		18.1	%		33.4	%		18.4	%		12.7	%

Adjusted EBITDA by Segment	YTD-22									YTD-21
	Electronics			Transportation			Industrial			Electronics			Transportation			Industrial
GAAP operating income	$	339.7		$	57.6		$	40.0		$	230.3		$	55.4		$	18.5
Add:
Add back amortization		22.5			13.7			3.7		$	21.0		$	7.1		$	3.5
Add back depreciation		26.5			19.0			2.9		$	25.0		$	14.0		$	2.5
Adjusted EBITDA	$	388.7		$	90.3		$	46.5		$	276.3		$	76.5		$	24.5
Adjusted EBITDA Margin		34.7	%		16.5	%		20.1	%		28.8	%		19.8	%		13.5	%

Net sales reconciliation	Q3-22 vs. Q3-21
	Electronics		Transportation		Industrial		Total
Net sales growth	15	%	46	%	17	%	22	%
Less:
Acquisitions	11	%	49	%	—	%	18	%
FX impact	(3	) %	(7	) %	(1	) %	(4	) %
Organic net sales growth	7	%	4	%	18	%	8	%

Net sales reconciliation	YTD-22 vs. YTD-21
	Electronics		Transportation		Industrial		Total
Net sales growth	17	%	42	%	27	%	24	%
Less:
Acquisitions	4	%	46	%	5	%	14	%
FX impact	(3	) %	(5	) %	(1	) %	(3	) %
Organic net sales growth	16	%	1	%	23	%	13	%

Income tax reconciliation
	Q3-22			Q3-21			YTD-22			YTD-21
Income taxes	$	20.5		$	21.5		$	59.7		$	49.6
Effective rate		21.4	%		19.0	%		17.6	%		17.6	%
Non-GAAP adjustments - income taxes		3.0			(0.4	)		12.2			2.1
Adjusted income taxes	$	23.4		$	21.1		$	71.9		$	51.7
Adjusted effective rate		18.0	%		17.6	%		17.5	%		17.1	%
Free cash flow reconciliation
	Q3-22			Q3-21			YTD-22			YTD-21
Net cash provided by operating activities	$	148.1		$	114.3		$	313.4		$	240.7
Less: Purchases of property, plant and equipment		(21.7	)		(24.9	)		(77.8	)		(57.5	)
Free cash flow	$	126.5		$	89.4		$	235.7		$	183.2

Consolidated Total Debt	As of October 1, 2022
Consolidated Total Debt	$	985.8
Unamortized debt issuance costs		5.0
Consolidated funded indebtedness		990.8
Cash held in U.S. (up to $400 million)		115.9
Net debt	$	874.9

Consolidated EBITDA	Twelve Months Ended October 1, 2022
Net Income	$	331.9
Interest expense		21.7
Income taxes		67.3
Depreciation		62.8
Amortization		51.0
Non-cash additions:
Stock-based compensation expense		23.3
Non-cash pension settlement charge		19.9
Purchase accounting inventory step-up charge		13.1
Unrealized loss on investments		14.6
Other		126.4
Consolidated EBITDA (1)	$	732.0

Consolidated Net Leverage Ratio (as defined in the Credit Agreement) *	1.2x

* 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.

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

(e) 2022 year-to-date amount included $0.5 million gain from the sale of a building within Transportation segment. Q3 2021 included a $0.1 million charge for an asset retirement obligation related to the disposal of a business in 2019. 2021 year-to-date amount included $0.5 million of impairment charges on certain other investments.

(f) reflected the tax impact associated with the non-GAAP adjustments, and 2022 year-to-date amount include 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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Littelfuse Reports Third Quarter Results For 2022