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 March 28, 1997 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 March 28, 1997, 9,855,054 shares of common stock, $.01 par value, of the Registrant and warrants to purchase 2,086,225 shares of common stock, $.01 par value, of the Registrant were outstanding. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION PAGE Item 1. Consolidated Condensed (unaudited) Statements of Operations, Financial Condition, and Cash Flows and Notes to the Consolidated Condensed Financial Statements .......................................................... .. ..... 1 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......................................................... ........ 6 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K ......................................................... 8 Part I - Financial Information Item 1. CONSOLIDATED CONDENSE STATMENTS OF OPERATIONS (In thousands, except per share data)(unaudited) For the Three Months Ended March 28, March 30, 1997 1996 Net sales $65,583 $59,078 Cost of sales 38,764 34,966 Gross profit 26,819 24,112 Selling, administrative and general expenses 14,490 13,462 Amortization of intangibles 1,747 1,764 Operating income 10,582 8,886 Interest expense 903 979 Other income, net (275) (257) Income before income taxes 9,954 8,164 Income taxes 3,687 2,939 Net income $6,267 $5,225 Net income per share $ 0.53 $0.42 Weighted average number of common and common equivalent shares outstanding 11,896 12,477 1 CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION (In thousands) March28,Dece mber28, 1997 1996 (Unaudited) ASSETS Current Assets: Cash and cash equivalents 2,003 1,427 Accounts receivable 42,571 35,468 Inventories 32,990 31,586 Deferred income taxes 3,100 3,100 Prepaid expenses and other 2,439 2,228 Total current assets 83,103 73,809 Property, plant, and equipment, net 62,722 63,889 Reorganization value, net 43,892 44,635 Patents and other identifiable intangible assets, net 22,898 23,978 Prepaid pension cost and other assets 3,746 3,640 $216,361 $209,951 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses 34,118 30,264 Accrued income taxes 12,465 10,775 Current portion of long-term debt 9,956 10,005 Total current liabilities 56,539 51,044 Long-term debt, less current portion 42,465 44,556 Deferred income taxes 5,417 5,417 Minority Interest 232 312 Shareholders' equity: Preferred stock, par value $.01 per share: 1,000,000 shares authorized; no shares issued and outstanding _ _ Common stock, par value $.01 per share: 19,000,000 shares authorized; 9,855,054 and 9,887,679 shares issued and outstanding 103 103 Cost of Treasury Stock, 1997 - 445,130 shares; 1996 - 395,130 shares (15,713) (13,442) Additional paid-in capital 57,653 57,426 Notes receivable - common stock (1,541) (1,470) Foreign translation adjustment (1,936) (870) Retained earnings 73,142 66,875 Total shareholders' equity $111,708 $108,622 $216,361 $209,951 2 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands unaudited) For the Three Months Ended March 28, March 30, 1997 1996 Operating activities: Net income $6,267 $5,225 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,331 3,126 Amortization 1,747 1,784 Provision for bad debts 124 97 Minority interest (64) (70) Other 61 - Changes in operating assets and liabilities: Accounts receivable (7,813) (6,293) Inventories (1,885) (266) Accounts payable and accrued expenses5,972 2,416 Other, net (360) (242) Net cash provided by operating activities 7,380 5,777 Cash used in investing activities: Purchases of property, plant, and equipment, net (2,533) (2,529) Cash used in financing activities: Proceeds/(payments) of long-term debt, net (2,051) 1,970 Proceeds from exercise of stock options 156 303 Purchase of common stock (2,271) (6,009) (4,166) (3,736) Effect of exchange rate changes on cash (105) (10) Increase (decrease) in cash and cash equivalents 576 (498) Cash and cash equivalents at beginning of period 1,427 1,308 Cash and cash equivalents at of period $2,003 $810 3 Notes to Consolidated Condensed Financial Statements (Unaudited) March 28, 1997 1. Basis of Presentation Littelfuse, Inc. and its subsidiaries (the "Company") are the successors in interest to the components business previously conducted by subsidiaries of Tracor Holdings, Inc. ("Predecessor"). The Company acquired its business as a result of the Predecessor's reorganization activities concluded on December 27, 1991. The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the period ended March 28, 1997 are not necessarily indicative of the results that may be expected for the year ending January 2, 1998. For further information, refer to the Company's consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10K, for the year ended December 28, 1996. Beginning in 1996, the Company changed its fiscal year end to the Saturday nearest December 31 and reports its quarterly interim financial information on the basis of periods of thirteen weeks. Previously the Company reported on a calendar year and quarter basis. The consolidated condensed statements of operations and cash flows for the three months ended March 28, 1997 are for the period from December 30, 1996 to March 28, 1997. 2. Inventories The components of inventories are as follows (in thousands): March 28 December 28 1997 1996 Raw material$ 8,535 $ 8,411 Work in process 3,119 3,263 Finished goods 21,336 19,912 Total $32,990 $31,586 4 3. Per Share Data Net income per share amounts for the three months ended March 28, 1997 and March 30, 1996 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 monthsended March 28, March 30, 1997 1996 Average shares outstanding 9,856 10,003 Net effect of dilutive stock options and warrants - Primary 2,040 2,414 - Fully diluted 2,040 2,474 Average shares outstanding - Primary 11,896 12,417 - Fully diluted 11,896 12,477 Net income $ 6,267 $ 5,225 Net income per share $ .53 $ .42 4. Long Term Debt The Company concluded a financing package on August 31, 1993. The package consists of a Note Purchase Agreement which requires principal payments of $9,000,000 payable annually beginning August 31, 1996 through August 31, 2000. The package also includes a bank Credit Agreement providing for an open revolver line of credit of $65,000,000 subject to a maximum indebtedness calculation and other traditional covenants. No revolver principal payments are required until the line matures on August 31, 2000. At March 28, 1997 the Company had available $51.5 million of borrowing capability under the revolver facility. 5. Recently Issued Accounting Standard In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted by the Company on January 2, 1998. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating basic earnings per share, the dilutive effect of stock options will be excluded. The adoption of Statement 128 is expected to result in basic earnings per share being higher than the previously reported primary earnings per share for the first quarter ended March 28, 1997 and March 30, 1996 of $0.11 and $0.10 per share, respectively. The impact of Statement 128 on the calculation of fully diluted earnings per share for these quarters is not expected to be material. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Sales increased 11 percent to $65.6 million the first quarter of 1997, compared to $59.1 million the first quarter of 1996. Operating income increased to $10.6 million for the quarter compared to $8.9 million the first quarter of last year. Net income was $6.3 million or $0.53 per share the first quarter of 1997 compared to $5.2 million or $0.42 per share the first quarter 1996. Cash flow from operations was $7.4 million the first quarter 1997. The Company repurchased 50,000 shares of common stock for $2.3 million and made capital investments of $2.5 million during the first quarter. The long term debt to equity ratio was 0.4 to 1 at March 28, 1997 unchanged from year end 1996 and March 30, 1996. First Quarter, 1997 Littelfuse sales increased 11 percent to $65.6 million the first quarter this year compared to $59.1 million last year. The gross margin was 40.9 percent this year compared to 40.8 percent last year. Operating income increased to 16.1 percent of sales the first quarter this year compared to 15.0 percent last year. Net income increased 20 percent to $6.3 million this year compared to $5.2 million last year and earnings per share increased 26 percent to $.53 this year compared to $.42 per share last year. First quarter 1997 sales grew $6.5 million compared to the same quarter last year. Strong automotive OEM and electronics distribution sales spurred 5 percent sales growth in North America. Sales grew 21 percent in local currency and 8 percent in dollars in the European Community based upon strong electronics and automotive OEM sales. Electronics sales spurred 36 percent sales growth in the Asia Pacific region, which were well balanced thoughout the region. Electronic sales grew to $32.1 million in the first quarter 1997 from $27.1 million the same quarter of last year for an increase of $5.0 million or 18 percent. Sales were very strong throughout Asia and Europe and moderately up in North America. Sales of personal computer and related accessories, telecom products and lighting ballasts showed the greatest improvement. Automotive sales grew to $24.7 million in the first quarter 1997 from $24.0 million the same quarter last year for an increase of $0.7 million or 3 percent. Worldwide automotive OEM businesses were very strong, but European currency exchange rate against the US dollar and weak worldwide aftermarket sales reduced the net sales growth for the quarter. Power fuse sales grew to $8.8 million in the first quarter 1997 from $8.0 million the same quarter last year for an increase of $0.8 million or 10 percent. The Company continues to improve its market share in this segment. Gross profit was $26.8 million or 40.9 percent of sales for the first quarter 1997 compared to $24.1 million or 40.8 percent last year. Margins improved slightly in North America and Europe. 6 Selling, general and administrative expenses were $14.5 million or 22.1 percent of sales for the first quarter 1997, compared to $13.5 million or 22.8 percent of sales for the same quarter last year. Selling expenses accounted for approximately sixty three percent of the expenses both quarters. The S,G&A expenses as a percent of sales are declining slightly despite greater investment in foreign sales effort and the implementation of new systems. The amortization of the reorganization value and other intangibles was 2.7 percent of sales for the first quarter of 1997 compared to 3.0 percent the first quarter of last year. Total S,G&A expenses, including intangibles amortization, were 24.8 percent of sales the first quarter 1997 compared to 25.8 percent the same quarter last year. Operating income was a record $10.6 million or 16.1 percent of sales for the first quarter 1997 compared to $8.9 million or 15.0 percent of sales last year. Interest expense was $0.9 million the first quarter of this year compared to $1.0 million the first quarter last year. Other income, net, was $0.3 million for both quarters. Income before taxes was $10.0 million for the first quarter 1997 compared to $8.2 million last year. Income taxes were $3.7 million with an effective tax rate of 37 percent for the first quarter 1997 compared to $2.9 million with an effective tax rate of 36 percent the first quarter of last year. Net income for the first quarter 1997 was $6.3 million or $0.53 per share compared to $5.2 million or $0.42 per 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 1997 year with $1.4 million of cash. Net cash provided by operations was $7.4 million for the first three months. Cash used to invest in property, plant and equipment was $2.5 million. Cash used to repurchase stock and net repayments of long term debt was $4.2 million. The net of cash provided, less investing activities and financing activities, resulted in an increase in cash of $0.6 million. This left the Company with a cash balance of approximately $2.0 million at March 28, 1997. The ratio of current assets to current liabilities was 1.5 to 1 at the end of the first quarter 1997 compared to 1.4 to 1 at year end 1996 and 1.5 to 1 at the end of the first quarter 1996. The days sales in receivables was approximately 59 days at the end of the first quarter 1997 compared to 52 days at year end 1996 and 55 days at first quarter end 1996 due to the higher foreign sales which have longer standard terms and higher sales the second half of the quarter. The inventory turnover rate was approximately 4.7 turns at first quarter end 1997 compared to 4.5 turns at year end 1996 and 4.6 turns at first quarter end 1996. 7 The Company's capital expenditures were $2.5 million for the first quarter 1997. The Company expects that capital expenditures, which will be primarily for new machinery and equipment, will be approximately $20.0 million in 1997. The ratio of long term debt to equity was 0.4 to 1 at the end of the first quarter 1997 unchanged from year end 1996 and the end of the first quarter of 1996. The debt to equity ratio has stayed relatively constant as the free cash flow has been used to repurchase shares and warrants. The long term debt at the end of the first quarter 1997 consisted of four types totaling $52.4 million. They are as follows: (1) private placement notes totaling $36.0 million, (2) bank revolver facility totaling $13.5 million, (3) notes payable relating to income taxes and mortgages totaling $0.7 million, and (4) other long-term debt totaling $2.2 million. These four items include $9.9 million of the bank revolver plus the tax notes and mortgage notes, which are considered to be current liabilities. This leaves net long term debt totaling $42.5 million at March 28, 1997. The private placement notes carry an interest rate of 6.31%. The Company had available at March 28, 1997, a revolver facility of $51.5 million. The bank revolver loan notes carry an interest rate of prime or LIBOR plus 0.5%, which currently is approximately 6.3%. The Company also has a $3.0 million letter of credit facility of which approximately $2.1 million was being used at March 28, 1997. Other Matters On April 25, 1997 the Board of Directors of the Company authorized a two-for-one split of its common stock in the form of a stock dividend. Stockholders of record as of the close of business on May 20, 1997 will receive one additional share for each share held. The additional shares will be distributed to stockholders on June 10, 1997. Subject to obtaining the consent of the warrant holders to an amendment to the warrants prior to June 10, each outstanding warrant to purchase shares of the company's common stock will become two warrants with an exercise price of $4.18 per share. When the stock split is completed, Littelfuse will have approximately 23.8 million equivalent shares outstanding. The Board of Directors also renewed the Company's share/warrant repurchase program though April 25, 1998, authorizing the Company to acquire any combination of up to one million pre-split shares or warrants or up to two million post-split shares or warrants. Since the Board first authorized a share/warrant repurchase program in 1994, Littelfuse has repurchased a total of 1,221,000 shares and warrants for a total price of approximately $37 million. PART II - OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K There were no reports on Form 8-K during the quarter ended March 28,1997. 8 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 March 28, 1997, to be signed on its behalf by the undersigned thereunto duly authorized. Littelfuse, Inc. Date: May 14, 1997 By /s/ James F. Brace James F. Brace Vice President, Treasurer, and Chief Financial Officer (As duly authorized officer and as the principal financial and accounting officer) 9 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 March 28, 1997, to be signed on its behalf by the undersigned thereunto duly authorized. Littelfuse, Inc. Date: May x,1997 By__________________________ James F. Brace Vice President, Treasurer, and Chief Financial Officer (As duly authorized officer and as the principal financial and accounting officer) 9