-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WDXwpBsCG27Z9xHppbYLrKaSMYAavMAybUcO+UVYulIYb3ASKjtrsFnGF6aiklwd m+UDQTszgEg9bZ34Kv4J8A== 0000950137-01-000885.txt : 20010327 0000950137-01-000885.hdr.sgml : 20010327 ACCESSION NUMBER: 0000950137-01-000885 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001230 FILED AS OF DATE: 20010326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LITTELFUSE INC /DE CENTRAL INDEX KEY: 0000889331 STANDARD INDUSTRIAL CLASSIFICATION: SWITCHGEAR & SWITCHBOARD APPARATUS [3613] IRS NUMBER: 363795742 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-20388 FILM NUMBER: 1578383 BUSINESS ADDRESS: STREET 1: 800 E NORTHWEST HWY CITY: DES PLAINES STATE: IL ZIP: 60016 BUSINESS PHONE: 7088241188 MAIL ADDRESS: STREET 1: 800 E. NORTHWEST HWY CITY: DES PLAINES STATE: IL ZIP: 60016 10-K405 1 c60888e10-k405.txt ANNUAL REPORT 1 Securities and Exchange Commission Washington, D.C. 20549 FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Mark One) for the fiscal year ended December 30, 2000 or [ ] Transition Report Pursuant to Section 13 or 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 of (I.R.S. Employer Identification No.) incorporation or organization) 800 East Northwest Highway, Des Plaines, Illinois 60016 (Address of principal executive offices) (Zip Code) 847/824-1188 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value, and Warrants to purchase shares of Common Stock, $.01 par value 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of 17,997,840 shares of voting stock held by non-affiliates of the registrant was approximately $483,691,950 based on the last reported sale price of the registrant's Common Stock, $.01 par value, as reported on The Nasdaq Stock Market on March 9, 2001. As of March 9, 2001, the registrant had outstanding 19,825,901 shares of Common Stock, $.01 par value, and Warrants to purchase 1,953,389 shares of Common Stock, $.01 par value. Portions of the following documents have been incorporated herein by reference to the extent indicated herein: Littelfuse, Inc. Proxy Statement dated March 26, 2001 (the "Proxy Statement") -- Part III. Littelfuse, Inc. Annual Report to Stockholders for the year ended December 30, 2000 (the "Annual Report") -- Parts II and III. 2 PART I ITEM 1. BUSINESS GENERAL Littelfuse, Inc. (the "Company" or "Littelfuse") is a leading manufacturer and seller of fuses and other circuit protection devices for use in the electronic, automotive and general industrial markets. Management believes the Company is ranked first in market share in both the electronic and automotive markets and third in the electrical fuse market in North America. Management believes the Company is also first in market share in both the electronic and automotive markets worldwide. In the electronic market, leading manufacturers such as Arrow, Celestica, Cisco, Compaq, Dell Computer, Future Electronics, GE, Intel, Lucent Technologies, Motorola, Nokia, Nortel, Panasonic, Samsung, Solectron and Sony obtain a substantial portion of their electronic circuit protection requirements from the Company. In the automotive market, the Company or its licensees have customer relationships with all leading automobile manufacturers throughout the world. Littelfuse provides substantially all of the automotive fuse requirements for vehicles manufactured domestically by General Motors, Ford and Daimler Chrysler as well as all Japanese and most European auto manufacturer transplants. The Company also competes in the electrical fuse market selling to companies such as International Paper, John Deere, U.S. Steel, Otis Elevator, Procter & Gamble, Heinz, Rockwell, Carrier and GE. See "Business Environment: Circuit Protection Market." The Company manufactures its products on fully integrated manufacturing and assembly equipment, much of which is designed and built by its own engineers. The Company fabricates and assembles a majority of its products and maintains product quality through a rigorous quality assurance program with all sites certified under ISO 9000 standards and its world headquarters certified under the QS9000 standards. The Company's products are sold worldwide through a direct sales force and manufacturers' representatives. For the year ended December 30, 2000, approximately 48% of the Company's net sales were to customers outside the United States (exports and foreign operations). References herein to "1998" or "fiscal 1998" refer to the fiscal year ended January 2, 1999. References herein to "1999" or "fiscal 1999" refer to the fiscal year ended January 1, 2000. References herein to "2000" or "fiscal 2000" refer to the fiscal year ended December 30, 2000. BUSINESS ENVIRONMENT: CIRCUIT PROTECTION MARKET The circuit protection market can be broadly categorized into three major product areas: electronic, automotive and electrical. The Company sells products designed for the electronic, automotive and electrical areas. The Company entered the circuit protection market in 1927 with the development and introduction of the first small, fast-acting fuse capable of protecting sensitive test meters. Since that time, the Company has diversified its involvement in the circuit 1 3 protection market to become a leader in the production of electronic and automotive fuses. The Company also entered the electrical fuse market in 1983 with a broad line of fuses, including several proprietary products. The Company believes it is a market leader in circuit protection devices, offering the broadest line of products in the industry and has the global presence to serve major markets throughout the world. LITTELFUSE PRODUCTS Net sales of the Company's products by industry category for the periods indicated are as follows: Fiscal Year (in thousands) --------------------------------------------------- 2000 1999 1998 --------------------------------------------------- Electronic $232,678 $154,141 $133,085 Automotive 100,035 101,270 96,686 Electrical 39,207 40,956 39,769 --------------------------------------------------- Total $371,920 $296,367 $269,540 =================================================== ELECTRONIC PRODUCTS Electronic circuit protection products are used to protect circuits in a multitude of electronic systems. The Company's product offering consists of five major categories: (1) fuses and protectors, (2) positive temperature coefficient (PTC) resettables (3) varistors (4) electrostatic discharge suppressors (5) diode arrays and thyristors and (6) fuseholders, blocks and other. Electronics fuses and protectors are devices which contain an element which melts in an overcurrent condition. Electronic miniature and subminiature fuses are designed to provide circuit protection in the limited space requirements of electronic equipment. The company's fuses are used in a wide variety of electronic products including wireless telephones, consumer electronics, computers, modems and telecommunications equipment. The Company markets its products under the following trademarked and brand names: PICO(R) II; NANO2 (R) SMF; ALF(TM) II and SMTelecom(TM). Resettables are positive temperature coefficient (PTC) polymer devices that limit the current when an overcurrent condition exists and then reset themselves once the overcurrent condition has cleared. The Company markets a line of surface mount PTC devices used primarily for computer and peripheral applications such as motherboards, disk drives, modems and printers. Varistors are ceramic based high energy absorption devices that provide transient overvoltage and surge suppression for automotive, telecommunication consumer electronics and industrial applications. The Company's product line offers both radial leaded and multilayer surface mount products. 2 4 Electrostatic discharge (ESD) suppressors are polymer based devices that protect an electronic system from failure due to rapid transfer of electrostatic charge to the circuit. The Company's PulseGuard(R) line of ESD suppressors is used in PC and PC peripherals, digital consumer electronics and wireless applications. Diode arrays and thyristors are fast switching silicon semiconductor structures commonly used to protect telecommunications circuits from overvoltage transients such as those resulting from lightning. Applications include telephones, modems, data transmission lines and alarm systems. OTHER PRODUCTS. In addition to the above products, the Company is also a supplier of fuse holders (including OMNI-BLOK(R)), fuse blocks (including Powr-Blok(R) power distribution systems) and fuse clips primarily to customers that purchase circuit protection devices from the Company. AUTOMOTIVE PRODUCTS Fuses are extensively used in automobiles, trucks, buses and off-road equipment to protect electrical circuits and the wires that supply electrical power to operate lights, heating, air conditioning, windshield wipers, radios, windows and other controls. Currently, a typical automobile contains 30 to 70 fuses, depending upon the options installed. The fuse content per vehicle is expected to continue to grow as more electronic features are included in automobiles. The Company also supplies fuses for the protection of electric and hybrid vehicles. The Company is a primary supplier of automotive fuses to United States, Japanese and European automotive OEMs, automotive component parts manufacturers and automotive parts distributors. The Company also sells its fuses in the replacement parts market, with its products being sold through merchandisers, discount stores and service stations, as well as under private label by national firms. The Company invented and owns all of the U.S. patents related to the blade type fuse which is the standard and most commonly used fuse in the automotive industry. The Company's automotive fuse products are marketed under the following trademarked and brand names: ATO(R); MINI(R); MAXI(R); MIDI(R); J-CASE(R) and MEGA(R). Over half of the Company's North American automotive (blade type) fuse sales are made to wire harness manufacturers that incorporate the fuses into their products. The remaining automotive fuse sales are made directly to automotive manufacturers and through distributors who in turn sell most of their products to automotive product wholesalers, such as warehouse distributors, discount stores and service stations. The Company has licensed its patented Mini(R) and Maxi(TM) automotive fuse designs to Bussmann, a division of Cooper Industries. Bussmann is the Company's largest domestic competitor. Additionally, the Company has entered into a licensing agreement with Pacific Engineering Company, Ltd., a Japanese fuse manufacturer, which produces and distributes the Company's patented Mini(R) automotive fuses to the Pacific Rim manufacturing operations of Japanese based automobile manufacturers. See "Business -- Patents, Trademarks and Other Intellectual Property" and "Competition." 3 5 ELECTRICAL PRODUCTS The Company entered the electrical fuse market in 1983 and manufactures and sells a broad range of low-voltage circuit protection products to electrical distributors and their customers in the construction, original equipment manufacturers ("OEM") and industrial maintenance and repair operations ("MRO") markets. Power fuses are used to protect circuits in various types of industrial equipment and circuits in industrial plants, office buildings and residential units. They are rated and listed under one of many Underwriters' Laboratories fuse classifications. Major applications for power fuses include protection from over-load and short-circuit currents in motor branch circuits, heating and cooling systems, control systems, lighting circuits and electrical distribution networks. The Company's POWR-GARD(TM) product line features the Indicator(TM) series power fuse used in both the OEM and MRO markets. The Indicator(TM) technology provides visual blown fuse indication at a glance, reducing maintenance and downtime on production equipment. The Indicator(TM) product offering is widely used in motor protection and industrial control panel applications. PRODUCT DESIGN AND DEVELOPMENT The Company employs scientific, engineering and other personnel to improve its existing product lines and to develop new products at its research and engineering facility in Des Plaines, Illinois. The Engineering Department consists of approximately 60 engineers, chemists, metallurgists, fusologists and technicians. This department is primarily responsible for the design and development of new products. Proposals for the development of new products are initiated primarily by sales and marketing personnel with input from customers. The entire product development process typically ranges from 6 to 18 months with continuous efforts to reduce the development cycle. During the fiscal years ended December 30, 2000, January 1, 2000, and January 2, 1999, the Company expended approximately $11.2 million, $9.5 million and $8.4 million, respectively, on product design and development. PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY The Company generally relies on patent and trademark laws and license and nondisclosure agreements to protect its rights in its trade secrets and its proprietary products. In cases where it is deemed necessary by management, key employees are required to sign an agreement that they will maintain the confidentiality of the Company's proprietary information and trade secrets. This information, for business reasons, is not disclosed to the public. As of December 30, 2000, the Company owned 122 patents in North America, 25 patents in the European Economic Community and 44 patents in other foreign countries. The Company has also registered trademark protection for certain of its brand names and logos. The 122 North American patents are in the following categories: 53 Electronic, 14 Resettable, 25 Automotive, 22 Power Fuse and 8 miscellaneous. 4 6 New products are continually being developed to replace older products. The Company regularly applies for patent protection on such new products. Although in the aggregate the Company's patents are important in the operation of its businesses, the Company believes that the loss by expiration or otherwise of any one patent or group of patents would not materially affect its business. The Company currently licenses its MINI(R) and MAXI(TM) automotive fuse technology to Bussmann, a division of Cooper Industries and the Company's largest domestic competitor. The license granted in 1987 is nonexclusive and grants the Company the right to receive royalties of 4% of the licensee's revenues from the sale of the licensed products with an annual minimum of $25,000. Each license expires upon the expiration of the licensed product patents. In addition, a second license covering the MINI(R) Fuse technology was granted to Pacific Engineering Company, Ltd., a Japanese manufacturer that produces and distributes the Company's patented automotive fuses to Pacific Rim operations of Pacific Rim-based automotive manufacturers. The license provides the Company with royalties of 2.5% of the licensee's revenues from the sale of the licensed products, with an annual minimum of $100,000. This second license expires on April 6, 2006. License royalties amounted to $338,000, $250,000 and $286,000 for fiscal 2000, 1999 and 1998, respectively. MANUFACTURING Much of the Company's manufacturing equipment is custom designed by its engineers, and the Company performs the majority of its own fabrication. The Company stamps some of the metal components used in its fuses, holders and switches from raw metal stock and makes its own contacts and springs. However, the Company does depend upon a single source for a substantial portion of its stamped metal end caps for one family of electronic fuses. The Company believes that alternative stamping sources are available at prices which would not have a material adverse effect on the Company. The Company also performs its own plating (silver, nickel, zinc, tin and oxides). In addition, all thermoplastic molded component requirements used for such products as the ATO(R), MINI(R) and MAXI(TM) product lines are met through the Company's in-house molding capabilities. After components are stamped, molded, plated and readied for assembly, final assembly is accomplished on fully automatic and semi-automatic assembly machines. Quality assurance and operations personnel, using techniques such as Statistical Process Control, perform tests, checks and measurements during the production process to maintain the highest levels of product quality and customer satisfaction. The principal raw materials for the Company's products include copper and copper alloys, heat resistant plastics, zinc, melamine, glass, silver, solder, sulphate chipboard and linerboard. The Company depends upon a sole source for several heat resistant plastics. The Company believes that suitable alternative heat resistant plastics are available from other sources at prices which 5 7 would not have a material adverse effect on the Company. All of the other raw materials are purchased from a number of readily available outside sources. A computer-aided design and manufacturing system (CAD/CAM) expedites product development and machine design, while reliability and high power laboratories test new products, prototype concepts and production run samples. The Company participates in "Just-in-Time" delivery programs with many of its major suppliers and actively promotes the building of strong cooperative relationships with its suppliers by involving them in pre-engineering product and process development. The Company also sponsors an annual major supplier conference and conducts a vendor certification program. MARKETING The Company's domestic sales staff of over 70 people maintains relations with major OEMs and distributors. The Company's sales and engineering personnel interact directly with the OEM engineers to ensure maximum circuit protection and reliability within the parameters of the OEM design. Internationally, the Company maintains a sales staff of over 40 people and sales offices in The Netherlands, England, Ireland, Singapore, Korea and China. The Company also markets its products indirectly through a worldwide organization of over 120 manufacturers' representatives and distributes through an extensive network of electronic, automotive and electrical distributors. ELECTRONIC. The Company retains manufacturers' representatives to sell its electronic products and to call on major domestic and international OEMs and distributors. The Company distributes approximately 32% of its domestic products directly to OEMs, with the remainder sold through distributors nationwide. In the Asia-Pacific region, the Company maintains a direct sales staff and one or more manufacturers' representatives in Japan, Singapore, Korea, Taiwan, China, Malaysia, Thailand, India, Indonesia, Philippines and Australia. In Europe, the Company maintains a direct sales force to call on OEMs exclusively and utilizes manufacturers' representatives to approach distributors and smaller OEMs. Unlike its domestic representatives, these manufacturers' representatives purchase inventory from the Company to facilitate delivery and reduce financial risks associated with currency exchange rate fluctuations. AUTOMOTIVE. The Company maintains a direct sales force to service all the major automotive OEMs (including the United States manufacturing operations of foreign-based OEMs) through both the engineering and purchasing departments of these companies. Twenty-two manufacturers' representatives represent the Company's products to aftermarket fuse retailers such as Autozone, Pep Boys, and K-Mart. In Europe, the Company uses both a direct sales force and manufacturers' representatives to distribute its products to Mercedes Benz, BMW, Volvo, Saab, Jaguar and other OEMs, as well as aftermarket distributors. In the Asia-Pacific region, the Company has licensed its automotive fuse technology to a Japanese firm, which supplies the majority of the automotive fuses to the Japanese manufacturing operations in the region including Toyota, Honda and Nissan. Additionally, the Company has a direct sales staff in Korea to call on major OEMs in that market. 6 8 ELECTRICAL. The Company markets and sells its power fuses through manufacturers' representatives across North America. These representatives sell power fuse products through an electrical distribution network comprised of approximately 1,600 distributor buying locations. These distributors have customers that include electrical contractors, municipalities, utilities and factories (including both MRO and OEM). Some of the manufacturers' representatives have consigned inventory in order to facilitate rapid customer delivery. The Company's field sales force (including application engineers) and manufacturers' representatives call on both distributors and end-users (consulting engineers, municipalities, utilities and OEMs) in an effort to educate these customers on the capabilities and characteristics of the Company's products. BUSINESS SEGMENT INFORMATION The Company has three reportable business segments: The Americas, Europe and Asia-Pacific. For information with respect to the Company's operations in its three geographic areas for the fiscal year ended December 30, 2000, see "Item 8. Financial Statements and Supplementary Data - Business Segment Information" incorporated herein by reference. CUSTOMERS The Company sells to over 10,000 customers worldwide. No single customer accounted for more than 10% of net sales during the last three years except for a Japanese stocking representative which accounted for 10.2% in 1998. During the 2000, 1999 and 1998 fiscal years, net sales to customers outside the United States (exports and foreign operations) accounted for approximately 48.4%, 46.1% and 43.0%, respectively, of the Company's total net sales. COMPETITION The Company's products compete with similar products of other manufacturers, some of which have substantially greater financial resources than the Company. In the electronics market, the Company's competitors are AVX, Bel Fuse, Bourns, Cooper Electronics, EPCOS, Raychem Division of TYCO International, San-O Industrial Corp., STMicroelectronics and Wickmann-Werke GmbH. In the automotive fuse market, the Company's competitors, both in sales to automobile manufacturers and in the aftermarket, are Bussmann Division of Cooper Industries and Pudenz Division of Wickmann-Werke. The Company licenses several of its automotive fuse designs to Bussmann. In the electrical market, the Company's major competitors include Cooper Bussmann and Ferraz Shawmut. The Company believes that it competes primarily on the basis of innovative products, the breadth of available product lines, the quality and design of its products and the responsiveness of its customer service rather than through price competition. 7 9 BACKLOG The Company does not consider backlog to be a predictive measure of results due to the Company's short delivery time. The Company manufactures high volume products based on its demand forecasts and manufactures low volume products based on customer orders. Generally, orders which request delivery within three weeks of the date of the order are filled on time from available stock or current production. EMPLOYEES During 2000, the Company employed an average of 3,800 persons. Approximately 45 employees in Des Plaines, 56 employees in Korea and 600 employees in Mexico are covered by collective bargaining agreements. The Des Plaines agreement expires March 31, 2002, the Korea agreement expires May 16, 2001 and the Mexico agreement expires January 31, 2003. The Company believes that its employee relations are satisfactory and that its employees, many of whom have long experience with the Company, represent a valuable resource. The Company emphasizes employee training and development and has established Quality Improvement Process (QIP) training for its employees worldwide to promote product quality and customer satisfaction. ENVIRONMENTAL REGULATION The Company is subject to numerous federal, state and local regulations relating to air and water quality, the disposal of hazardous waste materials, safety and health. Compliance with applicable environmental regulations has not significantly changed the Company's competitive position, capital spending or earnings in the past and the Company does not presently anticipate that compliance with such regulations will change its competitive position, capital spending or earnings for the foreseeable future. The Company employs an environmental engineer to monitor regulatory matters and believes that it is currently in compliance in all material respects with applicable environmental laws and regulations, except with respect to its facility located in Ireland. This facility was acquired in October 1999 in connection with the acquisition of the Harris suppression products division. Corrective steps are being taken to bring this facility into compliance with Irish environmental laws, and the Company received an indemnity from Harris Corporation with respect to these matters. ITEM 2. PROPERTIES LITTELFUSE FACILITIES The Company's operations are located in 20 owned or leased facilities worldwide, containing approximately 902,000 square feet. The U.S. headquarters and principal fabrication and distribution facility is located in Des Plaines, Illinois, supported by two additional plants in Illinois and one in Mexico. European headquarters and the primary European distribution center is in Utrecht, The Netherlands, with manufacturing plants in England, Ireland and Switzerland. Asia-Pacific operations include distribution centers located in Singapore and Japan, with 8 10 manufacturing plants in Korea, China and the Philippines. The Company does not believe that it will encounter any difficulty in renewing its existing leases upon the expiration of their current terms. Management believes that the Company's facilities are adequate to meet its requirements for the foreseeable future. The following table provides certain information concerning the Company's facilities:
Lease Size Lease/ Expiration Industry Location Use (sq.ft.) Own Date Focus - -------- --- -------- --- ---- ------- Des Plaines, Illinois Administrative, 340,000 Owned -- Auto, Electronic, Engineering, Power Manufacturing, Testing and Research Centralia, Illinois Manufacturing 45,200 Owned -- Electronic Arcola, Illinois Manufacturing 36,000 Owned -- Power Piedras Negras, Mexico Manufacturing 50,031 Leased 2003 Auto, Electronic, Power Piedras Negras, Mexico Manufacturing 12,594 Leased 2003 Electronic and Power Piedras Negras, Mexico Manufacturing, 22,711 Leased 2002 Electronic and Warehousing Power Piedras Negras, Mexico Warehousing 9,413 Leased 2001 Electronic and Power Washington, England Manufacturing, 60,000 Owned -- Electronic, Auto, Sales and Other Distribution Utrecht, The Netherlands Warehousing 8,680 Leased 2001 Auto, Electronic, Other Utrecht, The Netherlands Sales, 12,000 Owned -- Auto, Electronic, Administrative Other and Engineering Grenchen, Switzerland Manufacturing 11,000 Owned -- Auto
9 11
Lease Size Lease/ Expiration Industry Location Use (sq.ft.) Own Date Focus - -------- --- -------- --- ------- ------- Singapore Sales and 19,022 Leased 2003 Electronic and Auto Distribution Seoul, Korea Sales and 29,175 Owned -- Electronic and Auto Manufacturing Philippines Manufacturing 58,127 Owned -- Electronic Suzhou, China Manufacturing 40,000 Owned -- Electronic Hong Kong, China Sales 3,079 Leased 2002 Electronic Yokohama, Japan Sales and 6,243 Leased 2001 Electronic Distribution Yokohama, Japan Sales and 17,858 Leased 2004 Electronic Distribution Sao Paulo, Brazil Sales 800 Leased 2000 Electronic, Auto Dundalk, Ireland Manufacturing 120,000 Owned -- Electronic, Auto
ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any legal proceedings that it believes will have a material adverse effect upon the conduct of its business or its financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to the Company's stockholders during the fourth quarter of fiscal 2000. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company are as follows: 10 12 Name Age Position ---- --- -------- Howard B. Witt 60 Chairman, President and Chief Executive Officer Kenneth R. Audino 57 Vice President, Organizational Development and Total Quality Management William S. Barron 58 Vice President, Marketing and Sales Philip G. Franklin 49 Vice President, Treasurer and Chief Financial Officer Hans Ouwehand 54 Vice President, European Operations Mary S. Muchoney 55 Secretary Officers of Littelfuse are elected by the Board of Directors and serve at the discretion of the Board. Howard B. Witt was elected as the Chairman of the Board of the Company in May, 1993. He was promoted to President and Chief Executive Officer of the Company in February, 1990. Prior to his appointment as President and Chief Executive Officer, Mr. Witt served in several other key management positions since joining the Company as Operations Manager in 1979. Mr. Witt serves as a Director of Franklin Electric Co., Inc. and Material Sciences Corporation and is a member of the Electronic Industries Alliance Board of Directors and the Board of Governors of the National Electrical Manufacturers Association. He also serves as a director of the Artisan Mutual Fund. Kenneth R. Audino, Vice President, Organizational Development and Total Quality management, is responsible for the Company's overall quality, reliability and environmental compliance, quality systems, human resources and training efforts. Mr. Audino joined Littelfuse as a Control Technician in 1964. From 1964 to 1977, he progressed through several quality and reliability positions to Manager of Reliability and Standards. In 1983, he became Managing Director of the European Headquarters and later was named Corporate Director of Quality Assurance and Reliability. He was promoted to his current position in 1998. William S. Barron, Vice President, Sales and Marketing, is responsible for the Company's overall sales and marketing. Mr. Barron joined Littelfuse in March 1991. From August 1981 to March 1991, Mr. Barron served as Director of Sales and Marketing of Cinch Manufacturing, a division of TRW, and the General Manager of one of its domestic divisions. Philip G. Franklin, Vice President, Treasurer and Chief Financial Officer, has responsibility for the treasury, investor relations, accounting, information systems and global supply chain functions of the Company. Mr. Franklin joined the Company in 1998 from OmniQuip International, a $450 million construction equipment manufacturer which he helped take public. 11 13 Hans Ouwehand, Vice President, European Operations, has responsibility for all sales, marketing, manufacturing and engineering activities in Europe. Mr. Ouwehand joined Littelfuse in 1984 as Sales Manager, Europe, Electronics Division. He was later promoted to the position of European Sales and Marketing Manager for all Littelfuse products and in 1986 to the position of General Manager-European Operations. Prior to joining Littelfuse, his industrial background included research and development work with Sperry Rand and sales and product management with Lameris Medical Instruments. Mary S. Muchoney has served as Corporate Secretary since 1991, after joining Littelfuse in 1977. She is responsible for providing all secretarial and administrative functions for the President and Littelfuse Board of Directors. Ms. Muchoney is a member of the American Society of Corporate Secretaries. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information set forth under "Quarterly Stock Price" on page 34 of the Annual Report to Stockholders is incorporated herein by reference. As of March 9, 2001, there were 227 holders of record of the Company's Common Stock and approximately 5,000 beneficial holders of its Common Stock. Since September 22, 1992, shares of the Common Stock have been traded under the symbol "LFUS" on The Nasdaq Stock Market. The Company has not paid any cash dividends in its history. Future dividend policy will be determined by the Board of Directors based upon their evaluation of earnings, cash availability and general business prospects. Currently, there are restrictions on the payment of dividends contained in the Company's bank credit agreement which relate to the maintenance of certain restricted payment ratios. ITEM 6. SELECTED FINANCIAL DATA The information set forth under "Selected Financial Data - Five Year Summary" on page 34 of the Annual Report to Stockholders is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 17 through 20 of the Annual Report to Stockholders is incorporated herein by reference. 12 14 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The information set forth under "Market Risk" on page 20 of the Annual Report to Stockholders is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Report of Independent Auditors and the Consolidated Financial Statements and notes thereto of the Company set forth on pages 21 through 33 of the Annual Report to Stockholders are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth under "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement is incorporated herein by reference. The information set forth under "Executive Officers of the Registrant" in Part I of this Report is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information set forth under "Compensation of Executive Officers" in the Proxy Statement is incorporated herein by reference, except for the sections captioned "Reports of the Compensation Committee on Executive Compensation" and "Company Performance." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under "Ownership of Littelfuse, Inc. Common Stock" in the Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under "Certain Relationships and Related Transactions" in the Proxy Statement is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements and Schedules 13 15 (1) Financial Statements. The following financial statements included in the Annual Report to Stockholders are incorporated herein by reference. (i) Report of Independent Auditors (page 21) (ii) Consolidated Statements of Financial Condition as of December 30, 2000 and January 1, 2000 (page 22). (iii) Consolidated Statements of Income for the years ended December 30, 2000, January 1, 2000 and January 2, 1999 (page 23). (iv) Consolidated Statements of Cash Flows for the years ended December 30, 2000, January 1, 2000 and January 2, 1999 (page 24). (v) Consolidated Statements of Shareholders' Equity for the years ended December 30, 2000, January 1, 2000 and January 2, 1999 (page 25). (vi) Notes to Consolidated Financial Statements (pages 26-33). (2) Financial Statement Schedules. The following financial statement schedules are submitted herewith for the periods indicated therein. (i) Schedule II-Valuation and Qualifying Accounts and Reserves All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. (3) Exhibits See Exhibit Index on pages 17-19, incorporated herein by reference. (b) Reports on Form 8-K There were no reports on Form 8-K filed with the SEC during the fourth quarter of 2000. 14 16 LITTELFUSE, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (In Thousands) Additions Balance at Charged to Balance at Beginning Costs and Deductions End of Description Of Year Expenses (A) Year ---------- ---------- ---------- ------- Year ended December 30, 2000 Allowance for losses on accounts receivable . . . . . $ 1,570 $ 275 $ 615 $ 1,230 ======= ======= ======= ======= Reserves for sales discounts and allowances . . . . . . . $ 5,551 $ 2,397 $ -- $ 7,948 ======= ======= ======= ======= Year ended January 1, 2000 Allowance for losses on accounts receivable . . . . . $ 1,103 $ 614 $ 147 $ 1,570 ======= ======= ======= ======= Reserves for sales discounts and allowances . . . . . . . $ 4,782 $ 769 $ -- $ 5,551 ======= ======= ======= ======= Year ended January 2, 1999 Allowance for losses on accounts receivable . . . . . $ 1,118 $ 626 $ 641 $ 1,103 ======= ======= ======= ======= Reserves for sales discounts and allowances . . . . . . . $ 4,781 $ 1 $ -- $ 4,782 ======= ======= ======= ======= (A) Write-off of uncollectible accounts, net of recoveries and foreign currency translation. 15 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Littelfuse, Inc. By /s/ Howard B. Witt ------------------ Howard B. Witt, Chairman, President and Chief Executive Officer Date: March 26, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: /s/ Howard B. Witt - ----------------------------- Chairman of the Board, President Howard B. Witt and Chief Executive Officer /s/ John P. Driscoll Director - ----------------------------- John P. Driscoll /s/ Anthony Grillo Director - ----------------------------- Anthony Grillo /s/ Bruce A. Karsh Director - ----------------------------- Bruce A. Karsh /s/ John E. Major Director - ----------------------------- John E. Major /s/ John J. Nevin Director - ----------------------------- John J. Nevin /s/ Philip G. Franklin - ----------------------------- Vice President, Treasurer Philip G. Franklin and Chief Financial Officer (Principal Financial Officer) 16 18 LITTELFUSE INC. INDEX TO EXHIBITS Number Description of Exhibit - ------ ---------------------- 2.1 Plan of Reorganization under Chapter 11 of the Bankruptcy Code of Old Littelfuse (filed as exhibit 2.1 to the Company's Form 10 effective September 16, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 3.1 Certificate of Incorporation, as amended to date (filed as 3.1 to the Company's Form 10K for the fiscal year ended January 3, 1998 (1934 Act File No. 0-20388) and incorporated herein by reference.) 3.1A Certificate of Designations of Series A Preferred Stock (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K dated December 1, 1995 (1934 Act File No. 0-20388) and incorporated herein by reference.) 3.2 Bylaws, as amended to date (filed as exhibit 3.2 to the Company's Form 10-Q for the quarterly period ended September 30, 2000 (1934 Act File No. 0-20388) and incorporated herein by reference) 4.1 Second amended restated bank credit agreement among Littelfuse, Inc., as borrower, the lenders named therein and the First National Bank of Chicago, as agent, dated as of September 1, 1998. (filed as exhibit 4.1 to the Company's Form 10K for the fiscal year ended January 2, 1999 (1934 Act File No. 0-20388) and incorporated herein by reference) 4.2 Registration Rights Agreement, dated as of December 27, 1991, between Littelfuse, Inc. and the Toronto-Dominion Bank Trust Company, as agent (filed as exhibit 4.2 to the Company's Form 10 effective September 16, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 4.3 Warrant Agreement, dated as of December 27, 1991, between Littelfuse, Inc., and LaSalle National Trust, N.A., as warrant agent, together with form of Warrant), as amended. (filed as exhibit 4.3A to the Company's Form 10-Q for the quarterly period ended June 28, 1997 (1934 Act File No. 0-20388) and incorporated herein by reference.) 4.4 Stock Plan for Employees and Directors of Littelfuse, Inc., as amended (filed as exhibit 10.2 to the Company's Form 10-Q for the quarterly period ended July 1, 2000 (1934 Act File No. 0-20388) and incorporated herein by reference.) 4.5 Form of Stock Option Agreement (filed as exhibit 4.5 to the Company's Form 10 effective September 16, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 17 19 Number Description of Exhibit - ------ ---------------------- 4.6 Specimen Common Stock certificate (filed as exhibit 4.6 to the Company's Form 10 effective September 16, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 4.7 Littelfuse, Inc. Retirement Plan dated January 1, 1992, as amended and restated. (filed as exhibit 4.7 to the Company's Form 10K for the fiscal year ended December 31, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 4.8 Littelfuse, Inc. 401(k) Savings Plan (filed as exhibit 4.8 to the Company's Form 10K for the fiscal year ended December 31, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 4.10 Littelfuse Rights Plan Agreement, dated as of December 15, 1995, between Littelfuse, Inc. and LaSalle National Bank, as Rights Agent, together with Exhibits thereto, as amended (filed as exhibit 4.10 to the Company's Form 10-Q for the quarterly period ended October 3, 1998 (1934 Act File No. 0-20388) and incorporated herein by reference.) 4.11 Note Purchase Agreement dated as of September 1, 1998, relating to $60,000,000 principal amount of Littelfuse, Inc. 6.16% Senior Notes due September 1, 2005. (filed as exhibit 4.11 to the Company's Form 10K for the fiscal year ended January 2, 1999 (1934 Act File No. 0-20388) and incorporated herein by reference) 4.12 Form of Restricted Share Agreement (filed as exhibit 4.12 to the Company's Form 10-Q for the quarterly period ended July 1, 2000 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.3 Patent License Agreement, dated as of July 28, 1995, between Littelfuse, Inc. and Pacific Engineering Company, Ltd.(filed as exhibit 10.3 to the Company's Form 10K for the year ended December 28, 1996 (1934 Act File No. 0-20388) and incorporated herein by reference) 10.4 MINI(R) and MAXI(TM) License Agreement, dated as of June 21, 1989, between Littelfuse, Inc. and Cooper Industries, Inc. (filed as exhibit 4.6 to the Company's Form 10 effective September 16, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.5 Patent License Agreement, dated as of January 1, 1987, between Littelfuse, Inc. and Cooper Industries, Inc. (filed as exhibit 4.6 to the Company's Form 10 effective September 16, 1992 (1934 Act File No. 0-20388) and incorporated herein by reference.) 18 20 Number Description of Exhibit - ------ ---------------------- 10.6 1993 Stock Plan for Employees and Directors of Littelfuse, Inc., as amended (filed as exhibit 10.1 to the Company's Form 10-Q for the quarterly period ended July 1, 2000 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.7 Littelfuse, Inc. Supplemental Executive Retirement Plan (filed as exhibit 10.10 to the Company's Form 10K for the year ended December 31, 1993 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.8 Littelfuse Deferred Compensation Plan for Non-employee Directors, as amended (filed as exhibit 10.8 to the Company's Form 10K for the year ended January 2, 1999 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.9 Littelfuse Executive Loan Program (filed as Exhibit 10.2 to the Company's Form 10-Q for the quarterly period ended June 30, 1995 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.10 Employment Agreement dated as of September 1, 1996 between Littelfuse, Inc. and Howard B. Witt (filed as exhibit 10.10 to the Company's Form 10K for the year ended December 28, 1996 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.11 Change of Control Employment Agreement dated as of September 1, 1996 between Littelfuse, Inc. and Howard B. Witt (filed as exhibit 10.11 to the Company's Form 10K for the year ended December 28, 1996 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.12 Form of change of Control Employment Agreement dated as of September 1, 1996 between Littelfuse, Inc. and Messrs. Anderson, Audino, Barron, Krueger and Turner (filed as exhibit 10.12 to the Company's Form 10K for the year ended December 28, 1996 (1934 Act File No. 0-20388) and incorporated herein by reference.) 10.13 Form of change of Control Employment Agreement dated as of January 4, 1999 between Littelfuse, Inc. and Mr. Franklin (filed as exhibit 10.13 to the Company's Form 10K for the year ended January 2, 1999 (1934 Act File No. 0-20388) and incorporated herein by reference.) 13.1 Portions of Littelfuse Annual Report to Stockholders for the fiscal year ended December 30, 2000. 22.1 Subsidiaries. 23.1 Consent of Independent Auditors. 19 EX-13.1 2 c60888ex13-1.txt PORTIONS OF LITTELFUSE ANNUAL REPORT 1 EXHIBIT 13.1 Selected Financial Data Five Year Summary
Year Ended 2000 1999 1998 1997 1996 Net sales $371,920 $296,367 $269,540 $275,165 $241,446 Gross profit 150,648 117,255 100,199 111,131 98,288 Operating income 61,748 44,624 34,096 43,768 37,669 Net income 37,298 25,220 19,885 25,342 21,735 Net income per share - Diluted 1.69 1.16 0.86 1.07 0.91 Net working capital 74,503 60,008 46,685 41,548 31,343 Total assets 274,378 275,698 250,544 221,885 209,951 Long-term debt 41,397 55,460 70,061 40,385 44,556 Quarterly Results of Operations (unaudited) Year Ended 2000 1999 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q Net sales $82,883 $96,362 $97,356 $95,319 $82,009 $73,292 $72,094 $68,971 Gross profit 33,329 38,739 39,350 39,230 34,098 29,317 28,053 25,787 Operating income 11,545 16,271 16,730 17,202 13,162 11,538 10,862 9,062 Net income 6,710 9,728 10,647 10,213 7,604 6,588 6,005 5,023 Net income per share: Basic 0.34 0.49 0.54 0.51 0.39 0.34 0.31 0.25 Diluted 0.31 0.44 0.48 0.46 0.35 0.30 0.28 0.23 Quarterly Stock Prices Year Ended 2000 1999 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q High 33.88 51.13 50.63 39.50 25.00 22.88 22.25 20.50 Low 24.38 29.00 30.50 21.50 20.00 18.75 17.50 16.25 Close 28.63 29.69 49.00 36.69 24.27 22.13 20.50 17.69
2 Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion provides an analysis of the information contained in the consolidated financial statements and accompanying notes beginning on page 22 for the three fiscal years ended December 30, 2000, January 1, 2000 and January 2, 1999, respectively. Current Year Highlights Sales increased 25% in 2000 to $371.9 million and earnings per share increased 45% to $1.69. The record increases in sales and earnings were driven by electronics, where sales were up 51% due to increased demand in telecom, datacom and wireless applications. Also contributing to the electronics sales growth was the successful integration of the Suppression Products Group, acquired in October 1999. Sales of suppression products accounted for just under half of the electronics sales growth in 2000. Results of Operations--2000 Compared with 1999 Sales increased 25% to $371.9 million in 2000 from $296.4 million in 1999. Electronic sales increased $78.6 million or 51% to $232.7 million in 2000 compared to $154.1 million in 1999. The strong electronics market, driven by communications demand and continued strength in the Asia-Pacific region, resulted in record electronics sales growth. Automotive sales decreased $1.3 million or 1% to $100.0 million in 2000 compared to $101.3 million in 1999, reflecting continued aftermarket weakness and the unfavorable translation effects of a weak Euro. Electrical sales decreased $1.8 million or 4% to $39.2 million in 2000 compared to $41.0 million in 1999. Led by Asia-Pacific and European electronics sales growth, international sales increased 32.0% to $180.1 million or 48.4% of net sales in 2000 from $136.5 million or 46.1% of net sales in 1999. Gross profit was $150.6 million or 40.5% of sales for 2000 compared to $117.3 million or 39.6% of sales for 1999. The gross profit increase resulted from successful worldwide cost reductions, increasing unit volumes during the year and an improved pricing environment compared to the prior year. Selling, general and administrative expenses increased $15.0 million, representing 19.1% of sales in 2000 compared to 18.9% of sales in 1999. This increase was due primarily to higher sales and marketing expenses to support growth in electronic sales. Research and development costs increased $1.7 million, representing 3.0% of sales in 2000 as compared to 3.2% of sales in 1999, due to continued focus on development of new products. Amortization of reorganization value and other intangibles was $6.7 million or 1.8% of sales for 2000 compared to $7.1 million or 2.4% of sales for the prior year. Total operating expenses, including intangible amortization, were 23.9% of sales in 2000, compared to 24.5% of sales in 1999. Operating income for 2000 increased 38% to $61.7 million or 16.6% of sales compared to $44.6 million or 15.1% of sales for the prior year as a result of the factors discussed above. Interest expense was $4.7 million for 2000 compared to $5.3 million for 1999 due to lower average debt levels. Other income, net, consisting of interest income, royalties, minority interest and foreign currency items was $1.9 million compared to other income of $1.3 million for the prior year. The increase in other income was due to foreign currency gains and a gain from the sale of a non-core product line. Income before taxes was $59.0 million in 2000 compared to $40.7 million in 1999. Income tax expense was $21.7 million in 2000 compared to $15.5 million for the prior year. Net income for the year was $37.3 million, compared to $25.2 million for the prior year. The Company's effective tax rate was 36.8 % in 2000 compared to 38.0 % in 1999. The lower effective tax rate in 2000 was due to the increase in foreign earnings as a percent to total earnings. Diluted earnings per share increased 45% to $1.69 in 2000 compared to $1.16 in 1999. Results of Operations--1999 Compared with 1998 Sales increased 10% to $296.4 million in 1999 from $269.5 million in 1998. Of the $26.9 million sales increase during 1999, $8.0 million was attributable to sales of suppression products since the date of the acquisition. Electronic sales increased $21.1 million or 16% to $154.1 million in 1999 compared to $133.1 million in 1998, due primarily to strength in the Asia-Pacific region. Automotive sales increased $4.6 million or 5% to $101.3 million in 1999 compared to $96.7 million in 1998, reflecting growth in the OEM markets in all regions of the world. Electrical sales increased $1.2 million or 3% to $41.0 million in 1999 compared to $39.8 million in 1998. Led by Asia-Pacific and European sales growth, international sales increased by 18% in 1999 to 46.1% of net sales from 43.0% of net sales in 1998. 3 Gross profit was $117.3 million or 39.6% of sales for 1999 compared to $100.2 million or 37.2% of sales for 1998. The gross margin increase resulted from successful worldwide cost reductions, increasing unit volumes during the year and firming of selling prices in the last half of 1999. Selling, general and administrative expenses increased $5.2 million to 18.9% of sales in 1999, which was in line with 18.9% of sales in 1998. Research and development costs increased $1.1 million to 3.2% of sales in 1999 as compared to 3.1% of sales in 1998 due to continued focus on development of new products. Amortization of reorganization value and other intangibles was $7.1 million or 2.4% of sales for 1999 compared to $6.8 million or 2.5% of sales for the prior year. Total operating expenses, including intangible amortization, were 24.5% of sales for both years. Operating income for 1999 increased to $44.6 million or 15.1% of sales compared to $34.1 million or 12.6% of sales for the prior year as a result of the factors discussed above. Interest expense was $5.3 million for 1999 compared to $4.0 million for 1998 due to higher average debt levels. Other income, net, consisting of interest income, royalties, minority interest and foreign currency items was $1.3 million compared to other expense of $0.1 million for the prior year. The increase in other income was primarily the result of higher interest income in the year. Income before taxes was $40.7 million in 1999 compared to $30.0 million in 1998. Income tax expense was $15.5 million in 1999 compared to $10.1 million for the prior year. Net income for the year was $25.2 million, compared to $19.9 million for the prior year. The Company's effective tax rate was 38.0 % in 1999 compared to 33.7 % in 1998. The lower effective tax rate in 1998 was due to a one-time benefit related to the liquidation of one of the Company's Korean subsidiaries. Diluted earnings per share increased 35% to $1.16 in 1999 compared to $0.86 in 1998. A 6% decline in average shares outstanding in 1999 as compared to the prior year, due to the Company's repurchase of common stock, contributed favorably to the increase in earnings per share. Liquidity and Capital Resources Assuming no material adverse changes in market conditions, management expects that the Company will have sufficient cash from operations to support both its operations and its debt obligations for the foreseeable future. The Company started 2000 with $1.9 million in cash. Net cash provided by operations was $48.7 million for the year. Cash used in investing activities included $22.0 million in property, plant and equipment. Cash used in financing activities included net payments of long-term debt of $16.8 million. This left the Company with $55.0 million of borrowing capability under the revolving loan facility as of December 30, 2000. The repurchase of the Company's common stock for $11.2 million was partially offset by cash proceeds from the exercise of stock options and conversion of warrants of $5.8 million. The effect of exchange rate changes decreased cash by $0.9 million. The net of cash provided by operations, less investing activities, less financing activities, plus the effect of exchange rates resulted in a $3.6 million net increase in cash. This left the Company with a cash balance of $5.5 million at the end of 2000. Increases in net working capital resulted in a $14.2 million use of cash in 2000. The major factors contributing to higher working capital were a $10.8 million increase in inventory and an $8.5 million decrease in accounts payable and accrued expenses, partially offset by a $5.0 million reduction in accounts receivable. The inventory increase was primarily the result of increased sales in 2000. The reduction in accounts receivable was the result of improved collections performance. The Company started 1999 with $28.0 million in cash. Net cash provided by operations was $38.9 million for the year. Cash used in investing activities included $20.0 million in property, plant and equipment and $24.8 million for the Harris Corporation's Suppression Products Group acquisition. Cash used in financing activities included net payments of long-term debt of $9.1 million. The Company utilized borrowings under its revolving loan facility to finance the purchase of Harris Corporation's Suppression Products Group and had $6.0 million of this short-term debt remaining as of January 1, 2000. This left the Company with $49.0 million of borrowing capability under the revolving loan facility as of January 1, 2000. The repurchase of the Company's common stock for $12.8 million was partially offset by cash proceeds from the exercise of stock options and conversion of warrants of $1.6 million. The effect of exchange rate changes increased cash by $0.2 million. The net of cash provided by operations, less investing activities, less financing activities, plus the effect of exchange rates resulted in a $26.1 million net decrease in cash. This left the Company with a cash balance of $1.9 million at the end of 1999. Net working capital used $8.4 million of cash flow from operations in 1999. Increases in accounts receivable of $14.3 million, inventory of $8.9 million and other asset and liability changes of $0.1 million were offset by an increase in 4 accounts payable and accrued expenses of $14.9 million. Contributing to the increase in working capital in 1999 was an increase in sales as well as some information systems migration difficulties. The Company's capital expenditures were $22.0 million in 2000, $20.0 million in 1999 and $21.3 million in 1998. The Company expects that capital expenditures will be approximately $23 to $25 million in 2001. The primary purposes for capital expenditures in 2001 will be for new product tooling and production equipment. As in 2000, capital expenditures in 2001 are expected to be financed by cash flow from operations. The Company decreased total debt by $16.8 million in 2000, after decreasing debt by $9.1 million in 1999 and increasing debt by $33.9 million in 1998. The Company is required to repay $10.0 million of long-term debt in 2001. In two separate 1,000,000 share authorizations in May and October of 2000, the Company's Board of Directors authorized the Company to repurchase up to 2,000,000 shares of its common stock or 2,000,000 of its warrants, or any combination not to exceed 2,000,000 shares of common stock or warrants, from time to time, depending on market conditions. The Company repurchased 369,000 common shares for $11.2 million in 2000, 707,500 common shares for $12.8 million in 1999 and 1,345,300 common shares for $26.8 million in 1998. As of December 30, 2000, the Company had over 1,600,000 shares remaining for repurchase under the Board of Directors authorization expiring in May of 2001. Earnings before interest, taxes, depreciation, amortization and other income and expense (EBITDA) increased 26% to $88.5 million in 2000 compared to $70.2 million in 1999 and $56.3 million in 1998. Net working capital (working capital less cash and the current portion of long-term debt), as a percent of sales was 20.0% at year-end 2000 compared to 20.2% at year-end 1999 and 17.3% at year-end 1998. The slight decrease in net working capital was due in part to the decrease in days sales outstanding in accounts receivable to approximately 58 days at year-end 2000 compared to 68 days at year-end 1999 and 61 days at year-end 1998. The improvement in accounts receivable was partially offset by higher days inventory outstanding of 109 days at year-end 2000 compared to 94 days at year-end 1999 and 81 days at year-end 1998. The ratio of current assets to current liabilities was 2.0 to 1 at year-end 2000 compared to 1.5 to 1 at year-end 1999 and 2.1 to 1 at year-end 1998. The ratio of long-term debt to equity was 0.2 to 1 at year-end 2000 compared to 0.4 to 1 at year-end 1999 and 0.6 to 1 at year-end 1998. Market Risk The Company is exposed to market risk from changes in interest rates, foreign exchange rates and commodity prices. The Company had long-term debt outstanding at December 30, 2000 in the form of Senior Notes at 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. During 2000, sales exported from the United States or manufactured and sold abroad accounted for 48.4% percent of total sales. Substantially all sales in Europe are denominated in Dutch Guilders, British Pound Sterling and Euros and substantially all sales in the Asia-Pacific region are denominated in United States Dollars, Japanese Yen 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. The Company utilizes netting and intercompany offsets to reduce known foreign currency expenses. The Company does not use any material 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. 5 Outlook Sales for 2001 are expected to start slowly, reflecting softness in the electronics market and decreased car builds in the automotive market. However, sales are expected to increase in the second half of the year fueled by recovery in the electronics market and ramp- up of new product sales. The Company will continue to emphasize implementation of cost reduction opportunities in 2001 to help offset a more challenging market environment and selling price pressure from customers. The development of new products, global expansion, and reinvestment continue to be the Company's long-term growth strategy. The Company intends to continue its commitment to funding research and development, international market development, and investments in capital equipment and operations improvements. "Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995 The statements under "Outlook" and the other statements which are not historical facts contained in this report are forward-looking statements that involve risks and uncertainties, 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, interest and exchange rate fluctuations, commodity price fluctuations, actual purchases under agreements, the effect of the Company's accounting policies, and other risks which may be detailed in the Company's Securities and Exchange Commission filings. 6 Report of Independent Auditors The Board of Directors and Shareholders of Littelfuse, Inc. We have audited the consolidated statements of financial condition of Littelfuse, Inc. and subsidiaries as of December 30, 2000 and January 1, 2000, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Littelfuse, Inc. and subsidiaries as of December 30, 2000 and January 1, 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 30, 2000, in conformity with accounting principles generally accepted in the Unites States. ERNST & YOUNG LLP Chicago, Illinois January 26, 2001 7 Year Ended December 30, 2000 Consolidated Statements of Financial Condition (In Thousands)
December 30, 2000 January 1, 2000 Assets Current assets: Cash and cash equivalents $ 5,491 $ 1,888 Accounts receivable, less allowances (2000 - $9,178; 1999 - $ 7,121) 53,152 59,583 Inventories 59,272 48,916 Deferred income taxes 4,664 5,265 Prepaid expenses and other current assets 4,115 3,485 Total current assets 126,694 119,137 Property, plant, and equipment: Land 8,687 8,370 Buildings 29,650 28,636 Equipment 174,837 157,296 213,174 194,302 Less: Allowances for depreciation and amortization 120,501 102,511 92,673 91,791 Intangible assets, net of amortization: Reorganization value in excess of amounts allocable to identifiable assets 30,913 33,943 Patents and licenses 2,087 4,356 Distribution network 5,440 5,918 Trademarks 2,775 3,022 Other 13,698 16,274 54,913 63,513 Other assets 98 1,257 $ 274,378 $ 275,698 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 11,066 $ 19,075 Accrued payroll 18,548 14,167 Accrued expenses 9,224 14,596 Accrued income taxes 7,862 9,403 Current portion of long-term debt 17,070 20,974 Total current liabilities 63,770 78,215 Long-term debt, less current portion 41,397 55,460 Deferred income taxes 2,153 4,490 Other long-term liabilities 331 501 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: 34,000,000 shares authorized; shares issued and outstanding, 2000 - 19,849,894; 1999 - 19,489,143 198 195 Additional paid-in capital 60,223 55,241 Notes receivable - Common stock (3,353) (2,909) Accumulated other comprehensive loss (7,874) (5,642) Retained earnings 117,533 90,147 166,727 137,032 $ 274,378 $ 275,698
See accompanying notes. 8 Consolidated Statements of Income (In Thousands, Except per Share Amounts)
Year Ended December 30, 2000 January 1, 2000 January 2, 1999 Net sales $ 371,920 $ 296,367 $ 269,540 Cost of sales 221,272 179,112 169,341 Gross profit 150,648 117,255 100,199 Selling, general and administrative expenses 71,083 56,098 50,936 Research and development expenses 11,152 9,455 8,387 Amortization of intangibles 6,665 7,078 6,780 Operating income 61,748 44,624 34,096 Interest expense 4,652 5,253 3,989 Other expense/(income), net (1,940) (1,306) 98 Income before income taxes 59,036 40,677 30,009 Income taxes 21,738 15,457 10,124 Net income $ 37,298 $ 25,220 $ 19,885 Net income per share: Basic $ 1.88 $ 1.29 $ 0.97 Diluted $ 1.69 $ 1.16 $ 0.86 Weighted-average shares and equivalent shares outstanding: Basic 19,834 19,572 20,474 Diluted 22,118 21,751 23,154
See accompanying notes 9 Consolidated Statements of Cash Flows
Year Ended December 30, 2000 January 1, 2000 January 2, 1999 Operating activities Net income $ 37,298 $ 25,220 $ 19,885 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 20,074 18,461 15,426 Amortization of intangibles 6,665 7,078 6,780 Provision for bad debts 275 614 626 Deferred income taxes (1,810) (3,922) (896) Other 337 (225) 326 Changes in operating assets and liabilities: Accounts receivable 4,978 (14,323) (3,218) Inventories (10,802) (8,850) 3,610 Accounts payable and accrued expenses (8,514) 14,915 (4,992) Prepaid expenses and other 186 (117) 1,757 Net cash provided by operating activities 48,687 38,851 39,304 Investing activities Purchases of property, plant, and equipment, net (21,958) (19,975) (21,320) Purchase of business, net of cash acquired -- (24,754) (2,751) Other (60) (56) (249) Net cash used in investing activities (22,018) (44,785) (24,320) Financing activities Proceeds (payments) of long-term debt, net (16,819) (9,132) 33,851 Proceeds from exercise of stock options and warrants 5,831 1,645 6,308 Purchases of common stock and redemption of warrants (11,203) (12,833) (26,803) Net cash provided by (used in) financing activities (22,191) (20,320) 13,356 Effect of exchange rate changes on cash (875) 181 (1,134) Increase (decrease) in cash and cash equivalents 3,603 (26,073) 27,206 Cash and cash equivalents at beginning of year 1,888 27,961 755 Cash and cash equivalents at end of year $ 5,491 $ 1,888 $ 27,961
See accompanying notes. 10 Consolidated Statements of Shareholders' Equity
Notes Accumulated Additional Receivable- Other Common Paid-In Common Comprehensive Retained Period from January 3, 1998 to December 30, 2000 Stock Capital Stock Income/(Loss) Earnings Total Balance at January 3, 1998 199 $ 52,540 $ (1,960) $ (4,767) $ 77,493 $ 123,505 Comprehensive income: Net income for the year -- -- -- -- 19,885 19,885 Foreign currency translation adjustment -- -- -- 1,041 -- 1,041 Comprehensive income 20,926 Stock options and warrants exercised 15 7,693 (812) -- -- 6,896 Purchase of 1,345,300 shares of common stock (14) (4,696) -- -- (22,093) (26,803) Balance at January 2, 1999 200 $ 55,537 $ (2,772) $ (3,726) $ 75,285 $ 124,524 Comprehensive income: Net income for the year -- -- -- -- 25,220 25,220 Foreign currency translation adjustment -- -- -- (1,916) -- (1,916) Comprehensive income 23,304 Stock options and warrants exercised 2 2,172 (137) -- -- 2,037 Purchase of 707,500 shares of common stock (7) (2,468) -- -- (10,358) (12,833) Balance at January 1, 2000 195 $ 55,241 $ (2,909) $ (5,642) $ 90,147 $ 137,032 Comprehensive income: Net income for the year -- -- -- -- 37,298 37,298 Foreign currency translation adjustment -- -- -- (2,232) -- (2,232) Comprehensive income 35,066 Stock options and warrants exercised 7 6,269 (444) -- -- 5,832 Purchase of 369,000 shares of common stock (4) (1,287) -- -- (9,912) (11,203) Balance at December 30, 2000 198 $ 60,223 $ (3,353) $ (7,874) $ 117,533 $ 166,727
See accompanying notes. 11 Notes to Consolidated Financial Statements December 30, 2000 and January 1, 2000 1. Summary of Significant Accounting Policies and Other Information Nature of Operations Littelfuse, Inc. and its subsidiaries (the Company) design, manufacture, and sell circuit protection devices for use in the automotive, electronic, and general industrial markets throughout the world. Fiscal Year The Company's fiscal years ended December 30, 2000, January 1, 2000 and January 2, 1999, each contained 52 weeks. Principles of Consolidation The consolidated financial statements include the accounts of Littelfuse, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Cash Equivalents All highly liquid investments, with a maturity of three months or less when purchased, are considered to be cash equivalents. Fair Value of Financial Instruments The Company's financial instruments include cash and cash equivalents, accounts receivable, and long-term debt. The carrying values of such financial instruments approximate their estimated fair values. Accounts Receivable The Company performs credit evaluations of customers' financial condition and generally does not require collateral. Credit losses are provided for in the financial statements and consistently have been within management's expectations. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market, which approximates current replacement cost. Property, Plant, and Equipment Land, buildings, and equipment are carried at cost. Depreciation is provided under accelerated methods using useful lives of 21 years for buildings, 7 to 9 years for equipment, and 7 years for furniture and fixtures. Tooling and computer software are depreciated using the straight-line method over 5 years and 3 years, respectively. Intangible Assets Reorganization value in excess of amounts allocable to identifiable assets and trademarks are amortized using the straight-line method over 20 years. Patents are amortized using the straight-line method over their estimated useful lives, which average approximately 10 years. The distribution network is amortized using an accelerated method over 20 years. Licenses are amortized using an accelerated method over their estimated useful lives, which average approximately 9 years. Other intangible assets consist principally of goodwill that is being amortized over 10 to 20 years. Accumulated amortization of these intangible assets was $59.9 million at December 30, 2000 and $53.2 million at January 1, 2000. If there are indicators that long-lived assets may be impaired, the Company assesses recoverability from future operations using undiscounted cash flows. Under this approach, the carrying value of the intangible asset would be reduced to a fair value if the Company's best estimate for expected undiscounted future cash flows of the related business would be less than the carrying amount of the intangible asset over its remaining amortization period. Revenue Recognition In accordance with the Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements," issued in December 1999, sales and associated costs are recognized when products are shipped to customers. The adoption of SAB 101 did not have a material impact on the Company's earnings or financial position. Advertising Costs The Company expenses advertising costs as incurred which amounted to $2.1 million in 2000, $2.6 million in 1999 and $2.6 million in 1998. Foreign Currency Translation The financial statements of foreign entities have been translated in accordance with Statement of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation," and, accordingly, unrealized foreign currency translation adjustments are reflected as a component of shareholders' equity. Stock-Based Compensation Under the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), the Company accounts for stock option grants to employees and directors in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Generally, the Company grants stock options for a fixed number of shares with an exercise price equal to the market price of the underlying stock at the date of grant and, accordingly, does not recognize compensation expense. On certain occasions, the Company has granted stock options for a fixed number of shares with an exercise price below that of the underlying stock on the date of the grant and recognizes compensation expense accordingly. This compensation expense has not been material. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Shipping and Handling Fees and Costs In September 2000, Emerging Issues Task Force (EITF) Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs," concluded that all amounts billed to customers in a sales transaction represent fees earned for the goods provided and, accordingly, amounts billed related to shipping and 12 handling should be classified as revenue. The Company has adopted EITF 00-10 and has classified amounts billed related to shipping and handling in revenue. Costs incurred for shipping and handling of $3.9 million, $2.1 million, and $1.4 million in 2000, 1999, and 1998, respectively, are classified in Selling, General, and Administrative Expenses. Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) to establish accounting and reporting requirements for derivative instruments. This standard requires recognition of all derivative instruments in the statement of financial condition as either assets or liabilities, measured at fair value. This statement additionally requires changes in the fair value of derivatives to be recorded each period in current earnings or comprehensive income depending on the intended use of derivatives. The adoption of this new standard will not have a material impact on the Company's earnings or financial position. 2. Acquisition of Business and Liquidation During the year ended January 2, 1999, the Company made two acquisitions for approximately $2.8 million. The acquisitions have been accounted for through the use of the purchase method of accounting; accordingly, the accompanying financial statements include the results of operations since the acquisition dates. Goodwill arising from these acquisitions of approximately $2.6 million is being amortized over 10 years. Pro forma results of operations, assuming these acquisitions had occurred as of January 4, 1998, would not differ materially from reported results of operations. In March 1998, the Company consolidated its Korean operations into Littelfuse Triad. Pursuant to the consolidation, the Company incurred costs of approximately $400,000 to liquidate Sam Hwa Littelfuse, Inc. On October 19, 1999, the Company acquired Harris Corporation's Suppression Products Group for $24.8 million in cash. The Suppression Products Group manufactures and markets a broad line of transient voltage suppression devices that provide circuit protection for products in numerous markets including consumer, computer, telecommunications, automotive, office equipment, industrial and power transmission. This acquisition has been accounted for through the use of the purchase method of accounting; accordingly, the accompanying financial statements include the results of its operations since the acquisition date. The purchase price has been allocated to the following net assets acquired based on fair value of such assets: accounts receivable of $7.4 million, inventory of $4.6 million, property, plant and equipment of $12.7 million, other assets of $0.4 million, goodwill of $4.8 million and liabilities assumed of $5.1 million. Purchase accounting liabilities recorded during 1999 consist of $0.5 million for transaction costs and $5.7 million for costs associated with exiting a product line and involuntary termination of employees in connection with the integration of the business. Goodwill arising from this acquisition of approximately $11.0 million is being amortized over 20 years. Pro forma sales of Littelfuse, Inc., assuming that this acquisition had occurred as of January 4, 1998, would have been $328.3 million in 1999 and $311.9 million in 1998 and pro forma results of operations would not have differed materially from reported results of operations. During fiscal 2000, the Company reduced its estimate of purchase accounting liabilities related to 1999 acquisitions by $1.6 million and, accordingly, goodwill was reduced by an equivalent amount. These changes primarily resulted from costs being less than originally anticipated. 3. Inventories The components of inventories are as follows at December 30, 2000, and January 1, 2000 (in thousands): 2000 1999 Raw materials $14,488 $12,684 Work in process 15,288 14,854 Finished goods 29,496 21,378 $59,272 $48,916 4. Long-Term Obligations The carrying amounts of long-term debt, which approximate fair value, are as follows at December 30, 2000, and January 1, 2000 (in thousands): 2000 1999 6.16% Senior Notes, maturing 2005 $50,000 $55,000 6.31% Senior Notes, maturing 2000 -- 9,000 Revolving credit facility -- 6,000 13 Other obligations 6,742 4,964 Capital lease obligations 1,725 1,470 58,467 76,434 Less: Current maturities 17,070 20,974 $41,397 $55,460 The Company has unsecured financing arrangements consisting of Senior Notes with insurance companies and a credit agreement with banks that provides a $55.0 million revolving credit facility. The Senior Notes require minimum annual principal payments. No principal payments are required for borrowings against the revolving line of credit until the line matures on August 31, 2002. At December 30, 2000, the Company had available $55.0 million of borrowing capability under the revolving credit facility at an interest rate of LIBOR plus 0.375%. The bank credit agreement provides for letters of credit of up to $8.0 million as part of the available credit line. At December 30, 2000 the Company had $1.6 million of outstanding letters of credit. The Senior Notes and bank credit agreement contain 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 addition, the Company is required to satisfy certain financial covenants and tests relating to, among other matters, interest coverage, working capital, leverage and net worth. Aggregate maturities of long-term obligations at December 30, 2000, are as follows (in thousands): 2001 $17,070 2002 11,108 2003 10,062 2004 10,062 2005 and thereafter 10,165 $58,467 Interest paid on long-term debt approximated $4.3 million in 2000, $4.9 million in 1999 and $3.8 million in 1998. 5. Benefit Plans The Company has a defined-benefit pension plan covering substantially all of its North American employees. The amount of the retirement benefit is based on years of service and final average monthly pay. The plan also provides post-retirement medical benefits to retirees and their spouses if the retiree has reached age 62 and has provided at least ten years of service prior to retirement. Such benefits generally cease once the retiree attains age 65. The Company's contributions are made in amounts sufficient to satisfy ERISA funding requirements. The Company also has a contributory defined-benefit pension plan covering most of its Ireland employees as a result of its acquisition of the Suppression Products Group in October 1999. The amount of the retirement benefit is based on years of service and final average monthly pay. The plan also provides death benefits to the plan participants. In 1998, the Company adopted SFAS No. 132, "Employers' Disclosure about Pensions and Other Post-retirement Benefits." The statement standardizes the disclosure requirements for pensions and other post-retirement benefits.
U.S. U.S. Ireland (In Thousands) 2000 1999 2000 Change in benefit obligation Benefit obligation at beginning of year $ 44,104 $ 45,487 $ 14,942 Service cost 1,952 2,264 425 Interest cost 3,154 3,015 936 Plan participants' contributions -- -- 193 Actuarial loss/(gain) (1,068) (4,760) -- Benefits paid (2,200) (1,902) (329) Effects of exchange rate movements -- -- (1,095) Benefit obligation at end of year $ 45,942 $ 44,104 $ 15,072 Change in plan assets at fair value Plan assets at beginning of year $ 47,511 $ 44,363 $ 16,566 Actual return on plan assets 711 5,050 1,461
14 Employer contributions -- -- 314 Plan participant contributions -- -- 193 Benefits paid (2,200) (1,902) (329) Effects of exchange rate movements -- -- (1,246) Fair value of plan assets at end of year $ 46,022 $ 47,511 $ 16,959 Funded status $ 80 $ 3,407 $ 1,887 Unrecognized prior service cost 112 178 -- Unrecognized net actuarial loss/(gain) (1,687) (3,910) (210) Unrecognized transition (asset)/obligation -- -- (1,435) Prepaid pension obligation $ (1,495) $ (325) $ 242 Weighted-average assumptions Discount 7.50% 7.50% 6.00% Expected return on plan assets 9.00% 9.00% 7.00% Salary growth rate 4.00% 4.50% 4.00% Components of net periodic benefit cost Service cost $ 1,952 $ 2,264 $ 618 Interest cost 3,154 3,015 936 Expected return on plan assets (4,002) (3,648) (1,223) Amortization of prior service cost 66 66 -- Amortization of transition (asset)/obligation -- -- (96) Recognized net actuarial loss -- 50 -- Total cost of the plan for the year $ 1,170 $ 1,747 $ 235 Expected plan participants' contribution -- -- 193 Net periodic benefit cost $ 1,170 $ 1,747 $ 42
The Company provides additional retirement benefits for certain key executives through its unfunded defined contribution Supplemental Executive Retirement Plan. The charge to expense for this plan amounted to $638,000, $1,058,000 and $852,000 in 2000, 1999 and 1998, respectively. The Company also maintains a 401(k) savings plan covering substantially all U.S. employees. The Company matches 50% of the employee's annual contributions for the first 4% of the employee's gross wages. Employees vest in the Company contributions after two years of service. Company matching contributions amounted to $667,000 in 2000, $632,000 in 1999 and $547,000 in 1998. 6. Shareholders' Equity Stock Purchase Warrants Warrants to purchase 1,953,383 shares of common stock at $4.18 per share were outstanding at December 30, 2000. The warrants are exercisable at the option of the holder at any time prior to December 27, 2001, and are not callable by the Company. Stock Options The Company has stock option plans authorizing the granting of both incentive and nonqualified options and other stock rights of up to 3,400,000 shares of common stock to employees and directors, including an additional 600,000 shares authorized in April, 2000. The stock options vest over a five-year period and are exercisable over a ten-year period commencing from the date of vesting. A summary of stock option information follows:
2000 1999 1998 Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price Outstanding at beginning of year 1,588,840 $ 18.02 1,428,910 $ 16.91 1,361,310 $ 14.28 Options granted 358,250 35.07 367,200 19.63 311,500 24.64 Option price equals market price 358,250 35.07 352,200 20.25 311,500 24.64 Option price less than market price -- -- 15,000 5.00 -- -- Total options granted 358,250 35.07 367,200 19.63 311,500 24.64 Exercised (217,465) 10.15 (144,870) 9.34 (153,480) 6.49 Forfeited (37,550) 22.25 (62,400) 21.98 (90,420) 15.31
15 Outstanding at end of year 1,692,075 $ 22.53 1,588,840 $ 18.02 1,428,910 $ 16.91 Exercisable at end of year 794,450 765,960 708,818 Available for future grant 952,940 216,440 517,340 Weighted-average value of options granted during the year $ 21.05 $ 12.04 $ 11.81 Option price equals market price 21.05 11.79 11.81 Option price less than market price -- 17.75 --
As of December 30, 2000, the Company had the following outstanding options:
Weighted- Weighted- Average Average Options Exercise Remaining Options Exercise Price Outstanding Price Life Exercisable $ 3.69 to $ 5.00 54,300 4.41 3.31 42,060 $ 7.50 to $11.16 134,500 10.28 2.82 134,500 $11.63 to $16.50 199,460 15.06 4.01 199,460 $17.81 to $25.50 870,235 21.57 6.71 372,032 $28.88 to $35.50 433,580 33.98 8.81 46,398
Disclosure of pro forma information regarding net income and net income per share is required by SFAS 123 and has been determined as if the Company had accounted for its stock options granted in 2000, 1999 and 1998 under the fair value method using the Black-Scholes option pricing model. The following assumptions were utilized in the valuation:
2000 1999 1998 Risk-free interest rate 5.16% 6.52% 5.59% Expected dividend yield 0% 0% 0% Expected stock price volatility 47.6% 41.0% 30.0% Expected life of options 8 years 8 years 8 years
Had compensation cost for the Company's stock options granted in 2000, 1999 and 1998 been determined based on the fair value at the dates of grant, the Company's net income and net income per share would have been reduced to the pro forma amounts indicated:
2000 1999 1998 Pro forma net income (in thousands of dollars) $35,792 $24,341 $18,710 Pro forma basic net income per share $ 1.81 $ 1.24 $ 0.91 Pro forma diluted net income per share $ 1.62 $ 1.12 $ 0.81
Notes Receivable - Common Stock In 1995, the Company established the Executive Loan Program under which certain management employees may obtain interest-free loans from the Company to facilitate their exercise of stock options and payment of the related income tax liabilities. Such loans, limited to 90% of the exercise price plus related tax liabilities, have a five-year maturity, subject to acceleration for termination of employment or death of the employee. Such loans are classified as a reduction of shareholder's equity. Preferred Stock The Board of Directors may authorize the issuance from time to time of preferred stock in one or more series with such designations, preferences, qualifications, limitations, restrictions, and optional or other special rights as the Board may fix by resolution. In connection with the Rights Plan, the Board of Directors has reserved, but not issued, 200,000 shares of preferred stock. Rights Plan In December 1995, the Company adopted a shareholder rights plan providing for a dividend distribution of one preferred share purchase right for each share of common stock outstanding on and after December 15, 1995. The rights can be exercised only if an individual or group acquires or announces a tender offer for 15% or more of the Company's common stock and warrants. If the rights first become exercisable as a result of an announced tender offer, each right would entitle the holder to buy 1/200th of a share of a new series of preferred stock at an exercise price of $67.50. Once an individual or group acquires 15% or more of the Company's common stock, each right held by such individual or group becomes void and the remaining rights will then entitle the holder to purchase a number of common shares having a market value of twice the exercise price of the right. If the attempted takeover succeeds, each right will then entitle the holder to purchase a number of the acquiring Company's common shares having a market value of twice the exercise price of the right. After an individual or group acquires 15% of the Company's common stock and before they acquire 50%, the Company's Board of Directors may exchange the rights in whole or in part, at an 16 exchange ratio of one share of common stock or 1/100th of a share of a new series of preferred stock per right. Before an individual or group acquires 15% of the Company's common stock, or a majority of the Company's Board of Directors are removed by written consent, whichever occurs first, the rights are redeemable for $.01 per right at the option of the Company's Board of Directors. The Company's Board of Directors is authorized to reduce the 15% threshold to no less than 10%. Each right will expire on December 15, 2005, unless earlier redeemed by the Company. 7. Income Taxes Federal, state, and foreign income tax expense (credit) consists of the following (in thousands): 2000 1999 1998 Current: Federal $13,375 $10,078 $ 4,861 State 1,908 1,467 920 Foreign 8,265 6,180 5,239 23,548 17,725 11,020 Deferred: Federal (1,827) (1,875) (809) Foreign 17 (393) (87) (1,810) (2,268) (896) $21,738 $15,457 $10,124 Domestic and foreign income before income taxes is as follows (in thousands): 2000 1999 1998 Domestic $28,906 $22,846 $15,337 Foreign 30,130 17,831 14,672 $59,036 $40,677 $30,009 A reconciliation between income taxes computed on income before income taxes at the federal statutory rate and the provision for income taxes is provided below (in thousands):
2000 1999 1998 Tax expense at statutory rate of 35% $20,663 $14,237 $10,503 State and local taxes, net of federal tax benefit 1,179 904 598 Foreign income taxes (1,437) (735) 68 Sam Hwa Littelfuse, Inc. liquidation -- -- (1,055) Foreign losses for which no tax benefit is available 63 82 83 Other, net 1,270 969 (73) $21,738 $15,457 $10,124
Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the tax bases of the Company's assets and liabilities. Significant components of the Company's deferred tax assets and liabilities at December 30, 2000 and January 1, 2000, are as follows (in thousands): 2000 1999 Deferred tax liabilities Tax over book depreciation and amortization $2,097 $2,736 Prepaid expenses (10) 1,250 Other 989 887 Total deferred tax liabilities 3,076 4,873 Deferred tax assets Accrued expenses 5,586 5,648 Foreign net operating loss carryforwards 341 258 Gross deferred tax assets 5,927 5,906 Less: Valuation allowance (340) (258) Total deferred tax assets 5,587 5,648 Net deferred tax assets/(liabilities) $2,511 $775 17 The deferred tax asset valuation allowance is related to deferred tax assets from foreign net operating losses. The net operating loss carryforwards have no expiration date. The Company received a one-time tax benefit associated with the liquidation of approximately $1.1 million for the year ended January 2, 1999. The Company paid income taxes of $23.2 million in 2000, $12.1 million in 1999 and $11.5 million in 1998. 8. 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 electrical. 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 year ended December 30, 2000, is as follows (in thousands):
The Asia- Combined Consolidated Americas Europe Pacific Total Corporate Reconciliation Total Revenues 2000 $ 214,907 $ 61,634 $ 95,379 $ 371,920 $ -- $ -- $ 371,920 1999 $ 172,122 $ 50,434 $ 73,811 $ 296,367 -- -- $ 296,367 Intersegment revenues 2000 44,599 38,185 6,523 89,307 -- (89,307) -- 1999 32,250 18,884 3,883 55,017 -- (55,017) -- Interest expense 2000 4,337 69 246 4,652 -- -- 4,652 1999 5,007 11 235 5,253 -- -- 5,253 Depreciation and 2000 11,563 2,810 4,213 18,586 8,153 -- 26,739 amortization 1999 10,831 1,969 3,700 16,500 9,039 -- 25,539 Other income (loss) 2000 2,754 (893) 79 1,940 -- -- 1,940 1999 883 500 (77) 1,306 -- -- 1,306 Income tax expense 2000 12,290 4,546 4,902 21,738 -- -- 21,738 1999 8,967 3,706 2,784 15,457 -- -- 15,457 Net income (loss) 2000 24,493 9,124 11,856 45,473 (8,175) -- 37,298 1999 21,007 8,156 5,101 34,264 (9,044) -- 25,220 Identifiable assets 2000 181,727 39,559 48,096 269,382 60,404 (55,408) 274,378 1999 191,997 36,228 39,112 267,337 66,076 (57,715) 275,698 Capital expenditures, net 2000 13,929 1,875 6,154 21,958 -- -- 21,958 1999 13,303 2,978 3,694 19,975 -- -- 19,975
Intersegment revenues and receivables are eliminated to reconcile to consolidated totals. Corporate identifiable assets consist primarily of cash and intangible assets. The Company's revenues by product areas for the year ended December 30, 2000 and January 1, 2000, are as follows (in thousands): Revenues 2000 1999 Electronic $232,677 $154,141 Automotive 100,036 101,270 Electrical 39,207 40,956 Consolidated Total $371,920 $296,367 18 No single customer of the Company accounted for 10% or more of the Company's revenues. 9. Lease Commitments The Company leases certain office and warehouse space under noncancelable operating leases, as well as certain machinery and equipment. Rental expense under these leases was approximately $1.5 million in 2000 and $0.9 million in 1999 and 1998. Future minimum payments for all noncancelable operating leases with initial terms of one year or more at December 30, 2000 are as follows (in thousands): 2001 1,163 2002 1,124 2003 298 2004 8 2005 and thereafter -- 2,593 10. Earnings per Share The following table sets forth the computation of basic and diluted earnings per share:
(In Thousands) 2000 1999 1998 Numerator: Net income $37,298 $25,220 $19,885 Denominator: Denominator for basic earnings per share - Weighted-average shares 19,834 19,572 20,474 Effect of dilutive securities: Warrants 1,871 1,970 2,311 Employee stock options 413 209 369 Denominator for diluted earnings per share - Adjusted weighted-average shares and assumed conversions 22,118 21,751 23,154 Basic earnings per share $ 1.88 $ 1.29 $ 0.97 Diluted earnings per share $ 1.69 $ 1.16 $ 0.86
EX-22.1 3 c60888ex22-1.txt SUBSIDIARIES 1 Exhibit 22.1 SUBSIDIARIES Littelfuse, S.A. de C.V. Littelfuse FSC Littelfuse Do Brasil Ltda. Littelfuse Do Amazonia, Ltda. Watseka LF, Inc. Littelfuse, B.V. Littelfuse, A.G. Littelfuse Limited Littelfuse Ireland Development Co., Ltd. Littelfuse Ireland Limited Joyrush Investments Ltd. REMPAT Holding B.V. REMPAT Financial B.V. Littelfuse Far East Pte Ltd. Littelfuse HK Limited Suzhou Littelfuse OVS Ltd. Littelfuse KK Littelfuse Triad Inc. Littelfuse Phils Inc. Littelfuse S&L, Inc. EX-23.1 4 c60888ex23-1.txt CONSENT OF INDEPENDENT AUDITORS 1 Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Littelfuse, Inc. of our report dated January 26, 2001, included in the 2000 Annual Report to Shareholders of Littelfuse, Inc. Our audits also included the financial statement schedule of Littelfuse, Inc. listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (No. 33-55942, 33-64442, 33-95020, 333-03260 and 333-64285) on Form S-8 of our report dated January 26, 2001, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule in this Annual Report (Form 10-K) of Littelfuse, Inc. Chicago, Illinois March 26, 2001 Ernst & Young LLP -----END PRIVACY-ENHANCED MESSAGE-----