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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 January 2, 1999 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 18,452,016 shares of voting stock held by
non-affiliates of the registrant was approximately $321,766,255 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 12, 1999.
As of March 12, 1999, the registrant had outstanding 19,660,879 shares of
Common Stock, $.01 par value, and Warrants to purchase 2,474,615 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 18,
1999 (the "Proxy Statement") --Part III. Littelfuse, Inc. Annual Report to
Stockholders for the year ended January 3, 1998 (the "Annual Report") -- Parts
II and III.
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 the electronic market, first in
the automotive market and third in the power fuse market in North America.
Management believes that the Company, together with its licensees, is also first
in market share in the electronic market and first in the automotive market
worldwide.
In the electronic market, leading manufacturers such as 3Com, Canon,
Compaq, Hewlett Packard, IBM, LG Electronics, Lucent Technologies, Motorola,
Nortel, Panasonic, Samsung, Sharp, Sony and Toshiba 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 and is the primary supplier for Ford, Chrysler
and all Japanese and most European auto manufacturer transplants. The Company
also competes in the power fuse market selling to companies such as the Allen
Bradley division of Rockwell International and Reliance Electric. In addition to
fuses, the Company manufactures and supplies switches, circuit breakers and
indicator lights to the automotive industry and to appliance and general
electronics manufacturers.
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 (except the Philippines) certified under ISO 9000 standards and its world
headquarters now certified under the QS9000 standards.
The Company's products are sold worldwide through a direct sales force
and manufacturers' representatives. In Asia Pacific, the Company has licensed
its automotive fuse technology to a Japanese firm that supplies automotive fuses
to Pacific Rim customers. For the year ended January 2, 1999, approximately 43%
of the Company's net sales were to customers outside the United States (exports
and foreign operations).
References herein to "1996" or "fiscal 1996" refer to the calendar year
ended December 28, 1996. References herein to "1997" or "fiscal 1997" refer to
the fiscal year ended January 3, 1998. References herein to "1998" or "fiscal
1998" refer to the fiscal year ended January 2, 1999.
Business Environment: Circuit Protection Market
The circuit protection market can be broadly categorized into five
major product areas: electronic, automotive, industrial (power), high voltage
and residential. The Company sells products designed for the electronic,
automotive and industrial 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 protection market to
become a leader in the production of electronic and automotive fuses. The
Company also entered the power fuse market in 1983 with a broad line of fuses,
including several proprietary products. The Company believes it is the circuit
protection leader because it designs and produces almost all the products it
sells in all three markets including the two markets where it holds the number
one market share position. See "Littelfuse Products."
Electronic Products. Electronic circuit protection products are used to
protect power circuits in a multitude of electronic systems. Electronics
products fall into four major categories: (1) fuses, (2) protectors, (3)
resettables and (4) electrostatic discharge suppressors. Electronics fuses
generally are of two types - miniature and subminiature. Miniature fuses are
generally tubular in shape with glass, ceramic and composition bodies.
Subminiature devices are used where space is at a premium. Protectors are fuses
produced to a less rigorous specification. Resettables are polymer positive
temperature coefficient (PTC) devices that limit the current when an overcurrent
condition exists and let current pass again after the cause of the overcurrent
is removed. Electrostatic discharge (ESD) suppressors are polymer based devices
that shunt transient high voltage energy away from circuitry. Applications for
electronic products include telecommunications equipment, computers and computer
peripherals, power supplies, test and medical instrumentation, and consumer
electronic products. There is also a special segment of the electronic circuit
protection market directed toward the aerospace industry. These special
high-reliability fuses are manufactured in small quantities under extremely high
quality control standards.
Automotive Products. Fuses are extensively used in automobiles, trucks,
buses and off-road equipment to protect electrical circuits and wiring harnesses
supplying electrical power to operate lights, heating, air conditioning,
windshield wipers, radios, windows and controls. Currently, a typical automobile
contains 30 to 70 fuses, depending upon the options installed. The market for
automotive fuses is expected to grow in the coming years as more electronic
features are included in automobiles. Certain new vehicles, such as the Cadillac
Seville, Ford 150 series truck, Jeep Grand Cherokee and the Jaguar, contain as
many as 50 to 90 fuses and this higher fuse count is expected to spread to other
vehicles.
Power Products. Power fuses include both current limiting and
non-current limiting devices used to protect electrical systems against
overcurrents. Power fuses are rated and listed under one of many Underwriters'
Laboratories fuse classifications. The three main end user market segments for
power fuses include original equipment manufacturers ("OEMs"), industrial
maintenance and repair operations ("MROs") and new commercial and industrial
construction. 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.
Littelfuse Products
General. The Company is a leading manufacturer and seller of fuses and
other circuit protection devices for use in the electronic, automotive and
general industrial markets. The Company's products are marketed under the
general trademarked names of Littelfuse(R) and, where appropriate, Slo-Blo(R)
Fuse as well as the trademarked names of certain of its products listed below in
the description of the Company's electronic, automotive and power fuse products.
Product Sales. Net sales of the Company's products by industry category for the
periods indicated are as follows:
Fiscal Year
(in thousands)
-----------------------------------------------------------------
-------------------- --------------------- ----------------------
1998 1997 1996
-------------------- --------------------- ----------------------
-------------------- --------------------- ----------------------
Electronic $133,085 $135,032 $112,358
Automotive 96,686 102,139 93,690
Industrial (Power) 39,769 37,994 35,398
-------------------- --------------------- ----------------------
==================== ===================== ======================
Total $269,540 $275,165 $241,446
==================== ===================== ======================
Electronic Products. The Company manufactures and sells a wide range of
electronic circuit protection products, including miniature and subminiature
fuses, protectors and resettables. Electronic miniature and subminiature fuses
are designed to provide circuit protection in the limited space requirements of
electronic equipment. The Company entered the protector market in late 1994 and
the resettable polymer PTC device market in late 1996. While the Company
continues to develop its own resettable fuse products, the Company also entered
into agreements with Raychem Corp. in 1996 which allow the Company to sell
resettable fuses using certain of Raychem's technology. The Company entered the
ESD suppressor market in late 1998. The Company is in the process of developing
ESD suppressor products and also purchased the Pulse-Guard(R) product line and
technology in 1998.
The Company's electronic circuit protection products are marketed under the
following trademarked and brand names:
PICO(R) II Fuse is a very fast-acting subminiature fuse with axial
leads which can be automatically inserted into a circuit board. It
is used in consumer electronics, computers, medical instruments,
power supplies and telecommunication line cards. It was originally
developed for the aerospace industry where extremely small size
and high reliability were prime requisites. This fuse is
encapsulated with an epoxy coating which protects the fuse from
adverse environmental conditions. It can stand up under the rough
treatment found in high speed automated circuit board assembly
processes used by many different manufacturers.
2AG fuses are a miniature version of the standard 1/4" diameter by
1-1/4" long glass bodied fuses manufactured for more than 40
years. The fuse occupies about 1/3 of the space but still provides
the performance of the larger sized product. The Company has
developed a strong market in the telecommunications industry for a
leaded version of the 2AG fuse. These fuses are used in business
and personal telephone systems, answering machines and other
equipment connected to phone lines. They are used to protect the
system from lightning surges and accidental contact with power
lines. These fuses also are used extensively in electronic
ballasts for lighting.
NANO2 (R) SMF Fuse is a fourth generation surface mount fuse
product line. The compact size (.240" x .100" x .100") of this
rectangular shaped fuse is very attractive to design engineers. In
addition, the flat side design permits efficient pick and
placement by automated assembly equipment. The NANO2 (R) SMF Fuse
is used where space considerations are critical, including laptop
computers, camcorders and battery chargers.
ALF(TM) II or "1206" SMF is a very fast acting thin film surface
mount fuse measuring only .12 inch x .06 inch. The subminiature
size assures additional space savings in surface mount
applications. It is completely compatible with common soldering
systems used in surface mount assembly applications and it is
available on 8mm reels for use with automatic placement equipment.
Applications include hard disk drives, PC main boards, digital
cameras and CD-ROMs.
"0603" SMF is a very fast acting thin film surface mount fuse
measuring only .06 inch x .03 inch. The 0603 is the smallest fuse
available and has a very low profile .018 inches. The small
physical size along with low values for resistance and voltage
drop are significant features of this new fuse for battery and
other low voltage applications, such as hard disk drives and PC
main boards. The 0603 has also gained acceptance for use in the
protection of cellular telephones.
SMTelecom(TM) is the first surface mount fuse to comply with UL
1459 and UL 1950 third edition power cross requirements for
telecommunications. The new SMTelecom(TM) Fuse protects all phone
line connected equipment against current surges resulting from
power cross, power induction and lightning strikes. It is rated
for 250 volts with a 600 volt short circuit rating. Four current
ratings are offered, from 0.75 to 1.5 amperes. Applications
include modems, fax machines, desktop telephones, answering
machines and line cards.
Surface Mount PTC is the first in Littelfuse's line of PTC
devices. Its dimensions of 0.200" x 0.290" x 0.120" are ideal for
circuit board applications where space is at a premium. It also is
available in 0.340" x 0.250" x 0.10" and 0.179" x 0.127" x 0.02"
configurations. This polymer surface mount PTC has the ability to
reset itself once the fault or overcurrent condition has cleared.
This new product is used primarily for computer and peripheral
applications such as motherboards, disk drives, PC cards, modems,
printers, etc.
PulseGuard(R), an ESD suppressor, is a polymer based surface mount
or connector style device that utilizes a variable voltage
material to shunt high voltage ESD energy away from circuitry
without affecting data signals. The PulseGuard(R) characteristics
and available packages provide for protection of integrated
circuitry in applications such as PCs and PC peripherals.
Automotive Products. 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 mass merchandisers, discount stores and service stations, as well
as under private label by national firms. Management believes that it currently
is the leading worldwide supplier of automotive fuses for new vehicle production
and a leader for the aftermarket/replacement market.
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 believes that, together with its licensees, it
supplies substantially all of the blade type fuses used in the North American
and Japanese markets and a majority in the European market. The Company's
automotive fuse products are marketed under the following trademarked and brand
names:
AUTOFUSE(R) or ATO(R), a standard blade type fuse, is used in
automobiles produced worldwide and designed to provide superior
circuit protection in a small, heat resistant package for low
ampere applications.
MINI(R) Fuse, smaller than its predecessor AUTOFUSE(R), is offered
in a range from two amps to 30 amps and is designed to permit more
fuses in the same amount of space than prior products.
MAXI(TM) Fuse, a larger version of the AUTOFUSE(R), replaces the
commonly used low technology fusible wire or fusible links in
automobile electrical harnesses and is offered in a range from 20
amps to 80 amps.
MIDI(R) Fuse is a bolt down version of the MAXI(TM) fuse. This
style is preferred by some European customers in the 50 to 100 amp
range. Its primary use is for heating, air conditioning and motor
control circuits.
J-CASE(R) Fuse, is a cartridge version of the Maxi(TM) fuse. Its
primary use is for branch circuit protection and protection of
circuits with inductive loads.
MEGA(R)Fuse, a higher current fuse with ratings of 100 to 200
amps, is used for protection of battery cables.
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 believes it currently has adequate production capacity to
meet the anticipated increased demand for automotive fuses referred to in
"Business Environment: Circuit Protection Market -- Automotive Fuses." Any
required expenditures for additional machinery and equipment are expected to be
funded by cash flow from operations.
The Company has licensed its patented ATO(R), 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 ATO(R) and Mini(R) automotive fuses to the Pacific Rim manufacturing
operations of Japanese based automobile manufacturers. See "Competition" and
"Business -- Patents, Trademarks and Other Intellectual Property."
Power Products. The Company entered the power 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, OEM and 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. The Company's power fuse products are marketed under the following
classifications:
Class L fuses are commonly used as the first line of electrical
protection in building service entrance equipment of high capacity
electrical systems. Other applications include switchboard mains
and feeders, distribution equipment and branch circuit protection
for large motors.
Class R fuses are commonly used downstream from Class L fuses in a
variety of branch circuit applications. Both time delay and fast
acting versions cover a range of applications including main
feeder, motor, transformer and solenoids. The Company's RK5
INDICATOR fuse series has won numerous product awards and wide
recognition by industrial plant personnel. These fuses have an
integrated blown fuse indicator that turns from clear to dark once
a fuse has blown. This reduces troubleshooting time significantly
and helps improve safety.
Class J fuses are less than half the size of Class R to provide
substantial space savings. Applications for Class J are similar to
Class R. Additional applications include back up protection for
circuit breakers and protection for both IEC and NEMA rated
devices. The Company has also introduced an indicating J line of
fuses with indication functionality like the RK5 INDICATOR fuse.
Class CC fuses, Littelfuse's KLDR (for transformer protection) and
CCMR (for motor branch circuit protection) provide protection
formerly supplied by fuses 10 times larger. Littelfuse was the
first to the market with these products and is the only company
with a CCMR rated up to 60 amps.
Semiconductor fuses, designed for supplementary protection of
semiconducting devices, are used in electronic equipment and power
equipment, such as variable speed drives, power rectifiers, UPS
systems and DC power suppliers.
Midget fuses, in seven different series, provide supplementary
overcurrent protection in such diverse applications as control
circuits, control power transformers, solenoids, street lighting
and computers.
Medium voltage fuses, designed for general and back-up protection,
protect motors, transformers and motor controllers. The medium
voltage fuse line was expanded in 1998 with the purchase of the
product line and assets of a medium voltage fuse manufacturer
allowing for very short delivery times of these products.
Other Products. In addition to the above products, the Company supplies
switches, circuit breakers and indicator lights to the automotive industry and
to appliance and general electronics manufacturers. 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.
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 and consists of eight major groups: two product
design, two materials engineering, one advanced technology development, one
manufacturing engineering automation and two engineering support groups.
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 January 2, 1999,
January 3, 1998, and December 28, 1996, the Company expended approximately $8.4
million, $7.9 million and $7.3 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, which for business reasons, is not disclosed to the public.
As of January 2, 1999, the Company owned 111 patents in North America,
23 patents in the European Economic Community and 29 patents in other foreign
countries. The Company has also registered trademark protection for certain of
its brand names and logos. The 111 North American patents are in the following
categories: 50 Electronic, 7 Resettable, 26 Automotive, 19 Power Fuse and 9
miscellaneous.
The first patent covering the AUTOFUSE(R) or ATO(R) fuse expired on
September 30, 1992. However, the last improvement patent covering the ATO(R)
fuse expires on September 19, 2000. The ATO(R) fuse product is further protected
by trademark and trade dress protection which has a remaining indefinite life so
long as it continues to be correctly used by the Company and its licensees.
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.
The Company currently licenses its ATO(R) automotive fuse technology 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 is exclusive as to Japan
and non-exclusive as to other specified Pacific Rim territories and provides
that the Company will receive royalties of 1.5% of the licensee's revenues from
the sales of the licensed products with a $25,000 annual minimum. This license
expires on August 10, 1999. In addition, a second license covering the MINI(R)
Fuse technology was granted with similar territory arrangements to Pacific
Engineering which 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 $286,000, $332,000 and $266,000 for 1998,
1997 and 1996, respectively.
Manufacturing
Much of the Company's manufacturing equipment is custom designed by its
engineers, and the Company conducts the majority of its own fabrication. The
Company stamps most 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 AUTOFUSE(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 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 approximately 66 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 approximately 30 people
and sales offices in The Netherlands, England, Singapore, Korea and China. The
Company also markets its products indirectly through a worldwide organization of
approximately 125 manufacturers' representatives and distributes through an
extensive network of electronic, automotive and electrical distributors.
Electronic. The Company has retained 23 manufacturers' representatives
to sell its electronic products domestically and additional representatives to
sell its electronic products internationally. These representatives call on
major OEMs and distributors. The Company distributes approximately 41% of its
domestic products directly to OEMs, with the remainder distributed by more than
800 distributors nationwide.
In the Asia-Pacific region, the Company maintains a direct sales staff
of five people in Singapore, one in Hong Kong, seven in Korea, and one or more
manufacturers' representatives in Japan, Singapore, Korea, Hong Kong, Taiwan,
China, Malaysia, Thailand, Philippines and Australia. The Company also maintains
an engineering facility in Japan. In Europe, the Company's distribution methods
differ from its domestic methods in that it maintains a direct sales force of 17
people to call on OEMs exclusively and utilizes approximately 15 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 sells automotive fuses through a direct sales
force in Detroit consisting of four employees. Salespersons 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 distribute the
Company's products to aftermarket fuse retailers such as Autozone, Pep Boys,
K-Mart and NAPA. 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.
Power. The Company markets and sells its power fuses through 36
manufacturers' representatives across North America. These representatives sell
power fuse products through an electrical distribution network comprised of
approximately 1,200 distributors. 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 January 2, 1999, 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 its Japanese stocking representative which accounted for 10.2% in
1998. The Japanese stocking representative serves over 100 customers in the Asia
Pacific electronic market. During the 1998, 1997 and 1996 fiscal years, net
sales to customers outside the United States (exports and foreign operations)
accounted for approximately 43.0%, 40.6% and 38.5%, respectively, of the
Company's total net sales.
Competition
The Company's products compete with similar products of other
manufacturers, many of which have substantially greater financial resources than
the Company. In the electronic fuse market, the Company's competitors are
Bussmann, a division of Cooper Industries, Bel Fuse, Inc., Raychem Corp., San-O
Industrial Corp. and Wickmann-Werke GmbH. In the fuseholder portion of this
market, the Company's principal competitor is Schurter, Inc. In the automotive
fuse market, the Company's major competitor, both in sales to automobile
manufacturers and in the aftermarket, is Bussmann. The Company licenses several
of its automotive fuse designs to Bussmann. Other auto fuse competitors include
Pudenz and MTA. In the power fuse market, the Company's major competitors
include Bussmann, Gould, Inc and Ferraz. 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.
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. The Company attempts to ship such products to
the customer within five business days of the date of the order. Over 90% of all
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 1998, the Company employed approximately 3,085 persons.
Approximately 50 employees in Des Plaines and 450 employees in Mexico are
covered by collective bargaining agreements. The Des Plaines agreement expires
March 31, 1999 and the Mexico agreement expires January 31, 2001. The Company
has not experienced any work stoppage or other form of labor dispute within the
last 20 years. The Company believes that its employee relations are excellent
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 so as to promote product quality and customer
satisfaction.
Year 2000
For information relating to year 2000 see "Item 7. Management's Discussion and
Analysis of Financial Conditions and Results of Operations - Year 2000"
incorporated herein by reference.
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.
ITEM 2. PROPERTIES
Littelfuse Facilities
The Company's operations are located in 19 owned or leased facilities
worldwide, containing approximately 708,000 square feet. The U.S. headquarters
and principal fabrication and distribution facility is located in Des Plaines,
Illinois, supported by three 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 the United Kingdom and
Switzerland. Asia Pacific operations include a distribution center located in
Singapore, with 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
Expir-
Size Lease/ Ation Industry
Location Use (sq.ft.) Own Date Focus
Des Plaines, Illinois Administrative, 340,000 Owned -- Auto, Electronic, Power
Engineering,
Manufacturing,
Testing and Research
Centralia, Illinois Manufacturing 45,200 Owned -- Electronic
Arcola, Illinois Manufacturing 36,000 Owned -- Power
Watseka, Illinois Manufacturing 26,000 Leased(1) 1999 Auto, Electronic
Watseka, Illinois Storage 5,000 Owned -- Other
Farmington Hills, Michigan Administrative 1,562 Leased 2001 Auto
Piedras Negras, Mexico Manufacturing 59,838 Leased 2000 Auto, Electronic, Power
Piedras Negras, Mexico Manufacturing 12,590 Leased 2000 Electronic and Power
Washington, Manufacturing, 60,000 Owned -- Electronic, Auto, Other
England Sales and
Distribution
Utrecht, The Netherlands Warehousing 8,680 Leased 1999 Auto, Electronic, Other
Utrecht, The Netherlands Sales, 12,000 Owned -- Auto, Electronic, Other
Administrative and
Engineering
Grenchen, Switzerland Manufacturing 11,000 Owned -- Auto
Singapore Sales and 7,836 Leased 1999 Electronic
Distribution
Seoul, Korea Sales and 29,175 Owned -- Electronic
Manufacturing
Philippines Manufacturing 10,200 Leased 1999 Electronic
Suzhou, China Manufacturing 40,000 Owned -- Electronic
Hong Kong, China Sales 200 Leased 2000 Electronic
Yokohama, Japan Engineering 1,815 Leased 1999 Electronic
Sao Paulo, Brazil Sales and
Distribution 1,200 Leased 1999 Electronic, Auto
(1)...........The lease of the manufacturing facility in Watseka, Illinois,
provides that the Company may purchase the leased facility upon certain
terms and conditions.
ITEM 3. Legal Proceedings
The Company is not a party to any legal proceedings which 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 1998.
Executive Officers of Registrant
The executive officers of the Company are as follows:
Name Age Position
Howard B. Witt 58 Chairman of the Board, President
and Chief Executive Officer
Kenneth R. Audino 55 Vice President, Organizational Development
and Total Quality Management
William S. Barron 56 Vice President, Marketing and
Sales
Philip G. Franklin 47 Vice President, Treasurer
and Chief Financial Officer
David J. Krueger 61 Vice President, Engineering
Lloyd J. Turner 55 Vice President, Operations
Hans Ouwehand 52 Vice President, European
Operations
Mary S. Muchoney 53 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
predecessor company of the Company ("Old Littelfuse") in February, 1990. Prior
to his appointment as President and Chief Executive Officer, Mr. Witt served in
several other key management positions with Old Littelfuse, including Operations
Manager from March 1979 to January 1986, Vice President-Manufacturing Operations
from January 1986 to January 1988, and Executive Vice President with full
operating responsibilities for all U.S. activities from January 1988 to February
1990. Prior to joining Old Littelfuse, Mr. Witt was a division president of
Keene Corporation from 1974 to 1979. Mr. Witt currently serves as a member of
the Board of Directors of Franklin Electric Co., Inc. and Material Sciences
Corporation and is a member of the Electronic Industries Association Board of
Governors. He is also a director of the Artisan Mutual Fund.
Kenneth R. Audino, Vice President, Organizational Development and Total
Quality management, He is responsible for the Company's overall quality,
reliability and environmental compliance, quality systems, human resources and
training efforts. Mr. Audino joined Old 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 of Old Littelfuse 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, has responsibility
for the general direction of all sales, marketing and related support functions.
He also is responsible for the Information Services Department. Mr. Barron
joined Old Littelfuse in March 1991. From August 1981 to March 1991, Mr. Barron
served as Director of Sales and Marketing of Cinch Manufacturing and the General
Manager of one of its domestic divisions. Cinch Manufacturing is a subsidiary of
Labinal Corporation.
Philip G. Franklin, Vice President, Treasurer and Chief Financial
Officer, has responsibility for the treasury, financial control, financial
reporting and information systems functions of the Company. Mr. Franklin joined
the Company in January 1999 from OmniQuip International, a $450 million
construction equipment manufacturer which he helped take public. .
David J. Krueger, Vice President, Engineering, directs all product
feasibility, design, development and testing activities. Joining Old Littelfuse
as an Industrial Fuse Engineering Manager in 1982, he was named Manager of
Circuit Protection Devices in 1984, promoted to Director of Engineering in
January 1986 and promoted to his current position one year later. Prior to
joining Old Littelfuse, Mr. Krueger worked for 15 years as an Engineering
Manager for the Economy Fuse Division of Federal Electric, and for six years as
a Plant Manager for Federal Pacific Reliance Electric.
Lloyd J. Turner, Vice President, Operations, has responsibility for
manufacturing operations and related support functions. Mr. Turner joined Old
Littelfuse in October 1988, as Director of Manufacturing Operations after having
served as an Operations Manager with Texas Instruments from November 1984 to
September 1988. He was promoted to his current position in 1991.
Hans Ouwehand, Vice President, European Operations, has complete
responsibility for all sales, marketing, research and development, and
manufacturing activities covering the entire range of electronic, automotive and
aftermarket products sold by the Company in Europe. Mr. Ouwehand joined Old
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 Old 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 Old 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 38 of
the Annual Report to Stockholders is incorporated herein by reference. It is
also included in Exhibit 13.1 as filed with the SEC. As of March 12, 1999, there
were 295 holders of record of the Company's Common Stock and in excess of 2,700
beneficial holders of its Common Stock.
Since September 22, 1992, shares of the Common Stock have been traded
in the over-the-counter market and quotations are reported using 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 38 of the Annual Report to Stockholders is incorporated herein
by reference. It is also included in Exhibit 13.1 as filed with the SEC.
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 16 through 20 of the
Annual Report to Stockholders is incorporated herein by reference. It is also
included in Exhibit 13.1 as filed with the SEC.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risks
The Company is exposed to market risk from changes in interest rates, foreign
exchange rates and commodities.
The Company had long-term debt outstanding at January 2, 1999 in the form of
Senior Notes and lines of credit at both variable and 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, Switzerland, South Korea, China and the Philippines. During
1998, sales exported from the United States or manufactured abroad accounted for
43.0% 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 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. Other than utilizing netting
and offsetting intercompany account management techniques to reduce known
exposures, the Company does not use 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.
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 27 through 34 of
the Annual Report to Stockholders are incorporated herein by reference. They are
also included in Exhibit 13.1 as filed with the SEC.
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" 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
(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 34)
(ii) Consolidated Statements of Financial Condition
as of January 2, 1999 and January 3, 1998
(pages 22 and 23).
(iii) Consolidated Statements of Income for the years
ended January 2, 1999, January 3, 1998 and
December 28, 1996 (page 24).
(iv) Consolidated Statements of Cash Flows for the
years ended January 2, 1999, January 3, 1998
and December 28, 1996 (page 25).
(v) Consolidated Statements of Shareholders' Equity
for the years ended January 2, 1999, January 3,
1998 and December 28, 1996.
(page 26).
(vi) Notes to Consolidated Financial Statements
(pages 27-33).
(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 22-24, incorporated herein by
reference.
(b) Reports on Form 8-K
There were no reports on Form 8-K during the fourth
quarter of 1998.
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 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
======= ======== ========= =======
Year ended January 3, 1998
Allowance for losses on
accounts receivable . . . . . . $ 896 $ 410 $ 188 $ 1,118
======== ======= ======= =======
Reserves for sales discounts
and allowances . . . . . . . . $ 4,161 $ 620 $ -- $ 4,781
======= ====== ========= =======
Year ended December 28, 1996
Allowance for losses on
accounts receivable . . . . . $ 863 $ 236 $ 203 $ 896
========= ======= ======= ========
Reserves for sales discounts
and allowances . . . . . . . $ 3,038 $ 1,123 $ -- $ 4,161
======== ======= ========= ========
(A) Write-off of uncollectible accounts, net of recoveries and foreign currency
translation.
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 18, 1999
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)
LITTELFUSE INC.
INDEX TO EXHIBITS
Sequentialc)
Page Number
Number Description of Exhibit a)
2.1 Plan of Reorganization under Chapter 11 of the Bankruptcy Code of
Old Littelfuse.
3.1 Certificate of Incorporation (as amended to date).
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
b)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.
4.2 Registration Rights Agreement, dated as of December 27, 1991, between
Littelfuse, Inc. and The Toronto-Dominion Bank Trust Company, as
agent.
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. (filed as exhibit 4.3A to the Company's Form
10-Q for the quarterly period ended June 28, 1997 (1934 Act File No.
-20388) and incorporated herein by reference), as amended.
4.4 Stock Plan for Employees and Directors of Littelfuse, Inc. d)
4.5 Form of Stock Option Agreement
4.6 Specimen Common Stock certificate.
4.7 Littelfuse, Inc. Retirement Plan dated January 1, 1992, as amended and restated.d)
____________
a) All of the exhibits, (except those filed herewith or specifically noted as
being incorporated by reference from a different filing under the
Securities as of 1933 or Securities act of 1934) were filed as exhibits to
the Company's Form 10 as filed with the Securities and Exchange Commission
which became effective on September 16, 1992 (1934 Act File No. 0-20388)
and are incorporated herein by reference.
b) Filed herewith.
c) This information appears only in the manually signed copy of the report.
d) Indicates an employee benefit plan, management contract or compensatory
plan or arrangement in which a named executive officer participates.
Sequentialc)
Page Number
Description of Exhibit a)
Number
4.8 Littelfuse, Inc. 401(k) Savings Plan.d)
4.9 Note Purchase Agreement, dated as of August 31, 1993, relating to
$45,000,000 principal amount of Littelfuse, Inc. 6.31% Senior Notes due
August 31, 2000.
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.
b)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.
10.1 Lease Agreement (with option to purchase), dated December 27, 1991, between
Littelfuse, Inc. and Westmark Systems, Inc.
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)
10.4 MINI(R) and MAXITM License Agreement, dated as of June 21, 1989, between
Littelfuse, Inc. and Cooper Industries, Inc.
10.5 Patent License Agreement, dated as of January 1, 1987, between Littelfuse,
Inc. and Cooper Industries, Inc.
10.6 1993 Stock Plan for Employees and Directors of Littelfuse, Inc., as amended
d)
10.7 Littelfuse, Inc. Supplemental Executive Retirement Plan.d)
b)10.8 Littelfuse Deferred Compensation Plan for Non-employee Directors, as
amended.d)
Sequentialc)
Page Number
Number Description of Exhibit a)
10.9 Littelfuse Executive Loan Program (filed as Exhibit 10.2 to the Company's
Form 10Q for the quarterly period ended June 30, 1995 (1934 Act File No.
0-20388) and incorporated herein by reference.)d)
10.10 Employment Agreement dated as of September 1, 1996 between Littelfuse,
Inc. and Howard B. Witt. d)
10.11 Change of Control Employment Agreement dated as of September 1, 1996
between Littelfuse, Inc. and Howard B. Witt. d)
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. d)
b)10.13 Form of change of Control Employment Agreement dated as of January 4,
1999 between Littelfuse, Inc. and Mr. Franklin. d)
b)13.1 Portions of Littelfuse Annual Report to Stockholders for the fiscal
year ended January 2, 1999.
b)22.1 Subsidiaries.
b)23.1 Consent of Independent Auditors.
Exhibit 22.1
SUBSIDIARIES
Littelfuse, S.A. de C.V.
Littelfuse FSC
Littelfuse Do Brazil
Littelfuse, B.V.
Littelfuse, A.G.
Littelfuse Limited
Littelfuse Far East Pte Ltd.
Littelfuse HK Limited
Littelfuse Holdings Pte Ltd.
Suzhou Littelfuse OVS Ltd.
Littelfuse KK
Littelfuse Triad Inc.
Littelfuse Phils Inc.