UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JULY 7, 2003
LITTELFUSE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-20388 36-3795742
(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) Identification Number)
800 EAST NORTHWEST HIGHWAY
DES PLAINES, ILLINOIS 60016
(Address of principal (Zip Code)
executive offices)
(847) 824-1188
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 7, 2003, Littelfuse, Inc. ("Littelfuse") acquired all the
outstanding stock of Teccor Electronics, Inc. ("Teccor") located in Irving,
Texas from Ranco Incorporated ("Ranco"), a subsidiary of Invensys plc.
Littelfuse paid Ranco $44.9 million, including a working capital purchase price
adjustment of $0.9 million, and also incurred acquisition costs of $0.4 million.
Additionally, if the net sales of certain products (primarily those currently
manufactured by Teccor) during the calendar year 2005 equal or exceed $107
million, then Littelfuse shall pay to Ranco on January 31, 2006, $5 million as
additional purchase price. Littelfuse funded the acquisition with $29.3 million
in cash and $16 million of borrowings on an existing revolving line of credit.
Teccor was engaged in the manufacture of semiconductor devices for
telecommunications equipment and other applications and the Company intends to
continue to operate Teccor in such business subsequent to the acquisition.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
ITEM 7A. FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Below are the financial statements of Teccor Electronics, Inc. required by
Item 7(a) of this Form 8-K.
Report of Independent Auditors
The Board of Directors
Teccor Electronics, Inc.
We have audited the accompanying consolidated balance sheet of Teccor
Electronics, Inc., a wholly owned subsidiary of Invensys plc, and Subsidiaries
as of March 31, 2003, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our
opinion.
In our opinion, the March 31, 2003 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Teccor Electronics, Inc. and Subsidiaries at March 31, 2003, and the
consolidated results of their operations and their cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Dallas, Texas
September 16, 2003
Teccor Electronics, Inc. and Subsidiaries
Consolidated Balance Sheet
As of March 31, 2003
ASSETS
Current assets:
Cash $ 567,045
Trade receivables, net of allowance for doubtful 9,228,795
accounts of $50,000 at March 31, 2003
Inventories, net 10,968,856
Prepaid expenses and other current assets 391,565
Land held for sale 675,190
------------
Total current assets 21,831,451
Property, plant, and equipment, net 11,889,339
Other assets 4,197,687
------------
Total Assets $ 37,918,477
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 6,574,435
Accrued expenses 9,189,291
Notes payable to affiliates 26,789,467
Due to affiliates 3,890,895
------------
Total current liabilities 46,444,088
Other liabilities 325,028
------------
Total liabilities 46,769,116
Stockholders' deficit:
Common shares, $1 par value, 1,000,000 shares 1,176
authorized; 1,176 shares issued and outstanding
Additional paid-in capital 43,108,928
Retained deficit (51,960,743)
------------
Total stockholders' deficit (8,850,639)
------------
Total Liabilities and shareholders' deficit $ 37,918,477
============
See accompanying notes.
Teccor Electronics, Inc. and Subsidiaries
Consolidated Statement of Operations
Year ended March 31, 2003
Net sales $ 75,283,654
Cost of sales 64,094,271
------------
Gross profit 11,189,383
Expenses:
Selling, general, and administrative 14,926,739
Management and other intercompany charges 3,079,536
Research and development 1,380,590
------------
Total operating expenses 19,386,865
------------
Operating loss (8,197,482)
Interest expense, net 738,353
------------
Loss before income taxes (8,935,835)
Income tax expense 509,961
------------
Net loss $ (9,445,796)
============
See accompanying notes.
Teccor Electronics, Inc and Subsidiaries
Consolidated Statements of Stockholders' Equity (Deficit)
Year ended March 31, 2003
TOTAL
ADDITIONAL STOCKHOLDERS'
COMMON STOCK PAID-IN CAPITAL RETAINED DEFICIT EQUITY (DEFICIT)
------------ --------------- ---------------- ----------------
Balance at March 31, 2001 $ 1,176 $ 43,108,928 $(42,514,947) $ 595,157
Net loss -- -- (9,445,796) (9,445,796)
------------ ------------ ------------ ------------
Balance at March 31, 2003 $ 1,176 $ 43,108,928 $(51,960,743) $ (8,850,639)
============ ============ ============ ============
See accompanying notes.
Teccor Electronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Year ended March 31, 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(9,445,796)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 978,486
Changes in operating assets and liabilities:
Accounts receivable, net (2,999,265)
Inventories 3,788,424
Prepaid expenses 44,708
Accounts payable (594,895)
Accrued expenses (881,039)
Other 1,896,627
-----------
Net cash used in operating activities (7,212,750)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property, plant, and equipment (2,938,018)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from affiliates, net 6,981,901
Proceeds from factoring arrangements, net 1,597,511
-----------
Net cash provided by financing activities 8,579,412
Net decrease in cash (1,571,356)
Cash at beginning of year 2,138,401
-----------
Cash at end of year $ 567,045
===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 36,000
===========
Cash paid for income taxes $ 251,691
===========
See accompanying notes.
Teccor Electronics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Teccor Electronics, Inc. and Subsidiaries (the Company) is a Texas corporation
that is wholly owned by Ranco Incorporated of Delaware (Ranco), an indirect
wholly owned subsidiary of Invensys plc (Invensys), a United Kingdom company.
The Company is principally engaged in the manufacture of semiconductor devices
for telecommunications equipment and other applications. The Company has
manufacturing facilities in Irving, Texas and Matamoros, Mexico, with its
principal headquarters in Irving, Texas. The Company's customers are located
throughout the United States and internationally, with sales in the United
States and Asia of approximately 53% and 37%, respectively. The remaining sales
are in Europe and the Middle East.
The Company's raw material purchase contracts require no minimum purchases and
these materials are readily available.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, Teccor de Mexico, S.A. de C.V., Teccor Delaware,
Inc., Teccor Electronics Mexico Holdings LLC and Teccor Electronics I, L.P. All
significant intercompany balances and transactions have been eliminated in
consolidation.
The U.S. Dollar is the functional currency for financial reporting. With regard
to accounts recorded in currencies other than U.S. Dollars, current assets
(except inventories), deferred income taxes, other assets, current liabilities
and long-term liabilities are revalued at exchange rates in effect at year-end.
Inventories, property, plant and equipment and depreciation thereon are revalued
at historic exchange rates. Net currency exchange gains and losses from
revaluation are charged or credited on a current basis to other income
(expense), net.
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 based upon specific knowledge of a customer's inability to
meet its financial obligations to the Company. Historically, credit losses have
consistently been within the management's expectations and have not been a
material amount. Delinquency of accounts is based upon contractual terms with
each customer. The Company's allowance for doubtful accounts is as follows:
Allowance for doubtful accounts at March 31, 2002 $180,000
Accounts written off 130,000
--------
Allowance for doubtful accounts at March 31, 2003 $ 50,000
========
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FACTORING ARRANGEMENTS
The Company factors certain third-party trade receivables to unrelated financial
institutions on a recourse basis pursuant to certain agreements. The Company
accounts for the transfer of receivables pursuant to these agreements as a
financing transaction. The agreements, which are negotiated and administered by
the Parent or its affiliates, require the Company to provide all administrative
functions with respect to the factored receivables and to remit collected funds
to the financial institutions. At March 31, 2003, outstanding factored
receivables totaling $2,353,000 are included in accrued expenses.
For the year ended March 31, 2003, costs incurred relating to these agreements
amounted to $36,000 and is included in interest expense.
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 reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue from the sale of products is recognized when title to the product
passes, generally upon shipment of products to customers. Reserves for sales
returns and allowances are recorded in the same period as the related revenues.
Reserves are recorded based on the Company's historical experience. Returns 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. The Company maintains
allowances against inventory to reduce the carrying value of excess and obsolete
inventory to the expected net realizable value. These allowances are based upon
a combination of factors including historical sales volume, market conditions,
lower of cost or market analysis and expected realizable value of the inventory.
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost. Depreciation of property,
plant, and equipment is provided using the straight-line method over the
estimated useful lives of the assets ranging from 5 to 18 years. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term or the estimated useful life of the asset. Maintenance and
repairs are charged to operations as incurred, and renewals and betterments are
capitalized and depreciated.
OTHER ASSETS
Other assets consist principally of engineering spares used to build and repair
machinery used in production. The cost of these assets is charged to expense
once the item is placed in operation or expensed over two years if they have
extended useful production lives.
SHIPPING AND HANDLING FEES AND COSTS
Amounts billed related to shipping and handling are recorded as revenue. Costs
incurred for shipping and handling of $830,000 for the year ended March 31, 2003
are included in selling, general, and administrative expenses.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES (CONTINUED)
For federal income tax purposes, the Company is a member of a group of
affiliated companies and its results of operations are included in the
consolidated federal income tax returns filed by Invensys Inc., a subsidiary of
Invensys plc. A valuation allowance for deferred tax assets is established when
management determines it is more likely than not that a deferred tax asset will
not be realized.
The amount of consolidated net operating losses attributed to the Company from
the Invensys consolidated group has been estimated. This may be adjusted in the
future as the consolidated group return is filed or other events that may impact
the tax liability of members of the Invensys consolidated group becomes known.
IMPAIRMENT OF LONG-LIVED ASSETS
In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (Statement 144), which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations
for a Disposal of a Segment of a Business." Statement 144 is effective for
fiscal years beginning after December 15, 2001. The Company adopted Statement
144 on April 1, 2002. Using the methodology prescribed in Statement 144, the
Company reviews long-lived assets and the related intangible assets for
impairment whenever events or changes in circumstances indicate the carrying
amounts of such assets may not be recoverable. Once an indication of a potential
impairment exists, recoverability of the respective assets is determined by
comparing the forecasted undiscounted net cash flows of the operation to which
the assets relate, to the carrying amount, including associated intangible
assets, of such operation. If the operation is determined to be unable to
recover the carrying amount of its assets, then long-lived assets of the
operation are written down to fair value. Fair value is determined based on
discounted cash flows or appraised values, depending upon the nature of the
assets. Long-lived assets that are held for disposal are reported at the lower
of the asset carrying amount or fair value less costs related to the asset
disposal. During the year ended March 31, 2003, the Company recorded an
impairment charge of $285,000 to reduce real property owned in Mexico, and held
for sale, to its estimated fair value less
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS (CONTINUED)
expected selling expenses. In the year ended March 31, 2002, the Company
recorded an impairment charge in accordance with Statement No. 121 totaling
approximately $42,250,000 to reduce its long-lived fixed assets to fair value
and write-off its goodwill net of accumulated amortization in the amount of
$14,773,500. Due in part to the impairment charge recorded in the year ended
March 31, 2002, the adoption of Statement 144 had no impact on the financial
statements of the Company.
FOREIGN EXCHANGE GAIN
The Company is party to certain sales contracts that are denominated in U.K.
Pounds. The Company recorded a foreign exchange gain of $316,975 during the year
ended March 31, 2003 relating to those contracts. The gain is included in
selling, general and administrative expenses. The Company has no significant
exposure to foreign currency exchange related to unsettled balances as of March
31, 2003. The Company does not engage in hedging activities to hedge its
exposure to fluctuations in foreign currency exchange rates.
RESEARCH AND DEVELOPMENT AND ADVERTISING COSTS
Research and development and advertising costs are expensed as incurred.
Research and development costs consist of expenses primarily in new product
development activities in collaboration with customers. Advertising costs
amounted to $100,166 for the year ended March 31, 2003.
2. INVENTORIES
Inventories consist of the following as of March 31, 2003:
Raw materials $ 1,372,080
Work in process 4,429,930
Finished goods 5,166,846
-----------
$10,968,856
===========
3. NOTES PAYABLE TO AFFILIATES
The notes payable to affiliates represent a note payable to Invensys Inc. in the
amount of $20,954,491 and a note payable to Lambda Holdings, Inc., a wholly
owned subsidiary of Invensys, of $5,834,976. The notes are unsecured, due on
demand, and bear interest at the six-month LIBOR rate (1.7% at March 31, 2003).
Net interest expense on the notes for the year ended March 31, 2003, amounted to
$780,000, which was unpaid at March 31, 2003.
4. PROPERTY, PLANT, AND EQUIPMENT
In connection with the impairment charge during the year ended March 31, 2002
described in Note 1, property, plant, and equipment with an original cost of
$57,700,000 and accumulated depreciation of $16,900,000 was adjusted to its
estimated fair value at that date.
Property, plant, and equipment as of March 31, 2003 consists of:
Machinery and equipment $ 11,907,787
Construction in process 1,079,013
Leasehold improvements 81,029
------------
13,067,829
Less accumulated depreciation (1,178,490)
------------
Property, plant, and equipment, net $ 11,889,339
============
5. ACCRUED LIABILITIES
Accrued liabilities as of March 31, 2003 consists of:
Payroll and benefits related $3,383,710
Receivables factored with recourse 2,352,623
Customer return reserves 1,655,000
Environmental reserves 1,219,000
Other 578,958
----------
Total accrued liabilities $9,189,291
==========
6. INCOME TAXES
Income tax expense attributable to loss before income taxes as of March 31, 2003
consists of:
Current:
Federal $ --
Foreign 509,961
Deferred --
--------
$509,961
========
Income tax expense differs from expected tax expense (computed by applying the
statutory federal income tax rate of 35% in 2003 and 2002, to loss before income
taxes) as follows as of March 31, 2003:
Computed "expected" tax benefit $(3,127,542)
Increase in valuation allowance 3,127,542
Mexico current taxes 509,961
-----------
$ 509,961
===========
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at March 31, 2003 are presented below:
Deferred tax assets:
Net operating loss carryforward $ 2,588,600
Payroll and employee benefits 150,765
Inventories 245,000
Property, plant, and equipment 12,049,800
Accounts receivable allowance 17,424
Accrued liabilities 802,900
------------
Total gross deferred tax assets 15,854,489
Less: valuation allowance (15,854,489)
------------
Net deferred tax assets $ --
============
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that the net deferred assets will be
realized. Accordingly, the Company has provided a valuation allowance for its
entire deferred tax asset. As of March 31, 2003, the Company estimated its
portion of the consolidated Invensys net operating loss to be approximately
$7,396,000. Portions of this net operating loss carryforward begin to expire in
2023. This amount is an estimate based on information provided by Invensys
and could change based on the actual filing of the income tax return, the
Invensys consolidated group or other events that may impact the tax liability of
members of the Invensys group. In addition, as a result of the transaction
described in Note 13, the net operating loss carryforwards are subject to the
limitations of Internal Revenue Code section 382 regarding change in control and
are accordingly subject to annual limitations.
7. PENSION BENEFITS AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company, together with Ranco and its affiliates, participates in group
defined benefit pension plans covering substantially all of the Company's United
States employees. Ranco determines and allocates to the Company its portion of
the cost related to the plan. The Company expensed $644,358 for this plan during
the year ended March 31, 2003.
In addition to the defined benefit pension plans, the Company also participates
with Ranco and its affiliates in a group defined contribution plan. The Company
expensed $376,000 for this plan during the year ended March 31, 2003.
The Company also participates with Ranco and its affiliates in a defined benefit
health care plan that provides postretirement medical coverage for substantially
all of the Company's employees. Ranco determines and allocates to the Company
its portion of the cost related to the plan. The Company recognized no
postretirement benefit expense during the year ended March 31, 2003. As of March
31, 2003, the Company's liability for its allocated postretirement benefit cost
amounted to $289,000, and is included in due to affiliates in the accompanying
consolidated balance sheets. The Company recognized no expense related to the
postretirement benefit plan for the year ended March 31, 2003.
As a result of the transaction discussed in Note 13, Invensys assumed all
liabilities related to defined benefit pension and post retirement benefit
plans.
8. OTHER TRANSACTIONS WITH AFFILIATES
The Company conducts various transactions with affiliated companies during the
course of its operations. Receivables from affiliates and payables to affiliates
are expected to be settled in the normal course of business. These financial
statements reflect certain allocations from the parent company and affiliates
which may vary from amounts which would be reflected if the relationship between
the parent company and affiliates did not exist. Net sales to affiliates were
$547,000 for the year ended March 31, 2003.
9. COMMITMENTS
The Company has entered into various noncancellable operating lease agreements
for buildings, machinery, and equipment used in its manufacturing process.
Escalation clauses for building leases are recognized over the term of the
leases. The initial term of the Company's lease for its location in Irving,
Texas terminates in 2005. Thereafter, there are three non-binding options to
automatically renew the lease for five more years each at the then prevailing
market rates.
Future minimum lease payments under noncancellable operating leases (with
initial or remaining lease terms in excess of one year) for each of the
following five fiscal years are as follows:
2004 $ 4,004,000
2005 3,053,000
2006 2,080,000
2007 626,000
2008 and thereafter 2,348,000
-----------
Total payments $12,111,000
===========
Rental expense under all operating lease arrangements for the years ended March
31, 2003 was approximately $5,302,000.
10. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of trade accounts receivable. Concentration of
credit risk is reduced due to the large number of customers comprising the
customer base. Insight Electronics, a distributor of Teccor product in the
United States, accounted for 9% of the Company's net sales for the year ended
March 31, 2003 and 13% of the Company's accounts receivable balance at March 31,
2003. Mitsubishi Materials Corporation, a distributor of Teccor product in Asia,
accounted for 11% of the Company's net sales for the year ended March 31, 2003
and 17% of the accounts receivable balance at March 31, 2003.
11. CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business. When the Company determines that it is probable a
liability has been incurred and the amount can be reasonably estimated a reserve
is recorded. During the year ended March 31, 2003, the Company recorded expenses
of $866,000 related primarily to environmental matters at a former operating
location. A liability for potential environmental matters of $1,219,000 is
included in accrued expenses at March 31, 2003. The Company's accumulated costs
to date have totaled approximately $2.6 million and consist of estimated costs
related to site assessment, remediation of soil and ground water clean-up, a
settlement with the former landlord and legal costs. The clean-up plan is
subject to the approval of the Texas Commission on Environmental Quality (TCEQ).
In addition the TCEQ may require continued monitoring of the site. In addition,
the Company is a Potentially Responsible Party (PRP), as defined by the TCEQ,
for environmental matters related to a former plant site vacated in 1979.
Invensys acquired the plant site and clean-up costs have not been estimated to
date. In connection with the transaction described in Note 13, Invensys has
indemnified the Company and the buyer against further liabilities related to
these matters up to a total of $10 million in costs incurred after the
acquisition. The Company remains a PRP, as defined by the TCEQ; as a result, in
the event that Invensys is unable to fulfill its obligations pursuant to the
indemnity, the Company may be required to make further restitution related to
the clean-up and monitoring of each of the sites. In the opinion of management
the ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial position, results of operations,
or liquidity beyond the established reserves.
12. UNION AGREEMENTS
As of March 31, 2003, the Company employed approximately 1,678 employees in its
assembly operations in Mexico. In Mexico, labor relations are governed by
separate collective labor agreements between the Company and the unions
representing the particular group of employees. Approximately 1,436 of the
Company's employees in Mexico, whether seasonal or permanent, are affiliated
with labor unions which are generally affiliated with a national confederation.
Consistent with other labor practices in Mexico, wages are negotiated every year
while other terms are negotiated every two years.
In the United States, the Company's employees are not covered by collective
bargaining agreements.
13. SUBSEQUENT EVENT
Effective July 7, 2003, Littelfuse Inc. acquired all of the outstanding shares
of the Company from Invensys for cash of $44,000,000, plus a working capital
adjustment of $890,000, plus a contingent payment of $5,000,000 that will be
required in 2006 if sales of the Company's products exceed $107,000,000 during
the 2005 calendar year. The Company will not be required to repay its
intercompany payables or intercompany notes to Invensys that existed at the
close of the transaction. In addition, the Company and Littelfuse have been
indemnified for certain environmental matters more fully described in Note 11.
TECCOR ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2003
(IN THOUSANDS, UNAUDITED)
June 30, 2003
-------------
ASSETS:
Cash and cash equivalents $ 2,497
Receivables 10,007
Inventories 11,758
Other current assets 1,323
--------
Total current assets 25,788
Property, plant, and equipment,
net 12,041
Other assets 4,180
--------
Total assets $ 41,806
========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities $ 11,780
Notes payable due to affiliates 39,221
Total current liabilities 51,001
Other long-term liabilities 386
Shareholders' deficit (9,581)
--------
Total liabilities and
shareholders' deficit $ 41,806
========
See accompanying notes.
TECCOR ELECTRONICS, INC. AND SUBSIDIARIES
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30
(IN THOUSANDS, UNAUDITED)
For the Three Months
Ended June 30,
----------------------
2003 2002
-------- --------
Net sales $ 18,943 $ 19,546
Cost of sales 15,639 17,140
-------- --------
Gross profit 3,304 2,406
Selling, general and
administrative expenses 3,766 3,771
Research and development expenses 349 351
Management and other intercompany
charges 0 750
-------- --------
Operating loss (811) (2,466)
Interest expense 143 201
-------- --------
Income (loss) before income taxes (954) (2,667)
Income taxes (benefit) (221) 133
-------- --------
Net loss $ (733) $ (2,800)
======== ========
See accompanying notes.
TECCOR ELECTRONICS, INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30
(IN THOUSANDS, UNAUDITED)
For the Three Months
Ended June 30,
----------------------
2003 2002
-------- --------
Operating activities:
Net loss $ (733) $ (2,800)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 252 233
Changes in operating assets and liabilities:
Accounts receivable (778) (5,784)
Inventories (789) 1,626
Accounts payable and accrued expenses (859) (734)
Other, net (3,835) (626)
-------- --------
Net cash used in operating activities (6,742) (8,085)
Cash used in investing activities:
Purchases of property, plant, and equipment (1,407) (951)
-------- --------
Net cash used in investing activities (1,407) (951)
Cash provided by financing activities:
Proceeds from affiliate 12,432 7,152
Proceeds (payments) under factoring arrangements, net (2,353) 855
-------- --------
Net cash provided by financing activities 10,079 8,007
Increase/(decrease) in cash and cash equivalents 1,930 (1,029)
Cash and cash equivalents at beginning of period 567 2,138
-------- --------
Cash and cash equivalents at end of period $ 2,497 $ 1,109
======== ========
See accompanying notes.
TECCOR ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the period ended June 30, 2003, are not
necessarily indicative of the results that may be expected for the year ending
March 31, 2004. For further information, refer to the Company's consolidated
financial statements and the notes thereto included in this Form 8-K for the
year ended March 31, 2003.
2. INVENTORIES
The components of inventories are as follows (in thousands):
June 30,
2003
-------
Raw material $ 1,385
Work in process 6,142
Finished goods 4,231
-------
Total $11,758
=======
3. CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business. When the Company determines that it is probable a
liability has been incurred and the amount can be reasonably estimated a reserve
is recorded. A liability in the amount of $1,219,000, related primarily to
environmental matters at a former operating location, is included in accrued
expenses at June 30, 2003. The Company's accumulated costs to date have totaled
approximately $2,600,000 and consist of estimated costs related to site
assessment, remediation of soil and ground water clean-up, a settlement with the
former landlord and legal costs. The clean-up plan is subject to the approval of
the Texas Commission on Environmental Quality (TCEQ). In addition the TCEQ may
require continued monitoring of the site. In addition, the Company is a
Potentially Responsible Party (PRP), as defined by the TCEQ, for environmental
matters related to a former plant site vacated in 1979. Invensys acquired the
plant site and clean-up costs have not been estimated to date. In connection
with the transaction described in Note 13, Invensys has indemnified the Company
and the buyer against further liabilities related to these matters up to a total
of $10,000,000 in costs incurred after the acquisition. The Company remains a
PRP, as defined by the TCEQ; as a result, in the event that Invensys is unable
to fulfill its obligations pursuant to the indemnity, the Company may be
required to make further restitution related to the clean-up and monitoring each
of the sites. In the opinion of management the ultimate disposition of these
matters will not have a material adverse effect on the Company's consolidated
financial position, results of operations, or liquidity beyond the established
reserves.
4. FACTORING ARRANGEMENTS
The Company factors certain third-party trade receivables to unrelated financial
institutions on a recourse basis pursuant to certain agreements. The Company
accounts for the transfer of receivables pursuant to these agreements as a
financing transaction. The agreements, which are negotiated and administered by
the Parent or its affiliates, require the Company to provide all administrative
functions with respect to the factored receivables and to remit collected funds
to the financial institutions. At March 31, 2003, outstanding factored
receivables totaling $2,353,000 are included in accrued expenses. At June
30,2003, there were no outstanding factored receivables.
5. SUBSEQUENT EVENT
On July 7, 2003, Ranco Incorporated entered into and executed an agreement
to sell all of the outstanding shares of Teccor Electronics, Inc. to
Littelfuse, Inc. Under the terms of the agreement, the Company was sold to
Littelfuse, Inc. for $44,000,000 plus a working capital adjustment of
$890,000. Littelfuse, Inc. also agreed to make a future payment of
$5,000,000 to Ranco Incorporated contingent upon sales of Teccor products
reaching $107,000,000 for calendar year 2005. The Company will not be
required to repay its amounts payable to affiliates that existed at the
close of the transaction. In addition, the Company and Littelfuse, Inc.
have been indemnified for certain environmental matters more fully described
in Note 11 to the Notes to Consolidated Financial Statements of Teccor
Electronics, Inc. and Subsidiaries.
ITEM 7b. PRO FORMA FINANCIAL INFORMATION.
Below is the pro forma financial information required by Item 7(b) of this
Form 8-K relating to the acquisition of Teccor Electronics, Inc. described
above.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
Littelfuse, Inc. historical consolidated financial data as of and for the
year ended December 28, 2002, and for the six months ended June 28, 2003, are
derived from its consolidated financial statements. The historical balance sheet
and income statement data as of and for the six months ended June 28, 2003 have
been derived from its unaudited consolidated financial statements and include
all adjustments, consisting of normal recurring accruals, that management
considered necessary for a fair presentation of our consolidated financial
position and results of operations for such periods.
On July 7, 2003, Littelfuse, Inc. acquired Teccor Electronics, Inc. The
Teccor Electronics, Inc. historical financial data for the year ended March
31, 2003, and for the three months ended June 30, 2003, are derived from
Teccor Electronics, Inc.'s financial statements, which are included in Item
7a. Littelfuse, Inc. funded the acquisition with $29,300,000 in cash and
$16,000,000 in borrowings on an existing revolving line of credit.
Additionally, if the net sales of certain products (primarily those
currently manufactured by Teccor) during the calendar year 2005 equal or
exceed $107,000,000, then Littelfuse, Inc. shall pay to Ranco on January 31,
2006, $5,000,000 as additional purchase price.
The pro forma adjustments for the Teccor Electronics acquisition reflect the
pro forma adjustments under the purchase method of accounting, adjustments to
record additional borrowings by Littelfuse, Inc. to complete the purchase and
other adjustments to eliminate certain costs allocated to Teccor Electronics,
Inc. from its parent company, that are not anticipated to be incurred subsequent
to the acquisition.
The pro forma data assumes that the acquisition of Teccor Electronics, Inc.
occurred on December 30, 2001, in the case of the Unaudited Pro Forma
Consolidated Income Statements for the year ended December 28, 2002 and for the
six months ended June 28, 2003. In the case of the Unaudited Pro Forma
Consolidated Balance Sheet, the pro forma data assumes that the acquisition of
Teccor Electronics, Inc. occurred as of June 28, 2003.
The pro forma financial information should be read in conjunction with the
Littelfuse, Inc. historical financial statements as of and for the year ended
December 28, 2002 and the unaudited consolidated historical financial statements
as of and for the three months ended June 28, 2003. The audited historical
financial statements of Teccor Electronics, Inc. as of and for the year ended
March 31, 2003 and the unaudited historical financial statements as of and for
the six months ended June 30, 2003 are included in Item 7a and should be read in
conjunction with these pro forma financial statements. The pro forma information
is not necessarily indicative of future earnings or earnings that would have
been reported for the periods presented had these transactions been completed at
the beginning of the earliest period presented.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
Year Ended December 28, 2002
-----------------------------------------------------------------------
Pro Forma
Adjustments
Littelfuse Teccor for Teccor As Adjusted
Historical Historical Acquisition Pro Forma
---------- ---------- ----------- ---------
Net sales $ 283,267 $ 75,284 $ -- $ 358,551
Cost of sales 192,870 64,094 840(a) 257,804
--------- --------- --------- ---------
Gross profit (loss) 90,397 11,190 (840) 100,747
Selling, general and administrative expenses 61,621 18,007 (2,880)(b) 76,748
Research and development expenses 8,334 1,381 -- 9,715
Amortization of intangibles 767 -- -- 767
Restructuring expense 3,744 -- -- 3,744
--------- --------- --------- ---------
Operating income (loss) 15,931 (8,198) 2,040 9,773
Interest expense 2,653 738 448(c) 3,839
Other income (1,753) -- -- (1,753)
--------- --------- --------- ---------
Income (loss) before income taxes 15,031 (8,936) 1,592 7,687
Income taxes 5,411 510 (3,154)(d) 2,767
--------- --------- --------- ---------
Net income (loss) $ 9,620 $ (9,446) $ 4,746 $ 4,920
========= ========= ========= =========
Net income (loss) per share:
Basic $ 0.44 $ (0.43) $ 0.22 $ 0.23
========= ========= ========= =========
Diluted $ 0.44 $ (0.43) $ 0.22 $ 0.22
========= ========= ========= =========
Weighted average shares and equivalent
shares outstanding:
Basic 21,858
=========
Diluted 21,971
=========
See accompanying notes.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
Six Months Ended June 28, 2003
-----------------------------------------------------------------------
Pro Forma
Adjustments
Littelfuse Teccor for Teccor As Adjusted
Historical Historical Acquisition Pro Forma
---------- ---------- ----------- ---------
Net sales $ 142,752 $ 36,386 $ -- $ 179,138
Cost of sales 95,800 30,296 420 (a) 126,516
--------- --------- -------- ---------
Gross profit (loss) 46,952 6,090 (420) 52,622
Selling, general and administrative expenses 31,222 9,420 (1,540)(b) 39,102
Research and development expenses 3,794 660 -- 4,454
Amortization of intangibles 383 -- -- 383
--------- --------- -------- ---------
Operating income (loss) 11,553 (3,990) 1,120 8,683
Interest expense 1,050 280 224(c) 1,554
Other income (551) -- -- (551)
--------- --------- -------- ---------
Income (loss) before income taxes 11,054 (4,270) 896 7,680
Income taxes (benefit) 3,979 (99) (1,115)(d) 2,765
--------- --------- -------- ---------
Net income (loss) $ 7,075 $ (4,171) $ 2,011 $ 4,915
========= ========= ======== =========
Net income (loss) per share:
Basic $ 0.32 $ (0.19) $ 0.09 $ 0.23
========= ========= ======== =========
Diluted $ 0.32 $ (0.19) $ 0.09 $ 0.23
========= ========= ======== =========
Weighted average shares and equivalent
shares outstanding:
Basic 21,780
=========
Diluted 21,838
=========
See accompanying notes.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
June 28, 2003
--------------------------------------------------------------------
Pro Forma
Adjustments
Littelfuse Teccor for Teccor As Adjusted
Historical Historical Acquisition Pro Forma
---------- ---------- ----------- ---------
ASSETS:
Cash and cash equivalents $ 42,279 $ 2,497 $(29,290)(e) $ 15,486
Short-term investments -- -- -- --
Receivables 43,432 10,007 -- 53,439
Inventories 47,758 11,758 -- 59,516
Other current assets 17,376 1,323 1,216(f) 19,915
-------- -------- -------- --------
Total current assets 150,845 25,585 (28,074) 148,356
Property, plant, and equipment, net 75,759 12,041 9,576(g) 97,376
Reorganization value, net 27,665 -- -- 27,665
Other intangible assets, net 27,910 -- -- 27,910
Other assets 3,492 4,180 8,814(h) 16,486
-------- -------- -------- --------
Total assets $285,671 $ 41,806 $ (9,684) $317,793
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities excluding current portion
of long-term debt $ 39,407 $ 11,780 $ 3,956 (i) $ 55,143
Notes payable due to affiliate -- 39,221 (39,221)(j) --
Current portion of long-term debt 17,599 -- -- 17,599
-------- -------- -------- --------
Total current liabilities 57,006 51,001 (35,265) 72,742
Long-term debt 20,222 -- 16,000(e) 36,222
Deferred liabilities 1,610 -- -- 1,610
Accrued post-retirement benefits 10,392 -- -- 10,392
Other long-term liabilities 497 386 -- 883
Shareholders' equity (deficit) 195,944 (9,581) 9,581(k) 195,944
-------- -------- -------- --------
Total liabilities and shareholders' equity
(deficit) $285,671 $ 41,806 $ (9,684) $317,793
======== ======== ======== ========
See accompanying notes.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the purchase price allocation for the
acquisition of Teccor Electronics, Inc. as of June 28, 2003 in accordance
with the purchase method of accounting with adjustments to record the
acquired assets and liabilities of Teccor Electronics, Inc at their
estimated fair market or net realizable values in thousands of dollars.
Purchase price $ 44,000
Plus: Net working capital adjustment 890
Plus: Acquisition costs 400
---------
Total purchase price 45,290
Purchase price allocation
Current assets 26,801
Property, plant and equipment 21,617
Other assets 4,180
Deferred tax assets 8,814
Current liabilities (10,561)
Purchase accounting liabilities (5,175)
Other long-term liabilities (386)
---------
Total purchase price 45,290
The final purchase price allocation is subject to revision based upon
receipt of the independent appraisal of the property, equipment and
intangible assets acquired.
Purchase accounting liabilities are estimated to be $5,175,000 and are
primarily for redundancy costs related to manufacturing operations and
selling, general and administrative functions. Included in this amount is
$675,000 to reflect the obligation of Teccor to remit proceeds of the sale
of land acquired in the acquisition to the former owners.
(a) Represents depreciation expense related to the estimated $9,576,000
write-up to record fixed assets at fair value at June 28, 2003 as per the
following table:
Depreciation Expense in
Thousands of Dollars
Remaining Year Ended Six Months
Useful Life December 28, Ended June 28,
Fixed Asset of Assets 2002 2003
----------- --------- ------------- ---------------
Machinery,
equipment and
leasehold
improvements 11.4 years $ 840 $ 420
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(b) Represents adjustments based on forward-looking estimates to eliminate
Invensys expense allocations that are not expected to be incurred after
the acquisition.
(c) In July, 2003, Littelfuse, Inc. borrowed $16,000,000 under its line of
credit to help fund the acquisition.
Pro forma adjustments to interest expense are as follows:
Interest Expense in
Thousands of Dollars
------------------------
Year Ended Six Months
December 28, Ended June 28,
2002 2003
------------ --------------
Interest on revolving line of credit $ 448 $ 224
Pro forma interest expense under the revolving line of credit assumes a
rate of 2.8%.
(d) Represents an adjustment to reflect tax expense at the Littelfuse, Inc.
effective tax rate of 36%.
(e) Following are the estimated sources and uses of funds to acquire Teccor
Electronics, Inc. as if it were acquired by Littelfuse, Inc. as of June
28, 2003.
Sources of funds in thousands of dollars:
Cash $ 29,290
Proceeds from revolving line of credit $ 16,000
--------
Total sources of funds $ 45,290
========
Uses of funds in thousands of dollars:
Purchase of Teccor Electronics, Inc. $(44,000)
Working capital adjustment $ (890)
Acquisition costs $ (400)
--------
Total uses of funds $(45,290)
========
(f) Represents an adjustment to recognize deferred tax assets that were fully
reserved for by Teccor Electronics, Inc., as the realization of the
deferred tax assets by Littelfuse, Inc. is more likely than not.
(g) For purposes of preliminary purchase price allocation, an estimated
write-up in fixed assets in the amount of $9,576,000 has been reflected to
record fixed assets at fair market value. The final fixed asset fair
market value is subject to revision based upon appraisal.
(h) Represents an adjustment to recognize deferred tax assets that were fully
reserved for by Teccor Electronics, Inc., as the realization of the
deferred tax assets by Littelfuse, Inc. is more likely than not.
(i) Represents adjustments to 1) reduce to fair value accrued expenses for
environmental liabilities recorded by Teccor Electronics, Inc. from
$1,219,000 to -$0- because indemnification for environmental liabilities
was received from the seller, 2) record an obligation in the amount of
$675,000 for Teccor Electronics, Inc. to remit proceeds of the sale of
land to the former owners and 3) record liabilities amounting to
$4,500,000 for estimated severance costs and other liabilities resulting
from the integration of Teccor Electronics, Inc. into Littelfuse, Inc.
This estimated purchase accounting liability is subject to revision based
upon final completion of the purchase price allocation.
(j) Represents elimination of Teccor Electronics, Inc. amounts owed to its
affiliates since these liabilities were not assumed by Littelfuse, Inc.
(k) Eliminates retained earnings of Teccor Electronics, Inc.
Exhibit No. Description
----------- -----------
23.1 Consent of Ernst & Young LLP
SIGNATURES
Pursuant to the requirements 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.,
Date: September 22, 2003 By: /s/ Philip G. Franklin
---------------------------
Name: Philip G. Franklin
Title: Vice President and
Chief Financial Officer (As
duly authorized officer and
as the principal financial
and accounting officer)