Technitrol Announces Credit Amendment and 1H09 Outlook, Explores Options to Significantly Reduce Debt

Technitrol, Inc. (NYSE:TNL) announced that it has amended its credit facilities to provide significant additional operating flexibility to navigate through the current uncertain economic environment. The amendments took effect February 20, 2009 and will extend through the maturity of the facility in 2013.

Technitrol also provided its current internally generated revenue and operating profit outlooks for the first half of 2009, based on current industry analyses, customer activity and other anecdotal evidence. In the first quarter, the company currently expects revenues to be between $180 million and $185 million, and EBITDA, excluding severance and asset-impairment expenses, to be approximately $10 million to $12 million. In the second quarter of 2009, Technitrol expects revenues to be between $185 million and $190 million. EBITDA before special items is expected to grow sequentially to $16 million to $18 million due to a full quarter of reduced costs resulting from fourth-quarter actions, plus early benefits from additional reduction activities in the first quarter of 2009. Technitrol believes that the overall demand environment will be at its worst in the first half of 2009 and begin to improve modestly and slowly in the second half. Assuming sales throughout the year approximate first-half levels, Technitrol expects to produce sequential EBITDA improvement in each quarter as savings from cost-reduction activities increase.

The principal changes to the terms of the credit facility are as follows:

an increase in the maximum debt from 3.25 times EBITDA to 4.5 times, decreasing to 3.0 times by December 2010. Based on the above outlook, the company believes that its debt-to-EBITDA ratio will remain well below the new limit;
an increase in the EBITDA coverage of fixed charges (mandatory principal, cash interest and tax payments) from 1.5 times under the original agreement to 2.0 times (through the end of the second quarter of 2009), decreasing to 1.25 times by March 2011;
a return to the bank group of $125 million in unused borrowing capacity, reducing the facility from $500 million to $375 million (comprising the existing $200 million term loan and $175 million in revolving credit). Technitrol had drawn approximately $136 million of revolving credit as of December 26, 2008 and believes that the $175 million limit is more than sufficient to meet future needs;
a pledge of a group of selected assets, which may be eliminated at the company�s option when debt decreases to less than 2.5 times EBITDA; and
increases in the interest rate from a previous maximum of floating LIBOR plus 150 basis points to a maximum of LIBOR plus 325 basis points with no minimum LIBOR provision. At current LIBOR rates, the company�s borrowing rate remains less than 5% per annum.

For these amendments, Technitrol has paid up-front costs amounting to approximately $2.7 million. The company is very pleased with the amended terms, particularly the continuing ability to borrow at relatively low rates of interest. Coupled with previously announced reductions in annual expenses and costs by almost $30 million, this credit pricing will allow the company to continue to aggressively repay debt and emerge from the recession in a strong competitive position. The company is also pleased that the amendment process and terms demonstrate the cooperation of its bank syndicate in these difficult times. The agent for the banks in the credit facility is JPMorgan.

For the foreseeable future, Technitrol intends to continue conserving cash in a variety of ways and to apply cash savings toward repayment of debt. Consistent with the company�s ongoing desire to reduce leverage (which has had an irrational negative effect on its equity value), Technitrol also has decided to explore monetization alternatives with respect to its Electrical Contact Products Group (AMI Doduco) in whole or in part and has retained Morgan Stanley & Co. as its financial advisor to assist in this matter. For the fiscal year ended December 26, 2008, AMI Doduco generated EBITDA, excluding severance and asset-impairment expenses but unadjusted for other non-recurring items, of $22.8 million. In addition, AMI Doduco continues to provide the company with positive cash flows. This process is in an early exploratory stage as there is no requirement or immediate need to commence or complete any transaction or series of transactions. While this process is pending, AMI Doduco will operate normally in all aspects, with no change in customer and vendor support, capital expenditures or new product development efforts, all remaining consistent with usual practice.

Meanwhile, Technitrol continues to actively market its microelectromechanical systems (MEMS) business, which it expects to divest by the middle of 2009.

Based in Philadelphia, Technitrol is a worldwide producer of electronic components, electrical contacts and assemblies and other precision-engineered parts and materials for manufacturers in the wireless and wireline communications, hearing, medical, military/aerospace, automotive and electrical equipment industries. For more information, visit Technitrol�s Web site at http://www.technitrol.com.

Cautionary Note: This message contains "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially. This release should be read in conjunction with the factors set forth in Technitrol's report on Form 10-Q for the quarter ended September 26, 2008, in Item 1a under the caption "Factors that May Affect Our Future Results (Cautionary Statements for Purposes of the 'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of 1995)."

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