Technitrol, Inc. (NYSE:TNL) announced results for its first
fiscal quarter ended March 27, 2009. First-quarter results
include:
- consolidated revenues of $182.2
million, compared with $212.8 million in the previous quarter and
$274.0 million in the first quarter of 2008;
- very weak end-product demand and
significant customer inventory reductions principally during
January and February in the electronics and electrical businesses,
partly offset by:
- a March rebound in electronic
component shipments; and
- stable demand in
military/aerospace electronics markets and quarter-over-quarter
revenue growth in automotive electronic components, driven by the
progressive ramp-up of ignition coil production in China;
- reductions in SG&A and
indirect manufacturing expenses amounting to approximately $30
million per year compared with the first quarter of 2008. Because
of timing issues, the first quarter of 2009 did not reflect the
full benefit of the most recent cost reductions;
- adjusted EBITDA (see non-GAAP
table) of $12.3 million;
- earnings per diluted share
included approximately $0.18 from foreign-exchange gains and
approximately $0.03 resulting from insurance proceeds related to
the May 2008 earthquake in Mianyang, China;
- a $2.5 million repayment of
long-term debt. In future quarters, increasing amounts of debt
repayment are expected from:
- an absence of significant cash
restructuring expense after the second quarter;
- lower shareholder dividend
payments (in keeping with the recently reduced declarations);
- non-recurrence of one-time first
quarter expenses related to amending the credit agreement; and
- non-recurrence of a $2.1 million
outlay to fund retirement plan obligations in the first
quarter;
- working capital reductions
totaling $25.1 million (principally inventory reductions), or
approximately 14%, from the end of the fourth quarter, due mainly
to aggressive inventory management and correspondingly little
purchasing to replace consumed inventory; and
- capital spending of only $3.2
million, in line with the company�s conservation budget run rate
for 2009.
Technitrol�s first-quarter GAAP operating loss included the
following items:
- pre-tax severance expenses
amounting to approximately $2.9 million, mainly related to
previously announced work force reductions necessary to match
anticipated future business levels; and
- pre-tax non-cash charges, none
of which affect non-GAAP financial results or the company�s
compliance with debt covenants, of:
- approximately $5.6 million,
related to impairment of fixed assets in certain divisions of the
Electronic Components Group. The impairments relate to reduced
customer demand forecasts and also production equipment dedicated
to end-of-life customer products; and
- approximately $68.9 million for
the impairment of goodwill at our wireless product division, based
on an analysis of Technitrol�s equity market value and internal
demand forecasts as of March 27, 2009. If the analysis were done
under current market conditions, a different result would ensue.
The final amount of the impairment will be recorded upon completion
of third-party appraisals.
Excluding the above items, operating profit was $2.6 million in
the first quarter (see non-GAAP table).
Based on industry reports, customer input and internal analysis,
the company expects second-quarter revenues to be roughly
comparable to first-quarter levels, as electronics supply chain
inventory bottoming is offset by softer electrical markets,
particularly in Europe. Excluding severance, asset-impairment and
other associated costs, second-quarter adjusted EBITDA is expected
to improve from first-quarter levels, due to the full realization
of savings from recent cost-reduction efforts, plus additional
benefit from the transfer of acoustical components to Vietnam and
automotive components to China and overall improved plant
loading.
For the foreseeable future, Technitrol believes it will continue
producing sufficient EBITDA and/or free cash flows to remain
compliant with the covenants of its amended debt agreement. To
reduce its indebtedness as expediently as possible, the company
will continue:
- consolidating both electronic
and electrical component production into locations where it can be
done most efficiently;
- committing capital to product
lines serving markets with high growth potential;
- divesting assets, where
appropriate, such as the microelectromechanical systems (MEMS)
business and possibly the Electrical Contact Products Group (AMI
Doduco);
- completing the transfer of
automotive electronics and former Sonion operations to low-cost
production locations in China and Vietnam; and
- rigorously managing working
capital.
Separately, Technitrol announced that its board of directors has
declared a quarterly shareholder dividend to $0.025 per common
share, an amount equal to that declared in the previous quarter,
payable July 17, 2009 to shareholders of record on July 3,
2009.
Cautionary Note
Statements in the above report are �forward-looking� within the
meaning of the Private Securities Litigation Reform Act of 1995 and
involve a number of risks and uncertainties. Actual results may
differ materially due to the risk factors listed from time to time
in Technitrol�s SEC reports including, but not limited to, those
discussed in the company�s 10-K report for the year ended December
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).� All such risk factors are incorporated into this
report by reference as though set forth in full. This report should
be read in conjunction with item 1a of the 10-K report.
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.
Investors: Technitrol�s quarterly conference call will take
place on Monday, May 4, 2009 at 5:00 p.m. Eastern Time. The dial-in
number is (412) 858-4600. Also, the call will be broadcast live
over the Internet. Visit www.technitrol.com. On-demand Internet and
telephone replay will be available beginning at 7:00 p.m. on May 4,
2009 and concluding at midnight, May 11, 2009. For telephone
replay, dial (412) 317-0088 and enter access code 374010#. For
Internet replay, use the link from our home page mentioned
above.
� �
CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)
(in thousands, except per-share amounts) Quarter Ended
3/27/2009 3/28/2008 � Net sales $ 182,207
$ 274,004 Cost of goods sold �
146,741 � �
217,789 � Gross profit 35,466 56,215 Selling, general
and administrative expenses 32,899 40,373 Severance, impairment and
other associated costs �
77,315 � �
1,965
� Operating (loss) profit (74,748 ) 13,877 � Interest (expense),
net (4,985 ) (2,086 ) Other income, net �
8,914 � �
3,977 �
(Loss) earnings from continuing
operations before income taxes and non-controlling interest
(70,819 ) 15,768 Income taxes �
(129 ) �
521 �
Net (loss) earnings from
continuing operations before non-controlling interest
(70,690 ) 15,247 Net loss from discontinued operations �
(3,870 ) �
(429
)
Net (loss) earnings before
non-controlling interest
(74,560 ) 14,818
Net (loss) earnings attributable
to non- controlling interest
�
(12 ) �
81 � Net (loss)
earnings attributable to Technitrol, Inc. (74,548 ) 14,737 � �
AMOUNTS ATTRIBUTABLE TO TECHNITROL, INC. � Net (loss) earnings from
continuing operations (70,678 ) 15,166 Net loss from discontinued
operations �
(3,870 ) �
(429
) Net (loss) earnings attributable to Technitrol, Inc.
(74,548 ) 14,737 � �
Basic (loss) earnings per share
from continuing operations
(1.73 ) 0.37
Basic (loss) per share from
discontinued operations
�
(0.10 ) �
(0.01
) Basic (loss) earnings per share (1.83 ) 0.36 �
Diluted (loss) earnings per share
from continuing operations
(1.73 ) 0.37
Diluted (loss) per share from
discontinued operations
�
(0.10 ) �
(0.01
) Diluted (loss) earnings per share (1.83 ) 0.36 �
Weighted average common and
equivalent shares outstanding
40,809 40,836 � � � BUSINESS SEGMENT INFORMATION (UNAUDITED) (in
thousands) Quarter Ended
3/27/2009
3/28/2008 Net sales Electronic components
$
123,583
$ 170,016 Electrical contact products �
58,624 � �
103,988 Total net sales 182,207 274,004 � Operating
(loss) profit Electronic components (73,218 ) 8,067 Electrical
contact products �
(1,530 ) �
5,810 Total operating (loss) profit (74,748 ) 13,877 �
� � FINANCIAL POSITION (UNAUDITED) (in thousands, except per-share
amounts)
3/27/2009 12/26/2008 � � Cash
and equivalents $ 32,870 $ 41,401 Trade receivables, net 123,731
128,010 Inventories 104,422 127,074 Other current assets 45,368
58,568 Fixed assets 129,741 152,731 Other assets �
186,507 � �
262,127 Total assets 622,639
769,911 Current position of long-term debt 21,800 17,189 Accounts
payable 58,125 75,511 Accrued expenses 75,641 86,477 Long-term debt
318,500 326,000 Other long-term liabilities �
55,803 �
�
56,602 Total liabilities 529,869 561,779 Equity
92,770 208,132 � � NON-GAAP MEASURES (UNAUDITED) (in thousands
except per-share amounts) � � 1. Adjusted EBITDA
Quarter
Ended 3/27/09 12/26/08
3/28/08 � Net (loss) earnings attributable to
Technitrol, Inc. $ (74,548 ) $ (295,321 ) $ 14,737 Net loss from
discontinued operations 3,870 171 429
Net (loss) earnings attributable
to non-controlling interest
(12
)
140
81
Income taxes (129 ) (16,881 ) 521 Interest expense, net 4,985 4,291
2,086 Other income (8,914 ) (411 ) (3,977 ) Depreciation and
amortization �
9,764 � �
11,648 � �
10,013 � EBITDA (64,984 ) (296,363 ) 23,890
Severance, impairment and other
associated costs
77,315
315,910
1,965
Other adjustments: impact of
purchase accounting adjustments
�
--
� �
--
� �
1,875
� Adjusted EBITDA 12,331 19,547 27,730 � � 2. Net (loss) earnings
per diluted share excluding severance, impairment and other
associated costs and other adjustments
Quarter Ended
3/27/09 �
12/26/08 �
3/28/08
� Net (loss) earnings per diluted share $ (1.83 ) $ (7.24 ) $ 0.36
Diluted loss per share from
discontinued operations
0.10 0.00 0.01
After-tax severance, impairment
and other associated costs, per share
1.86 7.29 0.04
Other adjustments: amortization of
an amended credit facility�s fees, purchase accounting adjustments,
accelerated depreciation and impact of settlement of foreign
exchange forward contracts, per share
�
0.02 � �
-- � �
(0.05
)
Net earnings per diluted share
excluding severance, impairment and other associated costs and
other adjustments
0.15 0.05 0.36 � � 3. Segment (loss) operating profit excluding
severance, impairment and other associated costs, purchase
accounting adjustments and accelerated depreciation �
Quarter
Ended 3/27/09 �
12/26/08 �
3/28/08 � Electronic components operating (loss)
profit $ (73,218 ) $ (306,712 ) $ 8,067
Pre-tax severance, impairment and
other associated costs
77,035 314,290 1,965
Pre-tax impact of purchase
accounting adjustments and accelerated depreciation
�
--
� �
--
� �
2,110
Electronic components operating
profit, excluding severance, impairment and other associated costs,
purchase accounting adjustments and accelerated depreciation
3,817 7,578 12,142 �
Electrical contact products
operating (loss) profit
(1,530 ) (1,299 ) 5,810
Pre-tax severance, impairment and
other associated costs
�
281
� �
1,620
� �
--
Electrical contact products
operating (loss) profit, excluding severance, impairment and other
associated costs
(1,249 ) 321 5,810 �
1. Adjusted EBITDA (net income plus income taxes, depreciation
and amortization, excluding interest and other expense/income and
excluding severance, impairment and other associated costs and
other adjustments), is not a measure of performance under
accounting principles generally accepted in the United States.
Adjusted EBITDA should not be considered a substitute for, and an
investor should also consider, net income, cash flow from
operations and other measures of performance as defined by
accounting principles generally accepted in the United States as
indicators of our profitability or liquidity. EBITDA is often used
by shareholders and analysts as an indicator of a company�s ability
to service debt and fund capital expenditures. We believe it
enhances a reader�s understanding of our financial condition,
results of operations and cash flow because it is unaffected by
capital structure and, therefore, enables investors to compare our
operating performance to that of other companies. We understand
that our presentation of adjusted EBITDA may not be comparable to
other similarly titled captions of other companies due to
differences in the method of calculation.
2,3. Based on discussions with investors and equity analysts, we
believe that a reader�s understanding of Technitrol�s operating
performance is enhanced by references to these non-GAAP measures.
Removing charges for severance, impairment and other associated
costs facilitates comparisons of operating performance among
financial periods and peer companies. These charges result
exclusively from production relocations and capacity reductions and
/ or restructuring of overhead and operating expenses to enhance or
maintain profitability in an increasingly competitive environment.
Impairment charges represent adjustments to asset values and are
not part of the normal operating expense structure of the relevant
business in the period in which the charge is recorded.
Copyright � 2009 Technitrol, Inc. All rights reserved. All brand
names and trademarks are properties of their respective
holders.
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