Exhibit 99
Technitrol Posts First-Quarter 2004 Results, Raises Sales, Earnings Guidance
PHILADELPHIA--(BUSINESS WIRE)--April 19, 2004--Technitrol, Inc.
(NYSE:TNL) reported net earnings for its first fiscal quarter ended
March 26, 2004, according to U.S. Generally Accepted Accounting
Principles (GAAP), of $5.8 million, or $0.14 per diluted share,
including after-tax severance and asset-impairment expenses totaling
$1.9 million, or $0.05 per share. (Note: Analysts' earnings per share
estimates published on First Call do not include these expenses. See
the attached table, "non-GAAP Measures" reconciling "net earnings per
diluted share, excluding severance and asset-impairment expense" to
GAAP net earnings (loss) per diluted share.)
By comparison, GAAP net loss was $3.1 million in the previous
quarter, or $0.08 per diluted share, including after-tax severance and
asset-impairment expenses of $11.9 million, or $0.29 per share. In the
first quarter of 2003, GAAP net earnings were $2.6 million, or $0.07
per diluted share, including after-tax severance and asset-impairment
expenses of $3.0 million, or $0.08 per share.
Technitrol's consolidated first-quarter 2004 revenues were $139.6
million, compared with $134.7 million in the previous quarter and
$122.5 million in the first quarter of 2003. Driving the
sequential-quarter increase were strengthening revenues at AMI Doduco.
Earnings before interest, taxes, depreciation and amortization
(EBITDA, defined as operating profit plus depreciation and
amortization, a non-GAAP measure reconciled with GAAP operating profit
in the attached "Non-GAAP Measures" table) were $16.5 million in the
first quarter of 2004, compared with $15.7 million in the previous
quarter and $12.3 million in the first quarter of 2003. These numbers
exclude severance and asset-impairment expenses.
Net cash at March 26, 2004 was $149.4 million (cash and
equivalents of $155.9 million less debt of $6.5 million), up
approximately $12.8 million from December 26, 2003. Capital spending
in the first quarter of 2004 was approximately $2.1 million.
First-quarter severance and asset-impairment expenses relate to
Technitrol's ongoing effort to optimize business performance in an era
of low-cost competition. On a pre-tax basis, they amounted to
approximately $2.9 million, comprising $0.7 million in expenses for
closing Pulse's office and warehouse in Carlsbad, California and
consolidating personnel into Pulse's San Diego headquarters, and $2.1
million at AMI Doduco, mainly related to the elimination of overhead
positions in Germany. Technitrol expects first-quarter Pulse and AMI
Doduco actions to result in annual pre-tax savings of approximately
$2.5 million in costs of goods sold and $0.2 million in selling,
general and administrative (SG&A) expense. Technitrol expects to begin
realizing these savings in the second quarter of 2004.
Pulse
Pulse designs and manufactures a wide variety of passive
magnetics-based electronic components and modules. In the first
quarter of 2004, Pulse met or exceeded internal forecasts across its
legacy product divisions (networking, telecommunications, power
conversion and military/aerospace) as well as its consumer division.
First-quarter revenues were $77.5 million, 2.6% below $79.6 million in
the previous quarter due to normal seasonal effects. These effects
were much less pronounced than expected, however, especially in
markets for power conversion components and television transformers.
Pulse's first-quarter 2004 revenues increased 14.2% from $67.9 million
in the first quarter of 2003.
Shipments of Pulse components for voice-over-Internet, high-speed
networking and high-speed Internet access applications remained
strong, even in a seasonally slow quarter. Revenues from power
conversion components exceeded expectations by a wide margin,
reflecting Pulse's effort to penetrate consumer-driven as well as
infrastructure equipment markets. As expected, sales of television
transformers were seasonally lower than in the previous quarter, but
more than 20% higher than a year ago, when fears of war and sagging
consumer confidence hurt television sales in Europe. Normally slow in
the first half of the year, European demand for televisions has been
ramping up earlier than expected in 2004, driven by the approaching
Summer Olympics and European soccer championships.
Pulse's GAAP operating profit, including the $0.7 million pre-tax
Carlsbad expense, was $8.7 million in the first quarter, compared with
$7.0 million in the previous quarter and $5.6 million in the first
quarter of 2003. Excluding severance and asset-impairment expense in
all periods, first-quarter operating profit of $9.4 million (12.1% of
revenues), compared with $10.0 million in the previous quarter and 6.2
million in the first quarter of 2003. (See "Non-GAAP Measures" table
reconciling "Segment operating profit, excluding severance and
asset-impairment expense" with GAAP operating profit.) Further
adjusting the fourth-quarter 2003 result for the $0.7 million
full-year 2003 reduction in consumer division depreciation expense
taken in, but not pertaining to, that quarter, operating profit was
$9.4 million (11.8% of revenues). On comparable terms, Pulse's
first-quarter operating margin gained approximately 30 basis points
sequentially from the fourth quarter, despite the 2.6% seasonal
decline in revenues. The progressive improvement in Pulse operating
profit and operating margin reflects both improving market demand and
the increasing effects of previous cost-elimination actions.
AMI Doduco
AMI Doduco manufactures a full range of electrical contacts,
contact materials and contact assemblies. Revenues for the first
quarter of 2004 were $62.1 million, up 12.5% from $55.2 million in the
previous quarter and 13.6% from $54.7 million in the first quarter of
2003. Affecting both favorable comparisons have been higher prices for
precious metals and base metals, whose costs are generally passed on
to customers, and the favorable translation effect of a stronger euro,
the functional currency in AMI Doduco's largest geographic market. In
the first quarter of 2004, the euro was, on average, 5.3% and 16.6%
stronger versus the dollar than in the previous and year-ago quarters,
respectively.
In North America, market conditions improved markedly,
particularly in the long-depressed commercial and industrial markets
which are driven principally by capital spending. More importantly,
AMI Doduco's initiatives to improve North American revenue streams and
market share continue to be successful. The European business also
held its own in the first quarter, despite overall market sluggishness
and continued softness in the automotive sector, which is expected to
persist into the second half of 2004.
AMI Doduco's first-quarter GAAP operating loss, including the $2.1
million pre-tax severance and relocation expenses mentioned above, was
$1.1 million, compared with $0.5 million in the previous quarter and
$2.8 million in the first quarter of 2003. Excluding severance and
asset-impairment expense in all periods, first-quarter 2004 operating
profit was $1.1 million, compared with $0.1 million in the fourth
quarter of 2003 and $0.5 million in the first quarter of 2003. (See
"Non-GAAP Measures" table.) Although AMI Doduco's profitability
continues to be negatively affected by lower-than-optimal volumes,
first-quarter results reflect the significant progress made in
strengthening the revenue base, increasing market share, improving
plant utilization, lowering manufacturing costs and implementing lean
processes throughout the business. March 2004 was the strongest
operating month at AMI Doduco in several years. Much more remains to
be accomplished in these areas, but results thus far indicate
significant further upside potential to profitability.
Sales in AMI Doduco's operation in the People's Republic of China
(where products are manufactured for consumption in East Asia) hit a
record in March 2004. This business continues to aggressively add
capacity and capabilities to meet the needs of longstanding global
customers operating in China as well as emerging local manufacturers
for Western-engineered electrical contact products. AMI Doduco is the
only China-based source for these advanced types of products. Demand
for contact alloys, rivets, stampings and subassemblies is expected to
continue growing, as multinationals increase their presence in the
region and local markets for electrical goods continue to expand
rapidly.
2004 Outlook
As a result of stronger-than-expected market conditions and
customer demand trends during the first quarter, Technitrol is
revising its revenue and earnings outlook for fiscal 2004. Revenues
for the year are currently expected to be in the range of $566 million
and $574 million, comprising $318 million to $321 million at Pulse (up
8% to 9% from 2003) and, based on euro-to-dollar exchange rates in
effect on March 26, 2004, $248 million to $253 million at AMI Doduco
(up 15% to 18% from 2003).
These estimates assume modest sequential-quarter revenue growth at
Pulse at least through the third quarter, spurred by steadily
increasing demand for legacy (networking, military/aerospace,
telecommunications and power conversion) components, offset somewhat
by soft demand for consumer division products in the second half of
the year. Contrary to normal seasonality, our customers are indicating
that demand in the European television market is likely to peak around
mid-2004 due to the timing of significant televised sporting events
during the summer. At AMI Doduco, sales volumes are expected to be
within several percent of first-quarter levels in the remaining three
quarters of the year, as an anticipated decline in the price of base
and precious metals is offset by expected continued success in AMI
Doduco's drive to grow revenues and market share.
Late in the second quarter, AMI Doduco may experience some
negative impact due to delayed shipments resulting from an April 16
fire at its Pforzheim, Germany facility. The fire destroyed
air-handling equipment used in certain mill activities, which AMI
Doduco believes will be restored to normal levels within several
weeks. Revenues from the late shipments are expected to be recovered
in the third quarter. Potential equipment-related or business
interruption losses, if any, are fully insured, and no material impact
on full-year operating results is expected.
Before severance and asset-impairment expenses, Technitrol expects
diluted earnings per share to be between $0.88 and $0.91, up 26%-30%
year-over-year on revenue growth of 11%-13%. These estimates reflect
progressively increasing returns from AMI Doduco's revenue and margin
enhancement actions, the effects of stronger revenues and increased
operating leverage at Pulse, and continued overall market recovery in
both businesses.
Severance and asset-impairment expenses will be incurred over the
remainder of 2004 as Technitrol, Pulse and AMI Doduco continue to
strengthen their competitive positions by eliminating costs and
streamlining worldwide operations. Over the second, third and fourth
quarters, Technitrol estimates that these actions will result in
incremental pre-tax charges totaling approximately $5.5 million,
resulting in annual pre-tax savings of $3.5 million in cost of goods
sold and $0.6 million in SG&A expense. The savings will be fully
reflected in 2005 operating results, and their progressive impact on
2004 results is included in the above earning-per-share outlook.
Pulse is expected to incur $0.3 million in facility exit costs in
the second quarter and $0.4 million in production relocation expense
in the fourth quarter. AMI Doduco anticipates severance expenses in
Germany of $0.9 million and $0.2 million in the second and fourth
quarters, respectively, plus $3.7 million in plant consolidation costs
in the third quarter. These pre-tax estimates are approximate, and
their timing, magnitude and impact on future costs and expenses are
subject to revision.
This outlook will be updated as the results of future quarters and
other events material to full-year revenues and earnings unfold. Prior
to public announcement of such updates by Technitrol, changes in
forecasts from equity analysts are unofficial and should be considered
with caution.
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 below as well as others
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, 2003 in Item 1 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)."
These risk factors include, but are not limited to, the following:
-- Cyclical changes in the markets we serve, including the recent
contraction, could result in a significant decrease in demand
for our products and reduce our profitability.
-- Reduced prices for our products may adversely affect our
profit margins if we are unable to reduce our costs of
production.
-- An inability to adequately respond to changes in technology
may decrease our sales.
-- If our inventories become obsolete, our future performance and
operating results will be adversely affected.
-- An inability to capitalize on our recent or future
acquisitions may adversely affect our business.
-- Integration of acquisitions into the acquiring segment may
limit the ability of investors to track the performance of
individual acquisitions and to analyze trends in our operating
results.
-- An inability to identify additional acquisition opportunities
may slow our future growth.
-- If our customers terminate their existing agreements, or do
not enter into new agreements or submit additional purchase
orders for our products, our business will suffer.
-- If we do not effectively manage our business in the face of
fluctuations in the size of our organization, our business may
be disrupted.
-- Uncertainty in demand for our products may result in increased
costs of production and an inability to service our customers.
-- A decrease in availability or increase in cost of our key raw
materials could adversely affect our profit margins.
-- Competition may result in lower prices for our products and
reduced sales.
-- Our backlog is not an accurate measure of future revenues and
is subject to customer cancellation.
-- Fluctuations in foreign currency exchange rates may adversely
affect our operating results.
-- Our international operations subject us to the risks of
unfavorable political, regulatory, labor and tax conditions in
other countries.
-- Shifting our operations between regions may entail
considerable expense.
-- Liquidity requirements could necessitate movements of existing
cash balances, which may be subject to restrictions or cause
unfavorable tax and earnings consequences.
-- Losing the services of our executive officers or our other
highly qualified and experienced employees could adversely
affect our business.
-- Environmental liability and compliance obligations may affect
our operations and results.
-- Public health epidemics such as severe acute respiratory
syndrome may disrupt operations in affected regions and affect
operating results.
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 data
networking, broadband/Internet access, consumer electronics,
telecommunications, 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
Monday, April 19, 2004 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 April 19 and
concluding at midnight, April 26, 2004. For telephone replay, dial
(412) 858-1440 and enter access code 320809.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per-share amounts)
Quarter Ended
3/26/2004 3/28/2003
---------- ----------
Net sales $139,607 $122,544
Cost of goods sold 101,508 92,123
---------- ----------
Gross profit 38,099 30,421
Selling, general and administrative expenses 27,653 23,734
Severance and asset-impairment expenses 2,857 3,893
---------- ----------
Operating profit 7,589 2,794
Interest expense, net (152) (287)
Other expense, net (714) (40)
Equity earnings in minority-owned investments 135 272
---------- ----------
Net earnings before taxes 6,858 2,739
Income taxes 1,093 105
---------- ----------
Net earnings 5,765 2,634
Basic earnings per share 0.14 0.07
Diluted earnings per share 0.14 0.07
Weighted average common and equivalent shares
outstanding 40,320 40,134
BUSINESS SEGMENT INFORMATION (UNAUDITED)
(in thousands)
Quarter Ended
3/26/2004 3/28/2003
---------- ----------
Net sales
Pulse $77,538 $67,880
AMI Doduco 62,069 54,664
---------- ----------
Total net sales 139,607 122,544
Operating profit (loss)
Pulse 8,670 5,556
AMI Doduco (1,081) (2,762)
---------- ----------
Total operating profit 7,589 2,794
FINANCIAL POSITION
(in thousands, except per-share amounts) 3/26/2004 12/26/2003
----------- -----------
(unaudited)
-----------
Cash and equivalents $155,932 $143,448
Trade receivables, net 96,194 96,353
Inventories 63,721 63,086
Other current assets 16,541 17,435
Fixed assets 82,160 88,049
Other assets 182,396 180,523
----------- -----------
Total assets 596,944 588,894
Current portion of long-term debt 108 127
Accounts payable 47,690 46,677
Accrued expenses 76,308 73,748
Long-term debt 6,413 6,710
Other long-term liabilities 12,923 12,882
----------- -----------
Total liabilities 143,142 140,144
Shareholders' equity 453,502 448,750
Net worth per share 11.24 11.14
Shares outstanding 40,342 40,279
NON-GAAP MEASURES (UNAUDITED)
(in thousands except per-share amounts)
1. EBITDA
Quarter Ended
---------------------------
3/26/04 12/26/03 3/28/03
-------- --------- --------
Net earnings (loss) $5,765 $(3,078) $2,634
Income taxes 1,093 168 105
Interest expense, net 152 123 287
Other expense (income) 714 (1) 40
Depreciation and amortization 6,096 5,561 5,628
Equity method investment (earnings) losses (135) 9,290 (272)
-------- --------- --------
EBITDA 13,685 12,063 8,422
Severance and asset-impairment expenses 2,857 3,655 3,893
-------- --------- --------
EBITDA excluding severance and asset-
impairment expenses 16,542 15,718 12,315
2. Net earnings per diluted share excluding severance and
asset-impairment expense
Quarter Ended
---------------------------
3/26/04 12/26/03 3/28/03
-------- --------- --------
(Per-diluted-share amounts)
Net earnings (loss), GAAP $0.14 $(0.08) $0.07
After-tax severance and asset-impairment
expense 0.05 0.06 0.08
Impairment charge to adjust equity
investment to market value -- 0.23 --
-------- --------- --------
Net earnings, excluding severance and
asset-impairment expense 0.19 0.21 0.15
3. Segment operating profit (loss) excluding severance and
asset-impairment expense
Quarter Ended
---------------------------
3/26/04 12/26/03 3/28/03
-------- --------- --------
Pulse operating profit, GAAP $8,670 $7,001 $5,556
Pre-tax severance and asset-impairment
expense 715 3,021 609
-------- --------- --------
Pulse operating profit, excluding
severance and asset-impairment
expense 9,385 10,022 6,165
AMI Doduco operating loss, GAAP (1,081) (499) (2,762)
Pre-tax severance and asset-impairment
expense 2,142 634 3,284
-------- --------- --------
AMI Doduco operating profit, excluding
severance and asset-impairment expense 1,061 135 522
1. EBITDA (net income plus income taxes, interest and other
expense, depreciation and amortization, excluding equity method
investment earnings and losses) is not a measure of performance under
accounting principles generally accepted in the United States. 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 other companies. We understand
that our presentation of 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 and asset impairment facilitates
comparisons of operating performance among financial periods and peer
companies. Severance 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 (C) 2004 Technitrol, Inc. All rights reserved. All brand
names and trademarks are properties of their respective holders.
CONTACT: Technitrol, Inc., Philadelphia
David Stakun, 215-355-2900