Exhibit 99
Technitrol Posts Strong Q204 Results, Updates FY04 Sales,
Earnings Guidance
Technitrol, Inc. (NYSE:TNL) reported net earnings for its second
fiscal quarter ended June 25, 2004, according to U.S. Generally
Accepted Accounting Principles (GAAP), of $9.3 million, or $0.23 per
diluted share, including after-tax severance and asset-impairment
expenses totaling $1.1 million, or $0.03 per share, and a one-time
gain of $1.1 million, or $0.03 per share, related to the sale of
equity rights arising from the 2001 acquisition of the Engelhard-CLAL
electrical contacts business. (Note: Analysts' earnings per share
estimates published on First Call exclude these expenses and the gain.
See the attached table, "Non-GAAP Measures" reconciling "adjusted net
earnings per diluted share" to GAAP net earnings per diluted share.)
By comparison, GAAP net earnings were $5.8 million, or $0.14 per
diluted share, in the previous quarter and $6.0 million, or $0.15 per
share, in the second quarter of 2003, including after-tax severance
and asset-impairment expenses of $1.9 million, or $0.05 per share and
$0.4 million, or $0.01 per share, in each period, respectively.
Technitrol's consolidated second-quarter 2004 revenues were $147.0
million, compared with $139.6 million in the previous quarter and
$125.7 million in the second quarter of 2003. Both Pulse and AMI
Doduco contributed to the sequential-quarter revenue increase.
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 $17.0 million in the
second quarter of 2004, compared with $16.5 million in the previous
quarter and $14.4 million in the second quarter of 2003. These numbers
exclude severance and asset-impairment expenses.
Net cash at June 25, 2004 was $147.5 million (cash and equivalents
of $154.1 million less debt of $6.6 million), a decrease of
approximately $1.9 million from March 26, 2004 due to positive
operating cash flow offset by Pulse's purchase of a plastics
fabrication operation in the People's Republic of China in June of
2004. This purchase is consistent with Pulse's plan to internalize
production of certain key raw materials. Technitrol's capital spending
in the second quarter of 2004 was approximately $1.7 million.
Pre-tax severance and asset-impairment expenses of approximately
$1.5 million included in second-quarter results relate mainly to
severance expense and overhead reduction efforts at AMI Doduco, which
are a continuation of a program initiated in the prior quarter. The
previously indicated $0.3 million in facility exit costs that Pulse
originally expected in the second quarter related to a facility in
China that has continued to operate as a result of
higher-than-expected unit demand thus far in 2004. Accordingly, this
action has been deferred.
Pulse
Pulse designs and manufactures a wide variety of passive
magnetics-based electronic components and modules. Revenues for the
second quarter were $81.5 million, 5.1% above $77.5 million in the
previous quarter and 13.5% above the second quarter of 2003.
Pulse's networking, telecommunications, power conversion and
military/aerospace markets all displayed strength during the quarter.
Growth in end-user demand for faster networks and voice-over-Internet
capabilities drove shipments of networking components. End products,
moreover, are increasingly requiring modules that integrate
noise-filtering magnetics with connectors in single or multi-port
configurations. Pulse remains at the forefront of this technology
movement in close collaboration with Taiwan-based connector maker Full
Rise Electronics Ltd. (FRE), in which Technitrol increased its
ownership interest in July of 2004 from 28% to approximately 48%.
Under its existing agreement with FRE, the company maintains its
option to increase its interest to 51%. In the telecommunications
market, Pulse has benefited from long-deferred wireline and wireless
carrier spending on infrastructure, along with aggressive high-speed
Internet service deployment and strong subscriber growth worldwide.
Sales of power conversion components continued to beat expectations,
reflecting strong communications infrastructure markets and the
continued success of Pulse's efforts to design for a variety of
consumer electronics applications.
As in the first quarter, sales of television transformers defied
normal seasonal slowness due to the timing of widely viewed sporting
events in the spring and summer of 2004. However, shipments of
television components were slightly lower than in the first quarter
due to softening demand and order push-outs. Second-quarter sales in
Pulse's consumer division were approximately 30% stronger than in
2003, due not only to lack of normal seasonal slowness, but also more
positive consumer sentiment compared with a year ago and, to a lesser
extent, the positive translation effect in the 2004 period of a
stronger euro, on average, relative to the dollar.
Pulse's GAAP operating profit was $9.8 million, compared with $8.7
million in the previous quarter (which included pre-tax severance and
asset impairment expense of $0.7 million related to Pulse's San Diego
headquarters consolidation). Year-over-year, second-quarter operating
profit grew 39.7% from $7.0 million in the second quarter of 2003
(which included pre-tax severance and asset-impairment expenses of
$0.3 million), on 13.5% revenue growth, illustrating the significant
operating leverage that has resulted from Pulse's previous
consolidation and productivity improvement actions.
AMI Doduco
AMI Doduco manufactures a full range of electrical contacts,
contact materials and contact assemblies. Second-quarter revenues
reflected economic improvements across all end-markets, especially in
North America, led by continued strength in residential construction.
Also evident were the favorable effects of AMI Doduco's efforts to
improve revenue streams and increase market share. Shipments were
$65.5 million for the quarter, up 5.6% (8.2% on a constant-euro basis)
from $62.1 million in the previous quarter. Year over year, revenues
grew 21.5% (16.8% on a constant-euro basis). In the second quarter of
2004, the euro, the functional currency in AMI Doduco's largest
geographic market, was 3.6% weaker and 6.0% stronger, on average,
versus the dollar than in the previous and year-ago quarters,
respectively. Both favorable revenue comparisons were affected also by
higher prices for precious metals and other raw materials, whose costs
are generally passed on to customers.
AMI Doduco's second-quarter GAAP operating loss, including the
$1.5 million pre-tax severance expenses mentioned above, was $0.1
million, compared with $1.1 million in the previous quarter and a
profit of $0.8 million in the second quarter of 2003. Excluding
severance and asset-impairment expense in all periods, second-quarter
2004 operating profit was $1.4 million, up 28.6% from $1.1 million in
the first quarter of 2004 and 48.3% from $0.9 million in the second
quarter of 2003. (See "Non-GAAP Measures" table reconciling "Segment
operating profit (loss), excluding severance and asset-impairment
expense" with GAAP operating profit.). On a constant-euro basis,
operating profit, excluding severance and asset-impairment expenses,
grew 37.3% from the first quarter of 2004 and 35.0% from the second
quarter of 2003. AMI Doduco's second-quarter profitability, though
negatively impacted by throughput issues in North America resulting
from integration of factory consolidation in North America, reflects
significant progress made in improving plant utilization, reducing
manufacturing costs and implementing lean processes.
AMI Doduco's business continues to grow month by month in the
People's Republic of China. Quoting and product design activities have
been accelerating as the 2004 expansion of the Tianjin facility's
capacity and capabilities progresses. This expansion will continue for
the next several quarters in accordance with AMI Doduco's China growth
plan. The rapidly expanding East Asian market for Western-engineered
electrical contact alloys, rivets, stampings and subassemblies is
expected to remain a principal engine of growth at AMI Doduco for the
foreseeable future.
2004 Outlook
Because market conditions in the second quarter of 2004 were much
stronger than anticipated, and consistent with published reports from
customers, competitors and peers, Technitrol expects some weakening
for the remainder of the year. Thus, despite the very strong
second-quarter results, only modest revisions to the company's earlier
revenue and earnings range forecasts for fiscal 2004 are appropriate
at this time.
Revenues for the year are currently expected to be in the range of
$563 million to $570 million, comprising $318 million to $320 million
at Pulse and, based on a dollar-to-euro exchange rate of $1.15 used in
the company's previous outlook, $245 million to $250 million at AMI
Doduco.
These estimates assume third-quarter revenues at Pulse to be flat
with or slightly below second-quarter levels, based on expected
slowness in the consumer division after the early 2004 demand surge in
the European television market and, as has been publicly reported by
key customers and peer companies, some inventory swelling in the
overall electronics supply chain. The forecast also assumes revenues
at AMI Doduco will remain at or close to the second-quarter run rate
for the remainder of the year, reflecting normal seasonal slowness
during summer and toward year end, offset by expected success in the
continuing drive to grow revenues and market share.
Before severance and asset-impairment expenses, Technitrol expects
diluted earnings per share for fiscal 2004 to be between $0.89 and
$0.91, up 27%-30% year-over-year on revenue growth of 10%-12%. These
estimates reflect progressively increasing returns from AMI Doduco's
revenue and margin enhancement actions, the continued effects of
stronger revenues and increased operating leverage at Pulse, and
continued recovery in AMI Doduco's markets.
Severance and asset-impairment expenses will be incurred over the
remainder of 2004 as Technitrol, Pulse and AMI Doduco continue
strengthening their competitive positions by eliminating costs and
streamlining worldwide operations. Pulse is expected to incur $0.6
million in production relocation expense in the fourth quarter. AMI
Doduco anticipates $1.2 million in third-quarter severance and asset
impairment expense related to the closure of its France facility and
relocation of its production to Germany. These pre-tax estimates are
approximate, and their timing, magnitude and impact on future costs
and expenses are subject to revision.
The company estimates that these second-half actions, along with
the second-quarter severance expense in France, will result in annual
pre-tax savings of $2.5 million in cost of goods sold and $0.5 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.
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-Q report for the
quarter ended March 26, 2004 in Item 2 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.
-- Public health epidemics such as severe acute respiratory
syndrome may disrupt operations in affected regions and affect
operating results.
-- The unavailability of insurance against certain business risks
may adversely affect our future operating results.
-- Environmental liability and compliance obligations may affect
our operations and 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, July 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 July 19 and
concluding at midnight, July 26, 2004. For telephone replay, dial
(412) 317-0088 and enter access code 26123#.
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*T
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per-share amounts)
Quarter Ended Six Months Ended
6/25/2004 6/27/2003 6/25/2004 6/27/2003
---------- ---------- ---------- ----------
Net sales $146,970 $125,706 $286,577 $248,250
Cost of goods sold 107,378 92,888 208,886 185,011
---------- ---------- ---------- ----------
Gross profit 39,592 32,818 77,691 63,239
Selling, general and
administrative expenses 28,436 24,558 56,089 48,292
Severance and asset-
impairment expenses 1,484 505 4,341 4,398
---------- ---------- ---------- ----------
Operating profit 9,672 7,755 17,261 10,549
Interest expense, net (153) (257) (305) (544)
Other income (expense), net 1,290 (445) 576 (485)
Equity earnings in
minority-owned investments 257 233 392 505
---------- ---------- ---------- ----------
Net earnings before taxes 11,066 7,286 17,924 10,025
Income taxes 1,792 1,266 2,885 1,371
---------- ---------- ---------- ----------
Net earnings 9,274 6,020 15,039 8,654
Basic earnings per share 0.23 0.15 0.37 0.22
Diluted earnings per share 0.23 0.15 0.37 0.22
Weighted average common and
equivalent shares
outstanding 40,408 40,160 40,364 40,147
BUSINESS SEGMENT INFORMATION (UNAUDITED)
(in thousands)
Quarter Ended Six Months Ended
6/25/2004 6/27/2003 6/25/2004 6/27/2003
---------- ---------- ---------- ----------
Net sales
Pulse $81,455 $71,766 $158,993 $139,646
AMI Doduco 65,515 53,940 127,584 108,604
---------- ---------- ---------- ----------
Total net sales 146,970 125,706 286,577 248,250
Operating profit (loss)
Pulse 9,772 6,997 18,442 12,553
AMI Doduco (99) 758 (1,180) (2,004)
---------- ---------- ---------- ----------
Total operating
profit 9,673 7,755 17,262 10,549
FINANCIAL POSITION
(in thousands, except per- share amounts)
6/25/2004 12/26/2003
----------- -----------
(unaudited)
Cash and equivalents $154,053 $143,448
Trade receivables, net 103,929 96,353
Inventories 70,623 63,086
Other current assets 17,460 17,435
Fixed assets 83,033 88,049
Other assets 182,316 180,523
----------- -----------
Total assets 611,414 588,894
Current portion of long-
term debt 143 127
Accounts payable 46,958 46,677
Accrued expenses 80,600 73,748
Long-term debt 6,445 6,710
Other long-term liabilities 13,411 12,882
----------- -----------
Total liabilities 147,557 140,144
Shareholders' equity 463,857 448,750
Net worth per share 11.48 11.14
Shares outstanding 40,423 40,279
NON-GAAP MEASURES (UNAUDITED)
(in thousands except per-share amounts)
1. EBITDA
Quarter Ended
--------------------------
6/25/04 3/25/04 6/27/03
-------- -------- --------
Net earnings $9,274 $5,765 $6,020
Income taxes 1,792 1,093 1,266
Interest expense, net 153 152 257
Other expense (income) (1,290) 714 445
Depreciation and amortization 5,829 6,096 6,165
Equity method investment earnings (257) (135) (233)
-------- -------- --------
EBITDA 15,501 13,685 13,920
Severance and asset-impairment expenses 1,484 2,857 505
-------- -------- --------
EBITDA excluding severance and asset-
impairment expenses 16,985 16,542 14,425
2. Net earnings per diluted share excluding severance and
asset-impairment expense and non-operating gains
Quarter Ended
--------------------------
6/25/04 3/25/04 6/27/03
-------- -------- --------
Net earnings per diluted share, GAAP $0.23 $0.14 $0.15
After-tax severance and asset-impairment
expense, per share 0.03 0.05 0.01
Gain on sale of equity rights (0.03) -- --
-------- -------- --------
Adjusted net earnings per diluted share 0.23 0.19 0.16
3. Segment operating profit (loss) excluding severance and
asset-impairment expense
Quarter Ended
--------------------------
6/25/04 3/25/04 6/27/03
-------- -------- --------
Pulse operating profit, GAAP $9,772 $8,670 $6,997
Pre-tax severance and asset-impairment
expense 21 715 343
-------- -------- --------
Pulse operating profit, excluding severance
and asset-impairment expense 9,793 9,385 7,340
AMI Doduco operating profit (loss), GAAP (99) (1,081) 758
Pre-tax severance and asset-impairment
expense 1,463 2,142 162
-------- -------- --------
AMI Doduco operating profit, excluding
severance and asset-impairment expense 1,364 1,061 920
*T
1. EBITDA (net income plus income taxes, excluding interest and
other expense or income, 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 and unusual gains
or losses 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.
David Stakun, (215) 355-2900