Technitrol Reports Q301 Results.Business Editors/Hi-Tech Writers PHILADELPHIA--(BUSINESS WIRE)--Oct. 22, 2001 Technitrol, Inc. (NYSE NYSE See: New York Stock Exchange : TNL TNL The Next Level (church; gaming clan) TnL Transform and Lighting (video games) TNL Technical Newsletter TNL target nomination list (US DoD) ) reported net earnings of $0.7 million, or $.02 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, excluding incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. provisions and other charges, for its third fiscal quarter ended September 28, 2001. Including these charges and provisions, the company lost $9.3 million, or $.28 per diluted share. Incremental charges and provisions included: $5.3 million, or $.16 per share, for work force reductions (which have occurred or will occur over the next several months) and facility closing; $3.5 million, or $.11 per share, for writing down the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of machinery to its disposal value; and $1.3 million, or $.03 per share, for slow-moving inventories. Per-share results reflect the two-for-one stock split that became effective November 27, 2000. Technitrol Chairman and Chief Executive Officer James M. Papada, III said, "These incremental charges and provisions result from our ongoing aggressive cost reduction activities in response to the industry-wide slowdown in markets served by the Electronic Components Segment (ECS See eComStation. ) and weakening in the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. markets of the Electrical Contact Noun 1. electrical contact - contact that allows current to pass from one conductor to another tangency, contact - (electronics) a junction where things (as two electrical conductors) touch or are in physical contact; "they forget to solder the contacts" Products Segment (ECPS ECPS Educational and Counselling Psychology and Special Education (University of British Columbia, Vancouver) ECPS Executive Committee on Peace and Security ECPS East Coast Primary School (Singapore) ) related to prevailing economic conditions. "These charges and provisions include an additional work force reduction of approximately 1,400 people, the closing of a redundant facility in Malaysia, employee furlough fur·lough n. 1. a. A leave of absence or vacation, especially one granted to a member of the armed forces. b. A usually temporary layoff from work. c. programs and further cuts in discretionary spending," Papada said. "These actions, in addition to those taken in the first six months of 2001, result in annual cost of sales and operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. eliminations of approximately $22 million. In addition, the company will keep capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. well below half what it was in 2000. Our goal is to maximize cash flows and keep our balance sheet strong as we continue to weather this storm and await an eventual market recovery." Consolidated third-quarter revenues were $100.8 million, down from $170.7 million in the same period last year, due mainly to the widely reported demand slump in the ECS's networking, telecommunications and power conversion markets and, to a lesser extent, worsening wors·en tr. & intr.v. wors·ened, wors·en·ing, wors·ens To make or become worse. Noun 1. worsening - process of changing to an inferior state decline in quality, deterioration, declension economic conditions in the ECPS's North American markets, also widely reported. Excluding incremental charges and provisions, earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. plus depreciation and amortization) were $6.0 million in the third quarter of 2001. Despite the poor market environment, Technitrol was cash flow positive in the third quarter and the first nine months of 2001. Excluding cash used to acquire Excelsus Technologies, Inc. in August, the company's cash position at September 28 improved from June 29, reflecting cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses of $21.0 million. Electronic Components Segment Third-quarter ECS sales were $50.9 million, compared with $116.2 million in the third quarter of 2000. Excluding incremental charges and provisions of $8.3 million for severance, plant closing and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of assets, and $1.3 million in inventory write-downs, the segment's operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. was $1.6 million, reflecting low overhead absorption and production inefficiencies associated with very low revenues, partly offset by a partial quarter of positive profit contributions from Excelsus, acquired in August of 2001. Total ECS costs eliminated by these charges and provisions amount to approximately $7.3 million annually. "Weak demand continues to affect Pulse's legacy markets - networking, telecom and power conversion - primarily in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Europe," Papada said. "Order entry rates remain very low by historical standards, on par with the last several months by recent standards and, happily, somewhat in excess of shipments. We are no longer experiencing the rampant cancellations prevalent in the first half of 2001, so we believe we are at or very close to the bottom of this down cycle and that order entry has stabilized. "We note modest dollar increases in our weekly booking rates during the third quarter, and it appears that Pulse's fourth-quarter volumes in legacy product lines will improve sequentially, but only modestly so in dollar terms," Papada said. "Though there are signs of life in the enterprise networking The networking infrastructure in a large enterprise with multiple computer systems and networks of different types is extraordinarily complex. Due to the myriad of interfaces that are required, much of what goes on has little to do with the real data processing of the payroll and orders. market, our customers remain unable, unwilling, or both to project the timing or speed of a sustained upturn in the information/communication sector. "In the meantime Adv. 1. in the meantime - during the intervening time; "meanwhile I will not think about the problem"; "meantime he was attentive to his other interests"; "in the meantime the police were notified" meantime, meanwhile , Pulse has taken additional actions to streamline its cost structure, increase market share, and broaden its market presence based on its current outlook," Papada said. "Our Thailand facility is closed, and our Malaysia factory will be closed by year's end, and production will be relocated to Pulse facilities in China and the Philippines, resulting in a considerably lower cost structure. Since the beginning of 2001, we reduced Pulse's worldwide work force 60%, including a 40% reduction in indirect labor and a more than 20% cut in selling, general and administrative head count. Finally, we continue to restrict variable spending to only what is necessary to meet critical business needs. "So far, we have accomplished these objectives without material disruption to our program development activities," Papada said. "In only the first nine months of 2001, Pulse recorded more design wins than in all of 2000. Design activity among our customers continues to be very strong, and Pulse intends to be on board with as many new programs as possible to maximize market share in the next up cycle. What remains is for our customers to begin introducing new products. "To broaden our customer base, Pulse's new designs extend beyond our legacy markets to automotive applications, including technology for the new 42-volt power standard, and consumer electronics, including video game consoles This is a list of video game consoles by the era they appeared in. Eras are named based on the dominant console type of the era (even though not all consoles of those eras are of the same type). Some eras are referred to based on how many bits a major console could process. ," Papada said. "In our traditional information and communication markets, our presence is extending beyond core network applications toward the end-user, particularly in broadband access See broadband and wireless broadband. technologies such as digital subscriber line See DSL. (communications, protocol) Digital Subscriber Line - (DSL, or Digital Subscriber Loop, xDSL - see below) A family of digital telecommunications protocols designed to allow high speed data communication over the existing copper telephone lines between end-users and (DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary ) and cable modem cable modem Modem used to convert analog data signals to digital form and vise versa, for transmission or receipt over cable television lines, especially for connecting to the Internet. subscriber equipment. The Excelsus acquisition positions us as the market leader in digital subscriber line (DSL) microfilters on the customer premises." Electrical Contact Products Segment In the ECPS, revenues were $50.0 million, compared with $54.5 million in the third quarter of 2000. Worsening market conditions in North America offset consistent European performance. U.S. industrial production continued to contract, consistent with end-market performance reported by ECPS customers, especially in markets related to machine tools and commercial/industrial controls. Weakening in non-residential construction, autos and other durable goods durable goods Goods, such as appliances and automobiles, that have a useful life over a number of periods. Firms that produce durable goods are often subject to wide fluctuations in sales and profits. Also called consumer durables. markets intensified in the third quarter. "To a much lesser degree than in North America, we have seen some business softening in Europe as well, mainly in our industrial markets," Papada said. "Consumer-driven sectors remain stable, with construction and appliance demand about flat with last year. Automotive sales are also flat, but demand for our products has grown due to the continued increase in vehicle features and functionality. The integration of Engelhard-CLAL operations is proving more difficult than we originally thought and is also adversely impacting current operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. . "The outlook is bright for AMI Doduco's component subassembly sub·as·sem·bly n. pl. sub·as·sem·blies An assembled unit forming a component to be incorporated into a larger assembly. business, which addresses the increasing sophistication so·phis·ti·cate v. so·phis·ti·cat·ed, so·phis·ti·cat·ing, so·phis·ti·cates v.tr. 1. To cause to become less natural, especially to make less naive and more worldly. 2. of vehicles and appliances, particularly the need for new-generation products that support the 42-volt vehicle electrical standard," Papada said. "We're experiencing a steady pipeline of design requests, and we continue with our effort to expand our European subassembly capabilities into North America." Before severance and other charges and provisions of $0.6 million, third-quarter 2001 ECPS operating profit declined to approximately breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations levels from $3.1 million a year ago, mainly due to operating losses in North America driven by very low capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. and the ongoing costs of Engelhard-CLAL integration activities in Europe. Annual employment costs eliminated by third-quarter charges in the ECPS were approximately $2.3 million. "The current cycle will run its course and markets will rebound, more predictably in electrical contacts than in our electronics business," Papada said. "While the near-term outlook in our North American markets is not good, we believe the succession of domestic interest rate cuts will eventually stimulate business investment, industrial production and consumer demand. "AMI Doduco has taken advantage of the slow period to streamline production operations and management functions," Papada said. "We substantially reduced our North American direct and indirect labor as well as SG&A costs in the third quarter, and we are on track to combine our facility in Delmont, Pennsylvania Delmont is a borough in Westmoreland County, Pennsylvania, United States. The population was 2,497 at the 2000 census. Geography Delmont is located at (40.412971, -79.571433)GR1. into our Export plant, and our Cedar Knolls, New Jersey factory into our Reidsville, North Carolina Reidsville is a city located in Rockingham County, North Carolina. As of the 2000 census, the city had a total population of 14,485. Originally established in the early 19th century as an outpost and stop on the stage line that ran between Salisbury, NC and Danville, VA plant by year's end, completing our consolidation from eight to five North American locations. In Europe, the consolidation of all mill and contact pre-material production into our Pforzheim, Germany facility is on schedule to be complete by year-end. Other consolidation opportunities in Europe are also under study." Income Taxes The incremental charges and provisions noted above resulted in an effective tax benefit of only 6.2% of the company's consolidated third-quarter pre-tax loss, because a significant portion of these charges and provisions occurred in locations where the company will no longer operate. In these jurisdictions, the company expects to have no future income to offset such charges, thus resulting in little to no income tax benefit. Cautionary Note The statements made by James M. Papada, III in the above report are "forward-looking" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 June 29, 2001 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: -- Changes in capital spending levels for information technology, which would affect demand for our electronic components; -- Changes in spending for construction and electrical infrastructure, or in demand for vehicles, appliances, machine tools and commercial controls, which affect sales of our electrical contact products; -- Inaccurate demand forecasts from our customers, on which we base our own forecasts and production planning; -- Changes in incoming orders or in lead times to delivery requested by customers; -- Other changes in markets or economic conditions that may affect product demand or financing terms; -- Rapid technological change that could cause obsolescence of or reduction in demand for our products; -- Fluctuations in the price of our products; -- The timing of our customers' product introductions; -- Changes in gross margin due to sales mix sales mix See product mix. , method of distribution or the acquisition of businesses with lower-margin or higher-margin product lines; -- The capacity and efficiency of our manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. ; -- Our ability to obtain sufficient quantities of raw materials; -- Our level of success in integrating acquisitions; -- Political, regulatory and currency risks associated with operating in foreign countries; -- Strains on our operations, information systems and human resources associated with rapid growth; -- Information technology issues related to our computer systems or those of our suppliers or customers; and -- Legal liabilities or changes in liabilities unknown to us at the present time. Based in Philadelphia, Technitrol is a worldwide producer of electronic components, electrical contacts and assemblies and other precision-engineered parts and materials for manufacturers of networking, broadband/Internet access, telecommunications and computer equipment, electrical switching devices, and other products. For more information, visit Technitrol's Web site at http://www.technitrol.com. Investors: Technitrol's quarterly conference call will take place today at 5:00 p.m. Eastern Time. The dial-in number is (612) 332-0636. 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 9:00 p.m. today and concluding at midnight, October 29, 2001. For telephone replay, dial 320-365-3844 and enter access code 603905.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per-share amounts)
Quarter Ended Nine Months Ended
9/28/01 9/29/00 9/28/01 9/29/00
------------------------------------------
Net sales $100,846 $170,674 $370,925 $486,553
Cost of goods sold (a) 78,693 102,125 273,624 301,321
Selling, general and
administrative
expenses (a) 23,732 33,863 75,753 97,133
Restructuring and
other non-recurring
items (a) 8,808 -- 13,014 3,305
------ ------- ------- -------
Operating profit (loss) (10,387) 34,686 8,534 84,794
Interest and other
income, net 486 296 2,509 1,036
------- ------- ------- -------
Net earnings (loss)
before taxes (9,901) 34,982 11,043 85,830
Income taxes (benefit) (611) 7,198 3,798 16,330
------- ------- ------- -------
Net earnings (loss) (9,290) 27,784 7,245 69,500
Earnings (loss) per
share: Basic (0.28) .85 0.22 2.14
Diluted (0.28) .84 0.22 2.12
Weighted average
common and equivalent
shares outstanding 33,655 32,970 33,200 32,754
Per-share amounts reflect the two-for-one stock split effective
November 27, 2000.
BUSINESS SEGMENT INFORMATION (UNAUDITED)
(in thousands)
Quarter Ended Nine Months Ended
9/28/01 9/29/00 9/28/01 9/29/00
----------------------------------------
Net sales
Electronic Components $50,885 $116,151 $197,870 $313,542
Electrical Contact
Products 49,961 54,523 173,055 173,011
------ -------- ------- -------
Total net sales 100,846 170,674 370,925 486,553
Operating profit (loss)
Electronic Components (1,616) 31,556 14,515 78,546
Electronic Components
Segment Restructuring
and other non-recurring
items (a) (8,267) -- (12,473) --
Electrical Contact
Products 37 3,130 7,033 9,553
Electrical Contact
Products Segment
restructuring and
other non-recurring
items (541) -- (541) (3,305)
------ -------- ------- -------
Total operating
profit (loss) (10,387) 34,686 8,534 84,794
(a) Year-to-date 2001 numbers reflect re-classified non-recurring
costs from the first quarter
FINANCIAL POSITION
(in thousands, except per-share amounts)
9/28/01
(unaudited) 12/29/00
--------- --------
Cash and equivalents $171,244 $162,631
Other current assets 163,651 206,103
Fixed assets 89,986 92,398
Other assets 155,827 59,639
Total assets 580,708 520,771
Current liabilities 115,210 138,337
Long-term liabilities 129,395 58,004
Total liabilities 244,605 196,341
Shareholders' equity 336,103 324,430
Net worth per share 9.98 9.76
Shares outstanding 33,691 33,237
Per-share amounts reflect the two-for-one stock split effective
November 27, 2000.
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