Technitrol Reports Fourth-Quarter and Full-Year 2001 Results
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PHILADELPHIA--(BUSINESS WIRE)--Jan. 21, 2002--Technitrol, Inc. (NYSE:TNL) reported net earnings of $0.7 million, or $.02 per diluted share, excluding provisions and one-time items, for its fourth fiscal quarter ended December 28, 2001.
After-tax provisions and one-time items include a provision for slow-moving inventory of approximately $5.6 million, or $.17 per share, and an after-tax charge of approximately $0.4 million, or $.01 per share, for additional severance and related expenses, both related to the prolonged global downturn in markets served by the Electronic Components Segment (ECS), and a gain of $0.6 million, or $.02 per share, on the sale of a factory building in the Electrical Contact Products Segment (ECPS). Including these items, net loss for the quarter was $4.8 million, or $.14 per diluted share.
Consolidated fourth-quarter revenues were $103.3 million, compared with $100.8 million in the previous quarter. Excluding provisions and charges, earnings before interest, taxes, depreciation and amortization (EBITDA, defined as operating profit plus depreciation and amortization) were $7.7 million in the fourth quarter of 2001.
For the year ended December 28, 2001, Technitrol's net earnings were $25.7 million, or $.77 per diluted share, before inventory provisions and restructuring and severance charges. Including these items, earnings for the year were $2.5 million, or $.07 per diluted share.
The company also announced that first-quarter 2002 results are expected to include charges of between $16 million and $19 million, or $.47-$.56 per diluted share, related to an impairment of ECPS goodwill according to the new accounting standard, ``Goodwill and Other Intangible Assets'' (FAS 142), and approximately $1.0 million after tax, or $.03 per share, for additional severance costs in the ECS related to ongoing cost-down activities. The goodwill impairment charge will be recorded as a cumulative effect of a change in accounting principle and will not impact operating profit or cash flow. The company does not expect to incur any further goodwill-related charges for the remainder of 2002.
``Excluding the effect of the change in accounting principle and continuing cost-down severance, we currently expect our first-quarter 2002 earnings to be comparable to the fourth quarter of 2001,'' said Technitrol Chairman and Chief Executive Officer James M. Papada, III. ``We continue to monitor market developments, and, if warranted, we will take further restructuring actions in 2002 as early as necessary to protect operating profits for the year.
``Growth in demand for our products will recover from the broad-based slowdown in Pulse's electronics markets and from the downturn in AMI Doduco's industrial markets,'' Papada said, ``and we are taking every step to ensure that we participate fully in that recovery. We do not, however, intend to be lulled into a false sense of optimism. So cost-down efforts will continue in order to maximize operating profits as recovery proceeds slowly. We also intend to keep our balance sheet strong and our cash position growing. We ended 2001 with cash, net of debt, of $53 million, up from $51 million at the end of the third quarter.
``We believe that the market rebound may be more gradual than many industry analysts had projected,'' Papada said. ``So in the fourth quarter, we adopted a much more conservative bias in valuing inventory. In addition, we intend to remain very conservative regarding capital spending. Our 2002 capital budget is less than 2001 spending, which itself was less than half of 2000 capital spending.''
Electronic Components Segment
Fourth-quarter ECS sales were $55.4 million, compared with $50.9 million in the third quarter of 2001. Excluding pre-tax provisions of $6.4 million for inventory write-downs and a charge for severance and related expenses of $0.6 million, the segment's fourth-quarter operating profit was $1.3 million, reflecting low overhead absorption and production inefficiencies driven by very low revenues, partly offset by the first full quarter of positive profit contributions from Excelsus Technologies, acquired in August of 2001.
``Weak demand in Pulse's legacy markets - networking, telecom and power conversion - continues to affect our worldwide business, especially in North America and Europe,'' Papada said. ``As we anticipated, our revenues approximated those of the third quarter, and, though we believe we've reached the bottom of this cycle, customers in our legacy markets remain tentative in their ordering patterns.
``As 2002 progresses, Pulse will continue pursuing opportunities to broaden its market presence and increase market share,'' Papada said. ``And, depending on business conditions, we may also take further action to manage our overhead and operating costs in relation to production volumes. Variable spending will continue to be restricted to essential business needs.
``New product development activities at Pulse remain very strong,'' Papada said. ``We finished 2001 with 30% more design wins than the record we set in 2000. Remaining close to our customers, and their customers, through this down cycle is of paramount importance, as it will enable us to maximize our upside potential when market growth returns.
``We continue to strengthen our presence in new markets and among new customers for Pulse products in order to broaden and diversify our revenue streams,'' Papada said. ``We are stepping up product development for military/aerospace applications, increasing our participation in the design of tier-one automotive electronics systems, successfully penetrating the video game console market, and moving forward aggressively to leverage Excelsus's market leadership into rapidly growing offshore digital subscriber line markets for microfilters and broadband accessories.''
Electrical Contact Products Segment
In the ECPS, revenues were $47.9 million, compared with $50.0 million in the third quarter of 2001. As anticipated, weakened economic conditions, which affected North American markets in the latter half of 2001, began to impact European markets in the fourth quarter.
U.S. and European industrial production remained at low levels, especially in the machine tool and commercial/industrial controls sectors, consistent with end-market performance publicly reported by AMI Doduco's customers. Demand in the construction market, particularly in the non-residential sector, softened relative to 2000, reflecting weaker economic conditions in the United States and Western Europe and the fact that AMI Doduco's customers continued to work off inventories in anticipation of weakening markets.
``On a positive note, demand for our high-voltage products from the electrical generation and distribution markets was quite strong,'' Papada said. ``Residential construction and appliance markets in North America have been steady, and automotive markets, particularly in Europe, remained strong.
``We are seeing significant increases in design and quoting activities for component subassemblies in Europe for automotive applications such as tire pressure monitoring systems, multi-function switches, motor control sensors and ignition security systems, and non-automotive uses such as appliance and industrial controls and medical equipment,'' Papada said. ``Quoting activity recently initiated in North America is also picking up, and in 2002, we plan to begin producing our subassemblies in Reidsville, North Carolina, in step with our strategy to replicate our European capabilities in North America.''
The ECPS's fourth-quarter 2001 operating loss was $0.7 million, reflecting very low capacity utilization and the ongoing costs of Engelhard-CLAL integration activities in Europe.
``Although conditions in our end markets are difficult at present, we see signs that North American markets are firming, and we expect European markets to eventually follow suit.
``To increase AMI Doduco's operating efficiency, we continue to drive the North American plant consolidation we began earlier in 2001, as well as the consolidation of all European contact pre-material production into our Pforzheim, Germany facility,'' Papada said. ``We are now exploring opportunities to further consolidate parts of our European operations.''
2002 Outlook
``We are working very hard to ensure that Pulse and AMI Doduco approach the next upturn in their markets in as strong a position as possible, both strategically and operationally,'' Papada said. ``We believe our efforts to increase market share and market position, along with our aggressive restructuring and cost-reduction activities, will benefit our performance immediately and into the future. However, it is difficult, if not impossible, to accurately project our sales and earnings performance beyond the very near term, much less for 2002 as a whole. We formulate our outlook based on that of our customers, and our customers have not been able to accurately project future demand for their products. Nevertheless, current convention suggests that we attempt to do so.
``Given the lingering uncertainty and tentativeness in the global supply chain in each of our businesses, we currently believe that 2002 earnings will be in the range of $.45-$.52 per share on sales of between $450 million and $475 million, split roughly evenly between our two segments,'' Papada said. ``Earnings results will depend very much on our gross margins, which, in turn, depend on sales mix, pricing environment and our ability to manage and adjust our costs based on business conditions.'' |
