Technitrol Reports Third Quarter Financial Results

Technitrol, Inc. reported consolidated revenues of $257.7 million for its third fiscal quarter ended September 29, 2006. Revenues were $239.2 million in the previous quarter and $147.2 million in the third quarter of 2005. Third-quarter net earnings from continuing operations were $15.3 million, or $0.38 per diluted share compared to $15.2 million or $0.38 per diluted share in the prior quarter and $5.3 million, or $0.13 per diluted share in the third quarter of 2005.

Third-quarter 2006 earnings included after-tax severance and asset-impairment expenses totaling $1.9 million ($0.05 per share) and accelerated depreciation charges of $2.8 million ($0.06 per share), related to previously announced Pulse facility closures in Turkey and France and a trade name writeoff at the Pulse antenna division. Excluding these items, earnings per diluted share in the third quarter were $0.49. Technitrol's revenue and earnings comparisons and the segment performance reports that follow include contributions to Pulse results from LK Products and ERA Group since their acquisitions in September 2005 and January 2006, respectively.

EBITDA were $32.8 million in the third quarter of 2006, compared with $30.4 million in the previous quarter and $13.3 million in the third quarter of 2005, excluding pre-tax severance and asset-impairment expenses, insurance settlement proceeds, foreign exchange settlement gains, accelerated depreciation and amortization, if applicable, in each period. Net cash at September 29, 2006 was $10.5 million (cash and equivalents of $68.4 million less debt of $57.9 million), compared with $38.4 million (cash and equivalents of $81.8 million less debt of $43.4 million) at the end of the previous quarter. The reduction in net cash from the end of the second quarter reflects an earn-out payment to the seller of LK Products and funding of certain retirement plan obligations. Technitrol's capital spending in the third quarter of 2006 was approximately $5.4 million.

Pulse designs and manufactures a wide variety of passive electronic components and modules, electronic connector products, antennas for wireless communication/information devices, automotive ignition coils and other automotive components. Revenues for the third quarter were $174 million, up 12.0% from $155.4 million in the prior quarter and more than 100% above $86.6 million in the third quarter of 2005.

Sequential-quarter revenue growth at Pulse reflected pre-holiday production increases in consumer-driven markets such as mobile handsets and video game systems; new business wins in the networking division; and stronger-than-anticipated shipments in the antenna division resulting from strong end-market demand as well as temporary reallocation of market share due to a competitor's ramp-up difficulties. In Europe, automotive electronics markets remained strong, while the television market, which was slow throughout the summer, recovered somewhat late in the quarter. As expected, the telecommunications infrastructure equipment market displayed normal third-quarter slowness, while demand for plain connectors saw a sequential-quarter decline following high levels of expedited shipments in the second quarter.

Pulse's third-quarter operating profit lagged sequential quarter revenue growth primarily due to four factors: significant period expenses for the integration of the ERA Group acquisition; the pass-through effects of very high raw material prices (particularly for copper) which inflate revenue with no gross margin contribution; the effect of substantial wage increases that took effect in China in September (these will affect all similar producers in Southern China); and high demand for handset antenna modules, which contain pre-supplied non-antenna components for which no gross profit is received. The integration expenses, which are not expected to recur in the fourth quarter and beyond, related to information system changeover and one-time adjustments to reflect rising raw material prices and changes in selling prices.