Pulse Electronics Corp (fka PULS)

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Pulse Electronics Corporation Reports First Quarter Results

4:05 PM ET 5/7/13 | BusinessWire

Pulse Electronics Corporation (NYSE:PULS), a leading provider of electronic components, today reported results for its first quarter ended March 29, 2013.

First Quarter Highlights

-- Net sales were $84.8 million, down 9.9% from $94.1 million in the prior-year quarter, and down 6.2% from $90.4 million in the fourth quarter, in line with industry trends.

-- Operating profit (U.S. GAAP) was $1.0 million compared with a loss of $2.1 million in the prior-year quarter and a loss of $4.6 million in the fourth quarter.

-- Non-GAAP operating profit was $1.6 million, compared with a loss of $0.2 million in the prior-year quarter and a profit of $1.3 million in the fourth quarter. (See Schedule A for a reconciliation of U.S. GAAP results to non-GAAP measures.)

-- Gross profit margin was 23.8% compared with 19.5% in the prior-year quarter and 21.8% in the fourth quarter.

CEO Comments

"This quarter's results continue to demonstrate our ongoing progress in improving the operational performance of the company," said Pulse Chairman and Chief Executive Officer Ralph Faison. "Although the industry environment remained challenging, we exceeded our non-GAAP operating guidance on revenue that was within our guidance range but lower both year over year and sequentially. As a result of two years of major restructuring and reengineering, we began to realize notable gross profit margin improvement last quarter that continued this quarter, as gross profit margins increased nicely. We have substantially lowered our breakeven point and further stabilization and improvement in gross margin is a key objective for Pulse in 2013. We stand poised to continue to deliver improved operating profit when markets recover to more normal demand levels."

First Quarter Operating Performance

Net sales were $84.8 million compared with $94.1 million in the prior-year quarter, in line with ongoing economic and industry weakness plus lower industry demand for wireless products. Sequentially, consolidated net sales declined 6.2 percent compared with fourth quarter net sales of $90.4 million mainly due to reduced strength of smartphone demand and normal first quarter seasonal softness and the effects of Chinese New Year.

Cost of sales decreased 14.7 percent to $64.6 million from $75.7 million in the prior-year quarter. The company's gross profit margin was 23.8 percent compared with 19.5 percent in the prior-year quarter and 21.8 percent in the fourth quarter. The higher gross profit margin compared to the prior year reflects the favorable effects of manufacturing plant consolidations and other cost reduction programs and resulting operational efficiencies. The sequential improvement in gross margin was due mainly to improved product mix in wireless and continued favorable effects of cost reduction programs.

Operating expenses were $19.2 million, essentially flat from $19.0 million in the first quarter of 2012, as the company maintained sustained scrutiny over all discretionary spending. Operating expenses were also flat compared to the fourth quarter.

Operating profit (U.S. GAAP) was $1.0 million compared with a loss of $2.1 million in the prior-year quarter. Non-GAAP operating profit was $1.6 million compared with a loss of $0.2 million in the prior-year quarter and a profit of $1.3 million in the fourth quarter.

The company had $25.4 million of cash and cash equivalents at March 29, 2013 compared with $31.5 million at December 28, 2012. The decrease in cash mainly reflects refinancing transaction fees and expenses and working capital needs.

Second Quarter 2013 Outlook

"As we look to the second quarter, recent order patterns indicate revenue should achieve typical seasonal growth while at the same time we anticipate some additional improvement in wireless demand," said Mr. Faison. "We believe that somewhat higher volumes and continuation of the favorable gross margin trends we saw in the first quarter will help to offset increasing costs at our manufacturing facilities, resulting in non-GAAP operating profit similar to that of the first quarter."

The company expects second quarter 2013 net sales to range from $85 million to $91 million and non-GAAP operating profit to range from breakeven to a profit of $2 million.

Conference Call

Pulse management will conduct a conference call at 5 p.m. Eastern (2 p.m. Pacific) today. The conference call will be available via telephone and the Internet. The dial-in number is 1-800-860-2442 (international 1-412-858-4600). A link to the earnings press release, the Internet web cast and a slide presentation that will accompany management's prepared remarks will be available on the "Investor Information" section of the company's web site www.pulseelectronics.com for two weeks.

About Pulse Electronics Corporation

Pulse Electronics is the electronic components partner that helps customers build the next great product by providing the needed technical solutions. Pulse Electronics has a long operating history of innovation in magnetics, antennas and connectors, as well as the ability to ramp quickly into high-quality, high-volume production. The company serves the wireless and wireline communications, power management, military/aerospace and automotive industries. Pulse Electronics is a participating member of the IEEE, SFF, OIF, HDBaseT Alliance, CommNexus, and MoCA. Visit the Pulse Electronics website at www.pulseelectronics.com.

Safe Harbor

This press release contains statements, including projections of future business objectives and financial results, that are "forward-looking" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. These forward-looking statements are based on the company's current information and expectations. There can be no assurance these forward-looking statements, including, without limitation, the company's results for the first quarter, will be achieved. Factors that may cause expected results or anticipated events or circumstances discussed in this press release to not occur or to differ from expected results include: general conditions in the capital markets; general economic conditions; and the company's ability to maintain adequate liquidity to operate its business. Actual results may differ materially due to the risk factors listed from time to time in the company's SEC reports including, but not limited to, those discussed in its Current Reports on Form 8-K, Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. All such risk factors are incorporated herein by reference as though set forth in full. The company undertakes no obligation to update any forward looking statement.

Non-GAAP Rationale

Non-GAAP operating profit or loss (operating profit or loss according to accounting principles generally accepted in the United States excluding pre-tax severance, impairment and other associated costs; pre-tax non-cash stock-based compensation expenses; and other pre-tax adjustments as described in the applicable period), non-GAAP diluted earnings (loss) per share (net earnings (loss) per share from continuing operations according to principles generally accepted in the United States excluding after-tax severance, impairment and other associated costs; after-tax non-cash stock-based compensation expenses; and other after-tax adjustments as described in the applicable period) and adjusted EBITDA (net earnings attributable to Pulse Electronics Corporation plus net earnings from discontinued operations and non-controlling interest, excluding income taxes; depreciation and amortization; interest expense/income; non-cash stock-based compensation expenses; other expense/income; and severance, impairment and other associated costs; and other adjustments as described in the applicable period), are not measures of performance under accounting principles generally accepted in the United States. Non-GAAP operating profit or loss, non-GAAP diluted earnings (loss) per share and adjusted EBITDA should not be considered a substitute for, and an investor should also consider, net income, operating profit, cash flow from operations, and other measures of performance as defined by accounting principles generally accepted in the United States as indicators of the company's profitability or liquidity. Non-GAAP operating profit (loss) and non-GAAP diluted earnings (loss) per share are often used by the company's shareholders and analysts as additional measures of its operating performance. Adjusted EBITDA is often used by the company's shareholders and analysts as an indicator of a company's ability to service debt and fund capital expenditures. The company believes these non-GAAP measures enhance a reader's understanding of the company's financial condition, results of operations, and cash flow because they are unaffected by capital structure and, therefore, enable investors to compare its operating performance to that of other companies. The company understands that its presentation of non-GAAP operating profit (loss), non-GAAP diluted earnings (loss) per share and adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in the method of calculation.

Based on discussions with investors and analysts, the company believes that a reader's understanding of the company's operating performance is enhanced by references to these non-GAAP measures. Removing charges for severance, impairment and other associated costs; non-cash stock-based compensation expenses; and other adjustments may facilitate comparisons of operating performance among financial periods and peer companies. These charges may result from facility closures, the exit of a product line, production relocations and capacity reductions, and / or restructuring of overhead and operating expenses to enhance or maintain profitability in an increasingly competitive environment. Removing non-cash stock-based compensation expenses facilitates comparisons of the company's operating performance with that of other companies with differing compensation structures and with the company's performance in periods during which its own compensation structure may have been different. Impairment charges, debt restructuring and related costs, legal reserve charges, and costs related to an unsolicited takeover attempt are not part of the normal operating expense structure of the relevant business in the period in which the charge is recorded.

Copyright (C) 2013 Pulse Electronics Corporation. All rights reserved. All brand names and trademarks are properties of their respective holders.

View data
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per-share data)
Three Months Ended
3/29/13 3/30/12
------------- -------------
Net sales $ 84,806 $ 94,135
Cost of sales 64,625 75,737
------ ------
Gross profit 20,181 18,398
Operating expenses 19,174 18,993
Severance, impairment and other associated costs 19 1,537
Legal reserve 38 -
------ ------
Operating profit (loss) 950 (2,132 )
Interest expense, net (5,114 ) (2,593 )
Other (expense) income, net (2,532 ) 1,079
------ -- ------
Loss before income taxes (6,696 ) (3,646 )
Income tax expense (434 ) (657 )
------ -- ------ --
Net loss (7,130 ) (4,303 )
Less: Net loss attributable to non-controlling interest (14 ) (197 )
------ -- ------ --
Net loss attributable to Pulse Electronics Corporation (7,116 ) (4,106 )
Basic shares outstanding 79,573 41,422
Basic loss per share (0.09 ) (0.10 )
Diluted shares outstanding 79,573 41,422
Diluted loss per share (0.09 ) (0.10 )
AMOUNTS ATTRIBUTABLE TO PULSE ELECTRONICS CORPORATION:
Net loss attributable to Pulse Electronics Corporation $ (7,116 ) $ (4,106 )

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per-share data) Three Months Ended 3/29/13 3/30/12 ------------- ------------- Net sales $ 84,806 $ 94,135 Cost of sales 64,625 75,737 ------ ------ Gross profit 20,181 18,398 Operating expenses 19,174 18,993 Severance, impairment and other associated costs 19 1,537 Legal reserve 38 - ------ ------ Operating profit (loss) 950 (2,132 ) Interest expense, net (5,114 ) (2,593 ) Other (expense) income, net (2,532 ) 1,079 ------ -- ------ Loss before income taxes (6,696 ) (3,646 ) Income tax expense (434 ) (657 ) ------ -- ------ -- Net loss (7,130 ) (4,303 ) Less: Net loss attributable to non-controlling interest (14 ) (197 ) ------ -- ------ -- Net loss attributable to Pulse Electronics Corporation (7,116 ) (4,106 ) Basic shares outstanding 79,573 41,422 Basic loss per share (0.09 ) (0.10 ) Diluted shares outstanding 79,573 41,422 Diluted loss per share (0.09 ) (0.10 ) AMOUNTS ATTRIBUTABLE TO PULSE ELECTRONICS CORPORATION: Net loss attributable to Pulse Electronics Corporation $ (7,116 ) $ (4,106 )

View data
BUSINESS SEGMENT INFORMATION (UNAUDITED)
(in thousands)
Three Months Ended
3/29/2013 3/30/2012
------------------ -------------------
Net Sales
Network $ 35,831 $ 38,754
Power 27,585 31,690
Wireless 21,390 23,691
--------- ----------
Total net sales 84,806 94,135
Operating profit (loss)
Network 1,332 (873 )
Power 1,169 2,332
Wireless (1,494 ) (2,054 )
--------- --- ---------- ---
Operating profit (loss) excluding severance, impairment and other 1,007 (595 )
associated costs, and legal reserve costs
Severance, impairment and other associated costs 19 1,537
Legal reserve 38 -
--------- ----------
Operating profit (loss) $ 950 $ (2,132 )
FINANCIAL POSITION (UNAUDITED)
(in thousands) 3/29/2013 12/28/2012
--------- ----------
Cash and cash equivalents $ 25,438 $ 31,475
Accounts receivable, net 61,115 62,957
Inventory, net 30,150 31,434
Prepaid expenses and other current assets 18,075 21,500
Net property, plant and equipment 28,736 29,406
Other assets 16,407 11,826
--------- ----------
Total assets 179,921 188,598
Accounts payable $ 61,798 $ 65,883
Accrued expenses and other current liabilities 34,108 44,197
Warrant liability - 12,175
Long-term debt 102,196 96,753
Other long-term liabilities 17,581 19,134
--------- ----------
Total liabilities 215,683 238,142
Total deficit (35,762 ) (49,544 )
--------- --- ---------- ---
Total liabilities and deficit $ 179,921 $ 188,598
Shares outstanding 79,473 79,473

BUSINESS SEGMENT INFORMATION (UNAUDITED) (in thousands) Three Months Ended 3/29/2013 3/30/2012 ------------------ ------------------- Net Sales Network $ 35,831 $ 38,754 Power 27,585 31,690 Wireless 21,390 23,691 --------- ---------- Total net sales 84,806 94,135 Operating profit (loss) Network 1,332 (873 ) Power 1,169 2,332 Wireless (1,494 ) (2,054 ) --------- --- ---------- --- Operating profit (loss) excluding severance, impairment and other 1,007 (595 ) associated costs, and legal reserve costs Severance, impairment and other associated costs 19 1,537 Legal reserve 38 - --------- ---------- Operating profit (loss) $ 950 $ (2,132 ) FINANCIAL POSITION (UNAUDITED) (in thousands) 3/29/2013 12/28/2012 --------- ---------- Cash and cash equivalents $ 25,438 $ 31,475 Accounts receivable, net 61,115 62,957 Inventory, net 30,150 31,434 Prepaid expenses and other current assets 18,075 21,500 Net property, plant and equipment 28,736 29,406 Other assets 16,407 11,826 --------- ---------- Total assets 179,921 188,598 Accounts payable $ 61,798 $ 65,883 Accrued expenses and other current liabilities 34,108 44,197 Warrant liability - 12,175 Long-term debt 102,196 96,753 Other long-term liabilities 17,581 19,134 --------- ---------- Total liabilities 215,683 238,142 Total deficit (35,762 ) (49,544 ) --------- --- ---------- --- Total liabilities and deficit $ 179,921 $ 188,598 Shares outstanding 79,473 79,473

View data
Schedule A
---------------------------------------------------------------------
NON-GAAP MEASURES (UNAUDITED)
(in thousands, except per-share amounts)
1. Adjusted EBITDA
Quarter Ended
-----------------------------------------
3/29/13 3/30/12
-------------------- --------------------
Net loss attributable to Pulse Electronics Corporation $ (7,116 ) $ (4,106 )
Non-controlling interest 14 197
Income tax expense 434 657
Interest expense, net 5,114 2,593
Non-cash stock-based compensation expenses 579 407
Depreciation and amortization 1,749 1,942
Other expense (income), net 2,532 (1,079 )
Severance, impairment and other associated costs 19 1,537
Legal reserve 38 -
-------- --------
Adjusted EBITDA 3,363 2,148
2. Net (loss) earnings per diluted share excluding severance,
impairment and other associated costs, legal reserve costs, and
non-cash stock-based compensation expenses and other adjustments
Quarter Ended
-----------------------------------------
3/29/13 3/30/12
-------------------- --------------------
Net loss per diluted share $ (0.09 ) $ (0.10 )
After-tax severance, impairment and other associated costs, per share 0.00 0.04
After-tax non-cash stock-based compensation expenses, per share 0.01 0.01
After-tax legal reserve, per share 0.00 -
-------- --------
Net loss per diluted share excluding severance, impairment and other (0.08 ) (0.05 )
associated costs, legal reserve costs, non-cash stock-based
compensation expenses and other adjustments
3. Operating profit (loss) excluding severance, impairment and other
associated costs, legal reserve costs, non-cash stock-based
compensation expenses and other adjustments
Quarter Ended
-----------------------------------------
3/29/13 3/30/12
-------------------- --------------------
Operating profit (loss) $ 950 $ (2,132 )
Pre-tax severance, impairment and other associated costs 19 1,537
Pre-tax non-cash stock-based compensation expenses 579 407
Pre-tax legal reserve 38 -
-------- --------
Operating profit (loss) excluding severance, impairment and other 1,586 (188 )
associated costs, legal reserve costs, non-cash stock-based
compensation expenses and other adjustments

Schedule A --------------------------------------------------------------------- NON-GAAP MEASURES (UNAUDITED) (in thousands, except per-share amounts) 1. Adjusted EBITDA Quarter Ended ----------------------------------------- 3/29/13 3/30/12 -------------------- -------------------- Net loss attributable to Pulse Electronics Corporation $ (7,116 ) $ (4,106 ) Non-controlling interest 14 197 Income tax expense 434 657 Interest expense, net 5,114 2,593 Non-cash stock-based compensation expenses 579 407 Depreciation and amortization 1,749 1,942 Other expense (income), net 2,532 (1,079 ) Severance, impairment and other associated costs 19 1,537 Legal reserve 38 - -------- -------- Adjusted EBITDA 3,363 2,148 2. Net (loss) earnings per diluted share excluding severance, impairment and other associated costs, legal reserve costs, and non-cash stock-based compensation expenses and other adjustments Quarter Ended ----------------------------------------- 3/29/13 3/30/12 -------------------- -------------------- Net loss per diluted share $ (0.09 ) $ (0.10 ) After-tax severance, impairment and other associated costs, per share 0.00 0.04 After-tax non-cash stock-based compensation expenses, per share 0.01 0.01 After-tax legal reserve, per share 0.00 - -------- -------- Net loss per diluted share excluding severance, impairment and other (0.08 ) (0.05 ) associated costs, legal reserve costs, non-cash stock-based compensation expenses and other adjustments 3. Operating profit (loss) excluding severance, impairment and other associated costs, legal reserve costs, non-cash stock-based compensation expenses and other adjustments Quarter Ended ----------------------------------------- 3/29/13 3/30/12 -------------------- -------------------- Operating profit (loss) $ 950 $ (2,132 ) Pre-tax severance, impairment and other associated costs 19 1,537 Pre-tax non-cash stock-based compensation expenses 579 407 Pre-tax legal reserve 38 - -------- -------- Operating profit (loss) excluding severance, impairment and other 1,586 (188 ) associated costs, legal reserve costs, non-cash stock-based compensation expenses and other adjustments

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SOURCE: Pulse Electronics Corporation

Pulse Electronics Corporation
Drew A. Moyer
Senior Vice President, Chief Financial Officer
858-674-8268
[e-mail]