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Pulse Electronics Corporation Reports Second Quarter Results

Based on discussions with investors and equity analysts, we believe 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 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, accelerated depreciation 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 © 2011 Pulse Electronics Corporation. All rights reserved. All brand names and trademarks are properties of their respective holders.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)        
(in thousands, except per-share amounts)
Three Months Ended Six Months Ended

7/1/11

6/25/10

7/1/11

6/25/10
 
Net sales $ 94,758 $ 116,473 $ 182,797 $ 209,333
Cost of goods sold   72,385     85,605     142,000     158,873  
Gross profit 22,373 30,868 40,797 50,460
Selling, general and administrative expenses 21,255 24,689 42,796 47,387
Severance, impairment and other associated costs 3,867 3,767 10,623 31,094
Costs related to unsolicited takeover attempt   1,486     -     1,916     -  
Operating loss (4,235 ) 2,412 (14,538 ) (28,021 )
 
Interest expense, net (1,158 ) (1,272 ) (2,451 ) (2,621 )
Other income (expense), net   167     (1,625 )   1,709     (7,529 )
Loss from continuing operations before income taxes (5,226 ) (485 ) (15,280 ) (38,171 )
Income tax benefit   (765 )   1,997     (5,830 )   (145 )
Net loss from continuing operations (4,461 ) (2,482 ) (9,450 ) (38,026 )
Earnings (loss) from discontinued operations, net of taxes   -     2,908     612     (15,168 )
Net loss (4,461 ) 426 (8,838 ) (53,194 )
Non-controlling interest, net of taxes   (44 )   (290 )   (92 )   (597 )
Net loss attributable to Pulse Electronics Corporation (4,505 ) 136 (8,930 ) (53,791 )
 
Basic shares outstanding 41,153 40,916 41,186 40,922
Basic loss per share from continuing operations (0.11 ) (0.07 ) (0.23 ) (0.94 )
Basic earnings (loss) per share from discontinued operations   -     0.07     0.01     (0.37 )
Basic loss per share (0.11 ) 0.00 (0.22 ) (1.31 )
 
Diluted shares outstanding 41,153 40,936 41,186 40,922
Diluted loss per share from continuing operations (0.11 ) (0.07 ) (0.23 ) (0.94 )
Diluted earnings (loss) per share from discontinued operations   -     0.07     0.01     (0.37 )
Diluted loss per share (0.11 ) 0.00 (0.22 ) (1.31 )
 
AMOUNTS ATTRIBUTABLE TO PULSE ELECTRONICS CORPORATION:
 
Net loss from continuing operations excluding non-controlling interest $ (4,505 ) $ (2,772 ) $ (9,542 ) $ (38,623 )
Net earnings (loss) from discontinued operations   -     2,908     612     (15,168 )
Net loss attributable to Pulse Electronics Corporation (4,505 ) 136 (8,930 ) (53,791 )
 
BUSINESS SEGMENT INFORMATION (UNAUDITED)        
(in thousands)
Three Months Ended Six Months Ended

7/1/2011

6/25/2010

7/1/2011

6/25/2010
Net Sales
Network 43,391 60,845 85,935 104,219
Power 38,668 32,819 70,567 58,299
Wireless   12,699     22,809   26,295   46,815  
Total net sales 94,758 116,473 182,797 209,333
 
Operating loss
Network 1,278 8,368 1,687 10,646
Power 3,399 1,625 3,927 246
Wireless   (3,559 )   (3,814 ) (7,613 ) (7,819 )

Operating loss excluding severance, impairment and other associated costs and costs related to unsolicited takeover attempt
1,118 6,179 (1,999 ) 3,073
Severance, impairment and other associated costs 3,867 3,767 10,623 31,094
Costs related to unsolicited takeover attempt   1,486     -   1,916   -  
Operating loss (4,235 ) 2,412 (14,538 ) (28,021 )
 
FINANCIAL POSITION (UNAUDITED)
(in thousands)

7/1/2011

12/31/2010
 
Cash and cash equivalents $ 35,560 $ 35,905
Accounts receivable, net 58,993 65,532
Inventory 36,666 35,741
Prepaid expenses and other current assets 14,542 14,804
Net property, plant and equipment 30,627 30,681
Other assets   40,671     41,936  
Total assets 217,059 224,599
 
Accounts payable 50,689 46,102
Accrued expenses and other current liabilities 47,159 54,602
Long-term debt 42,150 32,150
Convertible senior notes 50,000 50,000
Other long-term liabilities   17,438     18,971  
Total liabilities 207,436 201,825
 
Total equity   9,623     22,774  
 
Total liabilities and equity 217,059 224,599
 
Shares outstanding 41,639 41,490
 
NON-GAAP MEASURES (UNAUDITED)

(in thousands, except per-share amounts)
 
 
1. Adjusted EBITDA
 

Quarter Ended

7/1/11

6/25/10
 
Net (loss) income attributable to Pulse Electronics Corporation $ (4,505 ) $ 136
Net (earnings) loss from discontinued operations - (2,908 )
Non-controlling interest 44 290
Income tax expense (benefit) (765 ) 1,997
Interest expense, net 1,158 1,272
Non-cash stock-based compensation expenses 399 393
Depreciation and amortization 2,579 4,513
Other (income) expense (167 ) 1,625
Severance, impairment and other associated costs 3,867 3,767
Costs related to unsolicited takeover attempt   1,486     -  
Adjusted EBITDA 4,095 11,085
 
 
2. Net earnings (loss) per diluted share from continuing operations excluding severance, impairment and other associated costs, costs related to unsolicited takeover attempt, non-cash stock-based compensation expenses and other adjustments
 

Quarter Ended

7/1/11

6/25/10
 
Net loss per diluted share $ (0.11 ) $ 0.00
Diluted (earnings) loss per share from discontinued operations - (0.07 )
After-tax severance, impairment and other associated costs, per share 0.07 0.09
After-tax costs related to unsolicited takeover attempt, per share 0.02 -
After-tax non-cash stock-based compensation expenses, per share 0.01 0.01
Other adjustments: accelerated depreciation, per share   -     0.02  
 
Net earnings (loss) per diluted share from continuing operations excluding severance, impairment and other associated costs, non-cash stock-based compensation expense and other adjustments (0.01 ) 0.05
 
3. Operating (loss) profit excluding severance, impairment and other associated costs, costs related to unsolicited takeover attempt, non-cash stock-based compensation expenses and other adjustments
 

Quarter Ended

7/1/11

6/25/10
 
Operating (loss) profit $ (4,235 ) $ 2,412
Pre-tax severance, impairment and other associated costs 3,867 3,767
Pre-tax non-cash stock-based compensation expenses 399 393
Pre-tax costs related to unsolicited takeover attempt 1,486 -
Other adjustment: accelerated deprecation   -     1,117  
Operating (loss) profit excluding severance, impairment and other associated costs, non-cash stock-based compensation expense and other adjustments 1,517 7,689
 
Net sales $ 94,758 $ 116,473
 

Operating margin excluding severance, impairment and other associated costs, costs related to unsolicited takeover attempt, non-cash stock-based compensation expense and other adjustments
1.6 % 6.6 %
 

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