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Pulse Electronics Corporation Reports Fourth Quarter Results

Operating expenses were $18.9 million, essentially flat from $18.8 million in the fourth quarter of 2011, as the company maintained sustained scrutiny over all discretionary spending. Compared to the third quarter, operating expenses increased 4.9% due to a $1.0 million favorable impact from intellectual property licensing in the third quarter and higher fourth quarter legal costs in the Halo matter as the jury trial occurred during the period.

Operating loss (U.S. GAAP) was $4.6 million compared with a loss of $2.7 million in the prior-year quarter. Non-GAAP operating profit was $1.3 million compared with a loss of $0.9 million in the prior-year quarter and a loss of $0.6 million in the third quarter. Fourth quarter operating loss (U.S. GAAP) included $5.5 million for legal reserves relating to prior year non-income tax related assessments on our former operations in Turkey and for a court judgment and accrued interest related to the Halo lawsuit resulting from a verdict in the trial held in the quarter. The company maintains its counterclaim that Pulse owes no liability whatsoever to Halo. The company plans to contest the amount of damages asserted by Halo and its expert, and to consider its rights of appeal with respect to any adverse rulings. The operating loss (U.S. GAAP) also included expenses of $0.4 million for debt restructuring and related costs.

The company had $31.5 million of cash and cash equivalents at December 28, 2012 compared with $17.6 million at December 30, 2011. The increase in cash mainly reflects the proceeds from the Oaktree investment in excess of debt repayments, transaction fees and expenses, and immediate working capital needs.

Oaktree Investment

As previously announced, on November 20, 2012, the company completed the closing of a recapitalization by certain affiliates of investment funds managed by Oaktree Capital Management, L.P., an affiliate of Oaktree Capital Group, LLC.

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