Technitrol Reports Improved Results in Q308, Announces Cost-Saving Measures

PHILADELPHIA--(Business Wire)--
Technitrol, Inc. (NYSE:TNL) announced financial results for
continuing operations in its third fiscal quarter ended September 26,
2008. The results described below reflect continuing operations and
exclude the company's non-core microelectromechanical systems (MEMS)
microphone business, which is being offered for sale and thus is
reflected as a discontinued operation. Third-quarter highlights were:

-- Non-GAAP operating profit improved significantly from the
previous quarter(1), reflecting:

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-- a 72% improvement in the operating results of the Electronic
Components Group from the prior quarter;

-- improved performance of businesses acquired with the acquisition
of Sonion A/S;

-- the recovery of production activities from the effects of the
second-quarter earthquake in China; and

-- initial benefits from price increases in both the Electronic
Components and Electrical Contact Products groups announced
late in the second quarter.
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-- Partly offsetting higher profit in Electronics was
lower-than-expected operating profit in the Electrical Contact
Products Group, which was negatively impacted by start-up
costs incurred in ramping up outsourced brazed assembly
business in Mexico and a significant (and widely reported)
drop in demand in the European automotive business;

-- Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) from continuing operations improved to
$30.4 million from $29.3 million in the second quarter, driven
primarily by stronger profitability in electronic components
as noted above (see non-GAAP table that computes adjusted
EBITDA); and

-- Consolidated revenues from continuing operations of $293
million compared with $317 million in the previous quarter.
The sequential quarter revenue decrease reflected:

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-- substantially lower pass-through costs for precious and non-
precious metals used in electrical contact products;

-- a weaker euro in the third quarter, resulting in lower dollar-
reported revenues; and

-- somewhat lower revenues from wireless, acoustical and
automotive products, partly offset by slightly higher sales of
wireline networking components.
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Technitrol anticipates that cash flow from operations will be
available to pay down approximately $15 million of its long-term debt
in the fourth quarter. The company believes that its current EBITDA
and anticipated cash flows will enable it to remain well within the
limits of its debt covenants, cover interest payments and achieve the
debt reduction noted above. Much is being made, and correctly so,
regarding a worsening slowdown in global economic activity. Mindful of
this, Technitrol is taking the following proactive steps to
"right-size" its cost structure, maximize free cash and aggressively
retire debt:

-- sell the MEMS business as noted above, and direct proceeds
entirely to debt reduction when realized;

-- by the end of the fourth quarter of 2008, reduce general and
administrative expenses by $6.0 million to $6.5 million per
year and, through consolidation, reduce annual selling and
development and engineering expenses by more than $5 million;

-- comprehensively re-size its indirect labor force and
production overhead in both business segments by approximately
15% and reduce its direct labor force as required to fit
business needs;

-- accelerate the continuing movement of acoustical production
from Poland to Vietnam, which will be completed in its
entirety by the end of the first quarter of 2009; this will
further boost gross margins in these product lines;

-- execute on additional steps to substantially reduce
inventories and manage working capital; and

-- limit capital expenditures to an annual rate of approximately
$13 million (or approximately 50% of 2008 levels) focusing
only on projects important to high-growth portions of its
product lineup, particularly wireless and hearing
aid/acoustical components.

Softer demand in 2009 is widely anticipated in many end markets.
Because the magnitude and duration of the slowdown are not yet known,
it is difficult to get accurate information from customers, some of
which are now overly conservative and most of which have simply
stopped forecasting. Therefore, Technitrol is unable to realistically
forecast revenues and therefore operating profit in the fourth quarter
of 2008 and beyond. Compared with the most recent quarter, order rates
have slowed in some of the company's markets, but not sharply.
Technitrol believes that the diversity of its geographic and
industrial presence, along with the cost-reduction actions noted
above, will be of significant help in weathering a severe and
sustained downturn, should one occur. Despite uncertain markets, the
company expects free cash flow generation to continue improving, due
to:

-- the cost-reduction programs mentioned above;

-- progressive implementation of price increases in both
businesses;

-- the optimization of former Sonion operations;

-- completion of start up activities in Mexico and the
commencement of additional outsourcing business there;

-- the completion of global restructuring activities in early
2009; and

-- continued aggressive inventory and working capital management.

Cautionary Note

Statements in the above report are "forward-looking" within the
meaning of the Private Securities Litigation Reform Act of 1995 and
involve a number of risks and uncertainties. Actual results may differ
materially due to the risk factors listed below as well as others
listed from time to time in Technitrol's SEC reports including, but
not limited to, those discussed in the company's 10-Q report for the
quarter ended September 26, 2008 in Item 1a under the caption "Factors
That May Affect Our Future Results (Cautionary Statements for Purposes
of the "Safe Harbor" Provisions of the Private Securities Litigation
Reform Act of 1995)."

These risk factors include, but are not limited to, the following:

-- Cyclical changes in the markets we serve could result in a
significant decrease in demand for our products and reduce our
profitability.

-- Reduced prices for our products may adversely affect our
profit margins if we are unable to reduce our costs of
production.

-- An inability to adequately respond to changes in technology or
customer needs may decrease our sales.

-- If our inventories become obsolete, our future performance and
operating results will be adversely affected.

-- An inability to capitalize on our recent or future
acquisitions may adversely affect our business.

-- Integration of acquisitions into the acquiring segment may
limit the ability of investors to track the performance of
individual acquisitions and to analyze trends in our operating
results.

-- An inability to identify additional acquisition opportunities
may slow our future growth.

-- If our customers terminate their existing agreements, or do
not enter into new agreements or submit additional purchase
orders for our products, our business will suffer.

-- If we do not effectively manage our business in the face of
fluctuations in the size of our organization, our business may
be disrupted.

-- Uncertainty in demand for our products may result in increased
costs of production, an inability to service our customers, or
higher inventory levels which may adversely affect our results
of operations and financial condition.

-- A decrease in availability or increase in cost of our key raw
materials could adversely affect our profit margins.

-- Costs associated with precious metals and base metals may not
be recoverable.

-- Competition may result in lower prices for our products and
reduced sales.

-- Fluctuations in foreign currency exchange rates may adversely
affect our operating results.

-- Our international operations subject us to the risks of
unfavorable political, regulatory, labor and tax conditions in
other countries.

-- Shifting our operations between regions may entail
considerable expense.

-- Liquidity requirements could necessitate movements of existing
cash balances which may be subject to restrictions or cause
unfavorable tax and earnings consequences.

-- Losing the services of our executive officers or our other
highly qualified and experienced employees could adversely
affect our business.

-- Public health epidemics (such as flu strains or severe acute
respiratory syndrome) or other natural disasters (such as
earthquakes or fires) may disrupt operations in affected
regions and affect operating results.

-- The unavailability of insurance against certain business risks
may adversely affect our future operating results.

-- Environmental liability and compliance obligations may affect
our operations and results.

-- An increase in our debt levels could adversely affect our
financial position, liquidity and perception of our financial
condition in the financial markets.

-- Our results may be negatively affected by changing interest
rates.

Based in Philadelphia, Technitrol is a worldwide producer of
electronic components, electrical contacts and assemblies and other
precision-engineered parts and materials for manufacturers in the
wireless and wireline communications hearing, medical,
military/aerospace, automotive and electrical equipment industries.
For more information, visit Technitrol's Web site at
http://www.technitrol.com.

Investors: Technitrol's quarterly conference call will take place
on Thursday, October 23, 2008 at 5:00 p.m. Eastern Time. The dial-in
number is (412) 858-4600. Also, the call will be broadcast live over
the Internet. Visit www.technitrol.com. On-demand Internet and
telephone replay will be available beginning at 7:00 p.m. on October
23, 2008 and concluding at midnight, October 30, 2008. For telephone
replay, dial (412) 317-0088 and enter access code 374010#. For
Internet replay, use the link from our home page mentioned above.

(1) See table below reconciling third-quarter GAAP operating
profit of $12.9 million to non-GAAP operating profit.

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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per-share amounts)

Quarter Ended Nine Months Ended
9/26/2008 9/28/2007 9/26/2008 9/28/2007
--------- --------- --------- ---------

Net sales $293,198 $257,093 $884,364 $770,037
Cost of goods sold 230,620 196,708 703,851 597,630
--------- --------- --------- ---------
Gross profit 62,578 60,385 180,513 172,407
Selling, general and
administrative expenses 44,827 35,668 136,231 106,142
Severance, impairment and
other associated costs 4,860 1,858 9,497 13,081
--------- --------- --------- ---------
Operating profit 12,891 22,859 34,785 53,184

Interest (expense), net (4,583) (638) (11,627) (2,876)
Other (expense) income, net (1,899) (912) 19 357
--------- --------- --------- ---------
Net earnings before income
taxes and minority interest 6,409 21,309 23,177 50,665
Income taxes 539 2,055 1,933 5,473
Minority interest, net of
income taxes (204) (69) (598) (354)
--------- --------- --------- ---------
Net earnings from continuing
operations 5,666 19,185 20,646 44,838
Loss from discontinued
operations, net of taxes (315) -- (1,082) --
--------- --------- --------- ---------
Net earnings 5,351 19,185 19,564 44,838

Basic earnings per share from
continuing operations 0.14 0.47 0.51 1.10
Basic (loss) per share from
discontinued operations (0.01) -- (0.03) --
--------- --------- --------- ---------
Basic earnings per share 0.13 0.47 0.48 1.10

Diluted earnings per share
from continuing operations 0.14 0.47 0.51 1.10
Diluted (loss) per share from
discontinued operations (0.01) -- (0.03) --
--------- --------- --------- ---------
Diluted earnings per share 0.13 0.47 0.48 1.10

Weighted average common and
equivalent shares outstanding 40,826 40,838 40,826 40,760

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BUSINESS SEGMENT INFORMATION (UNAUDITED)
(in thousands)
Quarter Ended Nine Months Ended
9/26/2008 9/28/2007 9/26/2008 9/28/2007
----------- ---------- --------- ---------
Net sales
Electronic components $ 195,908 $171,231 $573,102 $501,420
Electrical contact
products 97,290 85,862 311,262 268,617
----------- ---------- --------- ---------
Total net sales 293,198 257,093 884,364 770,037

Operating profit
Electronic components 9,112 17,045 18,607 36,009
Electrical contact
products 3,779 5,814 16,178 17,175
----------- ---------- --------- ---------
Total operating profit 12,891 22,859 34,785 53,184

FINANCIAL POSITION
(in thousands, except per-
share amounts) 9/26/2008 12/28/2007
----------- ----------
(unaudited)
-----------

Cash and equivalents $ 41,333 $116,289
Trade receivables, net 187,369 164,859
Inventories 151,873 122,115
Other current assets 52,574 24,864
Fixed assets 176,864 97,767
Other assets 581,149 295,459
----------- ----------
Total assets 1,191,162 821,353
Accounts payable 109,782 104,214
Accrued expenses 113,656 92,096
Long-term debt 356,472 10,467
Other long-term liabilities 43,500 43,550
----------- ----------
Total liabilities 623,410 250,327
Minority interest 10,546 9,947
Shareholders' equity 557,206 561,079
Net worth per share 13.59 13.72
Shares outstanding 40,998 40,901

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NON-GAAP MEASURES (UNAUDITED)
(in thousands, except per-share amounts; results for Quarter Ended
6/27/08 restated to exclude discontinued MEMS operations)

1. Adjusted EBITDA
Quarter Ended
------------------------
9/26/08 6/27/08 9/28/07
------- -------- -------

Net earnings (loss) $ 5,351 $ (524) $19,185
Net loss from discontinued operations 315 340 --
Minority interest 204 313 69
Income taxes 539 872 2,055
Interest expense, net 4,583 4,958 638
Other expense 1,899 2,059 912
Depreciation and amortization 12,692 14,450 8,254
------- -------- -------
EBITDA 25,583 22,468 31,113
Severance, impairment and other associated
costs 4,860 2,672 1,858
Other adjustments: impact of purchase
accounting adjustments -- 4,123 --
------- -------- -------
Adjusted EBITDA 30,443 29,263 32,971

2. Net earnings per diluted share excluding severance, impairment and
other associated costs and other adjustments

Quarter Ended
------------------------
9/26/08 6/27/08 9/28/07
------- -------- -------

Net earnings (loss) per diluted share $ 0.13 $ (0.01) $ 0.47
Diluted loss per share from discontinued
operations 0.01 0.01 --
After-tax severance, impairment and other
associated costs, per share 0.10 0.06 0.04
Other adjustments: after-tax purchase
accounting adjustments and accelerated
depreciation, per share -- 0.08 --
------- -------- -------
Net earnings per diluted share excluding
severance, impairment and other associated
costs and other adjustments 0.24 0.14 0.51

3. Segment operating profit excluding severance, impairment and other
associated costs, purchase accounting adjustments and accelerated
depreciation

Quarter Ended
------------------------
9/26/08 6/27/08 9/28/07
------- -------- -------

Electronic components operating profit $ 9,112 $ 1,429 $17,045
Pre-tax severance, impairment and other
associated costs 4,860 2,447 1,858
Pre-tax purchase accounting adjustments and
accelerated depreciation -- 4,267 --
------- -------- -------
Electronic components operating profit,
excluding severance, impairment and other
associated costs, purchase accounting
adjustments and accelerated depreciation 13,972 8,143 18,903

Electrical contact products operating profit 3,779 6,589 5,814
Pre-tax severance, impairment and other
associated costs -- 225 --
------- -------- -------
Electrical contact products operating profit,
excluding severance, impairment and other
associated costs 3,779 6,814 5,814

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1. Adjusted EBITDA (net income plus income taxes, depreciation and
amortization, excluding interest and other expense/income and
excluding severance, impairment and other associated costs and other
adjustments, is not a measure of performance under accounting
principles generally accepted in the United States. Adjusted EBITDA
should not be considered a substitute for, and an investor should
also consider, net income, cash flow from operations and other
measures of performance as defined by accounting principles generally
accepted in the United States as indicators of our profitability or
liquidity. EBITDA is often used by shareholders and analysts as an
indicator of a company's ability to service debt and fund capital
expenditures. We believe it enhances a reader's understanding of our
financial condition, results of operations and cash flow because it
is unaffected by capital structure and, therefore, enables investors
to compare our operating performance to that of other companies. We
understand that our presentation of adjusted EBITDA may not be
comparable to other similarly titled captions of other companies due
to differences in the method of calculation.

2,3. Based on discussions with investors and equity analysts, we
believe that a reader's understanding of Technitrol's operating
performance is enhanced by references to these non-GAAP measures.
Removing charges for severance, impairment and other associated costs
facilitates comparisons of operating performance among financial
periods and peer companies. These charges result exclusively from
production relocations and capacity reductions and / or restructuring
of overhead and operating expenses to enhance or maintain
profitability in an increasingly competitive environment. Impairment
charges represent adjustments to asset values and are not part of the
normal operating expense structure of the relevant business in the
period in which the charge is recorded.

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Copyright (C) 2008 Technitrol, Inc. All rights reserved. All brand
names and trademarks are properties of their respective holders.

Technitrol, Inc.
David Stakun, 215-942-8428

Copyright Business Wire 2008