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Pulse Electronics Corporation Reports Fourth Quarter ResultsPulse Electronics Corporation (OTC Pink: PULS), a leading provider of electronic components, today reported results for its fourth quarter ended December 26, 2014. Fourth Quarter Highlights
Fourth Quarter Operating Performance Net sales were $80.1 million compared to $87.8 million in the prior-year quarter mainly due to weakness in specific product lines, particularly mobile handset antennas and certain automotive products. Demand for core network and power products and wireless infrastructure antennas was largely flat with the previous year. Sequentially, net sales decreased 9.2 percent compared to third quarter net sales of $88.2 million as weak demand that began in the third quarter unexpectedly carried over into the fourth quarter and further suppressed revenue. Orders in the first quarter are stable with the fourth quarter, while revenue will be lower due to seasonality typical of Chinese New Year. Cost of sales decreased 10.3 percent to $61.6 million from $68.7 million in the prior-year quarter. The company's gross profit margin was 23.1 percent compared with 21.7 percent in the prior-year quarter and 24.0 percent in the third quarter. Gross profit margin increased compared to the prior year mainly due to improved product mix and manufacturing efficiency improvement initiatives which offset higher labor costs in China. Sequentially, gross margin declined slightly due to unfavorable product mix and continued industry price pressure in mobile antennas. Operating expenses were $16.4 million and included $0.7 million of expenses related to initiatives to reduce the company's number of legal entities. Excluding the legal entity restructuring costs, operating expenses declined 9.2 percent from the fourth quarter of 2013, mainly due to results of actions related to the previously announced expense reduction initiative. Operating expenses decreased 5.9 percent sequentially, mainly due to lower compensation expense and efforts to control spending in response to the lower revenue. Operating profit (U.S. GAAP) was $1.2 million compared with $1.2 million in the fourth quarter of 2013, as operating expense reductions offset lower gross profit resulting from lower revenue. Non-GAAP operating profit was $3.0 million compared with $2.2 million in the prior-year quarter and $4.6 million in the third quarter. The company had $21.0 million of cash and cash equivalents at December 26, 2014 compared with $26.9 million at December 27, 2013. The decrease in cash mainly reflects the payment of cash consideration for the convertible bond exchange transactions, redemption of remaining convertible bonds, refinancing transaction fees and expenses, capital expenditures, and increases in working capital. Cash generated by operating activities in the fourth quarter was $1.3 million. Merger with Affiliates of Oaktree Capital Management, L.P. The company announced on March 2, 2015 that it has entered into a definitive agreement with certain affiliates of investment funds managed by Oaktree Capital Management, L.P. (such affiliates, "Oaktree"), under which Oaktree will invest a total of $17.0 million in Pulse and subsequently acquire 100% of the outstanding shares of Pulse. Pulse shareholders will be entitled to receive $1.50 in cash for each share of common stock they hold immediately prior to the closing of the merger. The transactions will result in Pulse becoming a private company, which will continue to be led by Mark Twaalfhoven as Chief Executive Officer. Further information on the transaction can be found in the company's Form SC 13E3 filed with the SEC on March 6, 2015. About Pulse Electronics Corporation Pulse Electronics is a leading 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, MoCA, and IWPC. 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 will be achieved. 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 Measures In this press release and in other public statements, Pulse presents certain non-GAAP financial measures. These non-GAAP financial measures have limitations and may not be comparable with similar non-GAAP financial measures used by other companies and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Set forth in Schedule A are the reconciliations of the non-GAAP financial measures to their most directly comparable GAAP financial measures. These reconciliations should be carefully evaluated. Prior disclosures of non-GAAP figures may not exclude the same items and as such should not be used for comparison purposes. Management believes that these measures enhance investors' understanding of the company's financial performance and the comparability of the company's operating results to prior periods, as well as against the performance of other companies. Copyright © 2015 Pulse Electronics Corporation. All rights reserved. All brand names and trademarks are properties of their respective holders.
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