Pulse Electronics Corporation reported results for its fourth quarter ended December 26, 2014. Q4 net sales were $80.1 million compared to $87.8 million in the prior-year quarter.
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This was mainly due to weakness in specific product lines, particularly mobile handset antennas and certain automotive products.
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. ■