Measurement Specialties is a provider of sensors and sensors solutions with significant capabilities in harsh environments, including automotive end markets. For fiscal 2015, Measurement Specialties' sales are expected to be more than
The acquisition transforms
Pro forma for the combination, Fitch estimates total debt to operating EBITDA will be 1.5 times (x) for the latest 12 months (LTM) ended
The ratings and Outlook continue to reflect Fitch's expectations for strong profitability and annual FCF through the business cycle, continued top line benefits from diversified sales portfolio and conservative financial policies.
Fitch expects the company's end market and geographic diversification will drive solid top line growth over the longer term, albeit within a cyclical context. For fiscal 2014, Fitch expects solid global automotive production, strong commercial aerospace orders and recovering industrial equipment markets to offset declining personal computing, slow mid- and down-stream energy and weak datacomm markets to drive mid-single digit revenue growth.
Fitch has increased confidence in
Fitch expects annual FCF will range from
Other uses of cash include cash pension obligations, which should be minimal over the next few years, and potential cash payments related to the company's pre-separation tax sharing agreement with Tyco International and Covidien. Fitch expects obligations will be manageable at the current rating and a longer-term event.
Credit protection measures will remain solid for the rating. Total debt to operating EBITDA will range from 1x to 2x over the longer term with the potential for slightly higher levels over the short term related to a downturn or acquisitions. Interest coverage should remain in excess of 15x.
KEY RATING DRIVERS
The ratings and Outlook reflect
--Diversified geographic, end-market and customer portfolios, industry-leading positions in large and relatively fragmented markets; and substantial scale and scope, which should result in longer-term share gains in faster-growing developing markets;
--Consistent annual FCF of
--Conservative financial policies, including solid liquidity and commitment to managing debt levels to maintain total leverage target at or below 2x;
Fitch's rating concerns center on:
--The company's need to mitigate average selling price (ASP) pressures in the majority of its end-markets with efficiency initiatives and new product introductions, as well as vulnerability of gross profit margin over the short term to commodity price volatility;
--The cyclical demand patterns associated with electronics components;
--The company's use of cash for share repurchases and acquisitions, given mature organic revenue growth prospects across certain key end-markets.
Fitch believes further positive rating action is unlikely in the absence of expectations for structurally higher mid-cycle FCF or a commitment to more conservative financial policies.
Conversely, Fitch may take negative rating actions if:
--Expectations for operating profit margins to remain below the 10%-15% range over the longer term, likely due to a diminished ability to offset pricing pressures with new product introductions and productivity gains; or
--Expectations for annual FCF consistently below
Fitch's expectations for strong annual FCF also support liquidity.
Total debt at
--Other debt of approximately
Fitch currently rates
--Long-term Issuer Default Rating (IDR) 'A-';
--Short-term IDR 'F2'.
--Long-term IDR 'A-';
--Short-term IDR 'F2';
--CP program 'F2';
--Senior unsecured revolving credit facility (RCF) 'A-';
--Senior unsecured notes 'A-'.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology' (
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Source: Fitch Ratings
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