A complete list of ratings is provided at the end of this release.
TEGSA will use net proceeds for general corporate purposes, including funding a portion of the
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 senior notes issuance, Fitch estimates total debt to operating EBITDA (leverage) was 1.5 times (x) for the latest 12 months (LTM) ended
The ratings and Stable 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 declines in 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.
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
--Lower than anticipated annual FCF.
Pro forma for the senior notes issuance,
Availability under the revolving credit facility expiring currently is reduced by
Fitch's expectations for strong annual FCF also support liquidity.
Pro forma for the senior notes issuance, total debt at
Fitch currently rates
--Long-term 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-'.
The Rating Outlook is Stable.
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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