UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998
------------------------------
Commission File Number 1-8037
AEROFLEX INCORPORATED
(Exact name of Registrant as specified in its Charter)
DELAWARE 11-1974412
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
35 South Service Road
Plainview, N.Y. 11803
(Address of principal executive offices) Zip Code)
(516) 694-6700
(Registrant's telephone number, including area code)
*Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
November 6, 1998 7,558,526 shares (excluding 39,159 shares held in treasury)
- --------------------------------------------------------------------------------
(Date) (Number of Shares)
NOTE: THIS IS PAGE 1 OF A DOCUMENT CONSISTING OF 15 PAGES.
AEROFLEX INCORPORATED
AND SUBSIDIARIES
INDEX
PAGE
PART I: FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
September 30, 1998 and June 30, 1998 3-4
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, 1998 and 1997 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 1998 and 1997 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three Months Ended September 30, 1998 and 1997 10-13
PART II: OTHER INFORMATION
ITEM 2 Changes in Securities 14
ITEM 6 Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
1998 1998
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 19,885 $ 24,408
Accounts receivable, less allowance for
doubtful accounts of $368,000 and $317,000 19,567 19,853
Inventories 31,515 29,851
Deferred income taxes 2,132 1,861
Prepaid expenses and other current assets 1,862 1,197
-------- -------
Total current assets 74,961 77,170
Property, plant and equipment, at cost, net 28,826 26,994
Intangible assets acquired in connection with
the purchase of businesses, net 8,304 7,578
Cost in excess of fair value of net assets
of businesses acquired, net 9,744 9,827
Other assets 2,485 2,532
-------- --------
Total assets $124,320 $124,101
========= ========
See notes to consolidated financial statements.
3
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
September 30, June 30,
1998 1998
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,636 $ 1,755
Accounts payable 7,080 6,668
Accrued expenses and other current liabilities 10,752 12,932
Income taxes payable 2,373 1,850
--------- --------
Total current liabilities 21,841 23,205
Long-term debt 9,479 9,726
Deferred income taxes 1,067 1,156
Other long-term liabilities 2,557 2,978
--------- --------
Total liabilities 34,944 37,065
--------- --------
Stockholders' equity:
Preferred Stock, par value $.10 per share;
authorized 1,000,000 shares:
Series A Junior Participating Preferred
Stock, par value $.10 per share,
authorized 25,000 and 150,000 shares,
none issued - -
Common Stock, par value $.10 per share;
authorized 25,000,000 shares; issued
17,466,000 and 17,378,000 shares 1,747 1,738
Additional paid-in capital 100,893 100,481
Accumulated deficit (12,920) (15,178)
--------- ---------
89,720 87,041
Less: Treasury stock, at cost (39,000 and
1,000 shares) 344 5
--------- --------
Total stockholders' equity 89,376 87,036
--------- --------
Total liabilities and stockholders' equity $124,320 $124,101
========= ========
See notes to consolidated financial statements.
4
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
September 30,
1998 1997
------------ -----------
(In thousands, except per share data)
Net sales $ 31,629 $ 23,885
Cost of sales 20,504 15,673
--------- --------
Gross profit 11,125 8,212
--------- --------
Selling, general and administrative costs 5,630 4,606
Research and development costs 1,991 998
--------- --------
7,621 5,604
--------- --------
Operating income 3,504 2,608
--------- --------
Other expense (income)
Interest expense 299 723
Other expense (income) (303) 83
--------- --------
Total other expense (income) (4) 806
--------- --------
Income before income taxes 3,508 1,802
Provision for income taxes 1,250 650
--------- --------
Net income $ 2,258 $ 1,152
========= ========
Net income per common share:
- Basic $ .13 $ .09
====== =====
- Diluted $ .12 $ .08
====== =====
Weighted average number of common
shares and common share equivalents
outstanding:
- Basic 17,447 12,746
========= ========
- Diluted 18,562 15,364
========= ========
See notes to consolidated financial statements.
5
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 30,
1998 1997
---------- -------
(In thousands)
Cash Flows From Operating Activities:
Net income $ 2,258 $ 1,152
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,427 1,249
Amortization of deferred gain (147) (317)
Deferred income taxes (289) (56)
Other, net 53 51
Change in operating assets and liabilities,
net of effects from purchase of business:
Decrease (increase) in accounts receivable 430 2,799
Decrease (increase) in inventories (1,458) (5,137)
Decrease (increase) in prepaid expenses
and other assets (618) (1,186)
Increase (decrease) in accounts payable, accrued
expenses and other long-term liabilities (2,637) 2,426
Increase (decrease) in income taxes payable 1,014 501
--------- --------
Net Cash Provided By (Used In)
Operating Activities 33 1,482
--------- --------
Cash Flows From Investing Activities:
Payment for purchase of business, net of cash (929) -
Purchase of equipment, inventory and
technology rights from Lucent Technologies - (4,435)
Capital expenditures (3,877) (331)
Proceeds from sale of equipment 967 -
Other, net 164 11
--------- --------
Net Cash Provided By (Used In)
Investing Activities (3,675) (4,755)
-------- ---------
Cash Flows From Financing Activities:
Borrowings under debt agreements - 6,232
Debt repayments (558) (2,738)
Proceeds from the exercise of stock options
and warrants 20 249
Purchase of treasury stock (343) -
--------- -----
Net Cash Provided By (Used In)
Financing Activities (881) 3,743
--------- --------
Net Increase (Decrease) In Cash
And Cash Equivalents (4,523) 470
Cash And Cash Equivalents At Beginning Of Period 24,408 600
--------- --------
Cash And Cash Equivalents At End Of Period $ 19,885 $ 1,070
========= ========
See notes to consolidated financial statements.
6
AEROFLEX INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
The consolidated balance sheet of Aeroflex Incorporated and
Subsidiaries ("the Company") as of September 30, 1998 and the related
consolidated statements of operations for the three months ended
September 30, 1998 and 1997 and the consolidated statements of cash
flows for the three months ended September 30, 1998 and 1997 have been
prepared by the Company and are unaudited. In the opinion of
management, all adjustments (which include normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows at September 30, 1998 and for all
periods presented have been made. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
omitted. It is suggested that these consolidated financial statements
be read in conjunction with the financial statements and notes thereto
included in the Company's June 30, 1998 annual report to shareholders.
There have been no changes of significant accounting policies since
June 30, 1998. Certain reclassifications have been made to previously
reported financial statements to conform to current classifications.
Results of operations for the three month periods are not necessarily
indicative of results of operations for the corresponding years.
2. Common Stock Offering
---------------------
In March 1998, the Company sold 2,597,000 shares of its Common Stock in
a public offering for $31,285,000, net of an underwriting discount of
$1,973,000 and issuance costs of $496,000. Of these net proceeds,
$9,639,000 was used to repay bank indebtedness. The balance of the net
proceeds, which is included in cash and cash equivalents, will be used
for general corporate purposes, including working capital, capital
expenditures, facilities expansion and potential acquisitions.
3. Earnings Per Share
------------------
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128 "Earnings Per Share" during the quarter ended December
31, 1997. In accordance with SFAS No. 128, earnings per common share
("Basic EPS") is computed by dividing net income by the weighted
average common shares outstanding. Earnings per common share, assuming
dilution ("Diluted EPS") is computed by dividing net income plus a pro
forma addback of debenture interest by the weighted average common
shares outstanding plus potential dilution from the conversion of
debentures and the exercise of stock options and warrants. Earnings per
share amounts for prior periods have been restated to conform to SFAS
No. 128.
7
A reconciliation of the numerators and denominators of the Basic EPS
and Diluted EPS calculations is as follows:
Three Months
Ended September 30,
1998 1997
(In thousands, except per share data)
Computation of Adjusted Net Income:
Net income for basic earnings per common share $ 2,258 $ 1,152
Add: Debenture interest and amortization
expense, net of income taxes - 104
--------- --------
Adjusted net income for diluted
earnings per common share $ 2,258 $ 1,256
========= ========
Computation of Adjusted Weighted Average
Shares Outstanding:
Weighted average shares outstanding 17,447 12,746
Add: Shares assumed to be issued upon
conversion of debentures - 1,552
Add: Effect of dilutive options and warrants
outstanding 1,115 1,066
--------- --------
Weighted average shares and common share
equivalents used for computation of
diluted earnings per common share 18,562 15,364
========= ========
Net Income Per Common Share:
Basic $ .13 $ .09
====== =====
Diluted $ .12 $ .08
====== =====
4. Acquisition of Business
-----------------------
Effective September 1, 1998, the Company acquired 90% of the stock of
Europtest, S.A. (France) for approximately $1,100,000. The purchase
agreement also requires that the Company purchase the remaining 10% of
Europtest pro rata over a three year period at prices determined based
upon net sales of Europtest products. Europtest develops and sells
specialized software-driven test equipment used primarily in cellular,
satellite and other communications applications. The acquired company's
net sales were approximately $1,900,000 for the year ended March 31,
1998. On a pro forma basis, had the Europtest acquisition taken place
as of the beginning of the periods presented, results of operations for
those periods would not have been materially affected. The purchase
price has been allocated to the assets acquired and liabilities assumed
based on their fair values.
5. Bank Loan Agreements
--------------------
As of March 31, 1998, the Company replaced a previous agreement with a
revised revolving credit agreement with two banks which is secured by
substantially all of the Company's assets. The agreement provides for a
revolving credit line of $27,000,000, which expires on March 31, 2001.
The interest rate on borrowings under this agreement is at various
rates depending upon certain financial ratios, with the present rate
substantially equivalent to the prime rate (8.25% at September 30,
1998). The Company has entered into an interest rate swap agreement for
the $4,720,000 then outstanding under the revolving credit line at 7.6%
in order to reduce the interest rate risk associated with these
outstanding borrowings. The Company paid a facility fee of $20,000 and
is required to pay a commitment fee of
8
1/4% per annum of the average unused portion of the credit line.
The terms of the agreement require compliance with certain covenants
including minimum consolidated tangible net worth and pretax earnings,
maintenance of certain financial ratios, limitations on capital
expenditures and indebtedness and prohibition of the payment of cash
dividends. In connection with the purchase of certain materials for use
in manufacturing, the Company has a letter of credit facility of
$2,000,000. At September 30, 1998, the Company's available unused line
of credit was approximately $20,000,000 after consideration of the
letter of credit.
6. Inventories
-----------
Inventories consist of the following:
September 30, June 30,
1998 1998
(In thousands)
Raw Materials $ 14,835 $ 12,012
Work in Process 12,279 12,737
Finished Goods 4,401 5,102
--------- --------
$ 31,515 $ 29,851
========= ========
7. Income Taxes
------------
The Company is undergoing routine audits by various taxing authorities
of several of its state and local income tax returns covering periods
from 1994 to 1996. Management believes that the probable outcome of
these various audits should not materially affect the consolidated
financial statements of the Company.
8. Contingencies
-------------
A subsidiary of the Company whose operations were discontinued in 1991,
is one of several defendants named in a personal injury action
initiated in August, 1994, by a group of plaintiffs. The plaintiffs are
seeking damages which cumulatively exceed $500 million. The complaint
alleges, among other things, that the plaintiffs suffered injuries from
exposure to substances contained in products sold by the subsidiary to
one of its customers. This action is in the discovery stage. Based upon
available information and considering its various defenses, together
with its product liability insurance, in the opinion of management of
the Company, the outcome of the action against its subsidiary will not
have a materially adverse effect on the Company's consolidated
financial statements.
9. Conversion of 7-1/2% Debentures
-------------------------------
On September 8, 1997, the Company called for the redemption of all of
its outstanding 7-1/2% Senior Subordinated Convertible Debentures
($9,981,000) at 104-1/2% of the principal amount. As of October 1997,
all of the principal amount outstanding was converted into Common Stock
at $5-5/8 per share. In connection with the conversions, $599,000 of
deferred bond issuance costs were charged to additional paid-in
capital.
9
AEROFLEX INCORPORATED
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Aeroflex, founded in 1937, utilizes its advanced design, engineering and
manufacturing capabilities to provide state-of-the-art microelectronic module,
interconnect and testing solutions used in communication applications for
commercial and defense markets. Its products are used in satellite, personal
wireless, cable television ("CATV") and defense communications markets. It also
designs and manufactures motion control systems and shock and vibration
isolation systems used for commercial, industrial and defense applications. The
Company's operations are grouped into three segments: Microelectronics; Test,
Measurement and Other Electronics; and Isolator Products. The Company's
consolidated financial statements include the accounts of Aeroflex and its
subsidiaries, all of which are wholly-owned, except for Europtest, as discussed
below.
Effective September 1, 1998, the Company acquired 90% of the stock of
Europtest, S.A. (France) for approximately $1,100,000. The purchase agreement
also requires that the Company purchase the remaining 10% of Europtest pro rata
over a three year period at prices determined based upon net sales of Europtest
products. Europtest develops and sells specialized software-driven test
equipment used primarily in cellular, satellite and other communications
applications. The acquired company's net sales were approximately $1,900,000 for
the year ended March 31, 1998.
Approximately 42% and 50% of the Company's sales for fiscal years 1998 and
1997, respectively, were to agencies of the United States Government or to prime
defense contractors or subcontractors of the United States Government. The
Company's overall dependence on the defense market has been declining as a
result of the growth of MIC Technology Corporation, which is more commercially
oriented, and a focusing of resources towards developing standard products for
the commercial market.
Management believes that potential reductions in defense spending will not
materially affect its operations. In certain product areas, the Company has
suffered reductions in sales volume due to cutbacks in the military budget. In
other product areas, the Company has experienced increased sales volume due to a
realignment of government spending towards upgrading existing systems instead of
purchasing completely new systems. The overall effect of the cutbacks and
realignment has not been material to the Company.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure About
Segments of an Enterprise and Related Information", which is effective for
fiscal years beginning after December 15, 1997.
10
This statement establishes standards for reporting information about operating
segments and related disclosures about products and services, geographic areas
and major customers. The Company adopted this standard effective July 1, 1998,
as required, and does not believe the adoption will result in a material change
to its segment disclosures in its fiscal 1999 annual financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. This statement requires companies to record
derivatives on the balance sheet as assets or liabilities at their fair value.
In certain circumstances changes in the value of such derivatives may be
required to be recorded as gains or losses. Management believes that the impact
of this statement will not have a material effect on the Company's consolidated
financial statements.
Market Risk
The Company is exposed to market risk related to changes in interest rates
and, to an immaterial extent, to foreign currency exchange rates. Most of the
Company's debt is at fixed rates of interest or at a variable rate with an
interest rate swap agreement to effectively make it a fixed rate of interest.
That debt which is subject to a floating rate of interest (30-day LIBOR) and is
not hedged by an interest rate swap amounts to approximately $5.4 million at
September 30, 1998. If market interest rates increase by 10 percent from levels
at September 30, 1998, the effect on the Company's results of operations would
not be material.
Year 2000 Compliance
Management has initiated a company-wide program and has developed a formal
plan of implementation to prepare the Company for the Year 2000. This includes
taking actions designed to ensure that the Company's information technology
("IT") systems, products and infrastructure are Year 2000 compliant and that its
customers, suppliers and service providers have taken similar action. The
Company is in the process of evaluating its internal issues - all of its IT
systems, products, equipment and other facilities systems - and modifying items
that are not compliant. With respect to its external issues - customers,
suppliers and service providers - the Company is surveying them primarily
through written correspondence.
The Company expects to incur internal staff costs, as well as consulting
and other expenses, and believes the total costs to be incurred for all internal
Year 2000 compliance related projects will not have a material impact on the
Company's business, results of operations or financial condition. Management
expects to complete its investigation, remediation and contingency planning
activities for all mission critical systems and areas by early 1999, although
there can be no assurance that it will. At this time, Management believes that
the Company does not have any internal mission critical Year 2000 issues that it
cannot remedy. With respect to mission critical third parties,
11
in some instances the Company has protection under contracts and the Company
intends to create contingency plans to mitigate its exposure in the event such
third parties are not Year 2000 compliant. Despite its efforts to survey its
customers, suppliers and service providers, Management cannot be certain as to
the actual Year 2000 readiness of these third parties or the impact that any
non-compliance on their part may have on the Company's business, results of
operations or financial condition.
Three Months Ended September 30, 1998 Compared to Three Months Ended
September 30, 1997
Net Sales. Net sales increased 32.4% to $31.6 million for the three months
ended September 30, 1998 from $23.9 million for the three months ended September
30, 1997. Net sales in the Microelectronics segment increased 48.6% to $21.5
million for the three months ended September 30, 1998 from $14.5 million for the
three months ended September 30, 1997 due to increased sales volume in both thin
film interconnects and microelectronic modules. Net sales in the Test,
Measurement and Other Electronics segment increased 16.0% to $5.7 million for
the three months ended September 30, 1998 from $4.9 million for the three months
ended September 30, 1997 primarily due to increased sales volume in both
frequency synthesizers and high speed automatic test systems offset in part by
decreased sales volume in stabilization and tracking devices. Net sales in the
Isolator Products segment decreased 1.6% to $4.4 million for the three months
ended September 30, 1998 from $4.5 million for the three months ended September
30, 1997.
Gross Profit. Cost of sales includes materials, direct labor and overhead
expenses such as engineering labor, fringe benefits, allocable occupancy costs,
depreciation and manufacturing supplies. Gross profit increased 35.5% to $11.1
million for the three months ended September 30, 1998 from $8.2 million for the
three months ended September 30, 1997. Gross margin increased to 35.2% for the
three months ended September 30, 1998 from 34.4% for the three months ended
September 30, 1997. The increase was primarily a result of increased margins in
the Microelectronics segment reflecting the greater efficiencies of higher
volume and a favorable sales mix in that segment.
Selling, General and Administrative Costs. Selling, general and
administrative costs include office and management salaries, fringe benefits,
commissions and advertising costs. Selling, general and administrative costs
increased 22.2% to $5.6 million (17.8% of net sales) for the three months ended
September 30, 1998 from $4.6 million (19.3% of net sales) for the three months
ended September 30, 1997. The increase was primarily due to labor related
expenses, including salaries for additional hires.
Research and Development Costs. Research and development costs consist of
material, engineering labor and allocated overhead. Company sponsored research
and development costs increased 99.5% to $2.0 million (6.3% of net sales) for
the three months ended September 30, 1998 from $998,000 (4.2% of net sales) for
the three months ended September 30,
12
1997. The increase was primarily attributable to the costs for development of a
new low-cost, high speed, high performance frequency synthesizer intended for
commercial communication test systems.
Other Expense (Income). Interest expense decreased to $299,000 for the
three months ended September 30, 1998 from $723,000 for the three months ended
September 30, 1997, primarily due to reduced levels of borrowings. Other income
was $303,000 for the three months ended September 30, 1998 including interest
income of $297,000. Other expense was $83,000 for the three months ended
September 30, 1997 comprised primarily of $102,000 of debenture redemption costs
net of $14,000 of interest income. Interest income increased due to increased
levels of cash equivalents. The reduced levels of borrowings and the increased
levels of cash equivalents resulted from the net proceeds of $31.3 million from
stock issued in a public offering completed in March 1998.
Provision for Income Taxes. Income taxes recorded by the Company increased
92.3% to $1.3 million (an effective income tax rate of 35.6%) for the three
months ended September 30, 1998 from $650,000 (an effective income tax rate of
36.1%) for the three months ended September 30, 1997. The income tax provisions
for the two quarters differed from the amount computed by applying the U.S.
Federal income tax rate to income before income taxes primarily due to state and
local income taxes and research and development credits.
Liquidity and Capital Resources
In March 1998, the Company sold 2,597,000 shares of its Common Stock in a
public offering for $31,285,000, net of an underwriting discount of $1,973,000
and issuance costs of $496,000. Of these net proceeds, $9,639,000 was used to
repay bank indebtedness. The balance of the net proceeds, which is included in
cash and cash equivalents, will be used for general corporate purposes,
including working capital, capital expenditures, facilities expansion and
potential acquisitions. As of September 30, 1998, the Company had $53,120,000 in
working capital.
As of March 31, 1998, the Company replaced a previous agreement with a
revised revolving credit agreement with two banks which is secured by
substantially all of the Company's assets. The agreement provides for a
revolving credit line of $27,000,000, which expires on March 31, 2001. The
interest rate on borrowings under this agreement is at various rates depending
upon certain financial ratios, with the present rate substantially equivalent to
the prime rate (8.25% at September 30, 1998). The Company has entered into an
interest rate swap agreement for the $4,720,000 then outstanding under the
revolving credit line at 7.6% in order to reduce the interest rate risk
associated with these outstanding borrowings. The Company paid a facility fee of
$20,000 and is required to pay a commitment fee of 1/4% per annum of the average
unused portion of the credit line.
The terms of the agreement require compliance with certain covenants
including minimum consolidated tangible net worth and pretax earnings,
maintenance of certain financial ratios, limitations on capital expenditures and
indebtedness and prohibition of the payment of cash
13
dividends. In connection with the purchase of certain materials for use in
manufacturing, the Company has a letter of credit facility of $2,000,000. At
September 30, 1998, the Company's available unused line of credit was
approximately $20,000,000 after consideration of the letter of credit.
During June 1994, the Company completed a sale of $10.0 million principal
amount of 7-1/2% Senior Subordinated Convertible Debentures ("Debentures"). On
September 8, 1997, the Company called for redemption all of its outstanding
Debentures at 104-1/2% of the principal amount. The Debentures were convertible
into the Company's Common Stock at a price of $5-5/8 per share through October
6, 1997. As of October 1997, all of the principal amount outstanding was
converted into Common Stock.
The Company's order backlog at September 30, 1998 and 1997 was $78.5
million and $52.1 million, respectively.
The Company's net cash provided by operating activities was $33,000 for
the three months ended September 30, 1998 which was due to the continued
profitability of the Company which was offset, in part, by reductions in accrued
expenses and increases in inventories. Net cash used in investing activities was
$3.7 million for the three months ended September 30, 1998, consisting primarily
of $3.9 million for capital expenditures (including $2.5 million for the
acquisition of a previously leased operating facility in Pearl River, New York)
and $929,000 used to purchase Europtest offset, in part, by the proceeds from
the sale of equipment of $1.0 million. Net cash used in financing activities was
$881,000 for the three months ended September 30, 1998, consisting primarily of
debt payments and the purchase of treasury stock.
Management of the Company believes that internally generated funds and
available lines of credit will be sufficient for its working capital
requirements, capital expenditure needs and the servicing of its debt for at
least the next twelve months.
Forward-Looking Statements
All statements other than statements of historical fact included in this
Report on Form 10-Q, including without limitation statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, business strategy and plans and
objectives of management of the Company for future operations, are
forward-looking statements. When used in this Annual Report, words such as
"anticipate," "believe," "estimate," "expect," "intend" and similar expressions,
as they relate to the Company or its management, identify forward-looking
statements. Such forward-looking statements are based on the beliefs of the
Company's management, as well as assumptions made by and information currently
available to the Company's management. Actual results could differ materially
from those contemplated by the forward-looking statements, as a result of
certain factors, including but not limited to competitive factors and pricing
pressures, changes in legal and regulatory requirements, technological change or
difficulties, product development risks, commercialization difficulties and
general economic conditions. Such statements reflect the current views of the
Company with respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to the operations, results of operations,
growth strategy and liquidity of the Company.
14
AEROFLEX INCORPORATED
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
On August 13, 1998, the Company declared a dividend distribution
of one Preferred Share Purchase Right on each share of its common
stock (the "New Preferred Purchase Rights"). The dividend was
effective on the expiration of the Company's then outstanding
Preferred Share Purchase Rights. Upon the occurrence of certain
events, the New Preferred Purchase Rights enable stockholders to
buy one-thousandth of a share of a new series of preferred stock
(the "New Series A Preferred"). In connection with the adoption of
the New Preferred Purchase Rights, the Company amended its
Certificate of Incorporation to provide for the establishment of
the New Series A Preferred. The New Series A Preferred replaced
the then authorized preferred stock. The Company has reserved
25,000 shares of New Series A Preferred for issuance upon exercise
of the New Preferred Purchase Rights. No shares of New Series A
Preferred stock are issued and outstanding.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AEROFLEX INCORPORATED
(REGISTRANT)
November 6, 1998 By: s/Michael Gorin
Michael Gorin
President, Chief Financial Officer
and Principal Accounting Officer
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