Exhibit 99.1
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HERLEY REVENUE INCREASED
FOR THE FOURTH QUARTER AND FISCAL YEAR
OPERATING INCOME FOR THE FOURTH QUARTER AND FISCAL YEAR
WERE $3.2 MILLION AND $19.6 MILLION RESPECTIVELY
HERLEY BEGINS FISCAL 2005 WITH $100 MILLION IN BACKLOG
Lancaster, PA: October 15, 2004 - Herley Industries, Inc. (Nasdaq: HRLY) today
reported its financial results for the fourth quarter and fiscal year ended
August 1, 2004. Selected Results for the fourth quarter and fiscal year 2004 are
as follows: |X| Revenues for the fourth quarter increased 10.4% over the same
period last year to $34.2 million. |X| Litigation costs of $1.7 million in the
fourth quarter reduced earnings per share on a fully diluted basis by $0.08 per
share. |X| Net income for the fourth quarter was $3.5 million or 10.3% of
revenue, excluding the after-tax impact of litigation costs. |X| Revenues for
fiscal 2004 increased 10.8% to $122.2 million. |X| Excluding litigation costs in
fiscal 2004, income from operations was $21.5 million, or 17.6% of revenue. John
Kelley, President, said, "Herley's fourth quarter results reflected the ongoing
investment in business development and efforts to complete engineering on
several projects in order to transition these projects into production. We see
major changes in defense procurement and planning taking place immediately after
this presidential election, no matter which candidate wins. We believe the
long-awaited transformation from outdated cold war policies to defending against
today's regional terrorist threats will finally begin to come about. To prepare
for these changes Herley has been making the investments necessary to support
such programs as UAV's capable of carrying payloads and Network Centric
Communications. This kind of investment will position Herley to continue its
growth and profitability in the changed defense business of the future." Mr.
Kelley continued, "Two items should be especially noted in our financial report.
The first is the approximate $1.6 million payment to Robinson as a result of a
jury award after the 2002 trial. This is viewed as a one-time event. The second
is the 2-1/2% increase in SG&A due to what we view as our continuing investment
in our Business Development unit. Our success in reaching our goal of $250
million in annual revenues by fiscal year 2007 is heavily dependent on the
success of this unit."
"During fiscal 2004, we produced successful results on several fronts. We were
awarded contracts on very important programs, including ICAP, Trident, and
AFSAT. Additionally, we received authorization to proceed to production on major
engineering projects, including two systems on the F18." said Kelley. Kelley
continued, "Those engineering projects that have been completed are expected to
impact positively on Herley's financial performance beginning in the second
quarter of fiscal 2005." Herley Industries, Inc. is a leader in the design,
development and manufacture of microwave technology solutions for the defense,
aerospace and medical industries worldwide. Based in Lancaster, PA, Herley has
seven locations and approximately 800 employees worldwide. Additional
information about the company can be found on the Internet at www.herley.com
For information at Herley contact:
Peg Guzzetti Tel: (717) 735-8117
Investor Relations www.herley.com
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Safe Harbor Statement - Except for the historical information contained herein,
this release may contain forward-looking statements. Such statements are
inherently subject to risks and uncertainties. When used in this release, words
such as "anticipate," "believes," "estimate," "expect," "should," "intend,"
"projects," "objective," and similar expressions, as they relate to the Company
or its management, identify forward-looking statements. The Company's results
could differ materially based on various factors, including, but not limited to
cancellation or deferral of customer orders, difficulties in the timely
development of new products, difficulties in manufacturing, increased
competitive pressures, and general economic conditions. The Company does not
undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect future events or circumstances or to
reflect the occurrence of unanticipated events.
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HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)
Thirteen weeks ended 52 weeks 53 weeks
-------------------- ended ended
August 1, August 3, August 1, August 3,
2004 2003 2004 2003
--------- --------- --------- ---------
Net sales $ 34,246 $ 31,021 $ 122,154 $ 110,223
--------- --------- --------- ---------
Cost and expenses:
Cost of products sold 23,370 20,735 79,505 73,222
Selling and administrative expenses 5,910 4,559 21,123 16,187
Litigation costs 1,741 78 1,924 1,147
--------- --------- --------- ---------
31,021 25,372 102,552 90,556
--------- --------- --------- ---------
Income from operations 3,225 5,649 19,602 19,667
--------- --------- --------- ---------
Other income (expense), net
Investment income 158 213 674 1,113
Interest expense (78) (86) (326) (344)
Foreign exchange gain (loss) 31 - (194) -
--------- --------- --------- ---------
111 127 154 769
--------- --------- --------- ---------
Income before income taxes 3,336 5,776 19,756 20,436
Provision for income taxes 1,026 1,837 6,083 6,499
--------- --------- --------- ---------
Net income $ 2,310 $ 3,939 $ 13,673 $ 13,937
========= ========= ========= =========
Earnings (loss) per common share - Basic $ .16 $ .28 $ .97 $ .97
========= ========= ========= =========
Basic weighted average shares 14,205 13,921 14,105 14,317
========= ========= ========= =========
Earnings (loss) per common share - Diluted $ .15 $ .27 $ .92 $ .93
========= ========= ========= =========
Diluted weighted average shares 14,962 14,600 14,896 15,031
========= ========= ========= =========
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
August 1, August 3,
2004 2003
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 66,181 $ 81,523
Trade accounts receivable 24,664 16,525
Costs incurred and income recognized in excess
of billings on uncompleted contracts 14,210 6,960
Other receivables 576 827
Inventories, net of allowance of $3,412 in 2004
and $2,739 in 2003 44,909 37,545
Deferred taxes and other 3,579 3,207
--------- ---------
Total Current Assets 154,119 146,587
Property, Plant and Equipment, net 25,968 22,406
Goodwill 35,165 25,729
Intangibles, net of accumulated amortization of $752 in 2004
and $403 in 2003 4,555 1,542
Available-For-Sale Securities 147 75
Other Investments 117 162
Other Assets 900 1,063
--------- ---------
$ 220,971 $ 197,564
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 804 $ 686
Accounts payable and accrued expenses 17,514 13,177
Billings in excess of costs incurred and
income recognized on uncompleted contracts 1,303 -
Income taxes payable 2,091 2,670
Reserve for contract losses 954 736
Advance payments on contracts 1,180 856
--------- ---------
Total Current Liabilities 23,846 18,125
Long-term Debt 5,845 6,403
Other Long-term Liabilities 932 849
Deferred Income Taxes 4,848 4,945
--------- ---------
35,471 30,322
--------- ---------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.10 par value; authorized
20,000,000 shares; issued and outstanding
14,220,508 in 2004 and 13,969,151 in 2003 1,422 1,397
Additional paid-in capital 107,671 104,551
Retained earnings 75,151 61,478
Accumulated other comprehensive income (loss) 1,256 (184)
--------- ---------
Total Shareholders' Equity 185,500 167,242
--------- ---------
$ 220,971 $ 197,564
========= =========
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
52 weeks 53 weeks
ended ended
August 1, August 3,
2004 2003
-------- --------
Cash flows from operating activities:
Net income $ 13,673 $ 13,937
-------- --------
Adjustments to reconcile net income to net cash provided by
operations:
Depreciation and amortization 4,244 4,302
Foreign exchange loss 753 -
(Gain) on sale of fixed assets - (17)
Equity in income of limited partnership (10) (16)
(Increase) in deferred tax assets (316) (232)
(Decrease) increase in deferred tax liabilities (109) 1,048
Changes in operating assets and liabilities:
(Increase) in trade accounts receivable (6,923) (2,039)
(Increase) in costs incurred and income
recognized in excess of billings on
uncompleted contracts (7,250) (1,258)
Decrease (increase) in other receivables 251 (380)
Decrease in prepaid income taxes
(Increase) in inventories (5,806) (3,846)
Decrease (increase) in prepaid expenses and other 31 (52)
Increase in accounts payable
and accrued expenses 3,431 491
Increase in billings in excess of
costs incurred and income recognized
on uncompleted contracts 1,303 -
Increase in income taxes payable 108 3,627
(Decrease) in reserve for contract losses (240) (668)
Increase (decrease) in advance payments on contracts 324 (515)
Other, net 146 185
-------- --------
Total adjustments (10,063) 630
-------- --------
Net cash provided by operating activities 3,610 14,567
-------- --------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (14,914) (2,542)
Proceeds from sale of fixed assets 19 25
Partial distribution from limited partnership 55 49
Capital expenditures (5,884) (3,876)
-------- --------
Net cash used in investing activities (20,724) (6,344)
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants, net 2,458 1,994
Payments of long-term debt (686) (236)
Purchase of treasury stock - (14,668)
-------- --------
Net cash provided by (used in) financing activities 1,772 (12,910)
-------- --------
Net (decrease) in cash and cash equivalents (15,342) (4,687)
Cash and cash equivalents at beginning of period 81,523 86,210
-------- --------
Cash and cash equivalents at end of period $ 66,181 $ 81,523
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