Exhibit 99.1
------------
HERLEY REPORTS 1ST QUARTER RESULTS
REVENUES INCREASED 19% to $33.6 MILLION
FREE CASH FLOW WAS $5.6 MILLION
EARNINGS PER DILUTED SHARE WAS $0.24
Lancaster, PA. December 9, 2004. Herley Industries, Inc. (Nasdaq:HRLY) today
reported results for the first quarter ended October 31, 2004. Select financial
results for the first quarter are as follows:
o Net sales increased $5.3 million to $33.6 million
o Cash provided by operations was $7.7 million
o Capital expenditures were $2.0 million
o Net income was $3.6 million, 10.6% of revenues
o Book to Bill was .96:1 for the first quarter, 1.01:1 for last 12 months
John Kelley, President said, "Although our results for the quarter were mixed,
we did make good progress, both domestically and at our U.K. facility, on
several of the engineering issues that impacted gross margins in the quarter."
Kelley continued, "We are pleased with the Company's free cash flow in the
quarter. Generating healthy cash flow has been an area of emphasis for us and we
expect to continue to see the positive results of our actions in fiscal 2005."
Net sales for the thirteen weeks ended October 31, 2004 were approximately $33.6
million, as compared to $28.3 million in the thirteen weeks ended November 2,
2003, an increase of $5.3 million (19%). Net sales at two recent acquisitions,
CTI and RSS, accounted for an increase of approximately $3.5 million, or 66% of
the increase for the quarter. Herley also experienced an approximate $3.1
million increase in net sales at its other US operations due to:
o The start up of shipments of certain RF power amplifier products that
had been in development last year, and
o Shipments of certain microwave frequency modulation components
principally used in electronic warfare simulation systems.
These increases in sales in the first quarter were offset by a decrease in
revenues recognized by EWST, Herle's UK subsidiary, due to changes in contract
estimates at that operation versus contract estimates in the first quarter of
fiscal 2004.
The gross profit margin in the thirteen weeks ended October 31, 2004 was 32.3%
compared to 37.7% in the first quarter of fiscal 2004, a decline of 5.4%. The
decrease in gross profit is primarily attributable to:
o Decreases of gross margins at EWST, principally due to changes in
contract estimates at that operation versus contract estimates in the
first quarter of fiscal 2004;
o A decline of gross margins at one US operation due to lower shipments
and higher labor costs attributable to the start up of a major
electronic warfare upgrade program for the US Navy's EA 6B fleet
aircraft, offset by
o An improvement of gross margins at another US operation due to the
increase in volume attributable to start up of shipments of certain RF
power amplifier products, and shipments of certain microwave frequency
modulation components referred to above.
Selling and administrative expenses for the thirteen weeks ended October 31,
2004 were 17.4% of net sales as compared to 16.9% in the first quarter of fiscal
2004. Almost all of the net increase in expenses of $1 million was attributable
to the addition of selling and administrative expenses in connection with the
acquisitions of CTI and RSS.
Operating income for the first quarter was $5.0 million or 15% of net sales, as
compared to $5.9 million or 21% of net sales in 2004. The decrease in operating
income is primarily attributable to the decline in gross margin percentage (for
the reasons outlined above) and the 0.6% increase in selling and administrative
costs as a percentage of sales, offset by the beneficial impact of the $5.3
million increase in revenue for the quarter.
Herley will host a conference call on Friday, December 10, 2004 at 9:00 A.M.
Eastern Time to discuss this news. To join the conference call dial 1 (888)
425-4188, referencing Conference ID # 2617609. A taped replay of the call will
be available through December 17, 2004. To listen to the replay dial: 1 (800)
642 1687 (U.S.) or 1 (706) 645-9291 (International), and Conference ID #
2617609. In addition, the conference call will be broadcast live over the
Internet through PR Newswire at
http://phx.corporate-ir.net/playerlink.zhtml?c=111170&s=wm&e=979990.
To listen to the live call on the Internet, go to the web site 15 minutes
early to register, download and install any necessary audio software.
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 manufacturing
locations and approximately 830 employees. 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
- --------------------------------------------------------------------------------
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. 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.
- --------------------------------------------------------------------------------
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)
Thirteen weeks ended
--------------------
October 31, November 2,
2004 2003
----------- -----------
Net sales $ 33,590 $ 28,267
------- -------
Cost and expenses:
Cost of products sold 22,731 17,625
Selling and administrative expenses 5,855 4,780
------- -------
28,586 22,405
------- -------
Operating Income 5,004 5,862
------- -------
Other income (expense), net
Investment income 224 176
Interest expense (79) (87)
Foreign exchange (loss) -- (173)
------- -------
145 (84)
------- -------
Income before income taxes 5,149 5,778
Provision for income taxes 1,596 1,837
------- -------
Net income $ 3,553 $ 3,941
======= =======
Earnings per common share - Basic $ .25 $ .28
=== ===
Basic weighted average shares 14,252 14,013
====== ======
Earnings per common share - Diluted $ .24 $ .27
=== ===
Diluted weighted average shares 14,936 14,782
====== ======
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
October 31, August 1,
2004 2004
----------- ---------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 67,884 $ 66,181
Trade accounts receivable 20,809 24,664
Costs incurred and income recognized in excess
of billings on uncompleted contracts 14,035 14,210
Other receivables 840 576
Inventories, net of allowance of $4,081
in fiscal 2005 and $3,937 in 2004 45,885 44,909
Deferred taxes and other 4,054 3,579
------- -------
Total Current Assets 153,507 154,119
Property, Plant and Equipment, net 27,055 25,968
Goodwill 38,859 35,165
Intangibles, net of accumulated amortization of $847
in fiscal 2005 and $752 in 2004 4,463 4,555
Available-For-Sale Securities 147 147
Other Investments 113 117
Other Assets 846 900
------- -------
$ 224,990 $ 220,971
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 812 $ 804
Accounts payable and accrued expenses 16,999 16,934
Billings in excess of costs incurred and
income recognized on uncompleted contracts 679 1,303
Income taxes payable 3,132 2,091
Reserve for contract losses 960 954
Reserve for warranty costs 581 580
Advance payments on contracts 949 1,180
------- -------
Total Current Liabilities 24,112 23,846
Long-term Debt 5,159 5,845
Other Long-term Liabilities 993 932
Deferred Income Taxes 4,833 4,848
------- -------
35,097 35,471
------- -------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.10 par value; authorized
20,000,000 shares; issued and outstanding
14,285,107 in fiscal 2005 and 14,220,508 in 2004 1,429 1,422
Additional paid-in capital 108,423 107,671
Retained earnings 78,704 75,151
Accumulated other comprehensive income 1,337 1,256
------- -------
Total Shareholders' Equity 189,893 185,500
------- -------
$ 224,990 $ 220,971
======= =======
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Thirteen weeks ended
--------------------
October 31, November 2,
2004 2003
---------- -----------
Cash flows from operating activities:
Net income $ 3,553 $ 3,941
------ ------
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 1,149 966
Foreign exchange loss -- 173
Equity in income of limited partnership (6) --
Changes in operating assets and liabilities:
Decrease in accounts receivable 4,126 2,274
Decrease (increase) in costs incurred and income
recognized in excess of billings on
uncompleted contracts 175 (5,429)
(Increase) decrease in other receivables (265) 92
(Increase) in inventories (766) (1,735)
(Increase) in prepaid expenses and other (473) (243)
(Decrease) in accounts payable
and accrued expenses (60) (327)
(Decrease) increase in billings in excess of
costs incurred and income recognized
on uncompleted contracts (624) 1,294
Increase in income taxes payable 1,241 877
(Decrease) increase in reserve for contract losses (327) 241
(Decrease) in advance payments on contracts (231) (271)
Other, net 166 232
------ ------
Total adjustments 4,105 (1,856)
------ ------
Net cash provided by operating activities 7,658 2,085
------ ------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (3,753) --
Partial distribution from limited partnership 10 20
Capital expenditures (2,044) (1,187)
------ ------
Net cash used in investing activities (5,787) (1,167)
------ ------
Cash flows from financing activities:
Proceeds from exercise of stock options 559 718
Payments of long-term debt (727) (621)
------ ------
Net cash (used in) provided by financing activities (168) 97
------ ------
Net increase in cash and cash equivalents 1,703 1,015
Cash and cash equivalents at beginning of period 66,181 81,523
------ ------
Cash and cash equivalents at end of period $ 67,884 $ 82,538
====== ======