Exhibit 99.1
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HERLEY REPORTS SECOND QUARTER RESULTS
Lancaster, PA, March 8, 2005. Herley Industries, Inc. (Nasdaq:HRLY) today
reported net revenues for the second quarter ended January 30, 2005 were
$33.8 million, a 14.8% increase from the second quarter of fiscal year
2004.
Second quarter operating income was $2.5 million, or 7.3% of net sales, as
compared to $5.2 million or 17.6% of net sales for the same quarter in the
prior year. Net income for the second quarter was $2.1 million or 6.2% of
net revenues. Earnings per diluted share were $0.14, on 15.0 million
weighted average diluted shares.
John M. Kelley, Herley President said:
'Herley's margins in the second quarter and the first six months of fiscal
2005 were lower due to our business decision to make significant
investments in engineering development and IR & D in order to have Herley
in a position for the changes we see coming in future U.S. defense budgets.
'We have previously stated that we want to get involved with our customers
as early as possible in the decision-making process. Herley's business
development group was created as a result of this strategy. As a result of
our success in business development and customer initiatives, we are
currently active in more development projects than at any time in the
Company's history.
'On several major programs we are transitioning from engineering
development to the early stage of production, which by definition, has
higher costs associated with engineering without offsetting production
revenues. We believe revenues and profits will quickly catch up once these
programs enter full production.
'We are confident that the contracts we have won and are now investing in
are long-term programs that enjoy both political and military support. If
our decisions are correct and these are sustainable, multi-year programs,
our aforementioned investment in current engineering development projects
will grow revenues and generate profits for many years. We expect to begin
to see the positive effects from these investments as early as the third
quarter of fiscal year 2005. Bookings in the following major programs are
forecast for the next two quarters.
o Next generation Air Force targets
o ICAP III electronic warfare systems
o Trident missile upgrades
o Ballistic Missile Defense programs
o F/A - 18 ACLS and IFF systems
o Electronic warfare target generators and simulators
o High Power Amplifiers for electronic warfare jamming and network
centric communication systems.'
Additional second quarter financial information:
- Net cash provided by operating activities was $2.0 million
- Capital expenditures were $1.2 million
- $94.2 million in funded backlog
- $67.9 million in cash and cash equivalents
- Current assets of $152.5 million
- Current liabilities of $21.5 million
- Shareholder' equity of $193.3 million
Net sales for the twenty-six weeks ended January 30, 2005 were
approximately $67.3 million compared to $57.7 million in the first six
months of fiscal 2004, an increase of $9.7 million, or 16.8%. Net sales at
our one acquisition completed in fiscal 2005 accounted for an increase of
approximately $1.0 million, or 10.0% of the increase for the two quarters
ended January 2005.
The gross profit margin in the twenty-six weeks ended January 30, 2005 was
31.2% compared to 36.7% in the first two quarters of fiscal 2004, a decline
of 5.5%. Excluding the acquisition of RSS, the decline in gross profit
margins would have been similar.
Operating income for the six months was $7.5 million or 11.1% of net sales,
as compared to $11.0 million or 19.1% of net sales in 2004.
Herley will host a conference call on Wednesday, March 9, 2005 at 9:00 A.M.
Eastern Time to discuss this news. To join the conference call dial 1 (888)
425-4188, referencing Conference ID # 4435095. A taped replay of the call
will be available through March 16, 2005. To listen to the replay dial: 1
(800) 642 1687 (U.S.) or 1 (706) 645-9291 (International), and Conference
ID # 4435095.
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=1024877.
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 eight
manufacturing locations and approximately 900 employees. Additional
information about the company can be found on the Internet at
www.herley.com.
... tables follow
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. 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.
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HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
JANUARY 30, AUGUST 1,
2005 2004
----------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 67,948 $ 66,181
TRADE ACCOUNTS RECEIVABLE 18,325 24,664
COSTS INCURRED AND INCOME RECOGNIZED IN EXCESS
OF BILLINGS ON UNCOMPLETED CONTRACTS 16,803 14,210
OTHER RECEIVABLES 699 576
INVENTORIES, NET OF ALLOWANCE OF $4,198
IN FISCAL 2005 AND $3,937 IN 2004 44,635 44,909
DEFERRED TAXES AND OTHER 4,130 3,579
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TOTAL CURRENT ASSETS 152,540 154,119
PROPERTY, PLANT AND EQUIPMENT, NET 27,152 25,968
GOODWILL 38,824 35,165
INTANGIBLES, NET OF ACCUMULATED AMORTIZATION OF $929
IN FISCAL 2005 AND $752 IN 2004 4,407 4,555
AVAILABLE-FOR-SALE SECURITIES - 147
OTHER INVESTMENTS 47 117
OTHER ASSETS 2,804 900
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$ 225,774 $ 220,971
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
CURRENT PORTION OF LONG-TERM DEBT $ 830 $ 804
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 13,955 16,934
BILLINGS IN EXCESS OF COSTS INCURRED AND
INCOME RECOGNIZED ON UNCOMPLETED CONTRACTS 281 1,303
INCOME TAXES PAYABLE 3,799 2,091
ACCRUAL FOR CONTRACT LOSSES 1,142 954
ACCRUAL FOR WARRANTY COSTS 583 580
ADVANCE PAYMENTS ON CONTRACTS 899 1,180
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TOTAL CURRENT LIABILITIES 21,489 23,846
LONG-TERM DEBT 5,103 5,845
OTHER LONG-TERM LIABILITIES 1,014 932
DEFERRED INCOME TAXES 4,843 4,848
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32,449 35,471
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
COMMON STOCK, $.10 PAR VALUE; AUTHORIZED
20,000,000 SHARES; ISSUED AND OUTSTANDING
14,360,307 IN FISCAL 2005 AND 14,220,508 IN 2004 1,436 1,422
ADDITIONAL PAID-IN CAPITAL 109,586 107,671
RETAINED EARNINGS 80,781 75,151
ACCUMULATED OTHER COMPREHENSIVE INCOME 1,522 1,256
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TOTAL SHAREHOLDERS' EQUITY 193,325 185,500
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$ 225,774 $ 220,971
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HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------- ----------------------
JANUARY 30, FEBRUARY 1, JANUARY 30, FEBRUARY 1,
2005 2004 2005 2004
-------- -------- -------- --------
NET SALES $ 33,754 $ 29,408 $ 67,344 $ 57,675
-------- -------- -------- --------
COST AND EXPENSES:
COST OF PRODUCTS SOLD 23,874 18,888 46,356 36,494
SELLING AND ADMINISTRATIVE EXPENSES 7,405 5,355 13,509 10,154
-------- -------- -------- --------
31,279 24,243 59,865 46,648
-------- -------- -------- --------
OPERATING INCOME 2,475 5,165 7,479 11,027
-------- -------- -------- --------
OTHER INCOME (EXPENSE), NET:
INVESTMENT INCOME 292 187 516 363
INTEREST EXPENSE (58) (82) (137) (169)
FOREIGN EXCHANGE GAIN (LOSS) 185 (70) 185 (243)
-------- -------- -------- --------
419 35 564 (49)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 2,894 5,200 8,043 10,978
PROVISION FOR INCOME TAXES 817 1,654 2,413 3,491
-------- -------- -------- --------
NET INCOME $ 2,077 $ 3,546 $ 5,630 $ 7,487
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EARNINGS PER COMMON SHARE - BASIC $ .14 $ .25 $ .39 $ .53
======== ======== ======== ========
BASIC WEIGHTED AVERAGE SHARES 14,335 14,073 14,294 14,043
======== ======== ======== ========
EARNINGS PER COMMON SHARE - DILUTED $ .14 $ .24 $ .38 $ .50
======== ======== ======== ========
DILUTED WEIGHTED AVERAGE SHARES 15,044 14,880 14,990 14,826
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HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
TWENTY-SIX WEEKS ENDED
JANUARY 30, FEBRUARY 1,
2005 2004
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 5,630 $ 7,487
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ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATIONS:
DEPRECIATION AND AMORTIZATION 2,389 1,976
FOREIGN EXCHANGE LOSS 22 214
GAIN ON SALE OF SECURITIES (20) -
EQUITY IN INCOME OF LIMITED PARTNERSHIP (6) (6)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
DECREASE (INCREASE) IN TRADE ACCOUNTS RECEIVABLE 6,610 (1,184)
(INCREASE) IN COSTS INCURRED AND INCOME
RECOGNIZED IN EXCESS OF BILLINGS
ON UNCOMPLETED CONTRACTS (2,593) (8,519)
(INCREASE) IN OTHER RECEIVABLES (123) (339)
DECREASE (INCREASE) IN INVENTORIES 484 (2,463)
(INCREASE) IN DEFERRED TAXES AND OTHER (549) (177)
(DECREASE) INCREASE IN ACCOUNTS PAYABLE
AND ACCRUED EXPENSES (3,121) 574
(DECREASE) INCREASE IN BILLINGS IN EXCESS OF
COSTS INCURRED AND INCOME RECOGNIZED
ON UNCOMPLETED CONTRACTS (1,022) 423
INCREASE IN INCOME TAXES PAYABLE 2,038 396
INCREASE IN ACCRUAL FOR CONTRACT LOSSES 22 204
(DECREASE) INCREASE IN ADVANCE PAYMENTS ON CONTRACTS (281) 549
OTHER, NET 220 790
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TOTAL ADJUSTMENTS 4,070 (7,562)
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 9,700 (75)
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CASH FLOWS FROM INVESTING ACTIVITIES:
ACQUISITION OF BUSINESS, NET OF CASH ACQUIRED (3,753) -
DEPOSIT FOR TECHNOLOGY LICENSE (1,000) -
DEPOSIT ON PURCHASE PRICE OF ACQUIRED BUSINESS (1,014) -
PROCEEDS FROM SALE OF SECURITIES 165 -
PARTIAL DISTRIBUTION FROM LIMITED PARTNERSHIP 78 39
CAPITAL EXPENDITURES (3,274) (3,124)
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NET CASH USED IN INVESTING ACTIVITIES (8,798) (3,085)
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CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 1,599 1,277
PAYMENTS OF LONG-TERM DEBT (734) (642)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 865 635
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,767 (2,525)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 66,181 81,523
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 67,948 $ 78,998
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