NEWS RELEASE
AEROFLEX
FOR IMMEDIATE RELEASE
---------------------
FOR FURTHER INFORMATION CONTACT:
Investor Inquiries:
- ------------------
Michael Gorin
Vice Chairman and Chief Financial Officer
(516) 694-6700
AEROFLEX INCORPORATED
REPORTS FIRST QUARTER FISCAL 2005 OPERATING RESULTS
SALES INCREASED 43% FROM PRIOR YEAR TO $109.2 MILLION
PRO FORMA INCOME FROM CONTINUING OPERATIONS
OF $7.7 MILLION OR $.10 PER DILUTED SHARE
GAAP INCOME FROM CONTINUING OPERATIONS OF
$6.4 MILLION OR $.08 PER DILUTED SHARE
PLAINVIEW, NEW YORK, NOVEMBER 8, 2004 -- Aeroflex Incorporated (Nasdaq Symbol:
ARXX), a leading designer, developer and manufacturer of automated testing
solutions and microelectronics for the aerospace, defense and broadband
communications markets, today announced operating results for its first quarter
ended September 30, 2004.
Net sales from continuing operations for the first quarter ended September 30,
2004 were $109.2 million, compared with $76.1 million for the same period of
last year, representing an increase of 43%. The Company reported income from
continuing operations for the first quarter ended September 30, 2004 of $6.4
million, or $.08 per diluted share, versus income from continuing operations of
$962,000, or $.02 per diluted share, in the same period of last year.
On a pro forma basis, for the quarter ended September 30, 2004, after tax income
from continuing operations was $7.7 million, or $.10 per diluted share,
excluding a pre-tax charge of $2.1 million for amortization of acquired
intangibles. On a pro forma basis, for the quarter ended September 30, 2003,
after tax income from continuing operations was $3.8 million, or $.06 per
diluted share, excluding pre-tax charges of:
o $3.1 million for a write-off of in-process research and development
related to the Company's acquisitions and
o $1.3 million for amortization of acquired intangibles.
The pro forma results are a supplement to financial statements based on GAAP.
The Company uses pro forma information to evaluate its operating performance and
believes this presentation provides investors with additional insight into its
underlying operating results. A full reconciliation between the pro forma and
GAAP results from continuing operations is included in the accompanying
financial data.
The highlights of the company's year-over-year financial performance from
continuing operations for the first quarter of fiscal 2005 are as follows:
o Net sales increased 43% to a first quarter record $109.2 million from
$76.1 million. If our acquisitions of RIWS, MCE and Celerity were
completed as of the beginning of last year's first quarter, the
year-over-year sales increase would have been 23%.
o Gross profit margins were a first quarter record 47.0% compared to
44.4% last year.
o Pro forma operating margins reached 11.0%, compared to 7.9% last year.
o The Company completed the sale of its thin film manufacturing
subsidiary in September, 2004 for $8.8 million and utilized most of
the proceeds to pay off certain equipment lease obligations.
"As has been widely reported, the economic recovery, which started last year,
has hit a soft patch which has affected our first quarter sales growth and is
expected to impact our second quarter," said Michael Gorin, Vice Chairman and
CFO. "First quarter sales fell $4 to $5 million short of our expectations
principally due to the shortfall attributed to shipments of our FS1000 frequency
synthesizer to our semiconductor test customer. However, unlike 2001, when it
took our customer several years to work through its inventory of our product, we
believe that their current inventory levels are closely aligned with their
expected shipments and, therefore, the sales impact will be short term. In spite
of the sales shortfall, we were able to exceed our targeted gross and operating
margins.
"Based upon inputs from certain key customers, we expect to see a stronger
second half of our fiscal year."
SECOND QUARTER FISCAL 2005 BUSINESS OUTLOOK
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Our estimate of operating results for the December 2004 quarter is as follows:
o Net sales are expected to be in the range of $109 to $110 million.
o Gross profit margins are expected to be approximately 47% of sales.
o S,G&A costs are expected to be approximately 22% to 23% of sales.
o R&D costs are anticipated to be approximately 13% to 14% of sales.
o Amortization of acquired intangibles is expected to be approximately $.02
per diluted share.
o Using a share count of 76.5 million shares and an expected income tax rate
of 37%, we anticipate pro forma earnings from continuing operations per
diluted share of $.10. Pro forma earnings exclude amortization of acquired
intangibles. GAAP earnings per diluted share are anticipated to be $.08.
Our conference call discussing first quarter results is scheduled for 9:00 a.m.
(New York time) on November 9, 2004 and can be accessed by dialing
1-800-299-0148 in the United States and by dialing 617-801-9711 outside of the
United States. The participant passcode is 94884141. There will be a replay of
the conference call starting one hour after the meeting's conclusion. This
replay will be available for seven days. The replay can be accessed by dialing
1-888-286-8010 within the United States and by dialing 617-801-6888 outside of
the United States. The access code for both telephone numbers is 42647326. This
call is being webcast by CCBN and can be accessed at Aeroflex's website at
www.aeroflex.com. This webcast will be archived on that site for one year. In
conjunction with this conference call, the Company has also posted on its
website certain financial information on its first quarter results.
ABOUT AEROFLEX
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Aeroflex Incorporated is a global provider of high technology solutions to the
aerospace, defense and broadband communications markets. The Company's diverse
technologies allow it to design, develop, manufacture and market a broad range
of test, measurement and microelectronic products. The Company's common stock
trades on the Nasdaq National Market System under the symbol ARXX and is
included in the S&P SmallCap 600 index. Additional information concerning
Aeroflex Incorporated can be found on the Company's Web site: www.aeroflex.com.
All statements other than statements of historical fact included in this press
release regarding Aeroflex's financial position, business outlook, business
strategy and plans and objectives of its management for future operations are
forward-looking statements. When used in this press release, words such as
"anticipate," "believe," "estimate," "expect," "intend" and similar expressions,
as they relate to Aeroflex or its management, identify forward-looking
statements. Such forward-looking statements are based on the current beliefs of
Aeroflex's management, as well as assumptions made by and information currently
available to its 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, the
divestiture of the shock and vibration control device manufacturing business,
changes in legal and regulatory requirements, technological change or
difficulties, product development risks, commercialization difficulties and
general economic conditions. Such statements reflect our current views with
respect to the future and are subject to these and other risks, uncertainties
and assumptions relating to Aeroflex's financial condition, results of
operations, growth strategy and liquidity. Aeroflex does not undertake any
obligation to update such forward-looking statements.
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
For the Quarter Ended (Unaudited)
-------------------------------------------------------
9/30/04 9/30/04 9/30/03 9/30/03
(GAAP) (Pro forma) (GAAP) (Pro forma)
NET SALES $ 109,183 $ 109,183 $ 76,093 $ 76,093
Cost of sales 57,851 57,851 42,301 42,301
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GROSS PROFIT 51,332 51,332 33,792 33,792
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Selling, general and administrative
costs 24,767 24,767 17,912 17,912
Research and development costs 14,544 14,544 9,865 9,865
Amortization of acquired intangibles 2,060 - 1,340 -
Acquired in-process research and
development costs - - 3,120 -
--------- --------- --------- ---------
Total operating costs 41,371 39,311 32,237 27,777
--------- --------- --------- ---------
OPERATING INCOME 9,961 12,021 1,555 6,015
--------- --------- --------- ---------
Other expense (income)
Interest expense 260 260 320 320
Other expense (income) (424) (424) (245) (245)
--------- --------- --------- ---------
Total other expense (income) (164) (164) 75 75
--------- --------- --------- ---------
Income from continuing operations
before income taxes 10,125 12,185 1,480 5,940
Provision for income taxes 3,725 4,483 518 2,124
--------- --------- --------- ---------
Income from continuing operations 6,400 7,702 962 3,816
--------- --------- --------- ---------
Discontinued operations
Income (loss) from discontinued
operations, net of tax provision
(benefit) of $204 and $(298) 350 350 (568) (568)
Loss on disposal of operations, net
of tax benefit of $0 and $0 (1,133) (1,133) - -
--------- --------- --------- ---------
Loss from discontinued operations,
net of tax (783) (783) (568) (568)
--------- --------- --------- ---------
Net income $ 5,617 $ 6,919 $ 394 $ 3,248
========= ========= ========= =========
Income per common share:
Basic
Continuing operations $ .09 $ .10 $ .02 $ .06
Discontinued operations (.01) (.01) (.01) (.01)
----- ----- ------ -----
Net income $ .08 $ .09 $ .01 $ .05
===== ===== ====== =====
Diluted
Continuing operations $ .08 $ .10 $ .02 $ .06
Discontinued operations (.01) (.01) (.01) (.01)
----- ----- ------ -----
Net income $ .07 $ .09 $ .01 $ .05
===== ===== ====== =====
Weighted average number of shares
outstanding - Basic 74,446 74,446 61,959 61,959
======== ======== ======== ========
- Diluted 75,988 75,988 63,197 63,197
======== ======== ======== ========
AEROFLEX INCORPORATED
AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP RESULTS TO PRO FORMA
----------------------------------------------------
INCOME FROM CONTINUING OPERATIONS (UNAUDITED)
---------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
For the Quarter Ended
---------------------
9/30/04 9/30/03
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GAAP income from
continuing operations $ 6,400 $ 962
Pro forma adjustments:
Amortization of acquired
intangible assets 2,060 1,340
Acquired in-process R&D - 3,120
Income tax benefit (758) (1,606)
-------- --------
Pro forma income from
continuing operations $ 7,702 $ 3,816
======== ========
Income per common share:
Basic
GAAP income from
continuing operations after tax $ .09 $ .02
Pro forma adjustments, net of tax .01 .04
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Pro forma income from
continuing operations after tax $ .10 $ .06
====== ======
Diluted
GAAP income from
continuing operations after tax $ .08 $ .02
Pro forma adjustments, net of tax .02 .04
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Pro forma income from
continuing operations after tax $ .10 $ .06
====== ======
Weighted average number of shares
outstanding - Basic 74,446 61,959
====== ======
- Diluted 75,988 63,197
====== ======
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
2004 2004
------------ -----------
(Unaudited)
(In thousands)
ASSETS
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Current assets:
Cash and cash equivalents $ 108,890 $ 98,502
Accounts receivable, less allowance for
doubtful accounts 91,741 97,031
Inventories 97,884 94,617
Deferred income taxes 16,638 16,774
Assets of discontinued operations 6,065 11,910
Prepaid expenses and other current assets 10,976 8,646
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Total current assets 332,194 327,480
Property, plant and equipment, net 75,080 74,372
Assets of discontinued operations 3,196 9,717
Other assets 14,202 10,932
Intangible assets with definite lives, net 39,666 40,602
Goodwill 84,666 88,288
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Total assets $ 549,004 $ 551,391
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Current portion of long-term debt $ 3,396 $ 4,770
Accounts payable 25,380 25,293
Advance payments by customers 11,202 11,725
Income taxes payable 4,677 1,088
Liabilities of discontinued operations 1,837 4,573
Accrued payroll expenses 13,858 13,966
Accrued expenses and other current liabilities 23,108 28,200
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Total current liabilities 83,458 89,615
Long-term debt 4,783 5,505
Deferred income taxes 8,799 9,445
Liabilities of discontinued operations - 3,613
Other long-term liabilities 16,637 16,116
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Total liabilities 113,677 124,294
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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 110,000; none issued - -
Common Stock, par value $.10 per share;
authorized 110,000,000 shares; issued
74,456,000 and 74,282,000 shares 7,446 7,428
Additional paid-in capital 371,635 370,491
Accumulated other comprehensive income 12,838 11,387
Retained earnings 43,422 37,805
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435,341 427,111
Less: Treasury stock, at cost (4,000 shares) 14 14
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Total stockholders' equity 435,327 427,097
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Total liabilities and stockholders' equity $ 549,004 $ 551,391
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