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 SECOND QUARTER FISCAL 2005 OPERATING RESULTS
SALES INCREASED 13% FROM PRIOR YEAR TO $112.5 MILLION
PRO FORMA INCOME FROM CONTINUING OPERATIONS
OF $7.4 MILLION OR $.10 PER DILUTED SHARE
GAAP INCOME FROM CONTINUING OPERATIONS OF
$6.1 MILLION OR $.08 PER DILUTED SHARE
PLAINVIEW, NEW YORK, FEBRUARY 7, 2005 -- 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 second quarter
ended December 31, 2004.
Net sales from continuing operations for the second quarter ended December 31,
2004 were $112.5 million, compared with $99.6 million for the same period of
last year, representing an increase of 13%. On a GAAP basis, the Company
reported after tax income from continuing operations for the second quarter
ended December 31, 2004 of $6.1 million, or $.08 per diluted share, versus after
tax income from continuing operations of $3.9 million, or $.06 per diluted
share, in the same period of last year.
On a pro forma basis, for the quarter ended December 31, 2004, after tax income
from continuing operations was $7.4 million, or $.10 per diluted share,
excluding a pre-tax charge of $2.0 million for amortization of acquired
intangibles. On a pro forma basis, for the quarter ended December 31, 2003,
after tax income from continuing operations was $5.9 million, or $.09 per
diluted share, excluding pre-tax charges of:
o $1.1 million for a write-off of in-process research and development
related to the Company's acquisition of Celerity Systems, Incorporated
(CA) and
o $2.0 million for amortization of acquired intangibles.
Net sales from continuing operations for the six months ended December 31, 2004
were $221.7 million, compared with $175.7 million for the same period of last
year, representing an increase of 26%. On GAAP basis, the Company reported after
tax income from continuing operations for the six months ended December 31, 2004
of $12.5 million or $.16 per diluted share versus after tax income from
continuing operations of $4.9 million, or $.07 per diluted share, in the same
period of last year.
On a pro forma basis for the six months ended December 31, 2004 after tax income
from continuing operations was $15.1 million, or $.20 per diluted share,
excluding a pre-tax charge of $4.1 million for amortization of acquired
intangibles. On a pro forma basis, for the six months ended December 31, 2003
after tax income from continuing operations was $9.7 million, or $.15 per
diluted share, excluding pre-tax charges of:
o $4.2 million for a write-off of in-process research and development
related to the Company's acquisitions and
o $3.3 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 second quarter of fiscal 2005 are as follows:
o Net sales increased 13% to $112.5 million from $99.6 million.
o Gross profit margins were 47.6% compared to 45.9% last year.
o Pro forma operating margins reached 10.3%, compared to 10.1% last year.
o Pro forma operating income increased 14.7% to $11.6 million.
"We are encouraged by our second quarter performance with sales growing 3%
sequentially and gross profit margins expanding to 47.6% of sales," said Michael
Gorin, Vice Chairman and CFO. "The stronger than expected gross profit margins
were primarily the result of a favorable sales mix and operating efficiencies in
our test solutions segment.
"Our book-to-bill ratio for the second quarter was an excellent 1.08 to 1 and we
are anticipating a positive book-to-bill in the third quarter which gives us
reason to believe that business conditions are continuing to improve."
THIRD QUARTER FISCAL 2005 BUSINESS OUTLOOK
- ------------------------------------------
Our March 2005 operating results will include charges of approximately $.02 per
diluted share for restructuring costs associated with certain of our foreign
operations and $.02 per diluted share for consulting fees related to Sarbanes
Oxley 404 compliance. The restructuring is expected to be completed by the end
of March 2005 and result in annual savings of approximately $2 million. The
outside costs related to Sarbanes compliance other than year-end audit fees
(which are being accrued over the course of the year) are expected to be
significantly less in future quarters.
o Net sales are expected to be in the range of $117 million to $119
million.
o Gross profit margins are expected to be approximately 47% to 47.5% of
sales.
o SG&A costs are expected to be approximately 22% to 22.5% of sales,
excluding the Sarbanes related charge of $.02 per diluted share
referred to above. Including the costs related to Sarbanes compliance,
total SG&A costs are expected to be approximately 24% to 24.5% of
sales.
o R&D costs are anticipated to be approximately 13% to 13.5% of sales.
o Restructuring costs are expected to be approximately $.02 per diluted
share.
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 37.5%, we anticipate pro forma earnings from continuing
operations per diluted share of $.10, excluding the restructuring
costs referred to above and amortization of acquired intangibles. The
costs related to Sarbanes compliance will not be an adjustment in the
computation of pro forma earnings per common share. GAAP earnings are
anticipated to be $.06 per diluted share.
Our conference call discussing second quarter results is scheduled for 9:00 a.m.
(New York time) on February 8, 2005 and can be accessed by dialing
1-800-291-5365 in the United States and by dialing 617-614-3922 outside of the
United States. The participant passcode is 10200503. There will be a replay of
the conference call starting at approximately 11:00 a.m. (New York time) on
February 8, 2005 and will be available for one week. 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
87351195. 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 regarding its second quarter results.
ABOUT AEROFLEX
- --------------
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)
--------------------------------
12/31/04 12/31/04 12/31/03(a) 12/31/03(a)
--------- -------- -------- ---------
(GAAP) (Pro forma) (GAAP) (Pro forma)
NET SALES $112,469 $112,469 $ 99,581 $ 99,581
Cost of sales 58,988 58,988 53,873 53,873
--------- -------- --------- ---------
GROSS PROFIT 53,481 53,481 45,708 45,708
Selling, general and administrative
costs 26,719 26,719 23,845 23,845
Research and development costs 15,199 15,199 11,780 11,780
Amortization of acquired intangibles 2,042 - 1,976 -
Acquired in-process R&D - - 1,100 -
--------- -------- --------- ---------
OPERATING INCOME 9,521 11,563 7,007 10,083
Interest and other income
(expense), net 379 379 (871) (871)
--------- -------- --------- ---------
Income from continuing operations
before income taxes 9,900 11,942 6,136 9,212
Provision for income taxes 3,758 4,510 2,224 3,337
--------- -------- --------- ---------
Income from continuing operations 6,142 7,432 3,912 5,875
Income (loss) from discontinued
operations, net of tax (819) (819) (6,303) (6,303)
--------- -------- --------- ---------
Net income (loss) $ 5,323 $ 6,613 $ (2,391) $ (428)
========= ======== ========= =========
Income (loss) per common share:
Basic
Continuing operations $ .08 $ .10 $ .06 $ .09
Discontinued operations (.01) (.01) (.10) (.10)
----- ----- ----- -----
Net income (loss) $ .07 $ .09 $(.04) $(.01)
===== ===== ===== =====
Diluted
Continuing operations $ .08 $ .10 $ .06 $ .09
Discontinued operations (.01) (.01) (.09) (.10)
----- ----- ------ -----
Net income (loss) $ .07 $ .09 $ (.03) $ (.01)
===== ===== ====== ======
Weighted average number of shares
Outstanding - Basic 74,625 74,625 66,556 66,556
======= ======= ======= =======
- Diluted 76,310 76,310 68,433 68,433
======= ======= ======= =======
(a) Restated to reflect the results of both our thin-film interconnect and
shock and vibration control device operations as discontinued operations.
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
For the Six Months Ended (Unaudited)
--------------------------------------------------
12/31/04 12/31/04 12/31/03(a) 12/31/03(a)
-------- -------- -------- --------
(GAAP) (Pro forma) (GAAP) (Pro forma)
NET SALES $221,651 $221,651 $ 175,674 $ 175,674
Cost of sales 116,839 116,839 96,174 96,174
--------- -------- --------- ---------
GROSS PROFIT 104,812 104,812 79,500 79,500
Selling, general and administrative
costs 51,486 51,486 41,757 41,757
Research and development costs 29,743 29,743 21,645 21,645
Amortization of acquired intangibles 4,101 - 3,316 -
Acquired in-process R&D - - 4,220 -
--------- -------- --------- ---------
OPERATING INCOME 19,482 23,583 8,562 16,098
Interest and other income
(expense), net 543 543 (946) (946)
--------- -------- --------- ---------
Income from continuing operations
before income taxes 20,025 24,126 7,616 15,152
Provision for income taxes 7,484 8,992 2,742 5,455
--------- -------- --------- ---------
Income from continuing operations 12,541 15,134 4,874 9,697
Income (loss) from discontinued
operations, net of tax (1,602) (1,602) (6,870) (6,870)
--------- -------- --------- ---------
Net income (loss) $ 10,939 $ 13,532 $ (1,996) $ 2,827
========= ======== ========= =========
Income (loss) per common share:
Basic
Continuing operations $ .17 $ .20 $ .08 $ .15
Discontinued operations (.02) (.02) (.11) (.11)
----- ----- ----- -----
Net income (loss) $ .15 $ .18 $(.03) $ .04
===== ===== ===== =====
Diluted
Continuing operations $ .16 $ .20 $ .07 $ .15
Discontinued operations (.02) (.02) (.10) (.11)
----- ----- ----- ------
Net income (loss) $ .14 $ .18 $(.03) $ .04
===== ===== ===== ======
Weighted average number of shares
Outstanding - Basic 74,536 74,536 64,258 64,258
======= ======= ======= =======
- Diluted 76,149 76,149 65,815 65,815
======= ======= ======= =======
(a) Restated to reflect the results of both our thin-film interconnect and
shock and vibration control device operations as discontinued operations.
AEROFLEX INCORPORATED
AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP RESULTS TO PRO FORMA
----------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
---------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
For the Quarter Ended For the Six Months Ended
--------------------- ------------------------
12/31/04 12/31/03 12/31/04 12/31/03
-------- -------- -------- --------
GAAP income from
continuing operations $ 6,142 $ 3,912 $ 12,541 $ 4,874
Pro forma Adjustments:
Amortization of acquired
intangible assets 2,042 1,976 4,101 3,316
Acquired in-process R&D - 1,100 - 4,220
Income tax benefit (752) (1,113) (1,508) (2,713)
--------- -------- --------- ---------
Pro forma income from
continuing operations $ 7,432 $ 5,875 $ 15,134 $ 9,697
========= ======== ========= =========
Income per common share:
Basic
GAAP income from
continuing operations after tax $ .08 $ .06 $ .17 $ .08
Pro forma adjustments, net of tax .02 .03 .03 .07
------ ------ ----- ------
Pro forma income from
continuing operations after tax $ .10 $ .09 $ .20 $ .15
====== ====== ====== ======
Income per share:
Diluted
GAAP income from
continuing operations after tax $ .08 $ .06 $ .16 $ .07
Pro forma adjustments, net of tax .02 .03 .04 .08
------ ------ ------ -------
Pro forma income from
continuing operations after tax $ .10 $ .09 $ .20 $ .15
====== ====== ====== ======
Weighted average number of shares
outstanding - Basic 74,625 66,556 74,536 64,258
====== ======= ======= =======
- Diluted 76,310 68,433 76,149 65,815
====== ======= ======= =======
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
2004 2004
------------ ------------
(Unaudited)
(In thousands)
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 11,558 $ 98,502
Marketable Securities 97,666 -
Accounts receivable, less allowance for
doubtful accounts 91,418 97,031
Inventories 107,093 94,617
Deferred income taxes 14,895 16,774
Assets of discontinued operations 6,524 11,910
Prepaid expenses and other current assets 8,219 8,646
---------- ---------
Total current assets 337,373 327,480
Property, plant and equipment, net 76,022 74,372
Assets of discontinued operations 3,218 9,717
Other assets 14,925 10,932
Intangible assets with definite lives, net 38,848 40,602
Goodwill 85,658 88,288
---------- ---------
Total assets $ 556,044 $ 551,391
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 659 $ 4,770
Accounts payable 27,096 25,293
Advance payments by customers 13,233 11,725
Income taxes payable 1,148 1,088
Liabilities of discontinued operations 1,713 4,573
Accrued payroll expenses 13,084 13,966
Accrued expenses and other current liabilities 22,305 28,200
--------- ---------
Total current liabilities 79,238 89,615
Long-term debt 4,710 5,505
Deferred income taxes 6,481 9,445
Liabilities of discontinued operations - 3,613
Other long-term liabilities 18,300 16,116
--------- ---------
Total liabilities 108,729 124,294
--------- ---------
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
74,590,000 and 74,282,000 shares 7,459 7,428
Additional paid-in capital 372,654 370,491
Accumulated other comprehensive income 18,472 11,387
Retained earnings 48,744 37,805
--------- ---------
447,329 427,111
Less: Treasury stock, at cost (4,000 shares) 14 14
--------- ---------
Total stockholders' equity 447,315 427,097
--------- ----------
Total liabilities and stockholders' equity $ 556,044 $ 551,391
========= ==========