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 THIRD QUARTER FISCAL 2005 OPERATING RESULTS
PRO FORMA INCOME FROM CONTINUING OPERATIONS
OF $6.2 MILLION OR $.08 PER DILUTED SHARE
GAAP INCOME FROM CONTINUING OPERATIONS OF
$3.9 MILLION OR $.05 PER DILUTED SHARE
PLAINVIEW, NEW YORK, May 3, 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 third quarter ended March 31,
2005.
Net sales from continuing operations for the third quarter ended March 31, 2005
were $113.8 million, compared with $113.1 million for the same period of last
year. On a GAAP basis, the Company reported after tax income from continuing
operations for the third quarter ended March 31, 2005 of $3.9 million, or $.05
per diluted share, versus after tax income from continuing operations of $6.6
million, or $.09 per diluted share, in the same period of last year.
On a pro forma basis, for the quarter ended March 31, 2005, after tax income
from continuing operations was $6.2 million, or $.08 per diluted share,
excluding a pre-tax charge of $2.1 million for amortization of acquired
intangibles and a pre-tax restructuring charge of $1.7 million relating to the
consolidation of our European operations in the Test Solutions business segment.
On a pro forma basis, for the quarter ended March 31, 2004, after tax income
from continuing operations was $8.0 million, or $.11 per diluted share,
excluding a pre-tax charge of $2.1 million for amortization of acquired
intangibles.
Net sales from continuing operations for the nine months ended March 31, 2005
were $335.4 million, compared with $288.8 million for the same period of last
year, representing an increase of 16%. On a GAAP basis, the Company reported
after tax income from continuing operations for the nine months ended March 31,
2005 of $16.4 million or $.22 per diluted share versus after tax income from
continuing operations of $11.5 million, or $.17 per diluted share, in the same
period of last year.
On a pro forma basis, for the nine months ended March 31, 2005, after tax income
from continuing operations was $21.3 million, or $.28 per diluted share,
excluding a pre-tax charge of $6.2 million for amortization of acquired
intangibles and the pre-tax restructuring charge of $1.7 million. On a pro forma
basis, for the nine months ended March 31, 2004, after tax income from
continuing operations was $17.7 million, or $.26 per diluted share, excluding
pre-tax charges of $4.2 million for a write-off of in-process research and
development related to the Company's acquisitions and $5.4 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.
"We are obviously disappointed in our results for the third quarter," said
Michael Gorin, Vice Chairman and CFO. "Several of our operating units did not
receive certain orders which were expected to be shipped in the third quarter.
We anticipate that these orders will be received in the June quarter. On an
encouraging note, we were able to maintain gross profit margins above 47%.
"Consulting fees and costs and year-end audit fees related to Sarbanes-Oxley 404
compliance incurred or accrued during the current quarter amounted to
approximately $3.4 million on a pretax basis, or $.03 per diluted share. These
costs are reflected as an expense in both GAAP and pro forma earnings per share.
"In spite of a disappointing third quarter, we continue to believe that our
business model is sound and that we are positioned for growth both for the
fourth quarter and fiscal 2006."
Fourth Quarter Fiscal 2005 Business Outlook
- -------------------------------------------
Our estimate of operating results for the June 2005 quarter, including the
results of our recent acquisition, JcAIR, Inc., from April 20, 2005, is as
follows:
o Net sales are expected to increase sequentially approximately 5% from
the prior quarter before approximately an additional $4.5 million of
sales from JcAIR.
o Gross profit margins are expected to be 46.5% of sales, plus or minus
a few tenths of 1%.
o S,G&A costs are expected to be 23% of sales, plus or minus a few
tenths of 1%. Included in these costs are consulting fees and costs
and year-end audit fees related to Sarbanes-Oxley 404 compliance for
the fourth quarter of approximately $1.4 million pretax, or 1% of
sales.
o R&D costs are anticipated to be 13.7% of sales, plus or minus a few
tenths of 1%.
o Amortization of acquired intangibles and other acquisition related
charges and acquired in-process R&D costs in connection with the JcAIR
acquisition are expected to be approximately $.02 per diluted share.
o Using a share count of 76.0 million shares and an expected income tax
rate of 37.7%, we anticipate pro forma earnings from continuing
operations per diluted share of $.09 or $.10, excluding the
amortization mentioned above. 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 $.07 or $.08 per
diluted share.
o It should be noted that JcAIR's gross profit margins are somewhat lower
than our corporate average, however, its S,G&A costs and R&D costs are
also below our corporate average.
Our conference call discussing third quarter results is scheduled for 9:00 a.m.
(New York time) on May 4, 2005 and can be accessed by dialing 800-901-5241 in
the United States and by dialing 617-786-2963 outside of the United States. The
participant passcode is 57405543. There will be a replay of the conference call
starting at approximately 11:00 a.m. (New York time) on May 4, 2005 and will be
available for one week. The replay can be accessed by dialing 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 49582704. 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 third 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
integration of the business of JcAir, Inc., 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)
3/31/05 3/31/05 3/31/04 (a) 3/31/04 (a)
-------------- --------------- ----------------- -----------------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net sales $ 113,755 $ 113,755 $ 113,117 $ 113,117
Cost of sales 59,963 59,963 59,809 59,809
-------------- --------------- ----------------- -----------------
Gross profit 53,792 53,792 53,308 53,308
Selling, general and administrative
costs 30,110 28,432 25,185 25,185
Research and development costs 15,379 15,379 13,342 13,342
Amortization of acquired intangibles 2,063 - 2,132 -
Acquired in-process R&D - - - -
-------------- --------------- ----------------- -----------------
Operating income 6,240 9,981 12,649 14,781
Interest and other income
(expense), net 90 90 (2,249) (2,249)
-------------- --------------- ----------------- -----------------
Income from continuing operations
before income taxes 6,330 10,071 10,400 12,532
Provision for income taxes 2,464 3,914 3,782 4,568
-------------- --------------- ----------------- -----------------
Income from continuing operations 3,866 6,157 6,618 7,964
Income (loss) from discontinued
operations, net of tax 106 106 (753) (753)
-------------- --------------- ----------------- -----------------
Net income $ 3,972 $ 6,263 $ 5,865 $ 7,211
=============== =============== ================= =================
Income (loss) per common share:
Basic
Continuing operations $ 0.05 $ 0.08 $ 0.10 $ 0.12
Discontinued operations - - (0.01) (0.01)
-------------- --------------- ----------------- -----------------
Net income $ 0.05 $ 0.08 $ 0.09 $ 0.11
=============== =============== ================= =================
Diluted
Continuing operations $ 0.05 $ 0.08 $ 0.09 $ 0.11
Discontinued operations - - (0.01) (0.01)
-------------- --------------- ----------------- -----------------
Net income $ 0.05 $ 0.08 $ 0.08 $ 0.10
=============== =============== ================= =================
Weighted average number of shares
Outstanding - Basic 74,714 74,714 68,804 68,804
=============== =============== ================= =================
- Diluted 75,842 75,842 71,436 71,436
=============== =============== ================= =================
(a) Restated to reflect the results of our 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 Nine Months Ended (Unaudited)
------------------------------------------------------------------------
3/31/05 3/31/05 3/31/04 (a) 3/31/04 (a)
-------------- ---------------- -------------- --------------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net sales $ 335,406 $ 335,406 $ 288,792 $ 288,792
Cost of sales 176,802 176,802 155,985 155,985
-------------- ---------------- -------------- --------------
Gross profit 158,604 158,604 132,807 132,807
Selling, general and administrative
costs 81,597 79,919 66,942 66,942
Research and development costs 45,122 45,122 34,987 34,987
Amortization of acquired intangibles 6,164 - 5,448 -
Acquired in-process R&D - - 4,220 -
-------------- ---------------- -------------- --------------
Operating income 25,721 33,563 21,210 30,878
Interest and other income
(expense), net 633 633 (3,195) (3,195)
-------------- ---------------- -------------- --------------
Income from continuing operations
before income taxes 26,354 34,196 18,015 27,683
Provision for income taxes 9,947 12,907 6,523 10,021
-------------- ---------------- -------------- --------------
Income from continuing operations 16,407 21,289 11,492 17,662
Income (loss) from discontinued
operations, net of tax (1,496) (1,496) (7,623) (7,623)
-------------- ---------------- -------------- --------------
Net income $ 14,911 $ 19,793 $ 3,869 $ 10,039
============== ================ ============== ==============
Income (loss) per common share:
Basic
Continuing operations $ 0.22 $ 0.29 $ 0.18 $ 0.27
Discontinued operations (0.02) (0.02) (0.12) (0.12)
-------------- ---------------- -------------- --------------
Net income $ 0.20 $ 0.27 $ 0.06 $ 0.15
============== ================ ============== ==============
Diluted
Continuing operations $ 0.22 $ 0.28 $ 0.17 $ 0.26
Discontinued operations (0.02) (0.02) (0.12) (0.11)
-------------- ---------------- -------------- --------------
Net income $ 0.20 $ 0.26 $ 0.05 $ 0.15
============== ================ ============== ==============
Weighted average number of shares
Outstanding - Basic 74,595 74,595 65,773 65,773
============== ================ ============== ==============
- Diluted 76,047 76,047 67,689 67,689
============== ================ ============== ==============
(a) Restated to reflect the results of our 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 Nine Months Ended
--------------------------------- -----------------------------------
3/31/05 3/31/04 3/31/05 3/31/04
-------------- --------------- --------------- ---------------
GAAP income from
continuing operations $ 3,866 $ 6,618 $ 16,407 $ 11,492
Pro forma adjustments:
Restructuring 1,678 - 1,678 -
Amortization of acquired
intangible assets 2,063 2,132 6,164 5,448
Acquired in-process R&D - - - 4,220
Income tax benefit (1,450) (786) (2,960) (3,498)
Pro forma income from
-------------- --------------- --------------- ---------------
continuing operations $ 6,157 $ 7,964 $ 21,289 $ 17,662
============== =============== =============== ===============
Income per common share:
Basic
GAAP income from
continuing operations after tax $ 0.05 $ 0.10 $ 0.22 $ 0.18
Pro forma adjustments, net of tax 0.03 0.02 0.07 0.09
-------------- --------------- --------------- ---------------
Pro forma income from
continuing operations after tax $ 0.08 $ 0.12 $ 0.29 $ 0.27
============== =============== =============== ===============
Diluted
GAAP income from
continuing operations after tax $ 0.05 $ 0.09 $ 0.22 $ 0.17
Pro forma adjustments, net of tax 0.03 0.02 0.06 0.09
-------------- --------------- --------------- ---------------
Pro forma income from
continuing operations after tax $ 0.08 $ 0.11 $ 0.28 $ 0.26
============== =============== =============== ===============
Weighted average number of shares
outstanding - Basic 74,714 68,804 74,595 65,773
============== =============== =============== ===============
- Diluted 75,842 71,436 76,047 67,689
============== =============== =============== ===============
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
March 31, June 30,
2005 2004
--------- --------
(Unaudited)
ASSETS
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Current assets:
Cash and cash equivalents $ 8,186 $ 98,502
Marketable securities 117,788 -
Accounts receivable, less allowance for
doubtful accounts 90,110 97,031
Inventories 112,361 94,617
Deferred income taxes 18,223 16,774
Assets of discontinued operations - 11,910
Prepaid expenses and other current assets 8,180 8,646
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Total current assets 354,848 327,480
Property, plant and equipment, net 75,007 74,372
Assets of discontinued operations - 9,717
Other assets 14,965 10,932
Intangible assets with definite lives, net 36,434 40,602
Goodwill 85,329 88,288
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Total assets $ 566,583 $ 551,391
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 660 $ 4,770
Accounts payable 28,663 25,293
Advance payments by customers 11,333 11,725
Income taxes payable 2,359 1,088
Liabilities of discontinued operations - 4,573
Accrued payroll expenses 15,561 13,966
Accrued expenses and other current liabilities 25,385 28,200
------------ ----------
Total current liabilities 83,961 89,615
Long-term debt 4,607 5,505
Deferred income taxes 9,878 9,445
Liabilities of discontinued operations - 3,613
Other long-term liabilities 18,587 16,116
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Total liabilities 117,033 124,294
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Stockholders' equity:
Preferred Stock, par value $.10 per share;
authorized 1,000 shares:
Series A Junior Participating Preferred
Stock, par value $.10 per share,
authorized 110; none issued
Common Stock, par value $.10 per share; - -
authorized 110,000 shares; issued
74,615 and 74,282 shares 7,462 7,428
Additional paid-in capital 372,772 370,491
Accumulated other comprehensive income 16,614 11,387
Retained earnings 52,716 37,805
------------ ----------
449,564 427,111
Less: Treasury stock, at cost (4 shares) 14 14
------------ ----------
Total stockholders' equity 449,550 427,097
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Total liabilities and stockholders' equity $ 566,583 $ 551,391
============ ==========