NEWS RELEASE
AEROFLEX
FOR IMMEDIATE RELEASE
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FOR FURTHER INFORMATION CONTACT:
Investor Inquiries:
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Leonard Borow
President and Chief Operating Officer
(516) 694-6700
AEROFLEX INCORPORATED
REPORTS FIRST QUARTER FISCAL 2006 OPERATING RESULTS
SALES INCREASED 15% FROM PRIOR YEAR TO $126 MILLION
PRO FORMA INCOME FROM CONTINUING OPERATIONS INCREASED 12% TO
$8.7 MILLION OR $.11 PER DILUTED SHARE
GAAP INCOME FROM CONTINUING OPERATIONS WAS
$4.5 MILLION OR $.06 PER DILUTED SHARE
PLAINVIEW, NEW YORK, November 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 fiscal 2006
first quarter, which ended September 30, 2005.
The highlights of the Company's year-over-year financial performance from
continuing operations for the first quarter of fiscal 2006 are as follows:
o Net sales increased 15% to a first quarter record $125.6 million from
$109.2 million.
o Pro forma gross profit margins were a record 47.8% compared to 47.0%
last year.
o Pro forma operating income increased 15% compared to last year.
Net sales from continuing operations for the fiscal 2006 first quarter were
$125.6 million, compared with $109.2 million for the same period of last year,
representing an increase of 15%, including contributions from our recent
acquisitions in the fourth quarter of fiscal 2005.
On a pro forma basis, for the fiscal 2006 first quarter, after tax income from
continuing operations increased 12% to $8.7 million, or $.11 per diluted share,
compared to $7.7 million, or $.10 per diluted share, last year. The fiscal 2006
first quarter excludes pre-tax charges of:
o $3.5 million ($2.2 million, after tax) for amortization of acquired
intangibles,
o $2.0 million ($1.3 million, after tax) for stock based compensation,
and
o $1.1 million ($0.7 million, after tax) for current period impact of
acquisition related adjustments to inventory.
The prior year's first quarter pro forma results excluded a pre-tax charge of
$2.1 million ($1.3 million, after tax) for amortization of acquired intangibles.
On a GAAP basis, after tax income from continuing operations for the fiscal 2006
first quarter, including all of the aforementioned items, amounted to $4.5
million, or $.06 per diluted share, compared with $6.4 million, or $.08 per
diluted share, last year. The fiscal 2006 first quarter included a $1.3 million
after tax charge for stock based compensation (for which there was no comparable
amount in the prior year), an increase of $0.9 million, after tax, of
amortization of acquired intangibles related to our recent acquisitions and a
$0.7 million after tax charge for the current period impact of acquisition
related adjustments to inventory (for which there was no comparable amount in
the prior year's quarter).
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 started the year off with an excellent first quarter," said Len Borow,
President and Chief Operating Officer. "Sales were higher than street
expectations, gross margins increased to a new record, bookings were strong and
we finished with record backlog of $215 million."
Second Quarter Fiscal 2006 Business Outlook
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Our estimate of operating results for the December 2005 quarter is as follows:
o Net sales are expected to be in the range of $132 and $134 million.
o Gross profit margins are expected to be approximately 48% of sales.
o S,G&A costs are expected to be approximately 22% of sales.
o R&D costs are anticipated to be approximately 14% of sales.
o Gross profit, S,G&A and R&D are exclusive of stock based
compensation.
o Using a share count of 77.0 million shares and an expected income tax
rate of 37%, we anticipate pro forma earnings from continuing
operations per diluted share of $.13. Pro forma earnings exclude
amortization of acquired intangibles of $.03 per diluted share and
stock-based compensation of $.01 per diluted share. GAAP earnings per
diluted share are anticipated to be $.09.
Our conference call discussing first quarter results is scheduled for 9:00 a.m.
(New York time) on November 4, 2005 and can be accessed by dialing
1-866-272-9941 in the United States and by dialing 617-213-8895 outside of the
United States. The participant passcode is 18466936. There will be a replay of
the conference call starting at approximately 11:00 a.m. (New York time) on
November 4, 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
73257625. 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
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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
integration of the businesses of both JcAIR, Inc. and the Test and Measurement
division of UbiNetics Holdings Ltd., 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 (Unaudited)
(In thousands, except per share data)
For the Quarter Ended
9/30/05 9/30/05 9/30/04 9/30/04
------- ---------- ---------- -----------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net sales $125,648 $125,648 $109,183 $109,183
Cost of sales 66,722 65,555 57,851 57,851
-------- -------- -------- --------
Gross profit 58,926 60,093 51,332 51,332
Selling, general and administrative
costs 30,251 28,424 24,767 24,767
Research and development costs 17,964 17,856 14,544 14,544
Amortization of acquired intangibles 3,457 - 2,060 -
-------- -------- -------- --------
Operating income (1) 7,254 13,813 9,961 12,021
Interest and other income
(expense), net (69) (69) 164 164
-------- -------- -------- --------
Income from continuing operations
before income taxes 7,185 13,744 10,125 12,185
Provision for income taxes 2,658 5,084 3,725 4,483
-------- -------- -------- --------
Income from continuing operations 4,527 8,660 6,400 7,702
Income (loss) from discontinued
operations, net of tax - - (783) (783)
-------- -------- -------- --------
Net income $ 4,527 8,660 $ 5,617 $ 6,919
======== ======== ======== ========
Income (loss) per common share:
Basic
Continuing operations (1) $ 0.06 0.12 $ 0.09 $ 0.10
Discontinued operations - - (0.01) (0.01)
-------- ----- -------- --------
Net income $ 0.06 0.12 $ 0.08 $ 0.09
======== ==== ======== ========
Diluted
Continuing operations (1) $ 0.06 0.11 $ 0.08 $ 0.10
Discontinued operations - - (0.01) (0.01)
-------- ------ -------- --------
Net income $ 0.06 0.11 $ 0.07 $ 0.09
======== ====== ======== ========
Weighted average number of shares
Outstanding - Basic 74,758 74,758 74,446 74,446
====== ====== ====== ======
- Diluted 75,699 75,699 75,988 75,988
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(1) The Company adopted Statement of Financial Accounting Standard No. 123(R)
"Accounting for Stock Based Compensation" using the modified prospective method
effective July 1, 2005. Therefore, the first quarter of fiscal 2006 includes a
$1.3 million after tax charge ($0.02 per basic and diluted share), but the prior
year's first quarter does not have a comparable charge.
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
--------------------------
9/30/05 9/30/04
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GAAP income from
continuing operations $ 4,527 $ 6,400
Pro forma adjustments:
Add back:
Stock based compensation 2,014 -
Amortization of acquired
intangible assets 3,457 2,060
Acquisition related inventory adjustment 1,088 -
Income tax benefit (2,426) (758)
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Pro forma income from
continuing operations $ 8,660 $ 7,702
======== =======
Income per common share:
Basic
GAAP income from
continuing operations after tax $ 0.06 $ 0.09
Pro forma adjustments, net of tax 0.06 0.01
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Pro forma income from
continuing operations after tax $ 0.12 $ 0.10
======== =======
Diluted
GAAP income from
continuing operations after tax $ 0.06 $ 0.08
Pro forma adjustments, net of tax 0.05 0.02
-------- -------
Pro forma income from
continuing operations after tax $ 0.11 $ 0.10
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Weighted average number of shares
outstanding - Basic 74,758 74,446
====== ======
- Diluted 75,699 75,988
====== ======
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except per share data)
September 30, June 30,
2005 2005
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ASSETS
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Current assets:
Cash and cash equivalents $ 17,493 $ 12,974
Accounts receivable, less allowance for
doubtful accounts 95,542 101,317
Inventories 122,421 118,906
Deferred income taxes 19,511 18,499
Prepaid expenses and other current assets 12,736 11,107
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Total current assets 267,703 262,803
Property, plant and equipment, net 77,260 78,195
Other assets 13,289 13,537
Intangible assets with definite lives, net 63,287 67,266
Goodwill 166,729 168,048
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Total assets $ 588,268 $ 589,849
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Current portion of long-term debt $ 635 $ 634
Accounts payable 29,936 35,907
Advance payments by customers 15,859 15,183
Income taxes payable 6,619 3,657
Accrued payroll expenses 14,009 15,222
Accrued expenses and other current liabilities 31,519 30,451
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Total current liabilities 98,577 101,054
Long-term debt 4,088 4,190
Deferred income taxes 15,772 17,146
Other long-term liabilities 21,143 23,479
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Total liabilities 139,580 145,869
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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
74,678 and 74,618 shares 7,468 7,462
Additional paid-in capital 375,041 372,666
Accumulated other comprehensive income 6,806 9,020
Retained earnings 59,373 54,846
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448,688 443,994
Less: Treasury stock, at cost (4 shares) - 14
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Total stockholders' equity 448,688 443,980
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Total liabilities and stockholders' equity $ 588,268 $ 589,849
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