NEWS RELEASE
AEROFELX
FOR IMMEDIATE RELEASE
---------------------
FOR FURTHER INFORMATION CONTACT:
Investor Inquiries:
- ------------------
Leonard Borow
President and Chief Operating Officer
(516) 694-6700
AEROFLEX INCORPORATED
REPORTS RECORD THIRD QUARTER SALES,
87% INCREASE IN PRO FORMA EARNINGS AND
100% INCREASE IN GAAP EARNINGS
PLAINVIEW, NEW YORK, May 10, 2006 -- 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
third quarter, which ended March 31, 2006.
The highlights of the Company's quarterly financial performance from continuing
operations for the third quarter of fiscal 2006 are as follows:
o net sales increased 24% to a quarterly record $140.5 million
(including contributions from our fourth quarter 2005 acquisitions)
from $113.8 million last year and $135.2 million in the second quarter
of this fiscal year;
o pro forma gross profit margins were 48.0% compared to 47.3% last year
and 47.8% last quarter; and
o pro forma operating income increased 85% compared to last year and 8%
compared to last quarter.
On a pro forma basis, for the fiscal 2006 third quarter, income from continuing
operations increased 87% to $11.5 million, or $.15 per diluted share, compared
to $6.2 million, or $.08 per diluted share, last year. The fiscal 2006 third
quarter pro forma results exclude charges of:
o $3.4 million ($2.1 million, after tax) for amortization of acquired
intangibles;
o $1.6 million ($0.9 million, after tax) for share based compensation;
and
o $1.2 million ($0.7 million, after tax) for restructuring charges
related to the consolidation of the Company's subsidiaries in the
United Kingdom.
The prior year's third quarter pro forma results excluded a pre-tax charge of
$2.1 million ($1.2 million, after tax) for amortization of acquired intangibles
and $1.7 million ($1.0 million, after tax) for restructuring charges.
On a GAAP basis, gross profit margins for the fiscal 2006 third quarter were
47.7% compared to 47.3% last year and 47.8% last quarter. Operating income for
the fiscal 2006 third quarter increased 97% compared to last year and is the
same as the last quarter. Income from continuing operations for the fiscal 2006
third quarter amounted to $7.7 million, or $.10 per diluted share, compared with
$3.9 million, or $.05 per diluted share, last year representing a per share
increase of 100%. The fiscal 2006 third quarter included a $0.9 million after
tax charge for share based compensation (for which there was no comparable
expense in the prior year), a $2.1 million after tax charge for amortization of
acquired intangibles, (an increase of $0.9 million related to our acquisitions
in the fourth quarter of fiscal 2005); and a $0.7 million after tax charge for
restructuring costs (compared to a $1.0 million after tax charge in fiscal
2005).
The Company's financial performance from continuing operations for the nine
months of fiscal 2006 is as follows:
o net sales increased 20% to $401.3 million from $335.4 million last
year, including contributions from our fourth quarter 2005
acquisitions;
o pro forma gross profit margins were 47.9% compared to 47.3% last year;
and
o pro forma operating income increased 47% compared to last year.
On a pro forma basis, for the fiscal 2006 nine months, income from continuing
operations increased 45% to $30.9 million, or $.40 per diluted share, compared
to $21.3 million, or $.28 per diluted share, last year. The fiscal 2006 nine
month pro forma results exclude charges of:
o $10.3 million ($6.3 million, after tax) for amortization of acquired
intangibles;
o $5.0 million ($3.1 million, after tax) for share based compensation;
o $1.1 million ($0.7 million, after tax) for an acquisition related
inventory adjustment: and
o $1.2 million ($0.7 million, after tax) for restructuring charges.
The prior year's nine months pro forma results excluded a pre-tax charges of
$6.2 million ($3.8 million, after tax) for amortization of acquired intangibles
and $1.7 million ($1.0 million, after tax) for restructuring charges.
On a GAAP basis, gross profit margins for the fiscal 2006 nine months were 47.5%
compared to 47.3% last year. Operating income for the fiscal 2006 nine months
increased 24% compared to last year. Income from continuing operations for the
fiscal 2006 nine months increased 22% to $20.0 million, or $.26 per diluted
share, compared with $16.4 million, or $.22 per diluted share last year. The
fiscal 2006 nine months included: $3.1 million after tax charge for share based
compensation (for which there was no comparable expense in the prior year); a
$6.3 million after tax charge for amortization of acquired intangibles (an
increase of $2.5 million from last year's nine months); a $0.7 million after tax
charge for an acquisition related inventory adjustment; and a $0.7 million after
tax charge for restructuring costs (compared to a $1.0 million after tax charge
in fiscal year 2005).
"We are pleased with our operating results for the third quarter," said Len
Borow, President and Chief Operating Officer. "Our sales, excluding
acquisitions, grew 11% from last year's third quarter and we also achieved 8%
sequential growth in pre-tax pro forma earnings. Our backlog is $223.6 million,
with a book-to-bill ratio of .98 to 1. The book-to-bill was negatively impacted
by a $15 million test set order slipping into early April."
Our estimate of operating results for the June 2006 quarter is as follows:
o net sales are expected to be approximately $149 million; and
o pro forma earnings from continuing operations per diluted share are
anticipated to be $.17. Pro forma earnings exclude estimated amortization
of acquired intangibles, share based compensation and additional
restructuring charges of a combined $.05 per diluted share. GAAP earnings
from continuing operations per diluted share are anticipated to be $.12.
Our conference call discussing third quarter results is scheduled for 5:00 p.m.
(New York time) on May 10, 2006 and can be accessed by dialing 800-638-4930 in
the United States and by dialing 617-614-3944 outside of the United States. The
participant passcode is 29543227. There will be a replay of the conference call
beginning one hour after the call's conclusion 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 43676806. 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 related
to third 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
integration of acquired businesses, changes in legal and regulatory
requirements, technological change or difficulties, product development risks,
commercialization difficulties, general economic conditions, and other risk
factors disclosed in Aeroflex's most recently filed Form 10-Q. Such statements
reflect the current views of management 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.
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.
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(In thousands, except per share data)
For the Quarter Ended (Unaudited)
---------------------------------
3/31/06 3/31/06 3/31/05 3/31/05
------------- ------------ ------------ --------------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net Sales $ 140,527 $ 140,527 $ 113,755 $ 113,755
Cost of sales 73,461 73,130 59,963 59,963
------------- ------------ ------------ --------------
Gross profit 67,066 67,397 53,792 53,792
Selling, general and administrative
costs 30,863 28,550 30,110 28,432
Research and development costs 20,488 20,401 15,379 15,379
Amortization of acquired intangibles 3,440 - 2,063 -
------------- ------------ ------------ --------------
Operating income 12,275 18,446 6,240 9,981
Interest and other income
(expense), net 442 442 90 90
------------- ------------ ------------ --------------
Income from continuing operations
before income taxes 12,717 18,888 6,330 10,071
Provision for income taxes 4,971 7,384 2,464 3,914
------------- ------------ ------------ --------------
Income from continuing operations 7,746 11,504 3,866 6,157
Income (loss) from discontinued
operations, net of tax - - 106 106
------------- ------------ ------------ --------------
Net income $ 7,746 $ 11,504 $ 3,972 $ 6,263
============= ============ ============ ==============
Income (loss) per common share:
Basic
Continuing operations $ 0.10 $ 0.15 $ 0.05 $ 0.08
Discontinued operations - - - -
------------- ------------ ------------ --------------
Net income $ 0.10 $ 0.15 $ 0.05 $ 0.08
============= ============ ============ ==============
Diluted
Continuing operations $ 0.10 $ 0.15 $ 0.05 $ 0.08
Discontinued operations - - - -
------------- ------------ ------------ --------------
Net income $ 0.10 $ 0.15 $ 0.05 $ 0.08
============= ============ ============ ==============
Weighted average number of shares
Outstanding - Basic 75,133 75,133 74,714 74,714
============= ============ ============ ==============
- Diluted 77,230 77,230 75,842 75,842
============= ============ ============ ==============
AEROFLEX INCORPORATED
AND SUBSIDIARES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(In thousands, except per share data)
For the Nine Months Ended (Unaudited)
----------------------------------------------------------------------------
3/31/06 3/31/06 3/31/05 3/31/05
-------------- --------------- --------------- ----------------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net sales $ 401,332 $ 401,332 $ 335,406 $ 335,406
Cost of sales 210,785 209,215 176,802 176,802
-------------- --------------- --------------- ----------------
Gross profit 190,547 192,117 158,604 158,604
Selling, general and administrative
costs 91,672 86,270 81,597 79,919
Research and development costs 56,742 56,437 45,122 45,122
Amortization of acquired intangibles 10,329 - 6,164 -
-------------- --------------- --------------- ----------------
Operating income 31,804 49,410 25,721 33,563
Interest and other income
(expense), net 887 887 633 633
-------------- --------------- --------------- ----------------
Income from continuing operations
before income taxes 32,691 50,297 26,354 34,196
Provision for income taxes 12,642 19,433 9,947 12,907
-------------- --------------- --------------- ----------------
Income from continuing operations 20,049 30,864 16,407 21,289
Income (loss) from discontinued
operations, net of tax - - (1,496) (1,496)
-------------- --------------- --------------- ----------------
Net income $ 20,049 $ 30,864 $ 14,911 $ 19,793
============== =============== =============== ================
Income (loss) per common share:
Basic
Continuing operations $ 0.27 $ 0.41 $ 0.22 $ 0.29
Discontinued operations - - (0.02) (0.02)
-------------- --------------- --------------- ----------------
Net income $ 0.27 $ 0.41 $ 0.20 $ 0.27
============== =============== =============== ================
Diluted
Continuing operations $ 0.26 $ 0.40 $ 0.22 $ 0.28
Discontinued operations - - (0.02) (0.02)
-------------- --------------- --------------- ----------------
Net income $ 0.26 $ 0.40 $ 0.20 $ 0.26
============== =============== =============== ================
Weighted average number of shares
Outstanding - Basic 74,922 74,922 74,595 74,595
============== =============== =============== ================
- Diluted 76,306 76,306 76,047 76,047
============== =============== =============== ================
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 For the Nine Months Ended
------------------------------ -----------------------------
3/31/06 3/31/05 3/31/06 3/31/05
------------- ------------ ----------- -----------
GAAP income from
continuing operations $ 7,746 $ 3,866 $ 20,049 $ 16,407
Pro forma adjustments:
Share-based compensation 1,552 5,010
Amortization of acquired
intangible assets 3,440 2,063 10,329 6,164
Restructuring costs 1,179 1,678 1,179 1,678
Acquisition related inventory adjustment - - 1,088 -
Income tax benefit (2,413) (1,450) (6,791) (2,960)
------------- ------------ ----------- -----------
Pro forma income from
continuing operations $ 11,504 $ 6,157 $ 30,864 $ 21,289
============= ============ =========== ===========
Income per common share:
Basic
GAAP income from
continuing operations after tax $ 0.10 $ 0.05 $ 0.27 $ 0.22
Pro forma adjustments, net of tax 0.05 0.03 0.14 0.07
------------- ------------ ----------- -----------
Pro forma income from
continuing operations after tax $ 0.15 $ 0.08 $ 0.41 $ 0.29
============= ============ =========== ===========
Diluted
GAAP income from
continuing operations after tax $ 0.10 $ 0.05 $ 0.26 $ 0.22
Pro forma adjustments, net of tax 0.05 0.03 0.14 0.06
------------- ------------ ----------- -----------
Pro forma income from
continuing operations after tax $ 0.15 $ 0.08 $ 0.40 $ 0.28
============= ============ =========== ===========
Weighted average number of shares
outstanding - Basic 75,133 74,714 74,922 74,595
============= ============ =========== ===========
- Diluted 77,230 75,842 76,306 76,047
============= ============ =========== ===========
AEROFLEX INCORPORATED
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
-----------------------------------------------
(In thousands, except per share data)
March 31, June 30,
2006 2005
------------ -----------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 15,636 $ 12,974
Marketable securities 18,588 -
Accounts receivable, less allowance for
doubtful accounts 103,796 101,317
Inventories 129,594 118,906
Deferred income taxes 20,255 18,499
Prepaid expenses and other current assets 11,018 11,107
------------ -----------
Total current assets 298,887 262,803
Property, plant and equipment, net 75,387 78,195
Other assets 13,807 13,537
Intangible assets with definite lives, net 55,882 67,266
Goodwill 164,277 168,048
------------ -----------
Total assets $ 608,240 $ 589,849
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 618 $ 634
Accounts payable 29,023 35,907
Advance payments by customers 22,943 15,183
Income taxes payable 1,910 3,657
Accrued payroll expenses 17,536 15,222
Accrued expenses and other current liabilities 29,638 30,451
------------ -----------
Total current liabilities 101,668 101,054
Long-term debt 3,923 4,190
Deferred income taxes 13,498 17,146
Other long-term liabilities 20,236 23,479
------------ -----------
Total liabilities 139,325 145,869
------------ -----------
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
75,159 and 74,618 shares 7,516 7,462
Additional paid-in capital 381,987 372,666
Accumulated other comprehensive income 4,517 9,020
Retained earnings 74,895 54,846
------------ -----------
468,915 443,994
Less: Treasury stock, at cost (4 shares) - 14
------------ -----------
Total stockholders' equity 468,915 443,980
------------ -----------
Total liabilities and stockholders' equity $ 608,240 $ 589,849
============ ===========