NEWS RELEASE AEROFLEX
FOR IMMEDIATE RELEASE
---------------------
FOR FURTHER INFORMATION CONTACT:
Investor Inquiries:
Leonard Borow
President and Chief Operating Officer
(516) 694-6700
AEROFLEX
REPORTS RECORD FIRST QUARTER SALES AND EARNINGS
PLAINVIEW, NEW YORK, November 2, 2006 -- Aeroflex Incorporated (Nasdaq Symbol:
ARXX), today announced operating results for its fiscal 2007 first quarter which
ended September 30, 2006.
Quarter Ended September 30,
------------------------------------
2006 2005 % Increase
---------- ---------- ----------
Sales (in millions) $ 136.8 $ 125.6 9%
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Diluted earnings per share
GAAP $ 0.09 $ 0.06 50%
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Pro forma $ 0.13 $ 0.11 18%
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Pro forma gross profit margins were 46.6%, compared to 47.8% last year and pro
forma operating income of $15.6 million increased 13% compared to last year. The
pro forma gross margin comparison is negatively affected by a "tough comp" due
to a highly profitable satellite related shipment in last year's first quarter.
The first quarter pro forma results exclude the following items from net income
per diluted share:
Quarter Ended September 30,
----------------------------
2006 2005
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Acquisition-related items:
Amortization of intangibles $ 0.03 $ 0.03
Adjustments to inventory -- 0.01
Share based compensation 0.01 0.01
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Total EPS impact $ 0.04 $ 0.05
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On a GAAP basis, gross profit margins for the fiscal 2007 first quarter were
46.6% compared to 46.9% last year. Operating income for the fiscal 2007 first
quarter increased 57% compared to last year. Net income for the fiscal 2007
first quarter amounted to $7.2 million, or $0.09 per diluted share, compared
with $4.5 million, or $0.06 per diluted share, last year representing a per
share increase of 50%. The quarterly results were impacted by:
o a $940,000 ($601,000 after tax or $0.01 per share) charge for share based
compensation in fiscal 2007, compared to $2.0 million ( $1.3 million after
tax or $0.01 per share) in fiscal 2006;
o a $3.2 million ($2.1 million after tax or $0.03 per share) charge for
amortization of acquired intangibles in fiscal 2007, compared to $3.5
million ($2.2 million after tax or $0.03 per share) in fiscal 2006;
o a $100,000 ($64,000 after tax or $0.00 per share) charge in fiscal 2007
for restructuring costs (for which there was no comparable expense in the
prior year); and
o a fiscal 2006 charge of $1.1 million ($685,000 after tax or $0.01 per
share) for acquisition related inventory adjustments (for which there was
no comparable item in the current fiscal year).
Operating cash flow for the current quarter was approximately $13 million.
During the first quarter, approximately 1.8 million shares of our common stock
were repurchased for $17.2 million, leaving approximately 1.2 million shares to
be repurchased under the Board's most recent authorization. In October 2006,
$9.2 million was paid in a final determination of the Racal acquisition
earn-out. This amount has been added to goodwill as of September 30, 2006.
"Our first quarter performance positions us well for another solid year," said
Len Borow, President and Chief Operating Officer. "Organic sales growth was 9%
and the $0.13 pro forma EPS represented an 18% increase over last year. Both
segments of our business performed well as the quarterly book-to-bill ratio was
1.10 to 1.0. We head into the remainder of the fiscal year with a record backlog
of $254 million."
Our estimate of operating results for the December 2006 quarter is as follows:
o net sales are expected to be approximately $145 to $146 million; and
o pro forma earnings per diluted share are anticipated to be $0.16. Pro
forma earnings exclude estimated amortization of acquired intangibles and
share based compensation of a combined $.04 per diluted share. GAAP net
income per diluted share is anticipated to be $.012.
Our conference call discussing first quarter results is scheduled for 8:30 a.m.
(New York time) on November 3, 2006 and can be accessed by dialing 866-800-8651
in the United States and by dialing 617-614-2704 outside of the United States.
The participant passcode is 40742023. 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 97719311. 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 its first 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-K. 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 non-GAAP financial measures used in this press release are not prepared in
accordance with generally accepted accounting principles and may be different
from non-GAAP financial measures used by other companies. The Company's
management refers to these non-GAAP financial measures in making operating
decisions because they provide meaningful supplemental information regarding the
Company's operating performance. In addition, these non-GAAP financial measures
facilitate management's internal comparisons to the Company's historical
operating results and comparisons to competitors' operating results. We include
these non-GAAP financial measures (which should be viewed as a supplement to,
and not a substitute for, their comparable GAAP measures) in this press release
because we believe they are useful to investors in allowing for greater
transparency to supplemental information used by management in its financial and
operational decision-making. For a reconciliation of our GAAP and non-GAAP
financial results, please refer to our Reconciliation of Reported GAAP Results
to Pro Forma Net Income, presented in this release.
AEROFLEX INCORPORATED
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
September 30, June 30,
2006 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 14,741 $ 10,387
Marketable securities 16,271 28,332
Accounts receivable, less allowance for
doubtful accounts 117,127 120,296
Inventories 137,366 133,420
Deferred income taxes 24,770 24,732
Prepaid expenses and other current assets 10,008 11,187
------------ ------------
Total current assets 320,283 328,354
Property, plant and equipment, net 77,733 77,940
Other assets 15,968 14,276
Intangible assets with definite lives, net 51,330 54,215
Goodwill 173,300 163,237
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Total assets $ 638,614 $ 638,022
============ =-==-=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 607 $ 607
Accounts payable 34,621 37,832
Advance payments by customers 21,472 21,128
Income taxes payable 9,281 9,162
Accrued payroll expenses 19,268 17,440
Accrued expenses and other current liabilities 42,826 33,046
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Total current liabilities 128,075 119,215
Long-term debt 3,488 3,558
Deferred income taxes 3,340 4,631
Other long-term liabilities 22,991 22,948
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Total liabilities 157,894 150,352
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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
73,523 and 75,270 shares 7,352 7,527
Additional paid-in capital 368,756 384,870
Accumulated other comprehensive income 15,648 13,468
Retained earnings 88,964 81,805
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Total stockholders' equity 480,720 487,670
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Total liabilities and stockholders' equity $ 638,614 $ 638,022
=====----=== ============
AEROFLEX INCORPORATED
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
For the Quarter Ended
9/30/06 9/30/06 9/30/05 9/30/05
--------- --------- --------- ---------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net sales $ 136,835 $ 136,835 $ 125,648 $ 125,648
Cost of sales 73,081 73,018 66,722 65,555
--------- --------- --------- ---------
Gross profit 63,754 63,817 58,926 60,093
Selling, general and administrative
expenses 31,400 30,493 30,251 28,424
Research and development costs 17,748 17,678 17,964 17,856
Amortization of acquired intangibles 3,237 -- 3,457 --
--------- --------- --------- ---------
Operating income 11,369 15,646 7,254 13,813
Interest and other income
(expense), net (182) (182) (69) (69)
--------- --------- --------- ---------
Income before income taxes 11,187 15,464 7,185 13,744
Provision for income taxes 4,028 5,568 2,658 5,084
--------- --------- --------- ---------
Net income $ 7,159 $ 9,896 $ 4,527 $ 8,660
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Net income per common share:
Basic $ 0.10 $ 0.13 $ 0.06 $ 0.12
========= ========= ========= =========
Diluted $ 0.09 $ 0.13 $ 0.06 $ 0.11
========= ========= ========= =========
Weighted average number of shares
Outstanding - Basic 74,736 74,736 74,758 74,758
========= ========= ========= =========
- Diluted 75,984 75,984 75,699 75,699
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AEROFLEX INCORPORATED
AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP RESULTS TO PRO FORMA
NET INCOME (Unaudited)
(In thousands, except per share data)
For the Quarter Ended
------------------------
9/30/06 9/30/05
-------- ---------
GAAP net income $ 7,159 $ 4,527
Pro forma adjustments:
Share based compensation 940 2,014
Amortization of acquired
intangible assets 3,237 3,457
Restructuring costs 100 --
Acquisition related inventory adjustment -- 1,088
Income tax benefit (1,540) (2,426)
-------- --------
Pro forma net income $ 9,896 $ 8,660
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Net income per common share:
Basic
GAAP net income, after tax $ 0.10 $ 0.06
Pro forma adjustments, net of tax 0.03 0.06
-------- --------
Pro forma net income, after tax $ 0.13 $ 0.12
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Diluted
GAAP net income, after tax $ 0.09 $ 0.06
Pro forma adjustments, net of tax 0.04 0.05
-------- --------
Pro forma net income, after tax $ 0.13 $ 0.11
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Weighted average number of shares
outstanding - Basic 74,736 74,758
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- Diluted 75,984 75,699
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