HERLEY REPORTS 4TH QUARTER AND YEAR-END RESULTS
QUARTERLY REVENUES INCREASED 25.0% TO $42.8 MILLION
YEAR-END BACKLOG REACHES RECORD LEVEL - UP 44.7%
Lancaster, PA, October 25, 2005. Herley Industries, Inc. (Nasdaq: HRLY) today
reported net sales from continuing operations for the fourth quarter ended July
31, 2005 were $42.8 million, up 25.0% from the fourth quarter of fiscal year
2004, and a sequential increase of 3.7% from the third quarter of fiscal 2005.
Operating income for the fourth quarter was $2.6 million, or 6.2% of net sales,
down $591,000 or 18.3% from the fourth quarter of last year.
Net income for the fourth quarter was $1.5 million, or $0.10 per diluted share
compared to net income of $2.3 million, or $0.15 per diluted share for the
fourth quarter of last year.
For the fiscal year ended July 31, 2005 net sales were a record $151.4 million,
up 23.9% from net sales of $122.2 million in the previous year. Net income for
the year was $10.8 million, or $0.72 per diluted share compared to $13.7 million
or $0.92 per diluted share for fiscal year 2004.
The effective tax rate for the fourth quarter of fiscal 2005 was 29.7% compared
to 30.7% for the prior year fourth quarter. The effective income tax rate for
fiscal 2005 was 28.3% as compared to 30.8% for fiscal 2004.
Book-to-bill for the fourth quarter was 1.24 to 1, the best book-to-bill ratio
in seven quarters. For the fiscal year, Herley's book to bill was 1.05 to 1.
Funded backlog as of July 31, 2005 reached a record $144.7 million. Net cash
from continuing operations for fiscal 2005 was $13.0 million. Capital
expenditures for the year were $5.4 million, producing $7.6 million of free cash
flow.
John M. Kelley, Herley President, said, "Herley financial results for the fourth
quarter and fiscal year were mixed. Below are events that had an impact on
fiscal 2005 earnings."
- -- ACQUISITIONS. Herley acquired three companies and a new millimeter wave
seeker technology in fiscal 2005. The absorption and integration process
was a considerable effort, and it continues to this day. However, we have
worked through most of the problems and are now on the downside of this
activity. We believe these acquisitions are essential to increasing our
technological diversity and will increase our growth prospects as we
prepare the company for the defense business of the future.
- -- ADMINISTRATION. Increased legal and Sarbanes-Oxley costs. These costs are a
fact of business life. However, we will continue our efforts to reduce
costs whenever possible.
- -- OPERATIONS. Delivery delays related primarily to two simulation projects at
EWST negatively impacted margins in the fourth quarter and fiscal 2005. We
believe the problems have been solved, and we expect to complete factory
acceptance tests and ship both simulators within the next 30 days. These
simulators are the last of the original orders requiring extensive
hardware, software and integration development. Going forward, new
simulator orders will be based on existing product designs which include
actual costs for material, labor and overhead. Recent actions have been
taken that should improve EWST's performance in fiscal 2006.
Kelley continued "We are disappointed in our performance in 2005. For those
problems which we were able to immediately identify, we have taken the
corrective actions necessary to fix them. We continue to remain optimistic about
our business prospects for fiscal year 2006. Revenue growth is expected to be
strong based on the company's existing contracts with the U.S. Government, major
prime contractors and countries worldwide."
The Conference Call which had been scheduled for Friday, October 28, 2005 has
been rescheduled. The call will take place on Tuesday, November 1, 2005 at 9:00
a.m. Eastern Time. Participating in the call will be Myron Levy, Vice Chairman
and CEO and John M. Kelley, President. Interested parties may join the
conference through InterCall, Phone Number: 1 (888) 425-4188, referencing
Conference ID # 1379125.
Replay of the conference call is scheduled to begin on November 1, 2005 at 11:00
a.m. and end on November 7, 2005 at 11:59 p.m. Eastern Time. To listen to the
replay dial: 1 (800) 642-1687 (U.S.) or 1 (706) 645-9291 (International), and
Conference ID # 1379125
This conference call will be broadcast live over the Internet and can be
accessed by interested parties through the following URL: http://phx.corporate-
ir.net/playerlink.zhtml?c=111170&s=wm&e=1146721
To listen to the live call, please go to the Web site at least fifteen minutes
prior to the start of the call to register, download, and install any necessary
audio software. For those who are not available to listen to the live broadcast,
a replay will be available shortly after the call on the site.
Herley Industries, Inc. is a leader in the design, development and manufacture
of microwave technology solutions for the defense, aerospace and medical
industries worldwide. Based in Lancaster, PA, Herley has nine locations and over
a thousand employees worldwide. Additional information about the company can be
found on the Internet at www.herley.com
Tables follow
For information at Herley contact:
Peg Guzzetti Tel: (717) 735-8117
Investor Relations www.herley.com
Safe Harbor Statement - Except for the historical information contained herein,
this release may contain forward-looking statements. Such statements are
inherently subject to risks and uncertainties. When used in this release, words
such as "anticipate," "believes," "estimate," "expect," "should," "intend,"
"projects," "objective," and similar expressions, as they relate to the Company
or its management, identify forward-looking statements. The Company's results
could differ materially based on various factors, including, but not limited to
cancellation or deferral of customer orders, difficulties in the timely
development of new products, difficulties in manufacturing, increased
competitive pressures, and general economic conditions. The Company does not
undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect future events or circumstances or to
reflect the occurrence of unanticipated events.
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)
Thirteen weeks ended Fifty-two weeks ended
-------------------- ---------------------
July 31, August 1, July 31, August 1,
2005 2004 2005 2004
------------- ------------- ------------ -------------
Net sales $ 42,805 $ 34,246 $ 151,415 $ 122,154
------------- ------------- ------------ -------------
Cost and expenses:
Cost of products sold 31,407 23,370 106,441 79,505
Selling and administrative expenses 8,764 7,651 30,305 23,047
------------- ------------- ------------ -------------
40,171 31,021 136,746 102,552
------------- ------------- ------------ -------------
Operating Income 2,634 3,225 14,669 19,602
------------- ------------- ------------ -------------
Other income (expense), net:
Investment income 165 158 934 674
Interest expense (75) (78) (286) (326)
Foreign exchange gain (loss) (555) 31 (291) (194)
------------- ------------- ------------ -------------
(465) 111 357 154
------------- ------------- ------------ -------------
Income before income taxes 2,169 3,336 15,026 19,756
Provision for income taxes 645 1,026 4,245 6,083
------------- ------------- ------------ -------------
Net income $ 1,524 $ 2,310 $ 10,781 $ 13,673
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Earnings per common share - Basic $ .11 $ .16 $ .75 $ .97
============= ============= ============ =============
Basic weighted average shares 14,340 14,205 14,310 14,105
============= ============= ============ =============
Earnings per common share - Diluted $ .10 $ .15 $ .72 $ .92
============= ============= ============ =============
Diluted weighted average shares 14,952 14,962 14,969 14,896
============= ============= ============ =============
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
July 31, August 1,
2005 2004
------------ ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 20,331 $ 66,181
Trade accounts receivable 27,258 24,664
Costs incurred and income recognized in excess
of billings on uncompleted contracts 16,058 14,210
Other receivables 1,414 576
Inventories, net of allowance of $4,492 in 2005
and $3,938 in 2004 53,668 44,909
Deferred taxes and other 3,782 3,579
------------ ----------
Total Current Assets 122,511 154,119
Property, Plant and Equipment, net 29,461 25,968
Goodwill 70,831 35,165
Intangibles, net of accumulated amortization of $1,680 in 2005
and $752 in 2004 20,554 4,555
Other Investments 62 264
Other Assets 682 900
------------ ----------
$ 244,101 $ 220,971
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 797 $ 804
Accounts payable and accrued expenses 24,477 17,514
Billings in excess of costs incurred and
income recognized on uncompleted contracts 538 1,303
Income taxes payable 3,760 2,091
Reserve for contract losses 630 954
Advance payments on contracts 3,966 1,180
------------ ----------
Total Current Liabilities 34,168 23,846
Long-term Debt 5,000 5,845
Other Long-term Liabilities 1,042 932
Deferred Income Taxes 6,254 4,848
------------ ----------
46,464 35,471
------------ ----------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.10 par value; authorized
20,000,000 shares; issued and outstanding
14,389,625 in 2005 and 14,220,508 in 2004 1,439 1,422
Additional paid-in capital 109,118 107,671
Retained earnings 85,932 75,151
Accumulated other comprehensive income 1,148 1,256
------------ ----------
Total Shareholders' Equity 197,637 185,500
------------ ----------
$ 244,101 $ 220,971
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HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Fifty-two weeks ended
---------------------
July 31, August 1,
2005 2004
----------- ----------
Cash flows from operating activities:
Income from continuing operations $ 10,781 $ 13,673
----------- ----------
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 5,683 4,244
Foreign exchange (gain) loss (20) 753
(Gain) on sale of marketable securities (22) -
(Gain) loss on sale of fixed assets (8) -
Equity in income of limited partnership (54) (10)
Decrease (increase) in deferred tax assets 403 (316)
Increase (decrease) in deferred tax liabilities 1,397 (109)
Changes in operating assets and liabilities:
Decrease (increase) in trade accounts receivable 2,590 (6,923)
Increase in costs incurred and income
recognized in excess of billings on
uncompleted contracts (1,626) (7,250)
(Increase) decrease in other receivables (576) 251
Increase in inventories (3,789) (5,806)
(Increase) decrease in deferred taxes and other (430) 31
Increase in accounts payable
and accrued expenses 925 3,431
(Decrease) increase in billings in excess of
costs incurred and income recognized
on uncompleted contracts (1,596) 1,303
Increase in income taxes payable 2,306 108
(Decrease) in accrual for contract losses (500) (240)
(Decrease) increase in advance payments on contracts (2,749) 324
Other, net 253 146
----------- ----------
Total adjustments 2,187 (10,063)
----------- ----------
Net cash provided by continuing operations 12,968 3,610
----------- ----------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (51,407) (14,914)
Acquisition of technology license (2,300) -
Proceeds from sale of securities 165 -
Proceeds from sale of fixed assets 17 19
Partial distribution from limited partnership 109 55
Capital expenditures (5,404) (5,884)
----------- ----------
Net cash used in investing activities (58,820) (20,724)
----------- ----------
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants, net 3,534 2,458
Payments of long-term debt (804) (686)
Purchase of treasury stock (2,728) -
----------- ----------
Net cash provided by financing activities 2 1,772
----------- ----------
Net decrease in cash and cash equivalents (45,850) (15,342)
Cash and cash equivalents at beginning of period 66,181 81,523
----------- ----------
Cash and cash equivalents at end of period $ 20,331 $ 66,181
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