Exhibit 99
HERLEY REPORTS 3RD QUARTER RESULTS
REVENUES WERE $45.7 MILLION
BACKLOG TOTALS $143.3 MILLION
Lancaster, PA. June 14, 2006. Herley Industries, Inc. (Nasdaq:HRLY) today
announced its financial results for the third quarter ended April 30, 2006.
Net sales for the third quarter ended April 30, 2006 were $45.7 million, an
increase of $4.4 million or 10.7% compared to the third quarter of fiscal year
2005.
Operating income for the third quarter was $2.0 million, or 4.4% of net sales
compared to $4.6 million or 11.0% of net sales in the prior year.
Provision for income taxes for the third quarter of fiscal 2006 was $662,000,
representing an effective tax rate of approximately 28.0%.
Net income for the third quarter of fiscal 2006 was $1.7 million or $0.11 per
diluted share. This compares to net income of $3.6 million, or $0.24 per share
for third quarter of 2005.
John M. Kelley, Herley's President, said, "The results from two of our domestic
facilities prevented Herley from achieving solid financial results for three
consecutive quarters in fiscal 2006."
For the nine months ended April 30, 2006, net sales were $133.5 million,
compared to $108.6 million in the third quarter of fiscal 2005, an increase of
22.9%. Operating income for the first nine months of fiscal 2006 was $12.8
million or 9.6% of net sales, compared to $12.0 million or 11.1% of net sales in
2005. Our international operations contributed approximately $2.0 million in
operating income for the nine months as compared to $1.7 million in fiscal 2005.
Provision for income taxes for the first nine months of fiscal 2006 was $3.7
million, an effective tax rate of approximately 28%. Lower effective tax rate on
foreign source income, extra territorial income, research and development tax
credits, Section 199 manufacturing deduction and tax exempt interest income
resulted in the favorable effective tax rate in fiscal 2006.
Balance Sheet
Cash and cash equivalents at April 30, 2006 were $27.4 million. During the
quarter the Company generated $10 million in cash from operations and $5.5
million in free cash flow (cash from operations minus capital expenditures).
The Company has approximately $38.5 million (net of outstanding standby letters
of credit) available under a $50 million revolving credit loan agreement on an
unsecured basis which may be used for general corporate purposes, including
business acquisitions. There were no borrowings under the line at April 30,
2006.
Herley intends to file its quarterly report or 10-Q this week. The company has
been advised by BDO Seidman, LLP, its independent outside auditors that due to
the need to complete its review of procedures in connection with the company's
recent indictment, it is unable at this time to complete its review of the
company's financial statements, which review is required under applicable SEC
regulations.
Herley will host a conference call on Monday, June 19, 2006, 10:00 A.M. Eastern
Time to discuss this news. To join the conference call dial 1 (888) 425-4188,
referencing Conference ID1801972. A taped replay of the call will be available
through June 19, 2006. To listen to the replay dial: 1 (800) 642 1687 (U.S.) or
1 (706) 645-9291 (International), and Conference ID 1801972.
In addition, the conference call will be broadcast live over the Internet and
can be accessed through the following URL: http://www.visualwebcaster.com/event.
asp?id=34344
To listen to the live call on the Internet, go to the web site 15 minutes early
to register, download and install any necessary audio software.
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 manufacturing
locations and over 1000 employees. 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 report, words
such as "anticipated," "believes," "could," "estimates," "expects," "may,"
"plans," "potential" and "intends" and similar expressions, as they relate to
the Company or its management, identify forward-looking statements. Such
forward-looking statements are based on the belief of the Company's management,
as well as assumptions made by and information currently available to the
Company's management. 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 undertakes no obligation to update
forward-looking statements as a result of future events or developments.
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands except per share data)
April 30, July 31,
2006 2005
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ASSETS
Current Assets:
Cash and cash equivalents $ 27,364 $ 20,331
Trade accounts receivable 30,148 27,258
Costs incurred and income recognized in excess
of billings on uncompleted contracts 18,494 16,058
Other receivables 1,131 1,414
Inventories, net of allowance of $5,168
in fiscal 2006 and $4,492 in fiscal 2005 53,639 53,668
Deferred taxes and other 4,317 3,782
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Total Current Assets 135,093 122,511
Property, Plant and Equipment, net 30,133 29,461
Goodwill 73,500 70,831
Intangibles, net of accumulated amortization of $3,021
in fiscal 2006 and $1,680 in fiscal 2005 20,525 20,554
Other Assets 650 744
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$ 259,901 $ 244,101
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 221 $ 797
Accounts payable and accrued expenses 22,877 23,678
Billings in excess of costs incurred and
income recognized on uncompleted contracts 410 538
Income taxes payable 2,953 3,760
Accrual for contract losses 3,158 630
Accrual for warranty costs 715 799
Advance payments on contracts 5,109 3,966
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Total Current Liabilities 35,443 34,168
Long-term Debt 4,756 5,000
Other Long-term Liabilities 1,246 1,042
Deferred Income Taxes 7,182 6,254
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48,627 46,464
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Commitments and Contingencies
Shareholders' Equity:
Common stock, $.10 par value; authorized
20,000,000 shares; issued and outstanding
14,634,916 in fiscal 2006 and 14,389,625 in fiscal 2005 1,463 1,439
Additional paid-in capital 112,899 109,118
Retained earnings 95,573 85,932
Accumulated other comprehensive income 1,339 1,148
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Total Shareholders' Equity 211,274 197,637
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$ 259,901 $ 244,101
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HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)
Thirteen weeks ended Thirty-nine weeks ended
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April 30, May 1, April 30, May 1,
2006 2005 2006 2005
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Net sales $ 45,689 $ 41,266 $ 133,466 $ 108,610
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Cost and expenses:
Cost of products sold 34,736 27,845 94,900 75,034
Selling and administrative expenses 8,960 8,865 25,785 21,541
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43,696 36,710 120,685 96,575
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Operating Income 1,993 4,556 12,781 12,035
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Other income (expense), net:
Investment income 269 253 578 769
Interest expense (68) (74) (242) (211)
Foreign exchange gain 170 79 273 264
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371 258 609 822
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Income before income taxes 2,364 4,814 13,390 12,857
Provision for income taxes 662 1,187 3,749 3,600
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Net income $ 1,702 $ 3,627 $ 9,641 $ 9,257
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Earnings per common share - Basic $ .12 $ .25 $ .67 $ .65
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Basic weighted average shares 14,569 14,313 14,497 14,300
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Earnings per common share - Diluted $ .11 $ .24 $ .63 $ .62
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Diluted weighted average shares 15,398 14,936 15,230 14,972
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HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Thirty-nine weeks ended
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April 30, May 1,
2006 2005
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Cash flows from operating activities:
Net income $ 9,641 $ 9,257
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Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 5,266 3,825
Stock-based compensation expense 333 -
Increase in deferred tax assets (127) -
Increase in deferred tax liabilities 913 -
Foreign exchange (gain) loss (55) 31
Gain on sale of securities - (22)
Equity in income of limited partnership (49) (54)
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts receivable (2,890) 4,996
(Increase) in costs incurred and income
recognized in excess of billings on
uncompleted contracts, and claims (2,436) (3,569)
Decrease (Increase) in other receivables 283 (269)
Decrease (Increase) in inventories 29 (3,341)
(Increase) in deferred taxes and other (535) (400)
(Decrease) increase in accounts payable
and accrued expenses (801) 1,677
(Decrease) in billings in excess of
costs incurred and income recognized
on uncompleted contracts (128) (1,206)
(Decrease) increase in income taxes payable (807) 2,842
Increase (decrease) in accrual for contract losses 24 (377)
Increase (decrease) in advance payments on contracts 1,143 (1,410)
Other, net 205 293
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Total adjustments 368 3,016
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Net cash provided by operating activities 10,009 12,273
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Cash flows from investing activities:
Acquisition of businesses, net of cash acquired - (51,391)
Acquisition of technology license (1,256) (2,000)
Proceeds from sale of securities - 165
Partial distribution from limited partnership 111 109
Capital expenditures (4,525) (4,948)
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Net cash used in investing activities (5,670) (58,065)
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Cash flows from financing activities:
Borrowings under bank line of credit 12,000 -
Proceeds from exercise of stock options 2,799 1,803
Payments of long-term debt (779) (780)
Purchase of treasury stock - (1,770)
Payments under bank line of credit (12,000) -
Income tax benefit from exercise of stock options 674 345
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Net cash provided by (used in) financing activities 2,694 (402)
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Net increase in cash and cash equivalents 7,033 (46,194)
Cash and cash equivalents at beginning of period 20,331 66,181
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Cash and cash equivalents at end of period $ 27,364 $ 19,987
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