HERLEY REPORTS THIRD QUARTER RESULTS
CONFERENCE CALL SCHEDULED FOR FRIDAY, JUNE 13, 2008
Lancaster, PA. June 12, 2008 Herley Industries, Inc. (Nasdaq: HRLY) today
reported financial results for the third quarter ended May 4, 2008. Herley
reported net sales for the third quarter of $38.5 million, down $5.9 million or
13% from the third quarter of the prior fiscal year.
Herley reported a basic and diluted loss of $0.27 per share including the impact
of a litigation settlement agreement with the United States Department of
Justice, as compared with basic and diluted earnings per share of $0.28 and
$0.27, respectively, for the thirteen weeks ended April 29, 2007.
Excluding the impact of the litigation settlement costs in fiscal 2008, basic
and diluted earnings per common share in the third quarter would have been $
0.15 for the thirteen weeks ended May 4, 2008 as compared to basic and diluted
earnings per common share of $0.28 and $0.27, respectively, for the thirteen
weeks ended April 29, 2007. On a year-to-date basis, excluding the impact of
both the litigation settlement costs in fiscal 2008 and the employment contract
settlement costs in fiscal 2007, basic and diluted earnings per common share in
2008 would have been $ 0.07 for the forty weeks ended May 4, 2008 as compared to
basic and diluted earnings per common share of $0.46 and $0.44, respectively,
for the thirty-nine weeks ended April 29, 2007. A non-recurring income tax
benefit of $2.7 million is included in the results for both the thirteen weeks
ended May 4, 2008 and the forty weeks ended May 4, 2008. A reconciliation of the
Non-GAAP earnings per common share calculation is as follows:
(In thousands, except share data)
Thirteen weeks ended
May 4, 2008 April 29, 2007
----------------------------- ---------------
Non-GAAP As Reported As Reported
Measure * Under GAAP Under GAAP
------------- -------------- ---------------
(Loss) income before income taxes ($10,859) ($10,859) $4,176
Litigation settlement 9,500 - -
------------- -------------- ---------------
(Loss) income before income taxes (1,359) (10,859) 4,176
(Benefit) provision for income taxes (3,425) (7,267) 298
------------- -------------- ---------------
Net income (loss) $2,066 ($3,592) $3,878
Earnings (loss) per common share - Basic $0.15 ($0.27) $0.28
============= ============== ===============
Basic weighted average shares 13,507 13,507 13,969
Earnings (loss) per common share - Diluted $0.15 ($0.27) $0.27
============= ============== ===============
Basic weighted average shares 13,709 13,507 14,449
============= ============== ===============
For information at Herley contact:
Peg Guzzetti Tel: (717) 735-8117
Investor Relations www.herley.com
(In thousands, except share data)
Forty weeks ended Thirty-nine weeks ended
May 4, 2008 April 29, 2007
----------------------------- ---------------------------------
Non-GAAP As Reported Non-GAAP As Reported
Measure * Under GAAP Measure * Under GAAP
------------ -------------- --------------- ---------------
(Loss) before income taxes ($19,336) ($19,336) ($489) ($489)
Employment contract settlement - - 8,914 -
Litigation settlements 15,542 - - -
------------ -------------- --------------- ---------------
(Loss) income before income taxes (3,794) (19,336) 8,425 (489)
(Benefit) provision for income taxes (4,713) (9,313) 2,084 (29)
------------ -------------- --------------- ---------------
Net income (Loss) $919 ($10,023) $6,341 ($460)
============ ============== =============== ===============
Earnings (loss) per common share - Basic $0.07 ($0.73) $0.46 ($0.03)
============ ============== =============== ===============
Basic weighted average shares 13,696 13,696 13,911 13,911
============ ============== =============== ===============
Earnings (loss) per common share - Diluted $0.07 ($0.73) $0.44 ($0.03)
============ ============== =============== ===============
Basic weighted average shares 14,053 13,696 14,369 13,911
============ ============== =============== ===============
<FN>
- ---
* The non-GAAP disclosure of net income and basic and diluted earnings per
common share is not preferable to GAAP net income and earnings per common share
but is shown as a supplement to such disclosure for comparability to the prior
year's results. Management believes that this information is important to
investors for a meaningful analysis of our financial performance.
</FN>
Myron Levy, Herley Chairman and CEO commented, "It is no surprise that the
Company's third quarter and fiscal year results were affected by very unusual
and significant events. The good news is that these events are finally behind us
and we are looking to the future. Management is in the process of reviewing our
fiscal 2009 budgets. For the first time in several years, I believe that legal
expense will not be a dominant factor. During the budgeting process we carefully
review the military and commercial programs that are important to Herley's
success. By evaluating our past successes, we can more successfully plan for FY
2009 and beyond. We believe that our strong past performance on well-funded,
long-term U. S. military programs such as Trident D-5, EA-18G, AN/ARA-63
Tactical Instrument Landing System, and AMRAAM, will contribute significantly to
our continued success for the long term. The Company's bookings continue to be
strong; we have a record-level backlog; and we continue to extend our reach into
the international market. We are also continuing to take the steps necessary to
achieve more efficient operations, so that we can better meet the requirements
of current and future customers."
Mr. Levy will host a conference call on June 13, 2008 at 9:00 a.m. Eastern time
to discuss financial results for the third quarter ended May 4, 2008. To join
the conference call dial 1 (888) 425-4188, referencing Conference ID 50633300.
A taped replay of the call will be available on June 13, 2008 at 11:00 a.m.
through June 20, 2008 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
50633300.
In addition, the conference call will be broadcast live over the Internet and
can be accessed through the following URL: http://www.videonewswire.com/event.
asp?id=49000. To listen to the live call on the Internet, go to the web site at
least 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 eight manufacturing
locations and approximately 965 employees. Additional information about the
Company can be found on the Internet at www.herley.com
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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
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
May 4, 2008 July 29, 2007
(Unaudited)
------------------ ------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 20,583 $ 35,181
Trade accounts receivable, net 23,548 28,058
Income Taxes Receivable 2,056 819
Costs incurred and income recognized in excess
of billings on uncompleted contracts and claims 19,833 14,448
Other receivables 3,837 2,816
Inventories, net 60,321 51,815
Deferred income taxes 11,340 4,254
Other current assets 1,546 1,069
------------------ ------------------
Total Current Assets 143,064 138,460
Property, Plant and Equipment, net 30,957 29,996
Goodwill 73,903 74,044
Intangibles, net of accumulated amortization of $6,943 at May 4,
2008 and $5,256 at July 29, 2007 16,624 18,431
Other Assets 551 1,662
------------------ ------------------
Total Assets $ 265,099 $ 262,593
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,387 $ 1,346
Current portion of employment settlement agreement -
(net of imputed interest of $124 at May 4, 2008 and $245
at July 29, 2007) 1,234 1,113
Current portion of litigation settlements (net of imputed interest of $62) 10,438 -
Accounts payable, accrued expenses and other 30,903 21,719
Billings in excess of costs incurred and
income recognized on uncompleted contracts 527 99
Income taxes payable 411 3,518
Advance payments on contracts 7,111 7,163
------------------ ------------------
Total Current Liabilities 52,011 34,958
Long-term Debt 4,927 5,951
Long-term Portion of Employment Settlement Agreement -
(net of imputed interest of $471 at May 4, 2008 and $580
at July 29, 2007) 3,192 4,117
Long-term portion of litigation settlement (net of imputed interest of $122) 878 -
Other Long-term Liabilities 1,598 1,311
Deferred Income Taxes 8,675 6,615
Accrued Income Taxes Payable 507 -
------------------ ------------------
Total Liabilities 71,788 52,952
------------------ ------------------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.10 par value; authorized 20,000,000 shares;
issued and outstanding 13,510,177 at May 4, 2008, and
13,977,115 at July 29, 2007 1,351 1,398
Additional paid-in capital 101,085 107,094
Retained earnings 89,381 99,404
Accumulated other comprehensive income 1,494 1,745
------------------ ------------------
Total Shareholders' Equity 193,311 209,641
------------------ ------------------
Total Liabilities and Shareholders' Equity $ 265,099 $ 262,593
================== ==================
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
Forty weeks Thirty-nine
Thirteen weeks ended ended weeks ended
May 4, April 29, May 4, April 29,
2008 2007 2008 2007
----------------- ----------------- ----------------- ---------------
Net sales $ 38,549 $ 44,401 $ 108,343 $ 122,514
----------------- ----------------- ----------------- ---------------
Cost and expenses:
Cost of products sold 29,982 31,687 84,790 89,528
Selling and administrative expenses 9,951 8,895 27,869 25,315
Litigation settlements 9,500 - 15,542 -
Employment contract settlement costs - - - 8,914
----------------- ----------------- ----------------- ---------------
49,433 40,582 128,201 123,757
----------------- ----------------- ----------------- ---------------
(Loss) income from operations (10,884) 3,819 (19,858) (1,243)
----------------- ----------------- ----------------- ---------------
Other income (expense):
Investment income 147 375 955 854
Interest expense (164) (213) (427) (578)
Foreign exchange transactions gain (loss) 42 195 (6) 478
----------------- ----------------- ----------------- ---------------
25 357 522 754
----------------- ----------------- ----------------- ---------------
(Loss) income before income taxes (10,859) 4,176 (19,336) (489)
(Benefit) provision for income taxes (7,267) 298 (9,313) (29)
----------------- ----------------- ----------------- ---------------
Net (loss) income $ (3,592) $ 3,878 $ (10,023) $ (460)
================= ================= ================= ===============
(Loss) earnings per common share - Basic $ (.27) $ .28 $ (.73) $ (.03)
================= ================= ================= ===============
Basic weighted average shares 13,507 13,969 13,696 13,911
================= ================= ================= ===============
(Loss) earnings per common share - Diluted $ (.27) $ .27 $ (.73) $ (.03)
================= ================= ================= ===============
Diluted weighted average shares 13,507 14,449 13,696 13,911
================= ================= ================= ===============
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Forty weeks ended Thirty-nine weeks ended
May 4, 2008 April 29, 2008
------------------------ ------------------------
Cash flows from operating activities:
Net Loss $ (10,023) $ (460)
------------------------ ------------------------
Adjustments to reconcile net loss to
net cash (used in) provided by operating activities:
Depreciation and amortization 5,573 5,271
Stock-based compensation costs 800 326
Excess tax benefit from exercises of stock options (57) (235)
Employment contract settlement costs (includes $196 of
stock option modification costs) - 5,914
Litigation settlement costs 15,442 -
Imputed interest 347 199
Deferred tax benefit (4,999) (2,314)
Loss (gain) on sale of fixed assets 8 (107)
Foreign exchange transaction losses (gains) 48 (96)
Inventory valuation reserve charges 1,287 1,102
Reduction in accrual for contract losses (826) (699)
Warranty reserve charges 848 976
Changes in operating assets and liabilities:
Trade accounts receivable 4,416 (243)
Income taxes receivable (1,237) -
Costs incurred and income recognized in excess
of billings on uncompleted contracts and claims (5,385) 334
Other receivables (1,021) (1,310)
Inventories (9,876) (389)
Other current assets (477) (438)
Accounts payable, accrued expenses and other 10,079 (3,597)
Billings in excess of costs incurred and
income recognized on uncompleted contracts 428 51
Income taxes payable (2,543) 1,796
Employment settlement payments (1,034) (443)
Litigation settlement payments (4,000) -
Advance payments on contracts (52) 4,202
Other, net (531) 449
------------------------ ------------------------
Total adjustments 7,238 10,749
------------------------ ------------------------
Net cash (used in) provided by operating activities (2,785) 10,289
------------------------ ------------------------
Cash flows from investing activities:
Acquisition of technology license - (179)
Proceeds from sale of fixed assets - 202
Capital expenditures (3,912) (3,516)
------------------------ ------------------------
Net cash used in investing activities (3,912) (3,493)
------------------------ ------------------------
Cash flows from financing activities:
Borrowings under bank line of credit 13,900 13,000
Borrowings - other - 1,746
Proceeds from exercise of stock options 225 1,164
Excess tax benefit from exercises of stock options 57 235
Payments of long-term debt (1,044) (690)
Payments under bank line of credit (13,900) (13,000)
Purchase of treasury stock (7,138) -
------------------------ ------------------------
Net cash (used in) provided by financing activities (7,900) 2,455
------------------------ ------------------------
Effect of exchange rate changes on cash (1) 8
------------------------ ------------------------
Net (decrease) increase in cash and cash equivalents (14,598) 9,259
Cash and cash equivalents at beginning of period 35,181 22,303
------------------------ ------------------------
Cash and cash equivalents at end of period $ 20,583 $ 31,562
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