HERLEY REPORTS FOURTH QUARTER AND YEAR-END RESULTS
CONFERENCE CALL SCHEDULED FOR FRIDAY, OCTOBER 16, 2009
Lancaster, PA - October 15, 2009 - Herley Industries, Inc. (Nasdaq: HRLY) today
reported financial results for the Fourth Quarter and Fiscal Year ended August
2, 2009.
Fourth Quarter of Fiscal 2009
Net sales for the fourth quarter of fiscal 2009 were $43.0 million compared to
$37.9 million in the fourth quarter of fiscal 2008. In the fourth quarter of
fiscal 2009, the Company recorded several significant charges (see below)
aggregating $66.9 million, including a non-cash impairment charge for goodwill
and other intangible assets of $44.2 million. As a result, the loss from
continuing operations for that quarter was $44.4 million, or $3.26 per diluted
share, compared to a loss from continuing operations of $1.5 million, or $.11
per diluted share, last year. Income from discontinued operations that resulted
from the sale of the ICI business in November 2008 was $1.2 million, or $ .09
per diluted share, last year. Net loss for the quarter was $44.4 million, or
$3.26 per diluted share, compared to a net loss of $.3 million, or $.02 per
diluted share, last year.
In the fourth quarter of fiscal 2009, the Company reported a revenue increase of
$5.1 million compared to last year, which primarily resulted from the inclusion
of revenues from Eyal that was acquired early in fiscal 2009. Operating results
for the fourth quarter of fiscal 2009 were impacted by several significant
charges, as follows: (a) approximately $44.2 million related to the impairment
of goodwill and other intangible assets; (b) approximately $10.6 million related
to employment agreement settlements with two former officers of the Company; (c)
approximately $4.3 million to cost of products sold related to the settlement of
litigation with a customer; (d) approximately $2.8 million to net sales and $.3
million to cost of products sold related to the settlement of a claim for
equitable adjustment for unpriced change orders; (e) approximately $3.1 million
to cost of products sold related to the transition of the Farmingdale, NY
manufacturing operation, including contract losses of approximately $1.1 million
and inventory write-offs of approximately $2.0 million; (f) approximately $1.3
million to cost of products sold for additional inventory adjustments and
obsolescence reserves; and (g) approximately $.3 million to selling and
administrative expenses related to the abandonment of fixed assets. The non-cash
impairment of goodwill and other intangible assets does not affect the Company's
cash position, cash flow from operating activities, credit availability or
liquidity and none of these charges will have any adverse effect on its future
operations.
Of further significance, in July 2009, the Company's Board of Directors
appointed new senior management. New management was successful in resolving two
litigation/claim matters, resulting in a net cash outflow of $.5 million to the
Company and, more importantly, restoring a favorable relationship with these
customers.
Richard Poirier, Chief Executive Officer and President, commented, "This has
certainly been a very busy and exciting period since David Lieberman and I were
appointed. We are pleased with the progress we have made in the resolution of
past matters, most of which are ancillary to our operational activities going
forward. David and I are committed to reporting substantial profitability in
fiscal year 2010, and remain focused on strengthening our management team,
improving our sales and production processes and reducing costs. We ended the
year with a backlog of $182 million, and bookings have been strong in the first
quarter. We believe that we are now well positioned for success in fiscal 2010.
Fiscal Year 2009
Net sales for fiscal 2009 were $160.1 million compared to $136.1 million in
fiscal 2008. Fiscal 2009 results were significantly impacted by the fourth
quarter charges described above. The loss from continuing operations for fiscal
2009 was $40.7 million, or $3.00 per diluted share, compared to a loss from
continuing operations of $10.7 million, or $.78 per diluted share, last year.
Loss from discontinued operations that resulted from the sale of the ICI
business in November 2008 was $.5 million, or $.03 per diluted share, in fiscal
2009 compared to income of $.3 million, or $.02 per diluted share, last year.
Net loss for fiscal 2009 was $41.2 million, or $3.03 per diluted share, compared
to a net loss of $10.3 million, or $.76 per diluted share, last year.
Balance Sheet and Capital Expenditures
At August 2, 2009, the Company's total cash and cash equivalents balance was
$14.8 million and its long-term debt, exclusive of settlement commitments, was
$12.2 million. Capital expenditures were $.9 million for the fourth quarter of
fiscal 2009 and were $5.4 million for fiscal 2009.
***
Richard Poirier, Chief Executive Officer and President, will host a conference
call on October 16, 2009 at 9:00 a.m. Eastern Time to discuss financial results
for the Fourth Quarter and Fiscal Year ended August 2, 2009. To join the
conference call, dial 1 (888) 425-4188 and reference Conference ID #33627285.
A taped replay of the call will be available on October 16, 2009 approximately
one hour after the conclusion of the call through October 23, 2009 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 reference Conference ID #33627285.
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=62624. To listen to the live call on the internet, go to the
website 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 seven manufacturing
locations and approximately 1,000 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. Forward-looking statements
involve various important assumptions, risks, uncertainties and other factors
which could cause our actual results to differ materially from those expressed
in such forward-looking statements. Forward-looking statements in this
discussion can be identified by words such as "anticipate," "believe," "could,"
"estimate," "expect," "plan," "intend," "may," "should" or the negative of these
terms or similar expressions. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, performance or achievement. 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, changes in legal and regulatory requirements, cancellation or
deferral of customer orders, technological change or difficulties, difficulties
in the timely development of new products, difficulties in manufacturing,
commercialization and trade difficulties and current economic conditions,
including the potential for significant changes in US defense spending under the
new Administration which could affect future funding of programs and allocations
within the budget to various programs, as well as the factors set forth in this
release and in our public filings with the Securities and Exchange Commission.
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For information at Herley, contact:
Peg Guzzetti, Investor Relations
Tel: (717) 735-8117
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
Fifty-two Fifty-three
Thirteen weeks ended weeks ended weeks ended
August 2, August 3, August 2, August 3,
2009 2008 2009 2008
------------ ----------- -------------- --------------
Net sales $ 42,960 $ 37,867 $ 160,089 $ 136,088
------------ ----------- -------------- --------------
Cost and expenses:
Cost of products sold 42,990 30,866 132,648 107,848
Selling and administrative expenses 7,505 6,371 28,981 28,349
Impairment of goodwill and other intangible assets 44,151 - 44,151 -
Litigation costs 731 3,289 1,786 5,550
Litigation settlement - - - 15,542
Employment contract settlement costs 10,553 - 10,553 -
------------ ----------- -------------- --------------
105,930 40,526 218,119 157,289
Operating loss (62,970) (2,659) (58,030) (21,201)
------------ ----------- -------------- --------------
Other (expense) income:
Interest income 12 65 106 1,050
Interest expense (447) (195) (1,392) (661)
Foreign exchange transactions losses (43) (120) (276) (126)
------------ ----------- -------------- --------------
(478) (250) (1,562) 263
------------ ----------- -------------- --------------
Loss from continuing operations before income taxes (63,448) (2,909) (59,592) (20,938)
Benefit for income taxes (19,035) (1,422) (18,872) (10,254)
------------ ----------- -------------- --------------
Loss from continuing operations $ (44,413)$ (1,487) $ (40,720) $ (10,684)
------------ ----------- -------------- --------------
Discontinued operations:
Income (loss) from operations of discontinued subsidiary - 1,895 (734) 589
Provision for income taxes (benefit) - 731 (278) 251
------------ ----------- -------------- --------------
Income (loss) from discontinued operations $ - $ 1,164 $ (456) $ 338
------------ ----------- -------------- --------------
Net loss $ (44,413)$ (323) $ (41,176) $ (10,346)
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(Loss) earnings per common share - Basic and Diluted
Loss from continuing operations $ (3.26) $ (.11) $ (3.00) $ (.78)
Income (loss) from discontinued operations - .09 (.03) .02
------------ ----------- -------------- --------------
Net loss $ (3.26) $ (.02) $ (3.03) $ (.76)
============ =========== ============== ==============
Basic and diluted weighted average shares 13,607 13,518 13,560 13,652
============ =========== ============== ==============
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
August 2, August 3,
2009 2008
---------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 14,820 $ 14,347
Trade accounts receivable, net 28,687 27,003
Costs incurred and income recognized in excess
of billings on uncompleted contracts and claims 10,396 19,490
Inventories, net 57,804 61,559
Deferred income taxes 19,380 11,263
Other current assets 2,816 4,618
---------- -----------
Total Current Assets 133,903 138,280
Property, plant and equipment, net 32,872 30,552
Goodwill 43,722 73,900
Intangibles, net 9,619 16,145
Deferred income taxes 7,571 -
Other assets 598 541
---------- -----------
Total Assets $ 228,285 $ 259,418
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,595 $ 1,394
Current portion of employment settlement agreements -
(net of imputed interest of $98 in 2009 and $238
in 2008) 7,400 1,119
Current portion of litigation settlements
(net of imputed interest of $46 in fiscal 2009
and 2008) 954 954
Accounts payable and accrued expenses 25,509 27,589
Billings in excess of costs incurred and
income recognized on uncompleted contracts 261 613
Accrual for contract losses 3,440 2,994
Accrual for warranty costs 938 1,142
Advance payments on contracts 12,698 8,120
---------- -----------
Total Current Liabilities 52,795 43,925
Long-term debt, net of current portion 12,246 7,092
Long-term portion of employment settlement agreements
(net of imputed interest of $79 in 2009 and $287 in 2008) 2,827 3,074
Long-term portion of litigation settlement -
(net of imputed interest of $108) - 892
Other long-term liabilities 8,361 2,161
Deferred income taxes - 8,839
---------- -----------
Total Liabilities 76,229 65,983
---------- -----------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.10 par value; authorized 20,000,000 shares;
issued and outstanding 13,719,926 in 2009
and 13,521,902 in 2008 1,372 1,352
Additional paid-in capital 103,113 101,403
Retained earnings 47,882 89,058
Accumulated other comprehensive (loss) income (311) 1,622
---------- -----------
Total Shareholders' Equity 152,056 193,435
---------- -----------
Total Liabilities and Shareholders' Equity $ 228,285 $ 259,418
========== ===========
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Fifty-two Fifty-three
weeks ended weeks ended
August 2, August 3,
2009 2008
----------- -----------
Cash flows from operating activities:
Net loss $ (41,176)$ (10,346)
----------- -----------
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization 8,468 7,266
Gain on sale of fixed assets (574) -
Impairment of goodwill of discontinued subsidiary 1,000 -
Impairment of goodwill of continuing operations 42,050 -
Impairment of intangible assets 2,101 -
Abandonment of long-lived assets 345 -
Stock-based compensation costs 718 990
Excess tax benefit from exercises of stock options (212) (91)
Litigation and claim settlements 8,982 15,442
Employment contract settlement costs 10,553 -
Imputed interest on employment and litigation settlement
liabilities 327 446
Foreign exchange transaction (gains) losses (1) 122
Inventory valuation reserve charges 2,495 1,515
Reduction in accrual for contract losses - (826)
Warranty reserve charges 1,635 1,260
Deferred tax provision (24,514) (4,275)
Changes in operating assets and liabilities:
Cash of discontinued subsidiary (712) -
Trade accounts receivable (3,426) 961
Costs incurred and income recognized in excess
of billings on uncompleted contracts and claims 5,559 (5,042)
Inventories, net (6,739) (11,342)
Other current assets 2,651 86
Accounts payable and accrued expenses 2,920 3,485
Billings in excess of costs incurred and
income recognized on uncompleted contracts 304 514
Accrual for contract losses 755 2,660
Litigation settlement payments (1,000) (13,500)
Employment settlement payments (4,476) (1,336)
Advance payments on contracts 6,618 957
Other, net 229 438
----------- -----------
Total adjustments 56,056 (270)
----------- -----------
Net cash provided by (used in) operating activities 14,880 (10,616)
----------- -----------
Cash flows from investing activities:
Acquisition of business, net of cash acquired (30,010) -
Proceeds from sale of discontinued subsidiary 15,000 -
Capital expenditures (5,432) (4,637)
Other 27 3
----------- -----------
Net cash used in investing activities (20,415) (4,634)
----------- -----------
Cash flows from financing activities:
Borrowings under bank line of credit 35,600 20,400
Borrowings - term loan 10,000 -
Proceeds from exercise of stock options 538 321
Excess tax benefit from exercises of stock options 212 91
Payments of long-term debt (2,182) (1,357)
Payments under bank line of credit (38,100) (17,900)
Purchase of treasury stock - (7,139)
----------- -----------
Net cash provided by (used in) financing activities 6,068 (5,584)
----------- -----------
Effect of exchange rate changes on cash (60) -
----------- -----------
Net increase (decrease) in cash and cash equivalents 473 (20,834)
Cash and cash equivalents at beginning of period 14,347 35,181
----------- -----------
Cash and cash equivalents at end of period $ 14,820 $ 14,347
=========== ===========
Supplemental cash flow information:
Retirement of shares of treasury stock $ 1,831 $ 7,139
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