UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: October 29, 2006
----------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-5411
HERLEY INDUSTRIES, INC.
----------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE #23-2413500
-------- -----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
101 North Pointe Boulevard, Lancaster, Pennsylvania 17601
- --------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (717) 735-8117
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
--- ---
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
[ ] Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes X No
--- ---
As of December 4, 2006 - 13,863,949 shares of Common Stock are outstanding.
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets -
October 29, 2006 (Unaudited) and July 30, 2006 (Audited) 2
Condensed Consolidated Statements of Operations (Unaudited) - For the
thirteen weeks ended October 29, 2006
and October 30, 2005 3
Condensed Consolidated Statement of Shareholders' Equity (Unaudited) -
For the thirteen weeks ended October 29, 2006 4
Condensed Consolidated Statements of Cash Flows (Unaudited) - For the
thirteen weeks ended October 29, 2006
and October 30, 2005 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 16
Item 4 - Controls and Procedures 16
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 16
Item 6 - Exhibits 17
Signatures 18
Part I - Financial Information
Item 1 - Financial Statements
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
October 29, July 30,
2006 2006
--------------- -----------
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 21,482 $ 22,303
Trade accounts receivable 30,930 30,600
Costs incurred and income recognized in excess
of billings on uncompleted contracts and claims 13,258 13,926
Other receivables 1,204 769
Inventories, net 52,172 52,909
Deferred income taxes and other 5,963 4,932
--------------- -----------
Total Current Assets 125,009 125,439
Property, Plant and Equipment, net 30,184 30,478
Goodwill 73,612 73,612
Intangibles, net of accumulated amortization of $3,915
at October 29, 2006 and $3,468 at July 30, 2006 19,721 19,989
Other Assets 2,037 1,932
--------------- -----------
$ 250,563 $ 251,450
=============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,278 $ 630
Current portion of employment settlement agreement -
(net of imputed interest of $342) (Note 2) 816 -
Accounts payable and accrued expenses 19,809 21,503
Billings in excess of costs incurred and
income recognized on uncompleted contracts 589 555
Income taxes payable 4,072 3,395
Accrual for contract losses 2,794 2,959
Accrual for warranty costs 1,068 986
Advance payments on contracts 3,584 3,323
--------------- -----------
Total Current Liabilities 34,010 33,351
Long-term Debt 6,909 5,948
Long-term Portion of Employment Settlement Agreement -
(net of imputed interest of $728) (Note 2) 4,920 -
Other Long-term Liabilities 1,390 1,265
Deferred Income Taxes 5,605 7,416
--------------- -----------
52,834 47,980
--------------- -----------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.10 par value; authorized
20,000,000 shares; issued 14,660,716
and outstanding 13,862,149 1,466 1,466
Additional paid-in capital 113,730 113,418
Retained earnings 90,275 96,286
Treasury stock, 798,567 common shares at cost (9,044) (9,044)
Accumulated other comprehensive income 1,302 1,344
--------------- -----------
Total Shareholders' Equity 197,729 203,470
--------------- -----------
$ 250,563 $ 251,450
=============== ============
See notes to condensed consolidated financial statements.
2
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands except per share data)
Thirteen weeks ended
October 29, October 30,
2006 2005
------------ ------------
Net sales $ 40,116 $ 41,938
------------ ------------
Cost and expenses:
Cost of products sold 29,831 27,813
Selling and administrative expenses 9,022 8,587
Employment contract settlement costs (Note 2) 8,914 -
------------ ------------
47,767 36,400
------------ ------------
(Loss) income from operations (7,651) 5,538
------------ ------------
Other income (expense), net:
Investment income 216 110
Interest expense (143) (83)
Foreign exchange gain 17 113
------------ ------------
90 140
------------ ------------
(Loss) income before income taxes (7,561) 5,678
(Benefit) provision for income taxes (1,550) 1,703
------------ ------------
Net (loss) income $ (6,011) $ 3,975
============ ============
(Loss) earnings per common share - Basic $ (.43) $ .28
============ ============
Basic weighted average shares 13,862 14,446
============ ============
(Loss) earnings per common share - Diluted $ (.43) $ .26
============ ============
Diluted weighted average shares 13,862 15,240
============ ============
See notes to condensed consolidated financial statements.
3
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Thirteen weeks ended October 29, 2006
(In thousands except share data)
Accumulated
Common Stock Additional Other
------------ Paid-in Retained Treasury Comprehensive
Shares Amount Capital Earnings Stock Income Total
------------ ------- --------- --------- --------- -------------- ----------
Balance at July 30, 2006 14,660,716 $ 1,466 $ 113,418 $ 96,286 $ (9,044) $ 1,344 $ 203,470
Stock option compensation 116 116
Stock option modification (Note 2) 196 196
------------ ------- --------- --------- --------- -------------- ----------
Subtotal 14,660,716 1,466 113,730 96,286 (9,044) 1,344 203,782
----------
Net (loss) (6,011) (6,011)
Other comprehensive (loss), net of tax:
Unrealized loss on interest rate swap (21) (21)
Foreign currency translation loss (21) (21)
----------
Comprehensive loss (6,053)
------------ ------- --------- --------- --------- -------------- ----------
Balance at October 29, 2006 14,660,716 $ 1,466 $ 113,730 $ 90,275 $ (9,044) $ 1,302 $ 197,729
============ ======= ========= ========= ========= ============== ==========
See notes to condensed consolidated financial statements.
4
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Thirteen weeks ended
--------------------
October 29, October 30,
2006 2005
--------------- ---------------
Cash flows from operating activities:
Net (loss) income $ (6,011) $ 3,975
--------------- ---------------
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
Depreciation and amortization 1,751 1,730
Stock-based compensation expense 116 78
Excess tax benefit from exercise of stock options - (216)
Employment contract settlement costs (includes $196 of
stock option modification costs) 5,914 -
Deferred tax assets and liabilities (2,301) (30)
Foreign exchange gain (27) (31)
Inventory valuation reserve charges 287 331
Changes in operating assets and liabilities:
Trade accounts receivable (330) (437)
Costs incurred and income
recognized in excess of billings on
uncompleted contracts and claims 668 (1,357)
Other receivables (435) 114
Inventories 450 (2,844)
Other current assets (649) (139)
Accounts payable and accrued expenses (1,695) (489)
Billings in excess of costs incurred and
income recognized on uncompleted contracts 34 218
Income taxes payable 677 1,681
Accrual for contract losses (165) (210)
Advance payments on contracts 261 145
Other, net 250 123
--------------- ---------------
Total adjustments 4,806 (1,333)
--------------- ---------------
Net cash (used in) provided by operating activities (1,205) 2,642
--------------- ---------------
Cash flows from investing activities:
Acquisition of technology license (179) (375)
Capital expenditures (1,016) (1,820)
--------------- ---------------
Net cash used in investing activities (1,195) (2,195)
--------------- ---------------
Cash flows from financing activities:
Borrowings under bank line of credit 4,500 4,000
Borrowings - other 1,746 -
Proceeds from exercise of stock options - 898
Payments of long-term debt (167) (727)
Payments under bank line of credit (4,500) (4,000)
Excess tax benefit from exercises of stock options - 216
--------------- ---------------
Net cash provided by financing activities 1,579 387
--------------- ---------------
Net (decrease) increase in cash and cash equivalents (821) 834
Cash and cash equivalents at beginning of period 22,303 20,331
--------------- ---------------
Cash and cash equivalents at end of period $ 21,482 $ 21,165
=============== ===============
See notes to condensed consolidated financial statements.
5
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
1. Principles of Consolidation and Basis of Presentation
The unaudited condensed consolidated financial statements include the
accounts of Herley Industries, Inc. and its wholly-owned subsidiaries,
collectively referred to as the "Company." All significant intercompany
accounts and transactions have been eliminated.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with instructions to Form 10-Q and Article 10
of Regulation S-X and do not include all of the information and note
disclosures normally included in annual financial statements as required by
accounting principles generally accepted in the United States of America
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring items, except for the recording
of the employment contract settlement costs discussed in Note 2) considered
necessary for a fair presentation have been included in the accompanying
condensed consolidated financial statements. Operating results for interim
periods are not necessarily indicative of the results of operations that
may be expected for a full year. These statements should be read in
conjunction with the consolidated financial statements and notes thereto,
and the Company's description of critical accounting policies, included in
the Company's 2006 Annual Report on Form 10-K for the fiscal year ended
July 30, 2006, as filed with the Securities and Exchange Commission
("SEC"). The consolidated balance sheet at July 30, 2006 has been derived
from the audited consolidated financial statements at that date but does
not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Certain prior period balances have been reclassified to conform to the
current period's financial statement presentation.
2. Significant Events
In connection with the legal matter discussed in Note 7 "Litigation," the
Company was notified that certain of its operations had been suspended from
receiving new contract awards from the U. S. Government. The affected
operations included facilities in Lancaster, Pennsylvania; Woburn,
Massachusetts; Chicago, Illinois and the Company's subsidiary in
Farmingdale, New York. The Chicago, Illinois location is a two-person
marketing office. The result of this suspension was that these facilities
were not solicited for or awarded new contracts or contract extensions
without special exceptions, pending the outcome of the legal proceedings.
The suspended facilities were permitted to receive contract awards or
subcontracts from the Federal Government if the head of the agency stated
in writing the compelling reason to do so. A significant portion of the
Company's business is received under contracts where the Company is the
only qualified supplier on critical defense programs.
The Company's facilities which were not included in the action and who were
free at all times to contract with the U.S. Government are the facilities
in Whippany, New Jersey (Herley-CTI); Jerusalem (Herley-Israel); McLean,
Virginia (Innovative Concepts, Inc.); Fort Walton Beach, Florida (Micro
Systems, Inc. and Herley-RSS) and Farnborough, U.K. (EW Simulation
Technology, Limited).
Effective October 12, 2006, the Company entered into an Administrative
Agreement with the Department of the Navy, on behalf of the Department of
the Defense that requires the Company, among other things, to implement a
comprehensive program of compliance reviews, audits and reports for a
period of three years or until settlement or adjudication of the legal
matter referenced above, whichever is later, unless shortened or extended
by written agreement of the parties. In addition, the Company is required
to sever its relationship with Mr. Lee N. Blatt, former Chairman of the
Board of Directors, as an employee or consultant to the Company. In return,
the Navy, on behalf of the Department of Defense has terminated the
suspension and debarment of the Company from receiving new contract awards
from the U.S. Government.
Effective October 12, 2006 and as a condition to entering into the
Administrative Agreement with the Department of the Navy noted above, the
Company entered into an agreement (the "Agreement") with Lee N. Blatt to
terminate the Employment Agreement between the Company and Mr. Blatt dated
as of July 29, 2002 and modified on December 9, 2003. Under the terms of
the Agreement Mr. Blatt will receive payments totaling approximately
$9,462,000; payable $3,000,000 upon the effective date of the Agreement and
6
sixty-four (64) consecutive monthly payments of $100,000 commencing on
January 1, 2007 and a final payment of $61,528 on May 1, 2012 as evidenced
by a non-interest bearing Promissory Note dated effective October 12, 2006
(the "Promissory Note"). The note has been discounted at 6.75% and recorded
at approximately $5,373,000 including accrued interest of $19,000 ($759,000
is included in "Current portion of employment settlement agreement" net of
imputed interest of $342,000; and $4,614,000 is included in "Long-term
Portion of Employment Settlement Agreement" net of imputed interest of
$728,000). In addition Mr. Blatt will receive his bonus of $636,503 for
fiscal year 2006, and shall be entitled to receive reimbursement for
medical care and life insurance, in accordance with the original terms of
his Employment Agreement (the current portion of which is estimated at
$57,000 and is included in "Current portion of employment settlement
agreement;" and the long-term portion of which is estimated at $306,000 and
is included in "Long-term Portion of Employment Settlement Agreement"). The
Agreement also provides that all outstanding stock options previously
issued to Mr. Blatt which are all vested and fully exercisable shall
continue to be exercisable by him or, following his death, by his
designated beneficiaries, on or before the expiration date of the specific
option. On September 26, 2006, as required under the terms of the
Administrative Agreement with the Department of the Navy, Mr. Blatt entered
into a voting trust agreement wherein sole voting power to 1,301,000 shares
under stock options held by Mr. Blatt and 28,799 shares held in his IRA was
granted to the Company's Chairman, Myron Levy. In the event of a "change of
control" of the Company as defined in the Employment Agreement all
remaining payments due under the Promissory Note become immediately due and
payable.
Aggregate costs of approximately $8,914,000 under the Agreement, including
cash payments of $3,000,000, payments due under the Promissory Note of
approximately $5,354,000 and medical and life insurance benefits of
approximately $364,000 (both discounted at an imputed interest rate of
6.75%) and the fair value of the modification of the stock options of
approximately $196,000 using the Black-Scholes option valuation model, have
been recorded in the Company's condensed consolidated financial statements
in the quarter ended October 29, 2006.
3. Inventories
The major components of inventories are as follows (in thousands):
October 29, 2006 July 30, 2006
---------------- -------------
Purchased parts and raw materials $ 27,184 $ 27,191
Work in process 29,994 29,597
Finished products 2,580 3,270
------- -------
59,758 60,058
Less:
Allowance for obsolete and slow moving inventory 4,564 4,576
Unliquidated progress payments 3,022 2,573
------- -------
$ 52,172 $ 52,909
====== ======
4. Income taxes
The net deferred income tax asset balance at October 29, 2006 was
approximately $5.9 million, an increase of approximately $2.2 million from
July 30, 2006. The increase is due to the tax effect on the timing of the
deductions for future payments of approximately $5,354,000 under a
promissory note and approximately $364,000 for estimated medical and life
insurance benefits due under the employment contract settlement discussed
in Note 2.
The lower effective tax rate in the thirteen weeks ended October 29, 2006
is due primarily to the employment contract settlement costs which
significantly affects domestic profitability. As a result of lower domestic
earnings, foreign earnings are a greater percentage of total earnings which
are taxed at lower rates than the U.S. income tax rates, thereby reducing
the overall effective tax rate. The research and development tax credit
expired as of December 31, 2005. As this credit has not yet been extended
by Congress, no benefit is reflected in the effective tax rate for the
thirteen weeks ended October 29, 2006.
7
5. Product Warranties
The Company warrants its products generally for a period of one year.
Product warranty costs are accrued based on historical claims expense.
Accrued warranty costs are reduced as warranty repair costs are incurred.
The following table presents the change in the accrual for product warranty
costs for the thirteen weeks ended October 29, 2006 and October 30, 2005
(in thousands):
Thirteen weeks ended
---------------------
October 29, October 30,
2006 2005
---- ----
Balance at beginning of period $ 986 $ 799
Provision for warranty obligations 266 141
Warranty costs charged to the reserve (184) (164)
---------- ---------
Balance at end of period $ 1,068 $ 776
========== =========
6. Long Term Debt
In connection with the installation of Microsoft Dynamics AX enterprise
software, the Company entered into an additional financing agreement in
August 2006 with De Lage Landen Financial Services, Inc. through Microsoft
Capital Corporation providing for loans not to exceed an aggregate of
$2,000,000. Amounts borrowed under the agreement are payable in thirty-six
equal monthly installments with interest at 5.354% per annum. The Company
has borrowed an aggregate of $1,400,000 as of October 29, 2006 with monthly
payments totaling approximately $42,750.
7. Litigation
On June 6, 2006, in connection with a continuing investigation by the U.S.
Attorneys' Office in Pennsylvania which, inter alia, involves pricing under
contracts with the U.S. Department of Defense relating to voltage control
oscillators and powerheads, an indictment was returned against the Company
and Lee Blatt, its former Chairman. No other officer or director of the
Company was named in the indictment. The contracts aggregate approximately
$3.9 million in total revenue. The indictment alleges 29 counts of
violations of the wire fraud statute (18 U.S.C. Section 1343); 2 counts of
violations of the obstruction of a federal audit statute (18 U.S.C. Section
1516); 1 count of violating the major fraud against the United States
statute (18 U.S.C. Section 1031); 3 counts of violating the false
statements to the government statute (18 U.S.C. Section 1001) and a notice
of forfeiture. The Company believes that no criminal conduct has occurred
and will vigorously contest the charges. If convicted, Mr. Blatt and the
Company could be fined up to approximately $13 million each and the Company
could be required to forfeit approximately $2.9 million paid under the
contracts. Under the terms of an indemnification agreement with Mr. Blatt,
the Company has agreed to provide indemnification with regard to certain
legal proceedings so long as he has acted in good faith and in a manner
believed to be in, or not opposed to, the Company's best interest with
respect to any criminal proceeding and had no reasonable cause to believe
his conduct was unlawful.
In June and July 2006, the Company was served with several class-action
complaints against the Company and certain of its officers in the United
States District Court for the Eastern District of Pennsylvania. The claims
are made under Section 10(b) and 20(a) of the Securities Exchange Act of
1934 and Rule 10b-5 thereunder. In July 2006, the Company and its directors
were also served with a derivative complaint for breach of fiduciary duty
brought pursuant to Rule 23.1 of the Federal Rules of Civil Procedure. The
complaints relate to the Company's indictment in the matter discussed
above. In addition, in June 2006, the Company was notified by
representatives of the United States Attorney's Office for the Eastern
District of Pennsylvania, Civil Division, that they intended to file a
civil lawsuit against the Company pursuant to inter alia, the False Claims
Act, 31 U.S.C. Section 3729 et. seq. The Company entered into a Tolling
Agreement on June 21, 2006, and does not anticipate any further activity
related to this potential claim until after the trial of the criminal
matter mentioned above.
The Company believes it has substantial defenses to the charges alleged in
the indictment and intends to vigorously defend against these allegations.
The Company is involved in various other legal proceedings and claims which
arise in the ordinary course of its business. While any litigation contains
an element of uncertainty, management believes that the outcome of such
other litigation will not have a material adverse effect on the Company's
financial position or results of operations.
8
8. Comprehensive (Loss) Income, net of income taxes
Comprehensive (loss) income for the periods presented is as follows (in
thousands):
Thirteen weeks ended
--------------------
October 29, October 30,
2006 2005
---- ----
Net (loss) income $ (6,011) $ 3,975
Unrealized (loss) gain on interest rate swap (21) 12
Foreign currency translation (loss) gain (21) 28
----------- -----------
Comprehensive (loss) income $ (6,053) $ 4,015
=========== ===========
The foreign currency translation (loss) gain relates to the Company's
investment in its U.K. subsidiary and fluctuations in exchange rates
between its local currency and the U.S. dollar.
The components of accumulated other comprehensive income are as follows (in
thousands):
October 29, 2006 July 30, 2006
---------------- -------------
Unrealized loss on interest rate swap $ (43) $ (22)
Foreign currency translation gain 1,345 1,366
----- -----
Accumulated other comprehensive income $ 1,302 $ 1,344
===== =====
9. Stock-Based Compensation
The Company has various fixed stock option plans which are described in
Note M of the Company's July 30, 2006 Annual Report on Form 10-K that
provide for the grant of stock options to eligible employees and directors.
As of October 29, 2006, there were 3,490,080 stock options outstanding. No
stock options were issued during the quarter ended October 29, 2006. The
aggregate value of unvested options as of October 29, 2006, as determined
using a Black-Scholes option valuation model was approximately $700,000
(net of estimated forfeitures).
10. (Loss) Earnings Per Share ("EPS")
The following table shows the components used in the calculation of basic
(loss) earnings per share and (loss) earnings per share assuming dilution
(in thousands):
Thirteen weeks ended
October 29, October 30,
2006 2005
---------------- ------------------
Numerator:
Net (Loss) Income ($6,011) $3,975
====== =====
Denominator:
Basic weighted-average shares 13,862 14,446
Effect of dilutive securities:
Employee stock options - 794
---------------- ------------------
Diluted weighted-average shares 13,862 15,240
================ ==================
Stock options not included in computation 3,490 969
================ ==================
Exercise price range per share $4.06 - $21.18 $17.98 - $20.45
The number of stock options not included in the computation of diluted EPS
for the thirteen weeks ended October 30, 2005 relates to stock options
having exercise prices which are greater than the average market price of
the common shares during the period, and therefore, are anti-dilutive. No
employee stock options were considered in the computation of diluted net
loss per share for the thirteen weeks ended October 29, 2006 as their
effect is anti-dilutive. The options which were outstanding as of October
29, 2006 and excluded from the computation in the table above expire at
various dates through May 2, 2015.
11. Geographic Information
Net sales to the U.S. Government in the thirteen weeks ended October 29,
2006 and October 30, 2005 accounted for approximately 21% and 24% of net
sales, respectively. Northrop Grumman accounted for approximately 11% of
net sales in 2005. No other customer accounted for 10% or more of net sales
during the periods presented.
The Company operates as a single integrated business and as such has one
operating segment. Geographic net sales for the first quarter, based on
place of contract performance, were as follows (in thousands):
9
Thirteen weeks ended
--------------------
October 29, October 30,
2006 2005
---- ----
United States $ 33,585 $ 37,776
Israel 4,375 3,111
England 2,156 1,051
------------- -------------
$ 40,116 $ 41,938
============= =============
Net property, plant and equipment by geographic area was as follows (in
thousands):
October 29, 2006 October 30, 2005
---------------- ----------------
United States $ 24,946 $ 24,711
Israel 4,707 4,617
England 531 695
-------- --------
$ 30,184 $ 30,023
======== ========
12. Supplemental cash flow information is as follows (in thousands):
Thirteen weeks ended
--------------------
October 29, 2006 October 30, 2005
---------------- ----------------
Net cash paid during the period for:
Interest $ 79 $ 75
Income taxes - -
13. New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Post Retirement Plans, an
amendment of FASB Statements No. 87, 88, 106 and 132(R)" ("SFAS 158"). SFAS
158 requires an entity to recognize in its statement of financial position
an asset for a defined benefit pension or postretirement plan's overfunded
status or a liability for a plan's underfunded status and to recognize
changes in that funded status through comprehensive income in the year in
which the changes occur. SFAS 158 will not change the amount of net
periodic benefit expense recognized in an entity's results of operations.
SFAS 158 is effective for fiscal years ending after December 15, 2006. The
Company will evaluate the impact of adopting SFAS 158 but does not expect
that it will have a material impact on the Company's consolidated financial
position, results of operations or cash flows.
10
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS 157"). SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. It codifies the
definitions of fair value included in other authoritative literature;
clarifies and, in some cases, expands on the guidance for implementing fair
value measurements; and increases the level of disclosure required for fair
value measurements. Although SFAS 157 applies to (and amends) the
provisions of existing authoritative literature, it does not, of itself,
require any new fair value measurements, nor does it establish valuation
standards. SFAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those
fiscal years. This statement will be effective for the Company's fiscal
year beginning August 2008. The Company will evaluate the impact of
adopting SFAS 157 but does not expect that it will have a material impact
on the Company's consolidated financial position, results of operations or
cash flows.
In September 2006, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 108 ("SAB 108") which provides
interpretive guidance on how the effects of the carryover or reversal of
prior year misstatements should be considered in quantifying a current year
misstatement. SAB 108 becomes effective in fiscal 2007. Adoption of SAB 108
is not expected to have a material impact on the Company's consolidated
financial position, results of operations or cash flows.
In June 2006, the FASB issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes (as amended) - an interpretation of FASB
Statement No. 109" ("FIN 48"). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise's financial
statements in accordance with SFAS No. 109, "Accounting for Income Taxes",
and prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The Company is in the process of
analyzing the impact of FIN 48, which is required to be adopted by the
first quarter of fiscal 2008.
11
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Explanatory Note
In connection with the legal matter discussed in Note 6 "Litigation," the
Company was notified that certain of its operations had been suspended from
receiving new contract awards from the U. S. Government. The affected operations
included facilities in Lancaster, Pennsylvania; Woburn, Massachusetts; Chicago,
Illinois and the Company's subsidiary in Farmingdale, New York. The Chicago,
Illinois location is a two-person marketing office. The result of this
suspension was that these facilities were not solicited for or awarded new
contracts or contract extensions without special exceptions, pending the outcome
of the legal proceedings. The suspended facilities were permitted to receive
contract awards or subcontracts from the Federal Government if the head of the
agency stated in writing the compelling reason to do so. A significant portion
of the Company's business is received under contracts where the Company is the
only qualified supplier on critical defense programs.
The Company's facilities which were not included in the action and who were free
at all times to contract with the U.S. Government are the facilities in
Whippany, New Jersey (Herley-CTI); Jerusalem (Herley-Israel); McLean, Virginia
(Innovative Concepts, Inc.); Fort Walton Beach, Florida (Micro Systems, Inc. and
Herley-RSS) and Farnborough, U.K. (EW Simulation Technology, Limited).
Effective October 12, 2006, the Company entered into an Administrative Agreement
with the Department of the Navy, on behalf of the Department of Defense that
requires the Company, among other things, to implement a comprehensive program
of compliance reviews, audits and reports for a period of three years or until
settlement or adjudication of the legal matter referenced above, whichever is
later, unless shortened or extended by written agreement of the parties. In
addition, the Company is required to sever its relationship with Mr. Lee N.
Blatt, former Chairman of the Board of Directors, as an employee or consultant
to the Company. In return, the Navy, on behalf of the Department of Defense has
terminated the suspension and debarment of the Company from receiving new
contract awards from the U.S. Government.
12
Effective October 12, 2006 and as a condition to entering into the
Administrative Agreement with the Department of the Navy noted above, the
Company entered into an agreement (the "Agreement") with Lee N. Blatt to
terminate the Employment Agreement between the Company and Mr. Blatt dated as of
July 29, 2002 and modified on December 9, 2003. Under the terms of the Agreement
Mr. Blatt will receive payments totaling $9,461,528; payable $3,000,000 upon the
effective date of the Agreement and sixty-four (64) consecutive monthly payments
of $100,000 commencing on January 1, 2007 and a final payment of $61,528 on May
1, 2012 as evidenced by a non-interest bearing Promissory Note dated effective
October 12, 2006 (the "Promissory Note"). In addition Mr. Blatt will receive his
bonus of $636,503 for fiscal year 2006, and shall be entitled to receive
reimbursement for medical care and life insurance, in accordance with the
original terms of his Employment Agreement. The Agreement also provides that all
outstanding stock options previously issued to Mr. Blatt which are all vested
and fully exercisable shall continue to be exercisable by him or, following his
death, by his designated beneficiaries, on or before the expiration date of the
specific option. On September 26, 2006, as required under the terms of the
Administrative Agreement with the Department of the Navy, Mr. Blatt entered into
a voting trust agreement wherein sole voting power to 1,301,000 shares under
stock options held by Mr. Blatt and 28,799 shares held in his IRA was granted to
the Company's Chairman, Myron Levy. In the event of a "change of control" of the
Company as defined in the Employment Agreement all remaining payments due under
the Promissory Note become immediately due and payable.
Aggregate costs of approximately $8,914,000 under the Agreement including cash
payments, payments due under the Promissory Note and medical and life insurance
benefits (discounted at an imputed interest rate of 6.75%), plus the fair value
of the modification of the stock options using the Black-Scholes option
valuation model have been recorded in the Company's condensed consolidated
financial statements in the quarter ended October 29, 2006.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Certain statements contained in this report are "forward-looking statements"
that involve various important assumptions, risks, uncertainties and other
factors which could cause the Company's actual results to differ materially from
those expressed in such forward-looking statements. Forward-looking statements
can be identified by terminology such as "may", "will", "should" , "expects",
"intends", "anticipates", "believes", "estimates", "predicts", "continue", or
the negative of these terms or other comparable terminology. These important
factors include, without limitation, a large percentage of sales are under
government contracts, cost overruns under fixed price contracts, doing business
in foreign markets, customer concentration, competitive factors and pricing
pressures, effective integration of acquired businesses, management of future
growth, recruiting and retaining qualified technical personnel, general economic
conditions, as well as other risks previously disclosed in the Company's
securities filings and press releases. Although the Company believes that the
expectations reflected in the forward-looking statements are reasonable, it
cannot guarantee future results, performance or achievements. Further, the
Company is under no duty to update any of the forward-looking statements after
the date of this quarterly report to conform such statements to actual results.
13
Business Overview
We are a leading supplier of microwave products and systems to defense and
aerospace entities worldwide. Our primary customers include large defense prime
contractors (including Raytheon, Northrop Grumman, General Dynamics, Lockheed
Martin and Boeing), the U.S. Government (including the Department of Defense,
NASA and other U.S. Government agencies) and international customers (including
the German, Japanese, Turkish, British, Norwegian, Finnish and South Korean
militaries, and suppliers to international militaries). We are a leading
provider of microwave technologies for use in command and control systems,
flight instrumentation, weapons sensors, high power amplifiers, electronic
warfare systems, wireless data communications products and services, and radar
threat and electronic countermeasure simulation systems. We have served the
defense industry since 1965 by designing and manufacturing microwave devices and
systems for use in high technology defense electronics applications. Our
products and systems are currently deployed on a wide range of high profile
military platforms, including the F-16 Falcon, the F/A-18E/F Super Hornet, the
EA-6B Prowler, the EA-18 Growler, the AH-64D Apache Longbow, AEGIS class
destroyers, the AMRAAM missile, unmanned aerial vehicles (UAVs), as well as high
priority national security programs such as National Missile Defense and the
Trident II D-5 missile.
Results of Operations
Thirteen weeks ended October 29, 2006 and October 30, 2005
- ----------------------------------------------------------
The suspension from receiving new contract awards from the U.S. Government in
June 2006 caused disruption in our business in several respects which cannot be
easily measured, but certainly had an impact on the results of the first quarter
both in terms of sales and profitability. Throughout the quarter, management
focused on working with our customers to assure them of our commitment to
meeting their needs and also worked with the Department of the Navy to reach the
Administrative Agreement that ultimately lifted the suspension. As the
suspension was lifted effective October 12, 2006, most of the first quarter had
already been affected. Also, some shipments were affected due to the inability
to obtain the necessary export licenses.
Net sales for the thirteen weeks ended October 29, 2006 were approximately
$40,116,000, as compared to $41,938,000 in the thirteen weeks ended October 30,
2005, a decrease of $1.8 million (4.3%). The decrease in net sales is related to
the recording of a $2.2 million claim receivable on a major program during the
first quarter of the prior year. Excluding the $2.2 million claim in the prior
year, we experienced an increase in net sales of approximately $0.4 million.
Increases in sales related primarily to medical products and EA-18, as well as
increases in sales of both microwave systems and microwave products through
Israel and EWST. Offsetting these increases was a decline in domestic microwave
systems primarily due to the completion of certain contracts and timing of
shipments.
Domestic and foreign sales were 70% and 30% respectively of total net sales in
the quarter, versus 77% and 23% respectively in the prior year quarter. Bookings
in the first quarter were approximately $45 million, versus $30 million in the
prior year first quarter. Backlog at October 29, 2006 was $131 million, of which
approximately 74% is domestic and 26% is foreign.
The gross profit margin in the thirteen weeks ended October 29, 2006 was 25.6%
compared to 33.7% in the first quarter of fiscal 2006, a decrease of 8.1%.
Contributing to the reduction in gross profit for the quarter are the following
items:
o The booking of the $2.2 million claim receivable in the prior year.
o Disruption caused by the suspension.
o Engineering development costs overruns on certain contracts in excess of
billings to customers.
o Startup production costs on certain programs.
o Completion costs associated with certain low margin contracts.
Selling and administrative expenses for the thirteen weeks ended October 29,
2006 increased approximately $435,000 over the first quarter of fiscal 2006 and
was 22.5% of net sales as compared to 20.5% in fiscal 2006. Significant changes
during the period included:
o An increase in audit fees of $420,000 due to the three year audit scope
that was required subsequent to the resignation of our prior auditors.
o An increase in net legal fees over the prior year quarter of $114,000.
Legal costs in both periods are primarily attributable to the investigation
and indictment by the U.S. Attorneys' office in Pennsylvania which, inter
alia, involves pricing under two contracts with the U.S. Department of
Defense relating to voltage control oscillators and a contract relating to
powerheads.
14
Offset by
o A reduction in bonus expense of $393,000 due to the decreased operating
profit in the current quarter.
Employment contract settlement costs of approximately $8,914,000 relate to an
agreement effective October 12, 2006 with Lee N. Blatt, co-founder and former
Chairman of the Company, to terminate his employment agreement with us after 41
years of service. Settlement costs include a cash payment of $3,000,000,
payments due under a Promissory Note and estimated medical and life insurance
benefits discounted at an imputed interest rate of 6.75%, plus the fair value of
a modification to the stock options held by Mr. Blatt using the Black-Scholes
option valuation model.
Operating income for the first quarter of fiscal 2007, excluding the employment
contract settlement costs of $8,914,000, was $1,263,000 or 3.1% of net sales, as
compared to $5,538,000 or 13.2% of net sales in the prior year. The decrease in
operating income as a percentage of net sales is primarily attributable to the
reduction in gross margins discussed above, particularly the effect of the $2.2
million claim receivable that was recorded in the prior year quarter. Excluding
the $2.2 million claim, the prior year operating income would have been 8.4% of
net sales.
In the thirteen weeks ended October 29, 2006, the Company recognized a foreign
exchange gain of $17,000 versus a gain of $113,000 in the first quarter of
fiscal 2006. The foreign exchange gains are attributable to our UK subsidiary
primarily in connection with temporary advances we have made to them.
The income tax benefit recognized in the first quarter of fiscal 2007 was
$1,550,000 at an effective tax rate of approximately 21%, as compared to a
provision for income taxes of $1.7 million at an effective tax rate of
approximately 30% in the prior year's first quarter. The lower effective tax
rate in the first quarter of fiscal year 2007 is due primarily to the employment
contract settlement costs which significantly affects domestic profitability.
With this lower domestic profitability, foreign earnings are a greater
percentage of total earnings than in prior quarters and are taxed at a lower
rate, thereby reducing the overall effective tax rate. Excluding the impact of
the employment contract settlement costs, the effective tax rate would have been
approximately 28%. The research and development tax credit expired as of
December 31, 2005. As this credit has not yet been extended by Congress, no
benefit is reflected in the effective tax rate for the first quarter. If the
research and development credit is extended, the effective tax rate may be
adjusted in the second quarter.
Excluding the impact of the employment contract settlement costs, basic and
diluted earnings per common share would have been $.07 for the thirteen weeks
ended October 29, 2006 as compared to basic and diluted earnings per common
share of $.28 and $.26, respectively for the thirteen weeks ended October 30,
2005. A reconciliation of the Non-GAAP earnings per common share calculation is
as follows:
Thirteen weeks ended
--------------------
Non-GAAP
Measure As Reported Under GAAP
------- ----------------------
October 29, October 29, October 30,
2006 2006 2005
---- ---- ----
(Loss) income before income taxes $(7,561) S(7,561) $5,678
Employment contract settlement costs 8,914 - -
----- ----- -----
Income before income taxes 1,353 (7,561) 5,678
Provision (benefit)for income taxes 381 (1,550) 1,703
----- ----- -----
Net income (loss) $ 972 $(6,011) $3,975
===== ===== =====
Earnings (loss) per common share - Basic $0.07 $(0.43) $0.28
==== ==== ====
Basic weighted average shares 13,862 13,862 14,446
====== ====== ======
Earnings (loss) per common share - Diluted $0.07 $(0.43) $0.26
==== ==== ====
Basic weighted average shares 14,148 13,862 15,240
====== ====== ======
Liquidity and Capital Resources
- -------------------------------
As of October 29, 2006 and July 30, 2006, working capital was $90,999,000 and
$92,088,000, respectively, and the ratio of current assets to current
liabilities was 3.7 to 1 and 3.8 to 1, respectively.
As is customary in the defense industry, inventory is partially financed by
progress payments. In addition, it is customary for us to receive advanced
payments from customers on major contracts at the time a contract is entered
into. The un-liquidated balance of progress payments was approximately
$3,022,000 at October 29, 2006 and $2,573,000 at July 30, 2006. The balance of
advanced payments was approximately $3,584,000 at October 29, 2006 and
$3,323,000 at July 30, 2006.
15
Net cash used in operations during the thirteen weeks ended October 29, 2006 was
approximately $1,205,000 as compared to cash provided by operations of
$2,642,000 during the comparable period in the prior year, a net decrease of
approximately $3,847,000. Net (loss) income (adjusted for non-cash items
including depreciation, amortization, employment contract settlement costs and
foreign exchange gain) was $1,627,000 in the first quarter of the current fiscal
year versus $5,674,000 in the prior year first quarter, a decrease of
approximately $4,047,000. Other significant items contributing to the overall
decrease in cash provided by operations include the following:
1. An increase in deferred tax assets of $2.2 million related to the timing of
the deduction for tax purposes of the non-cash portion of the employment
contract settlement costs.
2. A decrease of approximately $1.2 million generated through amounts due to
vendors and accrued expenses.
3. A reduction in income taxes payable of approximately $1.0 million.
Offset primarily by
1. A reversal in the growth of inventory as compared to a significant increase
in inventory during the first quarter of fiscal 2006 resulting in an
improvement in cash flow of approximately $3.3 million.
2. A reduction of approximately $2.0 million in the amount of cash invested in
costs incurred and income recognized in excess of billings on uncompleted
contracts which included $2.2 million of estimated costs incurred and
income recognized in connection with a claim due to customer delays and
changes in specification and designs under a major program in fiscal 2006.
Net cash used in investing activities includes capital expenditures of
$1,016,000 and a final milestone payment of $178,700 in connection with the
Xytrans license agreement for millimeter wave technology for military
applications.
In connection with the installation of Microsoft Dynamics AX enterprise
software, we entered into an additional financing agreement in August 2006 with
De Lage Landen Financial Services, Inc. through Microsoft Capital Corporation
providing for loans not to exceed an aggregate of $2,000,000. Amounts borrowed
under the agreement are payable in thirty-six equal monthly installments with
interest at 5.354% per annum. We have borrowed an aggregate of $1,400,000 as of
October 29, 2006 with monthly payments totaling approximately $42,750. In
addition, we financed the purchase of capital equipment in the amount of
$346,000 in connection with a major long-term contract.
In June 2002, we entered into a new $50,000,000 Revolving Credit Loan Agreement
with two banks on an unsecured basis which may be used for general corporate
purposes, including business acquisitions. The revolving credit facility
requires the payment of interest only on a monthly basis and payment of the
outstanding principal balance on March 31, 2008 (as amended). We may elect to
borrow up to a maximum of $5,000,000 with interest based on the Federal Funds
Target Rate plus a margin of 1.50% to 1.80%, or up to a maximum of $45,000,000
with interest based on LIBOR plus a margin of 1.35% to 1.65%. The applicable
incremental margin is based on the ratio of total liabilities to tangible net
worth, as those terms are defined in the agreement. The Federal Funds Target
Rate and the LIBOR rate were 5.25% and 5.32%, respectively, at October 29, 2006.
There is a fee of 15 basis points per annum on the unused portion of the
$45,000,000 LIBOR based portion of the credit facility payable quarterly. During
the quarter ended October 29, 2006, we utilized the credit facility for
short-term working capital needs to the extent of $4.5 million. There are no
borrowings under the credit line at October 29, 2006 and July 30, 2006. Stand-by
letters of credit were outstanding in the amount of approximately $10,281,000
under the credit facility at October 29, 2006, and $10,285,000 at July 30, 2006.
The agreement contains various financial covenants, including, among other
matters, minimum tangible net worth, total liabilities to tangible net worth,
debt services coverage, and restrictions on other borrowings. We are in
compliance with all covenants at October 29, 2006.
We believe that presently anticipated future cash requirements will be provided
by internally generated funds, our existing unsecured credit facility, and
existing cash reserves. A significant portion of our revenue for fiscal 2007
will be generated from our existing backlog of sales orders. The backlog of
orders at October 29, 2006 was approximately $131 million. In the event of the
cancellation of a significant amount of government contracts included in our
backlog, we will be required to rely more heavily on cash reserves and our
existing credit facility to fund operations. We are not aware of any events
which are reasonably likely to result in any cancellation of our government
contracts. As of October 29, 2006, we have approximately $39,719,000 available
under our bank credit facility, net of outstanding stand-by letters of credit of
approximately $10,281,000 and cash reserves of approximately $21,482,000.
New Accounting Pronouncements
- -----------------------------
See Note 13 of Notes to Condensed Consolidated Financial Statements -
(Unaudited) for the discussion on recent accounting pronouncements.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
The Company's exposures to market risk have not changed significantly since July
30, 2006.
Item 4: Controls and Procedures
(a) Evaluation of disclosure controls and procedures. The term "disclosure
controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934 as amended (the "Exchange Act"). These rules
refer to the controls and other procedures of a company that are designed to
ensure that information required to be disclosed by the company in the reports
that it files under the Exchange Act is recorded, processed, summarized and
reported within the required time periods. The Company's management, with
participation of the Company's Chief Executive Officer and Chief Financial
Officer, has evaluated the design, operation and effectiveness of the Company's
disclosure controls and procedures and have concluded, based on such evaluation,
that such controls and procedures were effective at providing reasonable
assurance that required information will be disclosed in the Company's reports
filed under the Exchange Act as of October 29, 2006.
(b) Changes in internal controls. There were no changes in the Company's
internal controls over financial reporting (as such term is defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended
October 29, 2006 that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings:
As previously reported, there has been a continuing investigation by the U.S.
Attorneys' Office in Pennsylvania which, inter alia, involves pricing under
contracts with the U.S. Department of Defense relating to voltage control
oscillators and powerheads. The contracts aggregate approximately $3.9 million
in total revenue.
16
On June 6, 2006 an indictment was returned against the Company and Lee Blatt,
its former Chairman. No other officer or director of the Company was named in
the indictment. The indictment alleges 29 counts of violations of the wire fraud
statute (18 U.S.C. Section 1343); 2 counts of violations of the obstruction of a
federal audit statute (18 U.S.C. Section 1516); 1 count of violating the major
fraud against the United States statute (18 U.S.C. Section 1031); 3 counts of
violating the false statements to the government statute (18 U.S.C. Section
1001) and a notice of forfeiture. The Company believes that no criminal conduct
has occurred and will vigorously contest the charges. If convicted, Mr. Blatt
and the Company could be fined up to approximately $13 million each and the
Company could be required to forfeit approximately $2.9 million paid under the
contracts. Under the terms of an indemnification agreement with Mr. Blatt, the
Company has agreed to provide indemnification with regard to certain legal
proceedings so long as he has acted in good faith and in a manner believed to be
in, or not opposed to, the Company's best interest with respect to any criminal
proceeding and had no reasonable cause to believe his conduct was unlawful.
In June and July 2006, the Company was served with several class-action
complaints against the Company and certain of its officers in the United States
District Court for the Eastern District of Pennsylvania. The claims are made
under Section 10(b) and 20(a) of the Securities Exchange act of 1934 and Rule
10b-5 thereunder. In July 2006, the Company and its directors were also served
with a derivative complaint for breach of fiduciary duty brought pursuant to
Rule 23.1 of the Federal Rules of Civil Procedure. The complaints relate to the
Company's indictment in the matter discussed above. In addition, in June 2006
the Company was notified by representatives of the United States Attorney's
Office for the Eastern District of Pennsylvania, Civil Division, that they
intended to file a civil lawsuit against the Company pursuant to inter alia, the
False Claims Act, 31 U.S.C. ss. 3729 et. seq. The Company entered into a Tolling
Agreement on June 21, 2006, and does not anticipate any further activity related
to this potential claim until after the trial of the criminal matter mentioned
above.
The Company believes it has substantial defenses to the charges alleged in the
indictment and intends to vigorously defend against these allegations.
The Company is involved in various other legal proceedings and claims which
arise in the ordinary course of its business. While any litigation contains an
element of uncertainty, management believes that the outcome of such other
litigation will not have a material adverse effect on the Company's financial
position or results of operations.
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds:
None
Item 3 - Defaults Upon Senior Securities:
None
Item 4 - Submission of Matters to a Vote of Security Holders:
None
Item 5 - Other Information:
None
Item 6 - Exhibits
31. Certifications pursuant to Rules 13a-14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32. Certifications pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
17
FORM 10-Q
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HERLEY INDUSTRIES, INC.
-----------------------
Registrant
BY: /S/ Myron Levy
-----------------------------------
Myron Levy, Chief Executive Officer
BY: /S/ Kevin J. Purcell
-----------------------------------------
Kevin J. Purcell, Chief Financial Officer
DATE: December 8, 2006
18