Aeroflex Incorporated (Nasdaq: ARXX), today announced operating
results for its fiscal 2007 third quarter which ended March 31, 2007.
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Quarter Ended March 31,
-----------------------
2007 2006
----------- -----------
Sales (in millions) $150.3 $140.5
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Diluted earnings per share
GAAP $ 0.07 $ 0.10
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Non-GAAP $ 0.17 $ 0.15
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Operating income of $13.3 million for the fiscal 2007 third
quarter increased $1.0 million (8.5%) compared to last year. As
previously announced, Aeroflex has entered into an agreement to be
acquired by General Atlantic LLC and Francisco Partners II, L.P.
("Company Sale Transaction"). Including the Company Sale Transaction
expenses of $4.3 million ($3.4 million after tax), net income for the
fiscal 2007 third quarter amounted to $5.5 million, or $0.07 per
diluted share, compared with $7.7 million, or $0.10 per diluted share
last year. On a GAAP basis, gross profit margins for the fiscal 2007
third quarter were 47.1% compared to 47.7% last year. The quarterly
results were impacted by:
-- a $3.2 million ($2.1 million after tax or $0.03 per share)
charge for amortization of acquired intangibles in fiscal
2007, compared to $3.4 million ($2.1 million after tax or
$0.03 per share) in fiscal 2006;
-- a $1.3 million ($807,000 after tax or $0.01 per share) charge
for share based compensation in fiscal 2007, compared to $1.6
million ($943,000 after tax or $0.01 per share) in fiscal
2006;
-- a $2.0 million ($1.3 million after tax or $0.02 per share)
charge for restructuring costs related to the consolidation of
the company's subsidiaries in the United Kingdom in fiscal
2007, compared to $1.2 million ($723,000 after tax or $0.01
per share) in fiscal 2006; and
-- a $4.3 million ($3.4 million after tax or $0.04 per share)
charge for Company Sale Transaction expenses in fiscal 2007.
Non-GAAP gross profit margins, excluding the aforementioned items,
were 47.2%, compared to 48.0 % last year and non-GAAP operating income
of $19.8 million increased 7.6% compared to last year. The third
quarter non-GAAP results exclude the following items from net income
per diluted share:
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Quarter Ended March 31,
------------------------
2007 2006
------------ -----------
Amortization of acquired intangibles $0.03 $0.03
Share based compensation 0.01 0.01
Restucturing costs 0.02 0.01
Company Sale Transaction expenses 0.04 -
------------ -----------
Total EPS impact $0.10 $0.05
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Year-to-date results were:
Nine Months Ended March 31,
---------------------------------
2007 2006
---------------- ----------------
Sales (in millions) $432.4 $401.3
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Diluted earnings per share:
GAAP $ 0.29 $ 0.26
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Non-GAAP $ 0.46 $ 0.40
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On a GAAP basis, gross profit margins for the nine months of
fiscal 2007 were 47.0% compared to 47.5% last year. Operating income
of $38.9 million for the nine months of fiscal 2007 increased 22%
compared to last year. Net income for the nine months of fiscal 2007
amounted to $21.8 million, or $0.29 per diluted share, compared with
$20.0 million, or $0.26 per diluted share. The nine months results
were impacted by:
-- a $9.6 million ($6.2 million after tax or $0.08 per share)
charge for amortization of acquired intangibles in fiscal
2007, compared to $10.3 million ($6.3 million after tax or
$0.08 per share) in fiscal 2006;
-- a fiscal 2006 charge of $1.1 million ($685,000 after tax or
$0.01 per share) for an acquisition related inventory
adjustment (for which there was no comparable item in the
current fiscal year);
-- a $3.2 million ($2.1 million after tax or $0.03 per share)
charge for share based compensation in fiscal 2007, compared
to $5.0 million ($3.1 million after tax or $0.04 per share) in
fiscal 2006;
-- a $2.1 million ($1.4 after tax or $0.02 per share) charge for
restructuring costs in fiscal 2007, compared to $1.2 million
($723,000 after tax or $0.01 per share) in fiscal 2006; and
-- a $4.3 million ($3.4 million after tax or $0.04 per share)
charge for Company Sale Transaction expenses in fiscal 2007.
Non-GAAP gross profit margins, excluding the aforementioned items,
were 47.0%, compared to 47.9% last year and non-GAAP operating income
of $53.9 million increased 9.0% compared to last year. The
year-to-date non-GAAP results exclude the following items from net
income per diluted share:
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Nine Months Ended March 31,
2007 2006
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Acquisition-related items:
Amortization of intangibles $0.08 $0.08
Purchase adjustments to inventory - 0.01
Share based compensation 0.03 0.04
Restructuring charges 0.02 0.01
Company Sale Transaction costs 0.04 -
-------------- -------------
Total EPS impact $0.17 $0.14
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Operating cash flow for the nine months was approximately $23
million. During the nine months, we repurchased approximately 1.8
million shares of our common stock for $17.2 million. In October 2006,
we paid $9.2 million in a final determination of the Racal acquisition
earn-out. This amount has been added to goodwill.
"Our third quarter and nine months performance positions us well
for another solid year," said Len Borow, President and Chief Operating
Officer. Both segments of our business performed well as the nine
months book-to-bill ratio was 1.03 to 1.0. We head into the remainder
of the fiscal year with a backlog of $253 million, 46% of which is
scheduled to ship in the fourth quarter of fiscal 2007."
Our estimate of operating results for the June 2007 quarter is as
follows:
-- net sales are expected to be approximately $162 million, and
-- GAAP net income per diluted share is anticipated to be $0.15.
Non-GAAP earnings per diluted share are anticipated to be
$0.20. Non-GAAP earnings exclude estimated amortization of
acquired intangibles and share based compensation, of a
combined $0.05 per diluted share.
About Aeroflex
Aeroflex Incorporated is a global provider of high technology
solutions to the aerospace, defense and broadband communications
markets. The Company's diverse technologies allow it to design,
develop, manufacture and market a broad range of test, measurement and
microelectronic products. The Company's common stock trades on the
Nasdaq National Market System under the symbol ARXX and is included in
the S&P SmallCap 600 index. Additional information concerning Aeroflex
Incorporated can be found on the Company's Web site: www.aeroflex.com.
All statements other than statements of historical fact included
in this press release regarding Aeroflex's financial position,
business outlook, business strategy and plans and objectives of its
management for future operations are forward-looking statements. When
used in this press release, words such as "anticipate," "believe,"
"estimate," "expect," "intend" and similar expressions, as they relate
to Aeroflex or its management, identify forward-looking statements.
Such forward-looking statements are based on the current beliefs of
Aeroflex's management, as well as assumptions made by and information
currently available to its management. 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, completion of the proposed
Company Sale Transaction, the integration of acquired businesses,
changes in legal and regulatory requirements, technological change or
difficulties, product development risks, commercialization
difficulties, general economic conditions, and other risk factors
disclosed in Aeroflex's most recently filed Form 10-K. Such statements
reflect the current views of management with respect to the future and
are subject to these and other risks, uncertainties and assumptions
relating to Aeroflex's financial condition, results of operations,
growth strategy and liquidity. Aeroflex does not undertake any
obligation to update such forward-looking statements.
The non-GAAP financial measures used in this press release are not
prepared in accordance with generally accepted accounting principles
and may be different from non-GAAP financial measures used by other
companies. The Company's management refers to these non-GAAP financial
measures in making operating decisions because they provide meaningful
supplemental information regarding the Company's operating
performance. In addition, these non-GAAP financial measures facilitate
management's internal comparisons to the Company's historical
operating results. We include these non-GAAP financial measures (which
should be viewed as a supplement to, and not a substitute for, their
comparable GAAP measures) in this press release because we believe
they are useful to investors in allowing for greater transparency to
supplemental information used by management in its financial and
operational decision-making. For a reconciliation of our GAAP and
non-GAAP financial results, please refer to our Reconciliation of
Reported GAAP Results to Non-GAAP Measures, presented in this release.
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AEROFLEX INCORPORATED
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
March 31, June 30,
2007 2006
----------- ---------
ASSETS
------------------------------------------------
Current assets:
Cash and cash equivalents $ 13,476 $ 10,387
Marketable securities 10,576 28,332
Accounts receivable, less allowance for
doubtful accounts 129,192 120,296
Inventories 147,763 133,420
Deferred income taxes 24,159 24,732
Prepaid expenses and other current assets 13,159 11,187
----------- ---------
Total current assets 338,325 328,354
Property, plant and equipment, net 79,129 77,940
Other assets 16,271 14,276
Intangible assets with definite lives, net 46,228 54,215
Goodwill 177,522 163,237
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Total assets $ 657,475 $ 638,022
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------------
Current liabilities:
Current portion of long-term debt $ 607 $ 607
Accounts payable 39,325 37,832
Advance payments by customers 21,724 21,128
Income taxes payable 817 9,162
Accrued payroll expenses 20,392 17,440
Accrued expenses and other current
liabilities 39,041 33,046
----------- ---------
Total current liabilities 121,906 119,215
Long-term debt 3,327 3,558
Deferred income taxes 1,251 4,631
Other long-term liabilities 24,002 22,948
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Total liabilities 150,486 150,352
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Stockholders' equity:
Preferred Stock, par value $.10 per share;
authorized 1,000 shares:
Series A Junior Participating Preferred
Stock, par value $.10 per share,
authorized 110 shares; none issued - -
Common Stock, par value $.10 per share;
authorized 110,000 shares; issued 73,689 and
75,270 shares 7,369 7,527
Additional paid-in capital 372,187 384,870
Accumulated other comprehensive income 23,800 13,468
Retained earnings 103,633 81,805
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Total stockholders' equity 506,989 487,670
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Total liabilities and stockholders'
equity $ 657,475 $ 638,022
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AEROFLEX INCORPORATED
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
----------------------------------------------------------------------
(In thousands, except per share data)
For the Quarter Ended
--------------------------
03/31/07 03/31/06
------------- ------------
Net sales $ 150,271 $ 140,527
Cost of sales 79,460 73,461
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Gross profit 70,811 67,066
Selling, general and administrative
expenses 33,907 30,863
Research and development costs 20,360 20,488
Amortization of acquired intangibles 3,225 3,440
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Operating income 13,319 12,275
Company Sale Transaction expenses (4,319) -
Interest and other income (expense),
net 582 442
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Income before income taxes 9,582 12,717
Provision for income taxes 4,093 4,971
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Net income $ 5,489 $ 7,746
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Net income per common share:
Basic $ 0.07 $ 0.10
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Diluted $ 0.07 $ 0.10
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Weighted average number of shares
outstanding - Basic 73,775 75,133
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- Diluted 75,714 77,230
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AEROFLEX INCORPORATED
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
----------------------------------------------------------------------
(In thousands, except per share data)
For the Nine Months Ended
----------------------------
3/31/07 3/31/06
--------------- ------------
Net sales $ 432,420 $ 401,332
Cost of sales 229,310 210,785
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Gross profit 203,110 190,547
Selling, general and administrative
costs 98,057 91,672
Research and development costs 56,552 56,742
Amortization of acquired intangibles 9,650 10,329
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Operating income 38,851 31,804
Sale Transaction expenses (4,319)
Interest and other income (expense),
net 160 887
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Income before income taxes 34,692 32,691
Provision for income taxes 12,864 12,642
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Net income $ 21,828 $ 20,049
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Net income per common share:
Basic $ 0.29 $ 0.27
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Diluted $ 0.29 $ 0.26
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Weighted average number of shares
outstanding - Basic 74,066 74,922
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- Diluted 75,713 76,306
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AEROFLEX INCORPORATED
AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP RESULTS TO NON-GAAP
----------------------------------------------------------------------
MEASURES (Unaudited)
----------------------------------------------------------------------
(In thousands, except per share data)
For the Quarter For the Nine
Ended Months Ended
-----------------------------------
3/31/07 3/31/06 3/31/07 3/31/06
-------- -------- -------- --------
Gross Profits
----------------------------------
GAAP Gross Profits $ 70,811 $ 67,066 $203,110 $190,547
-------- -------- -------- --------
Non-GAAP adjustments:
Acquisition related inventory
adjustment - - - 1,088
Share based compensation 74 72 217 223
Restructuring costs - 259 - 259
-------- -------- -------- --------
Total Non-GAAP adjustments 74 331 217 1,570
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Non-GAAP Gross Profits $ 70,885 $ 67,397 $203,327 $192,117
======== ======== ======== ========
Operating Income
----------------------------------
GAAP Operating Income $ 13,319 $ 12,275 $ 38,851 $ 31,804
-------- -------- -------- --------
Non-GAAP adjustments:
Amortization of acquired
intangible assets 3,225 3,440 9,650 10,329
Acquisition related inventory
adjustment - - - 1,088
Share based compensation 1,258 1,552 3,212 5,010
Restructuring costs 2,040 1,179 2,140 1,179
-------- -------- -------- --------
Total Non-GAAP adjustments 6,523 6,171 15,002 17,606
-------- -------- -------- --------
Non-GAAP Operating Income $ 19,842 $ 18,446 $ 53,853 $ 49,410
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Net Income
----------------------------------
GAAP Net Income $ 5,489 $ 7,746 $ 21,828 $ 20,049
-------- -------- -------- --------
Non-GAAP adjustments:
Amortization of acquired
intangible assets 3,225 3,440 9,650 10,329
Acquisition related inventory
adjustment - - - 1,088
Share based compensation 1,258 1,552 3,212 5,010
Restructuring costs 2,040 1,179 2,140 1,179
Company Sale Transaction
expenses 4,319 - 4,319 -
Income tax benefit (3,231) (2,413) (6,193) (6,791)
-------- -------- -------- --------
Total Non-GAAP adjustments 7,611 3,758 13,128 10,815
-------- -------- -------- --------
Non-GAAP net income $ 13,100 $ 11,504 $ 34,956 $ 30,864
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AEROFLEX INCORPORATED
AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP RESULTS TO NON-GAAP
----------------------------------------------------------------------
MEASURES (Unaudited)
----------------------------------------------------------------------
(In thousands, except per share data)
For the Quarter For the Nine Months
Ended Ended
----------------------------------------
3/31/07 3/31/06 3/31/07 3/31/06
---------- --------- ---------- --------
Net Income Per Diluted Common
Share:
-----------------------------
GAAP net income $ 0.07 $ 0.10 $ 0.29 $ 0.26
---------- --------- ---------- --------
Non-GAAP adjustments, net of
taxes:
Amortization of acquired
intangible assets 0.03 0.03 0.08 0.08
Acquisition related
inventory adjustment - - 0.01
Share based compensation 0.01 0.01 0.03 0.04
Restructuring costs 0.02 0.01 0.02 0.01
Company Sale Transaction
expenses 0.04 - 0.04 -
---------- --------- ---------- --------
Total Non-GAAP adjustments 0.10 0.05 0.17 0.14
---------- --------- ---------- --------
Non-GAAP net income $ 0.17 $ 0.15 $ 0.46 $ 0.40
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Projection for the
Quarter Ending
June 30, 2007
---------------------
Net Income Per Diluted Common
Share:
-----------------------------
GAAP net income $ 0.15
--------------------
Non-GAAP adjustments, net of
taxes:
Amortization of acquired
intangible assets 0.04
Share based compensation 0.01
--------------------
Total Non-GAAP adjustments 0.05
--------------------
Non-GAAP net income $ 0.20
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