Aeroflex Incorporated Reports Record Second Quarter Sales and 44% Increase in Pro Forma Earnings.PLAINVIEW Plainview. 1 Uninc. city (1990 pop. 26,207), Nassau co., SE N.Y., on Long Island. It is chiefly residential. 2 City (1990 pop. 21,700), seat of Hale co., NW Tex., on the Llano Estacado; inc. 1907. , N.Y. -- Aeroflex Incorporated (Nasdaq: ARXX), a leading designer, developer and manufacturer of automated testing (testing) automated testing - Software testing assisted with software tools that require no operator input, analysis, or evaluation. solutions and microelectronics microelectronics, branch of electronic technology devoted to the design and development of extremely small electronic devices that consume very little electric power. for the aerospace, defense and broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). communications markets, today announced operating results for its fiscal 2006 second quarter, which ended December December: see month. 31, 2005. The highlights of the Company's quarterly financial performance from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the second quarter of fiscal 2006 are as follows: --net sales increased 20% to a quarterly record $135.2 million (including contributions from our fourth quarter 2005 acquisitions) from $112.5 million last year and $125.6 million in the first quarter of this fiscal year, representing 8% sequential One after the other in some consecutive order such as by name or number. growth; --pro forma forma, adj/n minor elements between the members of a botanical species. gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. were 47.8% compared to 47.6% last year; and --pro forma operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased 48% compared to last year. On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, for the fiscal 2006 second quarter, income from continuing operations increased 44% to $10.7 million, or $.14 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to $7.4 million, or $.10 per diluted share, last year. The fiscal 2006 second quarter pro forma results exclude pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charges of: --$3.4 million ($2.1 million, after tax) for amortization of acquired intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. ; and --$1.4 million ($0.8 million, after tax) for stock based compensation. The prior year's second quarter pro forma results excluded a pre-tax charge of $2.0 million ($1.3 million, after tax) for amortization of acquired intangibles. On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, income from continuing operations for the fiscal 2006 second quarter amounted to $7.8 million, or $.10 per diluted share, compared with $6.1 million, or $.08 per diluted share, last year representing an increase of 27%. The fiscal 2006 second quarter included a $0.8 million after tax charge for stock based compensation (for which there was no comparable amount in the prior year), and a $2.1 million after tax charge for amortization of acquired intangibles, (an increase of $0.8 million) related to our acquisitions in fiscal 2005. The Company's financial performance from continuing operations for the six months of fiscal 2006 are as follows: --net sales increased 18% to $260.8 million from $221.7 million last year, including contributions from our fourth quarter 2005 acquisitions; --pro forma gross profit margins were 47.8% compared to 47.3% last year; and --pro forma operating income increased 31% compared to last year. On a pro forma basis, for the fiscal 2006 six months, income from continuing operations increased 28% to $19.4 million, or $.26 per diluted share, compared to $15.1 million, or $.20 per diluted share, last year. The fiscal 2006 six months pro forma results exclude pre-tax charges of: --$6.9 million ($4.3 million, after tax) for amortization of acquired intangibles; --$3.5 million ($2.1 million, after tax) for stock based compensation; and --$1.1 million ($0.7 million, after tax) for an acquisition related inventory adjustment. The prior year's six months pro forma results excluded a pre-tax charge of $4.1 million ($2.6 million, after tax) for amortization of acquired intangibles. On a GAAP basis, income from continuing operations for the fiscal 2006 six months amounted to $12.3 million, or $.16 per diluted share, compared with $12.5 million, or $.16 per diluted share last year. The fiscal 2006 six months included a $2.1 million after tax charge for stock compensation (for which there was no comparable amount in the prior year), a $4.3 million after tax charge for amortization of acquired intangibles (an increase of $1.7 million from last year's six months) and a $0.7 million after tax charge for an acquisition related inventory adjustment. "We are pleased with the second quarter record sales which reflect 8% sequential growth," said Len Borow, President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . "Our cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. measures are showing results, as SG&A as a percentage of sales decreased by almost a full percent. We also achieved 24% sequential growth in pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. . Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. reached $226.3 million, another record high, with a strong book-to-bill ratio Book-to-Bill Ratio The technology industry's demand-to-supply ratio for orders on a "firm's book" to number of orders filled. Notes: This ratio tells whether the company has more orders than it can deliver (if greater than 1), has the same amount of orders that it can of 1.08 to 1.0." Our estimate of operating results for the March 2006 quarter is as follows: --net sales are expected to be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $140 million; and --pro forma earnings from continuing operations per diluted share are anticipated to be $.15. Pro forma earnings exclude estimated amortization of acquired intangibles of $.03 per diluted share and stock-based compensation of $.01 per diluted share. GAAP earnings from continuing operations per diluted share are anticipated to be $.11. Our conference call discussing second quarter results is scheduled for 9:00 a.m. (New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of time) on February February: see month. 8, 2006 and can be accessed by dialing 1-866-362-4829 in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and by dialing 617-597-5346 outside of the United States. The participant Participant A party of a funding. It usually refers to the lowest rank or smallest level of funding. passcode is 58564177. There will be a replay of the conference call starting at approximately 11:00 a.m. (New York time) on February 8, 2006 and will be available for one week. The replay can be accessed by dialing 1-888-286-8010 within the United States and by dialing 617-801-6888 outside of the United States. The access code for both telephone numbers is 52906762. This call is being webcast by CCBN CCBN Central Coast Bancorp CCBN Charles County Business Network and can be accessed at Aeroflex's website at www.aeroflex.com. This webcast will be archived on that site for one year. In conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with this conference call, the Company has also posted on its website certain financial information related to second quarter results. 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 The miniaturization of electronic circuits. See chip. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . 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, the integration of acquired businesses, changes in legal and regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. , technological change or difficulties, product development risks, commercialization difficulties, general economic conditions, and other risk factors disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in Aeroflex's most recently filed Form 10-Q Form 10-Q See 10-Q. . 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Aeroflex's financial condition, results of operations, growth strategy and liquidity. Aeroflex does not undertake any obligation to update such forward-looking statements. The pro forma results are a supplement to financial statements based on GAAP. The Company uses pro forma information to evaluate its operating performance and believes this presentation provides investors with additional insight into its underlying operating results. A full reconciliation between the pro forma and GAAP results from continuing operations is included in the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. financial data.
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
-------------------------------------------------------------------
(In thousands, except per share data)
For the Quarter Ended
-------------------------
12/31/05 12/31/05 12/31/04 12/31/04
-------- --------- --------- ----------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net sales $ 135,156 $ 135,156 $ 112,469 $ 112,469
Cost of sales 70,602 70,529 58,988 58,988
--------- --------- --------- ---------
Gross profit 64,554 64,627 53,481 53,481
Selling, general and
administrative costs 30,556 29,297 26,719 26,719
Research and development
costs 18,290 18,180 15,199 15,199
Amortization of acquired
intangibles 3,433 - 2,042 -
--------- --------- --------- ---------
Operating income 12,275 17,150 9,521 11,563
Interest and other income
(expense), net 514 514 379 379
--------- --------- --------- ---------
Income from continuing
operations before income
taxes 12,789 17,664 9,900 11,942
Provision for income taxes 5,015 6,965 3,758 4,510
--------- --------- --------- ---------
Income from continuing
operations 7,774 10,699 6,142 7,432
Income (loss) from
discontinued operations,
net of tax - - (819) (819)
--------- --------- --------- ---------
Net income $ 7,774 $ 10,699 $ 5,323 $ 6,613
========= ========= ========= =========
Income (loss) per common share:
Basic:
Continuing operations $ 0.10 $ 0.14 $ 0.08 $ 0.10
Discontinued operations - - (0.01) (0.01)
--------- --------- --------- ---------
Net income $ 0.10 $ 0.14 $ 0.07 $ 0.09
========= ========= ========= =========
Diluted:
Continuing operations $ 0.10 $ 0.14 $ 0.08 $ 0.10
Discontinued operations - - (0.01) (0.01)
--------- --------- --------- ---------
Net income $ 0.10 $ 0.14 $ 0.07 $ 0.09
========= ========= ========= =========
Weighted average number of shares
Outstanding - Basic 74,875 74,875 74,625 74,625
========= ========= ========= =========
- Diluted 75,990 75,990 76,310 76,310
========= ========= ========= =========
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
---------------------------------------------------------------------
(In thousands, except per share data)
For the Six Months Ended
--------------------------------------------
12/31/05 12/31/05 12/31/04 12/31/04
---------- --------- ---------- ----------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net sales $ 260,804 $ 260,804 $ 221,651 $ 221,651
Cost of sales 137,324 136,084 116,839 116,839
---------- --------- ---------- ----------
Gross profit 123,480 124,720 104,812 104,812
Selling, general and
administrative costs 60,808 57,721 51,486 51,486
Research and
development costs 36,254 36,035 29,743 29,743
Amortization of
acquired intangibles 6,889 - 4,101 -
---------- --------- ---------- ----------
Operating income 19,529 30,964 19,482 23,583
Interest and other
income (expense),
net 445 445 543 543
---------- --------- ---------- ----------
Income from continuing
operations before
income taxes 19,974 31,409 20,025 24,126
Provision for income
taxes 7,672 12,049 7,484 8,992
---------- --------- ---------- ----------
Income from continuing
operations 12,302 19,360 12,541 15,134
Income (loss) from
discontinued operations,
net of tax - - (1,602) (1,602)
---------- --------- ---------- ----------
Net income $ 12,302 $ 19,360 $ 10,939 $ 13,532
========== ========= ========== ==========
Income (loss) per common
share:
Basic:
Continuing
operations $ 0.16 $ 0.26 $ 0.17 $ 0.20
Discontinued
operations - - (0.02) (0.02)
---------- --------- ---------- ----------
Net income $ 0.16 $ 0.26 $ 0.15 $ 0.18
========== ========= ========== ==========
Diluted:
Continuing
operations $ 0.16 $ 0.26 $ 0.16 $ 0.20
Discontinued
operations - - (0.02) (0.02)
---------- --------- ---------- ----------
Net income $ 0.16 $ 0.26 $ 0.14 $ 0.18
========== ========= ========== ==========
Weighted average number
of shares
Outstanding - Basic 74,816 74,816 74,536 74,536
========== ========= ========== ==========
- Diluted 75,845 75,845 76,149 76,149
========== ========= ========== ==========
AEROFLEX INCORPORATED
AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP RESULTS TO PRO FORMA
--------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS (Unaudited)
----------------------------------------------------
(In thousands, except per share data)
For the Quarter For the Six
Ended Months Ended
----------------- -----------------
12/31/05 12/31/04 12/31/05 12/31/04
-------- -------- -------- --------
GAAP income from
continuing operations $ 7,774 $ 6,142 $12,302 $12,541
------- ------- ------- -------
Pro forma adjustments:
Add back:
Stock-based compensation 1,442 - 3,458 -
Amortization of acquired
intangible assets 3,433 2,042 6,889 4,101
Acquisition related inventory
adjustment - - 1,088 -
Income tax benefit (1,950) (752) (4,377) (1,508)
------- ------- ------- -------
Total pro forma adjustments 2,925 1,290 7,058 2,593
Pro forma income from ------- ------- ------- -------
continuing operations $10,699 $ 7,432 $19,360 $15,134
======= ======= ======= =======
Income per common share:
Basic:
GAAP income from
continuing operations
after tax $ 0.10 $ 0.08 $ 0.16 $ 0.17
Pro forma adjustments, net of
tax 0.04 0.02 0.10 0.03
------- ------- ------- -------
Pro forma income from
continuing operations
after tax $ 0.14 $ 0.10 $ 0.26 $ 0.20
======= ======= ======= =======
Diluted:
GAAP income from
continuing operations
after tax $ 0.10 $ 0.08 $ 0.16 $ 0.16
Pro forma adjustments, net of
tax 0.04 0.02 0.10 0.04
------- ------- ------- -------
Pro forma income from
continuing operations
after tax $ 0.14 $ 0.10 $ 0.26 $ 0.20
======= ======= ======= =======
Weighted average number of shares
outstanding - Basic 74,875 74,625 74,816 74,536
======= ======= ======= =======
- Diluted 75,990 76,310 75,845 76,149
======= ======= ======= =======
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
-------------------------------------------------
(In thousands, except per share data)
December
31, June 30,
2005 2005
-------- --------
ASSETS
------
Current assets:
Cash and cash equivalents $ 15,511 $ 12,974
Marketable securities 7,003 -
Accounts receivable, less allowance for
doubtful accounts 103,031 101,317
Inventories 126,275 118,906
Deferred income taxes 18,339 18,499
Prepaid expenses and other current assets 12,785 11,107
-------- --------
Total current assets 282,944 262,803
Property, plant and equipment, net 76,539 78,195
Other assets 13,249 13,537
Intangible assets with definite lives, net 59,257 67,266
Goodwill 165,403 168,048
-------- --------
Total assets $597,392 $589,849
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $ 628 $ 634
Accounts payable 26,754 35,907
Advance payments by customers 24,793 15,183
Income taxes payable 4,864 3,657
Accrued payroll expenses 15,057 15,222
Accrued expenses and other current liabilities 31,303 30,451
-------- --------
Total current liabilities 103,399 101,054
Long-term debt 4,004 4,190
Deferred income taxes 12,734 17,146
Other long-term liabilities 20,459 23,479
-------- --------
Total liabilities 140,596 145,869
-------- --------
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; none issued - -
Common Stock, par value $.10 per share;
authorized 110,000 shares; issued
74,875 and 74,618 shares 7,488 7,462
Additional paid-in capital 378,137 372,666
Accumulated other comprehensive income 4,024 9,020
Retained earnings 67,147 54,846
-------- --------
456,796 443,994
Less: Treasury stock, at cost (4 shares) - 14
-------- --------
Total stockholders' equity 456,796 443,980
-------- --------
Total liabilities and stockholders' equity $597,392 $589,849
======== ========
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