Aeroflex Incorporated Reports Record Third Quarter Sales, 87% Increase in Pro Forma Earnings and 100% Increase in GAAP 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 Symbol: 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 third quarter, which ended March 31, 2006. 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 third quarter of fiscal 2006 are as follows: --net sales increased 24% to a quarterly record $140.5 million (including contributions from our fourth quarter 2005 acquisitions) from $113.8 million last year and $135.2 million in the second quarter of this fiscal year; --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 48.0% compared to 47.3% last year and 47.8% last quarter; 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 85% compared to last year and 8% compared to last quarter. 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 third quarter, income from continuing operations increased 87% to $11.5 million, or $.15 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 $6.2 million, or $.08 per diluted share, last year. The fiscal 2006 third quarter pro forma results exclude 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. ; --$1.6 million ($0.9 million, after tax) for share based compensation; and --$1.2 million ($0.7 million, after tax) for restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. related to the consolidation of the Company's subsidiaries in the United Kingdom. The prior year's third quarter pro forma results excluded a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge of $2.1 million ($1.2 million, after tax) for amortization of acquired intangibles and $1.7 million ($1.0 million, after tax) for restructuring charges. On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, gross profit margins for the fiscal 2006 third quarter were 47.7% compared to 47.3% last year and 47.8% last quarter. Operating income for the fiscal 2006 third quarter increased 97% compared to last year and is the same as the last quarter. Income from continuing operations for the fiscal 2006 third quarter amounted to $7.7 million, or $.10 per diluted share, compared with $3.9 million, or $.05 per diluted share, last year representing a per share increase of 100 %. The fiscal 2006 third quarter included a $0.9 million after tax charge for share based compensation (for which there was no comparable expense in the prior year), a $2.1 million after tax charge for amortization of acquired intangibles, (an increase of $0.9 million related to our acquisitions in the fourth quarter of fiscal 2005); and a $0.7 million after tax charge for restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs (compared to a $1.0 million after tax charge in fiscal 2005). The Company's financial performance from continuing operations for the nine months of fiscal 2006 is as follows: --net sales increased 20% to $401.3 million from $335.4 million last year, including contributions from our fourth quarter 2005 acquisitions; --pro forma gross profit margins were 47.9% compared to 47.3% last year; and --pro forma operating income increased 47% compared to last year. On a pro forma basis, for the fiscal 2006 nine months, income from continuing operations increased 45% to $30.9 million, or $.40 per diluted share, compared to $21.3 million, or $.28 per diluted share, last year. The fiscal 2006 nine month pro forma results exclude charges of: --$10.3 million ($6.3 million, after tax) for amortization of acquired intangibles; --$5.0 million ($3.1 million, after tax) for share based compensation; --$1.1 million ($0.7 million, after tax) for an acquisition related inventory adjustment: and --$1.2 million ($0.7 million, after tax) for restructuring charges. The prior year's nine months pro forma results excluded a pre-tax charges of $6.2 million ($3.8 million, after tax) for amortization of acquired intangibles and $1.7 million ($1.0 million, after tax) for restructuring charges. On a GAAP basis, gross profit margins for the fiscal 2006 nine months were 47.5% compared to 47.3% last year. Operating income for the fiscal 2006 nine months increased 24% compared to last year. Income from continuing operations for the fiscal 2006 nine months increased 22% to $20.0 million, or $.26 per diluted share, compared with $16.4 million, or $.22 per diluted share last year. The fiscal 2006 nine months included: $3.1 million after tax charge for share based compensation (for which there was no comparable expense in the prior year); a $6.3 million after tax charge for amortization of acquired intangibles (an increase of $2.5 million from last year's nine months); a $0.7 million after tax charge for an acquisition related inventory adjustment; and a $0.7 million after tax charge for restructuring costs (compared to a $1.0 million after tax charge in fiscal year 2005). "We are pleased with our operating results for the third quarter," 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 sales, excluding acquisitions, grew 11% from last year's third quarter and we also achieved 8% sequential One after the other in some consecutive order such as by name or number. growth in net 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. . Our 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. is $223.6 million, with a 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 .98 to 1. The book-to-bill was negatively impacted by a $15 million test set order slipping into early April." Our estimate of operating results for the June June: see month. 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. $149 million; and --pro forma earnings from continuing operations per diluted share are anticipated to be $.17. Pro forma earnings exclude estimated amortization of acquired intangibles, share based compensation and additional restructuring charges of a combined $.05 per diluted share. GAAP earnings from continuing operations per diluted share are anticipated to be $.12. Our conference call discussing third quarter results is scheduled for 5:00 p.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 May 10, 2006 and can be accessed by dialing 800-638-4930 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 617-614-3944 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 29543227. There will be a replay of the conference call beginning one hour after the call's conclusion and will be available for one week. The replay can be accessed by dialing 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 43676806. 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 third 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
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
For the Quarter Ended
---------------------
3/31/06 3/31/06 3/31/05 3/31/05
-------- -------- --------- ---------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net sales $140,527 $140,527 $113,755 $113,755
Cost of sales 73,461 73,130 59,963 59,963
-------- -------- --------- --------
Gross profit 67,066 67,397 53,792 53,792
Selling, general and
administrative costs 30,863 28,550 30,110 28,432
Research and development
costs 20,488 20,401 15,379 15,379
Amortization of acquired
intangibles 3,440 - 2,063 -
-------- -------- --------- --------
Operating income 12,275 18,446 6,240 9,981
Interest and other income
(expense), net 442 442 90 90
-------- -------- --------- --------
Income from continuing
operations before income
taxes 12,717 18,888 6,330 10,071
Provision for income
taxes 4,971 7,384 2,464 3,914
-------- -------- --------- --------
Income from continuing
operations 7,746 11,504 3,866 6,157
Income (loss) from
discontinued operations,
net of tax - - 106 106
-------- -------- --------- --------
Net income $ 7,746 $ 11,504 $ 3,972 $ 6,263
======== ======== ========= ========
Income (loss) per common
share:
Basic
Continuing operations $ 0.10 $ 0.15 $ 0.05 $ 0.08
Discontinued operations - - - -
-------- -------- --------- --------
Net income $ 0.10 $ 0.15 $ 0.05 $ 0.08
======== ======== ========= ========
Diluted
Continuing operations $ 0.10 $ 0.15 $ 0.05 $ 0.08
Discontinued operations - - - -
-------- -------- --------- --------
Net income $ 0.10 $ 0.15 $ 0.05 $ 0.08
======== ======== ========= ========
Weighted average number of
shares
Outstanding - Basic 75,133 75,133 74,714 74,714
======== ======== ========= ========
- Diluted 77,230 77,230 75,842 75,842
======== ======== ========= ========
AEROFLEX INCORPORATED
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
For the Nine Months Ended
----------------------------------------
3/31/06 3/31/06 3/31/05 3/31/05
--------- --------- --------- ---------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net sales $401,332 $401,332 $335,406 $335,406
Cost of sales 210,785 209,215 176,802 176,802
--------- -------- --------- --------
Gross profit 190,547 192,117 158,604 158,604
Selling, general and
administrative costs 91,672 86,270 81,597 79,919
Research and development
costs 56,742 56,437 45,122 45,122
Amortization of acquired
intangibles 10,329 - 6,164 -
--------- -------- --------- --------
Operating income 31,804 49,410 25,721 33,563
Interest and other income
(expense), net 887 887 633 633
--------- -------- --------- --------
Income from continuing
operations before income
taxes 32,691 50,297 26,354 34,196
Provision for income
taxes 12,642 19,433 9,947 12,907
--------- -------- --------- --------
Income from continuing
operations 20,049 30,864 16,407 21,289
Income (loss) from
discontinued operations,
net of tax - - (1,496) (1,496)
--------- -------- --------- --------
Net income $ 20,049 $ 30,864 $ 14,911 $ 19,793
========= ======== ========= ========
Income (loss) per common
share:
Basic
Continuing operations $ 0.27 $ 0.41 $ 0.22 $ 0.29
Discontinued operations - - (0.02) (0.02)
--------- -------- --------- --------
Net income $ 0.27 $ 0.41 $ 0.20 $ 0.27
========= ======== ========= ========
Diluted
Continuing operations $ 0.26 $ 0.40 $ 0.22 $ 0.28
Discontinued operations - - (0.02) (0.02)
--------- -------- --------- --------
Net income $ 0.26 $ 0.40 $ 0.20 $ 0.26
========= ======== ========= ========
Weighted average number of
shares
Outstanding - Basic 74,922 74,922 74,595 74,595
========= ======== ========= ========
- Diluted 76,306 76,306 76,047 76,047
========= ======== ========= ========
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 For the Nine
Quarter Ended Months Ended
------------------ -----------------
3/31/06 3/31/05 3/31/06 3/31/05
------- ------- ------- -------
GAAP income from
continuing operations $ 7,746 $ 3,866 $ 20,049 $ 16,407
Pro forma adjustments:
Share-based compensation 1,552 - 5,010 -
Amortization of acquired
intangible assets 3,440 2,063 10,329 6,164
Restructuring costs 1,179 1,678 1,179 1,678
Acquisition related
inventory adjustment - - 1,088 -
Income tax benefit (2,413) (1,450) (6,791) (2,960)
-------- -------- -------- --------
Pro forma income from
continuing operations $ 11,504 $ 6,157 $ 30,864 $ 21,289
======== ======== ======== ========
Income per common share:
Basic
GAAP income from continuing
operations after tax $ 0.10 $ 0.05 $ 0.27 $ 0.22
Pro forma adjustments, net
of tax 0.05 0.03 0.14 0.07
-------- -------- -------- --------
Pro forma income from
continuing operations
after tax $ 0.15 $ 0.08 $ 0.41 $ 0.29
======== ======== ======== ========
Diluted
GAAP income from
continuing operations
after tax $ 0.10 $ 0.05 $ 0.26 $ 0.22
Pro forma adjustments, net
of tax 0.05 0.03 0.14 0.06
-------- -------- -------- --------
Pro forma income from
continuing operations
after tax $ 0.15 $ 0.08 $ 0.40 $ 0.28
======== ======== ======== ========
Weighted average number of
shares outstanding
- Basic 75,133 74,714 74,922 74,595
======== ======== ======== ========
- Diluted 77,230 75,842 76,306 76,047
======== ======== ======== ========
AEROFLEX INCORPORATED
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
March 31, 2006 June 30, 2005
-------------- -------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 15,636 $ 12,974
Marketable securities 18,588 -
Accounts receivable, less allowance
for doubtful accounts 103,796 101,317
Inventories 129,594 118,906
Deferred income taxes 20,255 18,499
Prepaid expenses and other current
assets 11,018 11,107
----------- -----------
Total current assets 298,887 262,803
Property, plant and equipment, net 75,387 78,195
Other assets 13,807 13,537
Intangible assets with definite lives,
net 55,882 67,266
Goodwill 164,277 168,048
----------- -----------
Total assets $ 608,240 $ 589,849
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $ 618 $ 634
Accounts payable 29,023 35,907
Advance payments by customers 22,943 15,183
Income taxes payable 1,697 3,657
Accrued payroll expenses 17,536 15,222
Accrued expenses and other current
liabilities 29,638 30,451
----------- -----------
Total current liabilities 101,455 101,054
Long-term debt 3,923 4,190
Deferred income taxes 13,711 17,146
Other long-term liabilities 20,236 23,479
----------- -----------
Total liabilities 139,325 145,869
----------- -----------
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 75,159 and 74,618 shares 7,516 7,462
Additional paid-in capital 381,987 372,666
Accumulated other comprehensive
income 4,517 9,020
Retained earnings 74,895 54,846
----------- -----------
468,915 443,994
Less: Treasury stock, at cost
(4 shares) - 14
----------- -----------
Total stockholders' equity 468,915 443,980
----------- -----------
Total liabilities and
stockholders' equity $ 608,240 $ 589,849
=========== ===========
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