Aeroflex Incorporated Reports Second Quarter Fiscal 2004 Operating Results; Pro Forma Sales Increased 50% From Prior Year and 30% Sequentially to a Record $103.6 Million.Business Editors/High-Tech Writers 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.--(BUSINESS WIRE)--Feb. 9, 2004 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 Net Income of $6.1 Million or $.09 Per Share; Record GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). Sales of $105.7 Million and GAAP Net Loss of $2.4 Million or $.04 Per Share 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 second quarter ended December December: see month. 31, 2003. On a GAAP basis, net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the second quarter ended December 31, 2003 were a record $105.7 million, compared with $71.8 million for the same period of last year, representing an increase of 47%. The Company reported a net loss for the second quarter ended December 31, 2003 of $2.4 million, or $.04 per share, versus a net loss of $204,000, or $.00 per share, in the same period of last year. On a pro forma basis, for the quarter ended December 31, 2003, after tax income 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 was $6.1 million, or $.09 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, excluding pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charges of -- $10.3 million for the operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of the thin film interconnect (1) To attach one device to another. (2) A physical port (plug, socket) or wireless port (transmitter, receiver) used to attach one device to another. manufacturing subsidiary which the Company has determined to divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. , -- $1.1 million for a write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of in-process research and development related to the Company's acquisition of Celerity ce·ler·i·ty n. Swiftness of action or motion; speed. See Synonyms at haste. [French célérité, from Old French, from Latin celerit Systems, Incorporated (CA) and -- $2.0 million 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. . On a pro forma basis, for the quarter ended December 31, 2002, after tax income from continuing operations was $2.7 million, or $.04 per diluted share, excluding pre-tax charges of -- $710,000 for amortization of acquired intangibles and -- $841,000 for the operating loss of our thin film interconnect manufacturing subsidiary. On a GAAP basis, for the six months ended December 31, 2003, net sales were $187.4 million, compared with $138.2 million for the same period of last year, representing an increase of 36%. The Company reported a net loss for six months ended December 31, 2003 of $2.0 million, or $.03 per share, versus net income of $428,000, or $.01 per share, in the same period of last year. On a pro forma basis, for the six months ended December 31, 2003, after tax income from continuing operations was $10.0 million, or $.15 per diluted share, excluding pre-tax charges of -- $11.3 million for the operating loss and impairment charge of the thin film interconnect manufacturing subsidiary which the Company has determined to divest -- $4.2 million for a write-off of in-process research and development related to the Company's acquisitions and -- $3.3 million for amortization of acquired intangibles. On a pro forma basis, for the six months ended December 31, 2002, after tax income from continuing operations was $4.7 million, or $.08 per diluted share, excluding pre-tax charges of -- $1.4 million for amortization of acquired intangibles and -- $2.0 million for the operating loss of our thin film interconnect manufacturing subsidiary. 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 believe 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. "Second quarter results of operations exceeded our expectations and reflect new records for both net sales and gross margins," said Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. Gorin Gorin is an air base in Amur Oblast, Russia located 75 km northwest of Komsomolsk-na-Amure. It contains a 1 km long remote tarmac on the north side. A noteworthy major, but remote airfield. It may have been intended for dispersion of intermediate-range bombers during a Sino-Soviet conflict. , President. "We are pleased with the contributions to our operating results made by our recent acquisitions, Racal Racal Electronics plc was a British defence electronics firm purchased by Thomson-CSF (now Thales Group) in 2000. History Racal was created in 1950 as Racal Ltd, the name being derived from the partners RAymond Brown and George CALder Cunningham. Instruments Wireless Solutions, MCE See Media Center Edition. Technologies and Celerity Systems. Pro forma sales (which excludes the sales of our thin film manufacturing business which we have determined to divest and which will be reflected as a discontinued operation discontinued operation A segment of a business that has been abandoned or sold or for which plans for one or another of these actions have been approved. See also continuing operations. in our fiscal third quarter) reached a record $103.6 million; an increase of 50% compared to last year's second quarter and a first to second quarter sequential One after the other in some consecutive order such as by name or number. increase of 30%. Pro forma 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. also set a new record of 45.2% of sales which represents a first to second quarter sequential increase of 170 basis points. Operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. for the quarter was $6.7 million. Business conditions continued to be robust 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 1.10 to 1. "As announced today in a separate press release, our Board of Directors resolved to divest our thin film interconnect manufacturing business and to seek a strategic buyer. Since our fiscal year 2002, this operation has not been profitable and, considering our strategic direction of moving to higher value-added val·ue-add·ed adj. Of or relating to the estimated value that is added to a product or material at each stage of its manufacture or distribution: products, we no longer consider this business to be core to our ongoing operations. GAAP results include, and pro forma results exclude a $9.1 million impairment charge to write down the net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. of this operation to its estimated fair value. Commencing in our third fiscal quarter, the results of this operation will be reflected as a discontinued operation and all prior periods will be restated to reflect a consistent classification treatment. "As we enter the historically stronger second half of our fiscal year, taken together with an excellent first half book-to-bill ratio, we are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that operating results will further improve." Third Quarter Fiscal 2004 Business Outlook Our estimate of operating results for the March 2004 quarter is as follows: -- Net sales are expected to increase sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 10%. -- Gross profit margins are expected to be approximately 45% of sales. -- S,G&A costs are expected to be approximately 23% of sales. -- R&D costs are anticipated to be approximately 11-1/2% of sales. -- Amortization of acquired intangibles is expected to be approximately $.02 per diluted share. -- Using a share count of 68.4 million shares and an income tax rate of 36%, we anticipate 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. from continuing operations per diluted share of $.11. Pro forma earnings exclude amortization of acquired intangibles. GAAP earnings per diluted share are anticipated to be $.09. 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. 10, 2004 and can be accessed by dialing 1-800-901-5241 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 617-786-2963 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 24101043. There will be a replay of the conference call starting at approximately 11:00 a.m. (New York time) on February 10, 2004 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 30600932. 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 on its 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 divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of the thin film interconnect manufacturing business, the integration of the business of each of MCE Technologies, Celerity Systems and the Racal Instruments Wireless Solutions Group with Aeroflex, 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 and general economic conditions. Such statements reflect our current views 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.
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
For the Quarter Ended (Unaudited)
-----------------------------------------------
12/31/03 12/31/03 12/31/02 12/31/02
-------- -------- -------- --------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net sales $ 105,708 $ 103,609 $ 71,764 $ 69,130
Cost of sales 58,952 56,750 44,645 42,288
------- ------- ------- --------
Gross profit 46,756 46,859 27,119 26,842
Selling, general and
administrative
costs 25,350 24,628 16,227 15,572
Research and
development costs 12,142 11,781 7,351 6,966
Amortization of
acquired intangibles 1,976 - 710 -
Acquired in-process
R&D 1,100 - - -
Impairment charge 9,100 - - -
------- ------- ------- -------
Operating income
(loss) (2,912) 10,450 2,831 4,304
Interest and other
expense (income),
net 917 859 260 182
------- ------- ------- -------
Income (loss) from
continuing operations
before income taxes (3,829) 9,591 2,571 4,122
Provision (benefit)
for income taxes (1,438) 3,483 887 1,438
------- ------- ------- -------
Income (loss) from
continuing operations (2,391) 6,108 1,684 2,684
======= ======= ======= =======
Loss from discontinued
operations, net of tax - (6,551) (1,888) (2,426)
Net income (loss) $ (2,391) $ (443) $ (204) $ 258
Income (loss) per
common share:
Basic
Continuing
operations $ (.04) $ .09 $ .03 $ .04
Discontinued
operations - (.10) (.03) (.04)
------- ------- ------- -------
Net income (loss) $(.04) $ (.01) $ - $ -
======= ======= ======= =======
Diluted
Continuing
operations (a) $ .09 $ .03 $ .04
Discontinued
operations (a) (.10) (.03) (.04)
Net income (loss) (a) $ (.01) $ - $ -
======= ======= =======
Weighted average
number of shares
outstanding - Basic 66,556 66,556 60,185 60,185
======= ======= ======= =======
- Diluted (a) 68,433 60,764 60,764
======= ======= ======= =======
(a) As a result of the loss, all options are anti-dilutive.
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
For the Six Months Ended (Unaudited)
---------------------------------------
12/31/03 12/31/03 12/31/02 12/31/02
-------- -------- -------- --------
(GAAP) (Pro forma) (GAAP) (Pro forma)
Net sales $187,446 $183,337 $138,197 $132,992
Cost of sales 105,931 101,767 86,135 81,582
-------- -------- -------- --------
Gross profit 81,515 81,570 52,062 51,410
Selling, general and
administrative costs 44,675 43,350 31,113 29,425
Research and development
costs 22,353 21,645 14,994 14,202
Amortization of acquired
intangibles 3,316 - 1,350 -
Acquired in-process R&D 4,220 - - -
Impairment charge 9,100 - - -
-------- -------- -------- --------
Operating income (loss) (2,149) 16,575 4,605 7,783
Interest and other
expense (income), net 1,065 934 722 574
-------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes (3,214) 15,641 3,883 7,209
Provision (benefit) for
income taxes (1,218) 5,631 1,325 2,487
-------- -------- -------- --------
Income (loss) from
continuing operations (1,996) 10,010 2,558 4,722
======== ======== ======== ========
Loss from discontinued
operations, net of tax - (7,183) (2,130) (3,410)
Net income (loss) $ (1,996) $ 2,827 $ 428 $ 1,312
Income (loss) per common
share:
Basic
Continuing operations $ (.03) $ .16 $ .04 $ .08
Discontinued operations - (.11) (.03) (.06)
-------- -------- -------- --------
Net income (loss) $ (.03) $ .05 $ .01 $ .02
======== ======== ======== ========
Diluted
Continuing operations (a) $ .15 $ .04 $ .08
Discontinued operations (a) (.11) (.03) (.06)
-------- -------- --------
Net income (loss) (a) $ .04 $ .01 $ .02
======== ======== ========
Weighted average number of
shares
outstanding - Basic 64,258 64,258 60,155 60,155
======== ======== ======== ========
- Diluted (a) 65,815 60,693 60,693
======== ======== ======== ========
(a) As a result of the loss, all options are anti-dilutive.
AEROFLEX INCORPORATED
AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP RESULTS TO PRO FORMA
INCOME (LOSS) FROM CONTINUING OPERATIONS
(In thousands, except per share data)
For the Quarter For the Six Months
Ended Ended
----------------- ------------------
12/31/03 12/31/02 12/31/03 12/31/02
-------- -------- -------- --------
GAAP income (loss) from
continuing operations $ (2,391) $ 1,684 $(1,996) $ 2,558
Pro forma Adjustments:
Amortization of acquired
intangible assets 1,976 710 3,316 1,350
Acquired in-process R&D 1,100 - 4,220 -
Asset impairment charge 9,100 - 9,100 -
Loss from operation
to be discontinued 1,244 841 2,219 1,977
Income tax benefit (4,921) (551) (6,849) (1,163)
-------- ------- -------- -------
Pro forma income (loss) from
continuing operations
$ 6,108 $ 2,684 $ 10,010 $ 4,722
======== ======= ======== =======
Income (loss) per common share:
Basic
GAAP income (loss) from
continuing operations
after tax $ (0.04) $ 0.03 $ (0.03) $ 0.04
Pro forma adjustments, net
of tax 0.13 0.01 0.19 0.04
-------- ------- -------- -------
Pro forma income (loss) from
continuing operations
after tax $ 0.09 $ 0.04 $ 0.16 $ 0.08
======== ======= ======== =======
Income (loss) per share:
Diluted
GAAP income (loss) from
continuing operations
after tax $ (0.04) $ 0.03 $ (0.03) 0.04
Pro forma adjustments, net
of tax 0.13 0.01 0.18 0.04
-------- ------- -------- -------
Pro forma income (loss) from
continuing operations
after tax $ 0.09 $ 0.04 $ 0.15 $ 0.08
======== ======= ======== =======
Weighted average number of
shares
outstanding - Basic 66,556 60,185 64,258 60,155
======== ======= ======== =======
- Diluted 68,433 60,764 65,815 60,693
======== ======= ======== =======
AEROFLEX INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December June
31, 30,
2003 2003
-------- --------
(Unaudited)
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 9,879 $ 51,307
Accounts receivable, less allowance for
doubtful accounts 80,655 65,243
Inventories 100,729 74,738
Deferred income taxes 19,529 14,394
Prepaid expenses and other current assets 9,836 5,556
-------- --------
Total current assets 220,628 211,238
Property, plant and equipment, net 78,118 66,724
Intangible assets with definite lives, net 43,772 15,111
Goodwill 91,724 22,449
Deferred income taxes - 1,002
Other assets 12,633 14,092
-------- --------
Total assets $446,875 $330,616
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 4,795 $ 1,879
Accounts payable 23,885 19,694
Advance payments by customers 10,267 2,826
Income taxes payable - 1,802
Liabilities of discontinued operations 794 973
Accrued expenses and other current
liabilities 41,390 22,508
-------- --------
Total current liabilities 81,131 49,682
Long-term debt 25,199 10,956
Deferred income taxes 12,859 -
Other long-term liabilities 14,197 11,563
-------- --------
Total liabilities 133,386 72,201
-------- --------
Stockholders' equity:
Preferred Stock, par value $.10 per share;
authorized 1,000,000 shares:
Series A Junior Participating Preferred
Stock, par value $.10 per share,
authorized 110,000; none issued - -
Common Stock, par value $.10 per share;
authorized 110,000,000 shares; issued
66,843,000 and 60,122,000 shares 6,684 6,012
Additional paid-in capital 275,988 222,943
Accumulated other comprehensive income 7,169 3,816
Retained earnings 23,662 25,658
-------- --------
313,503 258,429
Less: Treasury stock, at cost
(4,000 shares) 14 14
-------- --------
Total stockholders' equity 313,489 258,415
-------- --------
Total liabilities and stockholders'
equity $446,875 $330,616
======== ========
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