Aether Announces Fourth Quarter and Fiscal Year 2005 Results Loss of ($0.07) Per Share for 2005; Q4 MBS Impairment Charge of ($0.09) Per Share.BALTIMORE Baltimore, city (1990 pop. 736,014), N central Md., surrounded by but politically independent of Baltimore co., on the Patapsco River estuary, an arm of Chesapeake Bay; inc. 1745. -- Aether aether: see ether, in physics and astronomy. Aether god of whole atmosphere. [Gk. Myth.: Jobes, 42] See : Air Holdings, Inc. (Nasdaq:AETH), today reported financial results for the fourth quarter and fiscal year ended December December: see month. 31, 2005.(1) Loss 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 fourth quarter of 2005 was ($0.09) per share, or approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. ($3.8 million), compared with a loss from continuing operations of ($0.08) per share, or approximately ($3.7 million), in the fourth quarter of 2004. Loss from continuing operations for the year ended December 31, 2005 was ($0.07) per share, or approximately ($3.3 million), compared with a loss from continuing operations of ($0.54) per share, or approximately ($23.7 million), for the year ended December 31, 2004. The loss in the fourth quarter resulted primarily from the Company's decision to recognize previously unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. in its mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. ("MBS See Mb/sec. MBS - mobile broadband services ") portfolio as of December 31, 2005 by recording a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. charge to fourth quarter 2005 earnings of ($0.09) per share, or approximately ($4.0 million), reflecting an other than temporary decline in the fair market values of securities in its MBS portfolio. Excluding this charge, the Company would have reported income from continuing operations of $0.02 per share, or approximately $667,000, and $0.00 per share, or approximately, $189,000, for the year and the fourth quarter ended December 31, 2005, respectively. Of this $4.0 million charge, $3.5 million had been reflected as a reduction to stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. on the Company's balance sheet, as of September September: see month. 30, 2005. The Company concluded it was appropriate to recognize these unrealized losses and write down the value of its MBS portfolio because recent events had caused management to determine that such losses should now be considered "other than temporary" impairments under Statement of Accounting Standards 115, Accounting for Certain Investments in Debt and Equity Securities. Management previously has viewed these unrealized losses as not being "other than temporary," but as a result of the decline in the profitability of the leveraged MBS portfolio, the decision to sell a portion of the MBS portfolio in the first quarter of 2006 and repay all outstanding borrowings under repurchase agreements Repurchase agreement An agreement with a commitment by the seller (dealer) to buy a security back from the purchaser (customer) at a specified price at a designated future date. , and the potential for the Company to pursue additional or alternative business opportunities that may require the sale of some or all of our remaining MBS, management has changed its view and does not continue to have the firm intention to hold existing MBS investments until maturity, or such time as the market value has recovered. March 2006 Sales of MBS The Company also reported that in response to ongoing increases in the federal funds rate Federal Funds Rate The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight. and an inversion inversion /in·ver·sion/ (in-ver´zhun) 1. a turning inward, inside out, or other reversal of the normal relation of a part. 2. a term used by Freud for homosexuality. 3. of the current yield curve, which have had a continuing negative impact on the value and performance of its MBS portfolio, it entered into commitments on March 8, 2006, to sell approximately $140 million of MBS. These commitments will settle on March 27, 2006, and most of the proceeds will be used to repay all of the Company's then-outstanding short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. borrowings under repurchase agreements (approximately $119 million), which have been incurred to leverage the MBS portfolio. In connection with these transactions, the Company will record an additional loss on sale of MBS of approximately $490,000 in its first quarter 2006 financial statements, due to the further decline in the value of these MBS securities since December 31, 2005. "In the fourth quarter of 2005, the average cost of our MBS-related borrowings began to exceed the average yield on our MBS securities, causing us to experience a negative interest rate spread on the leveraged portion of our portfolio," said David Oros, Aether's Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "This negative spread has continued into 2006, and with the advice of our outside advisors, management and our Board we concluded that we should sell a portion of our MBS holdings in order to repay all of our MBS-related borrowings and eliminate this negative impact on our earnings and cash flow." The Company also reported that although market conditions have caused it to experience a decline in both net interest income and the fair market value of its MBS, as of December 31, 2005 the Company has realized approximately $3.7 million in net earnings from its MBS business since commencing that business in June June: see month. 2004. This net amount includes $5.6 million in net interest income, $2.1 million in net gains on sales of MBS, and the $4.0 million 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. loss on the MBS portfolio as of December 31, 2005. (These amounts exclude all first quarter 2006 results, including the $490,000 loss on MBS sales that the Company will realize as a result of the March 2006 sales). In addition, the Company stated that it does not expect to purchase any additional MBS in the near term, pending the results of the strategic work with Jefferies Jefferies may refer to: People with the surname Jefferies:
1. A person making investment recommendations in return for a flat fee or percentage of assets managed, known as a commission. 2. For mutual fund companies, it is the individual who has the day-to-day responsibility of investing and monitoring the cash and . Fourth Quarter and Fiscal Year Results The Company reported that net interest income from MBS was $1.1 million in the fourth quarter of 2005 compared to $672,000 in the fourth quarter of 2004 and $1.2 million in the third quarter of 2005. The Company attributed the reduction in net interest income to the increase in its borrowing costs associated with leveraging its MBS portfolio. The Company said operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , exclusive of management fees paid to its third-party MBS portfolio manager, were approximately $959,000 in the fourth quarter of 2005 as compared to approximately $2.4 million in the fourth quarter of 2004 and $1.0 million in the third quarter of 2005. This level of operating expenses is consistent with guidance previously provided by the Company. At December 31, 2005, the Company's MBS portfolio had a fair value of $253.9 million, compared to a fair value of $281.2 million at September 30, 2005 and $62.2 million at December 31, 2004. No MBS were purchased during the fourth quarter of 2005. As of December 31, 2005, the Company had approximately $133.9 million in borrowings under short-term repurchase agreements, which had a weighted average maturity of 25 days and a weighted average interest rate of 4.23%, compared to 18 days and 3.84% as of September 30, 2005. The Company had no borrowings under short-term repurchase agreements at December 31, 2004. The weighted average coupon Weighted average Coupon The weighted average of the gross interest rates of mortgages underlying a pool as of the pool issue date; the balance of each mortgage is used as the weighting factor. on the Company's MBS was 4.28% during the quarter ending December 31, 2005, compared to 3.92% at December 31, 2004 and 4.35% at September 30, 2005. The Company's debt-to-equity ratio debt-to-equity ratio The relationship between long-term funds provided by creditors and funds provided by owners. A firm's debt-to-equity ratio is calculated by dividing long-term debt by owners' equity. Both items are shown on the balance sheet. as of December 31, 2005 was 1.1:1, compared to 1.4:1 as of September 30, 2005. All of the Company's MBS are hybrid adjustable-rate securities that have initial fixed interest rates for three or five years and thereafter generally reset on an annual basis. In the fourth quarter of 2005, the weighted average annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. yield on average earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin was 3.99%, versus 3.76% in the fourth quarter of 2004 and 4.01% in the third quarter of 2005. For the fourth quarter of 2005, the Company's weighted average cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. was 4.06%, which equates to a negative interest rate spread of (0.07%) for the quarter, compared to a positive spread of 0.50% for the third quarter of 2005. The Company did not have borrowings under short-term repurchase agreements during the third quarter of 2004. The weighted average constant prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. rate on the Company's MBS portfolio was 30.0% during the fourth quarter of 2005, as compared to 7.3% during the fourth quarter of 2004 and 32.1% for the third quarter of 2005. Strategic Process The Company also reiterated that it is continuing to evaluate additional potential business opportunities that could enable it to more rapidly realize value from its substantial accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. net operating and capital loss carryforwards Loss Carryforward An accounting technique with which a company applies net operating losses of the current year to future year's profits in order to reduce tax liability. Notes: , which totaled $777.8 million and $287.8 million, respectively, at December 31, 2005. The Company said it has not yet identified a particular new strategy or business to pursue. As previously reported, the Company recently engaged Jefferies & Company, Inc. to provide advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal in connection with this strategic process. Earnings Release and Conference Call The Company will host a conference call to discuss its operating results on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , March 10, 2005 at 8:30 a.m., Eastern Time. Interested parties may access the call at www.aetherholdings.com or by telephone at (800) 500-0177 / (719) 457-2679. Please ask for confirmation code 4654836. Replay of this call will be available until March 30, 2006, by calling (888) 203-1112 / (719) 457-0820, access code 4654836. About Aether Holdings, Inc. Aether Holdings owns and manages a portfolio of mortgage-backed securities through its wholly-owned subsidiary Aether Systems, Inc. Forward-Looking Statement 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. Disclosure This press release contains "forward-looking statements," as such term is used in the Securities Exchange Act of 1934, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. . Such forward-looking statements include those regarding the Company's expectations about anticipated future cash balances and expense reductions. When used herein, the words "anticipate," "believe," "estimate," "intend," "may," "will," and "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties. They are not guarantees of future performance or results. The Company's actual results, performance or achievements could differ materially from the results expressed in, or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by, these forward-looking statements. Factors that could cause or contribute to such differences include: (1) our MBS business involves significant risks related primarily to changes in interest rates; (2) we may not be able to realize value from our accumulated tax loss carryforwards tax loss carryforward See carryforward. , because of a failure to generate sufficient taxable earnings, regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. limits or both; (3) in managing the MBS portfolio, we will depend heavily on third party investment managers and financial advisors and consultants, and there is no assurance that such third parties will continue to work with us, in which event our performance could be negatively affected; (4) as a result of continued negative market conditions for MBS, the value of our MBS may decline further and we may realize additional losses if we sell additional MBS; (5) our financial condition could be negatively affected by contingent Fortuitous; dependent upon the possible occurrence of a future event, the existence of which is not assured. The word contingent denotes that there is no present interest or right but only a conditional one which will become effective upon the happening of the or retained liabilities relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc businesses that we have sold which includes post-closing indemnity Recompense for loss, damage, or injuries; restitution or reimbursement. An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. claims relating to the sale of our Transportation segment, as the buyer of that business has alleged significant claims, which we are vigorously vig·or·ous adj. 1. Strong, energetic, and active in mind or body; robust. See Synonyms at healthy. 2. Marked by or done with force and energy. See Synonyms at active. disputing; (6) as a result of continuing negative market conditions for the MBS business, we are pursuing additional or different business strategies that, if implemented, may involve new or additional risks, and there is no assurance we will be able to identify or successfully implement any such additional or different strategies; and (7) other factors discussed in our filings with the Securities and Exchange Commission. Aether undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
(1) In accordance with generally accepted accounting principles
("GAAP"), the results of Aether's Transportation and Mobile
Government businesses, which were sold in September 2004, and its
Enterprise Mobility Systems business, which was sold in January
2004, have been presented as discontinued operations for all
periods, so that period-to-period comparisons are presented on a
comparable basis. Aether's continuing operations reflect the
results of its mortgage-backed securities business.
AETHER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, December 31,
2005 2004
------------ ------------
in thousands (Unaudited)
Cash and cash equivalents $ 1,092 $ 60,723
Mortgage-backed securities, at fair value 253,900 62,184
Interest receivable 1,174 356
Restricted cash 8,633 8,832
Property and equipment, net 255 367
Prepaid expenses and other assets 954 4,124
------------ ------------
Total assets $ 266,008 $ 136,586
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 4,465 $ 3,494
Repurchase agreements 133,924 -
Accrued employee compensation and benefits 70 186
Restructuring accruals - 259
Accrued interest payable 48 -
Other liabilities 1,114 2,057
------------ ------------
Total liabilities 139,621 5,996
Stockholders' equity 126,387 130,590
Commitments and contingencies
------------ ------------
Total liabilities and stockholders' equity $ 266,008 $ 136,586
============ ============
AETHER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(UNAUDITED)
Three Twelve
Months Ended Months Ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
--------- -------- -------- ---------
in thousands
except per share data
Interest income from mortgaged-
backed securities $ 2,617 $ 463 $ 9,775 $ 481
Interest income from cash and
cash equivalents $ 27 $ 209 $ 328 $ 447
Interest expense on repurchase
agreements (1,584) - (5,435) -
--------- -------- -------- ---------
Net interest income 1,060 672 4,668 928
--------- -------- -------- ---------
Gain on sale of mortgage-backed
securities - - 264 1,826
Other than temporary impairment
on mortgage-backed securities (3,993) - (3,993) -
Operating (expenses) income
---------------------------
Selling, general and
administrative expenses (959) (2,437) (5,013) (12,083)
Investment advisor fees (97) (38) (386) (67)
Depreciation (36) (664) (159) (2,212)
Stock compensation expense - (22) (76) (594)
Other expense (income) (29) 33 231 (60)
Restructuring charge - (406) 7 (1,054)
--------- -------- -------- ---------
Total operating expenses (1,121) (3,534) (5,396) (16,070)
--------- -------- -------- ---------
Operating loss (4,054) (2,862) (4,457) (13,316)
Non-operating income (expense)
------------------------------
Other interest income 250 285 1,150 3,508
Interest expense from
subordinated notes - (106) - (7,917)
Loss on early extinguishment
of debt - (2,419) - (2,419)
Investment gain (loss), net - 1,412 (19) (3,559)
--------- -------- -------- ---------
Total non-operating income
(expense) 250 (828) 1,131 (10,387)
Loss from continuing
operations (3,804) (3,690) (3,326) (23,703)
Discontinued operations
-----------------------
Loss from discontinued
operations - - - (45,450)
Gain (loss) on sale of
discontinued operations - (202) (1,194) 20,825
--------- -------- -------- ---------
Loss from discontinued
operations - (202) (1,194) (24,625)
--------- -------- -------- ---------
Net loss $ (3,804) $(3,892) $(4,520) $(48,328)
========= ======== ======== =========
Loss per share - basic and
diluted - from continuing
operations $ (0.09) $ (0.08) $ (0.07) $ (0.54)
Loss per share - basic and
diluted - from discontinued
operations - - (0.03) (1.04)
Income (loss) per share - basic
and diluted - gain on sale of
discontinued operations - (0.01) - 0.47
--------- -------- -------- ---------
Net loss per share - basic
and diluted $ (0.09) $ (0.09) $ (0.10) $ (1.11)
========= ======== ======== =========
Weighted average shares
outstanding
Basic and Diluted 44,019 43,904 44,019 43,713
========= ======== ======== =========
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