Aether Holdings Announces First Quarter 2006 Results.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 quarter ended March 31, 2006.(1) Net loss for the first quarter of 2006 was ($0.00) per share, or approximately ($133,000), compared with a net loss of ($0.02) per share, or approximately ($658,000) in the first quarter of 2005 and a net loss of ($0.09) per share or approximately ($3.8) million in the fourth quarter of 2005. The net loss for the first quarter of 2006 included an other than temporary 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 $228,000 on 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, and a loss on sale of approximately $490,000 in connection with the sale of $140.0 million of MBS in March 2006. In December December: see month. 2005, the Company recorded a $4.0 million impairment charge on the value of its MBS portfolio, $2.5 million of which related to the MBS investments that were sold in March 2006. The Company reported that net interest income from MBS was $1.2 million in the first quarter of 2006, as compared to $795,000 in the first quarter of 2005 and $1.1 million in the fourth quarter of 2005. The Company attributed the increase in net interest income in the first quarter to a reduction in premium amortization expense partially offset by increased borrowing costs under its 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. . 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. were approximately $858,000 in the first quarter, as compared to approximately $1.1 million in the fourth quarter of 2005. The decrease in operating expenses was primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. credit recognized in the current quarter. At March 31, 2006, the Company's MBS portfolio had a fair value of $94.8 million, compared to a fair value of $253.9 million at December 31, 2005. The reduction in fair value during the quarter was attributable to the sale of approximately $140.0 million of MBS, principal repayments of approximately $18.8 million and an impairment charge of approximately $228,000. The Company also stated that all of its outstanding borrowings under repurchase agreements had been repaid during the quarter using a portion of the proceeds from sales of MBS in March 2006. The Company's decision to de-lever its MBS portfolio during the quarter reflects a response to ongoing increases in short-term interest rates Short-term interest rates Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates. that produced a negative impact on the value and performance of its MBS portfolio. Outstanding borrowings as of December 31, 2005 were approximately $133.9 million, which had a weighted average maturity of 25 days and a weighted average interest rate of 4.23%. 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 4.33% during the quarter ending March 31, 2006, compared to 4.01% at March 31, 2005 and 4.28% at December 31, 2005. All of the Company's MBS are guaranteed by a U.S. government-chartered agency. In addition, all of the Company's MBS are hybrid adjustable-rate securities that have initial fixed interest rates for three years and thereafter generally reset on an annual basis. In Q1 2006, 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 MBS was 4.25%, versus 3.64% in Q1 of 2005 and 3.99 % in Q4 of 2005. For the first quarter of 2006, 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 4.49%, which equates to a negative interest rate spread of (0.24%) for the quarter, compared to a positive interest rate spread of 0.81% for the first quarter of 2005 and a negative interest rate spread of (0.07%) for the fourth quarter of 2005. 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 25.7 during the first quarter of 2006, as compared to 16.5 and 30.0 for the first quarter of 2005 and the fourth quarter of 2005, respectively. The Company reiterated that it does not expect to purchase additional MBS in the near term, pending the results of its strategic work with Jefferies Jefferies may refer to: People with the surname Jefferies:
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 $777.3 million and $290.7 million, respectively, at March 31, 2006. On April 5, 2006, a Schedule 13G Schedule 13G An SEC form similar to the Schedule 13D used to report a party's ownership of stock that is over 5% of the company. Schedule 13G is shorter and requires less information from the filing party. was filed with the Securities and Exchange Commission indicating that a fund group had acquired a 6.5% interest in the Company. Our Board of Directors, after reviewing the facts surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. this stock purchase, subsequently determined that this acquisition violated vi·o·late tr.v. vi·o·lat·ed, vi·o·lat·ing, vi·o·lates 1. To break or disregard (a law or promise, for example). 2. To assault (a person) sexually. 3. the transfer restrictions contained in our Certificate of Incorporation certificate of incorporation n. some states issue a certificate to prove a corporation's existence upon the filing of Articles of Incorporation. In most states the Articles are sufficient proof. . At our direction, the acquiring party has transferred shares in excess of the 5% ownership limit to our agent for disposition in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the terms of our Certificate of Incorporation. Conference Call Aether will host a conference call on Wednesday Wednesday: see week. , May 10, 2006 at 8:30 a.m., Eastern Time. Interested parties may access the call at www.aetherholdings.com or by telephone at (800) 361-0912 / (913) 981-5559. Please ask for confirmation code 5497369. Replay of this call will be available until May 30, 2006, by calling (888) 203-1112 / (719) 457-0820, access code 5497369. About Aether Holdings, Inc. Aether Holdings owns and manages a leveraged 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 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 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 filed a complaint in court alleging 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
March 31, December 31,
2006 2005
------------ ------------
in thousands (Unaudited)
Cash and cash equivalents $ 25,624 $ 1,092
Mortgage-backed securities, at fair value 94,751 253,900
Interest receivable 608 1,174
Restricted cash 8,633 8,633
Property and equipment, net 232 255
Prepaid expenses and other assets 1,257 954
------------ ------------
Total assets $ 131,105 $ 266,008
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 3,600 $ 4,465
Repurchase agreements - 133,924
Accrued employee compensation and benefits 60 70
Accrued interest payable - 48
Other liabilities 1,120 1,114
------------ ------------
Total liabilities 4,780 139,621
Stockholders' equity 126,325 126,387
Commitments and contingencies
------------ ------------
Total liabilities and stockholders'
equity $ 131,105 $ 266,008
============ ============
AETHER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
------------------
2006 2005
-------- --------
in thousands except per share data
Interest income from mortgaged-backed securities $ 2,549 $ 592
Interest income from cash and cash equivalents 14 215
Interest expense on repurchase agreements (1,354) (12)
-------- --------
Net interest income 1,209 795
-------- --------
Loss on sale of mortgage-backed securities (490) -
Other than temporary impairment on mortgage-backed
securities (228) -
Operating (expenses) income
---------------------------
Selling, general and administrative expenses (778) (1,741)
Investment advisor fees (46) (41)
Depreciation (23) (49)
Share-based compensation expense (71) (76)
Other income 60 188
Restructuring charge - 7
-------- --------
Total operating expenses (858) (1,712)
-------- --------
Operating loss (367) (917)
Non-operating income (expense)
------------------------------
Other interest income 246 269
Investment gain (loss), net - (10)
-------- --------
Total non-operating income (expense) 246 259
-------- --------
Loss from continuing operations (121) (658)
Discontinued operations
-----------------------
Gain (loss) on sale of discontinued operations (12) -
-------- --------
Loss from discontinued operations (12) -
-------- --------
Net loss $ (133) $ (658)
======== ========
Loss per share - basic and diluted - from
continuing operations $ (0.00) $ (0.02)
Income (loss) per share - basic and diluted - gain
on sale of discontinued operations - -
-------- --------
Net loss per share - basic and diluted $ (0.00) $ (0.02)
======== ========
Weighted average shares outstanding
Basic and diluted 44,019 43,991
======== ========
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