Aether Holdings Announces Second Quarter 2006 Results.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 -- Aether aether: see ether, in physics and astronomy. Aether god of whole atmosphere. [Gk. Myth.: Jobes, 42] See : Air Holdings, Inc. ("Aether" or the "Company") (Nasdaq:AETH), today reported financial results for the quarter ended June June: see month. 30, 2006.(1) Net loss for the second quarter of 2006 was ($0.03) per share, or approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. ($1,520,000), compared to net income of $0.02 per share, or approximately $778,000 in the second quarter of 2005 and net loss of ($0.00) per share or approximately ($133,000) in the first quarter of 2006. The net loss for the second quarter of 2006 included a share-based compensation charge of $608,000, along with a restructuring charge 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. of $789,000 which resulted from the Company's previously announced acquisition of UCC An abbreviation for the Uniform Commercial Code. Capital Corporation ("UCC") on June 6, 2006. UCC is an industry leader in providing strategic advice and structured finance solutions to intellectual property ("IP") centric companies and is the platform for the Company's new IP acquisition strategy. The Company stated that it also recognized 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 $324,000 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 during the current quarter. "As a result of our acquisition of UCC, we have begun implementing our new IP acquisition strategy while continuing to manage our MBS portfolio," said Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. D'Loren, Aether's Chief Executive Officer. "We believe that UCC's combination of experience, expertise and approach will enable us to quickly assemble a large and diverse portfolio of IP and IP-centric companies and create significant value for our shareholders." The Company reported net interest income from MBS of $1.3 million in the second quarter of 2006, as compared to $1.6 million in the second quarter of 2005 and $1.2 million in the first quarter of 2006. Revenue from the Company's IP business was $11,000 since the date of acquisition of UCC and is anticipated to increase significantly in future quarters as the Company implements its IP strategy. 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 $2.9 million in the second quarter of 2006, as compared to approximately $918,000 (excludes $60,000 of other income which is now classified as part of other 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. ) in the first quarter of 2006. The increase in operating expenses, exclusive of a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. credit of $180,000 recognized in the first quarter of 2006, was primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to share-based compensation and restructuring charges previously noted, along with approximately $204,000 in operating expenses associated with UCC's operations. The Company anticipates that operating expenses excluding restructuring charges will continue to increase in the next several quarters as it reports full quarter results for UCC and continues executing upon its new IP strategy. At June 30, 2006, the Company's MBS portfolio had a fair value of $87.4 million, compared to a fair value of $94.8 million at March 31, 2006. The reduction in fair value during the quarter was attributable to principal repayments of approximately $7.1 million and an impairment charge of approximately $324,000. The Company also stated that due 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 it did not purchase any MBS or borrow Borrow To obtain or receive money on loan with the promise or understanding that it will be repaid. any amounts 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. during the second quarter of 2006. 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 4.47% during the quarter ending June 30, 2006, compared to 4.44% at June 30, 2005 and 4.33% at March 31, 2006. 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 hybrid (hī`brĭd), term applied by plant and animal breeders to the offspring of a cross between two different subspecies or species, and by geneticists to the offspring of parents differing in any genetic characteristic (see genetics). adjustable-rate securities that have initial fixed interest rates for three years and thereafter generally reset on an annual basis. In Q2 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 4.47%, versus 4.12% in Q2 of 2005 and 4.25% in Q1 of 2006. The Company had no interest rate spread during the second quarter of 2006 as it had no borrowings under repurchase agreements. For the second 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 3.03%, which equates to an interest rate spread of 1.09% for the quarter. The Company's weighted average cost of funds was 4.49% for the first quarter of 2006 which equates to a negative interest rate spread of (0.24%). 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 second quarter of 2006, as compared to 17.0% and 25.7% for the second quarter of 2005 and the first quarter of 2006, respectively. The Company reiterated that it will continue to operate its existing MBS business but does not expect to purchase additional MBS in the near term. It will make a decision about the future of that business based upon the progress associated with its new IP business along with a further assessment of the outlook for MBS market conditions. The Company also stated that as of June 30, 2006 it had 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: totaling $779.5 million and $290.7 million, respectively. Conference Call Aether will host a conference call on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , August 4, 2006 at 8:30 a.m., Eastern Time. Interested parties may access the call at www.aetherholdings.com or by telephone at (800) 289-0746 / (913) 981-5573. Please ask for confirmation code 9568403. Replay of this call will be available until August 23, 2006, by calling (888) 203-1112 / (719) 457-0820, access code 9568403. About Aether Holdings Aether Holdings owns and manages a leveraged portfolio of mortgage-backed securities through its wholly-owned subsidiary Aether Systems, Inc. Through the acquisition of UCC, Aether will begin to build a new business focused on the acquisition of a diversified diversified (di·verˑ·s portfolio of IP and IP centric companies. Aether's business objective is to become profitable and produce taxable earnings that will enable it to realize value, in the form of tax savings, from its significant accumulated tax loss carryforwards tax loss carryforward See carryforward. . 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 expectations for the development of the new IP strategy business, anticipated benefits of the UCC acquisition, the Company's ability to develop the business conducted historically by UCC and to acquire IP and IP centric businesses. When used herein, the words "anticipate," "believe," "estimate," "intend," "may," "will," "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) we may not be successful in implementing the new IP strategy, (2) our MBS business continues to involve significant risks related primarily to changes in interest rates; (3) we may not be able to realize value from our accumulated tax loss carryforwards, 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; (4) we may not be able to acquire IP or IP centric companies or finance or exploit them on terms that are acceptable to the Company, (5) we are likely to face substantial competition in seeking to acquire and market desirable IP and IP centric companies, and competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. may have substantially greater resources than we do, (6) 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 and (7) other factors discussed in our filings with the Securities and Exchange Commission.
(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
June 30, December 31,
2006 2005
------------ ------------
in thousands (Unaudited)
Cash and cash equivalents $ 29,570 $ 1,092
Mortgage-backed securities, at fair value 87,360 253,900
Interest receivable 558 1,174
Restricted cash 8,633 8,633
Property and equipment, net 320 255
Prepaid expenses and other assets 854 954
Intangible assets 4,523 -
Goodwill 9,946 -
------------ ------------
Total assets $ 141,764 $ 266,008
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 3,412 $ 4,465
Repurchase agreements - 133,924
Accrued employee compensation and benefits 384 70
Accrued interest payable - 48
Accrued restructuring costs 789 -
Other liabilities 1,039 1,114
------------ ------------
Total liabilities 5,624 139,621
Stockholders' equity 136,140 126,387
Commitments and contingencies
------------ ------------
Total liabilities and stockholders'
equity $ 141,764 $ 266,008
============ ============
AETHER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
in thousands except per
share data
Interest income from
mortgaged-backed
securities $ 1,007 $ 3,314 $ 3,556 $ 3,906
Interest income from cash
and cash equivalents 342 20 356 235
Interest expense on
repurchase agreements - (1,707) (1,354) (1,719)
---------- ---------- ---------- ----------
Net interest income 1,349 1,627 2,558 2,422
---------- ---------- ---------- ----------
Loss on sale of mortgage-
backed securities - 423 (490) 423
Other than temporary
impairment on mortgage-
backed securities (324) - (552) -
Other income 21 19 82 207
Advisory and other fees 11 - 11 -
---------- ---------- ---------- ----------
Other operating
income (loss) (292) 442 (949) 630
---------- ---------- ---------- ----------
Operating expenses
--------------------------
Selling, general and
administrative
expenses (2,016) (1,278) (2,865) (3,094)
Investment advisor fees (44) (155) (90) (197)
Depreciation (25) (29) (49) (78)
Restructuring charge (789) - (789) 7
---------- ---------- ---------- ----------
Total operating
expenses (2,874) (1,462) (3,793) (3,362)
---------- ---------- ---------- ----------
Operating income
(loss) (1,817) 607 (2,184) (310)
Non-operating income
(expense)
--------------------------
Other interest income 296 301 542 570
Investment gain (loss),
net - (9) - (19)
---------- ---------- ---------- ----------
Total non-operating
income (expense) 296 292 542 551
---------- ---------- ---------- ----------
Loss from continuing
operations (1,521) 899 (1,642) 241
Discontinued operations
--------------------------
Gain (loss) on sale of
discontinued operations 1 (121) (11) (121)
---------- ---------- ---------- ----------
Gain (loss) from
discontinued
operations 1 (121) (11) (121)
---------- ---------- ---------- ----------
Net income (loss) $ (1,520) $ 778 $ (1,653) $ 120
========== ========== ========== ==========
Income (loss) per share -
basic and diluted - from
continuing operations $ (0.03) $ 0.02 $ (0.04) $ 0.00
Income (loss) per share -
basic and diluted - gain
on sale of discontinued
operations 0.00 0.00 0.00 0.00
---------- ---------- ---------- ----------
Net income (loss)
per share - basic
and diluted $ (0.03) $ 0.02 $ (0.04) $ 0.00
========== ========== ========== ==========
Weighted average shares
outstanding
Basic 44,721 44,009 45,460 44,000
========== ========== ========== ==========
Diluted 44,721 44,591 45,460 44,595
========== ========== ========== ==========
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