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8-K - AEROFLEX INC | v210432_8k.htm |
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AEROFLEX
ANNOUNCES FISCAL SECOND QUARTER RESULTS
·
|
Record
Second Quarter Revenue and Gross Profit
|
||
·
|
Book-to-Bill
Greater than 1:1
|
||
·
|
Repaid
$186.6 million of High Yield Debt
|
PLAINVIEW, New York — February 8, 2011
-- Aeroflex Holding Corp. ("Aeroflex") (NYSE: ARX), a leading global
provider of microelectronic components and test and measurement equipment, today
announced its financial results for the fiscal second quarter and six months
ended December 31, 2010.
In
November 2010, Aeroflex successfully completed a $267 million initial public
offering. Almost all of the net proceeds after fees, expenses and
extinguishment costs were used to retire $186.6 million of high yield
debt.
Record
net sales this quarter were driven by continued growth in LTE products,
radiation hardened space products and revenue from acquired
companies. GAAP results were impacted by non-recurring costs
associated with the initial public offering and the extinguishment of high yield
debt. Compared to the second quarter of fiscal 2010, non-GAAP results
for the second quarter of fiscal 2011 include costs associated with the
acceleration of research and development projects in Aeroflex Test
Solutions to meet customer requirements for new products, and higher operating
costs due to the acquisitions of Willtek, Radiation Assured Devices and Advanced
Control Components which were not fully integrated during the
quarter.
The full
fiscal year 2011 non-GAAP effective tax rate expected from our current
geographic mix of non-GAAP pre-tax income is 31%. This rate was
applied to our non-GAAP pre tax income for the three and six month periods ended
December 31, 2010.
The
following tables present selected financial information for the three and six
months ended December 31, 2010 and 2009 prepared in accordance with generally
accepted accounting principles (“GAAP”) and on a basis other than GAAP
(“Non-GAAP”). A
reconciliation of GAAP to Non-GAAP is presented at the end of this press
release.
Selected
GAAP Results
|
||||||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
December 31,
|
Ended
December 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
sales
|
$ | 181,579 | $ | 166,739 | $ | 337,510 | $ | 296,855 | ||||||||
Gross
profit
|
94,840 | 86,658 | 174,666 | 151,731 | ||||||||||||
Gross
margin
|
52.2 | % | 51.9 | % | 51.8 | % | 51.1 | % | ||||||||
Operating
income (loss)
|
(5,351 | ) | 22,246 | (2,148 | ) | 16,520 | ||||||||||
Net
income (loss)
|
$ | (11,403 | ) | $ | (10,614 | ) | $ | (17,220 | ) | $ | (31,157 | ) | ||||
Net
income (loss) per common share - basic
|
$ | (0.15 | ) | $ | (0.16 | ) | $ | (0.25 | ) | $ | (0.48 | ) | ||||
Weighted
average number of common
shares outstanding - basic |
74,034 | 65,000 | 69,517 | 65,000 |
Selected
Non-GAAP Results
|
||||||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
December 31,
|
Ended
December 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
sales
|
$ | 181,603 | $ | 166,772 | $ | 337,558 | $ | 296,919 | ||||||||
Gross
profit
|
95,214 | 87,059 | 175,843 | 152,847 | ||||||||||||
Gross
margin
|
52.4 | % | 52.2 | % | 52.1 | % | 51.5 | % | ||||||||
Operating
income
|
37,349 | 39,899 | 61,241 | 59,551 | ||||||||||||
Net
income (loss)
|
$ | 12,828 | $ | 13,869 | $ | 15,463 | $ | 13,829 | ||||||||
Net
income (loss) per common share - basic
|
$ | 0.17 | $ | 0.21 | $ | 0.22 | $ | 0.21 | ||||||||
Weighted
average number of common
shares outstanding -
basic |
74,034 | 65,000 | 69,517 | 65,000 | ||||||||||||
Adjusted
EBITDA
|
$ | 42,321 | $ | 44,652 | $ | 70,732 | $ | 69,198 |
“I am
pleased with our second quarter results,” said Len Borow, Chief Executive
Officer of Aeroflex. “Our unique portfolio of intellectual property
and market leadership in our core markets have translated into another strong
quarter of financial performance. Our strong gross margins in the
second quarter demonstrate the strength and value of our business model. I would
like to emphasize that this quarter is difficult to compare to our prior year
period due to the acceleration of research and development projects in our ATS
business, an expansion of our sales and marketing team in the Asia-Pacific
region, increased operating expenses from acquired companies, and an extremely
strong second quarter in our last fiscal year.”
Business
Outlook
For the fiscal third
quarter ending March 31, 2011, Aeroflex expects net sales to be between $192
million and $197 million, Adjusted EBITDA to be between $49 million and
$51 million, and non-GAAP net income per share of $.25 and $.27. The
range of expected net income per share was calculated using an effective tax
rate of approximately 31%.
Non-GAAP
Presentation
This
press release contains non-GAAP financial measures that are not in accordance
with, or an alternative for, measures prepared in accordance with generally
accepted accounting principles and may be different from non-GAAP measures used
by other companies. In addition, these non-GAAP measures: (i) are not based on
any comprehensive set of accounting rules or principles; and (ii) have
limitations in that they do not reflect all of the amounts associated with
Aeroflex's results of operations as determined in accordance with GAAP. As such,
these measures should only be used to evaluate Aeroflex's results of operations
in conjunction with the corresponding GAAP measures.
Aeroflex
believes that the presentation of non-GAAP financial measures, when shown in
conjunction with the corresponding GAAP measures, provides useful supplemental
information to investors and management regarding financial and business trends
relating to its financial condition and results of operations because they
exclude certain non-cash charges or items that we do not believe are reflective
of our ongoing operating results when assessing the performance of our
business.
Aeroflex
believes that these non-GAAP financial measures also facilitate the comparison
by management and investors of results between periods and among our peer
companies. However, our peer companies may calculate similar non-GAAP financial
measures differently than Aeroflex, limiting their usefulness as comparative
measures.
Webcast
and Conference Call Information
We will host a live webcast and
conference call at 8:15 a.m. eastern standard time on Wednesday, February 9th
during which management
will discuss the financial results. To participate in the live
webcast, please visit the events page of our website located at http://ir.aeroflex.com. Please plan to join five to ten
minutes before the start of the webcast to facilitate a timely connection. If
you are unable to participate and would like to hear a replay of the call,
an audio replay of the
webcast will be available on our website for approximately 90 days or can
be accessed telephonically for domestic callers at (888) 286-8010 or internationally at (617) 801-6888 with pass code 72562744.
About
Aeroflex
Aeroflex
Holding Corp. is a leading global provider of microelectronic components and
test and measurement equipment used by companies in the space, avionics,
defense, commercial wireless communications, medical and other
markets.
Forward-looking
Statements
All
statements other than statements of historical fact included in this press
release regarding Aeroflex’s business strategy and plans and objectives of its
management for future operations are forward-looking statements. 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, adverse developments in the global economy;
dependence on growth in customers’ businesses; the ability to remain competitive
in the markets Aeroflex serves; the inability to continue to develop,
manufacture and market innovative, customized products and services that meet
customer requirements for performance and reliability; any failure of suppliers
to provide raw materials and/or properly functioning component parts;
the termination of key contracts, including technology license
agreements, or loss of key customers; the inability to protect intellectual
property; the failure to comply with regulations such as International Traffic
in Arms Regulations and any changes in regulations; the failure to realize
anticipated benefits from completed acquisitions, divestitures or
restructurings, or the possibility that such acquisitions, divestitures or
restructurings could adversely affect Aeroflex; the loss of key employees;
exposure to foreign currency exchange rate risks; and terrorist acts or acts of
war. Such statements reflect the current views of management
with respect to the future and are subject to these and other risks,
uncertainties and assumptions. Aeroflex does not undertake any obligation to
update such forward-looking statements. Any projections in this
release are based on limited information currently available to Aeroflex, which
is subject to change. Although any such projections and the factors
influencing them will likely change, Aeroflex will not necessarily update the
information, since Aeroflex will only provide guidance at certain points during
the year.
Contact:
Andrew
Kaminsky
Vice
President – Corporate Development & Investor Relations
Aeroflex
Holding Corp.
(516)
752-6401
andrew.kaminsky@aeroflex.com
Aeroflex
Holding Corp. and Subsidiaries
|
||||||||
Unaudited
Condensed Consolidated Balance Sheets
|
||||||||
(In
thousands, except shares and per share data)
|
||||||||
December
31,
|
June
30,
|
|||||||
Assets
|
2010
|
2010
|
||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 70,643 | $ | 100,663 | ||||
Marketable
securities
|
8,357 | - | ||||||
Accounts
receivable, less allowance for doubtful accounts of $2,101 and $1,821 |
131,222 | 141,595 | ||||||
Inventories
|
153,880 | 126,568 | ||||||
Deferred
income taxes
|
26,030 | 28,018 | ||||||
Prepaid
expenses and other current assets
|
11,252 | 10,983 | ||||||
Total
current assets
|
401,384 | 407,827 | ||||||
Property,
plant and equipment, net
|
99,889 | 101,662 | ||||||
Non-current
marketable securities, net
|
- | 9,769 | ||||||
Deferred
financing costs, net
|
17,435 | 20,983 | ||||||
Other
assets
|
23,204 | 21,818 | ||||||
Intangible
assets with definite lives, net
|
214,085 | 238,313 | ||||||
Intangible
assets with indefinite lives
|
113,844 | 109,894 | ||||||
Goodwill
|
458,034 | 445,874 | ||||||
Total
assets
|
$ | 1,327,875 | $ | 1,356,140 | ||||
Liabilities and Stockholders'
Equity
|
||||||||
Current
liabilities:
|
||||||||
Current
portion of long-term debt
|
$ | 360 | $ | 21,817 | ||||
Accounts
payable
|
36,967 | 28,803 | ||||||
Advance
payments by customers and deferred revenue
|
23,185 | 30,741 | ||||||
Income
taxes payable
|
1,654 | 4,615 | ||||||
Accrued
payroll expenses
|
19,098 | 23,082 | ||||||
Accrued
expenses and other current liabilities
|
52,944 | 58,817 | ||||||
Total
current liabilities
|
134,208 | 167,875 | ||||||
Long-term
debt
|
695,908 | 880,030 | ||||||
Deferred
income taxes
|
88,066 | 138,849 | ||||||
Defined
benefit plan obligations
|
5,605 | 5,763 | ||||||
Other
long-term liabilities
|
12,983 | 12,639 | ||||||
Total
liabilities
|
936,770 | 1,205,156 | ||||||
Stockholders'
equity:
|
||||||||
Preferred stock $.01 par value; 50,000,000
shares authorized, no
shares issued and outstanding |
- | - | ||||||
Common
stock, par value $.01 per share; 300,000,000
shares authorized; 84,789,180 and 65,000,000
shares issued and outstanding |
848 | 650 | ||||||
Additional
paid-in capital
|
642,961 | 398,291 | ||||||
Accumulated
other comprehensive income (loss)
|
(41,102 | ) | (53,575 | ) | ||||
Accumulated
deficit
|
(211,602 | ) | (194,382 | ) | ||||
Total
stockholders' equity
|
391,105 | 150,984 | ||||||
Total
liabilities and stockholders' equity
|
$ | 1,327,875 | $ | 1,356,140 |
Aeroflex
Holding Corp. and Subsidiaries
Unaudited
Condensed Consolidated Statements of Operations
(In
thousands, except per share data)
Three Months Ended December
31,
|
||||||||
2010
|
2009
|
|||||||
Net sales
|
$ | 181,579 | $ | 166,739 | ||||
Cost of
sales
|
86,739 | 80,081 | ||||||
Gross
profit
|
94,840 | 86,658 | ||||||
Selling, general and
administrative costs
|
38,266 | 31,573 | ||||||
Research and development
costs
|
21,656 | 17,261 | ||||||
Amortization of acquired
intangibles
|
15,843 | 15,514 | ||||||
Termination of Sponsor Advisory
Agreement
|
18,133 | - | ||||||
Restructuring
charges
|
6,293 | 64 | ||||||
100,191 | 64,412 | |||||||
Operating income
(loss)
|
(5,351 | ) | 22,246 | |||||
Other income
(expense):
|
||||||||
Interest
expense
|
(20,713 | ) | (21,418 | ) | ||||
Loss on extinguishment of
debt
|
(25,178 | ) | - | |||||
Gain from a bargain purchase of a
business
|
173 | - | ||||||
Other income (expense),
net
|
(378 | ) | 422 | |||||
Total other income
(expense)
|
(46,096 | ) | (20,996 | ) | ||||
Income (loss) before income
taxes
|
(51,447 | ) | 1,250 | |||||
Provision (benefit) for income
taxes
|
(40,044 | ) | 11,864 | |||||
Net Income
(loss)
|
$ | (11,403 | ) | $ | (10,614 | ) | ||
Net Income (loss) per common
share–Basic
|
$ | (0.15 | ) | $ | (0.16 | ) | ||
Weighted average number of common
shares outstanding–Basic
|
74,034 | 65,000 |
Aeroflex
Holding Corp. and Subsidiaries
|
||||||||
Unaudited
Condensed Consolidated Statements of Operations
|
||||||||
(In
thousands, except per share data)
|
||||||||
Six
Months Ended December 31,
|
||||||||
2010
|
2009
|
|||||||
Net
sales
|
$ | 337,510 | $ | 296,855 | ||||
Cost
of sales
|
162,844 | 145,124 | ||||||
Gross
profit
|
174,666 | 151,731 | ||||||
Selling,
general and administrative costs
|
74,969 | 61,703 | ||||||
Research
and development costs
|
43,814 | 34,442 | ||||||
Amortization
of acquired intangibles
|
31,806 | 31,119 | ||||||
Termination
of Sponsor Advisory Agreement
|
18,133 | - | ||||||
Restructuring
charges
|
8,092 | 251 | ||||||
Loss
on liquidation of foreign subsidiary
|
- | 7,696 | ||||||
176,814 | 135,211 | |||||||
Operating
income (loss)
|
(2,148 | ) | 16,520 | |||||
Other
income (expense):
|
||||||||
Interest
expense
|
(41,951 | ) | (42,457 | ) | ||||
Loss
on extinguishment of debt
|
(25,178 | ) | - | |||||
Gain
from a bargain purchase of a business
|
173 | - | ||||||
Other
income (expense), net
|
(407 | ) | 479 | |||||
Total
other income (expense)
|
(67,363 | ) | (41,978 | ) | ||||
Income
(loss) before income taxes
|
(69,511 | ) | (25,458 | ) | ||||
Provision
(benefit) for income taxes
|
(52,291 | ) | 5,699 | |||||
Net
Income (loss)
|
$ | (17,220 | ) | $ | (31,157 | ) | ||
Net
Income (loss) per common share–Basic
|
$ | (0.25 | ) | $ | (0.48 | ) | ||
Weighted
average number of common shares outstanding–Basic
|
69,517 | 65,000 |
Aeroflex
Holding Corp. and Subsidiaries
|
||||||||
Unaudited
Condensed Consolidated Statements of Cash Flows
|
||||||||
(In
thousands)
|
||||||||
Six
Months Ended December 31,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income (loss)
|
$ | (17,220 | ) | $ | (31,157 | ) | ||
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities: |
||||||||
Depreciation
and amortization
|
41,534 | 41,774 | ||||||
Gain
from a bargain purchase of a business
|
(173 | ) | - | |||||
Acquisition
related adjustment to cost of sales
|
998 | 246 | ||||||
Loss
on liquidation of foreign subsidiary
|
- | 7,696 | ||||||
Loss
on extinguishment of debt
|
25,178 | - | ||||||
Deferred
income taxes
|
(55,926 | ) | 2,437 | |||||
Share-based
compensation
|
1,026 | 1,045 | ||||||
Non
- cash restructuring charges
|
4,860 | - | ||||||
Amortization
of deferred financing costs
|
2,839 | 2,386 | ||||||
Paid
in kind interest
|
2,434 | 8,857 | ||||||
Other,
net
|
1,194 | 400 | ||||||
Change
in operating assets and liabilities,
net
of effects from purchases of businesses:
|
||||||||
Decrease
(increase) in accounts receivable
|
13,629 | 12,136 | ||||||
Decrease
(increase) in inventories
|
(24,214 | ) | (358 | ) | ||||
Decrease
(increase) in prepaid expenses and other
assets |
(1,088 | ) | (4,319 | ) | ||||
Increase
(decrease) in accounts payable, accrued expenses and
other liabilities |
(6,128 | ) | (19,030 | ) | ||||
Net
cash provided by (used in) operating activities
|
(11,057 | ) | 22,113 | |||||
Cash
flows from investing activities:
|
||||||||
Payments
for purchase of businesses, net of cash acquired
|
(23,591 | ) | - | |||||
Capital
expenditures
|
(11,213 | ) | (8,401 | ) | ||||
Proceeds
from sale of marketable securities
|
2,000 | 1,000 | ||||||
Proceeds
from the sale of property, plant and equipment
|
741 | 845 | ||||||
Other,
net
|
- | (11 | ) | |||||
Net
cash provided by (used in) investing activities
|
(32,063 | ) | (6,567 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Net
proceeds from issuance of common stock
|
244,097 | - | ||||||
Repurchase
of senior unsecured notes and senior subordinated
unsecured term
loans, including premiums and fees |
(207,690 | ) | - | |||||
Debt
repayments
|
(21,458 | ) | (4,012 | ) | ||||
Debt
financing costs
|
(3,332 | ) | - | |||||
Net
cash provided by (used in) financing activities
|
11,617 | (4,012 | ) | |||||
Effect
of exchange rate changes on cash and cash
equivalents |
1,483 | (483 | ) | |||||
Net
increase (decrease) in cash and cash equivalents
|
(30,020 | ) | 11,051 | |||||
Cash
and cash equivalents at beginning of period
|
100,663 | 57,748 | ||||||
Cash
and cash equivalents at end of period
|
$ | 70,643 | $ | 68,799 |
Reconciliation
of GAAP Operating Income (Loss)
|
||||||||||||||||
to
Non-GAAP Operating Income (Loss)
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
December 31,
|
Ended
December 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Operating
income (loss) - GAAP
|
$ | (5,351 | ) | $ | 22,246 | $ | (2,148 | ) | $ | 16,520 | ||||||
Amortization
of acquired intangibles
|
15,843 | 15,514 | 31,806 | 31,119 | ||||||||||||
Impact
of purchase accounting adjustments
|
450 | 664 | 1,397 | 1,778 | ||||||||||||
Financial
sponsor fees
|
507 | 771 | 1,222 | 1,464 | ||||||||||||
Restructuring
costs (a)
|
6,293 | 64 | 8,092 | 251 | ||||||||||||
Share-based
compensation (b)
|
513 | 556 | 1,026 | 1,045 | ||||||||||||
Termination
of financial sponsor advisory agreement
|
18,133 | - | 18,133 | - | ||||||||||||
Non-cash
loss on liquidation of foreign subsidiary
|
- | - | - | 7,696 | ||||||||||||
Other
adjustments
|
961 | 84 | 1,713 | (322 | ) | |||||||||||
Operating
income - Non-GAAP
|
$ | 37,349 | $ | 39,899 | $ | 61,241 | $ | 59,551 |
Reconciliation
of GAAP Net Income (Loss)
|
||||||||||||||||
to
Non-GAAP Net Income (Loss)
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
December 31,
|
Ended
December 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
income (loss) - GAAP
|
$ | (11,403 | ) | $ | (10,614 | ) | $ | (17,220 | ) | $ | (31,157 | ) | ||||
Amortization
of acquired intangibles
|
15,843 | 15,514 | 31,806 | 31,119 | ||||||||||||
Impact
of purchase accounting adjustments
|
450 | 664 | 1,397 | 1,778 | ||||||||||||
Financial
sponsor fees
|
507 | 771 | 1,222 | 1,464 | ||||||||||||
Restructuring
costs (a)
|
6,293 | 64 | 8,092 | 251 | ||||||||||||
Share-based
compensation (b)
|
513 | 556 | 1,026 | 1,045 | ||||||||||||
Termination
of financial sponsor advisory agreement
|
18,133 | - | 18,133 | - | ||||||||||||
Loss
on extinguishment of debt
|
25,178 | - | 25,178 | - | ||||||||||||
Amortization
of deferred finance fees
|
1,646 | 1,193 | 2,839 | 2,386 | ||||||||||||
Non-cash
loss on liquidation of foreign subsidiary
|
- | - | 7,696 | |||||||||||||
Other
adjustments
|
1,476 | 88 | 2,228 | (239 | ) | |||||||||||
Tax
adjustments
|
(45,808 | ) | 5,633 | (59,238 | ) | (514 | ) | |||||||||
Net
income - Non-GAAP
|
$ | 12,828 | $ | 13,869 | $ | 15,463 | $ | 13,829 |
Calculation
of Adjusted EBITDA
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
December 31,
|
Ended
December 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
income (loss) - GAAP
|
$ | (11,403 | ) | $ | (10,614 | ) | $ | (17,220 | ) | $ | (31,157 | ) | ||||
Interest
expense
|
20,713 | 21,418 | 41,951 | 42,457 | ||||||||||||
Provision
(benefit) for income taxes
|
(40,044 | ) | 11,864 | (52,291 | ) | 5,699 | ||||||||||
Depreciation
and amortization
|
20,648 | 20,528 | 41,534 | 41,774 | ||||||||||||
EBITDA
|
(10,086 | ) | 43,196 | 13,974 | 58,773 | |||||||||||
Non-cash
purchase accounting adjustments
|
391 | 33 | 1,046 | 311 | ||||||||||||
Financial
Sponser fees
|
507 | 771 | 1,222 | 1,464 | ||||||||||||
Restructuring
Charges (a)
|
6,293 | 64 | 8,092 | 251 | ||||||||||||
Share-based
compensation (b)
|
513 | 556 | 1,026 | 1,045 | ||||||||||||
Termination
of financial sponsor advisory agreement
|
18,133 | - | 18,133 | - | ||||||||||||
Loss
on extinguishment of debt
|
25,178 | - | 25,178 | - | ||||||||||||
Non-cash
loss on liquidation of foreign subsidiary
|
- | - | - | 7,696 | ||||||||||||
Other
defined items (c)
|
1,392 | 32 | 2,061 | (342 | ) | |||||||||||
Adjusted
EBITDA
|
$ | 42,321 | $ | 44,652 | $ | 70,732 | $ | 69,198 |
(a)
|
Primarily
reflects costs associated with the reorganization of our U.K. operations
and consolidation of certain of our U.S. components
facilities
|
(b)
|
Reflects
non-cash share-based compensation expense.
|
(c)
|
Reflects
other adjustments required in calculating our debt covenant
compliance. These other defined items include pro forma EBITDA
for periods prior to the acquisition dates for companies acquired during
the periods presented.
|