Aether (NASDAQ:AETH)
Historical Stock Chart
From Jun 2019 to Jun 2024
Aether Systems, Inc. (Nasdaq:AETH) today reported
financial results for the quarter ended March 31, 2005.(1) Loss from
continuing operations for Q1 2005 was ($0.01) per share, or
approximately ($658,000), which was down from a loss of ($0.13) per
share, or approximately ($5.4 million) in Q1 2004. In Q4 2004, loss
from continuing operations was ($0.08) per share, or approximately
($3.7 million). The decline in the loss is primarily attributable to
the continued reduction of the Company's operating expenses as it
completes the transition to its mortgage-backed securities ("MBS")
business.
"Although market conditions remained somewhat challenging during
much of the quarter, we were able to take advantage of selected
opportunities to build our MBS portfolio," said David S. Oros,
Aether's Chairman and CEO. "With the increase in our MBS portfolio,
and having reduced operating expenses by approximately 52% from Q4
2004, we are now well-positioned to achieve our goal of becoming
profitable and expect our MBS operations to begin generating net cash
before the end of Q2."
Pursuant to forward purchase commitments entered into in February,
the Company settled $60.6 million in additional MBS purchases during
Q1 and also entered into a repurchase agreement to fund a portion of
the MBS settled. At March 31, 2005, the MBS portfolio had a fair value
of $434.4 million, consisting of $118.1 million of previously settled
MBS and $316.3 million of forward purchase commitments to acquire MBS
in April and May of 2005. At March 31, 2005 the Company had $19.4
million in borrowings under a single repurchase agreement having an
interest rate of 2.8% and a maturity of 25 days.
On April 25, 2005, the Company settled $241.5 million of MBS
purchases pursuant to its forward purchase commitments and entered
into additional repurchase agreements totaling $236.3 million to fund
the settlements. The Company said that it also intends to finance the
May 2005 settlement of MBS under its remaining forward purchase
contracts through additional borrowings in the form of repurchase
agreements. The Company used a total of $100 million of its available
cash in its MBS portfolio. The Company said that at March 31, 2005,
all of its MBS were guaranteed by U.S. government chartered agencies.
In addition, all MBS were hybrid adjustable-rate securities, which
have an initial fixed interest rate of three or five years and
thereafter generally reset on an annual basis. The weighted average
coupon of the Company's MBS was 4.01% at March 31, 2005, up from 3.92%
at December 31, 2004.
In Q1 2005, interest income from MBS was $808,000, representing a
weighted average yield on average earning assets of 3.64%. In Q4 2004,
weighted average yield was 3.76%. There were no sales of MBS during Q1
2005. The weighted average constant prepayment rate on the Company's
MBS portfolio was 16.5% during Q1 2005, as compared to 7.3% during Q4
2004.
The Company's $434.4 million MBS portfolio is net of unrealized
losses of approximately $2 million associated with marking the
portfolio to fair market value as of March 31, 2005. The Company
believes that this unrealized loss is temporary in nature and will not
be recognized because it has the ability and the intent to hold these
investments until maturity. In accordance with generally accepted
accounting principles, the Company records any unrealized gain or loss
on its MBS portfolio as a component of other comprehensive income or
loss in stockholders' equity.
Conference Call
Aether will host a conference call on Thursday, May 5, 2005 at
8:30 a.m., Eastern Time. Interested parties may access the call at
www.aethersystems.com or by telephone at 1-888-855-5428. Please ask
for confirmation code 2435404. Replay of this call will be available
until May 25, 2005, by calling 888-203-1112, access code 2435404.
About Aether Systems, Inc.
Aether Systems owns and manages a leveraged portfolio of
mortgage-backed securities.
Forward-Looking Statement Disclosure
This press release contains "forward-looking statements," as such
term is used in the Securities Exchange Act of 1934, as amended. 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) we may
not be able to implement our MBS strategy successfully, or the results
of such implementation may be inconsistent with our expectations; (2)
our future financial results may be negatively affected by contingent
or retained liabilities relating to businesses that we sold; (3) the
MBS strategy we are implementing involves significant risks related to
changes in interest rates and the complexities of managing the overall
yield of a leveraged portfolio, and we have not yet fully implemented
this strategy and cannot accurately predict the timing of additional
investments in MBS or the implementation of targeted portfolio
leverage; (4) leverage that we incur to expand the size of the MBS
portfolio may limit our financial flexibility and could have a
substantial negative effect on our financial results if we do not
successfully manage the risks of borrowing; (5) we may not be able to
realize value from our accumulated loss carryforwards, because of a
failure to generate sufficient taxable earnings, regulatory limits or
both, (6) 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; (7) our cash balance could be negatively affected
by post-closing price adjustments relating to the sale of our
Transportation segment, as the buyer of that business has disagreed
with our calculation of certain of these post-closing adjustments and
has requested a price reduction, which we are vigorously disputing;
and (8) 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.
-0-
*T
(1) In accordance with generally accepted accounting principles
("GAAP"), the results of Aether's Transportation and Mobile
Government segments, which were sold in September 2004, have been
reclassified as discontinued operations for all periods, so that
period-to-period comparisons are presented on a comparable basis.
Aether sold its Enterprise Mobility Systems segment in January
2004, and that segment's results also have been reclassified as
discontinued operations for all prior periods, in accordance with
GAAP. Aether's continuing operations reflect the results of its
mortgage-backed securities business.
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
-------------------------
2005 2004
------------ ------------
in thousands except per share data
Interest income from MBS portfolio $ 808 $ -
Interest expense from MBS portfolio (12) -
------------ ------------
Net interest income from MBS
portfolio 796 -
Selling, general and administrative
expenses (1,783) (3,286)
Depreciation (49) (628)
Stock compensation expense (76) (422)
Other income 188 30
Restructuring charge 7 (415)
------------ ------------
Total operating expenses (1,713) (4,721)
------------ ------------
Operating loss (917) (4,721)
Interest income from other than MBS
portfolio 269 1,354
Interest expense from subordinated notes
payable - (2,604)
Investment gain (loss), including
impairments, net (10) 557
------------ ------------
Loss from continuing operations (658) (5,414)
Loss from discontinued operations - (3,836)
Gain on sale of discontinued operations - 18,396
------------ ------------
Net income (loss) $ (658) $ 9,146
============ ============
Loss per share - basic and diluted - from
continuing operations $ (0.01) $ (0.13)
Loss per share - basic and diluted - from
discontinued operations - (0.09)
Income per share - basic and diluted - gain
on sale of discontinued operations - 0.43
------------ ------------
Net income (loss) per share - basic
and diluted $ (0.01) $ 0.21
============ ============
Weighted average shares outstanding - basic
and diluted 43,991 43,273
============ ============
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2005 2004
------------ ------------
in thousands (Unaudited)
Cash and cash equivalents $ 24,669 $ 60,723
Mortgage-backed securities, at fair value 434,358 62,184
Interest receivable 1,510 356
Prepaid expenses and other assets 1,965 4,124
Restricted cash 8,832 8,832
Furniture, computers, and equipment, net 259 367
------------ ------------
Total assets $ 471,593 $ 136,586
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 3,694 $ 3,494
Forward purchase obligations 318,068 -
Repurchase agreements 19,443 -
Accrued employee compensation and benefits 100 186
Accrued restructuring 14 259
Accrued interest payable 12 -
Other long-term liabilities 2,057 2,057
------------ ------------
Total liabilities 343,388 5,996
Stockholders' equity 128,205 130,590
Commitments and contingencies
------------ ------------
Total assets $ 471,593 $ 136,586
============ ============
*T