Aether (NASDAQ:AETH)
Historical Stock Chart
From Jun 2019 to Jun 2024
![Click Here for more Aether Charts. Click Here for more Aether Charts.](/p.php?pid=staticchart&s=N%5EAETH&p=8&t=15)
Aether Holdings, Inc. (Nasdaq:AETH), today reported
financial results for the fourth quarter and fiscal year ended
December 31, 2005.(1) Loss from continuing operations for the fourth
quarter of 2005 was ($0.09) per share, or approximately ($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 in its
mortgage-backed securities ("MBS") portfolio as of December 31, 2005
by recording a one-time 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 on the Company's
balance sheet, as of September 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, 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 and an inversion 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 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. "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 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 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 & Company and a further assessment later in 2006
of the outlook for its MBS business in light of market conditions.
Although the Company expects to maintain its remaining MBS portfolio
during this time (excluding the MBS sold this month), the Company said
it might sell additional MBS based upon its continued evaluation of
market conditions and the advice of its outside professional
investment advisors.
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, 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 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 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 yield on average earning
assets 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 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
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 net
operating and capital loss carryforwards, 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 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, 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 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) 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, because of a failure to generate
sufficient taxable earnings, regulatory 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 businesses
that we have sold which includes post-closing indemnity claims
relating to the sale of our Transportation segment, as the buyer of
that business has alleged significant claims, which we are vigorously
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.
-0-
*T
(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
========= ======== ======== =========
*T