Aeroflex (NASDAQ:ARXX)
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Aeroflex Incorporated (Nasdaq: ARXX), today announced operating results
for its fiscal 2007 third quarter which ended March 31, 2007.
Quarter Ended March 31,
2007
2006
Sales (in millions)
$
150.3
$
140.5
Diluted earnings per share
GAAP
$
0.07
$
0.10
Non-GAAP
$
0.17
$
0.15
Operating income of $13.3 million for the fiscal 2007 third quarter
increased $1.0 million (8.5%) compared to last year. As previously
announced, Aeroflex has entered into an agreement to be acquired by
General Atlantic LLC and Francisco Partners II, L.P. (“Company
Sale Transaction”). Including the Company Sale
Transaction expenses of $4.3 million ($3.4 million after tax), net
income for the fiscal 2007 third quarter amounted to $5.5 million, or
$0.07 per diluted share, compared with $7.7 million, or $0.10 per
diluted share last year. On a GAAP basis, gross profit margins for the
fiscal 2007 third quarter were 47.1% compared to 47.7% last year. The
quarterly results were impacted by:
a $3.2 million ($2.1 million after tax or $0.03 per share) charge for
amortization of acquired intangibles in fiscal 2007, compared to $3.4
million ($2.1 million after tax or $0.03 per share) in fiscal 2006;
a $1.3 million ($807,000 after tax or $0.01 per share) charge for
share based compensation in fiscal 2007, compared to $1.6 million
($943,000 after tax or $0.01 per share) in fiscal 2006;
a $2.0 million ($1.3 million after tax or $0.02 per share) charge for
restructuring costs related to the consolidation of the company’s
subsidiaries in the United Kingdom in fiscal 2007, compared to $1.2
million ($723,000 after tax or $0.01 per share) in fiscal 2006; and
a $4.3 million ($3.4 million after tax or $0.04 per share) charge for
Company Sale Transaction expenses in fiscal 2007.
Non-GAAP gross profit margins, excluding the aforementioned items, were
47.2%, compared to 48.0 % last year and non-GAAP operating income of
$19.8 million increased 7.6% compared to last year. The third quarter
non-GAAP results exclude the following items from net income per diluted
share:
Quarter Ended March 31,
2007
2006
Amortization of acquired intangibles
$
0.03
$
0.03
Share based compensation
0.01
0.01
Restucturing costs
0.02
0.01
Company Sale Transaction expenses
0.04
-
Total EPS impact
$
0.10
$
0.05
Year-to-date results were:
Nine Months Ended March 31,
2007
2006
Sales (in millions)
$
432.4
$
401.3
Diluted earnings per share:
GAAP
$
0.29
$
0.26
Non-GAAP
$
0.46
$
0.40
On a GAAP basis, gross profit margins for the nine months of fiscal 2007
were 47.0% compared to 47.5% last year. Operating income of $38.9
million for the nine months of fiscal 2007 increased 22% compared to
last year. Net income for the nine months of fiscal 2007 amounted to
$21.8 million, or $0.29 per diluted share, compared with $20.0 million,
or $0.26 per diluted share. The nine months results were impacted by:
a $9.6 million ($6.2 million after tax or $0.08 per share) charge for
amortization of acquired intangibles in fiscal 2007, compared to $10.3
million ($6.3 million after tax or $0.08 per share) in fiscal 2006;
a fiscal 2006 charge of $1.1 million ($685,000 after tax or $0.01 per
share) for an acquisition related inventory adjustment (for which
there was no comparable item in the current fiscal year);
a $3.2 million ($2.1 million after tax or $0.03 per share) charge for
share based compensation in fiscal 2007, compared to $5.0 million
($3.1 million after tax or $0.04 per share) in fiscal 2006;
a $2.1 million ($1.4 after tax or $0.02 per share) charge for
restructuring costs in fiscal 2007, compared to $1.2 million ($723,000
after tax or $0.01 per share) in fiscal 2006; and
a $4.3 million ($3.4 million after tax or $0.04 per share) charge for
Company Sale Transaction expenses in fiscal 2007.
Non-GAAP gross profit margins, excluding the aforementioned items, were
47.0%, compared to 47.9% last year and non-GAAP operating income of
$53.9 million increased 9.0% compared to last year. The year-to-date
non-GAAP results exclude the following items from net income per diluted
share:
Nine Months Ended March 31,
2007
2006
Acquisition-related items:
Amortization of intangibles
$
0.08
$
0.08
Purchase adjustments to inventory
-
0.01
Share based compensation
0.03
0.04
Restructuring charges
0.02
0.01
Company Sale Transaction costs
0.04
-
Total EPS impact
$
0.17
$
0.14
Operating cash flow for the nine months was approximately $23 million.
During the nine months, we repurchased approximately 1.8 million shares
of our common stock for $17.2 million. In October 2006, we paid $9.2
million in a final determination of the Racal acquisition earn-out. This
amount has been added to goodwill.
“Our third quarter and nine months performance
positions us well for another solid year,”
said Len Borow, President and Chief Operating Officer. Both segments of
our business performed well as the nine months book-to-bill ratio was
1.03 to 1.0. We head into the remainder of the fiscal year with a
backlog of $253 million, 46% of which is scheduled to ship in the fourth
quarter of fiscal 2007.”
Our estimate of operating results for the June 2007 quarter is as
follows:
net sales are expected to be approximately $162 million, and
GAAP net income per diluted share is anticipated to be $0.15. Non-GAAP
earnings per diluted share are anticipated to be $0.20. Non-GAAP
earnings exclude estimated amortization of acquired intangibles and
share based compensation, of a combined $0.05 per diluted share.
About Aeroflex
Aeroflex Incorporated is a global provider of high technology solutions
to the aerospace, defense and broadband communications markets. The
Company’s diverse technologies allow it to
design, develop, manufacture and market a broad range of test,
measurement and microelectronic products. The Company’s
common stock trades on the Nasdaq National Market System under the
symbol ARXX and is included in the S&P SmallCap 600 index. Additional
information concerning Aeroflex Incorporated can be found on the Company’s
Web site: www.aeroflex.com.
All statements other than statements of historical fact included in
this press release regarding Aeroflex’s
financial position, business outlook, 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, competitive
factors and pricing pressures, completion of the proposed Company Sale
Transaction, the integration of acquired businesses, changes in legal
and regulatory requirements, technological change or difficulties,
product development risks, commercialization difficulties, general
economic conditions, and other risk factors disclosed in Aeroflex’s
most recently filed Form 10-K. Such statements reflect the
current views of management with respect to the future and are subject
to these and other risks, uncertainties and assumptions relating to
Aeroflex’s financial condition, results of
operations, growth strategy and liquidity. Aeroflex does not
undertake any obligation to update such forward-looking statements.
The non-GAAP financial measures used in this press release are not
prepared in accordance with generally accepted accounting principles and
may be different from non-GAAP financial measures used by other
companies. The Company’s management
refers to these non-GAAP financial measures in making operating
decisions because they provide meaningful supplemental information
regarding the Company’s operating performance.
In addition, these non-GAAP financial measures facilitate management’s
internal comparisons to the Company’s
historical operating results. We include these non-GAAP financial
measures (which should be viewed as a supplement to, and not a
substitute for, their comparable GAAP measures) in this press release
because we believe they are useful to investors in allowing for greater
transparency to supplemental information used by management in its
financial and operational decision-making. For a reconciliation
of our GAAP and non-GAAP financial results, please refer to our
Reconciliation of Reported GAAP Results to Non-GAAP Measures, presented
in this release.
AEROFLEX INCORPORATED
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
March 31,
June 30,
2007
2006
ASSETS
Current assets:
Cash and cash equivalents
$
13,476
$
10,387
Marketable securities
10,576
28,332
Accounts receivable, less allowance for
doubtful accounts
129,192
120,296
Inventories
147,763
133,420
Deferred income taxes
24,159
24,732
Prepaid expenses and other current assets
13,159
11,187
Total current assets
338,325
328,354
Property, plant and equipment, net
79,129
77,940
Other assets
16,271
14,276
Intangible assets with definite lives, net
46,228
54,215
Goodwill
177,522
163,237
Total assets
$
657,475
$
638,022
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
$
607
$
607
Accounts payable
39,325
37,832
Advance payments by customers
21,724
21,128
Income taxes payable
817
9,162
Accrued payroll expenses
20,392
17,440
Accrued expenses and other current liabilities
39,041
33,046
Total current liabilities
121,906
119,215
Long-term debt
3,327
3,558
Deferred income taxes
1,251
4,631
Other long-term liabilities
24,002
22,948
Total liabilities
150,486
150,352
Stockholders' equity:
Preferred Stock, par value $.10 per share; authorized 1,000 shares:
Series A Junior Participating Preferred
Stock, par value $.10 per share, authorized 110 shares; none issued
-
-
Common Stock, par value $.10 per share; authorized 110,000 shares;
issued 73,689 and 75,270 shares
7,369
7,527
Additional paid-in capital
372,187
384,870
Accumulated other comprehensive income
23,800
13,468
Retained earnings
103,633
81,805
Total stockholders' equity
506,989
487,670
Total liabilities and stockholders' equity
$
657,475
$
638,022
AEROFLEX INCORPORATED
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
For the Quarter Ended
03/31/07
03/31/06
Net sales
$
150,271
$
140,527
Cost of sales
79,460
73,461
Gross profit
70,811
67,066
Selling, general and administrative expenses
33,907
30,863
Research and development costs
20,360
20,488
Amortization of acquired intangibles
3,225
3,440
Operating income
13,319
12,275
Company Sale Transaction expenses
(4,319)
-
Interest and other income (expense), net
582
442
Income before income taxes
9,582
12,717
Provision for income taxes
4,093
4,971
Net income
$
5,489
$
7,746
Net income per common share:
Basic
$
0.07
$
0.10
Diluted
$
0.07
$
0.10
Weighted average number of shares outstanding - Basic
73,775
75,133
- Diluted
75,714
77,230
AEROFLEX INCORPORATED
AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
For the Nine Months Ended
3/31/07
3/31/06
Net sales
$
432,420
$
401,332
Cost of sales
229,310
210,785
Gross profit
203,110
190,547
Selling, general and administrative costs
98,057
91,672
Research and development costs
56,552
56,742
Amortization of acquired intangibles
9,650
10,329
Operating income
38,851
31,804
Sale Transaction expenses
(4,319)
Interest and other income (expense), net
160
887
Income before income taxes
34,692
32,691
Provision for income taxes
12,864
12,642
Net income
$
21,828
$
20,049
Net income per common share:
Basic
$
0.29
$
0.27
Diluted
$
0.29
$
0.26
Weighted average number of shares outstanding - Basic
74,066
74,922
- Diluted
75,713
76,306
AEROFLEX INCORPORATED
AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP RESULTS TO NON-GAAP
MEASURES (Unaudited)
(In thousands, except per share data)
For the Quarter Ended
For the Nine Months Ended
3/31/07
3/31/06
3/31/07
3/31/06
Gross Profits
GAAP Gross Profits
$
70,811
$
67,066
$
203,110
$
190,547
Non-GAAP adjustments:
Acquisition related inventory adjustment
-
-
-
1,088
Share based compensation
74
72
217
223
Restructuring costs
-
259
-
259
Total Non-GAAP adjustments
74
331
217
1,570
Non-GAAP Gross Profits
$
70,885
$
67,397
$
203,327
$
192,117
Operating Income
GAAP Operating Income
$
13,319
$
12,275
$
38,851
$
31,804
Non-GAAP adjustments:
Amortization of acquired intangible assets
3,225
3,440
9,650
10,329
Acquisition related inventory adjustment
-
-
-
1,088
Share based compensation
1,258
1,552
3,212
5,010
Restructuring costs
2,040
1,179
2,140
1,179
Total Non-GAAP adjustments
6,523
6,171
15,002
17,606
Non-GAAP Operating Income
$
19,842
$
18,446
$
53,853
$
49,410
Net Income
GAAP Net Income
$
5,489
$
7,746
$
21,828
$
20,049
Non-GAAP adjustments:
Amortization of acquired intangible assets
3,225
3,440
9,650
10,329
Acquisition related inventory adjustment
-
-
-
1,088
Share based compensation
1,258
1,552
3,212
5,010
Restructuring costs
2,040
1,179
2,140
1,179
Company Sale Transaction expenses
4,319
-
4,319
-
Income tax benefit
(3,231)
(2,413)
(6,193)
(6,791)
Total Non-GAAP adjustments
7,611
3,758
13,128
10,815
Non-GAAP net income
$
13,100
$
11,504
$
34,956
$
30,864
AEROFLEX INCORPORATED
AND SUBSIDIARIES
RECONCILIATION OF REPORTED GAAP RESULTS TO NON-GAAP
MEASURES (Unaudited)
(In thousands, except per share data)
For the Quarter Ended
For the Nine Months Ended
3/31/07
3/31/06
3/31/07
3/31/06
Net Income Per Diluted Common Share:
GAAP net income
$
0.07
$
0.10
$
0.29
$
0.26
Non-GAAP adjustments, net of taxes:
Amortization of acquired intangible assets
0.03
0.03
0.08
0.08
Acquisition related inventory adjustment
-
-
0.01
Share based compensation
0.01
0.01
0.03
0.04
Restructuring costs
0.02
0.01
0.02
0.01
Company Sale Transaction expenses
0.04
-
0.04
-
Total Non-GAAP adjustments
0.10
0.05
0.17
0.14
Non-GAAP net income
$
0.17
$
0.15
$
0.46
$
0.40
Projection for the Quarter Ending
June 30, 2007
Net Income Per Diluted Common Share:
GAAP net income
$
0.15
Non-GAAP adjustments, net of taxes:
Amortization of acquired intangible assets
0.04
Share based compensation
0.01
Total Non-GAAP adjustments
0.05
Non-GAAP net income
$
0.20