Aeroflex Announces First Quarter Fiscal 2013 Results

Aeroflex Announces First Quarter Fiscal 2013 Results

PLAINVIEW, N.Y.--(BUSINESS WIRE)-- Aeroflex Holding Corp. ("Aeroflex") (NYS: ARX) , a leading global provider of high performance microelectronic components, and test and measurement equipment, today announced its financial results for the first quarter of fiscal 2013, which ended September 30, 2012.

For the first quarter of fiscal 2013:

  • Net sales were $141.2 million compared to $154.9 million in the first quarter of fiscal 2012.

  • Operating loss was $(5.5) million and net loss was $(14.1) million, or $(0.17) per share, compared to operating income of $0.5 million and a net loss of $(5.0) million, or $(0.06) per share, in the first quarter of fiscal 2012.

  • On a Non-GAAP basis, operating income was $14.5 million, net income was $3.2 million, or $0.04 per share, and Adjusted EBITDA was $19.4 million compared to operating income of $20.9 million, net income of $8.3 million, or $0.10 per share, and Adjusted EBITDA of $25.7 million, in the first quarter of fiscal 2012.


"Compared to our expectations, I am pleased with the performance of both AMS and ATS this quarter," said Len Borow, Chief Executive Officer of Aeroflex. "Our AMS business has continued its consistent execution despite the challenging economic and political environment we are operating within. After our initial reorganization efforts this summer, our ATS business has begun to perform according to our expectation. We had a strong book-to-bill this quarter of over one-to-one led by ATS. We also generated sufficient cash that allowed us repay $25 million of debt this quarter. We look forward to continuing our recent success as we move throughout our fiscal year."

The following tables present selected financial information for the three months ended September 30, 2012 and 2011 prepared in accordance with generally accepted accounting principles ("GAAP") and on a basis other than GAAP ("Non-GAAP"). The 32% Non-GAAP effective tax rate in the fiscal 2013 period and 34% in the fiscal 2012 period result from Aeroflex's geographic mix of Non-GAAP pre-tax income. These rates were applied to Aeroflex's Non-GAAP pre-tax income for the three month periods ended September 30, 2012 and 2011, respectively. A reconciliation between GAAP and Non-GAAP amounts is presented at the end of this press release.

Selected GAAP Results

(In thousands, except percentages and per share data)

Three Months Ended

September 30,

2012

2011

Net sales

$

141,153

$

154,884

Gross profit

68,899

78,519

Gross margin

48.8

%

50.7

%

Operating income (loss)

(5,529

)

538

Net loss

$

(14,139

)

$

(5,042

)

Net loss per common share:

Basic and diluted

$

(0.17

)

$

(0.06

)

Weighted average number of common shares outstanding:

Basic and diluted

84,836

84,789

Selected Non-GAAP Results

(In thousands, except percentages and per share data)

Three Months Ended

September 30,

2012

2011

Net sales

$

141,153

$

154,884

Gross profit

69,094

78,509

Gross margin

48.9

%

50.7

%

Operating income

14,547

20,941

Net income

$

3,214

$

8,299

Net income per common share:

Basic

$

0.04

$

0.10

Diluted

$

0.04

$

0.10

Weighted average number of common shares outstanding:

Basic

84,836

84,789

Diluted

84,861

84,789

Adjusted EBITDA

$

19,440

$

25,711

Business Outlook

For the fiscal second quarter ending December 31, 2012, Aeroflex expects net sales to be between $147 million and $155 million, GAAP net loss to be between $(7) million and $(4) million, Adjusted EBITDA to be between $22 million and $26 million, GAAP net loss per share to be between $(0.09) and $(0.04), and Non-GAAP net income per share to be between $0.06 and $0.09.

The range of expected GAAP and Non-GAAP net income per share for the fiscal second quarter was calculated using GAAP and Non-GAAP effective tax rates of 14% and 32%, respectively.

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 management does not believe are reflective of its ongoing operating results when assessing the performance of its business.

Aeroflex believes that these Non-GAAP financial measures also facilitate the comparison by management and investors of results between periods and among its peer companies. However, its peer companies may calculate similar Non-GAAP financial measures differently than Aeroflex, limiting the information's usefulness as comparative measures.

Webcast and Conference Call Information

Aeroflex will host a live webcast and conference call at 8:15 a.m. eastern standard time on Thursday, November 8th during which management will discuss the financial results. To participate in the live webcast, please visit the events page of the 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 the Aeroflex website or can be accessed telephonically for domestic callers at (888) 286-8010 or internationally at (617) 801-6888 with pass code 26598014.

About Aeroflex

Aeroflex Holding Corp. is a leading global provider of high performance 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, financial results 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; changes in government spending; 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 inability to meet covenants contained in debt agreements; 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.

Aeroflex Holding Corp. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share data)

Three Months Ended September 30,

2012

2011

Net sales

$

141,153

$

154,884

Cost of sales

72,254

76,365

Gross profit

68,899

78,519

Operating expenses:

Selling, general and administrative costs

35,703

37,131

Research and development costs

20,878

24,275

Amortization of acquired intangibles

14,580

15,736

Restructuring charges

3,267

436

Change in fair value of acquisition contingent consideration liability

-

403

Total operating expenses

74,428

77,981

Operating income (loss)

(5,529

)

538

Other income (expense):

Interest expense

(10,078

)

(8,574

)

Write-off of deferred financing costs

(597

)

-

Other income (expense), net

(289

)

(295

)

Total other income (expense), net

(10,964

)

(8,869

)

Income (loss) before income taxes

(16,493

)

(8,331

)

Provision (benefit) for income taxes

(2,354

)

(3,289

)

Net income (loss)

$

(14,139

)

$

(5,042

)

Net income (loss) per common share:

Basic and diluted

$

(0.17

)

$

(0.06

)

Weighted average number of common shares outstanding:

Basic and diluted

84,836

84,789

Aeroflex Holding Corp. and Subsidiaries

Selected Segment Data

(In thousands, except percentages)

Three Months Ended

September 30,

2012

2011

Net sales:

Microelectronic solutions ("AMS")

$

74,450

$

81,805

Test solutions ("ATS")

66,703

73,079

Total net sales

$

141,153

$

154,884

Gross profit:

- AMS

$

36,449

$

41,022

- ATS

32,450

37,497

Total gross profit

$

68,899

$

78,519

Gross Margin:

- AMS

49.0

%

50.1

%

- ATS

48.6

%

51.3

%

Total gross margin

48.8

%

50.7

%

Aeroflex Holding Corp. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

September 30,

June 30,

2012

2012

Assets

Current assets:

Cash and cash equivalents

$

45,235

$

41,324

Accounts receivable, less allowance for doubtful accounts of $1,527 and $981

113,547

146,597

Inventories

158,318

158,090

Deferred income taxes

29,825

33,315

Income taxes receivable

5,076

4,935

Prepaid expenses and other current assets

12,984

11,942

Total current assets

364,985

396,203

Property, plant and equipment, net of accumulated depreciation of $107,813 and $102,310

102,341

101,632

Deferred financing costs, net

14,569

15,720

Other assets

32,334

34,955

Intangible assets with definite lives, net

108,057

119,476

Intangible assets with indefinite lives

114,206

113,461

Goodwill

410,124

408,361

Total assets

$

1,146,616

$

1,189,808

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

25,144

$

26,822

Advance payments by customers and deferred revenue

21,660

23,433

Income taxes payable

417

593

Accrued payroll expenses

18,970

18,635

Accrued expenses and other current liabilities

36,654

37,559

Total current liabilities

102,845

107,042

Long-term debt

616,375

641,375

Deferred income taxes

88,186

94,022

Other long-term liabilities

20,386

20,592

Total liabilities

827,792

863,031

Stockholders' equity:

Preferred stock, par value $.01 per share; 50,000,000 shares authorized, no shares issued and outstanding

-

-

Common stock, par value $.01 per share; 300,000,000 shares authorized, 84,851,868 and 84,845,687 shares issued and outstanding

848

848

Additional paid-in capital

648,801

648,092

Accumulated other comprehensive income (loss)

(33,999

)

(39,476

)

Accumulated deficit

(296,826

)

(282,687

)

Total stockholders' equity

318,824

326,777

Total liabilities and stockholders' equity

$

1,146,616

$

1,189,808

Aeroflex Holding Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)