Aeroflex Announces Third Quarter Fiscal 2013 Results

Aeroflex Announces Third 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 third quarter of fiscal 2013, which ended March 31, 2013.

For the third quarter of fiscal 2013:

  • Net sales were $161.0 million compared to $162.3 million in the third quarter of fiscal 2012.

  • Operating loss was $(2.5) million and net loss was $(9.4) million, or $(0.11) per share, compared to operating loss of $(61.1) million and a net loss of $(65.3) million, or $(0.77) per share in the third quarter of fiscal 2012. This quarter, operating and net loss included a one-time $8 million International Traffic in Arms Regulation ("ITAR") settlement expense to resolve historical self-disclosed ITAR violations. The third quarter of fiscal 2012 included a non-cash goodwill and intangibles impairment charge of $59.7 million in the RFMW group.

  • On a Non-GAAP basis, compared to the third quarter of fiscal 2012, operating income was $24.1 million compared to $23.0 million, net income was $9.9 million, or $0.12 per share compared to net income of $7.4 million, or $0.09 per share, and Adjusted EBITDA was $29.4 million compared to Adjusted EBITDA of $27.8 million in the third quarter of fiscal 2012.


"Our wireless ATS business has continued its turnaround this fiscal year. The significant operational changes we implemented are now visible in our results as demonstrated by our increased gross margins and Adjusted EBITDA. We are executing on our strategic plan despite the challenges that exist due to sequestration in some of our government markets," stated Len Borow, Chief Executive Officer of Aeroflex. "Our AMS business continues to have a strong bookings year contributing to our nine month book-to-bill of over 1-to-1, which provides increased confidence going into our largest quarter of the fiscal year."

The following tables present selected financial information for the three and nine months ended March 31, 2013 and 2012 prepared in accordance with generally accepted accounting principles ("GAAP") and on a basis other than GAAP ("Non-GAAP"). A reconciliation between GAAP and Non-GAAP amounts is presented at the end of this press release. The 33% Non-GAAP effective tax rate in the fiscal 2013 period and 40% 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 and nine month periods ended March 31, 2013 and 2012, respectively.

Selected GAAP Results
(In thousands, except percentages and per share data)

Three Months Ended

Nine Months Ended

March 31,

March 31,

2013

2012

2013

2012

Net sales

$

160,954

$

162,262

$

458,337

$

488,284

Gross profit

80,560

79,173

228,457

243,383

Gross margin

50.1

%

48.8

%

49.8

%

49.8

%

Operating income (loss)

(2,523

)

(61,063

)

(2,228

)

(52,279

)

Net income (loss)

$

(9,389

)

$

(65,261

)

$

(22,783

)

$

(70,838

)

Net income (loss) per common share:

Basic and diluted

$

(0.11

)

$

(0.77

)

$

(0.27

)

$

(0.84

)

Weighted average number of common shares outstanding:

Basic and diluted

84,904

84,824

84,870

84,806

Selected Non-GAAP Results
(In thousands, except percentages and per share data)

Three Months Ended

Nine Months Ended

March 31,

March 31,

2013

2012

2013

2012

Net sales

$

160,954

$

162,262

$

458,337

$

488,284

Gross profit

80,803

79,292

229,081

243,494

Gross margin

50.2

%

48.9

%

50.0

%

49.9

%

Operating income

24,138

22,977

62,003

73,686

Net income

$

9,948

$

7,353

$

22,423

$

29,518

Net income per common share:

Basic

$

0.12

$

0.09

$

0.26

$

0.35

Diluted

$

0.12

$

0.09

$

0.26

$

0.35

Weighted average number of common shares outstanding:

Basic

84,904

84,824

84,870

84,806

Diluted

85,055

84,908

84,932

84,837

Adjusted EBITDA

$

29,445

$

27,848

$

77,267

$

87,911

Business Outlook

For the fiscal fourth quarter ending June 30, 2013, Aeroflex expects net sales to be between $175 million and $185 million, GAAP net income to be between $8 million and $11 million, Adjusted EBITDA to be between $41 million and $45 million, GAAP net income per share to be between $0.09 and $0.12 and Non-GAAP net income per share to be between $0.21 and $0.25.

The range of expected GAAP and Non-GAAP net income per share for the fiscal fourth quarter was calculated using GAAP and Non-GAAP effective tax rates of 23% and 30%, 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, May 9th 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 86207952.

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; the 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 March 31,

2013

2012

Net sales

$

160,954

$

162,262

Cost of sales

80,394

83,089

Gross profit

80,560

79,173

Operating expenses:

Selling, general and administrative costs

37,449

38,172

Research and development costs

23,247

22,245

Amortization of acquired intangibles

13,991

15,642

Restructuring charges

396

4,031

Impairment of goodwill and other long-lived assets

-

59,700

ITAR settlement expense

8,000

-

Change in fair value of acquisition contingent

consideration liability

-

446

Total operating expenses

83,083

140,236

Operating income (loss)

(2,523

)

(61,063

)

Other income (expense):

Interest expense

(9,448

)

(8,252

)

Write-off of deferred financing costs

-

(864

)

Other income (expense), net

(389

)

(251

)

Total other income (expense), net

(9,837

)

(9,367

)

Income (loss) before income taxes

(12,360

)

(70,430

)

Provision (benefit) for income taxes

(2,971

)

(5,169

)

Net income (loss)

$

(9,389

)

$

(65,261

)

Net income (loss) per common share:

Basic and diluted

$

(0.11

)

$

(0.77

)

Weighted average number of common shares outstanding:

Basic and diluted

84,904

84,824

Aeroflex Holding Corp. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share data)

Nine Months Ended March 31,

2013

2012

Net sales

$

458,337

$

488,284

Cost of sales

229,880

244,901

Gross profit

228,457

243,383

Operating expenses:

Selling, general and administrative costs

109,769

113,300

Research and development costs

65,213

68,940

Amortization of acquired intangibles

42,634

47,043

Restructuring charges

3,729

5,382

Impairment of goodwill and other long-lived assets

1,340

59,700

ITAR settlement expense

8,000

-

Change in fair value of acquisition contingent

consideration liability

-

1,297

Total operating expenses

230,685

295,662

Operating income (loss)

(2,228

)

(52,279

)

Other income (expense):

Interest expense

(29,294

)

(25,386

)

Write-off of deferred financing costs

(824

)

(864