EX-99.1 2 v327695_ex99-1.htm EXHIBIT 99.1

 

NEWS RELEASE

 

AEROFLEX ANNOUNCES FIRST QUARTER FISCAL 2013 RESULTS

 

PLAINVIEW, New York — November 8, 2012 — Aeroflex Holding Corp. ("Aeroflex") (NYSE: 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.

 

Contact:

Andrew Kaminsky

Aeroflex Holding Corp.

(516) 752-6401

andrew.kaminsky@aeroflex.com

 

 
 

 

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)

 

   Three Months Ended September 30, 
   2012   2011 
Cash flows from operating activities:          
Net income (loss)  $(14,139)  $(5,042)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:          
Depreciation and amortization   20,123    20,974 
Change in fair value of acquisition contingent consideration liability   -    403 
Write-off of deferred financing costs   597    - 
Deferred income taxes   (2,629)   394 
Share-based compensation   636    600 
Amortization of deferred financing costs   554    502 
Other, net   511    426 
Change in operating assets and liabilities:          
Decrease (increase) in accounts receivable   33,023    23,582 
Decrease (increase) in inventories   94    (10,774)
Decrease (increase) in prepaid expenses and other assets   (1,438)   (2,249)
Increase (decrease) in accounts payable, accrued expenses and other liabilities   (5,338)   (29,985)
           
Net cash provided by (used in) operating activities   31,994    (1,169)
           
Cash flows from investing activities:          
Capital expenditures   (4,087)   (4,713)
Other, net   248    4 
           
Net cash provided by (used in) investing activities   (3,839)   (4,709)
           
Cash flows from financing activities:          
Debt repayments   (25,000)   (1,812)
Deferred financing costs   -    (82)
Other, net   (21)   - 
           
Net cash provided by (used in) financing activities   (25,021)   (1,894)
           
Effect of exchange rate changes on cash and cash equivalents   777    (1,020)
           
Net increase (decrease) in cash and cash equivalents   3,911    (8,792)
Cash and cash equivalents at beginning of period   41,324    66,278 
           
Cash and cash equivalents at end of period  $45,235   $57,486 

 

 
 

 

Aeroflex Holding Corp. and Subsidiaries

Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Operating Income

(In thousands)

 

   Three Months Ended 
   September 30, 
   2012   2011 
Operating income (loss) -GAAP  $(5,529)  $538 
Amortization of acquired intangibles   14,580    15,736 
Impact of purchase accounting adjustments   42    70 
Change in fair value of acquisition contingent consideration liability   -    403 
Restructuring costs and related pro forma savings (a)   3,702    3,002 
Share-based compensation   636    600 
Other adjustments   1,116    592 
Operating income - non-GAAP  $14,547   $20,941 

 

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income

(In thousands)

 

   Three Months Ended 
   September 30, 
   2012   2011 
Net income (loss) -GAAP  $(14,139)  $(5,042)
Amortization of acquired intangibles   14,580    15,736 
Impact of purchase accounting adjustments   42    70 
Change in fair value of acquisition contingent consideration liability   -    403 
Restructuring costs and related pro forma savings (a)   3,702    3,002 
Share-based compensation   636    600 
Write-off of deferred financing costs   597    - 
Amortization of deferred financing costs   554    502 
Other adjustments   1,116    592 
Tax impact of adjustments   (3,874)   (7,564)
Net income -non-GAAP  $3,214   $8,299 

 

 
 

 

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA

(In thousands)

 

   Three Months Ended 
   September 30, 
  2012   2011 
Net income (loss) -GAAP  $(14,139)  $(5,042)
Interest expense   10,078    8,574 
Provision (benefit) for income taxes   (2,354)   (3,289)
Depreciation and amortization   20,123    20,974 
EBITDA   13,708    21,217 
           
Restructuring costs and related pro forma savings (a)   3,702    3,002 
Share-based compensation   636    600 
Change in fair value of acquisition contingent consideration liability   -    403 
Write-off of deferred financing costs   597    - 
Other defined items (b)   797    489 
Adjusted EBITDA  $19,440   $25,711 

 

(a)Primarily reflects costs associated with the reorganization of our European operations and consolidation of certain of our U.S. component facilities. Pro forma savings reflect the costs that we estimate would have been eliminated during the fiscal year in which a restructuring occurred had the restructuring occurred as of the first day of that fiscal year. Pro forma savings were estimated to be $434,000 and $2.6 million for the three months ended September 30, 2012 and 2011, respectively. The pro forma savings of $2.6 million for the three months ended September 30, 2011 were not reflected in our Adjusted EBITDA as reported in our September 30, 2011 report on Form 10-Q as they relate to restructuring activities recorded throughout fiscal 2012.

 

(b)Reflects other adjustments required in calculating our debt covenant compliance. These other defined items include legal fees related to litigation and business acquisition and divestiture costs.