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Aeroflex Announces First Quarter Fiscal 2013 Results

  Aeroflex Announces First Quarter Fiscal 2013 Results

Business Wire

PLAINVIEW, N.Y. -- November 08, 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 8^th 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             -               403      
contingent consideration liability
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            113,547         146,597
doubtful accounts of $1,527 and $981
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           102,341         101,632
$102,310
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         21,660          23,433
revenue
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      848             848
84,845,687 shares issued and outstanding
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              -                 403
contingent consideration liability
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      (1,438   )        (2,249   )
other assets
Increase (decrease) in accounts payable,        (5,338   )       (29,985  )
accrued expenses and other liabilities
                                                                
Net cash provided by (used in) operating        31,994          (1,169   )
activities
                                                                
Cash flows from investing activities:
Capital expenditures                             (4,087   )        (4,713   )
Other, net                                      248             4        
                                                                
Net cash provided by (used in) investing        (3,839   )       (4,709   )
activities
                                                                
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        (25,021  )       (1,894   )
activities
                                                                
Effect of exchange rate changes on cash and     777             (1,020   )
cash equivalents
                                                                
Net increase (decrease) in cash and cash         3,911             (8,792   )
equivalents
Cash and cash equivalents at beginning of       41,324          66,278   
period
                                                                
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          -             403
consideration liability
Restructuring costs and related pro forma savings       3,702         3,002
(a)
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             (2,354      )               (3,289    )
income taxes
Depreciation and                   20,123                    20,974    
amortization
EBITDA                              13,708                      21,217
                                                           
Restructuring costs and
related pro forma                   3,702                       3,002
savings (a)
Share-based                         636                         600
compensation
Change in fair value of
acquisition contingent              -                           403
consideration liability
Write-off of deferred               597                         -
financing costs
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 otherdefined items include legal fees related to
litigation and business acquisition and divestiture costs.

Contact:

Aeroflex Holding Corp.
Andrew Kaminsky, 516-752-6401
andrew.kaminsky@aeroflex.com
 
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