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| 8-K - 8-K - AEROFLEX INC | v221622_8k.htm |
AEROFLEX ANNOUNCES FISCAL THIRD QUARTER RESULTS
Record Third Quarter Revenue, Non-GAAP Operating Income and Adjusted EBITDA
PLAINVIEW, New York — May 10, 2011 — Aeroflex Holding Corp. ("Aeroflex") (NYSE: ARX), a leading global provider of microelectronic components and test and measurement equipment, today announced its financial results for the fiscal third quarter and nine months ended March 31, 2011.
Net sales increased 14.7% from the third quarter of fiscal 2010 to a new third quarter record of $193.2 million. Both segments contributed to the growth this quarter, as did sales from acquired businesses, which accounted for approximately 5% of revenue. Non-GAAP operating income increased 15.1% from the third quarter of fiscal 2010 to $46.0 million, also a new third quarter record. Adjusted EBITDA also reached a new third quarter record of $50.7 million which is a 13.6% increase from the third quarter of fiscal 2010.
“I am very pleased with our record third quarter results,” said Len Borow, Chief Executive Officer. “Our strong gross margins this quarter were derived from a favorable product mix, primarily related to Hi-Rel Radhard integrated circuits and wireless products, and demonstrate the value proposition of our products in the market. Our partnership with our customers and our ability to commercialize our intellectual property continues to drive our strong financial performance.”
The following tables present selected financial information for the three and nine months ended March 31, 2011 and 2010 prepared in accordance with generally accepted accounting principles (“GAAP”) and on a basis other than GAAP (“Non-GAAP”). The full fiscal year 2011 non-GAAP effective tax rate expected from Aeroflex’s current geographic mix of non-GAAP pre-tax income is 31%. This rate was applied to its non-GAAP pre-tax income for the three and nine month periods ended March 31, 2011 and 2010. A reconciliation between GAAP and Non-GAAP amounts is presented at the end of this press release.
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Selected GAAP Results
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||||||||||||||||
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(in thousands, except per share data)
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||||||||||||||||
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Three Months
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Nine Months
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|||||||||||||||
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Ended March 31,
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Ended March 31,
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|||||||||||||||
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2011
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2010
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2011
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2010
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|||||||||||||
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Net sales
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$ | 193,219 | $ | 168,435 | $ | 530,729 | $ | 465,290 | ||||||||
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Gross profit
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106,358 | 90,300 | 281,024 | 242,031 | ||||||||||||
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Gross margin
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55.0 | % | 53.6 | % | 53.0 | % | 52.0 | % | ||||||||
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Operating income
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24,832 | 22,658 | 22,684 | 39,178 | ||||||||||||
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Net income (loss)
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$ | 4,127 | $ | 2,856 | $ | (13,093 | ) | $ | (28,301 | ) | ||||||
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Net income (loss) per common share - basic
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$ | 0.05 | $ | 0.04 | $ | (0.18 | ) | $ | (0.44 | ) | ||||||
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Weighted average number of common shares outstanding - basic
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84,789 | 65,000 | 74,608 | 65,000 | ||||||||||||
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Selected Non-GAAP Results
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(in thousands, except per share data)
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||||||||||||||||
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Three Months
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Nine Months
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Ended March 31,
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Ended March 31,
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2011
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2010
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2011
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2010
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Net sales
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$ | 193,240 | $ | 168,466 | $ | 530,798 | $ | 465,385 | ||||||||
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Gross profit
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106,369 | 90,618 | 282,212 | 243,465 | ||||||||||||
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Gross margin
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55.0 | % | 53.8 | % | 53.2 | % | 52.3 | % | ||||||||
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Operating income
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45,952 | 39,915 | 109,628 | 99,466 | ||||||||||||
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Net income
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$ | 22,851 | $ | 14,153 | $ | 39,994 | $ | 27,982 | ||||||||
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Net income per common share - basic
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$ | 0.27 | $ | 0.22 | $ | 0.54 | $ | 0.43 | ||||||||
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Weighted average number of common shares outstanding - basic
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84,789 | 65,000 | 74,608 | 65,000 | ||||||||||||
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Adjusted EBITDA
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$ | 50,661 | $ | 44,581 | $ | 123,827 | $ | 113,779 | ||||||||
Business Outlook
For the fiscal fourth quarter ending June 30, 2011, Aeroflex expects net sales to be between $220 million and $228 million, Adjusted EBITDA to be between $64 million and $69 million, and non-GAAP net income per share to be between $.40 and $.44. The range of expected non-GAAP net income per share reflects interest expense savings from the debt refinancing completed on May 9, 2011 and was calculated using a non-GAAP effective tax rate of 31%.
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 Tuesday, May 10th 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 for approximately 90 days or can be accessed telephonically for domestic callers at (888) 286-8010 or internationally at (617) 801-6888 with pass code 55414775.
About Aeroflex
Aeroflex Holding Corp. is a leading global provider of 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 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; 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 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
Vice President – Corporate Development & Investor Relations
Aeroflex Holding Corp.
(516) 752-6401
andrew.kaminsky@aeroflex.com
Aeroflex Holding Corp. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share and per share data )
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March 31,
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June 30,
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|||||||
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2011
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2010
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|||||||
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Assets
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||||||||
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Current assets:
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||||||||
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Cash and cash equivalents
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$ | 67,152 | $ | 100,663 | ||||
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Accounts receivable, less allowance for doubtful accounts of $1,213 and $1,821
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158,382 | 141,595 | ||||||
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Inventories
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171,212 | 126,568 | ||||||
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Deferred income taxes
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25,903 | 28,018 | ||||||
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Prepaid expenses and other current assets
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13,212 | 10,983 | ||||||
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Total current assets
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435,861 | 407,827 | ||||||
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Property, plant and equipment, net of accumulated depreciation of $71,672 and $60,755
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101,776 | 101,662 | ||||||
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Non-current marketable securities, net
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- | 9,769 | ||||||
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Deferred financing costs, net
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16,298 | 20,983 | ||||||
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Other assets
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28,516 | 21,818 | ||||||
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Intangible assets with definite lives, net
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199,449 | 238,313 | ||||||
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Intangible assets with indefinite lives
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114,689 | 109,894 | ||||||
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Goodwill
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460,664 | 445,874 | ||||||
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Total assets
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$ | 1,357,253 | $ | 1,356,140 | ||||
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Liabilities and Stockholders' Equity
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||||||||
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Current liabilities:
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||||||||
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Current portion of long-term debt
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$ | 360 | $ | 21,817 | ||||
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Accounts payable
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47,240 | 28,803 | ||||||
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Advance payments by customers and deferred revenue
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31,519 | 30,741 | ||||||
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Income taxes payable
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1,323 | 4,615 | ||||||
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Accrued payroll expenses
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22,717 | 23,082 | ||||||
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Accrued expenses and other current liabilities
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43,616 | 58,817 | ||||||
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Total current liabilities
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146,775 | 167,875 | ||||||
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Long-term debt
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695,908 | 880,030 | ||||||
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Deferred income taxes
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92,511 | 138,849 | ||||||
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Defined benefit plan obligations
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5,526 | 5,763 | ||||||
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Other long-term liabilities
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12,830 | 12,639 | ||||||
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Total liabilities
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953,550 | 1,205,156 | ||||||
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Stockholders' equity:
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||||||||
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Preferred stock $.01 par value; 50,000,000 shares authorized, no shares issued and outstanding
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- | - | ||||||
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Common stock, par value $.01 per share; 300,000,000 shares authorized; 84,789,180 and 65,000,000 shares issued and outstanding
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848 | 650 | ||||||
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Additional paid-in capital
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643,600 | 398,291 | ||||||
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Accumulated other comprehensive income (loss)
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(33,270 | ) | (53,575 | ) | ||||
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Accumulated deficit
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(207,475 | ) | (194,382 | ) | ||||
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Total stockholders' equity
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403,703 | 150,984 | ||||||
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Total liabilities and stockholders' equity
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$ | 1,357,253 | $ | 1,356,140 | ||||
Aeroflex Holding Corp. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share data)
|
Three Months Ended March 31,
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||||||||
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2011
|
2010
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|||||||
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Net sales
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$ | 193,219 | $ | 168,435 | ||||
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Cost of sales
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86,861 | 78,135 | ||||||
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Gross profit
|
106,358 | 90,300 | ||||||
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Selling, general and administrative costs
|
38,265 | 31,285 | ||||||
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Research and development costs
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24,663 | 20,844 | ||||||
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Amortization of acquired intangibles
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15,900 | 15,408 | ||||||
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Restructuring charges
|
2,698 | 105 | ||||||
| 81,526 | 67,642 | |||||||
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Operating income
|
24,832 | 22,658 | ||||||
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Other income (expense):
|
||||||||
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Interest expense
|
(13,852 | ) | (20,815 | ) | ||||
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Other income (expense), net
|
(119 | ) | 222 | |||||
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Total other income (expense)
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(13,971 | ) | (20,593 | ) | ||||
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Income before income taxes
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10,861 | 2,065 | ||||||
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Provision (benefit) for income taxes
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6,734 | (791 | ) | |||||
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Net income
|
$ | 4,127 | $ | 2,856 | ||||
|
Net income per common share - Basic
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$ | 0.05 | $ | 0.04 | ||||
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Weighted average number of common shares outstanding - Basic
|
84,789 | 65,000 | ||||||
Aeroflex Holding Corp. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share data)
|
Nine Months Ended March 31,
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||||||||
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2011
|
2010
|
|||||||
|
Net sales
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$ | 530,729 | $ | 465,290 | ||||
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Cost of sales
|
249,705 | 223,259 | ||||||
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Gross profit
|
281,024 | 242,031 | ||||||
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Selling, general and administrative costs
|
113,234 | 92,988 | ||||||
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Research and development costs
|
68,477 | 55,286 | ||||||
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Amortization of acquired intangibles
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47,706 | 46,527 | ||||||
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Termination of Sponsor Advisory Agreement
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18,133 | - | ||||||
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Restructuring charges
|
10,790 | 356 | ||||||
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Loss on liquidation of foreign subsidiary
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- | 7,696 | ||||||
| 258,340 | 202,853 | |||||||
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Operating income
|
22,684 | 39,178 | ||||||
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Other income (expense):
|
||||||||
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Interest expense
|
(55,803 | ) | (63,272 | ) | ||||
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Loss on extinguishment of debt
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(25,178 | ) | - | |||||
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Gain from a bargain purchase of a business
|
173 | - | ||||||
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Other income (expense), net
|
(526 | ) | 701 | |||||
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Total other income (expense)
|
(81,334 | ) | (62,571 | ) | ||||
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Income (loss) before income taxes
|
(58,650 | ) | (23,393 | ) | ||||
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Provision (benefit) for income taxes
|
(45,557 | ) | 4,908 | |||||
|
Net income (loss)
|
$ | (13,093 | ) | $ | (28,301 | ) | ||
|
Net income (loss) per common share - Basic
|
$ | (0.18 | ) | $ | (0.44 | ) | ||
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Weighted average number of common shares outstanding - Basic
|
74,608 | 65,000 | ||||||
Aeroflex Holding Corp. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
|
Nine Months Ended March 31,
|
||||||||
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2011
|
2010
|
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Cash flows from operating activities:
|
||||||||
|
Net income (loss)
|
$ | (13,093 | ) | $ | (28,301 | ) | ||
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||
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Depreciation and amortization
|
62,426 | 62,178 | ||||||
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Gain from a bargain purchase of a business
|
(173 | ) | - | |||||
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Acquisition related adjustment to cost of sales
|
998 | 246 | ||||||
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Loss on liquidation of foreign subsidiary
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- | 7,696 | ||||||
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Loss on extinguishment of debt
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25,178 | - | ||||||
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Deferred income taxes
|
(52,317 | ) | (1,286 | ) | ||||
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Share-based compensation
|
1,655 | 1,563 | ||||||
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Non - cash restructuring charges
|
4,860 | - | ||||||
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Amortization of deferred financing costs
|
3,976 | 3,579 | ||||||
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Paid in kind interest
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2,434 | 13,377 | ||||||
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Other, net
|
496 | 758 | ||||||
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Change in operating assets and liabilities, net of effects from purchases of businesses:
|
||||||||
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Decrease (increase) in accounts receivable
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(10,890 | ) | 10,754 | |||||
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Decrease (increase) in inventories
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(39,936 | ) | 4,450 | |||||
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Decrease (increase) in prepaid expenses and other assets
|
(8,142 | ) | (2,711 | ) | ||||
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Increase (decrease) in accounts payable, accrued expenses and other liabilities
|
4,430 | (20,053 | ) | |||||
|
Net cash provided by (used in) operating activities
|
(18,098 | ) | 52,250 | |||||
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Cash flows from investing activities:
|
||||||||
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Payments for purchase of businesses, net of cash acquired
|
(23,593 | ) | (4,000 | ) | ||||
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Capital expenditures
|
(17,132 | ) | (13,176 | ) | ||||
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Proceeds from sale of marketable securities
|
10,357 | 8,580 | ||||||
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Proceeds from the sale of property, plant and equipment
|
819 | 1,021 | ||||||
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Other, net
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- | (12 | ) | |||||
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Net cash provided by (used in) investing activities
|
(29,549 | ) | (7,587 | ) | ||||
|
Cash flows from financing activities:
|
||||||||
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Net proceeds from issuance of common stock
|
244,021 | - | ||||||
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Repurchase of senior unsecured notes and senior subordinated unsecured term loans, including premiums and fees
|
(207,690 | ) | - | |||||
|
Debt repayments
|
(21,458 | ) | (4,012 | ) | ||||
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Debt financing costs
|
(3,332 | ) | - | |||||
|
Net cash provided by (used in) financing activities
|
11,541 | (4,012 | ) | |||||
|
Effect of exchange rate changes on cash and cash equivalents
|
2,595 | (2,051 | ) | |||||
|
Net increase (decrease) in cash and cash equivalents
|
(33,511 | ) | 38,600 | |||||
|
Cash and cash equivalents at beginning of period
|
100,663 | 57,748 | ||||||
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Cash and cash equivalents at end of period
|
$ | 67,152 | $ | 96,348 | ||||
|
Reconciliation of GAAP Operating Income
|
||||||||||||||||
|
to Non-GAAP Operating Income
|
||||||||||||||||
|
(in thousands)
|
||||||||||||||||
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Three Months
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Nine Months
|
|||||||||||||||
|
Ended March 31,
|
Ended March 31,
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|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
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Operating income - GAAP
|
$ | 24,832 | $ | 22,658 | $ | 22,684 | $ | 39,178 | ||||||||
|
Amortization of acquired intangibles
|
15,900 | 15,408 | 47,706 | 46,527 | ||||||||||||
|
Impact of purchase accounting adjustments
|
91 | 509 | 1,488 | 2,287 | ||||||||||||
|
Financial sponsor fees
|
- | 647 | 1,222 | 2,111 | ||||||||||||
|
Restructuring costs and related pro forma savings (a)
|
3,747 | 105 | 13,821 | 356 | ||||||||||||
|
Share-based compensation
|
629 | 518 | 1,655 | 1,563 | ||||||||||||
|
Termination of financial sponsor advisory agreement
|
- | - | 18,133 | - | ||||||||||||
|
Non-cash loss on liquidation of foreign subsidiary
|
- | - | - | 7,696 | ||||||||||||
|
Other adjustments
|
753 | 70 | 2,919 | (252 | ) | |||||||||||
|
Operating income - Non-GAAP
|
$ | 45,952 | $ | 39,915 | $ | 109,628 | $ | 99,466 | ||||||||
|
Reconciliation of GAAP Net Income (Loss)
|
||||||||||||||||
|
to Non-GAAP Net Income
|
||||||||||||||||
|
(in thousands)
|
||||||||||||||||
|
Three Months
|
Nine Months
|
|||||||||||||||
|
Ended March 31,
|
Ended March 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Net income (loss) - GAAP
|
$ | 4,127 | $ | 2,856 | $ | (13,093 | ) | $ | (28,301 | ) | ||||||
|
Amortization of acquired intangibles
|
15,900 | 15,408 | 47,706 | 46,527 | ||||||||||||
|
Impact of purchase accounting adjustments
|
91 | 509 | 1,488 | 2,287 | ||||||||||||
|
Financial sponsor fees
|
- | 647 | 1,222 | 2,111 | ||||||||||||
|
Restructuring costs and related pro forma savings (a)
|
3,747 | 105 | 13,821 | 356 | ||||||||||||
|
Share-based compensation
|
629 | 518 | 1,655 | 1,563 | ||||||||||||
|
Termination of sponsor advisory agreement
|
- | - | 18,133 | - | ||||||||||||
|
Loss on extinguishment of debt
|
- | - | 25,178 | - | ||||||||||||
|
Amortization of deferred finance fees
|
1,137 | 1,193 | 3,976 | 3,579 | ||||||||||||
|
Non-cash loss on liquidation of foreign subsidiary
|
- | - | - | 7,696 | ||||||||||||
|
Other adjustments
|
753 | 66 | 3,434 | (173 | ) | |||||||||||
|
Tax impact of adjustments
|
(3,533 | ) | (7,149 | ) | (63,526 | ) | (7,663 | ) | ||||||||
|
Net income - Non-GAAP
|
$ | 22,851 | $ | 14,153 | $ | 39,994 | $ | 27,982 | ||||||||
|
Calculation of Adjusted EBITDA
|
||||||||||||||||
|
(in thousands)
|
||||||||||||||||
|
Three Months
|
Nine Months
|
|||||||||||||||
|
Ended March 31,
|
Ended March 31,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Net income (loss) - GAAP
|
$ | 4,127 | $ | 2,856 | $ | (13,093 | ) | $ | (28,301 | ) | ||||||
|
Interest expense
|
13,852 | 20,815 | 55,803 | 63,272 | ||||||||||||
|
Provision (benefit) for income taxes
|
6,734 | (791 | ) | (45,557 | ) | 4,908 | ||||||||||
|
Depreciation and amortization
|
20,892 | 20,404 | 62,426 | 62,178 | ||||||||||||
|
EBITDA
|
45,605 | 43,284 | 59,579 | 102,057 | ||||||||||||
|
Non-cash purchase accounting adjustments
|
21 | 31 | 1,067 | 342 | ||||||||||||
|
Financial sponser fees
|
- | 647 | 1,222 | 2,111 | ||||||||||||
|
Restructuring costs and related pro forma savings (a)
|
3,747 | 105 | 13,821 | 356 | ||||||||||||
|
Share-based compensation
|
629 | 518 | 1,655 | 1,563 | ||||||||||||
|
Termination of sponsor advisory agreement
|
- | - | 18,133 | - | ||||||||||||
|
Loss on extinguishment of debt
|
- | - | 25,178 | - | ||||||||||||
|
Non-cash loss on liquidation of foreign subsidiary
|
- | - | - | 7,696 | ||||||||||||
|
Other defined items (b)
|
659 | (4 | ) | 3,172 | (346 | ) | ||||||||||
|
Adjusted EBITDA
|
$ | 50,661 | $ | 44,581 | $ | 123,827 | $ | 113,779 | ||||||||
|
(a)
|
Primarily reflects costs associated with the reorganization of our European operations and consolidation of certain of our U.S. components facilities. Pro forma savings reflect the amount of 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 $3.0 million for the nine months ended March 31, 2011, $1.0 million of which is applicable for the three months ended March 31, 2011, $1.2 million applicable to the three months ended December 31, 2010 and $800,000 applicable to the three months ended September 30, 2011.
|
|
(b)
|
Reflects other adjustments required in calculating our debt covenant compliance. These other defined items include pro forma EBITDA for periods prior to the acquisition dates for companies acquired during the periods presented.
|