Attached files
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| 8-K - 8-K - AEROFLEX HOLDING CORP. | v232834_8k.htm |
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AEROFLEX ANNOUNCES FOURTH QUARTER AND FULL YEAR FISCAL 2011 RESULTS
Record Fourth Quarter and Annual Revenue, Non-GAAP Operating Income and Adjusted EBITDA
PLAINVIEW, New York — August 18, 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 fourth quarter and full year of fiscal 2011.
Net sales increased 4.7% from the fourth quarter of fiscal 2010 to a new quarterly record of $198.7 million. Sales from the AMS segment were strong, offsetting the weakness in the ATS business from products that did not ship. Non-GAAP operating income increased 11.2% from the fourth quarter of fiscal 2010 to $53.2 million, also a new quarterly record. Adjusted EBITDA also reached a new quarterly record of $57.9 million, a 10.5% increase from the fourth quarter of fiscal 2010.
Net sales, Non-GAAP operating income and Adjusted EBITDA also reached full fiscal year records as sales increased 11.4% to $729.4 million, Non-GAAP operating income increased 11.9% to $164.8 million and Adjusted EBITDA increased 10.6% to $183.7 million.
“Our annual performance was exceptional despite the disappointment with our ATS business in the fourth quarter,” said Len Borow, Chief Executive Officer. “We achieved double digit growth in sales, Non-GAAP operating income and Adjusted EBITDA in fiscal 2011. Fourth quarter gross margins were extremely strong and contributed to a 120 basis point improvement to 53.9% for the full year of fiscal 2011. This quarter, in a key growth market, we received the first significant order from a major global manufacturer of wireless infrastructure equipment for next generation LTE(A) products. This order demonstrates our ability to continue to innovate and develop key products that are essential for us to continue our market leadership into LTE(A). As we prepare to enter a challenging year due to the uncertainty in the U.S. Government budget and the world economy, we have rededicated ourselves to maintaining market leadership positions, building upon our product portfolio and strengthening our partnerships with customers.”
The following tables present selected financial information for the three and twelve months ended June 30, 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 based on Aeroflex’s geographic mix of Non-GAAP pre-tax income is 31%. This rate was applied to Aeroflex’s Non-GAAP pre-tax income for the three and twelve month periods ended June 30, 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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(In thousands, except per share data)
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||||||||||||||||
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Three Months
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Year
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|||||||||||||||
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Ended June 30,
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Ended June 30,
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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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$ | 198,685 | $ | 189,758 | $ | 729,414 | $ | 655,048 | ||||||||
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Gross profit
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111,076 | 100,954 | 392,100 | 342,985 | ||||||||||||
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Gross margin
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55.9 | % | 53.2 | % | 53.8 | % | 52.4 | % | ||||||||
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Operating income
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30,031 | 28,796 | 52,715 | 67,974 | ||||||||||||
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Net income (loss)
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$ | (21,575 | ) | $ | 16,032 | $ | (34,668 | ) | $ | (12,269 | ) | |||||
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Net income (loss) per common share - basic
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$ | (0.25 | ) | $ | 0.25 | $ | (0.45 | ) | $ | (0.19 | ) | |||||
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Weighted average number of common shares outstanding - basic
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84,789 | 65,000 | 77,153 | 65,000 | ||||||||||||
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Selected Non-GAAP Results
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(In thousands, except per share data)
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Three Months
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Year
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Ended June 30,
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Ended June 30,
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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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$ | 198,773 | $ | 189,788 | $ | 729,571 | $ | 655,173 | ||||||||
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Gross profit
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111,154 | 101,555 | 393,366 | 345,020 | ||||||||||||
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Gross margin
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55.9 | % | 53.5 | % | 53.9 | % | 52.7 | % | ||||||||
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Operating income
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53,205 | 47,857 | 164,844 | 147,323 | ||||||||||||
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Net income
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$ | 29,900 | $ | 19,461 | $ | 71,283 | $ | 47,444 | ||||||||
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Net income per common share - basic
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$ | 0.35 | $ | 0.30 | $ | 0.92 | $ | 0.73 | ||||||||
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Weighted average number of common shares outstanding - basic
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84,789 | 65,000 | 77,153 | 65,000 | ||||||||||||
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Adjusted EBITDA
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$ | 57,860 | $ | 52,351 | $ | 183,698 | $ | 166,130 | ||||||||
Business Outlook
For the full fiscal year ending June 30, 2012, Aeroflex expects net sales to be between $790 million and $830 million, Adjusted EBITDA to be between $187 million and $203 million, and Non-GAAP net income per share to be between $1.09 and $1.22. For the fiscal first quarter ending September 30, 2011, Aeroflex expects net sales to be between $160 million and $165 million, Adjusted EBITDA to be between $24 million and $27 million, and Non-GAAP net income per share to be between $0.09 and $0.11. The range of expected Non-GAAP net income per share 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 Thursday, August 18th 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 65308436.
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; 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 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
Consolidated Balance Sheets
(In thousands, except share and per share data )
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June 30,
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2011
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2010
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Assets
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Current assets:
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Cash and cash equivalents
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$ | 66,278 | $ | 100,663 | ||||
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Accounts receivable, less allowance for doubtful accounts of $1,210 and $1,821
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168,141 | 141,595 | ||||||
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Inventories
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186,370 | 126,568 | ||||||
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Deferred income taxes
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51,855 | 28,018 | ||||||
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Prepaid expenses and other current assets
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10,044 | 10,983 | ||||||
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Total current assets
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482,688 | 407,827 | ||||||
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Property, plant and equipment, net of accumulated depreciation of $82,581 and $60,755
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105,162 | 101,662 | ||||||
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Non-current marketable securities, net
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- | 9,769 | ||||||
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Deferred financing costs, net
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15,289 | 20,983 | ||||||
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Other assets
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29,000 | 21,818 | ||||||
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Intangible assets with definite lives, net
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183,614 | 238,313 | ||||||
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Intangible assets with indefinite lives
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114,730 | 109,894 | ||||||
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Goodwill
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465,443 | 445,874 | ||||||
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Total assets
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$ | 1,395,926 | $ | 1,356,140 | ||||
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Liabilities and Stockholders' Equity
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Current liabilities:
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Current portion of long-term debt
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$ | 7,635 | $ | 21,817 | ||||
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Accounts payable
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48,737 | 28,803 | ||||||
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Advance payments by customers and deferred revenue
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25,859 | 30,741 | ||||||
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Income taxes payable
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8,371 | 4,615 | ||||||
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Accrued payroll expenses
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22,063 | 23,082 | ||||||
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Accrued expenses and other current liabilities
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45,772 | 58,817 | ||||||
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Total current liabilities
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158,437 | 167,875 | ||||||
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Long-term debt
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717,750 | 880,030 | ||||||
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Deferred income taxes
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117,150 | 138,849 | ||||||
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Defined benefit plan obligations
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5,539 | 5,763 | ||||||
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Other long-term liabilities
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13,526 | 12,639 | ||||||
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Total liabilities
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1,012,402 | 1,205,156 | ||||||
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Stockholders' equity:
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Preferred stock, par value $.01 per share; 50,000,000 shares authorized, no shares issued and outstanding
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- | - | ||||||
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Common stock, par value $.01 per share; 300,000,000 shares authorized; 84,789,180 and 65,000,000 shares issued and outstanding
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848 | 650 | ||||||
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Additional paid-in capital
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644,262 | 398,291 | ||||||
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Accumulated other comprehensive income (loss)
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(32,536 | ) | (53,575 | ) | ||||
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Accumulated deficit
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(229,050 | ) | (194,382 | ) | ||||
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Total stockholders' equity
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383,524 | 150,984 | ||||||
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Total liabilities and stockholders' equity
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$ | 1,395,926 | $ | 1,356,140 | ||||
Aeroflex Holding Corp. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
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Three Months Ended June 30,
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2011
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2010
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Net sales
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$ | 198,685 | $ | 189,758 | ||||
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Cost of sales
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87,609 | 88,804 | ||||||
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Gross profit
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111,076 | 100,954 | ||||||
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Selling, general and administrative costs
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39,475 | 35,872 | ||||||
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Research and development costs
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21,611 | 20,869 | ||||||
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Amortization of acquired intangibles
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15,966 | 15,388 | ||||||
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Restructuring charges
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3,993 | 29 | ||||||
| 81,045 | 72,158 | |||||||
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Operating income
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30,031 | 28,796 | ||||||
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Other income (expense):
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||||||||
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Interest expense
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(10,401 | ) | (20,676 | ) | ||||
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Loss on extinguishment of debt and write-off of deferred financing costs
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(34,217 | ) | - | |||||
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Gain from a bargain purchase of a business
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- | 3,993 | ||||||
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Other income (expense), net
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(249 | ) | (169 | ) | ||||
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Total other income (expense)
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(44,867 | ) | (16,852 | ) | ||||
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Income (loss) before income taxes
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(14,836 | ) | 11,944 | |||||
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Provision (benefit) for income taxes
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6,739 | (4,088 | ) | |||||
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Net income (loss)
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$ | (21,575 | ) | $ | 16,032 | |||
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Net income (loss) per common share - basic
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$ | (0.25 | ) | $ | 0.25 | |||
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Weighted average number of common shares outstanding - basic
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84,789 | 65,000 | ||||||
Aeroflex Holding Corp. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
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Years Ended June 30,
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2011
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2010
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Net sales
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$ | 729,414 | $ | 655,048 | ||||
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Cost of sales
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337,314 | 312,063 | ||||||
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Gross profit
|
392,100 | 342,985 | ||||||
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Selling, general and administrative costs
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152,709 | 128,860 | ||||||
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Research and development costs
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90,088 | 76,155 | ||||||
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Amortization of acquired intangibles
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63,672 | 61,915 | ||||||
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Termination of Sponsor Advisory Agreement
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18,133 | - | ||||||
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Restructuring charges
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14,783 | 385 | ||||||
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Loss on liquidation of foreign subsidiary
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- | 7,696 | ||||||
| 339,385 | 275,011 | |||||||
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Operating income
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52,715 | 67,974 | ||||||
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Other income (expense):
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||||||||
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Interest expense
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(66,204 | ) | (83,948 | ) | ||||
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Loss on extinguishment of debt and write-off of deferred financing costs
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(59,395 | ) | - | |||||
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Gain from a bargain purchase of a business
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173 | 3,993 | ||||||
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Other income (expense), net
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(775 | ) | 532 | |||||
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Total other income (expense)
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(126,201 | ) | (79,423 | ) | ||||
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Income (loss) before income taxes
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(73,486 | ) | (11,449 | ) | ||||
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Provision (benefit) for income taxes
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(38,818 | ) | 820 | |||||
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Net income (loss)
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$ | (34,668 | ) | $ | (12,269 | ) | ||
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Net income (loss) per common share - basic
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$ | (0.45 | ) | $ | (0.19 | ) | ||
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Weighted average number of common shares outstanding - basic
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77,153 | 65,000 | ||||||
Aeroflex Holding Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
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Years Ended June 30,
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2011
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2010
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Cash flows from operating activities:
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Net income (loss)
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$ | (34,668 | ) | $ | (12,269 | ) | ||
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
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||||||||
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Depreciation and amortization
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83,459 | 82,696 | ||||||
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Gain from a bargain purchase of a business
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(173 | ) | (3,993 | ) | ||||
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Acquisition related adjustment to cost of sales
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998 | 575 | ||||||
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Acquisition related adjustment to sales
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157 | 125 | ||||||
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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 and write-off of deferred financing costs
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59,395 | - | ||||||
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Deferred income taxes
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(53,626 | ) | (4,607 | ) | ||||
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Share-based compensation
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2,254 | 2,076 | ||||||
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Non - cash restructuring charges
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4,860 | - | ||||||
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Amortization of deferred financing costs
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4,755 | 4,771 | ||||||
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Paid in kind interest
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2,434 | 18,089 | ||||||
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Other, net
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1,103 | 670 | ||||||
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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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(20,577 | ) | (11,898 | ) | ||||
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Decrease (increase) in inventories
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(54,993 | ) | 8,432 | |||||
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Decrease (increase) in prepaid expenses and other assets
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(5,519 | ) | (4,927 | ) | ||||
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Increase (decrease) in accounts payable, accrued expenses and other liabilities
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4,683 | (5,385 | ) | |||||
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Net cash provided by (used in) operating activities
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(5,458 | ) | 82,051 | |||||
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Cash flows from investing activities:
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Payments for purchase of businesses, net of cash acquired
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(23,717 | ) | (19,813 | ) | ||||
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Capital expenditures
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(25,957 | ) | (21,015 | ) | ||||
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Proceeds from sale of marketable securities
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10,357 | 8,580 | ||||||
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Proceeds from the sale of property, plant and equipment
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995 | 1,485 | ||||||
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Other, net
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- | (385 | ) | |||||
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Net cash provided by (used in) investing activities
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(38,322 | ) | (31,148 | ) | ||||
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Cash flows from financing activities:
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||||||||
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Credit facility borrowings
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725,000 | - | ||||||
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Net proceeds from issuance of common stock
|
243,995 | - | ||||||
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Repurchase of senior unsecured notes and senior subordinated unsecured term loans, including premiums and fees
|
(432,526 | ) | - | |||||
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Debt repayments
|
(510,923 | ) | (5,590 | ) | ||||
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Deferred financing costs
|
(18,903 | ) | - | |||||
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Net cash provided by (used in) financing activities
|
6,643 | (5,590 | ) | |||||
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Effect of exchange rate changes on cash and cash equivalents
|
2,752 | (2,398 | ) | |||||
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Net increase (decrease) in cash and cash equivalents
|
(34,385 | ) | 42,915 | |||||
|
Cash and cash equivalents at beginning of year
|
100,663 | 57,748 | ||||||
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Cash and cash equivalents at end of year
|
$ | 66,278 | $ | 100,663 | ||||
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Reconciliation of GAAP Operating Income
|
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to Non-GAAP Operating Income
|
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(In thousands)
|
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Three Months
|
Year
|
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|
Ended June 30,
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Ended June 30,
|
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|
2011
|
2010
|
2011
|
2010
|
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|
Operating income - GAAP
|
$ | 30,031 | $ | 28,796 | $ | 52,715 | $ | 67,974 | ||||||||
|
Amortization of acquired intangibles
|
15,966 | 15,388 | 63,672 | 61,915 | ||||||||||||
|
Impact of purchase accounting adjustments
|
157 | 772 | 1,645 | 3,059 | ||||||||||||
|
Financial sponsor fees
|
- | 747 | 1,222 | 2,858 | ||||||||||||
|
Restructuring costs and related pro forma savings (a)
|
5,253 | 29 | 21,085 | 385 | ||||||||||||
|
Share-based compensation
|
599 | 513 | 2,254 | 2,076 | ||||||||||||
|
Termination of sponsor advisory agreement
|
- | - | 18,133 | - | ||||||||||||
|
Non-cash loss on liquidation of foreign subsidiary
|
- | - | - | 7,696 | ||||||||||||
|
Other adjustments
|
1,199 | 1,612 | 4,118 | 1,360 | ||||||||||||
|
Operating income - Non-GAAP
|
$ | 53,205 | $ | 47,857 | $ | 164,844 | $ | 147,323 | ||||||||
|
Reconciliation of GAAP Net Income (Loss)
|
||||||||||||||||
|
to Non-GAAP Net Income (Loss)
|
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(In thousands)
|
||||||||||||||||
|
Three Months
|
Year
|
|||||||||||||||
|
Ended June 30,
|
Ended June 30,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Net income (loss) - GAAP
|
$ | (21,575 | ) | $ | 16,032 | $ | (34,668 | ) | $ | (12,269 | ) | |||||
|
Amortization of acquired intangibles
|
15,966 | 15,388 | 63,672 | 61,915 | ||||||||||||
|
Impact of purchase accounting adjustments
|
157 | 772 | 1,645 | 3,059 | ||||||||||||
|
Financial sponsor fees
|
- | 747 | 1,222 | 2,858 | ||||||||||||
|
Restructuring costs and related pro forma savings (a)
|
5,253 | 29 | 21,085 | 385 | ||||||||||||
|
Share-based compensation
|
599 | 513 | 2,254 | 2,076 | ||||||||||||
|
Termination of sponsor advisory agreement
|
- | - | 18,133 | - | ||||||||||||
|
Loss on extinguishment of debt and write-off of deferred financing costs
|
34,217 | - | 59,395 | - | ||||||||||||
|
Amortization of deferred financing costs
|
779 | 1,192 | 4,755 | 4,771 | ||||||||||||
|
Non-cash loss on liquidation of foreign subsidiary
|
- | - | - | 7,696 | ||||||||||||
|
Gain from a bargain purchase of a business(b)
|
- | (3,993 | ) | (173 | ) | (3,993 | ) | |||||||||
|
Other adjustments
|
1,199 | 1,612 | 4,806 | 1,440 | ||||||||||||
|
Tax impact of adjustments
|
(6,695 | ) | (12,831 | ) | (70,843 | ) | (20,494 | ) | ||||||||
|
Net income - Non-GAAP
|
$ | 29,900 | $ | 19,461 | $ | 71,283 | $ | 47,444 | ||||||||
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||
|
Three Months
|
Year
|
|||||||||||||||
|
Ended June 30,
|
Ended June 30,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Net income (loss) - GAAP
|
$ | (21,575 | ) | $ | 16,032 | $ | (34,668 | ) | $ | (12,269 | ) | |||||
|
Interest expense
|
10,401 | 20,676 | 66,204 | 83,948 | ||||||||||||
|
Provision (benefit) for income taxes
|
6,739 | (4,088 | ) | (38,818 | ) | 820 | ||||||||||
|
Depreciation and amortization
|
21,033 | 20,518 | 83,459 | 82,696 | ||||||||||||
|
EBITDA
|
16,598 | 53,138 | 76,177 | 155,195 | ||||||||||||
|
Non-cash purchase accounting adjustments
|
88 | 358 | 1,155 | 700 | ||||||||||||
|
Financial sponser fees
|
- | 747 | 1,222 | 2,858 | ||||||||||||
|
Restructuring costs and related pro forma savings (a)
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5,253 | 29 | 21,085 | 385 | ||||||||||||
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Share-based compensation
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599 | 513 | 2,254 | 2,076 | ||||||||||||
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Termination of sponsor advisory agreement
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- | - | 18,133 | - | ||||||||||||
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Loss on extinguishment of debt and write-off of deferred financing costs
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34,217 | - | 59,395 | - | ||||||||||||
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Non-cash loss on liquidation of foreign subsidiary
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- | - | - | 7,696 | ||||||||||||
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Gain from a bargain purchase of a business (b)
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- | (3,993 | ) | (173 | ) | (3,993 | ) | |||||||||
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Other defined items (c)
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1,105 | 1,559 | 4,450 | 1,213 | ||||||||||||
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Adjusted EBITDA
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$ | 57,860 | $ | 52,351 | $ | 183,698 | $ | 166,130 | ||||||||
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(a)
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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 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 $6.3 million for the year ended June 30, 2011, $1.3 million of which is applicable to the three months ended June 30, 2011, $1.7 million applicable to the three months ended March 31, 2011, $1.9 million applicable to the three months ended December 31, 2010 and $1.4 million applicable to the three months ended September 30, 2010.
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(b)
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The gain from a bargain purchase of Willtek Communications reflects the excess of the fair value of net assets acquired over the purchase price. The purchase price was negotiated at such a level to be reflective of the cost of the restructuring efforts that we expected to incur at that time.
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(c)
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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 our fiscal year, increase in fair value of acquisition contingent consideration liability and business acquisition expenses.
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