Herley Reports Earnings for Second Quarter of Fiscal 2010
Revenues increase 17% to $46.6 million; Net income up 76% to $3.8 million $.27 EPS; EBITDA of $7.1 million
Conference Call Scheduled for Friday, March 12, 2010
LANCASTER, Pa., March 11 /PRNewswire-FirstCall/ -- Herley Industries, Inc. (Nasdaq: HRLY) today reported financial results for its Second Quarter of Fiscal Year 2010.
Net sales for the second quarter of fiscal 2010 were $46.6 million compared to $40.0 million for the second quarter of fiscal 2009. Net income for the first quarter was $3.8 million, or $.27 per diluted share, compared to $2.2 million, or $.16 per diluted share, last year.
The Company's EBITDA for the second quarter of 2010 was $7.1 million compared to $4.6 million last year. The Company's Adjusted EBITDA for the second quarter of 2010 was $6.8 million compared to $4.6 million last year. Adjusted EBITDA is defined as operating income plus the impact of foreign exchange transactions, excluding interest, taxes, depreciation and amortization, employment and litigation settlements, litigation costs, asset impairments and gains (losses) on asset sales.
The Company reported a revenue increase of $6.6 million in the second quarter of fiscal 2010 compared to last year. The 17% increase was primarily related to increased deliveries under major production programs, as well as sales volume increases associated with manufacturing process improvements. Gross profit in the quarter was $12.9 million (27.6% gross profit margin) compared to $9.7 million (24.2% gross profit margin) last year, an increase of $3.2 million. The increase in gross profit and gross profit margin during fiscal 2010 was principally a result of leveraging our fixed costs on the sales increase, as well as anticipated improvements in margins related to manufacturing efficiencies and a favorable program mix, partially offset by a contract loss accrual related to projected cost increases on certain programs.
Selling and administrative ("S&A") expenses for the second quarter were $7.7 million, or 16.6% of sales, compared to $7.0 million, or 17.6% of sales, last year. The $.7 million increase in S&A expenses was primarily attributable to an increased bid and proposal costs, as well as an increase in commissions and related sales expenses associated with the increase in sales, partially offset by lesser intangible amortization costs related to the prior-year acquisition of Eyal.
The Company reported operating income during the second quarter of fiscal 2010 of $5.4 million compared to $2.6 million last year.
At January 31, 2010, the Company's balance sheet is strong, with total cash and cash equivalents of $12.1 million, working capital of $90.4 million and long-term debt of $12.8 million. Capital expenditures were $1.3 million for the second quarter of fiscal 2010 compared to $.6 million last year.
Richard F. Poirier, Chief Executive Officer and President, commented, "We are pleased with our second quarter performance and the continued improvement in our year-over-year net sales and net income. Our backlog remains strong and our bookings are on plan. We anticipate a number of large orders in the second half of the fiscal year which are expected to fuel our continued improved performance."
Mr. Poirier will host a conference call on March 12, 2010 at 10:00 a.m. Eastern Time to discuss the financial results for the Second Quarter of Fiscal Year 2010, which ended January 31, 2010. To join the conference call, dial 1 (888) 425-4188, referencing Conference ID #58645536.
A taped replay of the call will be available one hour after completion of the call through March 19, 2010 at 11:59 p.m. Eastern Time. To listen to the replay, dial: 1 (800) 642-1687 (U.S.) or 1 (706) 645-9291 (International), and Conference ID #58645536.
In addition, the conference call will be broadcast live over the Internet and can be accessed through the following URL: http://www.videonewswire.com/event.asp?id=66611. To listen to the live call on the Internet, go to the website at least 15 minutes early to register, download and install any necessary audio software.
Herley Industries, Inc. is a leader in the design, development and manufacture of microwave technology solutions for the defense, aerospace and medical industries worldwide. Based in Lancaster, PA, Herley has seven manufacturing locations and approximately 1,000 employees. Additional information about the Company can be found on the Internet at www.herley.com.
Safe Harbor Statement - Except for the historical information contained herein, this release may contain forward-looking statements. Such statements are inherently subject to risks and uncertainties. Forward-looking statements involve various important assumptions, risks, uncertainties and other factors which could cause our actual results to differ materially from those expressed in such forward-looking statements. Forward-looking statements in this discussion can be identified by words such as "anticipate," "believe," "could," "estimate," "expect," "plan," "intend," "may," "should" or the negative of these terms or similar expressions. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance or achievement. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors including but not limited to, competitive factors and pricing pressures, changes in legal and regulatory requirements, cancellation or deferral of customer orders, technological change or difficulties, difficulties in the timely development of new products, difficulties in manufacturing, the outcome of pending litigation, commercialization and trade difficulties and current economic conditions, including the potential for significant changes in US defense spending under the current Administration which could affect future funding of programs and allocations within the budget to various programs, as well as the factors set forth in our public filings with the Securities and Exchange Commission.
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
January 31, 2010 August 2,
(Unaudited) 2009
----------- ----
ASSETS
Current Assets:
Cash and cash equivalents $12,134 $14,820
Trade accounts receivable, net 30,291 28,687
Income taxes receivable 3,771 36
Costs incurred and income
recognized in excess of
billings on uncompleted
contracts and claims 4,383 10,396
Inventories, net 56,049 57,804
Deferred income taxes 16,300 19,380
Other current assets 5,308 2,780
------- -------
Total Current Assets 128,236 133,903
Property, plant and equipment, net 32,830 32,872
Goodwill 43,722 43,722
Intangibles, net 8,744 9,619
Deferred income taxes 4,656 7,571
Other assets 508 598
--- ---
Total Assets $218,696 $228,285
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $1,321 $1,595
Current portion of employment
settlement agreements 1,294 7,400
Current portion of litigation
settlements 988 954
Accounts payable and accrued
expenses 21,452 26,447
Billings in excess of costs
incurred and income recognized on
uncompleted contracts 414 261
Accrual for contract losses 2,262 3,440
Advance payments on contracts 10,140 12,698
------ ------
Total Current Liabilities 37,871 52,795
Long-term debt, net of
current portion 11,501 12,246
Long-term portion of
employment settlement agreements 2,118 2,827
Other long-term liabilities 8,164 8,361
------ ------
Total Liabilities 59,654 76,229
------ ------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.10 par value;
authorized 20,000,000
shares; issued and outstanding
13,577,294 at January 31, 2010
and 13,719,926 at August 2, 2009 1,358 1,372
Additional paid-in capital 102,779 103,113
Retained earnings 55,223 47,882
Accumulated other comprehensive loss (318) (311)
---- ----
Total Shareholders'
Equity 159,042 152,056
------- -------
Total Liabilities and
Shareholders' Equity $218,696 $228,285
======== ========
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Thirteen weeks ended Twenty-six weeks ended
-------------------- ----------------------
January 31, February 1, January 31, February 1,
2010 2009 2010 2009
---- ---- ---- ----
Net sales $46,609 $39,974 $94,288 $75,318
------- ------- ------- -------
Cost and expenses:
Cost of products
sold 33,752 30,303 68,144 59,044
Selling and
administrative
expenses 7,746 7,047 15,427 14,370
Net loss (gain) on
sale of assets - 45 - (573)
Litigation costs,
net of recovery
settlement (1,224) - (684) 558
Employment
settlement costs 900 - 900 -
--- --- --- ---
41,174 37,395 83,787 73,399
------ ------ ------ ------
Operating income 5,435 2,579 10,501 1,919
Other (expense)
income:
Interest income 9 18 20 36
Interest expense (165) (476) (330) (699)
Foreign exchange
transaction
losses (122) (30) (164) (390)
---- --- ---- ----
(278) (488) (474) (1,053)
---- ---- ---- ------
Income from
continuing
operations
before income
taxes 5,157 2,091 10,027 866
Provision
(benefit) for
income taxes 1,367 (62) 2,686 (404)
----- --- ----- ----
Income from
continuing
operations 3,790 2,153 7,341 1,270
----- ----- ----- -----
Discontinued
operations:
Loss from
operations of
discontinued
subsidiary - - - (734)
Benefit for income
taxes - - - (278)
--- --- --- ----
Loss from
discontinued
operations - - - (456)
--- --- --- ----
Net income $3,790 $2,153 $7,341 $814
====== ====== ====== ====
Earnings (loss)
per common
share - Basic
Income from
continuing
operations $.28 $.16 $.54 $.09
Loss from
discontinued
operations - - - (.03)
--- --- --- ----
Net income - basic $.28 $.16 $.54 $.06
==== ==== ==== ====
Basic weighted
average shares 13,687 13,550 13,695 13,537
====== ====== ====== ======
Earnings (loss)
per common
share - Diluted
Income from
continuing
operations $.27 $.16 $.53 $.09
Loss from
discontinued
operations - - - (.03)
--- --- --- ----
Net income - diluted $.27 $.16 $.53 $.06
==== ==== ==== ====
Diluted weighted
average shares 13,853 13,746 13,865 13,949
====== ====== ====== ======
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Twenty-six weeks ended
----------------------
January 31, February 1,
2010 2009
---- ----
Cash flows from operating
activities:
Net income $7,341 $814
------ ---
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and
amortization 3,633 4,161
Gain on sale of fixed
assets - (573)
Impairment of goodwill of
discontinued subsidiary - 1,000
Stock-based compensation
costs 240 293
Excess tax benefit from
exercises of stock
options - (61)
Imputed interest on
employment and
litigation settlement
liabilities 88 190
Inventory valuation
reserve charges 619 723
Warranty reserve charges 842 817
Deferred tax provision
(benefit) 5,990 (474)
Changes in operating
assets and liabilities:
Cash of discontinued
subsidiary - (712)
Trade accounts receivable (1,630) (1,062)
Income taxes receivable (3,735) (290)
Costs incurred and income
recognized in excess
of billings on
uncompleted contracts
and claims 5,969 3,620
Inventories, net 1,111 (3,143)
Other current assets (2,531) (650)
Accounts payable and
accrued expenses (4,874) (5,525)
Billings in excess of
costs incurred and
income recognized on
uncompleted contracts 161 109
Accrual for contract
losses (1,172) (92)
Employment settlement
payments (7,769) (661)
Litigation settlement
payments (2,000) -
Advance payments on
contracts (557) 5,381
Other, net (80) (450)
--- ----
Total adjustments (5,695) 2,601
------ -----
Net cash provided by
operating activities 1,646 3,415
----- -----
Cash flows from investing
activities:
Acquisition of business,
net of cash acquired - (30,010)
Proceeds from sale of
discontinued business - 15,000
Capital expenditures (2,738) (2,622)
------ -------
Net cash used in
investing activities (2,738) (17,632)
------ -------
Cash flows from financing
activities:
Borrowings under bank
line of credit 7,000 24,000
Borrowings - term loan - 10,000
Proceeds from exercise of
stock options - 313
Excess tax benefit from
exercises of stock options - 61
Payments of long-term
debt (1,005) (1,010)
Payments under bank line
of credit (7,000) (21,500)
Purchase of treasury
stock (588) -
---- ---
Net cash (used in)
provided by financing
activities (1,593) 11,864
------ ------
Effect of exchange rate
changes on cash (1) (72)
--- ---
Net decrease in cash and
cash equivalents (2,686) (2,425)
Cash and cash equivalents
at beginning of period 14,820 14,347
------ ------
Cash and cash
equivalents at end of
period $12,134 $11,922
======= =======
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
EBITDA AND ADJUSTED EBITDA
(Unaudited)
The following is a reconciliation of operating income, which is a GAAP
measure of our operating results, to EBITDA and Adjusted EBITDA.
Management believes that the presentation of EBITDA and Adjusted EBITDA is
appropriate to provide additional information about the Company's results.
EBITDA and Adjusted EBITDA are not presentations made in accordance with
GAAP, are not measures of financial performance or condition, liquidity or
profitability of the Company, and should not be considered as an
alternative to (1) net income, operating income or any other performance
measures determined in accordance with GAAP or (2) operating cash flows
determined in accordance with GAAP. Additionally, EBITDA and Adjusted
EBITDA are not intended to be measures of free cash flow for management's
discretionary use, as they do not consider certain cash requirements such
as interest payments, tax payments, capital expenditures and debt service
requirements.
For the Thirteen Weeks Ended For the Twenty-six Weeks Ended
January 31, February 1, January 31, February 1,
(in thousands) 2010 2009 2010 2009
-------- ------- -------- -------
Operating
income – as
reported $5,435 $2,579 $10,501 $1,919
Depreciation
and
amortization 1,788 2,013 3,633 4,161
Foreign
exchange
transaction
losses (122) (30) (164) (390)
---- --- ---- ----
EBITDA 7,101 4,562 13,970 5,690
Litigation
costs, net of
recovery
settlement (1,224) - (684) 558
Employment
settlement
costs 900 - 900 -
Net loss
(gain) on sale
of assets - 45 - (573)
--- --- --- ----
Adjusted
EBITDA $6,777 $4,607 $14,186 $5,675
====== ====== ======= ======
For information at Herley, contact: |
||
Peg Guzzetti |
Tel: (717) 397-2777 |
|
Investor Relations |
||
SOURCE Herley Industries, Inc.
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