LANCASTER, Pa., June 10 /PRNewswire-FirstCall/ -- Herley Industries, Inc. today reported financial results for the Third Quarter of Fiscal Year 2010.
Net sales for the third quarter of fiscal 2010 were $45.4 million as compared to $41.8 million for the third quarter of fiscal 2009. Net income for the third quarter was $2.6 million, or $.19 per diluted share, compared to $2.4 million or $.18 per diluted share, last year.
The Company's EBITDA for the third quarter of 2010 was $5.5 million compared to $5.4 million last year. Adjusted for the impact of litigation costs and net settlements in the respective quarters, adjusted EBITDA for the third quarter of 2010 was $7.1 million compared to $6.1 million last year. EBITDA is defined as net income plus net interest, taxes, depreciation and amortization.
The Company reported a revenue increase of $3.6 million in the third quarter of fiscal 2010 compared to the same period in the prior fiscal year. The 8.7% increase was primarily related to increased deliveries under major production programs, including increases attributable to manufacturing process improvements as well as revenue recognized under certain percentage-of-completion contracts.
Gross profit in the quarter was $13.7 million (30.0% gross profit margin) compared to $11.2 million (26.8% gross profit margin) last year, an increase of $2.5 million. The increase in gross profit and gross profit margin during the quarter was principally a result of the sales volume increase and improvements in margins related to manufacturing efficiencies as well as a reduction in the estimated costs to complete a contract nearing completion. On a comparative basis, the third quarter of fiscal 2009 included a provision of $2.0 million for estimated losses on various contracts due to changes in estimated costs required to complete the contracts.
Selling and administrative ("S&A") expenses for the third quarter were $8.0 million, or 17.6% of net sales, compared to $7.5 million, or 18.0% of net sales, in the prior-year third quarter. The $.5 million increase in S&A expenses is primarily attributable to increased bid and proposal costs of $.3 million essential to future bookings and increased audit fees of $.2 million.
The Company reported operating income during the third quarter of fiscal 2010 of $4.1 million compared to $3.0 million last year.
At May 2, 2010, the Company's balance sheet was strong, with total cash and cash equivalents of $19.4 million, working capital of $92.8 million and long-term debt of $12.5 million. Capital expenditures were $.7 million for the third quarter of fiscal 2010 compared to $1.9 million last year.
John Thonet, Chairman of Herley's Board of Directors, commented, "The Board of Directors is pleased with the third quarter performance and commends CEO Richard Poirier and his division managers for a job well done."
Richard F. Poirier, Chief Executive Officer and President, commented, "In our third quarter, we experienced year-over-year improvement in net sales, net income and gross profit margins. Strong bookings during the quarter brought us to a backlog of $184.1 million as we entered the fourth quarter of the fiscal year."
We present the non-GAAP (generally accepted accounting principles) measure EBITDA (as defined herein) in this report and anticipate referring to this measure in the conference call referenced below. Presentation of EBITDA is consistent with how we evaluate our performance internally and EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA is a non-GAAP operating measure under Regulation G of the Securities and Exchange Commission. We compute EBITDA by adding back net interest, taxes, depreciation and amortization to net income. Each of these GAAP financial measures is included in our financial statements and thus EBITDA can be reconciled to net income attributable to common shareholders, the most comparable GAAP financial measure to it. However, other companies in our industry may calculate EBITDA differently than we do. EBITDA is not a measurement of financial performance under GAAP and should not be considered as a substitute for cash flow from operating activities as a measure of liquidity or a substitute for net income as an indicator of operating performance or any other measure of performance derived in accordance with GAAP. Net income attributable to common shareholders is reconciled to EBITDA for the third fiscal quarter of 2010 and 2009, respectively, in the following table (in thousands):
Thirteen Weeks Ended -------------- May 2, May 3, 2010 2009 ---- ---- Net Income $2,637 $2,423 Add: Interest, net 97 188 Taxes 1,191 567 Depreciation 1,341 1,585 Amortization 262 628 EBITDA $5,528 $5,391 ------ ------ Adjust for net Litigation Costs 1,548 664 ----- --- Adjusted EBITDA $7,076 $6,055 ====== ======
Mr. Thonet will host a conference call on June 11, 2010 at 10:00 a.m. Eastern time to discuss financial results for the Third Quarter of Fiscal 2010 ended May 2, 2010. He will be joined on the call by Mr. Richard H. Poirier, Chief Executive Officer and President, and Mr. Anello C. Garefino, Chief Financial Officer. To join the conference call dial 1 (888) 425-4188, referencing Conference ID #79502871.
A taped replay of the call will be available one hour after completion of the call through June 18 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 #79502871.
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=69742. 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 worldwide and approximately 1000 employees. Additional information about the company can be found on the Internet at http://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. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) May 2, 2010 August 2, (Unaudited) 2009 ----------- ---- ASSETS Current Assets: Cash and cash equivalents $19,439 $14,820 Trade accounts receivable, net 25,405 28,687 Income taxes receivable 3,614 36 Costs incurred and income recognized in excess of billings on uncompleted contracts and claims 5,386 10,396 Inventories, net 55,822 57,804 Deferred income taxes 15,221 19,380 Other current assets 3,667 2,780 ------- ------- Total Current Assets 128,554 133,903 Property, plant and equipment, net 32,051 32,872 Goodwill 43,722 43,722 Intangibles, net 8,455 9,619 Deferred income taxes 5,564 7,571 Other assets 467 598 -------- -------- Total Assets $218,813 $228,285 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $,322 $1,595 Current portion of employment settlement agreements 1,304 7,400 Current portion of litigation settlements 975 954 Accounts payable and accrued expenses 20,875 26,447 Billings in excess of costs incurred and income recognized on uncompleted contracts 868 261 Accrual for contract losses 2,097 3,440 Advance payments on contracts 8,323 12,698 ------ ------ Total Current Liabilities 35,764 52,795 Long-term debt, net of current portion 11,187 12,246 Long-term portion of employment settlement agreements 1,786 2,827 Other long-term liabilities 8,097 8,361 ----- ----- Total Liabilities 56,834 76,229 ------ ------ Commitments and Contingencies Shareholders' Equity: Common stock, $.10 par value; authorized 20,000,000 shares; issued and outstanding 13,682,402 at May 2, 2010 and 13,719,926 at August 2, 2009 1,368 1,372 Additional paid-in capital 103,094 103,113 Retained earnings 57,859 47,882 Accumulated other comprehensive loss (342) (311) ----- Total Shareholders' Equity 161,979 152,056 ------- ------- Total Liabilities and Shareholders' Equity $218,813 $228,285 ======== ======== HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share data) Thirteen weeks Thirty-nine ended weeks ended -------------- ----------- May 2, May 3, May 2, May 3, 2010 2009 2010 2009 ---- ---- ---- ---- Net sales $45,438 $41,811 $139,726 $117,129 ------- ------- -------- -------- Cost and expenses: Cost of products sold 31,786 30,613 99,930 89,658 Selling and administrative expenses 7,989 7,513 23,416 22,049 Net gain on sale of assets - - - (573) Litigation costs, net of recovery settlement 1,548 664 864 1,055 Employment settlement costs - - 900 - ------ ------ ------ ------ 41,323 38,790 125,110 112,189 Operating income 4,115 3,021 14,616 4,940 ----- ----- ------ ----- Other (expense) income: Interest income 9 58 29 94 Interest expense (106) (246) (436) (945) Foreign exchange transaction (losses) gains (190) 157 (355) (233) ----- ---- ----- ------- (287) (31) (762) (1,084) ---- --- ---- ------ Income from continuing operations before income taxes 3,828 2,990 13,854 3,856 Provision (benefit) for income taxes 1,191 567 3,877 163 ----- ----- ------ ----- Income from continuing operations 2,637 2,423 9,977 3,693 ----- ----- ------ ----- Discontinued operations: Loss from operations of discontinued subsidiary - - - (734) Benefit for income taxes - - - (278) Loss from discontinued ----- ---- ----- ----- operations - - - (456) --- ---- ----- ------ Net income $2,637 $2,423 $9,977 $3,237 ====== ====== ====== ====== Earnings (loss) per common share -Basic Income from continuing operations $.19 $.18 $.73 $.27 Loss from discontinued operations - - - (.03) --- ---- ---- ----- Net income - basic $.19 $.18 $.73 $.24 ==== ==== ==== ==== Basic weighted average shares 13,580 13,559 13,691 13,545 ====== ===== ====== ===== Earnings (loss) per common share -Diluted Income from continuing operations $.19 $.18 $.72 $.27 Loss from discontinued operations - - - (.03) --- ---- ----- ------ Net income - diluted $.19 $.18 $.72 $.24 ===== ==== ===== ==== Diluted weighted average shares 13,885 13,721 13,873 13,774 ====== ====== ====== ====== HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Thirty-nine weeks ended ----------- May 2, May 3, 2010 2009 ---- ---- Cash flows from operating activities: Net income $9,977 $3,237 ------ ------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,236 6,374 Loss (gain) on sale of fixed assets 28 (573) Impairment of goodwill of discontinued subsidiary - 1,000 Stock-based compensation costs 291 458 Excess tax benefit from exercises of stock options (893) (61) Litigation settlement costs 975 - Imputed interest on employment and litigation settlement liabilities 124 275 Inventory valuation reserve charges 1,102 1,164 Warranty reserve charges 1,324 1,130 Deferred tax provision (benefit) 7,049 16 Changes in operating assets and liabilities: Cash of discontinued subsidiary - (712) Trade accounts receivable 3,203 (2,285) Income taxes receivable (3,578) 2,056 Costs incurred and income recognized in excess of billings on uncompleted contracts and claims 4,878 3,477 Other receivables 192 1,020 Inventories, net 799 (6,167) Other current assets (1,096) (965) Accounts payable and accrued expenses (6,171) (6,094) Billings in excess of costs incurred and income recognized on uncompleted contracts 649 175 Income taxes payable 428 18 Accrual for contract losses (1,329) 1,420 Employment settlement payments (8,115) (964) Litigation settlement payments (3,000) (1,000) Advance payments on contracts (2,372) 9,361 Other, net (108) (224) Total adjustments (384) 8,899 ---- ----- Net cash provided by operating activities 9,593 12,136 Cash flows from investing activities: Acquisition of business, net of cash acquired - (30,010) Proceeds from sale of discontinued business - 15,000 Proceeds from sale of fixed assets 152 - Capital expenditures (3,484) (4,524) ------ ------ Net cash used in investing activities (3,332) (19,534) Cash flows from financing activities: Borrowings under bank line of credit 7,000 31,000 Borrowings - term loan - 10,000 Proceeds from exercise of stock options - 313 Excess tax benefit from exercises of stock options 893 61 Payments of long-term debt (1,302) (1,595) Payments under bank line of credit (7,000) (32,500) Purchase of treasury stock (1,207) - ------ --- Net cash (used in) provided by financing activities (1,616) 7,279 Effect of exchange rate changes on cash (26) (89) --- --- Net increase (decrease) in cash and cash equivalents 4,619 (208) Cash and cash equivalents at beginning of period 14,820 14,347 ------ ------ Cash and cash equivalents at end of period $19,439 $14,139 ======= ======= For information at Herley contact: Peg Guzzetti Tel: (717) 397-2777 Investor Relations http://www.herley.com/
Herley Industries, Inc.
CONTACT: Peg Guzzetti, Investor Relations, at Herley, +1-717-397-2777
Web Site: http://www.herley.com/
