8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 7, 2007

AEROFLEX INCORPORATED

(Exact Name of Registrant as Specified in Charter)

Delaware	000-02324	11-1974412
(State or Other Jurisdiction  of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

35 South Service Road Plainview, New York	11803
(Address of Principal Executive Offices)	(Zip Code)

(516) 694-6700

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.Results of Operations and Financial Condition.

On May 7, 2007, Aeroflex Incorporated (the “Registrant”) issued a press release announcing the Registrant’s financial results for the third fiscal quarter ended March 31, 2007. A copy of the Registrant’s press release is attached hereto as Exhibit 99.1.

Item 9.01.Financial Statements and Exhibits.

(d) Exhibits.

99.1. Press Release, dated May 7, 2007

The information filed as an exhibit to this Form 8-K is being furnished in accordance with Item 2.02 and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AEROFLEX INCORPORATED
By:	/s/John Adamovich, Jr.
	John Adamovich, Jr.
	Senior Vice President and Chief Financial Officer

Date: May 7, 2007

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Exhibit Index

99.1. Press release, dated May 7, 2007

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EX-99.1

  

FOR IMMEDIATE RELEASE

FOR FURTHER INFORMATION CONTACT:

Investor Inquiries:

Leonard Borow

President and Chief Operating Officer

(516) 694-6700

AEROFLEX

REPORTS RECORD THIRD QUARTER SALES

PLAINVIEW, NEW YORK, May 7, 2007 -- Aeroflex Incorporated (Nasdaq Symbol: ARXX), today announced operating results for its fiscal 2007 third quarter which ended March 31, 2007.

	Quarter Ended March 31,
	2007		2006
Sales (in millions)	$	150.3	$	140.5
Diluted earnings per share
GAAP	$	0.07	$	0.10
Non-GAAP	$	0.17	$	0.15

Operating income of 13.3 million for the fiscal 2007 third quarter increased $1.0 million (8.5%) compared to last year. As previously announced, Aeroflex has entered into an agreement to be acquired by General Atlantic LLC and Francisco Partners II, L.P. (“Company Sale Transaction”). Including the Company Sale Transaction expenses of $4.3 million ($3.4 million after tax), net income for the fiscal 2007 third quarter amounted to $5.5 million, or $0.07 per diluted share, compared with $7.7 million, or $0.10 per diluted share last year. On a GAAP basis, gross profit margins for the fiscal 2007 third quarter were 47.1% compared to 47.7% last year. The quarterly results were impacted by:

·   a $3.2 million ($2.1 million after tax or $0.03 per share) charge for amortization of acquired intangibles in fiscal 2007, compared to $3.4 million ($2.1 million after tax or $0.03 per share) in fiscal 2006;

·   a $1.3 million ($807,000 after tax or $0.01 per share) charge for share based compensation in fiscal 2007, compared to $1.6 million ($943,000 after tax or $0.01 per share) in fiscal 2006;

·   a $2.0 million ($1.3 million after tax or $0.02 per share) charge for restructuring costs related to the consolidation of the company’s subsidiaries in the United Kingdom in fiscal 2007, compared to $1.2 million ($723,000 after tax or $0.01 per share) in fiscal 2006; and

·   a $4.3 million ($3.4 million after tax or $0.04 per share) charge for Company Sale Transaction expenses in fiscal 2007.

Non-GAAP gross profit margins, excluding the aforementioned items, were 47.2%, compared to 48.0 % last year and non-GAAP operating income of $19.8 million increased 7.6% compared to last year. The third quarter non-GAAP results exclude the following items from net income per diluted share:

	Quarter Ended March 31,
	2007		2006
Amortization of acquired intangibles	$	0.03	$	0.03
Share based compensation		0.01		0.01
Restucturing costs		0.02		0.01
Company Sale Transaction expenses		0.04		-
Total EPS impact	$	0.10	$	0.05

Year-to-date results were:

	Nine Months Ended March 31,
	2007		2006
Sales (in millions)	$	432.4	$	401.3
Diluted earnings per share:
GAAP	$	0.29	$	0.26
Non-GAAP	$	0.46	$	0.40

On a GAAP basis, gross profit margins for the nine months of fiscal 2007 were 47.0% compared to 47.5% last year. Operating income of $38.9 million for the nine months of fiscal 2007 increased 22% compared to last year. Net income for the nine months of fiscal 2007 amounted to $21.8 million, or $0.29 per diluted share, compared with $20.0 million, or $0.26 per diluted share. The nine months results were impacted by:

·   a $9.6 million ($6.2 million after tax or $0.08 per share) charge for amortization of acquired intangibles in fiscal 2007, compared to $10.3 million ($6.3 million after tax or $0.08 per share) in fiscal 2006;

·   a fiscal 2006 charge of $1.1 million ($685,000 after tax or $0.01 per share) for an acquisition related inventory adjustment (for which there was no comparable item in the current fiscal year);

·   a $3.2 million ($2.1 million after tax or $0.03 per share) charge for share based compensation in fiscal 2007, compared to $5.0 million ($3.1 million after tax or $0.04 per share) in fiscal 2006;

·   a $2.1 million ($1.4 after tax or $0.02 per share) charge for restructuring costs in fiscal 2007, compared to $1.2 million ($723,000 after tax or $0.01 per share) in fiscal 2006; and

·   a $4.3 million ($3.4 million after tax or $0.04 per share) charge for Company Sale Transaction expenses in fiscal 2007.

Non-GAAP gross profit margins, excluding the aforementioned items, were 47.0%, compared to 47.9% last year and non-GAAP operating income of $53.9 million increased 9.0% compared to last year. The year-to-date non-GAAP results exclude the following items from net income per diluted share:

	Nine Months Ended March 31,
	2007		2006
Acquisition-related items:
Amortization of intangibles	$	0.08	$	0.08
Purchase adjustments to inventory		-		0.01
Share based compensation		0.03		0.04
Restructuring charges		0.02		0.01
Company Sale Transaction costs		0.04		-
Total EPS impact	$	0.17	$	0.14

Operating cash flow for the nine months was approximately $23 million. During the nine months, we repurchased approximately 1.8 million shares of our common stock for $17.2 million. In October 2006, we paid $9.2 million in a final determination of the Racal acquisition earn-out. This amount has been added to goodwill.

“Our third quarter and nine months performance positions us well for another solid year,” said Len Borow, President and Chief Operating Officer. Both segments of our business performed well as the nine months book-to-bill ratio was 1.03 to 1.0. We head into the remainder of the fiscal year with a backlog of $253 million, 46% of which is scheduled to ship in the fourth quarter of fiscal 2007.”

Our estimate of operating results for the June 2007 quarter is as follows:

·   net sales are expected to be approximately $162 million, and

·   GAAP net income per diluted share is anticipated to be $0.15. Non-GAAP earnings per diluted share are anticipated to be $0.20. Non-GAAP earnings exclude estimated amortization of acquired intangibles and share based compensation of a combined $0.05 per diluted share.

About Aeroflex

Aeroflex Incorporated is a global provider of high technology solutions to the aerospace, defense and broadband communications markets. The Company’s diverse technologies allow it to design, develop, manufacture and market a broad range of test, measurement and microelectronic products. The Company’s common stock trades on the Nasdaq National Market System under the symbol ARXX and is included in the S&P SmallCap 600 index. Additional information concerning Aeroflex Incorporated can be found on the Company’s Web site: www.aeroflex.com.

All statements other than statements of historical fact included in this press release regarding Aeroflex’s financial position, business outlook, 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, competitive factors and pricing pressures, completion of the proposed Company Sale Transaction, the integration of acquired businesses, changes in legal and regulatory requirements, technological change or difficulties, product development risks, commercialization difficulties, general economic conditions, and other risk factors disclosed in Aeroflex’s most recently filed Form 10-K. Such statements reflect the current views of management with respect to the future and are subject to these and other risks, uncertainties and assumptions relating to Aeroflex’s financial condition, results of operations, growth strategy and liquidity. Aeroflex does not undertake any obligation to update such forward-looking statements.

The non-GAAP financial measures used in this press release are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The Company’s management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Company’s operating performance. In addition, these non-GAAP financial measures facilitate management’s internal comparisons to the Company’s historical operating results. We include these non-GAAP financial measures (which should be viewed as a supplement to, and not a substitute for, their comparable GAAP measures) in this press release because we believe they are useful to investors in allowing for greater transparency to supplemental information used by management in its financial and operational decision-making. For a reconciliation of our GAAP and non-GAAP financial results, please refer to our Reconciliation of Reported GAAP Results to Non-GAAP Measures, presented in this release.

AEROFLEX INCORPORATED

AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	March 31,		June 30,
	2007		2006
ASSETS
Current assets:
Cash and cash equivalents	$	13,476	$	10,387
Marketable securities		10,576		28,332
Accounts receivable, less allowance for
doubtful accounts		129,192		120,296
Inventories		147,763		133,420
Deferred income taxes		24,159		24,732
Prepaid expenses and other current assets		13,159		11,187
Total current assets		338,325		328,354
Property, plant and equipment, net		79,129		77,940
Other assets		16,271		14,276
Intangible assets with definite lives, net		46,228		54,215
Goodwill		177,522		163,237
Total assets	$	657,475	$	638,022
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	607	$	607
Accounts payable		39,325		37,832
Advance payments by customers		21,724		21,128
Income taxes payable		817		9,162
Accrued payroll expenses		20,392		17,440
Accrued expenses and other current liabilities		39,041		33,046
Total current liabilities		121,906		119,215
Long-term debt		3,327		3,558
Deferred income taxes		1,251		4,631
Other long-term liabilities		24,002		22,948
Total liabilities		150,486		150,352
Stockholders' equity:
Preferred Stock, par value $.10 per share;
authorized 1,000 shares:
Series A Junior Participating Preferred
Stock, par value $.10 per share,
authorized 110 shares; none issued		-		-
Common Stock, par value $.10 per share;
authorized 110,000 shares; issued
73,689 and 75,270 shares		7,369		7,527
Additional paid-in capital		372,187		384,870
Accumulated other comprehensive income		23,800		13,468
Retained earnings		103,633		81,805
Total stockholders' equity		506,989		487,670
Total liabilities and stockholders' equity	$	657,475	$	638,022

AEROFLEX INCORPORATED

AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share data)

	For the Quarter Ended
	03/31/07			03/31/06
Net sales	$	150,271		$	140,527
Cost of sales		79,460			73,461
Gross profit		70,811			67,066
Selling, general and administrative
expenses		33,907			30,863
Research and development costs		20,360			20,488
Amortization of acquired intangibles		3,225			3,440
Operating income		13,319			12,275
Company SaleTransaction expenses		(4,319	)		-
Interest and other income
(expense), net		582			442
Income before income taxes		9,582			12,717
Provision for income taxes		4,093			4,971
Net income	$	5,489		$	7,746
Net income per common share:
Basic	$	0.07		$	0.10
Diluted	$	0.07		$	0.10
Weighted average number of shares
outstanding - Basic		73,775			75,133
- Diluted		75,714			77,230

AEROFLEX INCORPORATED

AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share data)

	For the Nine Months Ended
	3/31/07			3/31/06
Net sales	$	432,420		$	401,332
Cost of sales		229,310			210,785
Gross profit		203,110			190,547
Selling, general and administrative
costs		98,057			91,672
Research and development costs		56,552			56,742
Amortization of acquired intangibles		9,650			10,329
Operating income		38,851			31,804
Company Sale Transaction expenses		(4,319	)		—
Interest and other income
(expense), net		160			887
Income before income taxes		34,692			32,691
Provision for income taxes		12,864			12,642
Net income	$	21,828		$	20,049
Net income per common share:
Basic	$	0.29		$	0.27
Diluted	$	0.29		$	0.26
Weighted average number of shares
outstanding - Basic		74,066			74,922
- Diluted		75,713			76,306

AEROFLEX INCORPORATED

AND SUBSIDIARIES

RECONCILIATION OF REPORTED GAAP RESULTS TO NON-GAAP

MEASURES (Unaudited)

(In thousands, except per share data)

	For the Quarter Ended						For the Nine Months Ended
	3/31/07			3/31/06			3/31/07			3/31/06
Gross Profits
GAAP Gross Profits	$	70,811		$	67,066		$	203,110		$	190,547
Non-GAAP adjustments:
Acquisition related inventory adjustment		-			-			-			1,088
Share based compensation		74			72			217			223
Restructuring costs		-			259			-			259
Total Non-GAAP adjustments		74			331			217			1,570
Non-GAAP Gross Profits	$	70,885		$	67,397		$	203,327		$	192,117
Operating Income
GAAP Operating Income	$	13,319		$	12,275		$	38,851		$	31,804
Non-GAAP adjustments:
Amortization of acquired intangible assets		3,225			3,440			9,650			10,329
Acquisition related inventory adjustment		-			-			-			1,088
Share based compensation		1,258			1,552			3,212			5,010
Restructuring costs		2,040			1,179			2,140			1,179
Total Non-GAAP adjustments		6,523			6,171			15,002			17,606
Non-GAAP Operating Income	$	19,842		$	18,446		$	53,853		$	49,410
Net Income
GAAP Net Income	$	5,489		$	7,746		$	21,828		$	20,049
Non-GAAP adjustments:
Amortization of acquired intangible assets		3,225			3,440			9,650			10,329
Acquisition related inventory adjustment		-			-			-			1,088
Share based compensation		1,258			1,552			3,212			5,010
Restructuring costs		2,040			1,179			2,140			1,179
Company Sale Transaction expenses		4,319			-			4,319			-
Income tax benefit		(3,231	)		(2,413	)		(6,193	)		(6,791	)
Total Non-GAAP adjustments		7,611			3,758			13,128			10,815
Non-GAAP net income	$	13,100		$	11,504		$	34,956		$	30,864

AEROFLEX INCORPORATED

AND SUBSIDIARIES

RECONCILIATION OF REPORTED GAAP RESULTS TO NON-GAAP

MEASURES (Unaudited)

(In thousands, except per share data)

	For the Quarter Ended				For the Nine Months Ended
	3/31/07		3/31/06		3/31/07		3/31/06
Net Income Per Diluted Common Share:
GAAP net income	$	0.07	$	0.10	$	0.29	$	0.26
Non-GAAP adjustments, net of taxes:
Amortization of acquired intangible assets		0.03		0.03		0.08		0.08
Acquisition related inventory adjustment		-		-		-		0.01
Share based compensation		0.01		0.01		0.03		0.04
Restructuring costs		0.02		0.01		0.02		0.01
Company Sale Transaction expenses		0.04		-		0.04		-
Total Non-GAAP adjustments		0.10		0.05		0.17		0.14
Non-GAAP net income	$	0.17	$	0.15	$	0.46	$	0.40

	Projection for the Quarter Ending June 30, 2007
Net Income Per Diluted Common Share:
GAAP net income	$	0.15
Non-GAAP adjustments, net of taxes:
Amortization of acquired intangible assets		0.04
Share based compensation		0.01
Total Non-GAAP adjustments		0.05
Non-GAAP net income	$	0.20