EX-99 2 hrly8k-ex99.txt PRESS RELEASE EXHIBIT 99 HERLEY REPORTS 1ST QUARTER RESULTS CONFERENCE CALL SCHEDULED FOR FRIDAY, DECEMBER 7, 2007 Lancaster, PA. December 6, 2007 Herley Industries, Inc. (Nasdaq: HRLY) reported net sales for the first quarter of fiscal 2008 ended October 28, 2007 of $35.1 million, down $5.0 million or 12.4% from the first quarter of the prior fiscal year. Herley reported a loss of $0.19 per share including the impact of a litigation settlement agreement with EADS Deutschland GmbH ("EADS"), as compared with a loss of $0.43 for the thirteen weeks ended October 29, 2006, which included the impact of employment contract settlement costs. Excluding the impact of both the litigation settlement costs and the employment contract settlement costs, basic and diluted earnings per common share would have been $ 0.14 and $ 0.13, respectively for the thirteen weeks ended October 28, 2007 as compared to basic and diluted earnings per common share of $0.07 for the thirteen weeks ended October 29, 2006. A reconciliation of the Non-GAAP earnings per common share calculation is as follows:
Thirteen weeks ended -------------------- Non-GAAP Measure* As Reported Under GAAP ----------------- ---------------------- October 28, October 29, October 28, October 29, 2007 2006 2007 2006 -------- ---------- ---------- ---------- Loss before income taxes ($4,319) ($7,561) ($4,319) ($7,561) Litigation Settlement 6,042 - - - Employment contract settlement costs - 8,914 - - -------- ---------- ---------- ---------- Income (loss) before income taxes 1,723 1,353 (4,319) (7,561) (Benefit) provision for income taxes (181) 381 (1,728) (1,550) -------- ---------- ---------- ---------- Net income (loss) $1,904 $972 ($2,591) ($6,011) ======== ========== ========== ========== Earnings (loss) per common share - Basic $0.14 $0.07 ($0.19) ($0.43) ======== ========== ========== ========== Basic weighted average shares 13,965 13,862 13,965 13,862 ======== ========== ========== ========== Earnings (loss) per common share - Diluted $0.13 $0.07 ($0.19) ($0.43) ======== ========== ========== ========== Diluted weighted average shares 14,384 14,148 13,965 13,862 ======== ========== ========== ========== --- * The non-GAAP disclosure of net income and basic and diluted earnings per common share is not preferable to GAAP net income and earnings per common share but is shown as a supplement to such disclosure for comparability to the prior year's results. Management believes that this information is important to investors for a meaningful analysis of our financial performance.
Myron Levy, Herley Chairman and CEO commented, "Herley is on a long road back from a very difficult time. Net sales are down for the first quarter of fiscal year 2008 as compared to the first quarter of fiscal year 2007, but we experienced improved gross margins over the prior year, thanks to the focused management team we have in place. We experienced a net loss due to the effect of an agreement reached between Herley and EADS Deutschland GmbH ("EADS") to settle a lawsuit filed in April of this year. The settlement agreement provides for a guaranteed payment to EADS of the sum of $6,000,000 without interest over a three-year period. We believe that this settlement agreement is in the best interests of our Company not only because we will avoid extensive legal fees, but we are now in a position to return to a healthy, productive business relationship with one of the largest defense companies. The defense industry is dominated by major contractors like Boeing, Lockheed, Northrop Grumman, Raytheon, and EADS. EADS has been an excellent customer for Herley, but the relationship was clouded by the multiple lawsuits initiated here and overseas. With this agreement in place, we look forward to the increased opportunities with EADS as a business partner and customer." Mr. Levy continued, "On a positive note, the Company continues to book business on major defense programs, building a strong backlog of new and long-term programs in the U. S. Defense market as well as in the international market. Jeff Markel, our new Chief Operating Officer, has been actively reviewing the Company's eight operating locations and working with me and corporate officers to reach the Company's goals of improved profitability and shareholder value." A Conference Call has been scheduled for 9:00 a.m. Eastern Time on Friday, December 7, 2007. Interested parties may join the conference by dialing: (888) 425-4188 referencing Conference ID # 25615779. Replay of the conference call is scheduled to begin on December 7, 2007, one hour after completion of the call, and end on December 14 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# 25615779. This conference call will be broadcast live over the Internet and can be accessed by interested parties through URL: http://www.videonewswire. com/event .asp?id=44278 To listen to the live call, please go to the Web site at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those who are not available to listen to the live broadcast, a replay will be available shortly after the call on the site. 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 eight manufacturing locations and approximately 953 employees. Additional information about the company can be found on the Internet at www.herley.com. For information at Herley contact: Peg Guzzetti Tel: (717) 735-8117 Investor Relations 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. When used in this report, words such as "anticipated," "believes," "could," "estimates," "expects," "may," "plans," "potential" and "intends" and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Such forward-looking statements are based on the belief of the Company's management, as well as assumptions made by and information currently available to the Company's management. The Company's results could differ materially based on various factors, including, but not limited to, cancellation or deferral of customer orders, difficulties in the timely development of new products, difficulties in manufacturing, increased competitive pressures, the effects of the indictment of the Company and general economic conditions. The Company undertakes no obligation to update forward-looking statements as a result of future events or developments. HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
October 28, 2007 July 29, (Unaudited) 2007 ---------- ---------- ASSETS Current Assets: Cash and cash equivalents $ 34,643 $ 35,181 Trade accounts receivable, net 25,585 28,058 Income Taxes Receivable 819 819 Costs incurred and income recognized in excess of billings on uncompleted contracts and claims 17,495 14,448 Other receivables 2,353 2,816 Inventories, net 53,424 51,815 Deferred income taxes 6,513 4,254 Other current assets 1,860 1,069 ---------- ---------- Total Current Assets 142,692 138,460 Property, Plant and Equipment, net 30,623 29,996 Goodwill 74,102 74,044 Intangibles, net of accumulated amortization of $5,819 at October 28, 2007 and $5,256 at July 29, 2007 17,879 18,431 Other Assets 616 1,662 ---------- ---------- Total Assets $ 265,912 $ 262,593 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 1,361 $ 1,346 Current portion of employment settlement agreement - (net of imputed interest of $203 at October 28, 2007 and $245 at July 29, 2007) 1,154 1,113 Current portion of litigation settlement (net of imputed interest of $59) 3,941 - Accounts payable and accrued expenses 20,736 19,049 Billings in excess of costs incurred and income recognized on uncompleted contracts 641 99 Income taxes payable 158 3,518 Accrual for contract losses 889 1,564 Accrual for warranty costs 1,081 1,106 Advance payments on contracts 7,118 7,163 ---------- ---------- Total Current Liabilities 37,079 34,958 Long-term Debt 5,533 5,951 Long-term Portion of Employment Settlement Agreement - (net of imputed interest of $542 at October 28, 2007 and $580 at July 29, 2007) 3,854 4,117 Long-term portion of litigation settlement (net of imputed interest of $242) 1,758 - Other Long-term Liabilities 1,341 1,311 Deferred Income Taxes 7,120 6,615 Accrued Income Taxes Payable 3,139 - ---------- ---------- Total Liabilities 59,824 52,952 ---------- ---------- Commitments and Contingencies Shareholders' Equity: Common stock, $.10 par value; authorized 20,000,000 shares; issued and outstanding 13,896,671 at October 28, 2007, and 13,977,115 at July 29, 2007 1,390 1,398 Additional paid-in capital 106,108 107,094 Retained earnings 96,813 99,404 Accumulated other comprehensive income 1,777 1,745 ---------- ---------- Total Shareholders' Equity 206,088 209,641 ---------- ---------- Total Liabilities and Shareholders' Equity $ 265,912 $ 262,593 ========== ==========
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share data)
Thirteen weeks ended -------------------- October 28, October 29, 2007 2006 --------------- --------------- Net sales $ 35,133 $ 40,116 --------------- --------------- Cost and expenses: Cost of products sold 25,140 29,831 Selling and administrative expenses 8,820 9,022 Litigation settlement 6,042 - Employment contract settlement costs - 8,914 --------------- --------------- 40,002 47,767 --------------- --------------- Loss from operations (4,869) (7,651) --------------- --------------- Other income (expense): Investment income 429 216 Interest expense (25) (143) Foreign exchange transaction gain 146 17 --------------- --------------- 550 90 --------------- --------------- Loss before income taxes (4,319) (7,561) Benefit for income taxes (1,728) (1,550) --------------- --------------- Net loss $ (2,591) $ (6,011) =============== =============== Loss per common share - Basic $ (0.19) $ (0.43) =============== =============== Basic weighted average shares 13,965 13,862 =============== =============== Loss per common share - Diluted $ (0.19) $ (0.43) =============== =============== Diluted weighted average shares 13,965 13,862 =============== ===============
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
Thirteen weeks ended October 28, October 29, 2007 2006 ------------- -------------- Cash flows from operating activities: Net Loss $ (2,591)$ (6,011) ------------- -------------- Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 1,846 1,751 Stock-based compensation costs 247 116 Excess tax benefit from exercises of stock options (13) - Litigation settlement costs 5,942 - Employment contract settlement costs (includes $196 of stock option modification costs) - 8,914 Imputed interest related to employment settlement liability 80 19 Foreign exchange transaction gains (146) (17) Inventory valuation reserve charges 481 287 Reduction in accrual for contract losses (826) - Warranty reserve charges 348 266 Deferred tax benefit (1,742) (2,301) Changes in operating assets and liabilities: Trade accounts receivable 2,379 (330) Costs incurred and income recognized in excess of billings on uncompleted contracts and claims (3,047) 668 Other receivables 463 (435) Inventories (2,173) 450 Other current assets (791) (649) Accounts payable and accrued expenses 1,687 (1,961) Billings in excess of costs incurred and income recognized on uncompleted contracts 542 34 Income taxes payable (208) 677 Accrual for contract losses 151 (165) Employment settlement agreement (302) (3,000) Advance payments on contracts (45) 261 Other, net (188) 218 ------------- -------------- Total adjustments 4,685 4,803 ------------- -------------- Net cash provided by (used in) operating activities 2,094 (1,208) ------------- -------------- Cash flows from investing activities: Acquisition of technology license - (179) Capital expenditures (966) (1,016) ------------- -------------- Net cash used in investing activities (966) (1,195) ------------- -------------- Cash flows from financing activities: Borrowings under bank line of credit 4,900 4,500 Borrowings - other - 1,746 Proceeds from exercise of stock options 34 - Excess tax benefit from exercises of stock options 13 - Payments of long-term debt (425) (167) Payments under bank line of credit (4,900) (4,500) Purchase of treasury stock (1,288) - ------------- -------------- Net cash (used in) provided by financing activities (1,666) 1,579 ------------- -------------- Effect of exchange rate changes on cash - 22 ------------- -------------- Net decrease in cash and cash equivalents (538) (802) Cash and cash equivalents at beginning of period 35,181 22,303 ------------- -------------- Cash and cash equivalents at end of period $ 34,643 $ 21,501 ============= ==============