EX-99 2 hrly8k-ex99.txt PRESS RELEASE HERLEY REPORTS FOURTH QUARTER AND YEAR-END RESULTS CONFERENCE CALL SCHEDULED FOR FRIDAY, OCTOBER 16, 2009 Lancaster, PA - October 15, 2009 - Herley Industries, Inc. (Nasdaq: HRLY) today reported financial results for the Fourth Quarter and Fiscal Year ended August 2, 2009. Fourth Quarter of Fiscal 2009 Net sales for the fourth quarter of fiscal 2009 were $43.0 million compared to $37.9 million in the fourth quarter of fiscal 2008. In the fourth quarter of fiscal 2009, the Company recorded several significant charges (see below) aggregating $66.9 million, including a non-cash impairment charge for goodwill and other intangible assets of $44.2 million. As a result, the loss from continuing operations for that quarter was $44.4 million, or $3.26 per diluted share, compared to a loss from continuing operations of $1.5 million, or $.11 per diluted share, last year. Income from discontinued operations that resulted from the sale of the ICI business in November 2008 was $1.2 million, or $ .09 per diluted share, last year. Net loss for the quarter was $44.4 million, or $3.26 per diluted share, compared to a net loss of $.3 million, or $.02 per diluted share, last year. In the fourth quarter of fiscal 2009, the Company reported a revenue increase of $5.1 million compared to last year, which primarily resulted from the inclusion of revenues from Eyal that was acquired early in fiscal 2009. Operating results for the fourth quarter of fiscal 2009 were impacted by several significant charges, as follows: (a) approximately $44.2 million related to the impairment of goodwill and other intangible assets; (b) approximately $10.6 million related to employment agreement settlements with two former officers of the Company; (c) approximately $4.3 million to cost of products sold related to the settlement of litigation with a customer; (d) approximately $2.8 million to net sales and $.3 million to cost of products sold related to the settlement of a claim for equitable adjustment for unpriced change orders; (e) approximately $3.1 million to cost of products sold related to the transition of the Farmingdale, NY manufacturing operation, including contract losses of approximately $1.1 million and inventory write-offs of approximately $2.0 million; (f) approximately $1.3 million to cost of products sold for additional inventory adjustments and obsolescence reserves; and (g) approximately $.3 million to selling and administrative expenses related to the abandonment of fixed assets. The non-cash impairment of goodwill and other intangible assets does not affect the Company's cash position, cash flow from operating activities, credit availability or liquidity and none of these charges will have any adverse effect on its future operations. Of further significance, in July 2009, the Company's Board of Directors appointed new senior management. New management was successful in resolving two litigation/claim matters, resulting in a net cash outflow of $.5 million to the Company and, more importantly, restoring a favorable relationship with these customers. Richard Poirier, Chief Executive Officer and President, commented, "This has certainly been a very busy and exciting period since David Lieberman and I were appointed. We are pleased with the progress we have made in the resolution of past matters, most of which are ancillary to our operational activities going forward. David and I are committed to reporting substantial profitability in fiscal year 2010, and remain focused on strengthening our management team, improving our sales and production processes and reducing costs. We ended the year with a backlog of $182 million, and bookings have been strong in the first quarter. We believe that we are now well positioned for success in fiscal 2010. Fiscal Year 2009 Net sales for fiscal 2009 were $160.1 million compared to $136.1 million in fiscal 2008. Fiscal 2009 results were significantly impacted by the fourth quarter charges described above. The loss from continuing operations for fiscal 2009 was $40.7 million, or $3.00 per diluted share, compared to a loss from continuing operations of $10.7 million, or $.78 per diluted share, last year. Loss from discontinued operations that resulted from the sale of the ICI business in November 2008 was $.5 million, or $.03 per diluted share, in fiscal 2009 compared to income of $.3 million, or $.02 per diluted share, last year. Net loss for fiscal 2009 was $41.2 million, or $3.03 per diluted share, compared to a net loss of $10.3 million, or $.76 per diluted share, last year. Balance Sheet and Capital Expenditures At August 2, 2009, the Company's total cash and cash equivalents balance was $14.8 million and its long-term debt, exclusive of settlement commitments, was $12.2 million. Capital expenditures were $.9 million for the fourth quarter of fiscal 2009 and were $5.4 million for fiscal 2009. *** Richard Poirier, Chief Executive Officer and President, will host a conference call on October 16, 2009 at 9:00 a.m. Eastern Time to discuss financial results for the Fourth Quarter and Fiscal Year ended August 2, 2009. To join the conference call, dial 1 (888) 425-4188 and reference Conference ID #33627285. A taped replay of the call will be available on October 16, 2009 approximately one hour after the conclusion of the call through October 23, 2009 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 reference Conference ID #33627285. 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=62624. 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, commercialization and trade difficulties and current economic conditions, including the potential for significant changes in US defense spending under the new Administration which could affect future funding of programs and allocations within the budget to various programs, as well as the factors set forth in this release and in our public filings with the Securities and Exchange Commission. -------------------------------------------------------------------------------- For information at Herley, contact: Peg Guzzetti, Investor Relations Tel: (717) 735-8117 HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share data)
Fifty-two Fifty-three Thirteen weeks ended weeks ended weeks ended August 2, August 3, August 2, August 3, 2009 2008 2009 2008 ------------ ----------- -------------- -------------- Net sales $ 42,960 $ 37,867 $ 160,089 $ 136,088 ------------ ----------- -------------- -------------- Cost and expenses: Cost of products sold 42,990 30,866 132,648 107,848 Selling and administrative expenses 7,505 6,371 28,981 28,349 Impairment of goodwill and other intangible assets 44,151 - 44,151 - Litigation costs 731 3,289 1,786 5,550 Litigation settlement - - - 15,542 Employment contract settlement costs 10,553 - 10,553 - ------------ ----------- -------------- -------------- 105,930 40,526 218,119 157,289 Operating loss (62,970) (2,659) (58,030) (21,201) ------------ ----------- -------------- -------------- Other (expense) income: Interest income 12 65 106 1,050 Interest expense (447) (195) (1,392) (661) Foreign exchange transactions losses (43) (120) (276) (126) ------------ ----------- -------------- -------------- (478) (250) (1,562) 263 ------------ ----------- -------------- -------------- Loss from continuing operations before income taxes (63,448) (2,909) (59,592) (20,938) Benefit for income taxes (19,035) (1,422) (18,872) (10,254) ------------ ----------- -------------- -------------- Loss from continuing operations $ (44,413)$ (1,487) $ (40,720) $ (10,684) ------------ ----------- -------------- -------------- Discontinued operations: Income (loss) from operations of discontinued subsidiary - 1,895 (734) 589 Provision for income taxes (benefit) - 731 (278) 251 ------------ ----------- -------------- -------------- Income (loss) from discontinued operations $ - $ 1,164 $ (456) $ 338 ------------ ----------- -------------- -------------- Net loss $ (44,413)$ (323) $ (41,176) $ (10,346) ============ =========== ============== ============== (Loss) earnings per common share - Basic and Diluted Loss from continuing operations $ (3.26) $ (.11) $ (3.00) $ (.78) Income (loss) from discontinued operations - .09 (.03) .02 ------------ ----------- -------------- -------------- Net loss $ (3.26) $ (.02) $ (3.03) $ (.76) ============ =========== ============== ============== Basic and diluted weighted average shares 13,607 13,518 13,560 13,652 ============ =========== ============== ==============
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share data)
August 2, August 3, 2009 2008 ---------- ----------- ASSETS Current Assets: Cash and cash equivalents $ 14,820 $ 14,347 Trade accounts receivable, net 28,687 27,003 Costs incurred and income recognized in excess of billings on uncompleted contracts and claims 10,396 19,490 Inventories, net 57,804 61,559 Deferred income taxes 19,380 11,263 Other current assets 2,816 4,618 ---------- ----------- Total Current Assets 133,903 138,280 Property, plant and equipment, net 32,872 30,552 Goodwill 43,722 73,900 Intangibles, net 9,619 16,145 Deferred income taxes 7,571 - Other assets 598 541 ---------- ----------- Total Assets $ 228,285 $ 259,418 ========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 1,595 $ 1,394 Current portion of employment settlement agreements - (net of imputed interest of $98 in 2009 and $238 in 2008) 7,400 1,119 Current portion of litigation settlements (net of imputed interest of $46 in fiscal 2009 and 2008) 954 954 Accounts payable and accrued expenses 25,509 27,589 Billings in excess of costs incurred and income recognized on uncompleted contracts 261 613 Accrual for contract losses 3,440 2,994 Accrual for warranty costs 938 1,142 Advance payments on contracts 12,698 8,120 ---------- ----------- Total Current Liabilities 52,795 43,925 Long-term debt, net of current portion 12,246 7,092 Long-term portion of employment settlement agreements (net of imputed interest of $79 in 2009 and $287 in 2008) 2,827 3,074 Long-term portion of litigation settlement - (net of imputed interest of $108) - 892 Other long-term liabilities 8,361 2,161 Deferred income taxes - 8,839 ---------- ----------- Total Liabilities 76,229 65,983 ---------- ----------- Commitments and Contingencies Shareholders' Equity: Common stock, $.10 par value; authorized 20,000,000 shares; issued and outstanding 13,719,926 in 2009 and 13,521,902 in 2008 1,372 1,352 Additional paid-in capital 103,113 101,403 Retained earnings 47,882 89,058 Accumulated other comprehensive (loss) income (311) 1,622 ---------- ----------- Total Shareholders' Equity 152,056 193,435 ---------- ----------- Total Liabilities and Shareholders' Equity $ 228,285 $ 259,418 ========== ===========
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
Fifty-two Fifty-three weeks ended weeks ended August 2, August 3, 2009 2008 ----------- ----------- Cash flows from operating activities: Net loss $ (41,176)$ (10,346) ----------- ----------- Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 8,468 7,266 Gain on sale of fixed assets (574) - Impairment of goodwill of discontinued subsidiary 1,000 - Impairment of goodwill of continuing operations 42,050 - Impairment of intangible assets 2,101 - Abandonment of long-lived assets 345 - Stock-based compensation costs 718 990 Excess tax benefit from exercises of stock options (212) (91) Litigation and claim settlements 8,982 15,442 Employment contract settlement costs 10,553 - Imputed interest on employment and litigation settlement liabilities 327 446 Foreign exchange transaction (gains) losses (1) 122 Inventory valuation reserve charges 2,495 1,515 Reduction in accrual for contract losses - (826) Warranty reserve charges 1,635 1,260 Deferred tax provision (24,514) (4,275) Changes in operating assets and liabilities: Cash of discontinued subsidiary (712) - Trade accounts receivable (3,426) 961 Costs incurred and income recognized in excess of billings on uncompleted contracts and claims 5,559 (5,042) Inventories, net (6,739) (11,342) Other current assets 2,651 86 Accounts payable and accrued expenses 2,920 3,485 Billings in excess of costs incurred and income recognized on uncompleted contracts 304 514 Accrual for contract losses 755 2,660 Litigation settlement payments (1,000) (13,500) Employment settlement payments (4,476) (1,336) Advance payments on contracts 6,618 957 Other, net 229 438 ----------- ----------- Total adjustments 56,056 (270) ----------- ----------- Net cash provided by (used in) operating activities 14,880 (10,616) ----------- ----------- Cash flows from investing activities: Acquisition of business, net of cash acquired (30,010) - Proceeds from sale of discontinued subsidiary 15,000 - Capital expenditures (5,432) (4,637) Other 27 3 ----------- ----------- Net cash used in investing activities (20,415) (4,634) ----------- ----------- Cash flows from financing activities: Borrowings under bank line of credit 35,600 20,400 Borrowings - term loan 10,000 - Proceeds from exercise of stock options 538 321 Excess tax benefit from exercises of stock options 212 91 Payments of long-term debt (2,182) (1,357) Payments under bank line of credit (38,100) (17,900) Purchase of treasury stock - (7,139) ----------- ----------- Net cash provided by (used in) financing activities 6,068 (5,584) ----------- ----------- Effect of exchange rate changes on cash (60) - ----------- ----------- Net increase (decrease) in cash and cash equivalents 473 (20,834) Cash and cash equivalents at beginning of period 14,347 35,181 ----------- ----------- Cash and cash equivalents at end of period $ 14,820 $ 14,347 =========== =========== Supplemental cash flow information: Retirement of shares of treasury stock $ 1,831 $ 7,139 =========== ===========