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Herley Industries, Inc. Reports Third Quarter Earnings
Date:6/11/2009

Conference Call Scheduled for Friday, June 12, 2009

LANCASTER, Pa., June 11 /PRNewswire-FirstCall/ -- Herley Industries, Inc. (Nasdaq: HRLY) today reported financial results for the third quarter ended May 3, 2009.

Net sales from continuing operations for the thirteen weeks ended May 3, 2009 were approximately $41.8 million, up 25% as compared to $33.5 million in the thirteen weeks ended May 4, 2008.

Income from continuing operations before income taxes for the thirteen weeks ended May 3, 2009 was $3.0 million, versus an operating loss of $11.7 million for the thirteen weeks ended May 4, 2008, an improvement of $14.7 million.

Basic and diluted earnings per common share from continuing operations for the thirteen weeks ended May 3, 2009 were $.18 per common share, as compared to basic and diluted loss per common share from continuing operations of ($.33) in the prior year's third quarter.

Net sales for the thirty-nine weeks ended May 3, 2009 were $117.1 million, up 19% as compared to $98.2 million in the first forty weeks of fiscal 2008.

Income from continuing operations before income taxes for the thirty-nine weeks ended May 3, 2009 was $3.9 million, versus an operating loss of $18.0 million for the forty weeks ended May 4, 2008, an improvement of $21.9 million.

Basic and diluted earnings per common share from continuing operations for the thirty-nine weeks ended May 3, 2009 were $.27 per common share; as compared to basic and diluted loss per common share from continuing operations of ($.67) in the forty weeks ended May 4, 2008.

Myron Levy, Chairman and CEO commented, "I said at the end of our second quarter that Herley was on track for a solid fiscal year. The Company's third quarter results show continuing improvement in productivity and reflect the Company's underlying strength. Revenues are up, profits are up, and bookings continue to be strong. We are a valued supplier on many essential military programs for the U. S. Government, U. S prime contractors, and the international marketplace. The Company's backlog has risen from a record $178 million in January of 2009 to approximately $186 million today, with over $52 million of the current backlog at our Israeli operations, Herley General Microwave Israel and Eyal."

Mr. Levy continued, "More than many of our peers, we have focused on investing in the international defense marketplace for new products, new programs, and new technologies. Approximately 50% of the overall defense business available is international, and our long-time goal is to realize 50% of our business from the international defense community. We are beginning to see a return on our investments. Currently foreign sales are approximately 33% of net sales, and we expect that number to grow. The combination of our General Microwave Israel and Eyal operations is helping to make us a major player in the international defense community for sophisticated microwave products."

A Conference Call has been scheduled for 9:00 a.m. Eastern Time on Friday, June 12, 2009. Interested parties may join the conference by dialing: (888) 425-4188 referencing Conference ID # 12744436.

Replay of the conference call is scheduled to begin on June 12, 2009, two hours after completion of the call, and end on June 19 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 #12744436.

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=59457.

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 seven manufacturing locations and approximately 1000 employees. Additional information about the Company can be found on the Internet at www.herley.com.

    For information at Herley contact:      Tel:  (717) 735-8117
    Peg Guzzetti, 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. 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 report and in our public filings with the Securities and Exchange Commission.


                     HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                         (In thousands, except share data)

                                                   May 3,
                                                    2009            August 3,
                                                (Unaudited)           2008
                                                 ---------         --------

    ASSETS
    Current Assets:
      Cash and cash equivalents                   $14,139           $14,347
      Trade accounts receivable, net               27,427            27,003
      Income Taxes Receivable                           -             2,056
      Costs incurred and income recognized
       in excess of billings on uncompleted
       contracts and claims                        15,013            19,490
      Other receivables                             1,169             1,286
      Inventories, net                             67,261            61,559
      Deferred income taxes                        16,364            11,263
      Other current assets                          2,171             1,276
                                                 --------          --------
        Total Current Assets                      143,544           138,280
    Property, Plant and Equipment, net             33,801            30,552
    Goodwill                                       85,615            73,900
    Intangibles, net of accumulated
     amortization of $6,421 at May 3, 2009
     and $7,505 at August 3, 2008                  12,283            16,145
    Other Assets                                      900               541
                                                 --------          --------
        Total Assets                             $276,143          $259,418
                                                 ========          ========
        LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities:
      Current portion of long-term debt            $1,838            $1,394
      Current portion of employment
       settlement agreement - (net of imputed
       interest of $88 at May 3, 2009
       and $138 at August 3, 2008)                  1,169             1,119
      Current portion of litigation
       settlement - (net of imputed interest
       of $62 at May 3, 2009 and $46 at
       August 3, 2008)                                938               954
      Accounts payable and accrued expenses        21,420            27,546
      Billings in excess of costs incurred
       and income recognized on uncompleted
       contracts                                      113               613
      Income taxes payable                              -                43
      Accrual for contract losses                   4,841             2,994
      Accrual for warranty costs                      860             1,142
      Advance payments on contracts                17,248             8,120
                                                 --------          --------
        Total Current Liabilities                  48,427            43,925
    Long-term Debt                                 13,606             7,092
    Long-term Portion of Employment Settlement
     Agreement - (net of imputed interest
     of $254 at May 3, 2009 and $387 at
     August 3, 2008)                                2,243             3,074
    Long-term Portion of litigation
     settlement - (net of imputed interest
     of $108 at August 3, 2008)                         -               892
    Other Long-term Liabilities                     2,126             1,652
    Deferred Income Taxes                          13,936             8,839
    Accrued Income Taxes Payable                      516               509
                                                 --------          --------
        Total Liabilities                          80,854            65,983
                                                 --------          --------
    Commitments and Contingencies
    Shareholders' Equity:
      Common stock, $.10 par value;
       authorized 20,000,000 shares;
       issued and outstanding 13,559,427
       at May 3, 2009, and 13,521,902 at
       August 3, 2008                               1,356             1,352
      Additional paid-in capital                  102,231           101,403
      Retained earnings                            92,295            89,058
      Accumulated other comprehensive (loss)
       income                                        (593)            1,622
                                                 --------          --------
        Total Shareholders' Equity                195,289           193,435
                                                 --------          --------
        Total Liabilities and Shareholders'
         Equity                                  $276,143          $259,418
                                                 --------          --------


                     HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                       (In thousands except per share data)

                                                      Thirty-nine   Forty
                                 Thirteen weeks ended weeks ended weeks ended
                                 -------------------- ----------- -----------
                                      May 3,    May 4,    May 3,    May 4,
                                       2009      2008      2009      2008
                                    --------- --------- --------- ---------

    Net sales                       $  41,811 $ 33,516  $ 117,129 $  98,221
                                    --------- --------- --------- ---------
    Cost and expenses:
      Cost of products sold            30,613    27,030    89,658    76,982
      Selling and administrative
       expenses                         7,513     7,540    22,049    21,978
      Gain on sale of assets                -         -      (573)        -
      Litigation costs                    664     1,163     1,055     2,261
      Litigation settlement                 -     9,500         -    15,542
                                    --------- --------- --------- ---------
                                       38,790    45,233   112,189   116,763

      Operating income (loss)           3,021   (11,717)    4,940   (18,542)
                                    --------- --------- --------- ---------
    Other (expense) income:
      Interest income and other            58       154        94       945
      Interest expense                   (246)     (163)     (945)     (426)
      Foreign exchange transactions
       gains (losses)                     157        42      (233)       (6)
                                    --------- --------- --------- ---------
                                          (31)       33    (1,084)      513
                                    --------- --------- --------- ---------

      Income (loss) from continuing
       operations before income taxes   2,990   (11,684)    3,856   (18,029)
      Provision for income taxes
       (benefit)                          567    (7,258)      163    (8,832)
                                    --------- --------- --------- ---------

      Income (loss) from
       continuing operations        $   2,423 $  (4,426)$   3,693 $  (9,197)
                                    --------- --------- --------- ---------
    Discontinued operations:
      Income (loss) from operations
       of discontinued subsidiary           -       826      (734)   (1,306)
      Income taxes benefit                  -        (8)     (278)     (480)
                                    --------- --------- --------- ---------
      Income (loss) from
       discontinued operations              -       834      (456)     (826)
                                    --------- --------- --------- ---------

    Net income (loss)               $   2,423 $  (3,592)$   3,237 $ (10,023)
                                    ========= ========= ========= =========

    Earnings (loss) per common
     share - Basic
      Income (loss) from continuing
       operations                   $     .18 $    (.33)$     .27 $    (.67)
      Income (loss) from
       discontinued operations              -       .06      (.03)     (.06)
                                    --------- --------- --------- ---------
      Net income (loss) - basic     $     .18 $    (.27)$     .24 $    (.73)
                                    ========= ========= ========= =========

      Basic weighted average shares    13,559    13,507    13,545    13,696
                                    ========= ========= ========= =========

    Earnings (loss) per common
     share - Diluted
      Income (loss) from continuing
       operations                   $     .18 $    (.33)$     .27 $    (.67)
      Income (loss) from
       discontinued operations              -       .06      (.03)     (.06)
                                    --------- --------- --------- ---------
      Net income (loss) - diluted   $     .18 $    (.27)$     .24 $    (.73)
                                    ========= ========= ========= =========

      Diluted weighted average
       shares                          13,721    13,507    13,774    13,696
                                    ========= ========= ========= =========


                    HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                   (In thousands)

                                                 Thirty-nine        Forty
                                                 weeks ended     weeks ended
                                                    May 3,          May 4,
                                                     2009            2008
                                                 -----------     -----------
    Cash flows from operating activities:
      Net income (loss)                         $      3,237     $   (10,023)
                                                 -----------     -----------
      Adjustments to reconcile net income
       (loss) to net cash provided by(used in)
       operating activities:
        Depreciation and amortization                  6,374           5,573
        (Gain) loss on sale of fixed assets             (573)              8
        Loss from goodwill impairment of
         discontinued subsidiary                       1,000               -
        Stock-based compensation costs                   458             800
        Excess tax benefit from exercises of
         stock options                                   (61)            (57)
        Litigation settlement costs                        -          15,442
        Imputed interest                                 275             347
        Foreign exchange transaction losses                -              48
        Inventory valuation reserve charges            1,164           1,287
        Reduction in accrual for contract losses           -            (826)
        Warranty reserve charges                       1,130             848
        Deferred taxes                                    16          (4,999)
        Changes in operating assets and liabilities
          Cash of discontinued subsidiary               (712)              -
          Trade accounts receivable                   (2,285)          4,416
          Income taxes receivable                      2,056          (1,237)
          Costs incurred and income recognized
           in excess of billings on uncompleted
           contracts and claims                        3,477          (5,385)
          Other receivables                            1,020          (1,021)
          Inventories                                 (6,167)         (9,876)
          Other current assets                          (965)           (477)
          Accounts payable and accrued expenses       (6,094)         10,079
          Billings in excess of costs incurred
           and income recognized on uncompleted
           contracts                                     175             428
          Income taxes payable                            18          (2,543)
          Accrual for contract losses                  1,420               -
          Employment settlement payments                (964)         (1,034)
          Litigation settlement payments              (1,000)         (4,000)
          Advance payments on contracts                9,361             (52)
          Other, net                                    (224)           (531)
                                                 -----------     -----------
            Total adjustments                          8,899           7,238
                                                 -----------     -----------
        Net cash provided by (used in)
         operating activities                         12,136          (2,785)
                                                 -----------     -----------
    Cash flows from investing activities:
      Acquisition of business, net of cash
       acquired of $417                              (30,010)              -
      Proceeds from sale of discontinued
       subsidiary                                     15,000               -
      Capital expenditures                            (4,524)         (3,912)
                                                 -----------     -----------
        Net cash used in investing activities        (19,534)         (3,912)
                                                 -----------     -----------
    Cash flows from financing activities:
      Borrowings under bank line of credit            31,000          13,900
      Borrowings - other                              10,000               -
      Proceeds from exercise of stock options            313             225
      Excess tax benefit from exercises of
       stock options                                      61              57
      Payments of long-term debt                      (1,595)         (1,044)
      Payments under bank line of credit             (32,500)        (13,900)
      Purchase of treasury stock                           -          (7,138)
                                                 -----------     -----------
        Net cash provided by (used in)
         financing activities                          7,279          (7,900)
                                                 -----------     -----------
    Effect of exchange rate changes on cash              (89)             (1)
                                                 -----------     -----------
        Net decrease in cash and cash
         equivalents                                    (208)        (14,598)
    Cash and cash equivalents at beginning
     of period                                        14,347          35,181
                                                 -----------     -----------
    Cash and cash equivalents at end of period   $   14,139      $    20,583
                                                 ===========     ===========


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SOURCE Herley Industries, Inc.
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