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Herley Reports Third Quarter Results
Date:6/12/2008

Conference Call Scheduled for Friday, June 13, 2008

LANCASTER, Pa., June 12 /PRNewswire-FirstCall/ -- Herley Industries, Inc. (Nasdaq: HRLY) today reported financial results for the third quarter ended May 4, 2008. Herley reported net sales for the third quarter of $38.5 million, down $5.9 million or 13% from the third quarter of the prior fiscal year.

Herley reported a basic and diluted loss of $0.27 per share including the impact of a litigation settlement agreement with the United States Department of Justice, as compared with basic and diluted earnings per share of $0.28 and $0.27, respectively, for the thirteen weeks ended April 29, 2007.

Excluding the impact of the litigation settlement costs in fiscal 2008, basic and diluted earnings per common share in the third quarter would have been $ 0.15 for the thirteen weeks ended May 4, 2008 as compared to basic and diluted earnings per common share of $0.28 and $0.27, respectively, for the thirteen weeks ended April 29, 2007. On a year-to-date basis, excluding the impact of both the litigation settlement costs in fiscal 2008 and the employment contract settlement costs in fiscal 2007, basic and diluted earnings per common share in 2008 would have been $ 0.07 for the forty weeks ended May 4, 2008 as compared to basic and diluted earnings per common share of $0.46 and $0.44, respectively, for the thirty-nine weeks ended April 29, 2007. A non-recurring income tax benefit of $2.7 million is included in the results for both the thirteen weeks ended May 4, 2008 and the forty weeks ended May 4, 2008. A reconciliation of the Non-GAAP earnings per common share calculation is as follows:

(In thousands, except share data)

HERLEY INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

Forty weeks ended Thirty-nine weeks ended

May 4, 2008 April 29, 2008

----------------- -----------------------

Cash flows from operating

activities:

Net Loss $(10,023) $(460)

----------------- -----------------------

Adjustments to reconcile net

loss to net cash (used in)

provided by operating

activities:

Depreciation and

amortization 5,573 5,271

Stock-based compensation

costs 800 326

Excess tax benefit from

exercises of stock options (57) (235)

Employment contract

settlement costs (includes

$196 of stock option

modification costs) - 5,914

Litigation settlement costs 15,442 -

Imputed interest 347 199

Deferred tax benefit (4,999) (2,314)

Loss (gain) on sale of fixed

assets 8 (107)

Foreign exchange transaction

losses (gains) 48 (96)

Inventory valuation reserve

charges 1,287 1,102

Reduction in accrual for

contract losses (826) (699)

Warranty reserve charges 848 976

Changes in operating assets

and liabilities:

Trade accounts receivable 4,416 (243)

Income taxes receivable (1,237) -

Costs incurred and income

recognized in excess of

billings on uncompleted

contracts and claims (5,385) 334

Other receivables (1,021) (1,310)

Inventories (9,876) (389)

Other current assets (477) (438)

Accounts payable, accrued

expenses and other 10,079 (3,597)

Billings in excess of costs

incurred and income

recognized on

uncompleted contracts 428 51

Income taxes payable (2,543) 1,796

Employment settlement

payments (1,034) (443)

Litigation settlement

payments (4,000) -

Advance payments on

contracts (52) 4,202

Other, net (531) 449

----------------- -----------------------

Total adjustments 7,238 10,749

----------------- -----------------------

Net cash (used in)

provided by operating

activities (2,785) 10,289

----------------- -----------------------

Cash flows from investing

activities:

Acquisition of technology

license - (179)

Proceeds from sale of fixed

assets - 202

Capital expenditures (3,912) (3,516)

----------------- -----------------------

Net cash used in investing

activities (3,912) (3,493)

----------------- -----------------------

Cash flows from financing

activities:

Borrowings under bank line

of credit 13,900 13,000

Borrowings - other - 1,746

Proceeds from exercise of

stock options 225 1,164

Excess tax benefit from

exercises of stock options 57 235

Payments of long-term debt (1,044) (690)

Payments under bank line of

credit (13,900) (13,000)

Purchase of treasury stock (7,138) -

----------------- -----------------------

Net cash (used in) provided

by financing activities (7,900) 2,455

----------------- -----------------------

Effect of exchange rate changes

on cash (1) 8

----------------- -----------------------

Net (decrease) increase in

cash and cash equivalents (14,598) 9,259

Cash and cash equivalents at

beginning of period 35,181 22,303

----------------- -----------------------

Cash and cash equivalents at

end of period $20,583 $31,562

================= =======================

For information at Herley contact:

Peg Guzzetti

Investor Relations

Tel: (717) 735-8117

Thirteen weeks ended

May 4, 2008 April 29, 2007

---------------------- --------------

Non-GAAP As Reported As Reported

Measure* Under GAAP Under GAAP

--------- ----------- --------------

(Loss) income before income taxes ($10,859) ($10,859) $4,176

Litigation settlement 9,500 - -

--------- ----------- --------------

(Loss) income before income taxes (1,359) (10,859) 4,176

(Benefit) provision for income

taxes (3,425) (7,267) 298

--------- ----------- --------------

Net income (loss) $2,066 ($3,592) $3,878

Earnings (loss) per common share -

Basic $0.15 ($0.27) $0.28

========= =========== ==============

Basic weighted average shares 13,507 13,507 13,969

Earnings (loss) per common share -

Diluted $0.15 ($0.27) $0.27

========= =========== ==============

Basic weighted average shares 13,709 13,507 14,449

========= =========== ==============

(In thousands, except share data)

Forty weeks ended Thirty-nine weeks ended

May 4, 2008 April 29, 2007

----------------------- -------------------------

Non-GAAP As Reported Non-GAAP As Reported

Measure * Under GAAP Measure * Under GAAP

---------- ----------- ---------- -------------

(Loss) before income

taxes ($19,336) ($19,336) ($489) ($489)

Employment contract

settlement - - 8,914 -

Litigation settlements 15,542 - - -

---------- ----------- ---------- -------------

(Loss) income before

income taxes (3,794) (19,336) 8,425 (489)

(Benefit) provision

for income taxes (4,713) (9,313) 2,084 (29)

---------- ----------- ---------- -------------

Net income (Loss) $919 ($10,023) $6,341 ($460)

========== =========== ========== =============

Earnings (loss) per

common share - Basic $0.07 ($0.73) $0.46 ($0.03)

========== =========== ========== =============

Basic weighted

average shares 13,696 13,696 13,911 13,911

========== =========== ========== =============

Earnings (loss) per

common share -

Diluted $0.07 ($0.73) $0.44 ($0.03)

========== =========== ========== =============

Basic weighted

average shares 14,053 13,696 14,369 13,911

========== =========== ========== =============

* 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, "It is no surprise that the Company's third quarter and fiscal year results were affected by very unusual and significant events. The good news is that these events are finally behind us and we are looking to the future. Management is in the process of reviewing our fiscal 2009 budgets. For the first time in several years, I believe that legal expense will not be a dominant factor. During the budgeting process we carefully review the military and commercial programs that are important to Herley's success. By evaluating our past successes, we can more successfully plan for FY 2009 and beyond. We believe that our strong past performance on well-funded, long-term U.S. military programs such as Trident D-5, EA-18G, AN/ARA-63 Tactical Instrument Landing System, and AMRAAM, will contribute significantly to our continued success for the long term. The Company's bookings continue to be strong; we have a record-level backlog; and we continue to extend our reach into the international market. We are also continuing to take the steps necessary to achieve more efficient operations, so that we can better meet the requirements of current and future customers."

Mr. Levy will host a conference call on June 13, 2008 at 9:00 a.m. Eastern time to discuss financial results for the third quarter ended May 4, 2008. To join the conference call dial 1 (888) 425-4188, referencing Conference ID 50633300.

A taped replay of the call will be available on June 13, 2008 at 11:00 a.m. through June 20, 2008 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 50633300.

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=49000. To listen to the live call on the Internet, go to the web site 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 eight manufacturing locations and approximately 965 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. 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, 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)

May 4, 2008 July 29, 2007

(Unaudited)

----------- -------------

ASSETS

Current Assets:

Cash and cash equivalents $20,583 $35,181

Trade accounts receivable, net 23,548 28,058

Income Taxes Receivable 2,056 819

Costs incurred and income recognized in

excess of billings on uncompleted

contracts and claims 19,833 14,448

Other receivables 3,837 2,816

Inventories, net 60,321 51,815

Deferred income taxes 11,340 4,254

Other current assets 1,546 1,069

----------- -------------

Total Current Assets 143,064 138,460

Property, Plant and Equipment, net 30,957 29,996

Goodwill 73,903 74,044

Intangibles, net of accumulated amortization

of $6,943 at May 4, 2008 and $5,256 at

July 29, 2007 16,624 18,431

Other Assets 551 1,662

----------- -------------

Total Assets $265,099 $262,593

=========== =============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Current portion of long-term debt $1,387 $1,346

Current portion of employment settlement

agreement - (net of imputed interest of

$124 at May 4, 2008 and $245 at

July 29, 2007) 1,234 1,113

Current portion of litigation settlements

(net of imputed interest of $62) 10,438 -

Accounts payable, accrued expenses

and other 30,903 21,719

Billings in excess of costs incurred and

income recognized on uncompleted contracts 527 99

Income taxes payable 411 3,518

Advance payments on contracts 7,111 7,163

----------- -------------

Total Current Liabilities 52,011 34,958

Long-term Debt 4,927 5,951

Long-term Portion of Employment Settlement

Agreement - (net of imputed interest of

$471 at May 4, 2008 and $580 at

July 29, 2007) 3,192 4,117

Long-term portion of litigation settlement

(net of imputed interest of $122) 878 -

Other Long-term Liabilities 1,598 1,311

Deferred Income Taxes 8,675 6,615

Accrued Income Taxes Payable 507 -

----------- -------------

Total Liabilities 71,788 52,952

----------- -------------

Commitments and Contingencies

Shareholders' Equity:

Common stock, $.10 par value; authorized

20,000,000 shares; issued and outstanding

13,510,177 at May 4, 2008, and

13,977,115 at July 29, 2007 1,351 1,398

Additional paid-in capital 101,085 107,094

Retained earnings 89,381 99,404

Accumulated other comprehensive income 1,494 1,745

----------- -------------

Total Shareholders' Equity 193,311 209,641

----------- -------------

Total Liabilities and Shareholders'

Equity $265,099 $262,593

=========== =============

HERLEY INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

(Unaudited)

Forty weeks Thirty-nine

Thirteen weeks ended ended weeks ended

May 4, April 29, May 4, April 29,

2008 2007 2008 2007

--------- --------- -------- ----------

Net sales $38,549 $44,401 $108,343 $122,514

--------- --------- -------- ----------

Cost and expenses:

Cost of products sold 29,982 31,687 84,790 89,528

Selling and

administrative

expenses 9,951 8,895 27,869 25,315

Litigation settlements 9,500 - 15,542 -

Employment contract

settlement costs - - - 8,914

--------- --------- -------- ----------

49,433 40,582 128,201 123,757

--------- --------- -------- ----------

(Loss) income from

operations (10,884) 3,819 (19,858) (1,243)

--------- --------- -------- ----------

Other income (expense):

Investment income 147 375 955 854

Interest expense (164) (213) (427) (578)

Foreign exchange

transactions gain

(loss) 42 195 (6) 478

--------- --------- -------- ----------

25 357 522 754

--------- --------- -------- ----------

(Loss) income before

income taxes (10,859) 4,176 (19,336) (489)

(Benefit) provision for

income taxes (7,267) 298 (9,313) (29)

--------- --------- -------- ----------

Net (loss) income $(3,592) $3,878 $(10,023) $(460)

========= ========= ======== ==========

(Loss) earnings per

common share - Basic $(.27) $.28 $(.73) $(.03)

========= ========= ======== ==========

Basic weighted average

shares 13,507 13,969 13,696 13,911

========= ========= ======== ==========

(Loss) earnings per

common share -

Diluted $(.27) $.27 $(.73) $(.03)

========= ========= ======== ==========

Diluted weighted

average shares 13,507 14,449 13,696 13,911

========= ========= ======== ==========


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SOURCE Herley Industries, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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