PROFILE AEROFLEX INCORPORATED HIGH TECHNOLOGY COMPANY THAT DESIGNS, DE
|
|
|
Top Searches for this datasheet
PROFILE AEROFLEX INCORPORATED HIGH TECHNOLOGY COMPANY THAT DESIGNS, DEVELOPS, MANUFACTURES MARKETS EXTENSIVE, DIVERSE RANGE MICROELECTRONIC INSTRUMENT PRODUCTS FIBER OPTIC WIRELESS COMMUNICATIONS MARKETS. AEROFLEX PRODUCTS SERVICE WORLDWIDE, SUPPORTING ADVANCED FIBER OPTIC NETWORKS, AUTOMATIC TEST SYSTEMS WIRELESS COMMUNICATION DEVICES.
selected financial data
Fiscal 2000 Sales Operating Income* Income* Income Diluted Share* Working Capital Total Assets Stockholders' Equity *Exclusive "Special" item $185,924 22,362 14,400 0.57 Fiscal 1999 $157,104 21,084 13,257 0.55 50,366 165,216 102,093 Fiscal 1998 $118,861 14,858 8,406 0.41 53,965 124,101 87,036
133,904 248,707 201,932
focusing markets
FIBER OPTICS
Aeroflex continues focus product technology solutions that enhance support efficient transmission delivery information. Increasingly, these needs being fulfilled global fiber optic systems networks. Internet, driven increasing speed bandwidth capacity support forms content, from basic telephony data-intensive video, using virtually limitless capabilities fiber optic systems their vast bandwidth potential transform vision instantaneous connectivity into everyday reality.
fiber strands that carry digital information buried beneath ground ocean floor small segment that network. Fiber transportation medium, alternative both copper wire waves. fiber optic network, ultimately electronic photonic circuitry that does work. fact, electro-photonic systems short haul applications being developed today that propel immense volumes information wirelessly using light waves. Aeroflex products support electro-photonic
infrastructure essential global deployment wideband networks services.This market, following growth Internet traffic ever-increasing requirements bandwidth capacity, among most rapidly expanding markets communications industry. optical component sales market forecasted grow more than percent year, reaching billion 2003.
WIRELESS
relentless quest true communications mobility continues provide excellent market opportunities Aeroflex's wireless
products technology. explosive growth forecasted mobile information appliances coupled with user demand bandwidth, convenience, reliability access, Aeroflex position benefit significantly from wireless infrastructure build-out over coming years. Aeroflex leading manufacturer both interconnect products high-speed mixed signal test equipment both which expected participate this rapidly expanding market.
Thin film advanced interconnects electro-photonic circuits
Fiber optic network clock/data recovery module
Fiber optic components
Automatic Test System mixed signal system chip wireless devices
letter shareholders
FISCAL YEAR 2000 DEFINING YEAR AEROFLEX. SALES SIGNIFICANT ACCELERATION COMMERCIAL DEMAND, TECHNOLOGY FOCUS MADE MARKED TRANSITION FROM SUPPLYING LEGACY COPPER WIRELINE INFRASTRUCTURE MARKETS BECOMING SIGNIFICANT SUPPLIER RAPIDLY GROWING FIBER OPTIC MARKET. DEMAND PRODUCTS SUPPORTING WIRELESS INDUSTRY ALSO GREW SIGNIFICANTLY, RESULTING STRONG SALES BOOKINGS. SPEED EFFECTIVENESS TRANSITION ENABLED CLOSE FISCAL YEAR ENDED JUNE WITH RECORD BACKLOG $119.3 MILLION ORDERS. MOST NOTABLY, AEROFLEX RECORDED FOURTH QUARTER BOOKINGS MORE THAN MILLION, $14.7 MILLION WHICH DELIVERY FIBER OPTIC PRODUCTS. These substantial gains were made notwithstanding softness wireline satellite markets. With backlog design-ins concentrated high growth industries, expect bookings sales remain strong.
Picture Caption Aeroflex officers NASDAQ official celebrate Aeroflex's first NASDAQ.
Overall, sales rose $186 million fiscal 2000 from $157 million during year period increase more than 18%. This significant growth attributable increase million fiber optic product sales, 112% increase million wireless product sales. Operating profits rose $22.4 million, along with income, which grew $14.4 million, $0.57 diluted share. May, sold million shares common stock secondary public offering raised $68.5 million. After repaying term loan million, cash marketable securities June totaled $66.2 million. These funds will used working capital needs, research development, expansion facilities and, some cases, along with unissued common stock, possible strategic acquisitions Sales millions) proprietary technologies, product lines businesses.
$200
part Company's objective expand extend capabilities fiber optic products markets, have installed automatic surface mount thin film wafer process system support fiber optic sub-assembly manufacturing capability. fourth quarter alone, secured more than thin film design-ins sub-assembly design-ins Gbps advanced fiber optic systems from several leading fiber optic manufacturers. Additionally, received initial production order proprietary modules used clock data recovery subsystem newest generation fiber optic communications system. Production requirements this product expected ramp January 2001. continue increase production capacity efficiency FS1000 wireless system chip (SOC) testing synthesizer introduced last year. fourth quarter booked over million FS1000, bringing total year's bookings more than million. FS1000 sales year increased more than 700% $20.5 million. Most importantly, Aeroflex's success attributed workforce that continues design, develop manufacture world class innovative product technology solutions. would like thank employees, directors shareholders their help support during this exciting successful pivotal year.
Backlog
millions)
$120
Harvey Blau Chairman Board
Michael Gorin President
Leonard Borow Executive Vice President
fiber optics-telecommunications infrastructure
SPEED BANDWIDTH DELIVER COMMUNICATIONS EXPERIENCE CONSUMERS EXPECT. AEROFLEX LONG FOCUSED EFFORTS TECHNOLOGY PRODUCT DEVELOPMENT SUPPORT DELIVERING MORE BOTH. TODAY, THESE SYSTEM CHARACTERISTICS SYNONYMOUS WITH FIBER OPTIC INFRASTRUCTURE, MANUFACTURERS SERVICE PROVIDERS ACCELERATE THEIR BUILD-OUTS WITH INCREASINGLY ADVANCED PRODUCTS. AEROFLEX PROVIDES ENABLING TECHNOLOGIES MANUFACTURING CAPABILITIES HIGHLY REGARDED SUPPLIER TOP-TIER FIBER OPTIC COMPANIES. thin film interconnect products used advanced fiber optic components. proprietary technology capable providing loss operation frequencies more than GHz, easily supporting fastest growing segment fiber optics market systems that provide high rate services. Aeroflex's innovative thin film technology particularly suited providing efficient solutions cutting edge electro-photonic products principal technology supporting Gbps systems beyond.
Aeroflex's thin film interconnect products possess characteristics that critical reliable, high performance electro-photonic
FIBER OPTIC BOOKINGS SALES
components. dimensional precision mechanical stability inherent technology allows maintenance alignment required photonic elements well provides electrical characteristics that accommodate extremely high speed
Bookings
millions)
digital electronic signals. With bit-rates moving higher provide faster more efficient service, co-planar design becoming increasingly desirable; again, perfect thin film interconnects. Aeroflex's innovative methods reducing size while dissipating heat generated high-speed photonic devices contributes reliability necessary supporting such products. Aeroflex further innovating fiber optic sub-assembly manufacturing capability augmenting enhancing automated assembly process more efficiently produce assemblies and, ultimately, modules. This process allows deliver complete assemblies take advantage efficiencies gained using thin film wafer scale process. Aeroflex also enlarging scope product offerings moving strongly into providing complete modules top-tier fiber optic companies. proprietary clock data recovery module
Sales
millions)
already deployed Gbps fiber optic systems recently completed high-end module will soon deployed more advanced, faster systems. working toward being able provide complete solutions which incorporate enabling thin film technology capitalize design manufacturing expertise ASICs, assemblies modules support high bit-rate fiber optic systems. high-speed test technology also contributing quality
fiber optic systems. automatic testing characterization components equipment that constitute synchronous optical networks, such SONET, allows deployment networks that provide error free, efficient operation.
Wireless Communications
GROWING RELIANCE ELECTRONIC CONNECTIVITY COMPONENT LIVE BUSINESS FUELING EXPLOSION WIRELESS COMMUNICATIONS INFRASTRUCTURE SERVICES. CONCURRENT DEMAND HIGH BANDWIDTH INTERNET CONNECTIVITY NEED TRUE MOBILITY DRIVING TECHNOLOGICAL INNOVATION MERGING VOICE DATA DELIVERY SERVICES. expect these services ultimately seamless ubiquitous, with Aeroflex supporting enabling technologies products this global wireless network. portable devices that deliver individual, mobile access interactive information becoming increasingly more powerful compact. Aeroflex's advanced interconnect products based thin film technology ensure integrity reliability advanced
communications systems while delivering greater miniaturization cost-effectiveness. Today, while voice makes bulk mobile
WIRELESS BOOKINGS SALES
communications traffic, anticipate that sometime near future, mobile data communications, including voice services, will constitute majority mobile communications traffic. order accommodate demands this anticipated surge data traffic, mobile devices will need high bandwidth concentrated signal
Bookings
millions)
processing capabilities. Aeroflex's thin film advanced interconnect products ideally suited meet requirements this market. Aeroflex supplies specialized integrated circuits modules space-borne communication systems, ground systems supporting satellite communications terrestrial wireless systems. have introduced shipped first large order STI1000: virtual test instrumentation capable fully testing evaluating communication payloads satellite communication
systems. This system forefront high-speed testing technology. have also received initial orders TRM1000 virtual transmit/receive module test system. derivative STI1000, TRM1000 features high speed testing module level. working expand market this advanced technology developing next-generation virtual test instrument serve global wireless testing market.
Sales
millions)
Aeroflex also leading supplier microwave frequency synthesizers designed test verify performance latest system chip (SOC) devices that heart mobile appliances. have ramped production FS1000 dual frequency synthesizer support accelerating demand automatic test systems capable high-speed RF/microwave testing. Enhancements these products intended support third generation mobile devices, soon introduced. These products also support high-speed automatic testing mobile network devices, well Bluetooth enabled mobile devices.
TODAY'S DYNAMIC WORLD TECHNOLOGICAL INNOVATION ALLOWING INCREASINGLY ADVANCED COMMUNICATIONS PRODUCTS COME MARKET EARLIER THAN EVER. NEVERTHELESS, STRONGLY BELIEVE THAT THIS ONLY BEGINNING TECHNOLOGICAL REVOLUTION THAT WILL ULTIMATELY LEAD DEVELOPMENT NETWORK WHERE SEAMLESS CONNECTIVITY UNIVERSAL ACCESS INFORMATION REALITY. Aeroflex's focus technology products that enable development this network, will, believe, lead both technological market success. believe ongoing commitment investing innovative solutions fiber optic components systems, similar commitment developing wireless technology, will allow continue produce substantial growth figures maintain excellence serving customers. believe that focusing speed mobility, rapid acceptance products fiber optic wireless markets assured. result, remain confident successful future customers, company shareholders.
Aeroflex Incorporated Subsidiaries
SELECTED FINANCIAL DATA thousands, except percentages, footnotes share data) Years ended June 2000 1999 1998 1997 Earnings Statement Data Sales $185,924 $157,104 $118,861 94,299 Income (Loss) 14,400 9,757(1) 8,406 4,420 Income (Loss) Common Share Basic .44(1) Diluted .41(1) Weighted Average Number Common Shares Outstanding Basic 23,819 22,230 18,503 15,557 Diluted 25,462 23,910 20,658 18,275
1996 74,367 (17,420)(2)(3)
(1.16)(2)(3)
14,963
2000 Balance Sheet Data Working Capital Total Assets Long-term Debt (including current portion) Stockholders' Equity Other Statistics After Profit Margin (Loss) Return Average Stockholders' Equity Stockholders' Equity Share $133,904 248,707
1999 50,366 165,216
June 1998 53,965 124,101
1997 25,872 81,047
1996 25,300 81,169
14,549 201,932
31,117 102,093
11,481 87,036
28,916 35,040
34,577 30,472
7.7% 9.5% 7.26
6.2%(1) 10.3%(1) 4.43
7.1% 13.8% 4.01
4.7% 13.5% 2.24
(23.4)%(2)(3) (45.4)%(2)(3) 1.99
Includes $3.5 million ($.14 diluted share $.16 basic) write-off process research development acquired connection with purchase UTMC Microelectronic Systems, Inc. February 1999. Includes $23.2 million ($1.55 share) write-off in-process research development acquired connection with purchase Technology Corporation March 1996. Includes $437,000, tax, gain ($.03 share) sale securities. result loss, options, warrants convertible debentures anti-dilutive. Calculated dividing stockholders' equity, year, number shares outstanding year. Note: share share amounts have been restated reflect five-for-four stock split.
Aeroflex Incorporated Subsidiaries
CONSOLIDATED BALANCE SHEETS thousands, except share amounts) ASSETS Current assets: Cash cash equivalents Marketable securities Accounts receivable, less allowance doubtful accounts $509 $381 June 2000 1999, respectively Inventories, Deferred income taxes Prepaid expenses other current assets Total current assets Property, plant equipment, Intangible assets acquired connection with purchase businesses, accumulated amortization $4,689 $3,084 June 2000 1999, respectively Cost excess fair value assets businesses acquired, accumulated amortization $3,800 $3,161 June 2000 1999, respectively Deferred income taxes Other assets Total assets June 2000 1999 54,710 11,512 51,086 37,367 5,317 2,814 162,806 52,222 12,839 13,380 3,093 4,367 $248,707 2,714 39,967 32,637 5,291 2,314 82,923 50,802 13,777 14,019 3,695 $165,216 June 1999 6,509 8,070 16,923 1,055 32,557 24,608 3,582 2,376 63,123
LIABILITIES STOCKHOLDERS' EQUITY Current liabilities: Current portion long-term debt Accounts payable Accrued expenses other current liabilities Income taxes payable Total current liabilities Long-term debt Deferred income taxes Other long-term liabilities Total liabilities Commitments contingencies Stockholders' equity: Preferred Stock, value $.10 share; authorized 1,000 shares: Series Junior Participating Preferred Stock, value $.10 share; authorized shares; none issued Common Stock, value $.10 share; authorized 40,000 shares; issued 27,835 18,429 June 2000 1999, respectively Additional paid-in capital Retained earnings (accumulated deficit) Less:Treasury stock, cost shares June 2000 1999, respectively) Total stockholders' equity Total liabilities stockholders' equity notes consolidated financial statements.
2000 1,566 9,489 17,847 28,902 12,983 4,890 46,775
2,783 190,250 8,979 202,012 201,932 $248,707
1,843 105,720 (5,421) 102,142 102,093 $165,216
Aeroflex Incorporated Subsidiaries
CONSOLIDATED STATEMENTS EARNINGS thousands, except share amounts) Years Ended June 2000 1999 1998 sales Cost sales Gross profit Operating costs: Selling, general administrative costs Research development costs Acquired in-process research development (note Total operating costs Operating income Other expense (income): Interest expense Other expense (income) (including interest income dividends $650, $781 $389) Total other expense (income) Income before income taxes Provision income taxes income income common share: Basic Diluted Weighted average number common shares outstanding: Basic Diluted $185,924 118,548 67,376 $157,104 98,645 58,459 $118,861 77,286 41,575
34,034 10,980 45,014 22,362
27,763 9,612 3,500 40,875 17,584
21,545 5,172 26,717 14,858
2,316 (554) 1,762 20,600 6,200 14,400
1,454 (777) 16,907 7,150 9,757
2,011 (309) 1,702 13,156 4,750 8,406
$0.60 $0.57
$0.44 $0.41
$0.45 $0.41
23,819 25,462
22,230 23,910
18,503 20,658
notes consolidated financial statements.
Aeroflex Incorporated Subsidiaries
CONSOLIDATED STATEMENTS STOCKHOLDERS' EQUITY COMPREHENSIVE INCOME Years Ended June 2000, 1999 1998 thousands)
Retained Additional Earnings Paid-in (Accumulated Capital Deficit) 58,110 (23,584) 31,025 2,141 9,205 100,481 8,406 (15,178)
Balance, July 1997 Stock issued public offering Stock issued upon exercise stock options warrants Stock issued upon conversion debentures income Balance, June 1998 Stock issued upon exercise stock options warrants Purchase treasury stock Deferred compensation income Balance, June 1999
Total 35,040 31,285 2,923 9,382 8,406 87,036
Common Stock Shares Value 12,658 1,266 2,597 1,774 17,378 1,738
Treasury Stock Shares Cost (752) (168)
Comprehensive Income
8,406 8,406
4,967 (343) 9,757 102,093 68,500 18,457 (1,990) (11) 14,400 201,932
1,051 18,429 2,500 1,339 5,567 27,835
1,843 2,783
4,563 105,720 68,250 16,365 (568) 190,250
9,757 (5,421) 14,400 8,979
(34) (296)
(343) (49) 1,959 (1,990) (80)
9,757 9,757
Stock issued public offering Stock issued upon exercise stock options warrants Purchase treasury stock Deferred compensation Five-for-four stock split Unrealized gain marketable securities income Balance, June 2000
14,400 14,482
notes consolidated financial statements.
Aeroflex Incorporated Subsidiaries
CONSOLIDATED STATEMENTS CASH FLOWS thousands) 2000 Cash flows from operating activities: income Adjustments reconcile income cash provided operating activities: Acquired in-process research development Depreciation amortization Amortization deferred gain Deferred income taxes Other Change operating assets liabilities, effects from purchase businesses: Decrease (increase) accounts receivable Decrease (increase) inventories Decrease (increase) prepaid expenses other assets Increase (decrease) accounts payable, accrued expenses other long-term liabilities Increase (decrease) income taxes payable cash provided operating activities Cash flows from investing activities: Payment purchase businesses, cash acquired Purchase equipment, inventory technology rights from Lucent Technologies Capital expenditures Proceeds from sale property, plant equipment Purchase marketable securities Proceeds from sale marketable securities cash used investing activities Cash flows from financing activities: Proceeds from issuance common shares public offering Costs connection with public offering Borrowings under debt agreements Debt repayments Bank debt financing costs Purchase treasury stock Proceeds from exercise stock options warrants Amounts paid withholding taxes stock option exercises Withholding taxes collected stock option exercises cash provided financing activities increase (decrease) cash cash equivalents Cash cash equivalents beginning period Cash cash equivalents period 14,400 8,983 (596) 1,086 (11,133) (4,232) (1,067) 2,393 4,416 14,640 (566) (7,213) 1,686 (11,430) (17,330) 69,000 (500) 2,090 (19,081) (1,990) 5,170 (11,169) 11,166 54,686 51,996 2,714 54,710 Years Ended June 1999 1998 9,757 3,500 6,554 (588) 1,812 (16,365) 3,825 (2,238) 2,739 2,090 11,378 (43,656) (9,104) (51,595) 24,191 (4,663) (438) (343) 2,539 (5,434) 2,671 18,523 (21,694) 24,408 2,714 8,406 4,884 (588) 1,004 (10) 1,975 (8,397) (633) 5,384 1,648 13,673 (249) (4,435) (10,613) (14,978) 31,781 (496) 6,231 (13,685) 1,292 (1,512) 1,502 25,113 23,808 24,408
notes consolidated financial statements.
Aeroflex Incorporated Subsidiaries
NOTES CONSOLIDATED FINANCIAL STATEMENTS Summary Significant Accounting Principles Policies Property, Plant Equipment
Property, plant equipment stated cost less accumulated depreciation computed straight-line basis over estimated useful lives related assets. Leasehold improvements amortized over life lease estimated life asset, whichever shorter.
Principles Consolidation
accompanying consolidated financial statements include accounts Aeroflex Incorporated subsidiaries (the "Company"), which wholly-owned with exception Europtest which 93.4% owned June 2000 (see Note intercompany balances transactions have been eliminated.
Research Development Costs
research development costs charged expense incurred. Note discussion acquired in-process research development.
Estimates
preparation financial statements conformity with generally accepted accounting principles requires that management Company make number estimates assumptions relating reporting assets liabilities disclosure contingent assets liabilities. Among more significant estimates included consolidated financial statements estimated costs complete contracts process. Actual results could differ from those estimates.
Intangible Assets
Intangible assets recorded cost less accumulated amortization.The excess purchase price over fair value tangible assets acquired being amortized straight-line basis over periods ranging from years except certain costs allocated identifiable intangible assets including existing technology, assembled workforce, customer relationships patents which amortized over years, estimated remaining lives intangibles time they were acquired Company. Company periodically evaluates recoverability carrying value intangible assets related amortization periods. Company assesses recoverability unamortized goodwill based undiscounted projected future earnings related businesses.
Cash Cash Equivalents
Company considers highly liquid investments having maturities three months less date acquisition cash equivalents.
Inventories
Inventories stated lower cost (first-in, first-out) market. Inventories related long-term contracts recorded cost less amounts expensed under percentage-ofcompletion accounting.
Income Common Share
accordance with Statement Financial Accounting Standards ("SFAS") "Earnings Share," income common share ("Basic EPS") computed dividing income weighted average common shares outstanding. Income common share assuming dilution ("Diluted EPS") computed dividing income plus forma addback debenture interest weighted average common shares outstanding plus potential dilution from conversion debentures exercise stock options warrants.
Financial Instruments
fair values on-balance sheet financial instruments, other than long-term debt (see Note approximate book values because short maturity these instruments. Amounts receivable payable under interest rate swap agreements accounted adjustments interest expense.
Revenue Cost Recognition Contracts
Revenue recognized based upon shipments billings. Company records gross profit long-term contracts using percentage-of-completion accounting under which costs recognized revenues same relation that total estimated manufacturing costs bear total contract value. Estimated costs completion based upon engineering production estimates. Provisions estimated losses revisions estimated profits contracts-in-process recorded period which such losses revisions first determined.
Accounting Stock-Based Compensation
Company records compensation expense employee director stock options only current market price underlying stock exceeds exercise price date grant. Effective July 1996, Company adopted SFAS 123, "Accounting Stock-Based Compensation." Company elected implement fair value based accounting method employee director stock options, instead elected disclose forma income forma
Aeroflex Incorporated Subsidiaries
NOTES CONSOLIDATED FINANCIAL STATEMENTS
income share employee director stock option grants made beginning fiscal 1996 such method been used account stock-based compensation cost described SFAS 123. ("UTMC") $42.5 million cash.The purchase price paid with available cash $22.5 million borrowings under Company's bank loan agreement $20.0 million. UTMC supplier radiation-tolerant integrated circuits satellite communications. acquired company's sales were approximately $33.4 million year ended December 1998. Company commissioned independent asset valuation study acquired tangible identifiable intangible assets serve basis allocation purchase price. Based this study, Company allocated purchase price, including acquisition costs approximately $500,000, follows:
thousands) tangible assets $28,771 Identifiable intangible assets 6,300 Costs excess fair value assets acquired 4,429 In-process research development 3,500 $43,000
Income Taxes
accordance with SFAS 109, "Accounting Income Taxes," Company measures deferred assets liabilities based upon differences between financial accounting bases assets liabilities.
Comprehensive Income
July 1998, Company adopted SFAS 130, "Reporting Comprehensive Income." Comprehensive income consists income equity adjustments from foreign currency translation available for-sale securities presented Consolidated Statements Stockholders' Equity Comprehensive Income.The statement requires only additional disclosures consolidated financial statements; does effect Company's financial position results operations.
Reclassifications
Reclassifications have been made 1998 1999 consolidated financial statements conform 2000 presentation.
Recent Accounting Pronouncements
Effective July 2000, Company will adopt SFAS 133, "Accounting Derivative Instruments Hedging Activities," amended.This statement requires companies record derivatives balance sheet assets liabilities their fair value. certain circumstances changes value such derivatives required recorded gains losses. impact this statement expected have material effect Company's consolidated financial statements. March 2000, FASB issued FASB Interpretation "Accounting Certain Transactions involving Stock Compensation," interpretation Accounting Principles Board Opinion This interpretation clarifies application Opinion certain issues. This interpretation effective July 2000. effects applying this interpretation would recognized prospective basis from July 2000. impact this interpretation expected material.
identifiable intangible assets include existing technology, customer relationships assembled work force. identifiable intangibles costs excess fair value assets being amortized straight-line basis over years based study described above. acquired in-process research development considered have reached technological feasibility and, accordance with generally accepted accounting principles, value such expensed third quarter fiscal 1999. Summarized below unaudited forma results operations Company UTMC been acquired beginning fiscal periods presented. $3.5 million write-off been included June 1999 forma income June 1998 forma income order provide comparability respective actual results.
Forma Years Ended June 1999 1998 thousands, except share data) sales income income share Basic Diluted 177,149 155,371 9,469 11,267 0.43 0.40 $0.61 0.55
Acquisition Businesses
UTMC
Effective February 1999, Company acquired outstanding stock UTMC Microelectronic Systems, Inc.
forma financial information presented above necessarily indicative either results operations that would have occurred acquisition taken place beginning periods presented future operating results combined companies.
Aeroflex Incorporated Subsidiaries
NOTES CONSOLIDATED FINANCIAL STATEMENTS Europtest
Effective September 1998, Company acquired stock Europtest, S.A. (France) approximately $1.1 million.The purchase agreement also requires that Company purchase remaining Europtest rata over three-year period prices determined based upon sales Europtest products. October 1999, Company purchased additional 3.4% Europtest's stock approximately $54,000. Europtest develops sells specialized software-driven test equipment used primarily cellular, satellite other communications applications.The acquired company's sales were approximately $1.9 million year ended March 1998. forma basis, Europtest acquisition taken place beginning periods presented, results operations those periods would have been materially affected. purchase price been allocated assets acquired liabilities assumed based their fair values. acquisitions have been accounted purchases and, accordingly, acquired assets liabilities assumed have been recorded their estimated fair values respective dates acquisition. operating results UTMC Europtest included consolidated statements earnings from respective acquisition dates.
Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value June 2000 thousands) 11,430 11,512
marketable securities June 2000 were virtually U.S. corporate debt securities with scheduled maturities within year.
Inventories
Inventories consist following:
June 1999 thousands) 20,392 18,441 12,783 11,148 4,192 3,048 37,367 32,637 2000
materials Work-in-process Finished goods
Acquisition Assets From Lucent Technologies
Inventories include contracts-in-process $9.3 million $9.6 million June 2000 1999, respectively, which consist substantially unbilled material, labor overhead costs that were expected billed during succeeding fiscal year
Property, Plant Equipment
Property, plant equipment consists following:
June 2000 1999 thousands) $4,725 $4,725 33,058 38,268 8,258 6,769 91,078 32,353 37,727 7,521 2,334 84,660 Estimated Useful Life Years
Effective July 1997, Company's subsidiary, Technology ("MIC"), acquired certain equipment, inventory, licenses technology patents Lucent Technologies' microelectronics components units multi-chip modules film integrated circuits $4.4 million cash. These units manufacture microelectronic modules interconnect products.The purchase price been allocated assets acquired, based their fair values, certain obligations assumed relating agreements.
Marketable Securities
Company's marketable securities deemed management available-for-sale reported fair value with unrealized gains losses reported within stockholders' equity. Realized gains losses recorded based specific identification method. fiscal years 2000, 1999 1998, gross realized gains losses were $193,000, respectively. carrying amount Company's investments shown table below:
Land Building leasehold improvements Machinery, equipment, tools dies Furniture fixtures Assets recorded under capital leases Less accumulated depreciation amortization
38,856 33,858 52,222 50,802
July 1998, Company purchased previously leased operating facility Pearl River, York $2.5 million cash.
Aeroflex Incorporated Subsidiaries
NOTES CONSOLIDATED FINANCIAL STATEMENTS
Repairs maintenance expense property, plant equipment $2.5 million, $2.3 million $1.4 million years ended June 2000, 1999 1998, respectively. Common Stock 2000. interest rate borrowings under this agreement various rates depending upon certain financial ratios, with current rate substantially equivalent 30-day LIBOR (approximately 6.7% June 2000) plus 1.50% revolving credit borrowings. Company paid facility $100,000 required commitment .25% annum average unused portion credit line. mortgage payable monthly installments approximately $26,000 through March 2008 balloon payment $1.6 million April 2008. Company entered into interest rate swap agreement outstanding amount under mortgage agreement approximately 7.6% order reduce interest rate risk associated with these borrowings. fair market value interest rate swap agreement $154,000 June 2000 favor Company. terms agreement require compliance with certain covenants including minimum consolidated tangible worth pretax earnings, maintenance certain financial ratios, limitations capital expenditures indebtedness prohibition payment cash dividends. connection with purchase certain materials manufacturing, Company letter credit $2.0 million. June 2000, Company's available unused line credit $21.0 million after consideration letter credit. December 1998, Company financed acquisition renovation land building Pearl River, facility received proceeds amounting $4.2 million. This debt requires balloon payment $4.0 million 2019. During year ended June 1998, Company entered into equipment loans with banks totaling $6.2 million. June 2000, remaining balance these loans $4.1 million refinanced under sale capital leaseback agreements approximately $6.0 million. purposes Consolidated Statements Cash Flows, $4.1 million refinancing considered non-cash transaction. These agreements expire through June 2006 bear interest approximately 7.9%.
Accrued Expenses Other Current Liabilities
Accrued expenses other current liabilities include accrued salaries, wages other compensation $6.6 million $7.1 million June 2000 1999, respectively.
Long-Term Debt Credit Arrangements
Long-term debt consists following:
June 2000 1999 thousands)
Revolving credit, term loan mortgage agreement Building mortgage Equipment loans Capitalized lease obligations Other Less current maturities 4,038 3,965 21,853 4,165 4,877 31,117 6,509 24,608
6,026 14,549 1,566 12,983
Aggregate long-term debt June 2000 matures each fiscal year follows:
thousands) 2001 2002 2003 2004 2005 Thereafter 1,566 1,603 1,338 1,545 1,646 6,851 14,549
Interest paid $2.4 million, $1.6 million $2.1 million during years ended June 2000, 1999 1998, respectively. February 1999, Company replaced previous agreement with revised revolving credit, term loan mortgage agreement with banks which secured substantially Company's assets otherwise encumbered.The agreement provided revolving credit line $23.0 million, term loan $20.0 million mortgage Company's Plainview property $4.5 million.The revolving credit loan facility expires December 2002. June 1999, outstanding term loan $17.5 million.The term loan fully paid with proceeds from Company's sale
Senior Subordinated Convertible Debentures
September 1997, Company called redemption outstanding 7-1/2% Senior Subordinated Convertible Debentures 104.5% principal amount $10.0 million. principal amount debentures converted into Company's Common Stock price $4.50 share. connection with conversions, $599,000 deferred bond issuance costs were charged additional paid-in capital.
Aeroflex Incorporated Subsidiaries
NOTES CONSOLIDATED FINANCIAL STATEMENTS Stockholders' Equity Common Stock Offerings
March 1998, Company sold million shares (adjusted stock split) Common Stock public offering $31.3 million, underwriting discount $2.0 million issuance costs $496,000. these proceeds, $9.6 million used repay bank indebtedness.The balance proceeds used primarily purchase UTMC. 2000, Company sold million shares (adjusted stock split) Common Stock public offering $68.5 million, underwriting discount $3.5 million issuance costs $500,000. these proceeds, $13.0 million used repay term loan. balance proceeds invested short-term marketable securities intended ultimately used additional working capital, including research development, expansion facilities, general corporate purposes, including possible acquisitions technologies, product lines businesses. million shares Company's Common Stock except 1999 Plan which covers million shares 2000 Plan which covers 938,000 shares. Options under NQSOP 1994 Plan expire five years from date grant. Options under 1996 Plan, 1998 Plan, 1999 Plan 2000 Plan shall expire later than years from date grant. Company also issued employees, executive officers, options purchase 685,000 shares Common Stock exercisable between $3.20 $10.90 share. Such grants were covered above plans. Additional information with respect Company's stock options follows:
Weighted Average Exercise Prices Balance, July 1997 Granted Forfeited Exercised Balance, June 1998 Granted Forfeited Exercised Balance, June 1999 Granted Forfeited Exercised Balance, June 2000 3.06 7.95 2.92 2.54 4.43 9.46 3.60 2.99 6.64 28.02 9.64 4.45 17.30 Shares Under Outstanding Options thousands) 4,150 1,304 (44) (545) 4,865 1,444 (1,825) 4,480 2,197 (28) (1,866) 4,783
Common Stock Split
June 2000, Company's Board Directors authorized five-for-four stock split Common Stock, effective June 2000. share share amounts consolidated financial statements give effect stock split.
Stock Options Warrants
Under Company's stock option plans, options granted purchase shares Company's Common Stock exercisable prices equal fair market value date grant. During 1990, Company's shareholders approved Non-Qualified Stock Option Plan (the "NQSOP"). December 1993, Board Directors adopted Outside Director Stock Option Plan (the "Directors' Plan") which provides options non-employee directors, which become exercisable three installments expire years from date grant. Directors' Plan, amended, covers 625,000 shares Company's Common Stock. November 1994, shareholders approved Directors' Plan 1994 Non-Qualified Stock Option Plan (the "1994 Plan"). November 1996, shareholders approved 1996 Stock Option Plan (the "1996 Plan"). April 1998, Board Directors adopted 1998 Stock Option Plan (the "1998 Plan"). January 2000, shareholders approved 1999 Stock Option Plan (the "1999 Plan"). March 2000, Board Directors adopted 2000 Stock Option Plan (the "2000 Plan").The NQSOP, 1994 Plan, 1996 Plan, 1998 Plan, 1999 Plan 2000 Plan provide options which become exercisable more installments each cov-
Company's stock option plans allow employees shares received from exercise option satisfy withholding requirements. During fiscal years 2000, 1999 1998, payroll stock option exercises were withheld from employees shares Company's Common Stock amounting $2.6 million $10,000, respectively. Options purchase million, million million shares were exercisable weighted average exercise prices $13.62, $4.06 $3.12 June 2000, 1999 1998, respectively. options outstanding June 2000 summarized ranges follows:
Aeroflex Incorporated Subsidiaries
NOTES CONSOLIDATED FINANCIAL STATEMENTS
Options Outstanding Weighted Average Exercise Options Price Outstanding thousands) 3.60 7.86 1,789 12.67 1,386 38.83 1,287 4,783 Options Exercisable Weighted Average Exercise Options Price Exercisable thousands) 3.60 7.67 11.46 38.73 1,666
Range Exercise Prices 3.00 4.30 6.50 9.70 $10.75 $14.05 $32.82 $39.20
Weighted Average Remaining Life years
$14.0 million $4.8 million $2.0 million years ended June 2000, 1999 1998, respectively, based aforementioned fair value grant date only options granted after fiscal year 1995.The Company's income income share using this forma compensation cost would have been:
Years Ended June thousands, except share data) 2000 income income share Basic Diluted Reported 14,400 0.60 0.57 1999 income income share Basic Diluted Reported 9,757 0.44 0.41 1998 income income share Basic Diluted Reported 8,406 0.45 0.41 Forma 7,112 0.38 0.36 Forma 6,608 0.30 0.28 Forma 5,305 0.22 0.21
Range Exercise Prices 3.00 6.50 $10.75 $32.82 4.30 9.70 $14.05 $39.20
June 2000, Company outstanding warrants purchase 66,000 shares Common Stock exercisable between $5.40 $6.00 share through June 2004. These warrants were issued primarily connection with acquisition fiscal 1996.
Accounting Stock-Based Compensation
fiscal 1997, Company adopted SFAS 123, "Accounting Stock-Based Compensation." Company chosen implement fair value based accounting method employee director stock options, elected disclose forma income income share such method been used account stock-based compensation cost described SFAS 123. share weighted average fair value stock options granted during fiscal 2000, 1999 1998 $21.20, $6.00 $5.91, respectively, date grant using Black Scholes option-pricing model with following weighted average assumptions: 2000 expected dividend yield risk free interest rate 6.0%, expected stock volatility 94%, expected option life years; 1999 expected dividend yield risk free interest rate 5.3%, expected stock volatility 77%, expected option life years; 1998 expected dividend yield risk free interest rate 5.8%, expected stock volatility 80%, expected option life years. forma compensation cost before income taxes Since forma compensation cost reflects only options granted after fiscal year 1995, full impact calculating stock-based compensation costs under SFAS reflected forma income because compensation cost recognized over respective vesting period compensation cost options granted prior fiscal year 1996 reflected.
Shareholders' Rights Plan
August 1998, Company's Board Directors approved Shareholders' Rights Plan which provides dividend distribution right each share holders record Company's Common Stock August 1998 issuance right each share Common Stock that shall subsequently issued. rights become exercisable only event person group ("Acquiring Person") accumulates more Company's Common Stock, Acquiring Person announces offer which would result owning more Common Stock.The rights expire August 2008. Each right will entitle holder
Aeroflex Incorporated Subsidiaries
NOTES CONSOLIDATED FINANCIAL STATEMENTS
1/1250 share Series Junior Participating Preferred Stock, amended, Company price $65. addition, upon occurrence merger other business combination, acquisition Acquiring Person more Common Stock, holders rights, other than Acquiring Person, will entitled purchase either Common Stock Company common stock Acquiring Person half their respective market values. Company will entitled redeem rights $.01 right time prior person becoming Acquiring Person.
Income Taxes
provision (benefit) income taxes consists following:
2000 Current Federal State local Deferred Federal State local Years Ended June 1999 1998 thousands) 4,465 5,338 1,989 (177) 1,812 7,150 3,178 3,746 1,004 4,750
4,656 5,114 1,086 6,200
Income Share
reconciliation numerators denominators Basic Diluted calculations follows:
Years Ended June 2000 1999 1998 thousands, except share data) Computation Adjusted Income: income basic earnings common share 14,400 Add: Debenture interest amortization expense, income taxes Adjusted income diluted earnings common share 14,400 Computation Adjusted Weighted Average Shares Outstanding: Weighted average shares outstanding 23,819 Add: Shares assumed issued upon conversion debentures Add: Effect dilutive options warrants outstanding 1,643 Weighted average shares common share equivalents used computation diluted earnings common share 25,462 Income Common Share: Basic $0.60 Diluted $0.57
provision income taxes varies from amount computed applying U.S. Federal income rate income before income taxes result following:
Years Ended June 1999 1998 thousands) 7,210 5,917 $4,505 2000 (1,017)
9,757
8,406
9,757
8,509
statutory rate Utilization capital loss carryforward Non-deductible acquired in-process research development charge State local income Research development credit Other,
1,225 (300) (500) (53) 6,200 7,150
(250) $4,750
Deferred assets liabilities consist
22,230 18,503 June 2000 1999 thousands) 4,891 5,025 5,317 1,955 1,793 1,262 6,189 4,164 (2,165) 13,198 (5,698) (4,407) (10,105) 3,093 8,410 5,291 2,543 1,434 3,864 (3,426) 5,216 (3,572) (5,205) (21) (8,798) (3,582) 1,709
1,680
1,666
23,910 $0.44 $0.41
20,658 $0.45 $0.41
Options purchase million shares exercise prices ranging between $32.82 $39.20 share were outstanding June 2000 were included computation Diluted because exercise prices these options were greater than average market price common shares.
Accounts receivable Inventories Accrued expenses other current liabilities Current assets Capital lease obligation Other long-term liabilities Capital loss carryforwards loss carryforwards credit carryforwards Less: valuation allowance Non-current assets Property, plant equipment Intangibles Other Long-term liabilities non-current assets (liabilities) Total
Aeroflex Incorporated Subsidiaries
NOTES CONSOLIDATED FINANCIAL STATEMENTS
Company recorded credits $13.3 million, $5.2 million $1.6 million additional paid-in capital during years ended June 2000, 1999 1998, respectively, connection with benefit related compensation deductions exercise stock options warrants. deduction fiscal 2000, expected create operating loss carryforward purposes which resulted increase Company's deferred assets. accordance with SFAS 109, Company records valuation allowance against deferred assets more likely than that some deferred assets will realized. reduction valuation allowance fiscal 2000, primarily utilization capital loss carryforwards. Company undergoing routine audits various taxing authorities state local income returns covering periods from 1994 1996. Management believes that probable outcome these various audits should materially affect consolidated financial statements Company. Company made income payments $2.0 million, $3.3 million $2.1 million received refunds $940,000, $75,000 $26,000 during years ended June 2000, 1999 1998, respectively. 2000, 1999 1998, these 401(k) profit sharing plans aggregate expense $1.7 million, $1.0 million $810,000, respectively Effective January 1994, Company established Supplemental Executive Retirement Plan (the "SERP") which provides retirement, death disability benefits certain officers. SERP expense fiscal years ended June 2000, 1999 1998 $454,000, $384,000 $324,000, respectively.The assets SERP held Rabbi Trust amounted $1.8 million $1.2 million June 2000 1999, respectively. accumulated benefit obligation $2.6 million $2.0 million June 2000 1999, respectively. projected benefit obligation $3.3 million $2.9 million June 2000 1999, respectively. intangible asset related SERP $586,000 $462,000 June 2000 1999, respectively. discount rate 7.5% rate compensation increase 3.0% assumed above calculations both years. participants currently receiving benefits.
Commitments Contingencies Operating Leases
Several Company's operating facilities certain machinery equipment leased under agreements expiring through 2006. leases machinery equipment generally contain options purchase then fair market value related leased assets. Future minimum payments under operating leases June 2000 follows fiscal years:
2001 2002 2003 2004 2005 Thereafter thousands) 2,507 2,174 2,113 1,216 8,900
Employment Contracts
June 2000, Company employment agreements with certain officers periods through June 2004 with annual remuneration ranging from $206,000 $368,000, plus cost living adjustments and, some cases, additional compensation based upon earnings Company. Future aggregate minimum payments under these contracts $1.2 million year. Certain contracts provide three-year consulting period expiration employment term two-thirds salary. addition, these officers have option terminate their employment agreements upon change control Company, defined, receive lump payments equal salary bonus, any, remainder term.
Employee Benefit Plans
employees Company certain subsidiaries members collective bargaining agreement eligible participate company sponsored 401(k) plans. Each participant option contribute portion compensation receive discretionary employer matching contribution. Furthermore, employees certain subsidiaries eligible participate qualified profit sharing plans receive allocation discretionary share their respective subsidiary's profits. fiscal years ended June
Rental expense $2.6 million, $2.3 million $1.9 million during fiscal years 2000, 1999 1998, respectively.
Legal Matters
subsidiary Company whose operations were discontinued 1991, several defendants named personal injury action initiated August 1994, group plaintiffs. plaintiffs seeking damages which cumulatively exceed $500 million. complaint alleges, among other things,
Aeroflex Incorporated Subsidiaries
NOTES CONSOLIDATED FINANCIAL STATEMENTS
that plaintiffs suffered injuries from exposure substances contained products sold subsidiary customers. This action discovery stage. Based upon available information considering various defenses, together with product liability insurance, opinion management Company outcome action against subsidiary will have materially adverse effect Company's consolidated financial statements. Company involved various other routine legal matters. Management believes outcome these matters will have materially adverse effect Company's consolidated financial statements. primarily United States, export sales accounted 11.8%, 7.7% 5.5% fiscal years 2000, 1999 1998, respectively.
Business Segment Data: sales: Microelectronics Test, Measurement Other Electronics Isolator Products sales Operating income: Microelectronics Test, Measurement Other Electronics Isolator Products General corporate expenses Acquired in-process research development(1) Interest expense Other income (expense), Income before income taxes Total assets: Microelectronics Test, Measurement Other Electronics Isolator Products Corporate Total assets Capital expenditures: Microelectronics Test, Measurement Other Electronics Isolator Products Corporate Total capital expenditures Depreciation amortization expense: Microelectronics Test, Measurement Other Electronics Isolator Products Corporate Total depreciation amortization expense
Years Ended June 2000 1999 1998 thousands) $110,253 96,846 74,263
55,918 41,515 25,685 19,753 18,743 18,913 $185,924 $157,104 $118,861
Business Segments
Company's business segments major products included each segment, follows: Microelectronics: Microelectronic Modules Thin Film Interconnects Integrated Circuits Test, Measurement Other Electronics: Instrument Products Motion Control Systems Isolator Products: Commercial Spring Rubber Isolators Industrial Spring Rubber Isolators Military Wire-Rope Isolators Company manufacturer advanced technology systems components commercial industry, government defense contractors. Approximately 32%, Company's sales fiscal years 2000, 1999 1998, respectively, were agencies United States government prime defense contractors subcontractors United States government.The only customers which constituted more than Company's sales during year period presented were Teradyne Lockheed Martin which comprised 11.0% 10.5% sales fiscal year 2000, respectively, Lockheed Martin Lucent Technologies which comprised 12.2% 11.4% sales fiscal year 1999, respectively, Lucent Technologies which comprised 15.5% sales fiscal year 1998. Company's customers located
22,734 2,333 2,692 (5,397) 22,362
20,104 3,134 2,108 (4,262) 21,084
14,147 3,063 (3,348) 14,858
(3,500) (2,316) (1,454) (2,011) 20,600 16,907 13,156
$112,183 $104,222 58,053
52,401 43,958 27,522 9,567 10,020 10,163 74,556 7,016 28,363 $248,707 $165,216 $124,101
4,777 2,284 7,213
6,955 1,559 9,104
8,792 10,613
6,657 1,744 8,983
4,112 1,849 6,554
2,802 1,553 4,884
special charge write-off in-process research development acquired purchase UTMC allocable fully Microelectronics segment.
Aeroflex Incorporated Subsidiaries
INDEPENDENT AUDITORS' REPORT
Board Directors Stockholders Aeroflex Incorporated Plainview, York have audited accompanying consolidated balance sheets Aeroflex Incorporated subsidiaries June 2000 1999 related consolidated statements earnings, stockholders' equity comprehensive income, cash flows each years three year period ended June 2000. These consolidated financial statements responsibility Company's management. responsibility express opinion these consolidated financial statements based audits. conducted audits accordance with auditing standards generally accepted United States America. Those standards require that plan perform audit obtain reasonable assurance about whether financial statements free material misstatement. audit includes examining, test basis, evidence supporting amounts disclosures financial statements. audit also includes assessing accounting principles used significant estimates made management, well evaluating overall financial statement presentation. believe that audits provide reasonable basis opinion. opinion, consolidated financial statements referred above present fairly, material respects, financial position Aeroflex Incorporated subsidiaries June 2000 1999 results their operations their cash flows each years three year period ended June 2000, conformity with accounting principles generally accepted United States America.
Melville, York August 2000
Aeroflex Incorporated Subsidiaries
QUARTERLY FINANCIAL DATA (Unaudited):
thousands, except share data footnotes) 2000 Sales Gross Profit Income income share: Basic Diluted First 42,072 15,139 2,930 0.13 0.12 Second 41,531 13,559 1,341 0.06 0.06 Quarter 1999 Sales Gross Profit Income income share: Basic Diluted
Quarter Third 46,275 16,721 3,032 0.13 0.12 Fourth 56,046 21,957 7,097 0.28 0.26
Year Ended June $185,924 67,376 14,400 0.60 0.57 Year Ended June $157,104 58,459 9,757 0.44 0.41
First 31,629 11,125 2,258 0.10 0.10
Second 36,197 12,402 2,810 0.13 0.12
Third 40,604 15,399 0.01 0.01
Fourth 48,674 19,533 4,501 0.20 0.18
Includes $3.5 million ($.14 diluted share $.16 basic) year ended June 1999 quarter ended March 1999, write-off in-process research development acquired connection with purchase UTMC Microelectronic Systems, Inc.
Since share information computed independently each quarter full year, based respective average number common common equivalent shares outstanding, quarterly share amounts does necessarily equal share amounts each year. share share amounts have been restated reflect five-for-four stock split.
MARKET COMPANY'S COMMON EQUITY RELATED STOCKHOLDER MATTERS
common stock trades Nasdaq National Market under symbol "ARXX". Prior March 2000, common stock traded York Stock Exchange under symbol "ARX". following table sets forth, calendar periods indicated, high closing sales prices common stock reported Nasdaq National Market since March 2000 and, prior March 2000, high closing sales prices common stock reported York Stock Exchange. prices have been adjusted reflect five-for-four stock split that payable July 2000.
Common Stock High 1998 First Quarter Second Quarter Third Quarter Fourth Quarter 1999 First Quarter Second Quarter Third Quarter Fourth Quarter 2000 First Quarter Second Quarter Third Quarter (through September 2000) 11.70 11.45 9.25 12.10 6.30 6.80 5.35 6.00
14.70 15.80 17.25 10.85
9.65 10.40 9.75 4.45
56.00 39.75 45.00
7.75 20.80 25.69
September 2000, there were approximately record holders common stock. have never declared paid cash dividends common stock. There have been stock dividends declared paid common stock during past three years except five-for-four stock split, which payable July 2000 record holders June 2000. currently intend retain future earnings operation development business acquisitions and, therefore, intend declare cash dividends common stock foreseeable future. addition, revolving credit, term loan mortgage agreement, amended, prohibits from paying cash dividends.
Aeroflex Incorporated Subsidiaries
MANAGEMENT'S DISCUSSION ANALYSIS FINANCIAL CONDITION RESULTS OPERATIONS Overview
advanced design, engineering manufacturing abilities produce microelectronic, integrated circuit, interconnect testing solutions. products used fiber optic, broadband cable, wireless satellite communications markets. also design manufacture motion control systems shock vibration isolation systems which used commercial, industrial defense applications. operations grouped into three segments: Comstron, leader radio frequency microwave technology used manufacture fast switching frequency signal generators components, which acquired November 1989. Comstron currently operating division Aeroflex Laboratories Incorporated, wholly-owned subsidiaries. microelectronics test, measurement other electronics isolator products Europtest, S.A. (France), which acquired consolidated financial statements include accounts Aeroflex Incorporated subsidiaries. subsidiaries wholly-owned except Europtest, S.A., which 93.4%. effective September 1998, under purchase agreement which requires purchase remaining Europtest rata over three-year period prices determined based upon sales Europtest products. October 1999, purchased additional 3.4%. Europtest microelectronics segment been designing, manufacturing selling state-of-the-art microelectronics electronics industry since 1974. January 1994, acquired substantially operating assets microelectronics division Marconi Circuit Technology Corporation, which manufactures wide variety develops sells specialized software-driven test equipment used primarily cellular, satellite other communications applications. motion control products division been engaged development manufacture electro-optical scanning devices used infra-red night vision systems since 1975. Additionally, engaged design, development production stabilization tracking devices systems magnetic motors used satellites other high reliability applications. isolator products segment been designing, developing, manufacturing selling severe service shock vibration isolation systems since 1961. These devices primarily used defense applications. October 1983, acquired Vibration Mountings Controls, Inc., which manufactures line off-the-shelf rubber spring shock, vibration structure borne noise control devices used commercial industrial applications. December 1986, Lintek, leader high speed instrumentation antenna measurement systems, radar systems satellite test systems, which acquired January 1995. test, measurement other electronics segment consists divisions: instruments motion control products, including following product lines:
microelectronic assemblies. March 1996, acquired Technology Corporation which designs, develops, manufactures markets microelectronics products form passive thin film circuits interconnects. Effective July 1997, Technology acquired certain equipment, inventory, licenses technology patents Lucent Technologies' telecommunications component units multi-chip modules film integrated circuits. These units manufacture microelectronic modules interconnect products. February 1999, acquired outstanding stock UTMC Microelectronic Systems, Inc., consisting UTMC's integrated circuit business.
Aeroflex Incorporated Subsidiaries
MANAGEMENT'S DISCUSSION ANALYSIS FINANCIAL CONDITION RESULTS OPERATIONS
acquired operating assets Korfund Dynamics Corporation, manufacturer industrial line heavy duty spring rubber shock mounts. developing products revenue based upon shipments billings. record costs long-term contracts using percentage-of-completion accounting. Under percentage-of-completion accounting, costs recognized revenues same relation that total estimated manufacturing costs bear total contract value. Estimated costs completion based upon engineering production estimates. Provisions estimated losses revisions estimated profits contracts-in-process recorded period which such losses revisions first determined. Some development efforts reimbursed under contractual arrangements. Product development similar costs which cannot recover under contractual arrangements expensed period incurred. improving existing products adapting existing products applications developing prototype components specific programs product development efforts primarily involve engineering design relating
Statement Operations
Approximately sales fiscal 2000, sales fiscal 1999 sales fiscal 1998 were agencies United States Government prime defense contractors subcontractors United States Government. overall dependence military been declining focusing resources towards developing standard products commercial markets. government contracts have been awarded either basis after negotiation. government contracts primarily fixed price contracts, although also have government contracts providing cost plus fixed fee. defense contracts have customary provisions termination convenience government without cause. event such termination, entitled reimbursement costs receive reasonable profit, any, work done prior termination. believe that potential reductions defense spending will materially affect operations. certain product areas, have suffered reductions sales volume cutbacks military budget. other product areas, have experienced increased sales volume realignment government spending towards upgrading existing systems instead purchasing completely systems. overall effect cutbacks realignment been material operations.
Sales: Microelectronics Test, Measurement Other Electronics Isolator Products Sales Operating Income: Microelectronics Test, Measurement Other Electronics Isolator Products General Corporate Expenses Special Charge Operating Income (5,397) 22,362 22,362 (4,262) 21,084 (3,500) 17,584 (3,348) 14,858 14,858 2,333 2,692 3,134 2,108 3,063 22,734 20,104 14,147 55,918 19,753 41,515 18,743 25,685 18,913 $110,253 96,846 74,263 2000
following table sets forth sales operating income business segment periods indicated. special charge represents $3.5 million charge write-off in-process research development acquired connection with purchase UTMC Microelectronic Systems February 1999.
Years Ended June 1999 thousands) 1998
$185,924 $157,104 $118,861
Aeroflex Incorporated Subsidiaries
MANAGEMENT'S DISCUSSION ANALYSIS FINANCIAL CONDITION RESULTS OPERATIONS
following table sets forth certain items from statement earnings percentage sales periods indicated. special charge represents $3.5 million charge write-off in-process research development acquired connection with purchase UTMC Microelectronic Systems February 1999.
Years Ended June 2000 Sales Cost Sales Gross Profit Operating Expenses: Selling, General Administrative Costs Research Development Costs Special Charge Total Operating Expenses Operating Income Other Expense, Income Before Income Taxes Provision Income Taxes Income 18.3 24.2 12.0 11.1 7.7% 17.7 26.0 11.2 10.8 6.2% 18.1 22.5 12.5 11.1 7.1% 100.0% 63.8 36.2 1999 100.0% 62.8 37.2 1998 100.0% 65.0 35.0
Gross Profit
Cost sales includes materials, direct labor overhead expenses such engineering labor, fringe benefits, allocable occupancy costs, depreciation manufacturing supplies. Gross profit increased 15.3% $67.4 million fiscal 2000 from $58.5 million fiscal 1999. Gross margin decreased 36.2% fiscal 2000 from 37.2% fiscal 1999. This increase gross profit primarily result increased sales. decrease gross margin primarily margins both satellite test system development program start FS-1000, low-cost, high speed, high performance frequency synthesizer.
Selling, General Administrative Costs
Selling, general administrative costs include office management salaries, fringe benefits commissions. Selling, general administrative costs increased 22.6% $34.0 million (18.3% sales) fiscal 2000 from $27.8 million (17.7% sales) fiscal 1999.The increase primarily labor related expenses, including salaries additional personnel, connection with growth addition expenses UTMC Microelectronic Systems.
Fiscal Year Ended June 2000 Compared Fiscal Year Ended June 1999 Sales
Research Development Costs
Research development costs include material, sales increased 18.3% $185.9 million fiscal 2000 from $157.1 million fiscal 1999. sales microelectronics segment increased 13.8% $110.3 million fiscal 2000 from $96.8 million fiscal 1999 acquisition UTMC Microelectronic Systems 1999 partially offset reductions sales microelectronic modules temporary slowdowns satellite market. sales test, measurement other electronics segment increased 34.7% $55.9 million fiscal 2000 from $41.5 million fiscal 1999 primarily increased sales volume frequency synthesizers (primarily shipments FS-1000 commercial communications test systems). sales isolator products segment increased 5.4% $19.8 million fiscal 2000 from $18.7 million fiscal 1999. engineering labor allocated overhead. self-funded research development costs increased 14.2% $11.0 million (5.9% sales) fiscal 2000 from $9.6 million (6.1% sales) fiscal 1999. This increase primarily attributable additional costs UTMC Microelectronic Systems, partially offset reduced costs, relative prior year, related development FS-1000, low-cost, high speed, high performance frequency synthesizer intended commercial communication test systems, which completed early fiscal 2000.
Other Expense (Income)
Interest expense increased $2.3 million fiscal 2000 from $1.5 million fiscal 1999, primarily higher average levels borrowings throughout most current year. Other
Aeroflex Incorporated Subsidiaries
MANAGEMENT'S DISCUSSION ANALYSIS FINANCIAL CONDITION RESULTS OPERATIONS
income $554,000 year ended June 2000 consists primarily $650,000 interest income, $193,000 gain sale securities $300,000 expense settlement lawsuit. Other income $777,000 year ended June 1999 consists primarily interest income. Interest income decreased lower average levels cash cash equivalents throughout most current year. increased average levels borrowings decreased average levels cash cash equivalents resulted from acquisition UTMC Microelectronic Systems February 1999. connection with this acquisition, used most cash cash equivalents increased borrowings $20.0 million. $41.5 million fiscal 1999 from $25.7 million fiscal 1998 primarily increased sales volume both frequency synthesizers (including shipments under Navy CASS program) high speed automatic test systems (primarily satellite payload test equipment Hughes Space Communications) acquisition Europtest September 1998 offset part decreased sales volume stabilization tracking devices. sales isolator products segment were $18.7 million fiscal 1999 $18.9 million fiscal 1998.
Gross Profit
Gross profit increased 40.6% $58.5 million fiscal 1999
Provision Income Taxes
Income taxes were $7.2 million effective income rate 35.0%), excluding $1.0 million benefit from utilization capital loss carryforward, fiscal 2000, $7.2 million effective income rate 35.0%, exclusive special charge) fiscal 1999. income provisions years ended June 2000 1999 were different from amounts computed applying U.S. Federal income rate income before income taxes primarily state local income taxes research development credits, year ended June 2000, $1.0 million benefit from utilization capital loss carryforward year ended June 1999, non-deductibility $3.5 million special charge.
from $41.6 million fiscal 1998. Gross margin increased 37.2% fiscal 1999 from 35.0% fiscal 1998.This increase primarily result increased margins microelectronics segment Comstron product line, reflecting greater efficiency higher volume, well favorable sales microelectronics segment.
Selling, General Administrative Costs
Selling, general administrative costs increased 28.9% $27.8 million (17.7% sales) fiscal 1999 from $21.5 million (18.1% sales) fiscal 1998. increase primarily labor related costs, including salaries additional personnel, connection with growth addition expenses UTMC Microelectronic Systems.
Fiscal Year Ended June 1999 Compared Fiscal Year Ended June 1998 Sales
sales increased 32.2% $157.1 million fiscal 1999 from $118.9 million fiscal 1998. sales microelectronics segment increased 30.4% $96.8 million fiscal 1999 from $74.3 million fiscal 1998 increased sales volume both thin film interconnects microelectronic modules acquisition UTMC Microelectronic Systems February 1999. sales test, measurement other electronics segment increased 61.6%
Research Development Costs
self-funded research development costs increased 85.8% $9.6 million (6.1% sales) fiscal 1999 from $5.2 million (4.4% sales) fiscal 1998. This increase primarily attributable addition expenses UTMC Microelectronic Systems costs continued development low-cost, high speed, high performance frequency synthesizer intended commercial communication test systems.
Aeroflex Incorporated Subsidiaries
MANAGEMENT'S DISCUSSION ANALYSIS FINANCIAL CONDITION RESULTS OPERATIONS Acquired In-Process Research Development
connection with acquisition UTMC Microelectronic Systems, allocated $3.5 million purchase price incomplete research development projects. This allocation represents estimated fair value based future cash flows that have been adjusted projects' completion percentage. acquisition date, development these projects reached technological feasibility research development progress alternative future uses. Accordingly, expensed these costs acquisition date. used independent third-party appraiser assess value in-process research development. value assigned this asset determined identifying significant research projects which technological feasibility been established. case UTMC Microelectronic Systems, this included design, development, testing activities associated with commercial products, data products, radiation hardened products application specific integrated circuits. research development projects associated with introduction several products well specific significant enhancements existing products. Valuation development efforts future been excluded from research development appraisal. nature efforts develop acquired in-process technology into commercially viable product relate completion planning, designing, prototyping testing activities that necessary establish that proposed technologies meet their design specifications including functional, technical economic performance requirements. value assigned purchased in-process technology determined estimating contribution purchased in-process technology developing commercially viable product, estimating resulting cash flows from expected sales such product, discounting cash flows their present value using appropriate discount rate. believe that foregoing assumptions used forecasts were reasonable time acquisition. projections utilized transaction pricing purchase price allocation exclude potential synergetic benefits related specifically ownership. relatively early stage development reliance future, unproven products technologies, cost capital (discount rate) UTMC Microelectronic Systems estimated using venture capital rates return. nature forecast risks associated with projected growth profitability development projects, discount rate percent used discount cash flows from in-process products. This discount rate commensurate with UTMC Microelectronic Systems' market position, uncertainties economic estimates described above, inherent uncertainty surrounding successful development purchased in-process technology, useful life such technology, profitability levels such technology, uncertainty related technological advances that could render even UTMC Microelectronic Systems' development stage technologies obsolete. Selling, general administrative expenses profitability estimates were determined based forecasts well analysis comparable companies' margin expectations. Revenue growth rates UTMC Microelectronic Systems were estimated third party appraiser based detailed forecast prepared, well appraiser's discussions with finance, marketing engineering personnel those UTMC Microelectronic Systems. Allocation total UTMC Microelectronic Systems' projected revenues in-process research development based appraiser's discussions with UTMC Microelectronic Systems' management significant portion UTMC Microelectronic Systems' future revenues expected originate from sale products that were completed acquisition. However, UTMC Microelectronic Systems' existing products technologies expected generate sales through 2008.
Aeroflex Incorporated Subsidiaries
MANAGEMENT'S DISCUSSION ANALYSIS FINANCIAL CONDITION RESULTS OPERATIONS
assurance given, however, that underlying assumptions used estimate sales, development costs profitability, events associated with such projects will transpire estimated. these reasons, actual results vary from projected results. Remaining development efforts UTMC Microelectronic Systems' research development include various phases design, development testing. Funding such projects expected come from internally generated sources. evidenced continued support development projects, believe have reasonable chance successfully completing research development programs. However, with technology development, there risk associated with completion UTMC Microelectronic Systems' research development projects, there assurance that technological commercial success will achieved. development UTMC Microelectronic Systems' in-process research development project unsuccessful, sales profitability adversely affected future periods. Commercial results also subject certain market events risks, which beyond control, such trends technology, changes government regulation, market size growth, product introduction other actions competitors. February 1999, used most cash cash equivalents increased borrowings $20.0 million.
Provision Income Taxes
Income taxes increased 50.5% $7.2 million effective income rate 35.0%, exclusive special charge) fiscal 1999, from $4.8 million effective income rate 36.1%) fiscal 1998. income provisions years ended June 1999 1998 were different from amounts computed applying U.S. Federal income rate income before income taxes primarily state local income taxes research development credits, year ended June 1999, non-deductibility $3.5 million special charge.
Market Risk
exposed market risk related changes interest rates and, immaterial extent, foreign currency exchange rates. Most debt fixed rates interest variable rate with interest rate swap agreement which effectively converts variable rate debt into fixed rate debt. Therefore, market interest rates increase percent from levels June 2000, effect income would material. Most invested cash marketable securities variable rates interest. market interest rates decrease percent from levels June 2000, effect income would approximately $270,000.
Other Expense (Income)
Interest expense decreased $1.5 million fiscal 1999 from $2.0 million fiscal 1998, primarily reduced levels borrowings throughout most current period. Other income $777,000 fiscal 1999 $309,000 fiscal 1998 consisted primarily interest income. Interest income increased increased levels cash cash equivalents throughout most fiscal 1999. reduced levels borrowings increased levels cash cash equivalents resulted from proceeds $31.3 million from stock issued public offering completed March 1998. connection with acquisition UTMC Microelectronic Systems
Seasonality
Although business affected seasonality, historically revenues earnings increase sequentially from quarter quarter within fiscal year, first quarter less than previous year's fourth quarter.
Recent Accounting Pronouncements
Effective July 2000, Company will adopt SFAS 133, "Accounting Derivative Instruments Hedging Activities," amended.This statement requires companies record derivatives balance sheet assets liabilities their fair
Aeroflex Incorporated Subsidiaries
MANAGEMENT'S DISCUSSION ANALYSIS FINANCIAL CONDITION RESULTS OPERATIONS
value. certain circumstances changes value such derivatives required recorded gains losses. impact this statement expected have material effect Company's consolidated financial statements. Effective September 1998, acquired stock used repay bank indebtedness. balance proceeds used primarily purchase UTMC Microelectronic Systems February 1999.
Liquidity Capital Resources
June 2000, $133.9 million working capital. current ratio June 2000. February 1999, replaced previous agreement with revised revolving credit, term loan mortgage agreement with banks which secured substantially assets otherwise encumbered. agreement provided revolving credit line $23.0 million, term loan $20.0 million mortgage Plainview property $4.5 million. revolving credit loan facility expires December 2002.The term loan fully paid 2000 with proceeds from sale Common Stock. interest rate borrowings under this agreement various rates depending upon certain financial ratios, with current rate substantially equivalent 30-day LIBOR (approximately 6.7% June 2000) plus 1.50% revolving credit borrowings. mortgage payable monthly installments approximately $26,000 through March 2008 balloon payment $1.6 million April 2008. have entered into interest rate swap agreement outstanding amount under mortgage agreement approximately 7.6% order reduce interest rate risk associated with these borrowings. terms agreement require compliance with certain covenants including minimum consolidated tangible worth pretax earnings, maintenance certain financial ratios, limitations capital expenditures indebtedness prohibition payment cash dividends. connection with purchase certain materials manufacturing, have letter credit $2.0 million. March 1998, sold million shares (adjusted fivefor-four stock split) Common Stock public offering $31.3 million, underwriting discount $2.0 million issuance costs $496,000. these proceeds, $9.6 million
Europtest, S.A. (France) approximately $1.1 million. purchase agreement also requires that purchase remaining Europtest rata over three-year period prices determined based upon sales Europtest products. October, 1999, purchased additional 3.4% Europtest's stock approximately $54,000. Europtest develops sells specialized software-driven test equipment used primarily cellular, satellite other communications applications. acquired company's sales were approximately $1.9 million year ended March 1998. December 1998, financed acquisition renovation land building Pearl River, facility received proceeds amounting $4.2 million. debt requires balloon payment $4.0 million 2019. Effective February 1999, acquired outstanding stock UTMC Microelectronic Systems, Inc. $42.5 million cash. Prior acquisition, UTMC Microelectronic Systems distributed dividend then-parent, United Technologies Corporation, assets United Technologies assumed liabilities circuit card assembly portion UTMC Microelectronic Systems business.The purchase price paid with available cash $22.5 million borrowings under bank loan agreement $20.0 million. UTMC Microelectronic Systems leader supplying radiation-tolerant integrated circuits satellite communications. acquired company's sales, excluding circuit card assembly business, were approximately $33.4 million year ended December 1998. 2000, sold million shares (adjusted fivefor-four stock split) Common Stock public offering $68.5 million, underwriting discount $3.5 million issuance costs $500,000. these proceeds, $13.0 million
Aeroflex Incorporated Subsidiaries
MANAGEMENT'S DISCUSSION ANALYSIS FINANCIAL CONDITION RESULTS OPERATIONS
used repay term loan. balance proceeds invested short-term marketable securities intended ultimately used additional working capital, including research development, expansion facilities, general corporate purposes, including possible acquisitions technologies, product lines businesses. fiscal 2000, operations provided cash $14.6 million from continued profitability, partially offset increase receivables higher sales volume timing billings. fiscal 2000, investing activities used cash $17.3 million primarily purchase available-for-sale securities capital expenditures. fiscal 2000, financing activities provided cash $54.7 million primarily from sale Common Stock public offering $69.0 million offset, part, debt payments $19.1 million. believe that existing cash, cash equivalents marketable securities coupled with internally generated funds available lines credit will sufficient working capital requirements, capital expenditure needs servicing debt least next twelve months. June 2000, available unused line credit $21.0 million after consideration letter credit. subsidiaries whose operations were discontinued 1991, several defendants named personal injury action initiated August 1994, group plaintiffs. plaintiffs seeking damages which cumulatively exceed $500 million.The complaint alleges, among other things, that plaintiffs suffered injuries from exposure substances contained products sold subsidiary customers. This action discovery stage. Based upon available information considering various defenses, together with product liability insurance, opinion, outcome action against subsidiary will have materially adverse effect consolidated financial statements. backlog orders $119.3 million June 2000 $93.8 million June 1999. undergoing routine audits various taxing authorities state local income returns covering periods from 1994 1996. believe that probable outcome these various audits should materially affect consolidated financial statements. involved various other routine legal matters. believe outcome these matters will have materially adverse effect consolidated financial statements.
Forward-Looking Statements
statements other than statements historical fact included this Annual Report, including without limitation statements under "Management's Discussion Analysis Financial Condition Results Operations" regarding financial position, business strategy plans objectives management future operations, forward-looking statements. When used this Annual Report, words such "anticipate," "believe," "estimate," "expect," "intend" similar expressions, they relate management, identify forward-looking statements. Such forward-looking statements based beliefs management, well assumptions made information currently available management. Actual results could differ materially from those contemplated forward-looking statements result certain factors, including limited competitive factors pricing pressures, changes legal regulatory requirements, technological change difficulties, product development risks, commercialization difficulties general economic conditions. Such statements reflect current views with respect future events subject these other risks, uncertainties assumptions relating operations, results operations, growth strategy liquidity.
Aeroflex Incorporated Subsidiaries
CORPORATE INFORMATION
Board Directors
Harvey Blau
Chairman Board
Subsidiaries
Aeroflex Laboratories Incorporated
Plainview, York Leonard Borow
President
Michael Gorin
President
Aeroflex Lintek Corp.
Powell, Ohio Jerry Jost, Ph.D.
President
Leonard Borow
Executive Vice President
Aeroflex Technology Corporation
Paul Abecassis
Investment Banker
North Andover, Massachusetts Brian Mitchell
President
Milton Brenner
Retired Engineer
Aeroflex Systems Corporation
Leonard, Maryland Michael Gorin
President
Ernest Courchene,
Business Consultant
Aeroflex UTMC Microelectonic Systems, Inc.
Colorado Springs, Colorado Charles Gregory
President
Donald Jones
Vice Admiral (Ret.) Independent Consultant
Europtest, S.A. (France)
Elancourt, France Leonard Borow
President
Eugene Novikoff
Consulting Engineer
John Patton, Ph.D.
Major General USAF (Ret.) Technical Consultant
Vibration Mountings Controls, Inc.
Bloomingdale, Jersey Keith Larson
President
Corporate Officers
Harvey Blau
Chairman Board Chief Executive Officer
General Information
Auditors KPMG Transfer Agent Registrar American Stock Transfer Trust Company Wall St., York, York 10005 Copies Annual Report Form 10-K fiscal year ended June 2000 including schedules thereto filed with Securities Exchange Commission available without charge upon written request Office Secretary, Aeroflex Incorporated, South Service Road, Plainview, York 11803. 516-694-6700, Fax: 516-694-4823 equal opportunity employer and, through affirmative action program, full compliance with Executive Order 11246. Common Stock quoted Nasdaq National Market under symbol ARXX.
Michael Gorin
President Chief Financial Officer
Leonard Borow
Executive Vice President Chief Operating Officer
Carl Caruso
Vice President-Manufacturing
Charles Badlato
Treasurer
South Service Road Plainview, York 11803 (516) 694-6700 (516) 694-4823 www.aeroflex.com
Other recent searches
UB104S01 - UB104S01 UB104S01 Datasheet
MC14027B - MC14027B MC14027B Datasheet
DM9334 - DM9334 DM9334 Datasheet
CD110 - CD110 CD110 Datasheet
B3575 - B3575 B3575 Datasheet
B0530W - B0530W B0530W Datasheet
AN-803 - AN-803 AN-803 Datasheet
Privacy Policy | Disclaimer
© 2012 Datasheet Archive
