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Aeroflex Holding's CEO Discusses F2Q13 Results

Good afternoon, and asics mens running shoes size 11 clearance welcome to the Aeroflex women's asics gel kayano clearance Holding Corp. webcast and conference call, where management will discuss the company's financial results for the second quarter of fiscal year 2013, which ended December 31, 2012. This call is being recorded for future playback, and will be available later today in the events tab of the Investor Relations section on the company's website.

I would now like to turn the call over to Mr. Andrew Kaminsky, Senior Vice President of Corporate Development and Investor Relations for opening remarks.

Good afternoon, and thank you for joining us. With me on the call today is Len Borow, Aeroflex's Chief Executive Officer; John Adamovich, Aeroflex's Chief Financial Officer; and John Buyko, Aeroflex's Executive Vice President and President of AMS.

Please note that during this conference call, we may make forward looking statements regarding future events or financial performance and outlook that are based on information currently available to management. You are cautioned that any forward looking statements are not a guarantee of future performance and are subject to a number of uncertainties and other factors, which could cause the actual results to differ materially from those currently expected.

For a more detailed description of these uncertainties and factors, please see Aeroflex's filings with the Securities and Exchange Commission. Aeroflex undertakes no obligation to update or revise forward looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results.

Also note that all dollar figures and percentages are approximations, and that the detailed reconciliations of GAAP to non GAAP results can be men's asics gel-noosa tri 7 running shoes found in the press release we issued this afternoon that is posted on our website. After we review the results of the second quarter, we will open the lines for questions.

At this time, I'd like to turn the conference call over to, Len.

Thank you, Andrew. Good afternoon and thank you for joining us today. Despite the difficult environment, we have once again been able to exceed expectations this quarter. We saw combined improvement in both AMS and ATS, and had exceptional bookings led by our high performance, high reliability products in AMS, and our commercial wireless products in ATS.

Even with the unresolved budgetary issues in Washington, we are seeing meaningful opportunities in the aerospace, defense and government end markets. Our unique intellectual property and sole source or primary supplier status for many of our products and communications and defense applications keeps us well positioned in our end markets.

The very strong book to bill of over one to one this quarter was primarily driven by AMS. These bookings were across all our end markets, including medical, industrial, defense, aerospace and satellite.

This quarter we received an order for $12 million for Battery Electronic Units or BEUs from a leading satellite manufacturer as well as a significant order for our next generation Mixed Signal ASICs from a leading medical diagnostics company. We also received a multimillion dollar order from a leading digital X ray manufacturer for our high performance, high reliability ASICs. Many of these bookings are long term programs with shipping date over the next six to 36 months.

In ATS, we've continued to capitalize on the operational changes we made in our commercial wireless business last summer. We are continuing to evaluate our operations, and we're making more changes to make us even more efficient and profitable in the future.

Our strategy of focusing aggressively on our core competencies has begun to show signs of success. This quarter we had multimillion dollar orders from global telecom equipment vendors for our market leading wireless infrastructure products as well as strong PXI orders for wireless handset manufacturing from one of our key customers.

These orders contributed to our solid book to bill of over one to one in our commercial wireless business this quarter. This team has been reenergized and motivated to keep building upon the successes we've experienced in the first half of the fiscal year. Although, we are encouraged by the strong bookings activity this quarter, we're still cautious as the political and economic issues affecting our end markets still exist.

I would like to now turn the call over to John Adamovich to discuss our financial results.

Thanks, Len, and good afternoon. I am going to briefly discuss financial results for the quarter and give a quick update on our balance sheet. I'll then turn the call back to Len, who will discuss our guidance, before opening the lines for questions.

For purposes of this call, my statement of operations related comments will focus on our non GAAP metrics. These non GAAP metrics eliminate certain non recurring charges and non cash charges. As Andrew mentioned at the outset of the call, the detailed reconciliation of our GAAP to non GAAP results can be found in the press release we issued this afternoon.

The net sales exceeded the guidance we provided. Our net sales for the second quarter decreased year over year to $156 million. The sales split by segment was $79 million from AMS and $78 million asics outlet from ATS.

Gross margin for the quarter was 50.7%, up 180 basis points sequentially from 48.9% in the first quarter of fiscal 2013. The increase was driven by the performance of the commercial wireless business in ATS.

On a consolidated basis, SG was $35.6 million, flat from the second quarter of fiscal 2012. As we have previously discussed, as certain R projects included, we reduced the number of contract engineers in our wireless ATS business. R for the quarter was $21.1 million, down from $22.4 million in fiscal 2012.

As a percentage of sales, R was 13.5% this quarter compared to 13.1% in the second quarter of fiscal 2012. With R leading the path to our future, we continue to focus on core engineering projects that will contribute to our growth across both businesses. Due to the cost saving initiatives and headcount reductions we have executed, we have been able to reduce SG and R by a combined 5.5% compared to the first six months of fiscal 2012.

For the second quarter, we generated non GAAP operating income of $22.5 million and adjusted EBITDA of $27.6 million. Non GAAP net income for the quarter was $8.7 million or $0.10 per share.

Our customer diversity has remained strong. For the quarter, no customer accounted for more than 10% of net sales. government dropped to approximately 26% for the quarter from 39% for the same quarter in fiscal 2012.

Our geographic mix of non GAAP pre tax income for the quarter resulted in a non GAAP effective tax rate of 33%. We continually review our operations for additional efficiency and are not hesitant to take the actions to improve our profitability and position us for the future.

Our low CapEx needs continue to allow us to use our excess cash flow to repay debt. This quarter we prepaid an additional $10 million. Fiscal year to date, we prepaid $35 million of debt, bringing our gross debt balance down for $606.4 million and our net debt to $564.7 million at December 31.

Finally, at December 31, our leverage ratio under the one financial covenant in our credit agreement was 4.99 times compared to the permitted ratio of 5.75 times.

I will now turn the call back to Len for some closing remarks. Len?

Thanks, John. Before I even start my closing remarks, I just want to reiterate something that John said so that you can make sure you understand it. And that the biggest part of our increase in sales in wireless was APAC, which is where it's really happening. sales, we made up for it in APAC. government. So even with the sequestration looming over our head, we're feeling good about our core businesses.

While we remain cautious in the short term due to the uncertain economic conditions, in particular the government imposed economic conditions, I am confident about our long term market position and ability to execute and our desire to succeed.