Aether Holdings Announces First Quarter 2006 Results
10 May 2006 - 6:30AM
Business Wire
Aether Holdings, Inc. (Nasdaq:AETH), today reported financial
results for the quarter ended March 31, 2006.(1) Net loss for the
first quarter of 2006 was ($0.00) per share, or approximately
($133,000), compared with a net loss of ($0.02) per share, or
approximately ($658,000) in the first quarter of 2005 and a net
loss of ($0.09) per share or approximately ($3.8) million in the
fourth quarter of 2005. The net loss for the first quarter of 2006
included an other than temporary impairment charge of $228,000 on
its mortgage-backed securities ("MBS") portfolio, and a loss on
sale of approximately $490,000 in connection with the sale of
$140.0 million of MBS in March 2006. In December 2005, the Company
recorded a $4.0 million impairment charge on the value of its MBS
portfolio, $2.5 million of which related to the MBS investments
that were sold in March 2006. The Company reported that net
interest income from MBS was $1.2 million in the first quarter of
2006, as compared to $795,000 in the first quarter of 2005 and $1.1
million in the fourth quarter of 2005. The Company attributed the
increase in net interest income in the first quarter to a reduction
in premium amortization expense partially offset by increased
borrowing costs under its repurchase agreements. Operating expenses
were approximately $858,000 in the first quarter, as compared to
approximately $1.1 million in the fourth quarter of 2005. The
decrease in operating expenses was primarily attributable to a
one-time credit recognized in the current quarter. At March 31,
2006, the Company's MBS portfolio had a fair value of $94.8
million, compared to a fair value of $253.9 million at December 31,
2005. The reduction in fair value during the quarter was
attributable to the sale of approximately $140.0 million of MBS,
principal repayments of approximately $18.8 million and an
impairment charge of approximately $228,000. The Company also
stated that all of its outstanding borrowings under repurchase
agreements had been repaid during the quarter using a portion of
the proceeds from sales of MBS in March 2006. The Company's
decision to de-lever its MBS portfolio during the quarter reflects
a response to ongoing increases in short-term interest rates that
produced a negative impact on the value and performance of its MBS
portfolio. Outstanding borrowings as of December 31, 2005 were
approximately $133.9 million, which had a weighted average maturity
of 25 days and a weighted average interest rate of 4.23%. The
weighted average coupon on the Company's MBS was 4.33% during the
quarter ending March 31, 2006, compared to 4.01% at March 31, 2005
and 4.28% at December 31, 2005. All of the Company's MBS are
guaranteed by a U.S. government-chartered agency. In addition, all
of the Company's MBS are hybrid adjustable-rate securities that
have initial fixed interest rates for three years and thereafter
generally reset on an annual basis. In Q1 2006, the weighted
average annualized yield on MBS was 4.25%, versus 3.64% in Q1 of
2005 and 3.99 % in Q4 of 2005. For the first quarter of 2006, the
Company's weighted average cost of funds was 4.49%, which equates
to a negative interest rate spread of (0.24%) for the quarter,
compared to a positive interest rate spread of 0.81% for the first
quarter of 2005 and a negative interest rate spread of (0.07%) for
the fourth quarter of 2005. The weighted average constant
prepayment rate on the Company's MBS portfolio was 25.7 during the
first quarter of 2006, as compared to 16.5 and 30.0 for the first
quarter of 2005 and the fourth quarter of 2005, respectively. The
Company reiterated that it does not expect to purchase additional
MBS in the near term, pending the results of its strategic work
with Jefferies & Company and a further assessment of the
outlook for its MBS business in light of market conditions. The
Company also said that it is continuing to evaluate potential
business opportunities unrelated to the MBS business and that it
might sell additional MBS if it decided to pursue other business
opportunities or, based on the advice of its outside professional
advisors, in response to market conditions. The Company said that
any decisions would be made based upon its primary objective of
seeking to more rapidly realize value from its substantial
accumulated net operating and capital loss carryforwards, which
totaled $777.3 million and $290.7 million, respectively, at March
31, 2006. On April 5, 2006, a Schedule 13G was filed with the
Securities and Exchange Commission indicating that a fund group had
acquired a 6.5% interest in the Company. Our Board of Directors,
after reviewing the facts surrounding this stock purchase,
subsequently determined that this acquisition violated the transfer
restrictions contained in our Certificate of Incorporation. At our
direction, the acquiring party has transferred shares in excess of
the 5% ownership limit to our agent for disposition in accordance
with the terms of our Certificate of Incorporation. Conference Call
Aether will host a conference call on Wednesday, May 10, 2006 at
8:30 a.m., Eastern Time. Interested parties may access the call at
www.aetherholdings.com or by telephone at (800) 361-0912 / (913)
981-5559. Please ask for confirmation code 5497369. Replay of this
call will be available until May 30, 2006, by calling (888)
203-1112 / (719) 457-0820, access code 5497369. About Aether
Holdings, Inc. Aether Holdings owns and manages a leveraged
portfolio of mortgage-backed securities through its wholly-owned
subsidiary Aether Systems, Inc. Forward-Looking Statement
Disclosure This press release contains "forward-looking
statements," as such term is used in the Securities Exchange Act of
1934, as amended. Such forward-looking statements include those
regarding the Company's expectations about anticipated future cash
balances and expense reductions. When used herein, the words
"anticipate," "believe," "estimate," "intend," "may," "will," and
"expect" and similar expressions as they relate to the Company or
its management are intended to identify such forward-looking
statements. Forward-looking statements are based on current
expectations and assumptions, which are subject to risks and
uncertainties. They are not guarantees of future performance or
results. The Company's actual results, performance or achievements
could differ materially from the results expressed in, or implied
by, these forward-looking statements. Factors that could cause or
contribute to such differences include: (1) our MBS business
involves significant risks related primarily to changes in interest
rates; (2) we may not be able to realize value from our accumulated
tax loss carryforwards, because of a failure to generate sufficient
taxable earnings, regulatory limits or both; (3) in managing the
MBS portfolio, we will depend heavily on third party investment
managers and financial advisors and consultants, and there is no
assurance that such third parties will continue to work with us, in
which event our performance could be negatively affected; (4) as a
result of continued negative market conditions for MBS, the value
of our MBS may decline further and we may realize additional losses
if we sell additional MBS; (5) our financial condition could be
negatively affected by contingent or retained liabilities relating
to businesses that we have sold which includes post-closing
indemnity claims relating to the sale of our Transportation
segment, as the buyer of that business has filed a complaint in
court alleging significant claims, which we are vigorously
disputing; (6) as a result of continuing negative market conditions
for the MBS business, we are pursuing additional or different
business strategies that, if implemented, may involve new or
additional risks, and there is no assurance we will be able to
identify or successfully implement any such additional or different
strategies; and (7) other factors discussed in our filings with the
Securities and Exchange Commission. Aether undertakes no obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. -0- *T (1)
In accordance with generally accepted accounting principles
("GAAP"), the results of Aether's Transportation and Mobile
Government businesses, which were sold in September 2004, and its
Enterprise Mobility Systems business, which was sold in January
2004, have been presented as discontinued operations for all
periods, so that period-to-period comparisons are presented on a
comparable basis. Aether's continuing operations reflect the
results of its mortgage-backed securities business. AETHER
HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS March
31, December 31, 2006 2005 ------------ ------------ in thousands
(Unaudited) Cash and cash equivalents $ 25,624 $ 1,092
Mortgage-backed securities, at fair value 94,751 253,900 Interest
receivable 608 1,174 Restricted cash 8,633 8,633 Property and
equipment, net 232 255 Prepaid expenses and other assets 1,257 954
------------ ------------ Total assets $ 131,105 $ 266,008
============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 3,600 $ 4,465 Repurchase
agreements - 133,924 Accrued employee compensation and benefits 60
70 Accrued interest payable - 48 Other liabilities 1,120 1,114
------------ ------------ Total liabilities 4,780 139,621
Stockholders' equity 126,325 126,387 Commitments and contingencies
------------ ------------ Total liabilities and stockholders'
equity $ 131,105 $ 266,008 ============ ============ AETHER
HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) Three Months Ended March 31, ------------------ 2006
2005 -------- -------- in thousands except per share data Interest
income from mortgaged-backed securities $ 2,549 $ 592 Interest
income from cash and cash equivalents 14 215 Interest expense on
repurchase agreements (1,354) (12) -------- -------- Net interest
income 1,209 795 -------- -------- Loss on sale of mortgage-backed
securities (490) - Other than temporary impairment on
mortgage-backed securities (228) - Operating (expenses) income
--------------------------- Selling, general and administrative
expenses (778) (1,741) Investment advisor fees (46) (41)
Depreciation (23) (49) Share-based compensation expense (71) (76)
Other income 60 188 Restructuring charge - 7 -------- --------
Total operating expenses (858) (1,712) -------- -------- Operating
loss (367) (917) Non-operating income (expense)
------------------------------ Other interest income 246 269
Investment gain (loss), net - (10) -------- -------- Total
non-operating income (expense) 246 259 -------- -------- Loss from
continuing operations (121) (658) Discontinued operations
----------------------- Gain (loss) on sale of discontinued
operations (12) - -------- -------- Loss from discontinued
operations (12) - -------- -------- Net loss $ (133) $ (658)
======== ======== Loss per share - basic and diluted - from
continuing operations $ (0.00) $ (0.02) Income (loss) per share -
basic and diluted - gain on sale of discontinued operations - -
-------- -------- Net loss per share - basic and diluted $ (0.00) $
(0.02) ======== ======== Weighted average shares outstanding Basic
and diluted 44,019 43,991 ======== ======== *T
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