Net sales for the third quarter of fiscal 2010 were $45.4 million as compared to
$41.8 million for the third quarter of fiscal 2009. Net income for the third quarter was $2.6 million, or $.19 per diluted share, compared to $2.4 million or
$.18 per diluted share, last year.

The Company's EBITDA for the third quarter of 2010 was $5.5 million compared to
$5.4 million last year. Adjusted for the impact of litigation costs and net settlements in the respective quarters, adjusted EBITDA for the third quarter of 2010 was $7.1 million compared to $6.1 million last year. EBITDA is defined as net income plus net interest, taxes, depreciation and amortization.

The Company reported a revenue increase of $3.6 million in the third quarter of fiscal 2010 compared to the same period in the prior fiscal year. The 8.7% increase was primarily related to increased deliveries under major production programs, including increases attributable to manufacturing process improvements as well as revenue recognized under certain percentage-of-completion contracts.

Gross profit in the quarter was $13.7 million (30.0% gross profit margin) compared to $11.2 million (26.8% gross profit margin) last year, an increase of
$2.5 million. The increase in gross profit and gross profit margin during the quarter was principally a result of the sales volume increase and improvements in margins related to manufacturing efficiencies as well as a reduction in the estimated costs to complete a contract nearing completion. On a comparative basis, the third quarter of fiscal 2009 included a provision of $2.0 million for estimated losses on various contracts due to changes in estimated costs required to complete the contracts.

Selling and administrative ("S&A") expenses for the third quarter were $8.0 million, or 17.6% of net sales, compared to $7.5 million, or 18.0% of net sales, in the prior-year third quarter. The $.5 million increase in S&A expenses is primarily attributable to increased bid and proposal costs of $.3 million essential to future bookings and increased audit fees of $.2 million.

The Company reported operating income during the third quarter of fiscal 2010 of
$4.1 million compared to $3.0 million last year.

At May 2, 2010, the Company's balance sheet was strong, with total cash and cash equivalents of $19.4 million, working capital of $92.8 million and long-term debt of $12.5 million. Capital expenditures were $.7 million for the third quarter of fiscal 2010 compared to $1.9 million last year.

John Thonet, Chairman of Herley's Board of Directors, commented, "The Board of Directors is pleased with the third quarter performance and commends CEO Richard Poirier and his division managers for a job well done."

Richard F. Poirier, Chief Executive Officer and President, commented, "In our third quarter, we experienced year-over-year improvement in net sales, net income and gross profit margins. Strong bookings during the quarter brought us to a backlog of $184.1 million as we entered the fourth quarter of the fiscal year."

We present the non-GAAP (generally accepted accounting principles) measure EBITDA (as defined herein) in this report and anticipate referring to this measure in the conference call referenced below. Presentation of EBITDA is consistent with how we evaluate our performance internally and EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA is a non-GAAP operating measure under Regulation G of the Securities and Exchange Commission. We compute EBITDA by adding back net interest, taxes, depreciation and amortization to net income. Each of these GAAP financial measures is included in our financial statements and thus EBITDA can be reconciled to net income attributable to common shareholders, the most comparable GAAP financial measure to it. However, other companies in our industry may calculate EBITDA differently than we do.
EBITDA is not a measurement of financial performance under GAAP and should not be considered as a substitute for cash flow from operating activities as a measure of liquidity or a substitute for net income as an indicator of operating performance or any other measure of performance derived in accordance with GAAP.
Net income attributable to common shareholders is reconciled to EBITDA for the third fiscal quarter of 2010 and 2009, respectively, in the following table (in
thousands):

Thirteen Weeks
Ended
--------------
May 2, May 3,
2010 2009
---- ----
Net Income $2,637 $2,423
Add:
Interest, net 97 188
Taxes 1,191 567
Depreciation 1,341 1,585
Amortization 262 628

EBITDA $5,528 $5,391
------ ------

Adjust for net Litigation Costs 1,548 664
----- ---

Adjusted EBITDA $7,076 $6,055
====== ======

Mr. Thonet will host a conference call on June 11, 2010 at 10:00 a.m. Eastern time to discuss financial results for the Third Quarter of Fiscal 2010 ended May 2, 2010. He will be joined on the call by Mr. Richard H. Poirier, Chief Executive Officer and President, and Mr. Anello C. Garefino, Chief Financial Officer. To join the conference call dial 1 (888) 425-4188, referencing Conference ID #79502871.

A taped replay of the call will be available one hour after completion of the call through June 18 at 11:59 p.m. Eastern time. To listen to the replay dial: 1
(800) 642-1687 (U.S.) or 1 (706) 645-9291 (International), and Conference ID #79502871.

In addition, the conference call will be broadcast live over the Internet and can be accessed through the following URL:
http://www.videonewswire.com/event.asp?id=69742. To listen to the live call on the Internet, go to the website at least 15 minutes early to register, download and install any necessary audio software.

Herley Industries, Inc. is a leader in the design, development and manufacture of microwave technology solutions for the defense, aerospace and medical industries worldwide. Based in Lancaster, PA, Herley has seven manufacturing locations worldwide and approximately 1000 employees. Additional information about the company can be found on the Internet at www.herley.com

Safe Harbor Statement - Except for the historical information contained herein, this release may contain forward-looking statements. Such statements are inherently subject to risks and uncertainties. Forward-looking statements involve various important assumptions, risks, uncertainties and other factors which could cause our actual results to differ materially from those expressed in such forward-looking statements. Forward-looking statements in this discussion can be identified by words such as "anticipate," "believe," "could,"
"estimate," "expect," "plan," "intend," "may," "should" or the negative of these terms or similar expressions. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance or achievement. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors including but not limited to, competitive factors and pricing pressures, changes in legal and regulatory requirements, cancellation or deferral of customer orders, technological change or difficulties, difficulties in the timely development of new products, difficulties in manufacturing, the outcome of pending litigation, commercialization and trade difficulties and current economic conditions, including the potential for significant changes in US defense spending under the current Administration which could affect future funding of programs and allocations within the budget to various programs as well as the factors set forth in our public filings with the Securities and Exchange Commission. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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

May 2,
2010 August 2,
(Unaudited) 2009
----------- ----
ASSETS
Current Assets:
Cash and cash
equivalents $19,439 $14,820
Trade accounts
receivable, net 25,405 28,687
Income taxes
receivable 3,614 36
Costs incurred and income
recognized in excess
of billings on uncompleted
contracts and claims 5,386 10,396
Inventories, net 55,822 57,804
Deferred income
taxes 15,221 19,380
Other current
assets 3,667 2,780
------- -------
Total Current Assets 128,554 133,903
Property, plant and
equipment, net 32,051 32,872
Goodwill 43,722 43,722
Intangibles, net 8,455 9,619
Deferred income taxes 5,564 7,571
Other
assets 467 598
-------- --------
Total Assets $218,813 $228,285
======== ========

LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of
long-term debt $,322 $1,595
Current portion of employment
settlement agreements 1,304 7,400
Current portion of litigation
settlements 975 954
Accounts payable and accrued
expenses 20,875 26,447
Billings in excess of costs
incurred and
income recognized on uncompleted
contracts 868 261
Accrual for
contract losses 2,097 3,440
Advance payments on
contracts 8,323 12,698
------ ------
Total Current Liabilities 35,764 52,795
Long-term debt, net
of current portion 11,187 12,246
Long-term portion of
employment settlement
agreements 1,786 2,827
Other long-term
liabilities 8,097 8,361
----- -----
Total Liabilities 56,834 76,229
------ ------
Commitments and
Contingencies
Shareholders' Equity:
Common stock, $.10 par value;
authorized 20,000,000 shares;
issued and outstanding 13,682,402
at May 2, 2010
and 13,719,926 at
August 2, 2009 1,368 1,372
Additional paid-in
capital 103,094 103,113
Retained earnings 57,859 47,882
Accumulated other comprehensive
loss (342) (311)
-----
Total Shareholders' Equity 161,979 152,056
------- -------
Total Liabilities and
Shareholders' Equity $218,813 $228,285
======== ========

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

Thirteen weeks Thirty-nine
ended weeks ended
-------------- -----------
May 2, May 3, May 2, May 3,
2010 2009 2010 2009
---- ---- ---- ----

Net sales $45,438 $41,811 $139,726 $117,129
------- ------- -------- --------
Cost and
expenses:
Cost of products sold 31,786 30,613 99,930 89,658
Selling and
administrative expenses 7,989 7,513 23,416 22,049
Net gain on sale of
assets - - - (573)
Litigation costs, net of
recovery settlement 1,548 664 864 1,055
Employment settlement
costs - - 900 -
------ ------ ------ ------
41,323 38,790 125,110 112,189

Operating income 4,115 3,021 14,616 4,940
----- ----- ------ -----
Other (expense)
income:
Interest income 9 58 29 94
Interest expense (106) (246) (436) (945)
Foreign exchange
transaction (losses)
gains (190) 157 (355) (233)
----- ---- ----- -------
(287) (31) (762) (1,084)
---- --- ---- ------

Income from continuing
operations
before income taxes 3,828 2,990 13,854 3,856
Provision (benefit) for
income taxes 1,191 567 3,877 163
----- ----- ------ -----

Income from continuing
operations 2,637 2,423 9,977 3,693
----- ----- ------ -----
Discontinued
operations:
Loss from operations of
discontinued subsidiary - - - (734)
Benefit for income taxes - - - (278)
Loss from discontinued ----- ---- ----- -----
operations - - - (456)
--- ---- ----- ------

Net income $2,637 $2,423 $9,977 $3,237
====== ====== ====== ======

Earnings (loss)
per common
share -Basic
Income from continuing
operations $.19 $.18 $.73 $.27
Loss from discontinued
operations - - - (.03)
--- ---- ---- -----
Net income - basic $.19 $.18 $.73 $.24
==== ==== ==== ====

Basic weighted average
shares 13,580 13,559 13,691 13,545
====== ===== ====== =====

Earnings (loss)
per common
share -Diluted
Income from continuing
operations $.19 $.18 $.72 $.27
Loss from discontinued
operations - - - (.03)
--- ---- ----- ------
Net income - diluted $.19 $.18 $.72 $.24
===== ==== ===== ====

Diluted weighted average
shares 13,885 13,721 13,873 13,774
====== ====== ====== ======

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

Thirty-nine
weeks ended
-----------
May 2, May 3,
2010 2009
---- ----
Cash flows from operating
activities:
Net income $9,977 $3,237
------ ------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,236 6,374
Loss (gain) on sale of fixed
assets 28 (573)
Impairment of goodwill of
discontinued subsidiary - 1,000
Stock-based compensation costs 291 458
Excess tax benefit from
exercises of stock options (893) (61)
Litigation
settlement costs 975 -
Imputed interest on employment
and litigation settlement
liabilities 124 275
Inventory valuation reserve
charges 1,102 1,164
Warranty reserve
charges 1,324 1,130
Deferred tax provision
(benefit) 7,049 16
Changes in operating assets
and liabilities:
Cash of discontinued
subsidiary - (712)
Trade accounts receivable 3,203 (2,285)
Income taxes receivable (3,578) 2,056
Costs incurred and income
recognized in excess of
billings on uncompleted
contracts and claims 4,878 3,477
Other receivables 192 1,020
Inventories, net 799 (6,167)
Other current assets (1,096) (965)
Accounts payable and accrued
expenses (6,171) (6,094)
Billings in excess of costs
incurred and
income recognized on
uncompleted contracts 649 175
Income taxes payable 428 18
Accrual for contract losses (1,329) 1,420
Employment settlement
payments (8,115) (964)
Litigation settlement
payments (3,000) (1,000)
Advance payments on
contracts (2,372) 9,361
Other, net (108) (224)
Total
adjustments (384) 8,899
---- -----
Net cash provided by operating
activities 9,593 12,136

Cash flows from investing
activities:
Acquisition of business, net of cash
acquired - (30,010)
Proceeds from sale of discontinued
business - 15,000
Proceeds from sale of fixed assets 152 -
Capital expenditures (3,484) (4,524)
------ ------
Net cash used in investing
activities (3,332) (19,534)

Cash flows from financing
activities:
Borrowings under bank line of credit 7,000 31,000
Borrowings - term loan - 10,000
Proceeds from exercise of stock options - 313
Excess tax benefit from exercises of stock
options 893 61
Payments of long-term debt (1,302) (1,595)
Payments under bank line of credit (7,000) (32,500)
Purchase of treasury stock (1,207) -
------ ---
Net cash (used in) provided by
financing activities (1,616) 7,279

Effect of exchange rate
changes on cash (26) (89)
--- ---
Net increase (decrease) in
cash and cash equivalents 4,619 (208)
Cash and cash equivalents at beginning of
period 14,820 14,347
------ ------
Cash and cash equivalents at
end of period $19,439 $14,139
======= =======

For information at Herley contact:
Peg Guzzetti Tel: (717) 397-2777
Investor Relations www.herley.com

SOURCE Herley Industries, Inc.