ANEN Anaren, Inc. (MM)

SYRACUSE, N.Y., Jan. 26 /PRNewswire-FirstCall/ -- Anaren, Inc. (NASDAQ:ANEN) today reported record net sales for the second quarter ended December 31, 2005 were $25.0 million, up 6% from the second quarter of fiscal year 2005. (Logo: http://www.newscom.com/cgi-bin/prnh/20021022/NYTU197LOGO ) Net income for the second quarter was $2.2 million, or $0.13 per diluted share including $0.8 million, or $0.04 per diluted share in equity based compensation expense as required by Statement of Financial Accounting Standards No. 123R. Net income for the second quarter of fiscal 2006 before equity based compensation expense was $3.0 million, or $0.17 per diluted share. This compares to net income of $1.0 million, or $0.05 per diluted share for the second quarter of fiscal 2005 which included $0.9 million in restructuring and consolidation charges and no equity based compensation expense. The effective tax rate for the second quarter of fiscal 2006 was 27.1%, compared to 9.4% for the second quarter of fiscal 2005. Operating income for the second quarter of fiscal 2006 was $2.5 million, or 10.1% of net sales, including $0.8 million, or 3.3% of net sales, in equity based compensation expense, up 177% from the second quarter of fiscal 2005. Operating income for the second quarter of fiscal 2006 before equity based compensation expenses was 13.4% of net sales. This compares to operating income of $0.9 million, or 3.9% of sales, for the second quarter of fiscal 2005, which included $0.5 million in restructuring and $0.4 million in other consolidation charges and no equity based compensation expense. Lawrence A. Sala, Anaren's President and CEO said, "The growth in net sales for the quarter was driven by the Space and Defense Group. Profitability for the quarter continued to improve as a result of the increase in net sales, continued favorable wireless product mix, and improved operating efficiencies particularly at our Anaren Ceramics subsidiary." Mr. Sala added, "We are pleased with the continued improvement in operating profitability and the expanding breadth of our Space and Defense business." For the six months ended December 31, 2005, net sales were $49.6 million, up 2% from the first six months of fiscal 2005. Operating income for the first six months of fiscal 2006 was $4.9 million, or 9.8% of net sales, including $1.7 million, or 3.4% of net sales, in equity based compensation expense. Operating income before equity based compensation expense for the first six months of fiscal 2006 was 13.2% of net sales. Net income for the first six months of fiscal 2006 was $4.5 million, or $0.25 per diluted share, including $1.7 million, or $0.09 per diluted share, in equity based compensation expense net of tax. This compares to net income for the first six months of fiscal 2005 of $3.0 million, or $0.15 per diluted share, which included $1.1 million in restructuring and consolidation charges and no equity based compensation expense. Balance Sheet Cash, cash equivalents and marketable debt securities at December 31, 2005 were $77.2 million. During the quarter, the Company generated $4.2 million in cash from operations, repurchased 343,611 shares of its common stock for $4.9 million, and expended $2.1 million on capital additions. Wireless Group Wireless Group net sales for the quarter were $15.5 million, down 3% from the second quarter of fiscal 2005. The decrease in wireless net sales from the second quarter of last year was driven by an anticipated decline in resistive product sales which was largely offset by an increase in sales of consumer component products. Sales of consumer component products were $1.1 million for the quarter, up 200% from the second quarter of fiscal 2005 driven by increased demand for satellite television applications. Due to the seasonality of this application, we anticipate that consumer component sales will decline in the third quarter. Development of new custom assembly opportunities continued during the quarter with the delivery of qualification units on two programs. The group also began sampling new balun and filter products for consumer terrestrial and satellite television applications. Wireless Group research and development spending remains focused on consumer and ferrite component development activity. Customers that exceeded 10% of Wireless Group net sales for the quarter were Nokia Corp. and Motorola, Inc. Space and Defense Group Space and Defense Group net sales for the quarter were $9.5 million, up 24.6% from the second quarter of fiscal 2005. New orders for the quarter totaled $8.9 million and included contracts for satellite antenna and airborne passive ranging applications. Space and Defense backlog at December 31, 2005 was $49.6 million, up 4% from $47.5 million at June 30, 2005. Outlook We expect continued market demand volatility for wireless infrastructure products, seasonal driven decline in the consumer component product line and relative consistency from the backlog-driven Space and Defense segment. As a result, we expect net sales to be in the range of $23.0 - $25.0 million for the third quarter of fiscal 2006. With an anticipated tax rate of 25% - 26% and an expected equity based compensation expense of approximately $0.04 per diluted share, we expect net earnings per diluted share to be in the range of $0.09 - $0.12 for the third quarter. Forward-Looking Statements The statements contained in this news release which are not historical information are "forward-looking statements". These, and other forward- looking statements, are subject to business and economic risks and uncertainties that could cause actual results to differ materially from those discussed. The risks and uncertainties described below are not the only risks and uncertainties facing our Company. Additional risks and uncertainties not presently known to us or that are currently deemed immaterial may also impair our business operations. If any of the following risks actually occur, our business could be adversely affected, and the trading price of our common stock could decline, and you may lose all or part of your investment. Such known factors include, but are not limited to: the Company's ability to timely ramp up to meet some of our customers' increased demands; unanticipated delays and/or difficulties associated with effectively operating the Company's recently consolidated Anaren Ceramics subsidiary; unanticipated delays in successfully completing customer orders within contractually required timeframes; increased pricing pressure from our customers; decreased capital expenditures by wireless service providers; the possibility that the Company may be unable to successfully execute its business strategies or achieve its operating objectives, generate revenue growth or achieve profitability expectations; successfully securing new design wins from our OEM customers, reliance on a limited number of key component suppliers, unpredictable difficulties or delays in the development of new products; order cancellations or extended postponements; the risks associated with any technological shifts away from the Company's technologies and core competencies; unanticipated impairments of assets including investment values and goodwill; diversion of defense spending away from the Company's products and or technologies due to on-going military operations; and litigation involving antitrust, intellectual property, environmental, product warranty, product liability, and other issues. You are encouraged to review Anaren's 2005 Annual Report, Anaren's Form 10-K for the fiscal year ended June 30, 2005 and Anaren's Form 10-Q for the three months ended December 31, 2005 and exhibits to those Reports filed with the Securities and Exchange Commission to learn more about the various risks and uncertainties facing Anaren's business and their potential impact on Anaren's revenue, earnings and stock price. Unless required by law, Anaren disclaims any obligation to update or revise any forward-looking statement. Conference Call Anaren will host a live teleconference, open to the public, on the Anaren Investor Info, Live Webcast Web Site (http://www.anaren.com/) and http://www.ccbn.com/ at http://www.streetevents.com/ on Thursday, January 26, 2006 at 5:00 p.m. EDT. A replay of the conference call will be available at 8:00 p.m. (EDT) beginning January 26, 2006 through midnight January 30, 2006. To listen to the replay, interested parties may dial in the U.S. at 1-888-203-1112 and international at 1-719-457-0820. The access code is 2766294. If you are unable to access the Live Webcast, the dial in number for the U.S. is 1-800-231-9012 and International is 1-719-457-2617. Company Background Anaren designs, manufactures and sells complex microwave signal distribution networks and components for the wireless communications, satellite communications and defense electronics markets. For more information on Anaren's products, visit our Web site at http://www.anaren.com/. Anaren, Inc. Anaren, Inc. and Subsidiaries Consolidated Condensed Statements of Income (Unaudited) Three Months Ended Six Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2005 2004 2005 2004 Sales $25,019,013 $23,650,022 $49,633,371 $48,557,379 Cost of sales 15,982,504 16,888,850 31,942,416 33,905,389 Gross profit 9,036,509 6,761,172 17,690,955 14,651,990 Operating expenses: Marketing 1,715,660 1,860,973 3,483,739 3,637,618 Research and development 2,268,438 1,387,105 4,303,079 3,032,182 General and administrative 2,523,124 2,141,752 5,015,434 4,243,936 Restructuring - 458,335 - 458,335 Total operating expenses 6,507,222 5,848,165 12,802,252 11,372,071 Operating income 2,529,287 913,007 4,888,703 3,279,919 Other income (expense): Other income, primarily interest 536,821 179,714 1,124,565 532,771 Interest expense (6,143) (9,837) (12,286) (15,642) Total other income (expense) 530,678 169,877 1,112,279 517,129 Income before income taxes 3,059,965 1,082,884 6,000,982 3,797,048 Income taxes 830,000 102,000 1,517,000 835,000 Net income 2,229,965 980,884 4,483,982 2,962,048 Basic earnings per share $0.13 $0.05 $0.26 $0.15 Diluted earnings per share $0.13 $0.05 $0.25 $0.15 Shares used in computing net income Per share: Basic 17,020,360 19,580,182 17,211,315 19,862,314 Diluted 17,595,314 20,167,087 17,765,683 20,422,625 Anaren, Inc. and Subsidiaries Consolidated Condensed Statements of Income (Unaudited) Three Months Ended Six Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2005 2004 2005 2004 Sales 100.0% 100.0% 100.0% 100.0% Cost of sales 63.9% 71.4% 64.4% 69.8% Gross profit 36.1% 28.6% 35.6% 30.2% Operating expenses: Marketing 6.8% 7.9% 7.0% 7.5% Research and development 9.1% 5.9% 8.7% 6.3% General and administrative 10.1% 9.0% 10.1% 8.7% Restructuring 0.0% 1.9% 0.0% 0.9% Total operating expenses 26.0% 24.7% 25.8% 23.4% Operating income 10.1% 3.9% 9.8% 6.8% Other income (expense): Other, primarily interest income 2.1% 0.7% 2.3% 1.0% Interest expense 0.0% 0.0% 0.0% 0.0% Total other income, net 2.1% 0.7% 2.3% 1.0% Income before income taxes 12.2% 4.6% 12.1% 7.8% Income taxes 3.3% 0.4% 3.1% 1.7% Net income 8.9% 4.2% 9.0% 6.1% Anaren, Inc. and Subsidiaries Consolidated Condensed Statements of Income (Unaudited) Three Months Ended Dec. 31, Dec. 31, Sept. 30, 2005 2004 2005 Net sales $25,019,013 $23,650,022 $24,614,358 Cost of sales 15,982,504 16,888,850 15,959,912 Gross profit 9,036,509 6,761,172 8,654,446 Operating expenses: Marketing 1,715,660 1,860,973 1,768,079 Research and development 2,268,438 1,387,105 2,034,641 General and administrative 2,523,124 2,141,752 2,492,310 Restructuring - 458,335 - Total operating expenses 6,507,222 5,848,165 6,295,030 Operating income 2,529,287 913,007 2,359,416 Other income (expense): Other, primarily interest income 536,821 179,714 587,744 Interest expense (6,143) (9,837) (6,143) Total other income, net 530,678 169,877 581,601 Income before income taxes 3,059,965 1,082,884 2,941,017 Income taxes 830,000 102,000 687,000 Net Income $2,229,965 $980,884 $2,254,017 Basic earnings per share $0.13 $0.05 $0.13 Diluted earnings per share $0.13 $0.05 $0.13 Shares used in computing net income per share: Basic 17,020,360 19,580,182 17,402,270 Diluted 17,595,314 20,167,087 17,936,051 Anaren, Inc. and Subsidiaries Consolidated Condensed Statements of Income (Unaudited) Three Months Ended Dec. 31, Dec. 31, Sept. 30, 2005 2004 2005 Net sales 100.0% 100.0% 100.0% Cost of sales 63.9% 71.4% 64.8% Gross profit 36.1% 28.6% 35.2% Operating expenses: Marketing 6.8% 7.9% 7.2% Research and development 9.1% 5.9% 8.3% General and administrative 10.1% 9.0% 10.1% Restructuring 0.0% 1.9% 0.0% Total operating expenses 26.0% 24.7% 25.6% Operating income 10.1% 3.9% 9.6% Other income (expense): Other, primarily interest income 2.1% 0.7% 2.4% Interest expense 0.0% 0.0% 0.0% Total other income, net 2.1% 0.7% 2.4% Income before income taxes 12.2% 4.6% 12.0% Income taxes 3.3% 0.4% 2.8% Net income 8.9% 4.2% 9.2% Anaren, Inc. Consolidated Condensed Balance Sheets (Unaudited) Dec. 31, June 30, 2005 2005 Assets: Cash, cash equivalents and short-term investments $64,728,186 $58,408,721 Accounts receivable, net 13,907,521 14,780,146 Other receivables 1,142,200 1,144,680 Inventories 22,380,517 19,403,348 Other current assets 2,018,153 1,771,658 Total current assets 104,176,577 95,508,553 Net property, plant and equipment 25,564,872 24,983,653 Securities available for sale - 3,500,000 Securities held to maturity 12,499,018 20,100,547 Goodwill 30,715,861 30,715,861 Other intangibles 506,806 673,241 Total assets $173,463,134 $175,481,855 Liabilities and stockholders' equity Liabilities: Accounts payable $5,525,706 $6,077,313 Accrued expenses 2,473,539 2,331,885 Customer advance payments 483,722 Other liabilities 2,420,237 2,545,847 Total current liabilities 10,903,204 10,955,045 Other non-current liabilities 6,013,707 5,448,247 Total liabilities 16,916,911 16,403,292 Stockholders' equity: Retained earnings 63,143,789 58,659,807 Common stock and additional paid-in capital 174,096,475 171,346,105 Accumulated comprehensive loss (721,756) (747,539) Less cost of treasury stock (79,972,285) (70,179,810) Total stockholders' equity 156,546,223 159,078,563 Total liabilities and stockholders' equity $173,463,134 $175,481,855 Anaren, Inc. and Subsidiaries Consolidated Condensed Statements of Income (Unaudited) Three Months Ended GAAP Results SFAS 123R EXP W/O SFAS 123R Dec. 31, Dec. 31, Dec. 31, 2005 2005 2005 Net sales $25,019,013 $ - $25,019,013 Cost of sales 15,982,504 196,907 15,785,597 Gross profit 9,036,509 196,907 9,233,416 Operating expenses: Marketing 1,715,660 68,733 1,646,927 Research and development 2,268,438 127,702 2,140,736 General and administrative 2,523,124 440,947 2,082,177 Total operating expenses 6,507,222 637,382 5,869,840 Operating income 2,529,287 834,289 3,363,576 Other income (expense): Other, primarily interest income 536,821 - 536,821 Interest expense (6,143) - (6,143) Total other income, net 530,678 - 530,678 Income before income taxes 3,059,965 834,289 3,894,254 Income taxes 830,000 (57,000) 887,000 Net Income $2,229,965 $777,289 $3,007,254 Basic earnings per share $0.13 $0.05 $0.18 Diluted earnings per share $0.13 $0.04 $0.17 Shares used in computing net income per share: Basic 17,020,360 17,020,360 17,020,360 Diluted 17,595,314 17,595,314 17,595,314 Anaren, Inc. and Subsidiaries Consolidated Condensed Statements of Income (Unaudited) Three Months Ended GAAP Results SFAS 123R EXP W/O SFAS 123R Dec. 31, Dec. 31, Dec. 31, 2005 2005 2005 Net sales 100.0% 100.0% Cost of sales 63.9% 0.8% 63.1% Gross profit 36.1% (0.8)% 36.9% Operating expenses: Marketing 6.8% 0.2% 6.6% Research and development 9.1% 0.5% 8.6% General and administrative 10.1% 1.8% 8.3% Restructuring 0.0% 0.0% 0.0% Total operating expenses 26.0% 2.5% 23.5% Operating income 10.1% (3.3)% 13.4% Other income (expense): Other, primarily interest income 2.1% 0.0% 2.1% Interest expense 0.0% 0.0% 0.0% Total other income, net 2.1% 0.0% 2.1% Income before income taxes 12.2% (3.3)% 15.5% Income taxes 3.3% (0.2)% 3.5% Net income 8.9% (3.1)% 12.0% Anaren, Inc. and Subsidiaries Consolidated Condensed Statements of Cash Flows (Unaudited) Six Months Three Months Three Months Ended Ended Ended Dec. 31, Dec. 31, Sept. 30, 2005 2005 2005 Cash flows from operating activities: Net income $4,483,982 $2,229,965 $2,254,017 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of plant and equipment 2,391,077 1,189,158 1,201,919 Loss on sale of equipment 15,875 15,875 - Amortization of intangibles 166,435 83,217 83,218 Provision for doubtful accounts (2,292) (2,292) - Deferred income taxes 156,405 84,405 72,000 Equity based compensation 1,725,844 863,923 861,921 Tax benefit from exercise of stock options 378,318 378,318 - Receivables 874,917 860,877 14,040 Inventories (2,977,169) (1,591,914) (1,385,255) Accounts payable (551,607) (1,022,551) (470,944) Other assets and liabilities 664,805 1,094,756 (429,951) Net cash provided by operating activities 7,326,590 4,183,737 3,142,853 Cash flows from investing activities: Capital expenditures (2,989,171) (2,141,269) (847,902) Proceeds from sale of equipment 1,000 1,000 - Net maturities (purchases) of marketable debt and equity securities 3,510,237 (22,171) 3,532,408 Net cash (used in) provided by investing activities from continuing operations 522,066 (2,162,440) (2,684,506) Cash flows from financing activities: Stock options exercised 646,209 498,373 147,836 Purchase of treasury stock (9,792,475) (4,898,324) (4,894,151) Net cash (used in) provided by financing activities (9,146,266) (4,399,951) (4,746,315) Effect of exchange rates 25,783 (37,906) 63,689 Net increase (decrease) in cash and cash equivalents (1,271,827) (2,416,560) 1,144,733 Cash and cash equivalents at beginning of period 5,900,841 7,045,574 5,900,841 Cash and cash equivalents at end of period $4,629,014 $4,629,014 $7,045,574 First Call Analyst: FCMN Contact: asavage@anaren.com http://www.newscom.com/cgi-bin/prnh/20021022/NYTU197LOGO http://photoarchive.ap.org/ DATASOURCE: Anaren, Inc. CONTACT: Joseph E. Porcello, VP of Finance, Anaren, Inc., +1-315-432-8909 Web site: http://www.anaren.com/

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