SYRACUSE, N.Y., April 29, 2010 (GLOBE NEWSWIRE) -- Anaren, Inc. (Nasdaq:ANEN) today reported net sales for the fiscal 2010 third quarter ended March 31, 2010 of $42.2 million, down 3.0% from $43.5 million for the third quarter of last year.
GAAP (U.S. generally accepted accounting principles) net income for the third quarter of fiscal 2010 was $4.6 million, or $0.32 per diluted share, compared to $3.5 million, or $0.25 per diluted share for the third quarter of last year.
Non-GAAP diluted earnings per share, excluding non-cash equity based compensation, acquisition related inventory step-up (fiscal 2009 only) and intangible amortization, was $0.38 for the third quarter of fiscal 2010 compared to non-GAAP earnings per share of $0.30 for the third quarter of fiscal 2009.
GAAP operating income for the third quarter of fiscal 2010 was $5.3 million, or 12.6% of net sales, compared to $4.7 million, or 10.9% of net sales for the third quarter of last year. Non-GAAP operating income for the third quarter of fiscal 2010, excluding non-cash equity based compensation and acquisition related intangible amortization was $6.7 million, or 15.9% of net sales up 15.7% from $5.8 million, or 13.3% of net sales for the third quarter of fiscal 2009.
Income taxes for the third quarter of fiscal 2010 were $700,000, representing an effective tax rate of 13.4% compared to income tax expense of $1.2 million for the third quarter of fiscal 2009, representing an effective tax rate of 25.7%. Tax expense for the current quarter included a reduction of approximately $1.0 million, or $0.07 per diluted share, due to the settlement of the IRS examination for the fiscal 2007 and 2008 returns and the related uncertain tax position adjustments. The projected effective tax rate for all of fiscal 2010, absent one-time events, is expected to be approximately 32.0%.
Lawrence A. Sala, Anaren's Chairman, President and CEO said, "We are very pleased with the growth in Wireless Group net sales from second quarter levels as well as the continuing improvement in our operating profitability. The record operating profits in the quarter were due to a very favorable product mix, as well as yield improvements and our continuing cost reduction initiatives."
Net sales for the first nine months ended March 31, 2010, including $37.5 million of sales from M.S. Kennedy Corp and Unicircuit, Inc., were $123.5 million, compared to net sales of $123.1 million for the first nine months of last year, which included $25.5 million of sales from M.S. Kennedy Corp and Unicircuit, Inc. GAAP net income for the first nine months of fiscal 2010 was $9.9 million, or $0.68 per diluted share, compared to $6.4 million, or $0.45 per diluted share for the first nine months of last year.
Non-GAAP diluted earnings per share, excluding non-cash equity based compensation, acquisition related inventory step-up (fiscal 2009 only) and intangible amortization, was $0.84 for the first nine months of fiscal 2010 compared to non-GAAP diluted earnings per share of $0.74 for the first nine months of fiscal 2009.
During the third quarter of fiscal 2010, the Company generated $8.4 million in operating cash flow compared to $8.6 million in the same period in fiscal 2009. Additionally, during the current quarter the Company repurchased approximately 244,000 shares of its common stock for a total of $3.2 million and expended $1.7 million for capital additions. Cash, cash equivalents and marketable debt securities at March 31, 2010 were $65.4 million, up $3.6 million from $61.8 million at December 31, 2009.
Wireless Group
Wireless Group net sales for the quarter were $14.2 million, down 18% from the third quarter of fiscal 2009, but up 15% from second quarter fiscal 2010 levels driven by strong demand for standard component products.
Demand for consumer and infrastructure standard component products remained robust throughout the quarter and offset continuing weakness in demand for infrastructure custom assemblies. New product investments for the quarter remained focused on expanding the infrastructure and consumer standard component product portfolios.
Customers that generated greater than 10% of Wireless Group net sales for the quarter were Richardson, E.G. Components, Motorola, and Huawei.
Space & Defense Group
Space & Defense Group net sales for the quarter were $28.0 million, up 7% from the third quarter of fiscal 2009. The transition from low rate to volume production on a number of new programs drove the increase in net sales.
New orders for the quarter totaled $22.3 million and included contracts for components and assemblies for use in satellite, radar, passive ranging and airborne jamming applications. Space & Defense Group order backlog at March 31, 2010 was $79.4 million.
Customers that generated greater than 10% of Space & Defense Group net sales for the quarter were Lockheed Martin and Raytheon.
Non-GAAP Financial Measures
In addition to presenting financial results calculated in accordance with GAAP, Anaren's earnings release contains non-GAAP financial measures including: non-GAAP gross profit, non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share. These non-GAAP measures are each adjusted from GAAP results to exclude certain non-cash items including equity based compensation and acquisition related inventory step-up and intangible amortization.
The Company believes these non-GAAP financial measures provide useful information to both management and investors to help understand and compare business trends among reporting periods on a consistent basis. Additionally, these non-GAAP financial measurements are one of the primary indicators management uses for planning and forecasting in future periods. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.
Outlook
For the fourth quarter of fiscal 2010, we anticipate comparable sales for the Wireless Group and an increase in sales for the Space & Defense Group compared to our third quarter levels. As a result, we expect net sales to be in the range of $41 to $45 million. We expect GAAP net earnings per diluted share to be in the range of $0.22 - $0.26, using an anticipated tax rate of approximately 32.0% and inclusive of approximately $0.06 per share related to expected equity based compensation expense and acquisition related amortization of intangibles. Non-GAAP net earnings per diluted share are expected to be in the range of $0.28 - $0.32 for the fourth 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.
These known risks and uncertainties include, but are not limited to: the Company's ability to continue to successfully integrate the MSK and Unicircuit acquisitions, including but not limited to, the timely and effective installation of appropriate financial controls; unknown liabilities not identified during due diligence; not realizing the expected benefits of the acquisitions, including the realization of the accretive effects from the acquisitions; the Company's substantial increase in long term debt (originally $50 million, currently $40 million outstanding), and the unanticipated loss of key management or technical employees. The Company also could experience an impairment of goodwill which increased as the result of the Company's two acquisitions in fiscal 2009 as well as acquisitions made in previous years. Other non-acquisition related risks and uncertainties include: the Company's ability to timely ramp up to meet some of our customers' increased demands; potential delay or inability to collect accounts receivable due to the current economic recession; unanticipated delays in successfully completing customer orders within contractually required timeframes; unanticipated penalties resulting from failure to meet contractually imposed delivery schedules; unanticipated costs and damages resulting from replacement or repair of products found to include latent defects; 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 limited number of OEM customers, reliance on key component suppliers, unpredictable difficulties or delays in the development of new products; the need to relocate the Company's Suzhou, China facility in calendar year 2010 due to expansion of China's mass transit system; 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; 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 2009 Annual Report on Form 10-K for the fiscal year ended June 30, 2009 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) on Thursday, April 29 at 5:00 p.m. EDT. A replay of the conference call will be available at 8:00 p.m. (EDT) beginning April 29, 2010 through midnight May 3, 2010. To listen to the replay, interested parties may dial in the U.S. at 1-800-642-1687 and International at 1-706-645-9291. The access code is 67026842. If you are unable to access the Live Webcast, the dial in number for the U.S. is 1-877-734-4580 and International is 1-678-905-9378.
Company Background
Anaren designs, manufactures and sells complex microwave components and subsystems for the wireless communications, satellite communications and defense electronics markets. For more information on Anaren's products, visit our Web site at www.anaren.com
The Anaren, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5360
| ANAREN, INC. | ||||
| Condensed Consolidated Income Statement | ||||
| (in thousands except per share data) | ||||
| (unaudited) | ||||
| Three Months Ended | Nine Months Ended | |||
| March 31, 2010 | March 31, 2009 | March 31, 2010 | March 31, 2009 | |
| Sales | $ 42,181 | $ 43,507 | $ 123,537 | $ 123,074 |
| Cost of sales | 25,356 | 28,423 | 77,743 | 84,168 |
| Gross profit | 16,825 | 15,084 | 45,794 | 38,906 |
| 39.9% | 34.7% | 37.1% | 31.6% | |
| Operating expenses: | ||||
| Marketing | 2,407 | 2,360 | 7,006 | 6,505 |
| Research and development | 3,999 | 3,392 | 11,140 | 9,500 |
| General and administration | 5,096 | 4,601 | 14,218 | 13,993 |
| Total operating expenses | 11,502 | 10,353 | 32,364 | 29,998 |
| Operating income | 5,323 | 4,731 | 13,430 | 8,908 |
| 12.6% | 10.9% | 10.9% | 7.2% | |
| Other income (expense): | ||||
| Other income, primarily interest | 75 | 257 | 288 | 968 |
| Interest expense | (129) | (311) | (451) | (1,200) |
| Total other income (expense) | (54) | (54) | (163) | (232) |
| Income before income tax expense | 5,269 | 4,677 | 13,267 | 8,676 |
| Income taxes | 708 | 1,200 | 3,328 | 2,274 |
| Net income | $ 4,561 | $ 3,477 | $ 9,939 | $ 6,402 |
| 10.8% | 8.0% | 8.0% | 5.2% | |
| Earnings per share | ||||
| Basic | $ 0.33 | $ 0.25 | $ 0.71 | $ 0.46 |
| Diluted | $ 0.32 | $ 0.25 | $ 0.68 | $ 0.45 |
| Weighted average common shares outstanding | ||||
| Basic | 13,919 | 13,812 | 14,083 | 13,916 |
| Diluted | 14,328 | 14,062 | 14,595 | 14,102 |
| ANAREN, INC. | ||
| Condensed Consolidated Balance Sheet | ||
| (in thousands) | ||
| (unaudited) | ||
| March 31, 2010 | June 30, 2009 | |
| Assets: | ||
| Cash, cash equivalents and short-term investments | $ 45,961 | $ 61,703 |
| Receivables, less allowances | 28,103 | 24,466 |
| Inventories | 33,392 | 35,282 |
| Prepaid expenses and other current assets | 5,906 | 5,580 |
| Total current assets | 113,362 | 127,031 |
| Securities available-for-sale | 1,050 | 1,050 |
| Securities held to maturity | 18,430 | 2,079 |
| Property, plant, and equipment, net | 49,789 | 52,889 |
| Deferred income taxes | 28 | 27 |
| Goodwill | 42,481 | 42,635 |
| Other intangibles, net of accumulated amortization | 10,450 | 11,344 |
| Total assets | $ 235,590 | $ 237,055 |
| Liabilities and Stockholders' Equity | ||
| Liabilities: | ||
| Current installments of long-term obligation | $ 10,000 | $ 9,800 |
| Accounts payable | 8,117 | 6,991 |
| Accrued expenses | 4,819 | 5,208 |
| Customer advance payments | 1,071 | 118 |
| Other liabilities | 2,237 | 2,702 |
| Total current liabilities | 26,244 | 24,819 |
| Long-term debt | 30,000 | 40,000 |
| Other non-current liabilities | 10,703 | 11,291 |
| Total liabilities | 66,947 | 76,110 |
| Common stock and additional paid-in capital | 205,484 | 199,877 |
| Retained earnings | 114,339 | 104,399 |
| Accumulated other comprehensive loss | (2,380) | (2,397) |
| Less: cost of treasury shares | (148,800) | (140,934) |
| Total stockholders' equity | 168,643 | 160,945 |
| Total liabilities and stockholders' equity | $ 235,590 | $ 237,055 |
| ANAREN, INC. | ||||
| Reconciliation of GAAP and Non-GAAP Gross Profit, Operating Income, and Earnings Per Share | ||||
| (in thousands except per share data) | ||||
| (unaudited) | ||||
| Three Months Ended | Nine Months Ended | |||
| March 31, 2010 | March 31, 2009 | March 31, 2010 | March 31, 2009 | |
| Sales | $ 42,181 | $ 43,507 | $ 123,537 | $ 123,074 |
| GAAP gross profit | $ 16,825 | $ 15,084 | $ 45,794 | $ 38,906 |
| Equity based compensation expense (1) | 199 | 245 | 395 | 694 |
| Acquisition related inventory step-up (2) | -- | -- | -- | 2,164 |
| Acquisition related amortization of intangibles (3) | 39 | (247) | 117 | 104 |
| Non-GAAP gross profit | $ 17,063 | $ 15,082 | $ 46,306 | $ 41,868 |
| % of sales | 40.5% | 34.7% | 37.5% | 34.0% |
| GAAP operating income | $ 5,323 | $ 4,731 | $ 13,430 | $ 8,908 |
| Equity based compensation expense (1) | 1,081 | 997 | 2,703 | 3,048 |
| Acquisition related inventory step-up (2) | -- | -- | -- | 2,164 |
| Acquisition related amortization of intangibles (3) | 298 | 63 | 894 | 778 |
| Non-GAAP operating income | $ 6,702 | $ 5,791 | $ 17,027 | $ 14,898 |
| % of sales | 15.9% | 13.3% | 13.8% | 12.1% |
| GAAP net income | $ 4,561 | $ 3,477 | $ 9,939 | $ 6,402 |
| Equity based compensation expense (1) | 1,081 | 997 | 2,703 | 3,048 |
| Acquisition related inventory step-up (2) | -- | -- | -- | 2,164 |
| Acquisition related amortization of intangibles (3) | 298 | 63 | 894 | 778 |
| Tax effect | (496) | (340) | (1,295) | (1,964) |
| Non-GAAP net income | $ 5,444 | $ 4,197 | $ 12,241 | $ 10,428 |
| % of sales | 12.9% | 9.6% | 9.9% | 8.5% |
| Diluted earnings per share | ||||
| GAAP earnings per share | $ 0.32 | $ 0.25 | $ 0.68 | $ 0.45 |
| Equity based compensation expense (1) | 0.08 | 0.07 | 0.19 | 0.22 |
| Acquisition related inventory step-up (2) | -- | -- | -- | 0.15 |
| Acquisition related amortization of intangibles (3) | 0.02 | -- | 0.06 | 0.06 |
| Tax adjustments | (0.04) | (0.02) | (0.09) | (0.14) |
| Non-GAAP earnings per share | $ 0.38 | $ 0.30 | $ 0.84 | $ 0.74 |
| Weighted average common shares outstanding | ||||
| Diluted | 14,328 | 14,062 | 14,595 | 14,102 |
| 1) These costs represent expense recognized in accordance with ASC718 - Stock Compensation. | ||||
| 2) These costs represent purchase accounting charges for step-up in inventory to fair market value to cost of sales related to the sale of acquisition related inventory in the nine months ended March 31, 2009. | ||||
| 3) These costs represent amortization of purchase accounting charges for acquisition related intangible charged to expense for the quarter and nine months ended March 31, 2010 and 2009. | ||||
| 4) The following table details the Non-GAAP, Non-Cash expenses related to equity compensation and acquisition related inventory step-up and intangible amortization by expense category. | ||||
| ANAREN, INC. | ||||
| Reconciliation of GAAP and Non-GAAP Gross Profit, Operating Income, and Earnings Per Share | ||||
| (in thousands except per share data) | ||||
| (unaudited) | ||||
| Three Months Ended March 31, 2010 | ||||
| (in thousands) | ||||
| (unaudited) | ||||
| Equity Based | Acquisition | Amortization | ||
| Compensation | Inventory Step-up | of Intangibles | Total | |
| Cost of sales | $ 199 | $ -- | $ 39 | $ 238 |
| Marketing | 65 | -- | -- | 65 |
| Research and development | 166 | -- | -- | 166 |
| General and administrative | 651 | -- | 259 | 910 |
| $ 1,081 | $ -- | $ 298 | $ 1,379 | |
| Nine Months Ended March 31, 2010 | ||||
| (in thousands) | ||||
| (unaudited) | ||||
| Equity Based | Acquisition | Amortization | ||
| Compensation | Inventory Step-up | of Intangibles | Total | |
| Cost of sales | $ 395 | $ -- | $ 117 | $ 512 |
| Marketing | 171 | -- | -- | 171 |
| Research and development | 526 | -- | -- | 526 |
| General and administrative | 1,611 | -- | 777 | 2,388 |
| $ 2,703 | $ -- | $ 894 | $ 3,597 | |
| Three Months Ended March 31, 2009 | ||||
| (in thousands) | ||||
| (unaudited) | ||||
| Equity Based | Acquisition | Amortization | ||
| Compensation | Inventory Step-up | of Intangibles | Total | |
| Cost of sales | $ 245 | $ -- | $ (247) | $ (2) |
| Marketing | 72 | -- | -- | 72 |
| Research and development | 136 | -- | -- | 136 |
| General and administrative | 544 | -- | 310 | 854 |
| $ 997 | $ -- | $ 63 | $ 1,060 | |
| Nine Months Ended March 31, 2009 | ||||
| (in thousands) | ||||
| (unaudited) | ||||
| Equity Based | Acquisition | Amortization | ||
| Compensation | Inventory Step-up | of Intangibles | Total | |
| Cost of sales | $ 694 | $ 2,164 | $ 104 | $ 2,962 |
| Marketing | 218 | -- | -- | 218 |
| Research and development | 415 | -- | -- | 415 |
| General and administrative | 1,721 | -- | 674 | 2,395 |
| $ 3,048 | $ 2,164 | $ 778 | $ 5,990 | |
| ANAREN, INC. | ||
| Condensed Consolidated Statements of Cash Flows | ||
| (in thousands) | ||
| (unaudited) | ||
| Three months ended | Nine months ended | |
| March 31, 2010 | March 31, 2010 | |
| Cash flows from operating activities: | ||
| Net income | $ 4,561 | $ 9,939 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation | 2,560 | 6,700 |
| Amortization | 325 | 996 |
| Loss on disposal of fixed assets | 147 | 214 |
| Deferred income taxes | (87) | (245) |
| Equity based compensation | 1,081 | 2,703 |
| Receivables | (2,264) | (3,638) |
| Inventories | (248) | 1,874 |
| Accounts payable | 2,218 | 1,126 |
| Other assets and liabilities | 68 | (1,016) |
| Net cash provided by operating activities | 8,361 | 18,653 |
| Cash flows from investing activities: | ||
| Capital expenditures | (1,652) | (3,812) |
| Escrow claim received related to the Unicircuit acquisition | 154 | 154 |
| Net purchases of marketable debt securities | (16,908) | (6,158) |
| Net cash used in investing activities | (18,406) | (9,816) |
| Cash flows from financing activities: | ||
| Payments on note payable | -- | (9,800) |
| Stock options exercised | -- | 3,149 |
| Tax benefit from exercise of stock options | -- | 214 |
| Purchase of treasury stock | (3,208) | (7,865) |
| Net cash used in financing activities | (3,208) | (14,302) |
| Effect of exchange rates on cash | 1 | 17 |
| Net decrease in cash and cash equivalents | $ (13,252) | $ (5,448) |
| Cash and cash equivalents at beginning of period | $ 57,697 | $ 49,893 |
| Cash and cash equivalents at end of period | $ 44,445 | $ 44,445 |