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PRESS RELEASES
SYRACUSE, N.Y., April 29 /PRNewswire-FirstCall/ -- Anaren, Inc. (Nasdaq:
ANEN) today reported net sales for the fiscal 2008 third quarter ended March
31, 2008 of $32.6 million, unchanged from the third quarter of last year.
Income from continuing operations for the third quarter of fiscal 2008 was
$2.0 million, or $0.14 per diluted share, down from income from continuing
operations of $3.5 million, or $0.20 per diluted share for the third quarter
of last year. Net income for the third quarter of fiscal 2008 was $2.8
million, or $0.19 per share, and included $770,000, or $0.05 per share of
income from discontinued operations due to the reduction of an unrecognized
tax benefit resulting from the lapse of the applicable statute of limitations
related to the prior dissolution of the Company's Netherland subsidiary. This
compares to net income of $3.5 million, or $0.20 per diluted share for the
third quarter of last year.
(Logo: http://www.newscom.com/cgi-bin/prnh/20021022/NYTU197LOGO )
Proforma net income per share, excluding non cash equity based
compensation, for the third quarter ended March 31, 2008 was $0.24 per diluted
share and included $0.05 per share for income from discontinued operations.
This compares to net income per diluted share, excluding non cash equity based
compensation, of $0.24 per share for the third quarter of the previous year.
Gross margin for the third quarter ended March 31, 2008 was 31.1%,
compared to 34.8% for the third quarter of last year. The decline in gross
margin in the current quarter resulted from manufacturing inefficiencies on
several production programs and cost overruns on development projects within
the Space & Defense Group, as well as a decline in profitability in the Salem,
NH ceramics operation of the Wireless group. As a result of the continued
poor financial performance of the ceramics operation, the Company is
transitioning the production of the high power wireless resistor product line
from the ceramics operation to our Suzhou, China operation. The transition is
expected to be completed in the first quarter of fiscal 2009 and will result
in more than $1.0 million in annual savings.
Lawrence A. Sala, Anaren's President and CEO said, "Though we remain very
optimistic with regard to the near and long term prospects for our Space &
Defense business, the execution on several key programs during the quarter was
disappointing." Mr. Sala added, "A number of supply chain, quality and
product development issues negatively impacted net sales and profit margins
for the group in the third quarter."
The effective tax rate on income from continuing operations for the third
quarter of fiscal 2008 was 27.4% compared to 28.3% for the third quarter of
fiscal 2007. The tax rate for the remainder of fiscal 2008 is expected to be
approximately 26.5%.
Operating income for the third quarter of fiscal 2008 was $2.3 million, or
7.0% of net sales, down from $4.0 million, or 12.4% of net sales for the third
quarter of last year. The Company incurred a lease charge in the third
quarter in the amount of $215,000, or $0.01 per diluted share related to
future lease cost in excess of the expected rental income generated from the
Company's Frimley, U.K. facility. This charge coupled with the decline in
gross margin and a 1.0 percentage point increase in R&D expense as a percent
of sales, reduced operating income by 5.4 percentage points for the third
quarter of fiscal 2008.
As disclosed in our latest Form 10-K, the Company leases an 18,000 square
foot facility in Frimley, England under a non-cancellable lease which runs
through February 2014. The building is vacant at this time and the annual
rental costs including fees and property taxes are approximately $700,000.
The Company has been attempting to sublet the facility for over six months and
due to the current real estate market in this area, has not been successful in
procuring a new tenant. Currently, the Company believes that it will take a
minimum 4 to 6 months to find a tenant and therefore, has reserved for the
rent expense over this period. If a tenant is not found during this period,
the Company will be required to take additional reserve charges in future
quarters.
For the nine months ended March 31, 2008, net sales were $97.1 million, up
4.2% from the first nine months of fiscal 2007. Operating income for the
first nine months of fiscal 2008 was $8.1 million, or 8.3% of net sales, down
$4.1 million from the same period of last year. Income from continuing
operations and net income for the first nine months of fiscal 2008 were $7.3
million, or $0.48 per diluted share and $8.1 million, or $0.53 per share,
respectively. This compares to income from continuing operations and net
income for the first nine months of fiscal 2007 of $11.0 million, or $0.62 per
diluted share.
Balance Sheet
During the third quarter, the Company generated $270,000 in operating cash
flow and used $2.8 million to repurchase 194,471 shares of its common stock.
Expenditures for capital additions in the third quarter were $2.7 million
driven primarily by the expansion and renovation of the Company's East
Syracuse, New York manufacturing facility. Funds needed for stock repurchases
and capital expenditures in excess of funds generated by operations came from
maturities of the Company's investments. Cash, cash equivalents and
marketable debt securities at March 31, 2008 were $42.6 million.
Wireless Group
Wireless Group net sales for the quarter were $20.2 million, up 13.3% from
the third quarter of fiscal 2007. Increased demand for standard components
predominately from customers in Asia offset continued weakness in demand for
custom assemblies from one customer. In general, demand for infrastructure
products remains volatile and visibility remains very limited. Sales of
consumer component products were $845,000 for the quarter, relatively
unchanged from the third quarter of last year due to the continued
diversification of design wins.
Customers that generated greater than 10% of Wireless Group net sales for
the quarter were Flextronics, Huawei, Motorola, Nokia and Richardson
Electronics, Ltd.
Space & Defense Group
Space & Defense Group net sales for the quarter were $12.4 million, down
16.0% from the third quarter of fiscal 2007. The decline in net sales from
the third quarter of last year was due to the poor execution on several
programs in the current third quarter and the significant sales in the third
quarter of last year for counter IED related products. This counter IED
program was completed in the fourth quarter of last year.
New orders for the quarter totaled $10.0 million and included contracts
for passive ranging and radar subsystems. In addition, the Group received a
$3.5 million contract to provide receive/transmit assemblies to the Raytheon
Missile Division for the Phalanx System. This initial order is both a key new
product and new program win for the group with potential for future orders to
support additional upgrades and new system production.
Customers that generated greater than 10% of Space & Defense net sales for
the quarter were ITT, Raytheon, Northrop Grumman, and Lockheed Martin.
Space & Defense backlog at March 31, 2008 was approximately $58.0 million.
Outlook
For the fourth quarter of fiscal 2008, we expect an increase in sales for
the Space & Defense Group and a decrease in demand for Wireless products. As
a result, we expect net sales to be in the range of $30 - $33 million for the
fourth quarter of fiscal 2008. With an anticipated tax rate of approximately
26.5% and expected stock based compensation expense of approximately $0.05 per
diluted share, we expect GAAP net earnings per diluted share to be in the
range of $0.12-$0.16 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 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 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 OEM
customers, reliance on a limited number of key component suppliers,
unpredictable difficulties or delays in the development of new products; the
ability to successfully transition the production of resistive products from
the Company's Salem, New Hampshire facility to the Company's Suzhou China
facility; 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
2007 Annual Report on Form 10-K for the fiscal year ended June 30, 2007 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 ccbn.com at
http://www.streetevents.com on Tuesday, 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, 2008 through midnight May 2, 2008. 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 4863774. If you are unable to access the
Live Webcast, the dial in number for the U.S. is 1-877-856-1958 and
International is 1-719-325-4822.
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.
Anaren, Inc. and Subsidiaries
Consolidated Condensed Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
2008 2007 2008 2007
Sales $32,618,733 $32,600,635 $97,076,907 $93,126,530
Cost of sales 22,478,241 21,242,154 66,016,934 60,030,937
Gross profit 10,140,492 11,358,481 31,059,973 33,095,593
31.1% 34.8% 32.0% 35.5%
Operating expenses:
Marketing 1,766,226 1,829,982 5,299,409 5,571,546
Research and
development 2,675,685 2,345,034 7,565,676 6,676,042
General and
administrative 3,193,705 3,155,894 9,715,555 8,684,862
Lease impairment 214,727 - 418,383 -
Total operating
expenses 7,850,343 7,330,910 22,999,023 20,932,450
Operating income 2,290,149 4,027,571 8,060,950 12,163,143
7.0% 12.4% 8.3% 13.1%
Other income
(expense):
Other income,
primarily
interest 535,582 874,297 1,883,991 2,687,983
Interest expense (6,142) (6,143) (52,574) (18,429)
Total other
income (expense) 529,440 868,154 1,831,417 2,669,554
Income before income
taxes 2,819,589 4,895,725 9,892,367 14,832,697
Income taxes 773,000 1,385,000 2,589,000 3,800,000
Income from
continuing
operations $2,046,589 $3,510,725 $7,303,367 $11,032,697
6.3% 10.8% 7.5% 11.8%
Discontinued
operations:
Income from
discontinued
operations of
Anaren Europe - - - -
Income tax benefit 770,000 - 770,000 -
Income from
discontinued
operations $770,000 $- $770,000 $ -
Net income $2,816,589 $3,510,725 $8,073,367 $11,032,697
8.6% 10.8% 8.3% 11.8%
Basic earnings
per share:
Income from
continuing
operations $0.14 $0.20 $0.49 $0.63
Income from
discontinued
operations 0.05 0.00 0.05 0.00
Net income $0.19 $0.20 $0.54 $0.63
Diluted earnings
per share:
Income from
continuing
operations $0.14 $0.20 $0.48 $0.62
Income from
discontinued
operations 0.05 0.00 0.05 0.00
Net income $0.19 $0.20 $0.53 $0.62
Shares used in
computing net
income
Per share:
Basic 14,301,900 17,397,647 15,022,181 17,504,946
Diluted 14,479,862 17,699,597 15,282,144 17,921,998
Anaren, Inc.
Consolidated Condensed Balance Sheet
March 31, 2008 June 30, 2007
(Unaudited)
Assets:
Cash, cash equivalents and short-term
investments $25,657,018 $43,014,064
Accounts receivable, net 23,147,498 19,768,701
Other receivables 1,541,788 1,606,093
Inventories 27,636,992 24,331,597
Other current assets 2,821,586 3,067,019
Total current assets 80,804,882 91,787,474
Net property, plant and equipment 41,352,684 37,091,786
Securities available for sale 500,000 -
Securities held to maturity 16,475,067 31,540,247
Goodwill 30,715,861 30,715,861
Other assets 24,751 68,947
Total assets $169,873,245 $191,204,315
Liabilities and stockholders' equity
Liabilities:
Accounts payable $9,009,367 $11,717,120
Accrued expenses 2,103,809 3,907,652
Customer advance payments 1,999,898 1,318,812
Other liabilities 2,822,323 1,985,856
Total current liabilities 15,935,397 18,929,440
Other non-current liabilities 5,052,150 5,480,727
Total liabilities 20,987,547 24,410,167
Stockholders' equity:
Retained earnings 93,380,180 85,306,813
Common stock and additional paid-in capital 191,631,636 188,149,232
Accumulated comprehensive loss (205,692) (984,640)
Less cost of treasury stock (135,920,426) (105,677,257)
Total stockholders' equity 148,885,698 166,794,148
Total liabilities and stockholders' equity $169,873,245 $191,204,315
Anaren, Inc.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Nine Months Three Months
Ended Ended
Mar. 31, 2008 Mar. 31, 2007
Cash flows from operating activities:
Net income $ 8,073,367 $2,816,589
Income from discontinued operations 770,000 770,000
Income from continuing operations 7,303,367 2,046,589
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization of plant
and equipment 4,957,528 1,579,415
Amortization 473,220 140,070
Provision for doubtful accounts (24,197) (242)
Deferred income taxes 89,000 705,000
Equity based compensation 2,781,092 942,830
Receivables (3,272,600) (2,438,128)
Inventories (3,312,017) (565,005)
Accounts payable (1,652,316) (1,118,254)
Other assets and liabilities 282,567 (1,021,973)
Net cash provided by continuing operations 7,625,644 270,302
Net cash used for discontinued operations - -
Net cash provided by operating activities 7,625,644 270,302
Cash flows from investing activities:
Capital expenditures (9,767,865) (2,659,843)
Net maturities of marketable debt and
equity securities 30,047,265 4,609,775
Net cash provided by investing activities 20,279,400 1,949,932
Cash flows from financing activities:
Stock options exercised 591,004 52,063
Tax benefit from exercise of stock options 116,932 10,822
Purchase of treasury stock (30,243,169) (2,751,891)
Net cash used in financing activities (29,535,233) (2,689,006)
Effect of exchange rates 190,948 132,332
Net decrease in cash and cash equivalents (1,439,241) (336,440)
Cash and cash equivalents at beginning
of period 7,912,276 6,809,475
Cash and cash equivalents at end of period $6,473,035 $6,473,035
Non-GAAP Measurements
Non-GAAP results reported in this release, which are a supplement to
financial results based on GAAP, exclude charges for stock based compensation.
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
accounting principles generally accepted in the United States. The chart
below, compares results on a GAAP basis to pro-forma results excluding non-
cash equity based compensation.
Anaren, Inc.
Reconciliation of GAAP and Pro-forma Gross Profit, Operating Income, Net
Income and Earnings Per Share
Three Months Ended Nine Months Ended
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
2008 2007 2008 2007
Net sales $32,618,733 $32,600,635 $97,076,907 $93,126,530
GAAP gross profit 10,140,492 11,358,481 31,059,973 33,095,593
% of sales 31.1% 34.8% 32.0% 35.5%
Stock based
compensation expense 192,914 226,065 625,487 745,757
Proforma gross
profit $10,333,406 $11,584,546 $31,685,460 $33,841,350
% of sales 31.7% 35.5% 32.6% 36.3%
GAAP operating income $2,290,149 $4,027,571 $8,060,950 $12,163,143
% of sales 7.0% 12.4% 8.3% 13.1%
Stock based
compensation expense 942,830 851,441 2,781,092 2,534,990
Proforma operating
income $3,232,979 $4,879,012 $10,842,042 $ 14,698,133
% of sales 9.9% 15.0% 11.2% 15.8%
GAAP net income $2,816,589 $3,510,725 $8,073,367 $11,032,697
% of sales 8.6% 10.8% 8.3% 11.8%
Stock based
compensation
expense, net of tax 699,830 685,441 2,065,092 2,046,990
Proforma net income $3,516,419 $4,196,166 $10,138,459 $13,079,687
% of sales 10.8% 12.9% 10.4% 14.0%
Diluted earnings per
share:
GAAP net income $0.19 $0.20 $0.53 $0.62
Stock based
compensation expense,
net of tax 0.05 0.04 0.13 0.11
Proforma net income
per share $0.24 $0.24 $0.66 $0.73
Shares used in computing
net income per share:
Diluted 14,479,862 17,699,597 15,282,144 17,921,998
SOURCE Anaren, Inc.
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