Anaren Reports 2nd Quarter Results

SYRACUSE, N.Y., Feb. 1  /PRNewswire-FirstCall/ -- Anaren, Inc. (NASDAQ:ANEN) today reported record net sales for the second quarter ended December 31, 2006 of $30.3 million, up 21% from the second quarter of fiscal year 2006.

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Net income for the second quarter of fiscal 2007 was $4.0 million, or $0.22 per diluted share, up 101% from the second quarter of last year.  Net income for the quarter included $0.04 per diluted share in stock based compensation expense.  Excluding stock based compensation expense, net income for the second quarter was $4.7 million, or $0.26 per diluted share.

The effective tax rate for the second quarter of fiscal 2007 was 21.6%, compared to 27.4% for the second quarter of fiscal 2006.

Operating income for the second quarter of fiscal 2007 was $4.3 million, or 14.0% of net sales, up 90% from the second quarter of last year.  Operating income for the quarter included $820,000 in stock based compensation expense. Excluding stock based compensation expense, operating income for the second quarter of fiscal 2007 was $5.1 million, or 16.7% of net sales.

Lawrence A. Sala, Anaren's President and CEO said, "The overall growth in net sales for the quarter was driven by strong growth in Space & Defense Group net sales which offset reduced demand for wireless infrastructure products. The continued growth in net sales and a favorable product mix positively impacted our profitability for the quarter."  Mr. Sala added, "Though the general decline in wireless infrastructure demand continued throughout the quarter, we continue to see numerous new wireless consumer and infrastructure product opportunities."

For the six months ended December 31, 2006, net sales were $60.5 million, up 22% from the first six months of fiscal 2006.  Operating income for the first six months of fiscal 2007 was $8.4 million, or 13.8% of net sales, including $1.6 million, or 2.7% of net sales, in stock based compensation expense.  Operating income before stock based compensation expense for the first six months of fiscal 2007 was 16.6% of net sales.  Net income for the first six months of fiscal 2007 was $7.8 million, or $0.43 per diluted share, including $0.08 per diluted share in stock based compensation expense.  This compares to net income for the first six months of fiscal 2006 of $4.2 million, or $0.24 per diluted share, which included $1.7 million in stock based compensation expense.

Balance Sheet

Cash, cash equivalents and marketable debt securities at December 31, 2006 were $91.5 million.  During the quarter, the Company generated $7.2 million in cash from operations which consisted of the $4.0 million in net income and a $3.6 million decrease in accounts receivable which was partially offset by a $2.1 million increase in inventory. Expenditures for capital additions in the second quarter were $3.9 million driven primarily by the building expansion at the Company's East Syracuse, New York manufacturing facility and capital equipment purchases for the Company's newly acquired Suzhou, China facility.

Wireless Group

Wireless Group net sales for the quarter were $17.0 million, up 9.7% from the second quarter of fiscal 2006 but down 14% from the first quarter of fiscal year 2007.  Reduced demand across all wireless infrastructure product lines from first quarter levels continued throughout the quarter.  Sales of consumer component products were $1.8 million for the quarter, up 68% from the second quarter of last year.  Product development activity remains focused on expanding the ferrite and consumer component product lines.  During the quarter, the Company introduced several new filter products for satellite television applications.  "We are pleased with the progress of our new product development efforts as well as the number and quality of new business opportunities for both infrastructure and consumer applications," said Mr. Sala.

Customers that generated 10% of Wireless Group net sales or greater for the quarter were Motorola, Inc. and Nokia Corp.

Space & Defense Group

Space & Defense Group net sales for the quarter were $13.3 million, up 40% from the second quarter of fiscal 2006 due largely to production relating to the recently announced contracts with SRCTec, Inc.  New orders for the quarter totaled $12.7 million and included contracts for airborne and ground based radar receiver and jammer components and subsystems.  Research and development investment is focused on increasing the integration, functionality and frequency range of radar and receiver related products.  Space & Defense backlog at December 31, 2006 was $50.7 million.

Outlook

For the third quarter, we expect moderate demand for wireless infrastructure products, a seasonally driven decrease in demand for the consumer component product line and continued strong sales for the Space & Defense segment as a result of recent new contract wins.  As a result, we expect net sales to be in the range of $27.0 - $30.0 million for the third quarter of fiscal 2007.  With an anticipated tax rate of approximately 25% and an expected stock based compensation expense of approximately $0.04 per diluted share, we expect net earnings per diluted share to be in the range of $0.16 - $0.21 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.

On January 31, the Company filed an amended Annual Report on Form 10-k/A for the fiscal year 2006 restating the Company's consolidated financial statements for the fiscal year 2006 and the fiscal year 2004, modified related disclosures, and disclosed material weaknesses in the Company's disclosure controls and procedures.  The Company additionally filed on January 31, 2007 amended Quarterly Reports on Form 10-Q/A for the periods ending December 31, 2005, March 31, 2006 and September 30, 2006.  The Company cannot predict the reaction to the filing of these Amended Reports and if adverse, the market price of the Company's stock could decline.  Other 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 relocating the Company's Suzhou China facility and successfully completing all requalification procedures; potential unanticipated liabilities and delays associated with the physical expansion of the Company's Syracuse, New York facility; 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 2006 Annual Report, Anaren's Form 10-K/A for the fiscal year ended June 30, 2006, Anaren's Form 10-Q for the three months ended September 30, 2006, Anaren's Form 10-Q/A for the three months ended December 31, 2006 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 Thursday, February 1 at 5:00 p.m. EDT.  A replay of the conference call will be available at 8:00 p.m. (EDT) beginning February 1, 2007 through midnight February 5, 2007.  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 5964893.  If you are unable to access the Live Webcast, the dial in number for the U.S. is 1-800-474-8920 and International is 1-719-457-2727.

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. and Subsidiaries
               Consolidated Condensed Statements of Income
                               (Unaudited)

                        Three Months Ended          Six Months Ended
                       Dec. 31,     Dec. 31,      Dec. 31,     Dec. 31,
                        2006         2005          2006         2005

  Sales             $30,325,785  $25,019,013   $60,528,895  $49,633,371

  Cost of sales      19,224,005   16,273,387    38,587,783   32,233,299
  Gross profit       11,101,780    8,745,626    21,941,112   17,400,072
                          36.6%        35.0%         36.2%        35.1%
  Operating expenses:
    Marketing         1,928,858    1,715,660     3,741,564    3,483,739
    Research and
     development      2,192,823    2,268,438     4,331,008    4,303,079
    General and
     administrative   2,726,742    2,523,124     5,494,968    5,015,434
      Total
       operating
       expenses       6,848,423    6,507,222    13,567,540   12,802,252

  Operating income    4,253,357    2,238,404     8,373,572    4,597,820
                          14.0%         8.9%         13.8%         9.3%

  Other income (expense):
    Other income,
      primarily
      interest          917,080      536,821     1,813,686    1,124,565
    Interest expense     (6,143)      (6,143)      (12,286)     (12,286)
      Total other
       income (expense) 910,937      530,678     1,801,400    1,112,279


  Income before
   income taxes       5,164,294    2,769,082    10,174,972    5,710,099
  Income taxes        1,116,000      759,000     2,366,000    1,474,000
    Net income       $4,048,294   $2,010,082    $7,808,972   $4,236,099
                          13.3%         8.0%         12.9%         8.5%

  Basic earnings
   per share              $0.23        $0.12         $0.44        $0.25

  Diluted earnings
   per share              $0.22        $0.11         $0.43        $0.24

  Shares used in computing
   net income Per share:
    Basic            17,622,700   17,020,360    17,557,429   17,211,315
    Diluted          18,088,109   17,595,314    18,032,032   17,765,683


                      Anaren, Inc. and Subsidiaries
               Consolidated Condensed Statements of Income
                               (Unaudited)

                             Three Months Ended

                                         Stock Based      W/O Stock Based
                                         Compensation      Compensation
                         GAAP Results      Expense            Expense
                        Dec. 31, 2006   Dec. 31, 2006     Dec. 31, 2006

  Net sales              $30,325,785     $        -        $30,325,785

  Cost of sales           19,224,005        242,647         18,981,358

  Gross profit            11,101,780        242,647         11,344,427
                               36.6%                             37.4%
  Costs and expenses:
    Marketing              1,928,858         59,262          1,869,596
    Research and
     development           2,192,823        103,965          2,088,858
    General and
     administrative        2,726,742        414,007          2,312,735
      Total operating
       expenses            6,848,423        577,234          6,271,189

  Operating income         4,253,357        819,881          5,073,238
                               14.0%           2.8%              16.7%

  Other income (expense):
    Other, primarily
     interest income         917,080              -            917,080
    Interest expense          (6,143)             -             (6,143)
      Total other income,
       net                   910,937              -            910,937

  Income from continuing
   operations before
   income tax              5,164,294        819,881          5,984,175
  Income taxes             1,116,000       (173,000)         1,289,000
    Net Income           $ 4,048,294     $  646,881        $ 4,695,175
                               13.3%                             15.5%

  Basic earnings per share     $0.23          $0.04              $0.27

  Diluted earnings per share   $0.22          $0.04              $0.26

  Shares used in computing
   net income per share
      Basic               17,622,700     17,622,700         17,622,700

      Diluted             18,088,109     18,088,109         18,088,109


                      Anaren, Inc. and Subsidiaries
               Consolidated Condensed Statements of Income
                               (Unaudited)

                             Six Months Ended

                                         Stock Based      W/O Stock Based
                                         Compensation      Compensation
                         GAAP Results      Expense            Expense
                        Dec. 31, 2006   Dec. 31, 2006     Dec. 31, 2006

  Net sales              $60,528,895    $         -        $60,528,895

  Cost of sales           38,587,783        519,690         38,068,093

  Gross profit            21,941,112        519,690         22,460,802
                               36.2%                             37.1%
  Costs and expenses:
    Marketing              3,741,564        115,168          3,626,396
    Research and
     development           4,331,008        172,636          4,158,372
    General and
     administrative        5,494,968        842,053          4,652,915
      Total operating
       expenses           13,567,540      1,129,857         12,437,683

  Operating income         8,373,572      1,649,547         10,023,119
                               13.8%           2.7%              16.6%
  Other income (expense):
    Other, primarily
     interest income       1,813,686              -          1,813,686
    Interest expense         (12,286)             -            (12,286)
      Total other income,
       net                 1,801,400              -          1,801,400

  Income from continuing
   operations before
   income tax             10,174,972      1,649,547         11,824,519
  Income taxes             2,366,000       (322,000)         2,688,000
    Net Income           $ 7,808,972    $ 1,327,547        $ 9,136,519
                               12.9%                             15.1%

  Basic earnings per share     $0.44          $0.08              $0.52

  Diluted earnings per share   $0.43          $0.08              $0.51

  Shares used in computing
   net income per share
      Basic               17,557,429     17,557,429         17,557,429

      Diluted             18,032,032     18,032,032         18,032,032


                      Anaren, Inc. and Subsidiaries
                  Consolidated Condensed Balance Sheets

                                              Dec. 31, 2006  June 30, 2006
                                               (Unaudited)
  Assets:

  Cash, cash equivalents and short-term
   investments                                 $71,681,774    $82,492,947

  Accounts receivable, net                      16,451,375     16,362,011
  Other receivables                              1,763,909      1,336,009
  Inventories                                   26,819,270     21,827,271
  Other current assets                           2,934,089      2,152,471
       Total current assets                    119,650,417    124,170,709

  Net property, plant and equipment             31,226,848     27,635,161
  Securities available for sale                          -              -
  Securities held to maturity                   19,865,894      6,131,425
  Goodwill                                      30,715,861     30,715,861
  Other intangibles                                185,935        340,371
  Other assets                                      32,902         32,902
       Total assets                           $201,677,857   $189,026,429


  Liabilities and stockholders' equity
  Liabilities:
  Accounts payable                              $7,769,666     $6,798,793
  Accrued expenses                               2,575,912      3,254,816
  Customer advance payments                        483,722        483,722
  Other liabilities                                963,172      1,473,011
      Total current liabilities                 11,792,472     12,010,342

  Other non-current liabilities                  5,535,266      4,897,687
      Total liabilities                         17,327,738     16,908,029

  Stockholders' equity:
  Retained earnings                             78,302,825     70,493,853
  Common stock and additional paid-in capital  186,417,499    182,049,235
  Accumulated comprehensive loss                  (386,914)      (441,397)
    Less cost of treasury stock                (79,983,291)   (79,983,291)
    Total stockholders' equity                 184,350,119    172,118,400
  Total liabilities and stockholders' equity  $201,677,857   $189,026,429


                      Anaren, Inc. and Subsidiaries
             Consolidated Condensed Statements of Cash Flows
                               (Unaudited)

                                Six Months  Three Months    Three Months
                                  Ended         Ended          Ended
                             Dec. 31, 2006  Dec. 31, 2006  Sept. 30, 2006

  Cash flows from operating
   activities:
      Net income               $7,808,972     $4,048,294      $3,760,678

  Adjustments to reconcile net
   income to net cash provided
   by operating activities:

      Depreciation and
       amortization of plant
       and equipment            2,524,216      1,120,904       1,403,312
      Amortization of
       intangibles                154,436         74,218          80,218
      Gain on sale of land        (77,508)             -         (77,508)
      Stock based compensation  1,628,320        800,512         827,808
      Provision for doubtful
       accounts                   (21,726)       (23,005)          1,279
      Deferred income taxes       248,000        103,000         145,000
      Receivables                 (67,638)     3,602,359      (3,669,997)
      Inventories              (4,991,999)    (2,143,644)     (2,848,355)
      Accounts payable            970,873        292,701         678,172
      Other assets and
       liabilities             (2,008,682)      (710,936)     (1,297,746)
      Net cash provided by
       (used in) operating
       activities               6,167,264      7,164,403        (997,139)

  Cash flows from investing
   activities:
      Capital expenditures     (6,172,903)    (3,902,635)     (2,270,268)
      Increase in other assets          -        341,448        (341,448)
      Proceeds from sale of land  134,508              -         134,508
      Net maturities (purchases)
       of marketable debt and
       equity securities         (647,869)       213,475        (861,344)
      Net cash used in investing
       activities              (6,686,264)    (3,347,712)     (3,338,552)

  Cash flows from financing
   activities:
      Stock options exercised   2,111,188        885,391       1,225,797
      Tax benefit from exercise
       of stock options           628,756        206,676         422,080
      Net cash provided by
       financing activities     2,739,944      1,092,067       1,647,877
      Effect of exchange rates     54,483         66,634         (12,151)
      Net increase (decrease)
       in cash and cash
       equivalents              2,275,427      4,975,392      (2,699,965)

  Cash and cash equivalents
   at beginning of period      15,733,214     13,033,249      15,733,214
  Cash and cash equivalents
   at end of period           $18,008,641    $18,008,641     $13,033,249


DATASOURCE: Anaren, Inc.



CONTACT:  Joseph E. Porcello, VP of Finance, [phone]



Web site:  http://www.newscom.com/cgi-bin/prnh/20021022/NYTU197LOGO 

Web site:  http://www.anaren.com/ 

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