Anaren Reports 2nd Quarter Fiscal 2013 Results

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| Source: Anaren, Inc.

SYRACUSE, N.Y., Jan. 22, 2013 (GLOBE NEWSWIRE) -- Anaren, Inc. (Nasdaq:ANEN) today reported net sales for the fiscal 2013 second quarter ended December 31, 2012 of $38.0 million, up 6.3% from $35.7 million for the second quarter of last year.

GAAP (U.S. generally accepted accounting principles) net income for the second quarter of fiscal 2013 was $3.5 million, or $0.27 per diluted share, up 199% from $1.2 million, or $0.08 per diluted share for the second quarter of last year.

Non-GAAP diluted earnings per share, excluding non-cash equity based compensation and intangible asset amortization, was $0.33 for the second quarter of fiscal 2013 compared to non-GAAP diluted earnings per share of $0.13 for the second quarter of fiscal 2012.

GAAP operating income for the second quarter of fiscal 2013 was $5.1 million, or 13.4% of net sales, up 261% from $1.4 million, or 3.9% of net sales for the second quarter of last year. Non-GAAP operating income for the second quarter of fiscal 2013, which excludes non-cash equity based compensation and intangible asset amortization, was $6.3 million, or 16.6% of net sales, up 134% from $2.7 million, or 7.5% of net sales for the second quarter of fiscal 2012. Both net income and operating income for the second quarter were enhanced by a one-time favorable adjustment of approximately $0.5 million to healthcare costs.

Income taxes for the second quarter of fiscal 2013 were $1.7 million, representing an effective tax rate of 32.0% compared to income tax expense of $0.3 million for the second quarter of fiscal 2012, representing an effective tax rate of 21.4%. The projected effective tax rate for fiscal 2013, absent one-time events and adjusted for the reinstatement of the Federal Research and Experimentation credit in January 2013, is expected to be approximately 28%.

Lawrence A. Sala, Anaren's Chairman, President and CEO said, "We are very pleased with the significant improvement in operating profitability resulting from a favorable product mix, operational efficiencies, and cost reductions as we exceeded our 15% Non-GAAP operating profit target. While sales levels were down 2.7% sequentially, profitability improved in both of our business segments and we continue to focus on operating efficiency given the uncertainty in both defense and wireless infrastructure spending."

Net sales for the six months ended December 31, 2012 were $77.1 million, up 3.5% from net sales of $74.5 million for the first six months of last year. GAAP net income for the first half of fiscal 2013 was $6.4 million, or $0.47 per diluted share, up 72% from $3.7 million, or $0.25 per diluted share for the first half of last year.

Non-GAAP diluted earnings per share, excluding non-cash equity based compensation and intangible amortization, was $0.59 for the first six months of fiscal 2013 compared to non-GAAP diluted earnings per share of $0.36 for the first six months of fiscal 2012.

During the second quarter of fiscal 2013, the Company generated $4.9 million in operating cash flow compared to $2.5 million in the second quarter of fiscal 2012. Additionally, during the current quarter the Company repurchased approximately 610,000 shares of its common stock for a total of $11.2 million and expended $0.9 million for capital additions. Non-operating cash receipts for the quarter included $0.1 million from the exercise of stock options and approximately $5.0 million from the sale of its manufacturing facility in Salem, New Hampshire. Cash, cash equivalents and marketable debt securities were $43.6 million at December 31, 2012, down $2.0 million from September 30, 2012. The Company had $8.0 million outstanding on its revolving credit facility at December 31, 2012, unchanged from September 30, 2012.

Wireless Group

Wireless Group net sales for the quarter were $12.8 million, up 19.0% from the second quarter of fiscal 2012, but sequentially down 2.7% compared to the first quarter, as uncertainty and softness continued in the wireless infrastructure market. Demand from wireless infrastructure customers declined throughout the second quarter and current forecasts indicate comparable demand for the third quarter.

New product investments for the quarter continued to be focused on expansion of the wireless infrastructure components and low power wireless Anaren Integrated Radio (AIR) module product lines.

Customers that generated greater than 10% of Wireless Group net sales for the quarter were Arrow Electronics, Richardson and Huawei.

Space & Defense Group

Space & Defense Group net sales for the quarter were $25.2 million, up 0.8% from the second quarter of fiscal 2012. Improved operational execution and a more favorable product mix during the current quarter resulted in higher profitability for the Group compared to the second quarter last year.  Space & Defense Group sales are expected to be higher in the second half of fiscal 2013 as production rates increase on the TPQ-53 Radar Program.

New orders for the quarter totaled $25.6 million and were driven by numerous space, radar and electronic warfare applications. Space & Defense Group order backlog at December 31, 2012 was approximately $105 million.  

Customers that generated greater than 10% of Space & Defense Group net sales for the quarter were Lockheed Martin, Northrop Grumman 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 intangible asset 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 third quarter of fiscal 2013, we anticipate comparable sales for the Wireless Group and an increase in sales for the Space & Defense Group compared to the second quarter levels. As a result, we expect net sales to be in the range of $37 to $41 million. We expect GAAP net earnings, inclusive of a tax benefit of approximately $0.09 per share related to of the impact of the reinstatement of the Federal Research and Experimentation credit retroactive to January 1, 2012, to be in the range of $0.29 - $0.37 per diluted share for the third quarter.

Non-GAAP net earnings, which are inclusive of approximately $0.05 -$0.06 per diluted share related to expected equity based compensation expense and amortization of intangibles assets, are expected to be in the range of $0.34 - $0.42 per diluted share 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 based on management's current expectations and are subject to business, market and economic risks and uncertainties that could cause actual results to differ materially from those discussed. You are encouraged to review Anaren's filings 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 (www.anaren.com) on January 23 at 8:30 a.m. (ET). A replay of the conference call will be available at 11:30 a.m. (ET) beginning January 23, 2013 through 11:30 p.m. on January 30, 2013. To listen to the replay, interested parties may dial in the U.S. at 1-855-859-2056 and International at 1-404-537-3406. The passcode is 76556541. 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 Statements of Income 
 (in thousands except per share data) 
 (unaudited) 
         
   Three Months Ended   Six Months Ended 
  December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011
         
 Sales   $ 38,002  $ 35,737  $ 77,064  $ 74,457
         
 Cost of sales   22,987  24,395  47,634  48,591
 Gross profit   15,015  11,342  29,430  25,866
  39.5% 31.7% 38.2% 34.7%
 Operating expenses:         
 Marketing   2,376  2,438  4,915  5,033
 Research and development   3,243  3,124  6,577  7,049
 General and administration   4,317  4,372  8,867  8,787
 Total operating expenses   9,936  9,934  20,359  20,869
         
 Operating income   5,079  1,408  9,071  4,997
  13.4% 3.9% 11.8% 6.7%
 Other income (expense):         
 Other income   138  139  360  279
 Interest expense   (47)  (53)  (65)  (133)
 Total other income, net   91  86  295  146
         
 Income before income tax expense   5,170  1,494  9,366  5,143
 Income tax expense   1,657  320  3,000  1,440
 Net income   $ 3,513  $ 1,174  $ 6,366  $ 3,703
  9.2% 3.3% 8.3% 5.0%
         
 Earnings per share:         
 Basic   $ 0.28  $ 0.08  $ 0.50  $ 0.26
 Diluted   $ 0.27  $ 0.08  $ 0.47  $ 0.25
         
         
 Weighted average common shares outstanding:       
 Basic   12,697  14,244  12,848  14,180
 Diluted   13,191  14,861  13,433  14,825
 
ANAREN, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
     
  December 31, 2012 June 30, 2012
     
Assets:    
Cash, cash equivalents and short-term investments  $ 35,123  $ 32,232
Receivables, less allowances  32,283  29,521
Inventories  38,188  36,443
Prepaid expenses and other assets  6,453  6,650
Total current assets  112,047  104,846
     
Securities held to maturity  8,470  11,657
Property, plant, and equipment, net  41,167  47,171
Goodwill  42,343  42,343
Other intangibles, net  7,288  7,770
Total assets  $ 211,315  $ 213,787
     
Liabilities and Stockholders' Equity    
Liabilities:    
Accounts payable  $ 6,563  $ 8,604
Accrued expenses  4,150  3,926
Customer advance payments  1,168  1,307
Other liabilities  2,438  2,068
Total current liabilities  14,319  15,905
     
Long-term debt obligation  8,000  -- 
Other non-current liabilities  13,144  12,379
Total liabilities  35,463  28,284
     
Stockholders' Equity:    
Common stock and additional paid-in capital  227,404  223,326
Retained earnings  149,493  143,126
Accumulated other comprehensive loss  (3,012)  (3,026)
Less: cost of treasury shares  (198,033)  (177,923)
Total stockholders' equity  175,852  185,503
     
Total liabilities and stockholders' equity  $ 211,315  $ 213,787
 
 ANAREN, INC. 
 
 Reconciliation of GAAP and Non-GAAP Gross Profit, Operating Income, Net Income and Diluted Earnings Per Share 
 (in thousands except per share data) 
 (unaudited) 
         
   Three Months Ended   Six Months Ended 
  December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011
         
 Sales   $ 38,002  $ 35,737  $ 77,064  $ 74,457
         
 GAAP gross profit   $ 15,015  $ 11,342  $ 29,430  $ 25,866
 Equity-based compensation expense (1)   238  210  477  404
 Amortization of intangibles (2)   39  39  78  78
 Non-GAAP gross profit   $ 15,292  $ 11,591  $ 29,985  $ 26,348
 % of sales  40.2% 32.4% 38.9% 35.4%
         
 GAAP operating income   $ 5,079  $ 1,408  $ 9,071  $ 4,997
 Equity-based compensation expense (1)   997  991  2,047  1,946
 Amortization of intangibles (2)   227  298  482  596
 Non-GAAP operating income   $ 6,303  $ 2,697  $ 11,600  $ 7,539
 % of sales  16.6% 7.5% 15.1% 10.1%
         
 GAAP net income   $ 3,513  $ 1,174  $ 6,366  $ 3,703
 Equity-based compensation expense (1)   997  991  2,047  1,946
 Amortization of intangibles (2)   227  298  482  596
 Tax effect   (441)  (464)  (910)  (915)
 Non-GAAP net income   $ 4,296  $ 1,999  $ 7,985  $ 5,330
 % of sales  11.3% 5.6% 10.4% 7.2%
         
         
 Diluted earnings per share         
 GAAP diluted earnings per share   $ 0.27  $ 0.08  $ 0.47  $ 0.25
 Equity-based compensation expense (1)   0.08  0.07  0.15  0.13
 Amortization of intangibles (2)   0.02  0.02  0.04  0.04
 Tax adjustments   (0.04)  (0.04)  (0.07)  (0.06)
 Non-GAAP diluted earnings per share   $ 0.33  $ 0.13  $ 0.59  $ 0.36
         
 Weighted average common shares outstanding         
 Diluted   13,191  14,861  13,433  14,825
         
 1) These costs represent expense recognized in accordance with the share-based payment accounting rules.     
 2) These costs represent amortization of intangible assets for the three and six months ended December 31, 2012 and 2011.   
 
 ANAREN, INC. 
 Reconciliation of GAAP and Non-GAAP Gross Profit, Operating Income, and Earnings Per Share 
 (in thousands) 
 (unaudited) 
       
The following table details the Non-GAAP, Non-Cash expenses related to equity-based compensation and  
intangible asset amortization by expense category.
       
Three Months Ended      
(in thousands)      
(unaudited)      
       
   Equity Based 
Compensation 
 Amortization of
Intangibles 
 Total 
 Cost of sales   $ 238  $ 39  $ 277
 Marketing   86  --   86
 Research and development   108  --   108
 General and administrative   565  188  753
   $ 997  $ 227  $ 1,224
       
       
Six Months Ended      
(in thousands)      
(unaudited)      
       
   Equity Based 
Compensation 
 Amortization of
Intangibles 
 Total 
 Cost of sales   $ 477  $ 78  $ 555
 Marketing   172  --   172
 Research and development   228  --   228
 General and administrative   1,170  404  1,574
   $ 2,047  $ 482  $ 2,529
       
       
Three Months Ended      
(in thousands)      
(unaudited)      
       
   Equity Based 
Compensation 
 Amortization of
Intangibles 
 Total 
 Cost of sales   $ 210  $ 39  $ 249
 Marketing   74  --   74
 Research and development   107  --   107
 General and administrative   600  259  859
   $ 991  $ 298  $ 1,289
       
Six Months Ended      
(in thousands)      
(unaudited)      
       
   Equity Based
Compensation 
 Amortization of
Intangibles 
 Total 
 Cost of sales   $ 404  $ 78  $ 482
 Marketing   139  --   139
 Research and development   221  --   221
 General and administrative   1,182  518  1,700
   $ 1,946  $ 596  $ 2,542
 
ANAREN, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
     
       
   Three Months
Ended
December 31, 2012 
 Six Months Ended
December 31, 2012 
Cash flows from operating activities:    
Net income  $ 3,513  $ 6,366
     
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation  1,920  3,830
Amortization  317  680
Deferred income taxes  588  693
Equity-based compensation  997  2,047
Receivables  1,143  (2,762)
Inventories  (1,334)  (1,745)
Accounts payable  (1,052)  (2,041)
Other assets and liabilities  (1,234)  (145)
Net cash provided by operating activities  4,858  6,923
     
Cash flows from investing activities:    
Capital expenditures   (875)  (2,184)
Proceeds from sale of Salem building  5,030  5,230
Net maturities of held to maturity securities  3,650  9,065
Net cash provided by investing activities  7,805  12,111
     
Cash flows from financing activities:    
Proceeds from long-term debt obligation  --   8,000
Stock options exercised  125  1,476
Excess tax benefit from equity-based compensation  101  554
Purchase of treasury shares  (11,213)  (20,111)
Net cash used in financing activities  (10,987)  (10,081)
     
Effect of exchange rates on cash  45  14
     
Net increase in cash and cash equivalents  $ 1,721  $ 8,967
     
Cash and cash equivalents at beginning of period  $ 28,258  $ 21,012
     
Cash and cash equivalents at end of period  $ 29,979  $ 29,979
George Blanton, CFO
315-362-0436
Joseph E. Porcello, VP-Accounting
315-362-0514