Anaren Reports 4th Quarter and Year End Results

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    SYRACUSE, N.Y., Aug. 4 - Anaren, Inc. (Nasdaq: ANEN) today reported net sales from continuing operations for the fourth quarter ended June 30, 2005 were $24.1 million, down 3% from the fourth quarter of fiscal year 2004, and up 11% sequentially from the third quarter of fiscal 2005.

    (Logo: http://www.newscom.com/cgi-bin/prnh/20021022/NYTU197LOGO )

    Net income for the fourth quarter was $2.6 million, or $0.14 per diluted share compared to net income of $2.7 million, or $0.12 per diluted share for the fourth quarter of last year. Net income for the third quarter of fiscal 2005 was $1.9 million or $0.09 per diluted share including $397,000 in charges for the consolidation of the RF Power and Amitron Subsidiaries. The effective tax rate for the fourth quarter of fiscal 2005 was 15.2%, compared to 20.6% for the fourth quarter of fiscal 2004 and 19.1% for the third quarter of fiscal 2005.

    Operating income for the fourth quarter was $2.6 million, or 10.6% of net sales, down $353,000 or 11% from the fourth quarter of last year, and up $806,000, or 46% sequentially from the third quarter of fiscal 2005. Operating income for the third quarter included consolidation charges of $397,000.

    Lawrence A. Sala, Anaren's President and CEO said, "Wireless market demand in the fourth quarter was stronger than anticipated resulting in a sequential improvement in net sales and profitability. We continue to focus on accelerating both our wireless and space and defense product development initiatives as well as improving our operating performance."

    For the fiscal year ended June 30, 2005, net sales were a record $94.5 million, up 11% from net sales of $85.1 million for fiscal 2004. Income from continuing operations for the year was $7.4 million, or $0.37 per diluted share compared to $7.7 million, or $0.35 per diluted share for the fiscal year 2004. Net income for fiscal 2005 was $7.4 million, or $0.37 per diluted share compared to $8.0 million, or $0.36 per diluted share for last year.

    Balance Sheet

    Cash, cash equivalents and marketable debt securities at June 30, 2005 were $82.0 million. The Company generated $3.7 million in cash from operations for the quarter. During the quarter, the Company repurchased 1.5 million shares of its common stock for $17.0 million.

    Wireless Group

    Wireless Group net sales from continuing operations for the quarter were $16.2 million, down 10% from the fourth quarter of fiscal year 2004, and up 15% sequentially from the third quarter of fiscal 2005. The increase in wireless net sales from the third quarter was driven by increased sales of both standard and custom assembly products. Though we experienced a general increase in demand throughout the quarter, a substantial percentage of the increase in resistive product sales came as the result of fulfilling shipments that had been delayed due to the consolidation of RF Power and Amitron. In general, monthly demand from Wireless customers remains volatile.

    Development of consumer component products accelerated during the quarter as additional engineering and technician resources are being applied to this product line. Demand from existing applications strengthened during the quarter and we continue to pursue numerous new design-in opportunities.

    Space and Defense Group

    Space and Defense Group net sales for the quarter were $7.9 million, up 16% from the fourth quarter of fiscal 2004, and up 3% sequentially from the third quarter. New orders for the quarter totaled $12.5 million resulting in a book to bill ratio of 1.6 to 1.0 for the quarter. Orders for the quarter included contracts for radar, missile, and jamming subsystems. For the year, Space and Defense new orders were $40.9 million resulting in backlog at June 30, 2005 of $47.5 million, up 28% from $37.1 million at June 30, 2004.

    Outlook

    Given the current Wireless demand and our Space and Defense order backlog, we expect net sales to be in the range of $23 - $24.5 million for the first quarter of fiscal 2006. With an anticipated tax rate of approximately 22% and an anticipated stock based compensation expense SFAS 123(R) of approximately $0.04 per diluted share, we expect net earnings per diluted share to be in the range of $0.07 - $0.09 for the first 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; 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 2004 Annual Report, Anaren's Form 10-K for the fiscal year ended June 30, 2004 and Anaren's Form 10-Q for the three months and nine months ended March 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 ccbn.com at http://www.streetevents.com on Thursday, August 4, 2005 at 5:00 p.m. EDT. A replay of the conference call will be available at 8:00 p.m. (EDT) beginning August 4, 2005 through midnight August 8, 2005. 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 6744010. If you are unable to access the Live Webcast, the dial in number for the U.S. is 1-800-967-7184 and International is 1-719-457-2633.

    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.

     Consolidated Condensed Statements of Income

     (Unaudited)

     Three Months Ended Twelve Months Ended

     June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004

    Net Sales $24,120,268 $24,827,114 $94,461,065 $85,078,939

    Cost of sales 16,054,707 15,332,027 64,590,866 55,069,793

    Gross profit 8,065,561 9,495,087 29,870,199 30,009,146

    Operating expenses:

     Marketing 1,707,082 1,742,553 6,857,974 6,723,478

     Research and

     development 1,620,284 1,911,196 6,287,514 5,860,493

     General and

     administrative 2,184,577 2,960,602 8,685,332 8,731,580

     Restructuring - - 458,335 -

     Total

     operating

     expenses 5,511,943 6,614,351 22,289,155 21,315,551

    Operating income 2,553,618 2,880,736 7,581,044 8,693,595

    Other income (expense):

     Other, primarily

     interest income 507,977 467,177 1,598,914 1,678,414

     Interest expense (7,637) (2,676) (29,422) (10,195)

     Total other

     income

     (expense), net 500,340 464,501 1,569,492 1,668,219

    Income from

     continuing

     operations

     before income

     taxes 3,053,958 3,345,237 9,150,536 10,361,814

    Income taxes 464,000 689,000 1,738,000 2,695,000

    Income from

     continuing

     operations 2,589,958 2,656,237 7,412,536 7,666,814

    Discontinued

     operations:

     Income (loss)

     from discontinued

     Operations of

     Anaren Europe - 133 - (1,509,686)

     Income tax benefit - - - (1,800,000)

     Net income

     (loss) from

     discontinued

     operations - 133 - 290,314

    Net income $2,589,958 $2,656,370 $7,412,536 $7,957,128

    Basic earnings per share:

     Income from

     continuing

     operations $0.14 $0.13 $0.38 $0.37

     Income (loss)

     from discontinued

     operations 0.00 0.00 0.00 0.01

     Net income $0.14 $0.13 $0.38 $0.38

    Diluted earnings per share:

     Income from

     continuing

     operations $0.14 $0.12 $0.37 $0.35

     Income (loss) from

     discontinued

     operations 0.00 0.00 0.00 0.01

     Net income $0.14 $0.12 $0.37 $0.36

    Shares used in computing net earnings

     Per share:

     Basic 18,315,130 20,638,326 19,346,491 21,026,001

     Diluted 18,669,847 21,413,113 19,831,710 21,807,538

     Anaren, Inc.

     Consolidated Condensed Statements of Income

     (Unaudited)

     Three Months Ended Twelve Months Ended

     June 30, June 30, June 30 , June 30,

     2005 2004 2005 2004

    Net Sales 100.0% 100.0% 100.0% 100.0%

    Cost of sales 66.6% 61.8% 68.4% 64.7%

    Gross profit 33.4% 38.2% 31.6% 35.3%

    Operating expenses:

     Marketing 7.1% 7.0% 7.2% 7.9%

     Research and development 6.7% 7.7% 6.7% 6.9%

     General and

     administrative 9.0% 11.9% 9.2% 10.3%

     Restructuring 0.0% 0.0% 0.5% 0.0%

     Total operating

     expenses 22.8% 26.6% 23.6% 25.1%

    Operating income (loss) 10.6% 11.6% 8.0% 10.2%

    Other income (expense):

     Other, primarily

     interest income 2.1% 1.9% 1.7% 2.0%

     Interest expense 0.0% 0.0% 0.0% 0.0%

     Total other income

     (expense), net 2.1% 1.9% 1.7% 2.0%

    Income from continuing

     operations before

     income taxes 12.7% 13.5% 9.7% 12.2%

    Income taxes 2.0% 2.8% 1.9% 3.2%

    Income from continuing

     operations 10.7% 10.7% 7.8% 9.0%

    Discontinued operations:

     Income (loss) from

     discontinued operations

     of Anaren Europe 0.0% 0.0% 0.0% (1.8%)

     Income tax benefit 0.0% 0.0% 0.0% (2.1%)

     Net income (loss)

     from discontinued

     operations 0.0% 0.0% 0.0% 0.3%

     Net income 10.7% 10.7% 7.8% 9.3%

     Anaren, Inc.

     Consolidated Statements of Income

     (Unaudited)

     Three Months Ended

     June 30, 2005 June 30, 2004 Mar. 31, 2005

    Net Sales $24,120,268 $24,827,114 $21,783,418

    Cost of sales 16,054,707 15,332,027 14,630,770

    Gross profit 8,065,561 9,495,087 7,152,648

    Operating expenses:

     Marketing 1,707,082 1,742,553 1,513,274

     Research and development 1,620,284 1,911,196 1,635,048

     General and administrative 2,184,577 2,960,602 2,256,819

     Restructuring - - -

     Total operating expenses 5,511,943 6,614,351 5,405,141

    Operating income 2,553,618 2,880,736 1,747,507

    Other income (expense):

     Other, primarily interest

     income 507,977 467,177 558,166

     Interest expense (7,637) (2,676) (6,143)

     Total other income 500,340 464,501 552,023

    Income before income taxes 3,053,958 3,345,237 2,299,530

    Income taxes 464,000 689,000 439,000

    Income from continuing

     operations 2,589,958 2,656,237 1,860,530

    Discontinued operations:

    Income (loss) from discontinued

     Operations of Anaren Europe - 133 -

    Income tax benefit - - -

    Net income (loss) on

     discontinued operations - 133 -

     Net income $2,589,958 $2,656,370 $1,860,530

    Basic earnings per share:

     Income from continuing

     operations $0.14 $0.13 $0.10

     Income (loss) from discontinued

     operations 0.00 0.00 0.00

     Net income $0.14 $0.13 $0.10

    Diluted earnings per share:

     Income from continuing

     operations $0.14 $0.12 $0.09

     Income (loss) from discontinued

     operations 0.00 0.00 0.00

     Net income $0.14 $0.12 $0.09

    Shares used in computing

     net income per share:

     Basic 18,315,130 20,638,326 19,336,007

     Diluted 18,669,847 21,413,113 19,801,542

     Anaren, Inc.

     Consolidated Condensed Statements of Income

     (Unaudited)

     Three Months Ended

     June 30, 2005 June 30, 2004 Mar. 31, 2005

    Net Sales 100.0% 100.0% 100.0%

    Cost of sales 66.6% 61.8% 67.2%

    Gross profit 33.4% 38.2% 32.8%

    Operating expenses:

     Marketing 7.1% 7.0% 6.9%

     Research and development 6.7% 7.7% 7.5%

     General and administrative 9.0% 11.9% 10.4%

     Restructuring 0.0% 0.0% 0.0%

    Total operating expenses 22.8% 26.6% 24.8%

    Operating income (loss) 10.6% 11.6% 8.0%

    Other income (expense):

     Other, primarily interest income 2.1% 1.9% 2.5%

     Interest expense 0.0% 0.0% 0.0%

     Total other income

     (expense), net 2.1% 1.9% 2.5%

    Income from continuing operations

     before income taxes 12.7% 13.5% 10.5%

    Income taxes 2.0% 2.8% 2.0%

    Income from continuing operations 10.7% 10.7% 8.5%

    Discontinued operations:

     Income (loss) from discontinued

     operations of Anaren Europe 0.0% 0.0% 0.0%

     Income tax benefit 0.0% 0.0% 0.0%

     Net income (loss) from

     discontinued operations 0.0% 0.0% 0.0%

     Net income 10.7% 10.7% 8.5%

     Anaren, Inc.

     Consolidated Condensed Balance Sheets

     (Unaudited)

     June 30, 2005 June 30, 2004

    Cash, cash equivalents and short-term

     investments $58,408,721 $85,341,896

    Accounts receivable, net 14,780,146 13,812,853

    Other receivables 1,144,680 1,040,838

    Inventories 19,403,348 16,608,055

    Other current assets 1,771,658 2,263,477

     Total current assets 95,508,553 119,067,119

    Net property, plant and equipment 24,983,653 21,342,554

    Marketable debt securities 23,600,547 35,113,068

    Goodwill 30,715,861 30,715,861

    Other intangibles 673,241 1,243,886

    Total assets $175,481,855 $207,482,488

    Liabilities and stockholders' equity

    Liabilities:

    Accounts payable $6,077,312 7,198,252

    Accrued expenses 2,331,885 3,092,370

    Customer advance payments - 411,486

    Other liabilities 1,870,846 1,627,679

     Total current liabilities 10,280,043 12,329,787

    Other non-current liabilities 6,123,248 4,788,433

     Total liabilities 16,403,291 17,118,220

    Stockholders' equity:

    Retained earnings 58,659,807 51,247,271

    Common stock and additional paid-in capital 171,814,217 171,329,299

    Accumulated comprehensive income (loss) (1,215,650) 41,110

     Less cost of treasury stock (70,179,810) (32,253,412)

     Total stockholders' equity 159,078,564 190,364,268

    Total liabilities and stockholders' equity $175,481,855 $207,482,488

     Anaren, Inc.

     Consolidated Condensed Statements of Cash Flows

     June 30, 2005

     (Unaudited)

     Fiscal Year Three Months

     June 30, 2005 June 30, 2005

    Cash flows from operating activities:

     Net income $7,412,536 $2,589,958

     Net income (loss) from discontinued

     operations - -

     Net income from continuing operations 7,412,536 2,589,958

    Adjustments to reconcile net income to net

     cash provided by operating activities:

     Depreciation and amortization of plant

     and equipment 4,887,154 1,210,476

     Impairment loss 272,118 -

     Loss on sale of equipment 98,332 30,935

     Loss on sale of equity securities 342,711 -

     Amortization of intangibles (includes patents) 570,645 83,218

     Provision for doubtful accounts 67,599 (16,525)

     Deferred income taxes (long & short term) 558,897 340,560

     Unearned compensation 65,710 26,633

     Tax benefit (expense) from stock

     option & grant activity 29,308 15,772

     Receivables (1,034,892) (1,818,645)

     Inventories (2,795,293) (316,639)

     Accounts payable (1,120,940) 1,187,440

     Other changes in operating assets

     and liabilities 985,603 (222,591)

     Net cash provided by continuing operations 8,368,282 3,743,870

     Net cash used for discontinued operations - -

     Net cash provided by operating activities 8,368,282 3,743,870

    Cash flows from investing activities:

     Capital expenditures (9,058,703) (800,157)

     Proceeds from sale of equity securities 2,746,130 -

     Proceeds from sale of equipment 160,000 -

     Net maturities (purchases) of marketable

     debt and Equity securities 18,081,569 8,883,724

     Net cash (used in) provided by investing

     activities from continuing operations 11,928,996 8,083,567

     Net cash (used in) provided by investing

     activities from discontinued operations - -

     Net cash (used in) provided by investing

     activities 11,928,996 8,083,567

    Cash flows from financing activities:

     Stock options exercised 224,747 43,976

     Purchase of treasury stock (37,926,398) (17,026,251)

     Net cash provided by (used in)

     financing activities (37,701,651) (16,982,275)

     Effect of exchange rates 1,951 4,102

     Net increase (decrease) in cash and

     cash equivalents (17,402,422) (5,150,736)

    Cash and cash equivalents at beginning

     of period 23,303,263 11,051,577

    Cash and cash equivalents at end of period $5,900,841 $5,900,841
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