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Anaren, Inc. F4Q10 (Qtr End 06/30/10) Earnings Call Transcript

Anaren, Inc. F4Q10 (Qtr End 06/30/10) Earnings Call Transcript

Anaren, Inc. (ANEN)

F4Q10 (Qtr End 06/30/10) Earnings Call Transcript

August 4, 2010 5:00 pm ET


Lawrence Sala – Chairman, President and CEO

George Blanton – SVP, CFO and Treasurer


Rich Valera – Needham & Company

Mark Bauser – BlueFin

Chris McDonald – Kennedy Capital

Greg Weaver – Invicta Capital



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Good day, ladies and gentlemen, and welcome to Anaren’s fourth quarter earnings call. (Operator Instructions) I would now like to turn the conference over to your host for today Mr. Larry Sala, Chairman, President and CEO. Sir, you may begin.

Lawrence Sala

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Thank you. Good afternoon and thank you for participating in the Anaren fiscal 2010 fourth quarter conference call. I’m joined again today by George Blanton, our CFO, and Joe Porcello, our VP of Accounting. I’ll provide a brief overview of the results of the quarter and for the fiscal year after which George will review the financial highlights. We will then take your questions.

Certain statements made during this conference call will be forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially from those discussed. You are encouraged to review our SEC reports and exhibits to those reports to learn more about the various risks and uncertainties facing our business and their potential impact on our net sales, earnings, and stock price.

Net sales for the fourth quarter were $45.3 million, up 3% from the fourth quarter of last year, and up 7% sequentially from the third quarter, an increase in Space & Defense Group net sales drove the overall increase from the third quarter. The strong fourth quarter sales drove record sales for the fiscal year of a $168.8 million.

New orders for the quarter were $57 million as a result of robust new orders in the Space & Defense Group, resulting in record total new orders of $174 million for the fiscal year.

Non-GAAP operating income for the quarter was a record $6.7 million or 14.9% of net sales, up 5% from the fourth quarter of last year. The increase in Space & Defense Group net sales, a favorable overall product mix and our continued cost reduction efforts positively impacted profitability for the quarter and for the fiscal year.

Wireless Group net sales for the quarter were $14.5 million, down 5% from the fourth quarter of last year but up 2% sequentially from the third quarter. Improved demand for standard infrastructure in consumer components drove the increase in net sales from the third quarter. Demand for standard component products remained robust throughout the quarter. New product and technology development efforts remain focused on expanding our standard component product portfolio.

During the quarter, the Group continued to expand the Xinger 3 high power resistor and consumer component product lines. In addition, the Group introduced the new Anaren Integrated Radio or AIR product line of low power wireless modules. These FCC compliant transceiver modules utilize Texas Instruments’ low power RF transceiver ICs and offer industry leading size and performance. Customers had exceeded 10% of Wireless Group net sales for the quarter were E.G. Components, Nokia, Motorola, and Richardson.

For the Space & Defense Group, net sales for the quarter were $30.7 million, up 7% from the fourth quarter of last year. Profit margins for the Group continued to improve as a resulted of increased product yields.

Product and technology development initiatives for the Group remained focused on cost reduction of our LTCC technology, introduction of radiation ARM (ph) and hybrid electronic module standard products for satellite applications, RF manifold and hybrid electronic module opportunities for ground based radar and airborne radar applications and the development of integrated microwave assembly technology.

New orders for the quarter totaled $41 million and included contracts for components and assemblies for using ground based and airborne radars, counter IED applications, communication satellite, passive ranging and airborne jamming applications. The acquisitions completed in fiscal 2009 have increased the Group’s addressable market as well as the Group’s dollar content on a number of new subsystem opportunities.

Space & Defense order backlog at June 30, 2010 was a record $89.6 million. Customers that generated greater than 10% of Space & Defense Group net sales for the quarter were Lockheed Martin and Northrop Grumman and Raytheon. George?

George Blanton

The highlights of the fourth quarter income statement and balance sheet at June 30, 2010 are presented on a non-GAAP basis. 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 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. Please refer to our Q4 earnings release for a reconciliation of GAAP and non-GAAP measures.

Non-GAAP gross margin was 16.7 million or 37% of our current quarter, compared to 16 million or 36.4% for the fourth quarter of last year. Gross profit as a percent of sales increased slightly in the fourth quarter of fiscal 2010 from the fourth quarter of last year, due to a more favorable product sales mix in both the Wireless Group and Space & Defense Group. Gross margins were enhanced by the decline in sales of lower margin, high material content custom wireless group products. This was partially offset by lower production yields for circuit boards and disposition of excess materials for our wireless product is being discontinued.

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