-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UrSrebOrNvz+ceJYuu2vxaXSYdtADpLOyAyDQ2RqOjKnRmqRGtrB2boheZIAuJEy wBRuU8IynvX1K+0l6HoPTA== 0000891092-03-003127.txt : 20031103 0000891092-03-003127.hdr.sgml : 20031103 20031103140749 ACCESSION NUMBER: 0000891092-03-003127 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANAREN INC CENTRAL INDEX KEY: 0000006314 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 160928561 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06620 FILM NUMBER: 03972475 BUSINESS ADDRESS: STREET 1: 6635 KIRKVILLE RD CITY: EAST SYRACUSE STATE: NY ZIP: 13057 BUSINESS PHONE: 3154328909 MAIL ADDRESS: STREET 1: 6635 KIRKVILLE ROAD CITY: EAST SYRACUSE STATE: NY ZIP: 13057 FORMER COMPANY: FORMER CONFORMED NAME: MICRONETICS INC DATE OF NAME CHANGE: 19721103 10-Q 1 e16088_10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003 __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to ________________________ Commission file number 0-6620 ANAREN, INC. (Exact name of Registrant as specified in its Charter) New York 16-0928561 -------- ---------- (State of incorporation) (I.R.S Employer Identification No.) 6635 Kirkville Road East Syracuse, New York 13057 ----------------------- ----- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: 315-432-8909 ________________________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by Check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ The number of shares of Registrant's Common Stock outstanding on October 23, 2003 was 21,619,532. ANAREN, INC. INDEX PART I - FINANCIAL INFORMATION Page No. - ------------------------------ -------- Item 1. Financial Statements Consolidated Condensed Balance Sheets as of 3 September 30, 2003 and June 30, 2003 (unaudited) Consolidated Condensed Statements of Earnings 4 for the Three Months Ended September 30, 2003 and 2002 (unaudited) Consolidated Condensed Statements of Cash Flows 5 for the Three Months Ended September 30, 2003 and 2002 (unaudited) Notes to Consolidated Condensed Financial 6 Statements (unaudited) Item 2. Management's Discussion and Analysis 12 of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 Item 4. Controls & Procedures 21 PART II - OTHER INFORMATION Item 5. Submission of Matters to a Vote of Security Holders 21 Item 6. Exhibits and Reports on Form 8-K 21 Officer Certifications 23 - 26 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements ANAREN, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets September 30, 2003 and June 30, 2003 (Unaudited)
Assets September 30, 2003 June 30, 2003 ------ ------------------ ------------- Current assets: Cash and cash equivalents $ 8,423,228 $ 11,062,662 Securities available for sale (note 3) 6,296,327 5,682,260 Securities held to maturity (note 3) 79,270,848 87,584,016 Receivables, less allowance of $234,662 and $245,000, respectively 10,655,163 9,317,941 Inventories (note 4) 15,250,744 15,671,659 Interest and other receivables 2,438,000 823,189 Refundable income taxes 2,449,733 876,220 Deferred income taxes 1,093,916 1,132,016 Prepaid expenses and other current assets 1,264,618 1,235,325 ------------- ------------- Total current assets 127,142,577 133,385,288 ------------- ------------- Securities held to maturity (note 3) 31,730,102 23,394,382 Property, plant and equipment, net (note 5) 21,244,637 23,639,821 Goodwill 30,715,861 30,715,861 Other intangible assets, net of accumulated amortization of $1,196,427 at September 30, 2003 and $1,071,542 at June 30, 2003 (note 1) 1,828,540 1,953,424 ------------- ------------- Total assets $ 212,661,717 $ 213,088,776 ============= ============= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 4,556,868 $ 4,380,459 Accrued expenses (note 6) 2,111,987 2,477,670 Income taxes payable 407,494 66,594 Other current liabilities (note 8) 242,759 225,534 ------------- ------------- Total current liabilities 7,319,108 7,150,257 Deferred income taxes 1,601,346 1,601,346 Postretirement benefit obligation 3,402,145 3,302,532 Other liabilities (note 8) 423,857 437,236 ------------- ------------- Total liabilities 12,746,456 12,491,371 ------------- ------------- Stockholders' equity: Common stock of $.01 par value. Authorized 200,000,000 shares; issued 25,712,354 shares at September 30, 2003 and 25,681,854 at June 30, 2003 257,124 256,818 Additional paid-in capital 168,977,547 168,805,153 Unearned compensation (310,038) (381,588) Accumulated other comprehensive loss (590,619) (1,216,961) Retained earnings 45,074,050 43,290,143 ------------- ------------- 213,408,064 210,753,565 Less cost of 4,102,522 and 3,820,822 treasury shares at September 30, 2003 and June 30, 2003 13,492,803 10,156,160 ------------- ------------- Total stockholders' equity 199,915,261 200,597,405 ------------- ------------- Total liabilities and stockholders' equity $ 212,661,717 $ 213,088,776 ============= =============
See accompanying notes to consolidated condensed financial statements. 3 ANAREN, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Earnings Three Months Ended September 30, 2003 and 2002 (Unaudited)
2003 2002 ---- ---- Net sales $ 18,270,673 $ 19,197,817 Cost of sales 12,311,778 13,008,271 ------------ ------------ Gross profit 5,958,895 6,189,546 ------------ ------------ Operating expenses: Marketing 1,585,466 1,597,483 Research and development 1,421,782 1,401,061 General and administrative 1,838,399 2,140,563 ------------ ------------ Total operating expenses 4,845,647 5,139,107 ------------ ------------ Operating income 1,113,248 1,050,439 Other income, primarily interest 467,976 647,011 Interest expense (2,972) (19,522) ------------ ------------ Income before income taxes 1,578,252 1,677,928 Income tax expense 381,000 378,000 ------------ ------------ Net income from continuing operations $ 1,197,252 $ 1,299,928 ============ ============ Discontinued operations: Loss from discontinued operations of Anaren Europe (note 9) (1,213,345) (1,483,722) Income tax benefit (1,800,000) (330,000) ------------ ------------ Net income (loss) from discontinued operations 586,655 (1,153,722) ------------ ------------ Net income $ 1,783,907 $ 146,206 ============ ============ Basic earnings per share: Income from continuing operations $0.05 $0.06 Income (loss) from discontinued operations $0.03 ($0.05) ----- ----- Net income $0.08 $0.01 ===== ===== Diluted earnings per share: Income from continuing operations $0.05 $0.06 Income (loss) from discontinued operations $0.03 ($0.05) ----- ----- Net income $0.08 $0.01 ===== ===== Shares used in computing net earnings per share: Basic 21,757,734 22,331,289 ============ ============ Diluted 22,352,927 22,811,612 ============ ============
See accompanying notes to consolidated condensed financial statements. 4 ANAREN, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows Three Months Ended September 30, 2003 and 2002 (Unaudited)
Cash flows from operating activities: 2003 2002 ---- ---- Net income $ 1,783,907 $ 146,206 Net income (loss) from discontinued operations 586,655 (1,153,722) ------------ ------------ Net income from continuing operations 1,197,252 1,299,928 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 997,964 931,023 Amortization of intangibles 124,885 124,885 Provision for doubtful accounts (8,205) -- Deferred income taxes 38,100 (37,799) Unearned compensation 71,550 159,177 Changes in operating assets and liabilities, net of acquisition: Receivables (1,366,549) 842,238 Inventories (69,491) (38,485) Interest and other receivables 53,099 98,673 Other current assets (309,546) (191,125) Refundable income taxes 226,487 -- Accounts payable 371,604 (253,003) Accrued expenses 54,153 392,749 Customer advance payments -- (309,990) Other liabilities 107,681 9,132 ------------ ------------ Net cash provided by continuing operations 1,488,984 3,179,971 Net cash used for discontinued operations (75,750) (1,045,330) ------------ ------------ Net cash provided by operating activities 1,413,234 2,134,641 Cash flows from investing activities: Capital expenditures (878,447) (2,116,052) Net maturities (purchases) of marketable debt and equity securities (22,553) 4,156,029 ------------ ------------ Net cash provided by (used in) investing activities (901,000) 2,039,977 ------------ ------------ Cash flows from financing activities: Stock options exercised 172,701 -- Purchase of treasury stock (3,336,643) (593,700) ------------ ------------ Net cash used in financing activities (3,163,942) (593,700) ------------ ------------ Effect of exchange rates 12,274 (75,328) ------------ ------------ Net decrease in cash and cash equivalents (2,639,434) 3,505,590 Cash and cash equivalents at beginning of period 11,062,662 12,565,424 ------------ ------------ Cash and cash equivalents at end of period $ 8,423,228 $ 16,071,014 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash Paid During the Period For: Interest $ -- $ 19,522 ============ ============ Income taxes, net of refunds $ 2,000 $ 150,000 ============ ============
See accompanying notes to consolidated condensed financial statements. 5 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) The consolidated condensed financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations, contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2003. The results of operations for the three months ended September 30, 2003 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2004, or any future interim period. The income tax rates utilized for interim financial statement purposes for the three months ended September 30, 2003 and 2002 are based on estimates of income and utilization of tax credits for the entire year. NOTE 1: Intangible Assets INTANGIBLE ASSETS: Intangible assets as of September 30, 2003 are as follows: Gross Carrying Accumulated Amount Amortization -------------- ------------ Patent $ 574,966 $ 305,451 Customer Base 1,350,000 468,750 Trade Name 320,000 222,225 Non-Competition Agreements 180,000 75,000 Favorable Lease 600,000 125,000 ---------- ---------- Total $3,024,966 $1,196,426 ========== ========== Intangible asset amortization expense for the three month period ended September 30, 2003 and 2002 aggregated $124,885. Amortization expense related to intangible assets for the next five years is as follows: Year Ending June 30, 2004 $ 499,539 2005 $ 410,645 2006 $ 392,871 2007 $ 362,879 2008 $ 97,500 6 NOTE 2: Stock-Based Compensation The Company measures compensation expense for its stock option-based employee compensation plans using the intrinsic value method. The following table sets forth the pro forma effect of these plans as if the fair value-based method had been used to measure compensation expense.
Three months ended Three months ended September 30, 2003 September 30, 2002 ------------------ ------------------ Net income, as reported $ 1,783,907 $ 146,206 Fair value-based stock based compensation cost, net of tax 2,075,992 2,187,164 ------------- ------------- Pro forma net loss $ (292,085) $ (2,040,958) ============= ============= Net income (loss) per share: Basic $ 0.08 $ 0.01 Diluted $ 0.08 $ 0.01 Pro forma net loss per share: Pro forma basic $ (0.01) $ (0.09) Pro forma diluted $ (0.01) $ (0.09)
NOTE 3: Marketable Securities Marketable securities are summarized as follows:
September 30, 2003 June 30, 2003 ------------------ ------------- Marketable debt securities - held-to-maturity $111,000,950 $110,978,398 Marketable equity securities - available for sale 6,296,327 5,682,260 ------------ ------------ Total 117,297,277 116,660,658 Current portion 85,567,175 93,266,276 ------------ ------------ Long term $ 31,730,102 $ 23,394,382 ============ ============
NOTE 4: Inventories Inventories are summarized as follows:
September 30, 2003 June 30, 2003 ------------------ ------------- Component parts $ 9,080,521 $ 8,810,207 Work in process 5,255,439 5,627,150 Finished goods 2,751,965 2,656,029 ------------ ------------ $ 17,087,925 $ 17,093,386 Reserve for obsolescence (1,837,181) (1,421,727) ------------ ------------ Net inventory $ 15,250,744 $ 15,671,659 ============ ============
7 NOTE 5: Property, Plant and Equipment Property, plant and equipment are summarized as follows:
September 30, 2003 June 30, 2003 ------------------ ------------- Land and land improvements $ 1,595,821 $ 1,595,821 Buildings, furniture and fixtures 13,670,416 12,944,778 Machinery and equipment 45,468,096 47,590,955 ----------- ----------- $60,734,333 $62,131,554 Less accumulated depreciation and amortization 39,489,696 38,491,733 ----------- ----------- $21,244,637 $23,639,821 =========== ===========
NOTE 6: Accrued Expenses Accrued expenses consist of the following:
September 30, 2003 June 30, 2003 ------------------ ------------- Compensation $1,190,013 $ 924,290 Commissions 295,542 355,098 Health insurance 201,059 290,424 Restructuring (note 7) 196,604 710,885 Other 228,768 196,973 ---------- ---------- $2,111,986 $2,477,670 ========== ==========
NOTE 7: Restructuring The following is a rollforward of the balance of restructuring charges since the filing of the Company's Form 10-K Annual Report for the fiscal year ended June 30, 2003.
Balance Balance June 30, Cash Non-Cash September 30, 2003 Expenditures Write-offs 2003 ---- ------------ ---------- ---- Severance payment $677,251 $(480,647) $ -- $196,604 Outplacement services and others 33,634 (33,634) -- -- -------- --------- --- -------- Total $710,885 $(514,281) $ -- $196,604 ======== ========= === ========
At September 30, 2003, outstanding liabilities related to the restructuring totaled $196,604 and are included in accrued expenses in the accompanying Balance Sheets and are expected to be paid in full over the next twelve months. 8 NOTE 8: Other Liabilities Other liabilities consist of the following: September 30, 2003 June 30, 2003 ------------------ ------------- Deferred compensation $488,857 $502,236 Other 177,759 160,534 -------- -------- 666,616 662,770 Less current portion 242,759 225,534 -------- -------- $423,857 $437,236 ======== ======== NOTE 9: Discontinued Operations On July 10, 2003, the Company announced its decision to dispose of its Anaren Europe operation. After completing production of the remaining customer orders under contract, during the first quarter, the Company ceased production at Anaren Europe and liquidated the remaining net assets of that operation through sale of equipment via auction. Included in other receivables, in the accompanying balance sheet, is a $1,493,377 receivable from the sale of the equipment. Effective with the reporting of our operating results for the first quarter ended September 30, 2003, the results of operations for Anaren Europe for both the current and prior year first quarters have been reclassified as discontinued operations in the statement of earnings. Components of the loss from discontinued operations of Anaren Europe for the quarter ended September 30, are the following: 2003 2002 ---- ---- Net sales $ 640,468 $ 1,226,056 Expenses (1,071,524) (2,709,778) Loss on sale of equipment (782,289) -- ----------- ----------- Net loss from discontinued operations $(1,213,345) $(1,483,722) =========== =========== The Company also recorded an income tax benefit of $1,800,000 related to the disposal of its Anaren Europe operations. 9 NOTE 10: Net Income (Loss) Per Share Basic income (loss) per share is based on the weighted average number of common shares outstanding. Diluted income (loss) per share is based on the weighted average number of common shares outstanding, as well as dilutive potential common shares which, in the Company's case, comprise shares issuable under the stock option and restricted stock plans. The weighted average number of common shares utilized in the calculation of the diluted income (loss) per share does not include antidilutive shares aggregating 2,137,400 and 2,115,700 at September 30, 2003 and 2002, respectively. The treasury stock method is used to calculate dilutive shares, which reduces the gross number of dilutive shares by the number of shares purchasable from the proceeds of the options assumed to be exercised. The following table sets forth the computation of basic and fully diluted earnings per share:
Three Months Ended ------------------ September 30 Numerator: 2003 2002 ---- ---- Net income from continuing operations $ 1,197,252 $ 1,299,928 =========== =========== Denominator: Denominator for basic earnings per share: Weighted average shares outstanding 21,757,734 22,331,289 =========== =========== Denominator for diluted earnings per share: Weighted average shares outstanding 21,757,734 22,331,289 Common stock options and restricted stock 595,193 480,323 ----------- ----------- Weighted average shares and conversions 22,352,927 22,811,612 =========== ===========
NOTE 11: Segment Information The Company operates predominately in the wireless communications, satellite communications and defense electronics markets. The Company's two reportable segments are the wireless group and the space and defense group. These segments have been determined based upon the nature of the products and services offered, customer base, technology, availability of discrete internal financial information, homogeneity of products and delivery channel, and are consistent with the way the Company organizes and evaluates financial information internally for purposes of making operating decisions and assessing performance. The wireless segment designs, manufactures and markets commercial products used mainly by the wireless communications market. The space and defense segment of the business designs, manufactures and markets specialized products for the defense electronics and satellite communications markets. The revenue disclosures for the Company's reportable segments depict products that are similar in nature. 10 The following table reflects the operating results of the segments consistent with the Company's internal financial reporting process. The following results are used in part, by management, both in evaluating the performance of, and in allocating resources to, each of the segments:
Space & Corporate and Wireless Defense Unallocated Consolidated -------- ------- ----------- ------------ Net sales: Three months ended: September 30, 2003 $ 11,526,589 6,744,084 -- $ 18,270,673 September 30, 2002 $ 11,882,290 7,315,527 -- $ 19,197,817 Operating income (loss): Three months ended: September 30, 2003 (109,808) 1,223,055 -- 1,113,247 September 30, 2002 (609,710) 1,660,149 -- 1,050,439 Goodwill and intangible assets: September 30, 2003 32,544,401 -- -- 32,544,401 June 30, 2003 32,669,285 -- -- 32,669,285 Identifiable assets:* September 30, 2003 14,716,365 10,633,899 154,767,052 180,117,316 June 30, 2003 14,145,826 9,760,194 156,513,471 180,419,491 Depreciation:** Three months ended: September 30, 2003 563,637 434,327 -- 997,964 September 30, 2002 560,981 370,042 -- 931,023 Intangibles amortization: *** Three months ended: September 30, 2003 124,885 -- -- 124,885 September 30, 2002 124,885 -- -- 124,885
* Segment assets primarily include receivables and inventories. The Company does not segregate other assets on a products and services basis for internal management reporting and, therefore, such information is not presented. Assets included in corporate and unallocated principally are cash and cash equivalents, marketable securities, other receivables, prepaid expenses, deferred income taxes, property, plant and equipment not specific to business acquisitions and assets associated with discontinued operations of Anaren Europe. ** Depreciation expense related to acquisition - specific property, plant and equipment is included in the segment classification of the acquired business. Depreciation expense related to non business combination assets is allocated departmentally based on an estimate of capital equipment employed by each department. Depreciation expense is then further allocated within the department as it relates to the specific business segment impacted by the consumption of the capital resources utilized. Due to the similarity of the property, plant and equipment utilized, the Company does not specifically identify these assets by individual business segment for internal reporting purposes. 11 *** Amortization of identifiable intangible assets arising from business combinations and patent amortization is allocated to the segments based on the segment classification of the acquired or applicable operation. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis set forth below reviews the Company's operating results for the three months ended September 30, 2003 and 2002 and its financial condition at September 30, 2003. This review should be read in conjunction with the accompanying consolidated condensed financial statements. Statements contained in management's discussion and analysis, other than historical facts, are forward-looking statements that are qualified by the cautionary statements at the end of this discussion. Overview The consolidated condensed financial statements present the financial condition of the Company as of September 30, 2003 and June 30, 2003, and the consolidated results of operations and cash flows of the Company for the three months ended September 30, 2003 and 2002. The Company designs, develops and markets microwave components and assemblies for the wireless communications, satellite communications and defense electronics markets. The Company's distinctive manufacturing and packaging techniques enable it to cost-effectively produce compact, lightweight microwave products for use in base stations for wireless communications systems, in satellites and in defense electronics systems. The Company sells its products to leading wireless communications equipment manufacturers such as Ericsson, Lucent Technologies, Motorola, Nokia, Nortel Networks, and Powerwave and to satellite communications and defense electronics companies such as Boeing Satellite, I.T.T., Lockheed Martin, Northrup Grumman, Raytheon and TRW. The Company generally recognizes sales at the time products are shipped to customers, provided that persuasive evidence of an arrangement exists, the sales price is fixed or easily determinable, collectibility is reasonably assured and title and risk of loss has passed to the customer. Title and the risks and rewards of ownership of products are generally transferred at the time of shipment. Payments received from customers in advance of products delivered are recorded as customer advance payments until earned. Annually, a small percentage of sales are derived from long-term fixed-price contracts for the sale of large space and defense electronics products. Sales and estimated profits under long-term contracts are recognized using the percentage of completion method of accounting on a units-of-delivery basis. Profit estimates are revised periodically based upon changes in sales value and costs at completion. Any losses on these contracts are recognized in the period in which such losses are determined. In February 2002, the Company created a new subsidiary, Anaren Communications Suzhou Company, Ltd., and leased a 24,000 square foot facility in Suzhou Industrial Park in Suzhou China. Presently, the facility has a staff of 33 and is expected to continue to add personnel during the second quarter to support production for a custom wireless program for a European based customer. It is anticipated that this facility will serve all of the Company's Asian customers and, when possible, will be used to facilitate procurement of raw materials in China for all the Company's subsidiaries. 12 On July 10, 2003, after several reorganizations and restructuring, the Company announced its decision to dispose of its Anaren Europe subsidiary due to continuing low sales levels and large operating losses. This facility ceased production during the first quarter, an auction was held and all remaining equipment was sold in September 2003. This subsidiary is now being accounted for as a discontinued operation in the statements of earnings for both the first quarters ended September 30, 2003 and 2002. Included in the results of discontinued operations for the first quarter of fiscal 2004 are a loss on the sale of equipment of $782,000 and a U.S. tax benefit of $1,800,000 resulting from losses attributable to Anaren Europe. The Company's original investment in Celeritek common stock averaged approximately $8.47 a share and totaled $6.6 million. During the three month period ended September 30, 2003 the market value of Celeritek common stock has fluctuated substantially, and the stock has at times traded above the cost of the Company's investment. This investment had a market value at September 30, 2003 of approximately $6,296,130, a decline of $290,368. The Company considers this to be a temporary decline in market value and it has been recorded as a component of "accumulated other comprehensive loss" in shareholders equity. Net sales from continuing operations for the first quarter ended September 30, 2003 were $18,271,000, down 4.8% from net sales from continuing operations of $19,198,000 for the first quarter of last fiscal year. Income from continuing operations for the first quarter of fiscal 2004 was $1,197,000, or $0.05 a share, while the income from discontinued operations, including a federal tax benefit of $1.8 million, was $587,000, or $0.03 a share, resulting in net income of $1,784,000, or $0.08 a share. This compares to income from continuing operations of $1,300,000, or $0.06 per diluted share, and a loss of ($1,154,000), or ($0.05) per diluted share, from discontinued operations, resulting in net income of $146,000, or $0.01 per share, for the first quarter of last year. 13 Results of Operations The following table sets forth the percentage relationships of certain items from the Company's consolidated condensed statements of earnings as a percentage of net sales. Three Months Ended Sept. 30, 2003 Sept. 30, 2002 -------------- -------------- Net Sales 100.0% 100.0% Cost of sales 67.4% 67.8% ----- ----- Gross profit 32.6% 32.2% ----- ----- Operating expenses: Marketing 8.7% 8.3% Research and development 7.8% 7.3% General and administrative 10.0% 11.1% ----- ----- Total operating expenses 26.5% 26.7% ----- ----- Operating income 6.1% 5.5% ----- ----- Other income (expense): Interest expense (0.0%) (0.1%) Other, primarily interest income 2.6% 3.4% ----- ----- Total other income, net 2.6% 3.3% ----- ----- Income from continuing operations before income taxes 8.7% 8.8% Income taxes 2.1% 2.0% ----- ----- Income from continuing operations 6.6% 6.8% ----- ----- Discontinued operations: Loss from discontinued operations of Anaren Europe (6.6%) (7.7%) Income tax benefit (9.8%) (1.7%) ----- ----- Income (loss) from discontinued operations 3.2% (6.0%) ----- ----- Net income 9.8% 0.8% ===== ===== The following table summarizes the Company's net sales by operating segments for the periods indicated. Amounts are in thousands. Three Months Ended September 30 ------------------ 2003 2002 ---- ---- Wireless $11,527 $11,882 Space and Defense 6,744 7,316 ------- ------- $18,271 $19,198 ======= ======= Three Months Ended September 30, 2003 Compared to Three Months Ended September 30, 2002 Net sales. Net sales decreased $927,000, or 4.8%, to $18.3 million for the three months ended September 30, 2003, compared to $19.2 million for the first quarter of the previous fiscal year. This decrease resulted from a $355,000 (3.0%) drop in shipments of Wireless infrastructure products and a $572,000 (7.8%) decrease in sales of Space and Defense products. 14 The decrease in sales of Wireless products, which consist of standard surface mount components and custom subassemblies for use in building wireless base station equipment, was the result of Company efforts to eliminate certain unprofitable ferrite products from its product lines. This effort resulted in a decline of $1.2 million in shipments of low or no margin ferrite products in the first quarter of fiscal 2003. This decline was partially offset by a $292,000, or 10.7%, increase in sales of surface mount components and a $587,000, or 23.5%, increase in sales of wireless custom components, both of which reflect a small increase in worldwide base station component demand during the quarter. Space and Defense products consist of custom components and assemblies for communication satellites and defense radar and countermeasure subsystems for the military. Sales in the Space and Defense group fell $572,000, or 7.8%, in the first quarter of fiscal 2004, compared to the same quarter in the prior fiscal year. This decrease in shipments resulted from the completion of shipments under the Boeing Spaceway program in the fourth quarter of fiscal 2003. This program accounted for over $4.0 million in shipments in fiscal 2003 and $1.0 million in the first quarter of last year. Sales in the Space and Defense segment are expected to average approximately $6.5 million per quarter in fiscal 2004. Gross Profit. Cost of sales consists primarily of engineering design costs, materials, material fabrication costs, assembly costs, direct and indirect overhead, and test costs. Gross profit for the first quarter of fiscal 2004 was $6.0 million (32.6% of net sales), down $200,000 from $6.2 million (32.2% of net sales) for the same quarter of the prior year. The small rise in gross margin as a percent of sales, despite the drop in revenue year over year and an additional $235,000 increase in the inventory obsolescence reserve, was a result of the $1.2 million decrease in sales of low margin ferrite products, coupled with an increase in sales of higher margin surface mount and custom wireless components in the current first quarter compared to the first quarter last year. The Company expects gross margins to continue to improve with further increases in sales levels. Marketing. Marketing expenses consist mainly of employee related expenses, commissions paid to sales representatives, trade show expenses, advertising expenses and related travel expenses. Marketing expenses were $1.6 million (8.7% of net sales) for the first quarter of fiscal 2004, unchanged from $1.6 million (8.3% of net sales) for the first quarter of fiscal 2003, as a budgeted decline in advertising expenditures was large enough to offset the increase in expense to fund three new geographic product line marketing positions. Research and Development. Research and development expenses consist of material and salaries and related overhead costs of employees engaged in ongoing research, design and development activities associated with new products and technology development. Research and development expenses were $1.4 million (7.8% of net sales) in the first quarter of fiscal 2004, unchanged from $1.4 million (7.3% of net sales) for the first quarter of fiscal 2003. Research and development expenditures are supporting further development of wireless infrastructure products and new wireless networking product opportunities. The Company does not expect to significantly reduce its current research and development efforts in the near term and is presently working on a number of new standard wireless products. General and Administrative. General and administrative expenses consist of employee related expenses, professional services, and intangible amortization, travel related expenses and other corporate costs. General and administrative expenses decreased 14.1% to $1.8 million (10.0% of 15 net sales) for the first quarter of fiscal 2004 from $2.1 million (11.1% of net sales) for the first quarter of fiscal 2003. The decrease in general and administrative costs in the first quarter of fiscal 2004 compared to the first quarter of fiscal 2003 was a result of restructuring by the Company in the second half of fiscal 2003 and reductions in spending for professional services and outside consulting in the current first quarter. Operating Income. Operating income increased slightly in the first quarter of fiscal 2004 to $1,113,000 (6.1% of sales) from $1,030,000 (5.5% of net sales) for the first quarter of fiscal 2003. On a reporting segment basis, the Wireless operating loss was $110,000 for the first quarter of fiscal 2004 an improvement of $500,000 from a Wireless operating loss of $610,000 for the first quarter of fiscal 2003. The main reason for the decrease in Wireless loss in the current first quarter was the restructuring and cost reduction activities in the second half of fiscal 2003, which lowered Wireless operating costs, and the discontinuation of some low margin wireless ferrite products. Space and Defense operating income fell $437,000 in the first quarter of fiscal 2004 to $1.2 million compared to $1.7 million in the first quarter of fiscal 2003. This decrease resulted from the lower sales volume and a change in product mix during the current first quarter compared to the first quarter last year. This year's first quarter sales included more volume attributable to military programs, while sales in the first quarter last year consisted of more profitable commercial space programs. Interest Expense. Interest expense represents interest paid on a deferred obligation. Interest expense for the first quarter of fiscal 2004 was $3,000 (0.0% of net sales) compared to $20,000 (0.1% of net sales) for the first quarter of fiscal 2003. Other Income. Other income is primarily interest income received on invested cash balances. Other income decreased 27.7% to $468,000 (2.6% of net sales) for the quarter ended September 30, 2003, from $647,000 (3.4% of net sales) for the same quarter last year. This decrease was caused mainly by the decline in market interest rates over the last 12 months brought about by reductions in the Federal Fund rates. Interest income will fluctuate based on the level of interest rates and the level of investable cash balances. Income Taxes. Income taxes for the first quarter of fiscal 2004 were $381,000 (2.1% of net sales), representing an effective tax rate of 24.1%. This compares to income tax expense of $378,000 (2.0% of net sales) for the first quarter of fiscal 2003, representing an effective tax rate of 22.5%. The Company's effective tax rate is a direct result of the proportion of federally exempt state municipal bond income and federal tax credits and benefits in relation to the levels of taxable income or loss. Discontinued Operations. On July, 10, 2003, the Company announced its decision to dispose of its Anaren Europe operation. During the first quarter, the Company ceased production at Anaren Europe and liquidated the remaining net assets of that operation. Effective with this 10-Q Quarterly Report for the first quarter ended September 30, 2003, the results of operations for Anaren Europe for both the current and prior year first quarters have been reclassified as discontinued operations in the statements of earnings. The results from discontinued operations for the first quarter ended September 30, 2003 include a loss of $782,000 to recognize the difference between the estimated and actual realized value of liquidated equipment, and a federal tax benefit of $1.8 million resulting from losses attributable to Anaren Europe. It is anticipated 16 that an additional $600,000 to $700,000 of expenses from discontinued operations will be incurred over the next 3 to 6 months to return the facility to its original condition, pay lease termination costs, and pay cost of employees to close the facility. Critical Accounting Policies The methods, estimates and judgments management uses in applying the Company's most critical accounting policies have a significant impact on the results reported in the Company's financial statements. The U.S.Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of Anaren's financial condition and results, and that require management to make the most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company's most critical policies include: valuation of accounts receivable, which impacts general and administrative expense; valuation of inventory, which impacts cost of sales and gross margin; the assessment of recoverability of goodwill and other intangible and long-lived assets, which impacts write-offs of goodwill, intangibles and long-lived assets; and accounting for income taxes, which impacts the valuation allowance and the effective tax rate. Management reviews the estimates, including but not limited to allowance for doubtful accounts, inventory reserves and income tax valuations, on a regular basis and makes adjustments based on historical experiences, current conditions and future expectations. The reviews are performed regularly and adjustments are made as required by current available information. The Company believes these estimates are reasonable, but actual results could differ from these estimates. The Company's accounts receivable represent those amounts which have been billed to its customers but not yet collected. The Company analyzes various factors including historical experience, credit worthiness of customers and current market and economic conditions. The allowance for doubtful accounts balance is established based on the portion of those accounts receivable which are deemed to be potentially uncollectible. Changes in judgments on these factors could impact the timing of costs recognized. The Company states inventories at the lower of cost or market, using a standard cost methodology to determine the cost basis for the inventory. This method approximates actual cost on a first-in-first-out basis. The recoverability of inventories is based on the types and levels of inventory held, forecasted demand, pricing, competition and changes in technology. The Company records valuation allowances to reduce deferred tax assets when it is more likely than not that some portion of the amount may not be realized. The Company evaluates the need for valuation allowances on a regular basis and adjusts the allowance as needed. These adjustments, when made, would have an impact on the Company's financial statements in the period that they were recorded. Intangible assets with estimable useful lives are amortized to their residual values over those estimated useful lives in proportion to the economic benefit consumed. Long-lived assets with estimated useful lives are depreciated to their residual values over those useful lives in proportion to the economic value consumed. Long-lived assets are tested for impairment at the group level, which is usually an economic unit such as a manufacturing facility or department, which has a measurable economic output or product. Long-lived assets are tested for impairment when events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable and exceeds its fair market value. This circumstance 17 exists if the carrying amount of the assets in question exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. The impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value as determined by the discounted cash flow, or in the case of negative cash flow an independent market appraisal, of the asset. Goodwill is tested annually, or sooner if indicators of impairment exist, for impairment by the Company at the reporting unit level by comparing the fair value of the reporting unit with its carrying value. Valuation methods for determining the fair value of the reporting unit include reviewing quoted market prices and discounted cash flows. If the goodwill is indicated as being impaired (the fair value of the reporting unit is less than the carrying amount), the fair value of the reporting unit is then allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. This implied fair value of the reporting unit goodwill is then compared with the carrying amount of the reporting unit goodwill and, if it is less, the Company would then recognize an impairment loss. The projection of future cash flows for the goodwill impairment analysis requires significant judgments and estimates with respect to future revenues related to the assets and the future cash outlays related to those revenues. Actual revenues and related cash flows or changes in anticipated revenues and related cash flows could result in changes in this assessment and result in an impairment charge. The use of different assumptions could increase or decrease the related impairment charge. Liquidity and Capital Resources Net cash provided by operations for the three months ended September 30, 2003 and the three months ended September 30, 2002 was $1.4 million and $2.1 million, respectively. The positive cash flow from operations was due primarily to the profit before depreciation in both years and in the current year was decreased by the rise in receivables, while the prior fiscal year was augmented by the decline in accounts receivable. Net cash used in investing activities consists of funds used to purchase capital equipment in both years. Capital equipment purchases in the first quarter of fiscal 2004 were $878,000, down 59% from $2.1 million in capital equipment expenditures in the first quarter of fiscal 2003. Additionally, in fiscal 2003 maturities of marketable securities provide $4.2 million of investing activities cash. Net cash used for financing activities was $3.2 million in the first quarter of fiscal 2004 and $594,000 in the first quarter of last year. Cash was used in the current first quarter of fiscal 2004 for the purchase of 281,700 treasury shares, net of $173,000 received for the exercise of stock options. Funds used in the first quarter of last fiscal year were used to purchase 71,800 treasury shares. During the remainder of fiscal 2003, the Company anticipates that its main cash requirements will be for additions to capital equipment and the purchase of additional Treasury shares. Capital expenditures, including purchases of $878,000 made in the first quarter, are expected to total between $3.0 and $4.0 million for fiscal 2004 (4-5% of sales) and will be funded by existing cash balances. 18 The Company expects to continue to purchase Treasury shares in the open market under the current board authorization, depending on market conditions. At September 30, 2003, under the current board authorization of 2.0 million shares, the Company has 958,000 shares remaining to purchase. At September 30, 2003, the Company had approximately $125.8 million in cash, cash equivalents, and marketable securities and no debt, and has had positive operating cash flow for over eight years. The Company believes that its cash requirements for the foreseeable future will be satisfied by currently invested cash balances and expected cash flows from operations. Disclosures About Contractual Obligations and Commercial Commitments Accounting standards require disclosure concerning the Company's obligations and commitments to make future payments under contracts, such as debt, lease agreements, and under contingent commitments, such as debt guarantees. The Company's obligations and commitments are as follows:
Payment Due by Period --------------------- Less Total than 1 Yr. 2-3 Yrs 4-5 Yrs Over 5 Yrs ----- --------- ------- ------- ---------- Contractual obligations Operating leases - facilities $5,545,798 $893,912 $1,424,798 $870,226 $2,356,862 Deferred compensation 483,807 65,000 130,000 130,000 158,807
Forward-Looking Cautionary Statement In an effort to provide investors a balanced view of the Company's current condition and future growth opportunities, this Quarterly Report on Form 10-Q includes comments by the Company's management about future performance. Because these statements are forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, management's forecasts involve risks and uncertainties, and actual results could differ materially from those predicted in the forward-looking statements. The risks and uncertainties described below are not the only ones facing our Company. Additional risks and uncertainties not presently known to us or that are currently derived immaterial may also impair our business operations. If any of the following risks actually occur, our business could be adversely effected and the trading price of our common stock could decline and you may lose all or part of your investment. Such factors include, but are not limited to: o current unpredictable wireless market conditions; o 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; o decreased capital expenditures by wireless service providers; o successfully securing new designs wins from our OEM customers; o loss of one or more of a limited number of original equipment manufacturers as customers; o costs associated with potential product recalls; o unpredictable difficulties or delays in the development of new products; o the timely availability of component parts and services from a limited number of suppliers; o the risks associated with any technological market shifts away from the Company's technologies and core competencies; 19 o cancellation of existing contracts or orders, or other declines in demand for the Company's products; o diversion of defense spending away from the Company's products and/or technologies due to on-going military operations; o increased pricing pressure and increased competition; o the failure of wireless customers' annual procurement forecasts to result in future sales; o our ability to successfully finalize the shutdown of our Anaren Europe operation which may result in additional costs related to disposal of its assets, environmental clean-up, termination of Anaren Europe's facility lease and other related issues; o potential impairments of assets including investment values and goodwill; o foreign currency fluctuations; o litigation relating to Anaren's ownership interest in Celeritek or a potential transaction with Celeritek, or litigation or adverse regulatory action involving antitrust, intellectual property, product warranty, product liability, tax and other issues. Anaren disclaims any obligation, unless required by law, to update or revise any forward-looking statement. Readers are advised to carefully review the risk factors set forth in this Quarterly Report on Form 10-Q and the Company's Annual Report on Form 10-K 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 revenues and earnings. Item 3. Quantitative and Qualitative Disclosures About Market Risk The following discusses the Company's possible exposure to market risk related to changes in interest rates, equity prices and foreign currency exchange rates. This discussion contains forward-looking statements that are subject to risks and uncertainties. Results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including factors described elsewhere in this Quarterly Report on Form 10-Q. As of September 30, 2003, the Company had cash, cash equivalents and marketable securities of $125.8 million, of which approximately $119.5 million consisted of cash and highly liquid investments in marketable debt securities and $6.3 million consisted of marketable equity securities. The marketable debt securities at date of purchase normally have maturities between one and eighteen months, are exposed to interest rate risk and will decrease in value if market interest rates increase. A hypothetical decrease in market interest rate of 10.0% from September 30, 2003 rates, or 0.15%, would have reduced net income and cash flow by approximately $45,000, or $0.002 per share for the quarter. Due to the relatively short maturities of the securities and its ability to hold those investments to maturity, the Company does not believe that an immediate decrease in interest rates would have a significant effect on its financial condition or results of operations. Over time, however, declines in interest rates will reduce the Company's interest income. The Company currently owns equity investments held for sale with a market value of approximately $6.3 million. Fluctuations in market value of these securities are presently considered to be temporary and are charged to stockholders' equity monthly. A theoretical 10.0% decline in market value of these securities would result in a $630,000 reduction in stockholders' equity. In the future, if the decline in value of these securities is considered other than temporary, then the full decline in value experienced to the date of impairment will be reflected in the then current period income statement. 20 All of the Company's sales from its domestic U.S. subsidiaries to foreign customers are denominated in United States dollars and, accordingly, are not exposed to foreign currency exchange risk. Item 4. Controls and Procedures 1. Evaluation of disclosure controls and procedures. Based on their evaluation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company's chief executive officer and chief financial officer have concluded that the Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and are operating in an effective manner. 2. Changes in internal controls. During the period covered by this Quarterly Report on Form 10-Q, there were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f)) that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Item 5. Submission of Matters to a Vote of Security Holders None. Item 6. Exhibits and Reports on Form 8-K Item 6(a) Exhibits 31 RULE 13a-14(a) CERTIFICATION, 32 SECTION 1350 CERTIFICATION, Item 6(b) Reports on Form 8-K The Company filed a current report on Form 8-K on July 10, 2003 with respect to the announcement of the disposal of its Anaren Europe facility. The Company filed a current report on Form 8-K on August 12, 2003 with respect to its Results of Operations for the fourth quarter and year ended June 30, 2003. The Company filed a current report on Form 8-K on October 23, 2003 with respect to its Results of Operations for the first quarter ended September 30, 2003. 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Anaren, Inc. (Registrant) Date: October 30, 2003 /s/ Lawrence A. Sala --------------------------------------- Lawrence A.Sala President & Chief Executive Officer Date: October 30, 2003 /s/ Joseph E. Porcello --------------------------------------- Joseph E. Porcello Vice President of Finance and Treasurer 22 EX-31 3 e16088ex_31.txt CERTIFICATIONS EXHIBIT 31 CERTIFICATIONS I, Lawrence A. Sala, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Anaren, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [text omitted in accordance with SEC transition instructions contained in SEC Release 34-47986] for the registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release 34-47986] c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: October 30, 2003 /s/ Lawrence A. Sala ------------------------------------- Lawrence A. Sala President and Chief Executive Officer I, Joseph E. Porcello, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Anaren, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [text omitted in accordance with SEC transition instructions contained in SEC Release 34-47986]for the registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release 34-47986] c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: October 30, 2003 /s/ Joseph E. Porcello --------------------------------------- Joseph E. Porcello Vice President of Finance and Treasurer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Anaren, Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Lawrence A. Sala, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Lawrence A. Sala - -------------------- Lawrence A. Sala President and Chief Executive Officer October 30, 2003 A signed original of this written statement required by Section 906 has been provided to Anaren, Inc. and will be retained by Anaren, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Anaren, Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joseph E. Porcello, Vice President of Finance and Treasurer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Joseph E. Porcello - ---------------------- Joseph E. Porcello Vice President of Finance and Treasurer October 30, 2003 A signed original of this written statement required by Section 906 has been provided to Anaren, Inc. and will be retained by Anaren, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----