SYRACUSE, N.Y., Aug. 6 /PRNewswire-FirstCall/ -- Anaren, Inc. (Nasdaq: ANEN) today reported net sales for the fiscal 2008 fourth quarter ended June 30, 2008 of $34.2 million, down $1.7 million from the fourth quarter of last year. Net income for the fourth quarter of fiscal 2008 was $1.2 million, or $0.08 per diluted share, down from net income of $4.3 million, or $0.25 per diluted share for the fourth quarter of last year. Proforma net income per diluted share, excluding non cash equity based compensation was $0.13 for the fourth quarter of fiscal 2008 compared to $0.29 for the fourth quarter of the previous year.

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Gross margin for the fourth quarter ended June 30, 2008 was 27.5%, compared to 35.6% for the fourth quarter of last year. The decline in gross margin in the current quarter resulted from poor yield on several production programs, a $250,000 Wireless inventory end of program charge and a $450,000 cost overrun on a development project within the Space & Defense Group.

Lawrence A. Sala, Anaren's President and CEO said, 'Though we are very pleased with the increase in net sales over the third quarter and strong flow of new orders in our Space & Defense Group, the Group continued to have execution issues on several production and development programs which we are addressing.'

Mr. Sala added, 'During the quarter George Blanton joined our management team as Chief Financial Officer. George's extensive experience integrating acquisitions and driving improved financial performance is an excellent fit for Anaren given our recent acquisition of M.S. Kennedy Corp. and our focus on improving profitability and cash flow.'

The effective tax rate on income from continuing operations for the fourth quarter of fiscal 2008 was 25.3% compared to 24.6% for the fourth quarter of fiscal 2007. The tax rate for fiscal 2009 is expected to be approximately 30%.

Operating income for the fourth quarter of fiscal 2008 was $1.1 million, or 3.3% of net sales, down from $4.9 million, or 13.5% of net sales for the fourth quarter of last year. During the quarter the Company incurred a $400,000 increase in R&D expense as a result of increased development work in both business groups. The company also incurred a restructuring charge of $255,000 related to personnel reductions at its Salem, New Hampshire subsidiary. These costs coupled with the decline in sales and gross margin reduced operating income by 10.2 percentage points for the fourth quarter of fiscal 2008.

The Company announced on August 1, 2008 that it had completed the acquisition of M.S. Kennedy Corp. ('MSK') located in Syracuse, New York for a purchase price of $28.0 million on a cash free, debt free basis. MSK is a leading provider of high performance analog microelectronics to Defense and Space markets. MSK has experienced considerable growth over the last few years and is a leading producer of custom hybrids, power hybrids, and multi- chip modules. MSK offers broad electronic component design, packaging, and integration capability. The effective price adjusting for cash and the net present value of tax deductible goodwill is approximately $24.2 million. Anaren estimates that the effective price paid for the business represents a multiple of approximately 6X MSK's calendar year 2007 EBITDA. Anaren will finance this transaction through a five year $50 million revolving debt facility. Earnings from MSK are expected to be accretive in fiscal 2009. The transaction is a significant step in Anaren's growth strategy.

For the year ended June 30, 2008, net sales were $131.3 million, up 1.8% from fiscal year 2007. Operating income for fiscal 2008 was $9.2 million, or 7.0% of net sales, down $7.8 million from last year. Income from continuing operations and net income for fiscal 2008 was $8.5 million, or $0.56 per diluted share, and $9.2 million, or $0.61 per share, respectively. This compares to income from continuing operations and net income for fiscal 2007 of $15.3 million, or $0.87 per diluted share.

Balance Sheet

During the fourth quarter, the Company generated $4.3 million in operating cash flow. Expenditures for capital additions in the fourth quarter were $2.6 million, driven primarily by the expansion and renovation of the Company's East Syracuse, New York manufacturing facility as well as the acquisition of additional test equipment to support the growth in the Space & Defense Group. Cash, cash equivalents and marketable debt securities at June 30, 2008 were $44.1 million.

Wireless Group

Wireless Group net sales for the quarter were $19.5 million, down 15.5% from the fourth quarter of fiscal 2007. Continuing strong demand for standard components partially offset continued weakness in demand for custom assemblies from one customer. In general, demand for infrastructure products remains volatile and visibility remains very limited. Sales of consumer component products were $1.3 million for the quarter, up 174% from the fourth quarter of last year due to the continued diversification of the customer base through new design wins.

Customers that generated greater than 10% of Wireless Group net sales for the quarter were Huawei, Nokia, E G Components and Richardson Electronics, Ltd.

Space & Defense Group

Space & Defense Group net sales for the quarter were $14.7 million, up 15.3% from the fourth quarter of fiscal 2007. The increase in net sales from the fourth quarter of last year was due to the significant sales in the current quarter of passive ranging subsystems and space related products.

New orders for the quarter totaled $21.8 million and included contracts for passive ranging, radar and jamming subsystems. In addition to the strong flow of follow-on production orders, the Group received initial production orders on several new radar programs, each of which have multi-year production potential. Customers that generated greater than 10% of Space & Defense net sales for the quarter were ITT, Raytheon, Northrop Grumman, and Lockheed Martin. The Space & Defense Group backlog at June 30, 2008 was approximately $64.6 million.

Outlook

For the first quarter of fiscal 2009, which will include two months of net sales and earnings from MS Kennedy, we expect an increase in sales for the Space & Defense Group and a decline in sales for the Wireless Group. As a result, we expect net sales to be in the range of $33 - $36 million for the first quarter of fiscal 2009.