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UNITED STATES
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, 2011

__ 
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 executive offices)   (Zip Code)
 
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 __

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.  Yes __  No __

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).
 
 Check One:   Large accelerated filer __    Accelerated filer X  
         
   Non-accelerated filer  __    Smaller reporting company __  
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes __ No X

The number of shares of Registrant’s Common Stock outstanding on October 24, 2011 was 15,044,226.

 
1

 

ANAREN, INC.
FORM 10-Q
INDEX
 
PART I – FINANCIAL INFORMATION
Page No.
       
 
Item 1.
Financial Statements
 
       
   
Condensed Consolidated Balance Sheets as of September 30, 2011 and June 30, 2011 (unaudited)
3
       
   
Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2011 and 2010 (unaudited)
4
       
   
Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2011 and 2010 (unaudited)
5
       
   
Notes to Condensed Consolidated Financial Statements (unaudited)
6 - 11
       
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
12 - 17
       
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
17 - 18
       
 
Item 4.
Controls & Procedures
18
       
PART II – OTHER INFORMATION
 
       
 
Item 1A.
Risk Factors
19
       
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
19
       
 
Item 6.
Exhibits
19
       
Officer Certifications
 

 
2

 
 
PART I – FINANCIAL INFORMATION
 
Item 1.                    Financial Statements
 
ANAREN, INC.
Condensed Consolidated Balance Sheets
September 30, 2011 and June 30, 2011
(in thousands, except per share amounts)
(unaudited)
 
   
September 30, 2011
   
June 30, 2011
 
ASSETS
           
Assets:
           
Cash and cash equivalents
  $ 52,754     $ 58,388  
Securities held to maturity
    12,397       9,314  
Receivables, less an allowance of $380 at September 30, 2011 and June 30, 2011.
    26,230       30,931  
Inventories
    36,353       33,733  
Prepaid expenses and other current assets
    5,073       3,769  
Deferred income taxes
    1,032       2,351  
Total current assets
    133,839       138,486  
Securities held to maturity
    10,274       13,441  
Property, plant, and equipment, net
    47,397       47,627  
Other assets
    1,673       1,741  
Goodwill
    42,389       42,389  
Other intangible assets, net of accumulated amortization
    8,663       8,961  
     Total assets
  $ 244,235     $ 252,645  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Liabilities and Stockholders’ Equity:
               
Current installments of long-term debt obligation
  $ -     $ 10,000  
Accounts payable
    8,069       9,535  
Accrued expenses
    3,690       6,340  
Customer advance payments
    981       222  
Other current liabilities
    2,414       2,290  
Total current liabilities
    15,154       28,387  
Deferred income taxes
    2,150       1,901  
Pension and postretirement benefit obligation
    5,779       5,715  
Long-term debt obligation
    20,000       20,000  
Other liabilities
    1,422       1,538  
     Total liabilities
    44,505       57,541  
Stockholders' Equity:
               
Common stock, $0.01 par value.  Authorized 200,000 shares; issued 29,226 and 28,972 at September 30, 2011and June 30, 2011, respectively
    292       288  
Additional paid-in capital
    218,380       214,179  
Retained earnings
    137,041       134,512  
Accumulated other comprehensive loss
    (466 )     (603 )
            Total stockholders’ equity before treasury stock
    355,247       348,376  
Less 14,191 and 14,072 treasury shares at September 30, 2011and June 30, 2011, respectively, at cost
    155,517       153,272  
  Total stockholders' equity
    199,730       195,104  
   Total liabilities and stockholders' equity
  $ 244,235     $ 252,645  
 
See accompanying notes to condensed consolidated financial statements.
 
 
3

 
 
ANAREN, INC.
Condensed Consolidated Statements of Income
Three Months Ended September 30, 2011 and 2010
(in thousands, except per share amounts)
(unaudited)
 
   
2011
   
2010
 
             
Net sales
  $ 38,720     $ 44,539  
Cost of sales
    24,196       26,906  
Gross profit
    14,524       17,633  
Operating expenses:
               
Marketing
    2,596       2,399  
Research and development
    3,924       3,831  
General and administrative
    4,415       5,234  
Total operating expenses
    10,935       11,464  
Operating income
    3,589       6,169  
Other income (expense):
               
Interest expense
    (80 )     (184 )
Other, primarily interest income
    140       120  
Total other income (expense), net
    60       (64 )
Income before income tax expense
    3,649       6,105  
Income tax expense
    1,120       2,000  
Net income
  $ 2,529     $ 4,105  
                 
Earnings per share:
               
Basic
  $ 0.18     $ 0.30  
Diluted
  $ 0.17     $ 0.28  
                 
Weighted average common shares outstanding:
               
Basic
    14,129       13,839  
Diluted
    14,803       14,426  
 
See accompanying notes to condensed consolidated financial statements.

 
4

 
 
ANAREN, INC.
Condensed Consolidated Statements of Cash Flows
Three Months Ended September 30, 2011 and 2010
(in thousands)
(unaudited)
 
   
2011
   
2010
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 2,529     $ 4,105  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    2,208       2,136  
Amortization
    487       487  
Deferred income taxes
    297       (51 )
Equity-based compensation
    956       1,093  
                 
Changes in operating assets and liabilities:
               
Receivables
    4,699       1,273  
Inventories
    (2,620 )     (1,983 )
Prepaid expenses and other assets
    (1,234 )     (520 )
Accounts payable
    (1,465 )     (668 )
Accrued expenses
    (2,651 )     (1,825 )
Customer advance payments
    760       (52 )
Other liabilities
    1,278       1,797  
Pension and postretirement benefit obligation
    64       80  
Net cash provided by operating activities
    5,308       5,872  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Capital expenditures
    (1,979 )     (1,396 )
Maturities of held to maturity and sale of available-for-sale Securities
    2,411       271  
Purchases of held to maturity securities
    (2,516 )     (1,057 )
Net cash used in investing activities
    (2,084 )     (2,182 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Payment on long-term debt obligation
    (10,000 )     (10,000 )
Stock options exercised
    2,542       237  
Excess tax benefit
    707       7  
Purchase of treasury stock
    (2,245 )     (656 )
                 
Net cash used in financing activities
    (8,996 )     (10,412 )
Effect of exchange rates on cash
    138       135  
Net decrease in cash and cash equivalents
    (5,634 )     (6,587 )
Cash and cash equivalents, beginning of year
    58,388       50,521  
Cash and cash equivalents, end of period
  $ 52,754     $ 43,934  
                 
Supplemental disclosures of cash flow information:
               
Cash paid during the period for:
               
               Interest   $ 99     $ 131  
               Income tax (refunds) payments, net   $ (58   $ 818  

See accompanying notes to condensed consolidated financial statements.

 
5

 

ANAREN, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
The condensed consolidated financial statements are unaudited and reflect all adjustments (consisting of normal recurring adjustments) and accruals, which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods.  The condensed consolidated 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, 2011.  The results of operations for the three months ended September 30, 2011 are not necessarily indicative of the results for the entire fiscal year ending June 30, 2012, or any future interim period.

The income tax rate utilized for interim financial statement purposes for the three months ended September 30, 2011 is based on estimates of income and utilization of tax credits for the entire fiscal year ending June 30, 2012.

(1)  Securities
 
The amortized cost and fair value of securities are as follows:

 
September 30, 2011
 
(amounts in thousands)
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair value
 
                 
Securities held to maturity:
                       
Municipal bonds
  $ 19,002     $ 68     $ -     $ 19,070  
Corporate bonds
    3,669       -       (19 )     3,650  
           Total securities held to maturity
  $ 22,671     $ 68     $ (19 )   $ 22,720  

 
June 30, 2011
 
(amounts in thousands)
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair value
 
                         
Securities held to maturity:
                       
Municipal bonds
  $ 18,263     $ 57     $ -     $ 18,320  
Corporate bonds
    4,492       23       -       4,515  
           Total securities held to maturity
  $ 22,755     $ 80     $ -     $ 22,835  

Contractual maturities of marketable debt securities held to maturity are summarized as follows:
 
 
September 30, 2011
June 30, 2011
   
 
Amortized Cost
 
Fair  value
 
Amortized Cost
 
Fair value
   
(amounts in thousands)
                 
Within one year
  $ 12,397     $ 12,437     $ 9,314     $ 9,326  
One year to three years
    10,274       10,283       13,441       13,509  
Total
  $ 22,671     $ 22,720     $ 22,755     $ 22,835  

(2)  Fair Value Measurements
 
The carrying amount of financial instruments, including cash, trade receivables and accounts payable, approximated their fair value as of September 30, 2011 and June 30, 2011 because of the short maturity of these instruments.  Also, the Company’s carrying cost for its revolving credit note approximates fair value.

Cash equivalents are carried at cost, which approximates fair value.
 
 
6

 
ANAREN, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
Valuations on certain instruments are categorized into three levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived principally from or corroborated by observable market data through correlation. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the assets and liabilities carried at fair value as measured on a recurring basis as of September 30, 2011 and June 30, 2011:

(amounts in thousands)
                       
 
  
 
Total Carrying
Value at
 September 30, 2011
 
Quoted prices in
active markets
(Level 1)
 
Significant other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
Asset Category
                       
Cash equivalents
  $ 5,280     $ 5,280     $ -     $ -  

(amounts in thousands)
                       
 
  
 
Total Carrying
Value at
 June 30, 2011
 
Quoted prices in
active markets
(Level 1)
 
Significant other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
Asset Category
                       
Cash equivalents
  $ 5,040     $ 5,040     $ -     $ -  

(3)  Intangible Assets
 
The major components of intangible assets are as follows:
 
   
September 30, 2011
   
June 30, 2011
 
(amounts in thousands)
 
Gross
   
Net
   
Gross
   
Net
 
   
Carrying
   
Carrying
   
Carrying
   
Carrying
 
   
Amount
   
Amount
   
Amount
   
Amount
 
                   
Amortizable intangible assets:
                               
Customer relationships (10 years)
 
$
7,530
   
$
5,158
   
$
7,530
   
$
5,346
 
Developed technology (5 years)
   
780
     
286
     
780
     
325
 
Non-competition agreements (4 years)
   
1,130
     
239
     
1,130
     
310
 
                         
Total
 
$
9,440
   
 
5,683
   
$
9,440
   
 
5,981
 
                             
Non-amortizable intangible assets:
                               
Trade names
           
2,980
             
2,980
 
Total intangible assets
         
$
8,663
           
$
8,961
 
 
Intangible asset amortization expense for the three months ended September 30, 2011 and 2010 aggregated $0.3 million in each period.  Amortization expense related to developed technology is recorded in cost of sales, and amortization expense for non-compete agreements and customer relationships is recorded in general and administrative expense. There have been no changes to the goodwill balance in the three months ended September 30, 2011.

In September 2011, the Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU) No. 2011-08, Testing Goodwill for Impairment, which amends the guidance in Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other. Under the revised guidance, when testing goodwill for impairment the Company has the option of performing a qualitative assessment before calculating the fair value of a reporting unit. If the Company determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required.  This ASU is effective for the Company beginning in fiscal year 2013.  The Company has elected early adoption, and the new ASU is not expected to have a material impact on the Company’s financial statements.  The qualitative factors will be evaluated when the Company annually assesses its goodwill for impairment.
 
 
7

 
ANAREN, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
(4) Inventories
 
Inventories are summarized as follows:
 
 (amounts in thousands)
 
September 30, 2011
   
June 30, 2011
 
Raw materials
  $ 20,048     $ 18,021  
Work in process
    11,627       11,547  
Finished goods
    4,678       4,165  
    $ 36,353     $ 33,733  
 
(5) Property, Plant, and Equipment

Components of property, plant, and equipment consist of the following:
 
 (amounts in thousands)
 
September 30, 2011
   
June 30, 2011
 
Land and land improvements
  $ 5,167     $ 5,167  
Construction-in-process
    2,113       1,777  
Buildings, furniture, and fixtures
    35,154       35,023  
Machinery and equipment
    68,768       67,902  
      111,202       109,869  
Less accumulated depreciation
    (63,805 )     (62,242 )
    $ 47,397     $ 47,627  
 
(6) Accrued Expenses
 
Accrued expenses consist of the following:
 
 (amounts in thousands)
 
September 30, 2011
   
June 30, 2011
 
Compensation
  $ 2,487     $ 4,724  
Commissions
    678       763  
Health Insurance
    455       452  
Restructuring
    -       380  
Other
    70       21  
    $ 3,690     $ 6,340  

(7) Other Liabilities
 
Other liabilities consist of the following:
 
 (amounts in thousands)
 
September 30, 2011
   
June 30, 2011
 
Deferred compensation
  $ 389     $ 385  
Supplemental retirement plan
    759       759  
Accrued lease
    1,128       1,247  
Warranty accrual
    267       277  
Income tax liability
    631       404  
Deferred grant income
    375       375  
Interest
    73       99  
Other
    214       282  
      3,836       3,828  
Less current portion
    (2,414 )     (2,290 )
    $ 1,422     $ 1,538  
 
 
8

 
ANAREN, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
The Company provides warranty policies on its products. In addition, the Company incurs costs to service our products in connection with specific product performance issues. Liabilities for product warranties are based upon expected future product performance and durability, and is estimated largely based upon historical experience. Adjustments are made to accruals as claim data and historical experience warrant. The changes in product warranty reserves for the three months ended September 30, 2011, is as follows:
 
(amounts in thousands)
     
Balance as of July 1, 2011 
  $ 277  
Additions
    70  
Costs incurred
    (33 )
Adjustments
    (47 )
Balance as of September 30, 2011 
  $ 267  
 
(8)  Long-term Debt Obligation
 
In August 2011, the Company refinanced its borrowings with Key Bank National Association (Lender), and entered into a $50 million revolving credit facility (Line) agreement.  The Line bears interest at the 90-day London inter-bank offer rate (LIBOR), plus 100 to 200 basis points, or at the Lender’s prime rate, plus 0 to 75 basis points, based upon the Company's earnings before interest and taxes and depreciation and amortization (EBITDA) performance at the end of each quarter as measured by the leverage ratio, total indebtedness divided by EBITDA.  The Company pays a commitment fee (10 to 40 basis points) for any unused portion of the Line, up to $50 million, based upon the same EBITDA formula identified above.  The Company has an option to borrow an additional $50 million, $100 million total, subject to the approval of the Lender.

The Company’s indebtedness and obligations are guaranteed by five of the Company’s domestic subsidiaries, as well as an assignment of the Company’s interest in its foreign subsidiary.  Certain financial and compliance covenants also need to be met on a quarterly basis (leverage ratio, minimum liquidity, and interest coverage). The principle payments are due on the maturity date, August 2014.
 
For the three months ended September 30, 2011, the weighted average interest rate on the outstanding borrowings was approximately 1.25%. In the three months ended September 30, 2011, the Company paid $10.0 million on the borrowings prior to being refinanced.  

(9)  Earnings Per Share
 
Basic earnings per share is based on the weighted average number of common shares outstanding.  Diluted earnings 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 Company’s Comprehensive Long-Term Incentive Plan.  The weighted average number of common shares utilized in the calculation of the diluted earnings per share does not include anti-dilutive shares aggregating 11,000 and 599,000 for the three months ended September 30, 2011 and 2010, 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
 
  (amounts in thousands)
 
2011
   
2010
 
Numerator:
           
Net income
 
$
2,529
   
$
4,105
 
Denominator:
               
Denominator for basic earnings per share outstanding
   
14,129
     
13,839
 
Denominator for diluted earnings per share:
               
Weighted average shares outstanding
   
14,129
     
13,839
 
Common stock options and restricted stock
   
674
     
587
 
Weighted average shares
   
14,803
     
14,426
 

 
9

 
ANAREN, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
(10)  Employee Benefit Plans
 
Defined Benefit Plan
Components of net periodic pension cost for the three months ended September 30, are as follows:

 
Three Months Ended
 
September 30
 
2011
 
2010
 
(amounts in thousands)
       
Service cost
  $ 95     $ 70  
Interest cost
    225       198  
Expected return on plan assets
    (264 )     (191 )
Amortization of the unrecognized loss
    80       76  
Net periodic benefit cost
  $ 136     $ 153  

Required contributions for fiscal 2012 are approximately $0.6 million.
 
Postretirement Health Benefit Plan
Components of net periodic postretirement benefit cost for the three months ended September 30, are as follows:
 
 
Three Months Ended
 
September 30
 
2011
 
2010
 
(amounts in thousands)
       
Service cost
  $ 8     $ 13  
Interest cost
    17       27  
Amortization of the unrecognized loss
    (18 )     (7 )
Amortization of the prior service cost
    (5 )     (5 )
Net periodic benefit cost
  $ 2     $ 28  

Expected contributions for fiscal 2012 are estimated to be approximately $0.1 million.

(11)  Other Comprehensive Income
 
Other Comprehensive Income
Comprehensive income consists of the following:

 
Three Months Ended
 
 
September 30
 
 
2011
 
2010
 
 (amounts in thousands)
       
Net income
  $ 2,529     $ 4,105
             
Other comprehensive income:
           
   Foreign currency translation gain
    139       186
   Defined benefit pension plan adjustment
    (2 )     -
             
Comprehensive income
  $ 2,666     $ 4,291

 
10

 
ANAREN, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
Accumulated Other Comprehensive Income (Loss)
The cumulative balance of each component of accumulated other comprehensive income (loss) is as follows:
 
   
Foreign
currency
translation
adjustment
   
Defined benefit
pension plan
 liability
   
Mark to
market
available-for-sale securities
   
Accumulated
other
comprehensive
income (loss)
 
(amounts in thousands)
                       
Balances at June 30, 2010
  $ 1,466     $ (3,890 )   $ (389 )   $ (2,813 )
Current period change
    556       1,265       389       2,210  
Balances at June 30, 2011
    2,022       (2,625 )     -       (603 )
Current period change
    139       (2 )     -       137  
Balances at September 30, 2011
  $ 2,161     $ (2,627 )   $ -     $ (466 )
 
(12) Segment and Related Information
 
The Company’s two reportable segments are the Wireless Group and the Space & 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 Group designs, manufactures, and markets commercial products used mainly by the wireless communications market. The Space & Defense Group designs, manufactures, and markets specialized products for the space and defense electronics markets.
 
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:
 
 (amounts in thousands)
 
Wireless
   
Space &
Defense
   
Unallocated
   
Consolidated
 
Net sales (Three Months Ended):
                       
September 30, 2011
  $ 18,213     $ 20,507     $ -     $ 38,720  
September 30, 2010
    15,525       29,014       -       44,539  
Operating income (loss) (Three Months Ended) 
                               
September 30, 2011
    3,684       (95 )     -       3,589  
September 30, 2010 (1)
    2,980       3,709       (520 )     6,169  
Goodwill and intangible assets:
                               
September 30, 2011
    30,716       20,336       -       51,052  
June 30, 2011
    30,716       20,634       -       51,350  
 
(1)
Unallocated amounts relate to the lease expense incurred on the Company’s operating lease located in England.
 
 
11

 

Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto appearing elsewhere in this Form 10-Q.  The following condensed discussion, other than historical facts, contains forward-looking statements that involve a number of risks and uncertainties.  The Company’s 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 and factors described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011.

Overview
The condensed consolidated financial statements present the financial condition of the Company as of September 30, 2011 and June 30, 2011, and the consolidated results of operations and cash flows of the Company for the three months ended September 30, 2011 and 2010.
 
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 and subscriber equipment for wireless communications as well as, in satellites and in defense electronics systems. The Company sells its products to leading wireless communications equipment manufacturers such as Ericsson, Nokia Siemens Networks, and Huawei, and to satellite communications and defense electronics companies such as Boeing Satellite, ITT, Lockheed Martin, Northrop Grumman and Raytheon.
 
Net sales generally are recognized when units are shipped. Net sales under certain long-term contracts of the Space & Defense Group, many of which provide for periodic payments, are recognized under the percentage-of-completion method based on units of delivery. Estimated manufacturing cost-at-completion for these contracts are reviewed on a routine periodic basis, and adjustments are made periodically to the estimated cost-at-completion based on actual costs incurred, progress made, and estimates of the costs required to complete the contractual requirements.  When the estimated manufacturing cost-at-completion exceeds the contract value, the contract is written down to its net realizable value, and the loss resulting from cost overruns is immediately recognized. To properly match net sales with costs, certain contracts may have revenue recognized in excess of billings (unbilled revenues), and other contracts may have billings in excess of net sales recognized (billings in excess of contract costs). Under long-term contracts, the prerequisites for billing the customer for periodic payments generally involve the Company's achievement of contractually specific, objective milestones (e.g., completion of design, testing, or other engineering phase, delivery of test data or other documentation, or delivery of an engineering model or flight hardware).

The Company operates in the wireless communications, satellite communications and defense electronics markets all of which have been affected by the current economic climate and recession. The United States defense budget has a direct impact on the level of funding available for programs that the Company currently participates in or has targeted for future participation. We continue to assess the effect of the 2012 defense budget on these programs and, to date have seen only minimal negative impact on our anticipated Space & Defense Group order rate in fiscal 2012.  The economic downturn has negatively impacted the worldwide Wireless infrastructure market as the market has delayed or downsized system expansions and upgrades.   Wireless Group sales have improved in the first three months of fiscal 2012, compared to the first quarter of fiscal 2011 due to strong demand for standard components in the first half of calendar 2011. Demand for consumer and infrastructure standard components, while strong in the first half of the quarter, weakened significantly in the latter half of the quarter. Current customer forecast for calendar 2012 remain robust and the Company remains optimistic about second half fiscal 2012 component shipment levels.

Second Quarter of Fiscal 2012 Outlook
For the second quarter of fiscal 2012, we anticipate increased sales for the Space & Defense Group and a decrease in sales for the Wireless Group compared to first quarter levels. As a result, we expect net sales to be in the range of $35 to $40 million.  We expect earnings per diluted share, absent the effect of any one-time events, to be in the range of $0.03 - $0.07, using an anticipated tax rate of approximately 31% and inclusive of approximately $0.05 per share related to expected non-cash equity based compensation expense and amortization of intangibles.  
 
 
12

 

Results of Operations
Net sales for the three months ended September 30, 2011 were $38.7 million, down 13.0% from sales of $44.5 million for the first quarter of fiscal 2011.  Net income for the first quarter of fiscal 2012 was $2.5 million, or 6.5% of net sales, down $1.6 million from net income of $4.1 million in the first quarter of fiscal 2011.
 
The following table sets forth the percentage relationships of certain items from the Company’s condensed consolidated statements of income as a percentage of net sales.
 
   
Three Months Ended
 
   
September 30,
    September 30,  
   
2011
    2010  
Net Sales
    100.0 %     100.0 %
Cost of sales
    62.5 %     60.4 %
Gross profit
    37.5 %     39.6 %
Operating expenses:
               
Marketing
    6.7 %     5.4 %
Research and development
    10.1 %     8.6 %
General and administrative
    11.4 %     11.7 %
Total operating expenses
    28.2 %     25.7 %
Operating income
    9.3 %     13.9 %
Other income (expense):
               
Other, primarily interest income
    0.4 %     0.2 %
Interest expense
    (0.3 %)     (0.4 %)
Total other income (expense), net
    0.1 %     (0.2 %)
                 
                 
Income before income taxes
    9.4 %     13.7 %
Income taxes
    2.9 %     4.5 %
Net income
    6.5 %     9.2 %
 
The following table summarizes the Company’s net sales by operating segments for the periods indicated.

   
Three Months Ended
 
   
Sept. 30, 2011
    Sept. 30, 2010  
(amounts in thousands)
           
Wireless  Group
  $ 18,213     $ 15,525  
Space & Defense Group
    20,507       29,014  
     Total
  $ 38,720     $ 44,539  
 
Three Months Ended September 30, 2011 Compared to Three Months Ended September 30, 2010
Net sales.  Net sales were $38.7 million for the first quarter of fiscal 2012, down 13% compared to $44.5 million for the first quarter of fiscal 2011.  Sales of Wireless Group products rose $2.7 million, or 17.3%, and sales of Space & Defense Group products fell $8.5 million, or 29.3%, in the current first quarter compared to the first quarter of fiscal 2011.
 
The increase in sales of Wireless Group products, which consist of standard components, ferrite components and custom subassemblies for use in building wireless base station and consumer equipment, was the result of a substantial increase in demand for standard Wireless component products beginning in the second half of fiscal 2011 and continuing through the first half of the current first quarter, compared to first quarter of fiscal 2011 demand.  
 
 
13

 
 
Sales of these products rose $2.7 million in the current first quarter over the first quarter of fiscal 2011 on the strength of orders from both European OEMs and Asian contract manufacturers. Demand for consumer and infrastructure standard components, while strong in the first half of the quarter, weakened significantly in the latter half of the quarter. Demand for Wireless Group products in the second quarter of fiscal 2012 is expected to decline compared to first quarter levels due to the decline in customer demand the Company is presently experiencing, but current customer forecast for calendar 2012 remain robust and the Company remains optimistic about second half fiscal 2012 Wireless Group shipment levels.
 
Space & Defense Group products consist of custom components and assemblies for commercial and military satellites, as well as radar, receiver, and countermeasure subsystems for the military.  Sales of Space & Defense Group products declined $8.5 million, or 29.3% in the first quarter of fiscal 2012 compared to the first quarter of the previous fiscal year.  This decrease resulted from an anticipated $2.0 million decline in shipments of legacy receiver products and a $4.0 million decline in sales of counter-improvised explosive devices (IED) related products in the current first quarter compared to the first quarter of fiscal 2011 due to the completion of the orders for these products in the third quarter of fiscal 2011. New orders for Counter-IED products are not anticipated, if at all, until fiscal 2013 or later. Additionally, approximately $2.0 million of Space & Defense Group product shipments were pushed from the first to the second quarter of fiscal 2012 due to a delay in securing required customer specification waivers at the end of the current quarter. These items are now expected to ship in the second quarter upon securing the required waivers.
 
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 2012 was $14.5 million, (37.5% of net sales), down from $17.6 million (39.6% of net sales) for the same quarter of the prior year.  Gross profit as a percent of sales decreased in the first quarter of fiscal 2012 from the first quarter of fiscal 2011 due to the 13% overall decline in sales volume, which resulted in less favorable absorption of overhead in the current quarter. Additionally a less profitable product mix in the Space & Defense Group due to the completion of the latest Counter-IED contract in fiscal 2011 and delays in shipping older, more mature legacy products had a negative impact on gross margins in the current quarter compared to the first quarter last year.
 
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 $2.6 million (6.7% of net sales) for the first quarter of fiscal 2012, up from $2.4 million (5.4% of net sales) for the first quarter of fiscal 2011.  Marketing expenses in the current first quarter increased due to higher personnel levels and travel expenses in the Space & Defense Group resulting from a reorganization and expansion of the business development function for that group in the latter half of fiscal 2011.

Research and Development.  Research and development expenses consist of material, 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 $3.9 million (10.1% of net sales) in the first quarter of fiscal 2012, up 2.4% from $3.8 million (8.6% of net sales) for the first quarter of fiscal 2011.  Research and development expenditures are supporting further development of Wireless Group infrastructure and consumer component opportunities, as well as new technology development in the Space & Defense Group.  Research and development expenditures have increased in the first quarter of fiscal 2012 versus fiscal 2011 due to the higher level of opportunities in the Space & Defense Group and Wireless Group marketplaces, which resulted in approximately $0.1 million in additional spending in the current quarter. The Company expects to continue its current research and development efforts and spending levels during the remainder of fiscal 2012 are expected to continue at or below current first quarter levels.
 
General and Administrative.  General and administrative expenses consist of employee related expenses, incentive compensation, professional services, intangible amortization, travel related expenses and other corporate costs.  General and administrative expenses decreased 15.6% to $4.4 million (11.4% of net sales) for the first quarter of fiscal 2012, from $5.2 million (11.7% of net sales) for the first quarter of fiscal 2011.  The decrease in general and administrative expense in the current first quarter was due to declining compensation costs resulting from personnel reductions in fiscal 2011 and a decrease in the management bonus accrual in the current quarter due to the present lower level of profitability compared to the first quarter of fiscal 2011. Additionally, G&A in the first quarter of fiscal 2011 included a lease charge of $0.5 million to recognize additional rent expense related to the Company’s facility in Frimley, U.K. No like charge was recorded in the first quarter of fiscal 2012.
 
 
14

 
 
Operating Income.  Operating income decreased $2.6 million in the first quarter of fiscal 2012 to $3.6 million, (9.3% of net sales), compared to $6.2 million (13.9% of net sales) for the first quarter of fiscal 2011. This decrease in operating income was a result of the $5.8 million decline in sales volume and the less favorable product mix in the Space & Defense Group, which offset the positive impact on operating margins from the increase sales of Wireless standard components during the current quarter.
 
On an operating segment basis, Wireless Group operating income was $3.7 million (20.2% of group sales) for the first quarter of fiscal 2012, up $0.7 million from the Group’s operating income of $3.0 million (19.2% of group sales) in the first quarter of fiscal 2011. The improvement in Wireless Group operating income in the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011 was due to the $2.7 million overall rise in Wireless Group sales due to the increased demand for higher margin standard component products. This favorable product mix coupled with continuing yield improvements for standard components served to increase gross and operating margins 3.5 percentage points in the current quarter compared to the first quarter of last year.
 
Space & Defense Group operating income was $(0.1) million, or (0.5)% of Group sales, in the first quarter of fiscal 2012, compared to $3.7 million (12.8% of net group sales) for the first quarter of fiscal 2011.  Operating margins for this Group declined in the current first quarter due mainly to the $8.5 million drop in sales volume and the resulting inefficiencies in production.  Additionally, Space & Defense Group operating margins suffered as a result of the conclusion of contracts for sales of higher margin counter-IED related products in the latter part of fiscal 2011. Sales of these products totaled $4.0 million in the first quarter of fiscal 2011 compared to no sales in the first quarter of fiscal 2012.
 
Other Income.  Other income primarily consists of interest income received on invested cash balances and rental income.  Other income was flat at $0.1 million in the first quarter of fiscal 2012 compared to $0.1 million for the first quarter of last year.  Short-term interest rates have remained constant year over year and the Company has deliberately shortened the maturities of the investment portfolio due to the turmoil in the credit market. Other income will fluctuate based on short term market interest rates and the level of investable cash balances.
 
Interest Expense. Interest expense consists mainly of interest on Company borrowings and deferred items. Interest expense in the first quarter of fiscal 2012 was $0.1 million, compared to $0.2 million for the first quarter of fiscal 2011. Interest expense has remained relatively low and has declined due to the continuing low level of the 90 day London Inter-Bank Offer Rate (LIBOR) interest rate, and the 33% decline in outstanding loan balance for the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011. During the first quarter of fiscal 2012, the Company signed a new $50.0 million revolving credit facility (Line) with its Key Bank National Association (Lender) and repaid a total of $10 million. Currently, the Company has $20.0 million outstanding under the Line. These borrowings bear interest at the 90 day LIBOR rate, plus 100 to 200 basis points, based upon the Company’s rolling twelve month earnings before interest and taxes and depreciation and amortization (EBITDA) performance. The rate is reset quarterly and for the second quarter of fiscal 2012 is expected to be approximately 1.3%.
 
Income Taxes.  Income taxes for the first quarter of fiscal 2012 were $1.1 million (2.9% of net sales), representing an effective tax rate of 30.7%.  This compares to income tax expense of $2.0 million (4.5% of net sales) for the first quarter of fiscal 2011, representing an effective tax rate of 32.8%.  The decrease in the effective rate for the quarter is a result of the decrease in taxable income and the mix of foreign and domestic taxable income year over year. The projected effective tax rate for fiscal 2012 is expected to be approximately 31.0%.

Critical Accounting Policies
There have been no changes to the Company’s critical accounting policies, estimates, or judgments from those discussed in the Company’s 2011 Annual Report on Form 10-K.
 
Liquidity and Capital Resources
Net cash provided by operations for the first three months of fiscal 2012 was $5.3 million and resulted primarily from the level of net income before depreciation, amortization and non-cash equity based compensation expense.  The positive cash flow from net income for the quarter was further enhanced by a $4.7 million decrease in receivables due to higher collections, which was off-set by a $2.6 million increase in inventory, a $1.5 million decrease in accounts payable and a $1.8 million net decline in other assets and liabilities. Net cash provided by operations for the first three months of fiscal 2011 was $5.9 million and primarily resulted from net income before depreciation and non-cash equity based compensation expense.  The positive cash flow from net income for the first quarter of fiscal 2011 was further enhanced by a $1.3 million decrease in accounts receivable due to improved collections, which was off-set by a $2.0 million increase in inventory and a $0.7 million pay down of current liabilities.
 
 
15

 

Net cash used for investing activities in the first three months of fiscal 2012 was $2.1 million and consisted of $0.1 million use for the net purchase of marketable debt securities and $2.0 million used for capital additions.  Net cash used for investing activities in the first three months of fiscal 2011 was $2.2 million and consisted of $0.8 million used for the net purchase of marketable debt securities and $1.4 million used for capital additions.

Net cash used in financing activities was $9.0 million in the first three months of fiscal 2012 and consisted of $3.2 million of cash and tax benefits provided by the exercise of stock options, less $10.0 million used to pay long-term debt and $2.2 million used to purchase approximately 118,000 treasury shares. Net cash used in financing activities was $10.4 million in the first three months of fiscal 2011 and consisted of $0.2 million of cash and tax benefits provided by the exercise of stock options, less $10.0 million used to pay long-term debt and $0.7 million used to purchase approximately 40,000 treasury shares.

During the remainder of fiscal 2012, the Company anticipates that its primary cash requirement will be for capital expenditures and possible repurchase of the Company’s common stock. Capital expenditures for the remainder of fiscal 2012 are expected to be in the range of $5.0 - $6.0 million, 4-5% of anticipated sales, and will be funded from existing cash and investments, and expected cash flow generated by operations.
 
During the first quarter of fiscal 2012, the Company signed a new $50.0 million revolving credit facility, with an option of an additional $50 million for a total of $100 million, with its Lender and repaid a total of $10 million. Currently, the Company has $20.0 million outstanding under the Line. These borrowings bear interest at the 90 day LIBOR rate, plus 100 to 200 basis points, based upon the Company’s rolling twelve month earnings before interest and taxes and depreciation and amortization (EBITDA) performance. The rate is reset quarterly and for the second quarter of fiscal 2012 is expected to be approximately 1.3%.
 
The Company may continue to repurchase shares of its common stock in the open market and/or through privately negotiated transactions under the current Board authorization, depending on market conditions.  At September 30, 2011, there were approximately 1.1 million shares remaining under the current Board repurchase authorization.
 
At September 30, 2011, the Company had approximately $75.4 million in cash, cash equivalents, and marketable securities.  The Company has had positive operating cash flow for over ten years, and believes that its cash requirements for the foreseeable future will be satisfied by currently invested cash balances and expected cash flows from operations.
 
Recent Accounting Pronouncements
 
In September 2011, the Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU) No. 2011-08, Testing Goodwill for Impairment, which amends the guidance in Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other. Under the revised guidance, when testing goodwill for impairment the Company has the option of performing a qualitative assessment before calculating the fair value of a reporting unit. If the Company determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required.  This ASU is effective for the Company beginning in fiscal year 2013.  The Company has elected early adoption, and the new ASU is not expected to have a material impact on the Company’s financial statements.  The qualitative factors will be evaluated when the Company annually assesses its goodwill for impairment.
 
 
16

 

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 and lease agreements, and under contingent commitments, such as debt guarantees. The Company's obligations and commitments are as follows:
 
(amounts in thousands)
                             
Contractual Obligations
 
Total
   
Less than 1 year
   
1 to 3 years
   
3 to 5 years
   
Over 5 years
 
Debt and Interest
  $ 20,780     $ 260     $ 20,520     $ -     $ -  
Operating Leases
    1,799       541       898       320       40  
Other Long-Term Liabilities
    389       65       130       130       64  
Pension Benefits
    7,993       660       1,371       1,467       4,495  
Total
  $ 30,961     $ 1,526     $ 22,919     $ 1,917     $ 4,599  
 
The unrecognized tax benefits that are recorded in other long-term liabilities in the Company's condensed consolidated balance sheet are not anticipated to be paid within one year of the balance sheet date; and the time period for when a cash payout on these unrecognized tax benefits cannot be anticipated or estimated do to the uncertainty and as such are not included in the above table.

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.  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.
 
As of September 30, 2011, the Company had cash, cash equivalents and marketable securities of $75.4 million, all of which consisted of highly liquid investments in marketable debt securities.  The marketable debt securities at date of purchase have maturities within 3 years, 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, 2011 rates, or 0.035%, would have reduced net income by approximately $7,000, or $.0005 net income per diluted share for the quarter and would have reduced cash flow by approximately $7,000 in the quarter.  Due to the relatively short maturities of the securities, continuing current unprecedented low market rates and the Company’s 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 rate will reduce the Company’s interest income.
 
As of September 30, 2011, the Company had $20.0 million in outstanding debt under its revolving credit facility (Line) with Key Bank National Association for which principal amounts are due in August 2014.  The Line bears interest at the 90-day London inter-bank offer rate (LIBOR), plus 100 to 200 basis points, or at the Lender’s prime rate, plus 0 to 75 basis points, based upon the Company's earnings before interest and taxes and depreciation and amortization (EBITDA) performance at the end of each quarter as measured by the leverage ratio, total indebtedness divided by EBITDA.  The Company pays a commitment fee (10 to 40 basis points) for any unused portion of the Line, up to $50 million, based upon the same EBITDA formula identified above.  For the three months ended September 30, 2011, the weighted average interest rate on the outstanding borrowings was 1.25%.  Interest expense for these borrowings is exposed to interest rate risk and will increase if market interest rates rise.  A hypothetical increase in market interest rate of 10.0% from September 30, 2011 rates, or 0.13%, would have reduced net income by approximately $6,500, or $.0007 net income per diluted share for the quarter and would have reduced cash flow by approximately $6,500 in the quarter. Due to the Company’s significant cash reserves and historical positive operating cash flow, the Company does not believe that an immediate increase in interest rates would have a significant effect on its financial condition or results of operations.  Over time, however, increases in market interest rates will increase the Company’s interest expense.
 
 
17

 
 
Forward-Looking Cautionary Statement
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for “forward-looking statements” made by or on behalf of the Company. We may from time to time make written or oral statements that are “forward-looking,” including statements contained in this report and other filings with the Securities and Exchange Commission and in reports to our shareholders. All forward-looking statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made and the Company does not undertake any obligation to update its disclosure relating to forward looking matters. Actual results may differ materially from those expressed or implied. The uncertainties and risk factors that could affect our Company, its business and actual results are described throughout this filing and in our 2011 Annual Report on Form 10-K under the Item 1A, “Risk Factors.”
 
Item 4.Controls and Procedures

A.    Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) was carried out under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer (“the Certifying Officers”) as of September 30, 2011.  Based on that evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2011.  

B. Changes in Internal Control Over Financial Reporting
There were no changes in the registrant’s internal control over financial reporting during our fiscal quarter to which this Quarterly Report on Form 10-Q relates that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

 
18

 

PART IIOTHER INFORMATION

Item 1A.Risk Factors
 
The Company is exposed to certain risk factors that may affect operations and/or financial results.  The significant factors known to the Company are described in the Company’s most recently filed Annual Report on Form 10-K.  There have been no material changes from the risk factors as previously disclosed in the Company’s Annual Report on Form 10-K.

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

(c) Issuer Purchases of Equity Securities

On May 11, 2011, the Board of Directors increased by an additional 1,000,000 the number of shares that the Company was authorized to repurchase in the open market or by privately negotiated transactions through its previously announced stock repurchase program.  The program (originally announced on March 5, 2001), which may be suspended at any time without notice, has no expiration date.  The following table sets forth information regarding shares repurchased and purchasable under the program during and as of the end of the periods indicated.  On September 30, 2011, approximately 1,137,000 shares remained authorized for purchase, depending on market conditions.

Period
Total Number of Shares (or Units) Purchased
Average Price Paid per Share (or Unit)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 2011
-
-
-
1,255,199
August 2011
118,481
18.95
118,481
1,136,718
September 2011
-
-
-
1,136,718
Total
118,481
18.95
118,481
1,136,718
 
Item 6.        Exhibits

 
31
Rule 13a-14(a) Certifications

 
32
Section 1350 Certifications

 
10.1
Loan Agreement, dated as of August 25, 2011, between the Company and KeyBank National Association

 
10.2
Promissory Note Revolving Credit LIBOR Rate, dated August 25, 2011, issued by the Company to KeyBank National Association
 
 
101.INS**
XBRL Instance

 
101.SCH**
XBRL Taxonomy Extension Schema

 
101.CAL**
XBRL Taxonomy Extension Calculation

 
101.DEF**
XBRL Taxonomy Extension Definition

 
101.LAB**
XBRL Taxonomy Extension Labels

 
101.PRE**
XBRL Taxonomy Extension Presentation

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 
19

 
 
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 28, 2011
By:
/s/ Lawrence A.Sala  
   
Lawrence A.Sala
President & Chief Executive Officer
 
       

Date:  October 28, 2011
By:
/s/ George A. Blanton  
   
George A. Blanton
Sr. Vice President, Chief Financial Officer and Treasurer
 
       
       



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